Automatic Data Processing (ADP) 27 Apr 222022 Q3 Earnings call transcript

Company Profile

Participants

Danyal Hussain	Vice President-Investor Relations
Carlos Rodriguez	Chief Executive Officer
Maria Black	President
Don McGuire	Chief Financial Officer
Peter Christiansen	Citi
Tien-tsin Huang	JPMorgan
Bryan Bergin	Cowen
Eugene Simuni	MoffettNathanson
Kartik Mehta	Northcoast Research
Ramsey El-Assal	Barclays
Mark Marcon	Baird
Mihir Bhatia	Bank of America
James Faucette	Morgan Stanley

Call transcript

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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 Third 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. you. Thank Instructions] [Operator turn over now Mr. the will to conference I Investor Danyal President, Hussain, Vice Relations. go Please ahead.

Danyal Hussain

and to results Rodriguez, welcome fiscal Michelle, morning, Don you, Thank everyone Earlier CFO. quarter. call. Black, President; this today McGuire, Maria our XXXX released ADP's Participating are the CEO; Carlos our our we our and for earnings quarter third

presentation call. you SEC's 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

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

Carlos Rodriguez

basis EBIT strong expectations. margin an our EPS, organic on The ahead everyone diluted adjusted growth XX% revenue basis, Thank expansion. including strong reported third call. growth growth drove well revenue XX% for you, solid quarter on currency XX% and adjusted that thank and Danny, We and you a on in constant results, our joining with delivered coupled both outcome margin exceptionally accelerated to of

employees but technology the they them continue shortage months, to their support HCM of Our all through We're have leading workforce support in XX businesses. grow clients last unrivaled their persevere through invested not their and our to better but only to these expertise. have challenges proud in in and it efforts new navigating have they had

commentary as on product and updated then high-level And will through the provide I'll take Don outlook. key financials our drivers, usual, discuss Maria quarter, This updates. some us will other business and and

me Let bookings. with business new Services start Employer

pleased And variant half third factor a the levels have had double-digit a we Omicron of growth quarter we the was meaningful hoped was range our end in quarter. quarter, guidance for third performance, not high of record you the when our from We delivered another quarter. bookings our to as level growth. last are first very strong This towards this as accelerated updated quarter

tremendous and delivering with value suite us HR position our our again, outsourcing, guidance fiscal to offerings narrow this look for we should bookings full way. growth leading double-digit forward year, and to We're clients which continue the our across to for XXXX. pleased of ES find and PEO international Our well downmarket higher, businesses, the

Our employer also was this very services quarter. retention strong

our by retention you year. As we among others. quarter retention pleased like start were we territory for businesses, further pre-pandemic mid-market actually decreasing important know, the calendar we of international from incredible rather especially than anticipated, Accordingly, that and new towards since the very our switching our elevated typically the performance is record with third levels quarter driven into increased experience

client record very of to keep pace increased year's up added to at for ahead retention elevated and growth We this period. believe the headcount organization. to strong strong level. satisfaction retention this year-end discussed implementation year, with retention quarters, client from pressure we've of on result, XX% remain having a so expectations outperformed were ongoing slightly our able hold demand last have expect we've gains several to down for now the demand. to overall despite With our most And versus on and As are we last year's service as busy far we this retention our employee experienced on demands maintain and scores year, our we the to

reenter to pays as came factors control for Moving force Services or hire year. on better a and labor continue there number in for Employer X% the per expected. pace to growth control, of play our gradually our the when are Clearly, enter workers clients labor quarter at last we've than force And of to steadily activity but over before recover I turn highlight growth of considering demand it trends, over labor to economic pleased Maria. employment strong the for see participation keep been and continues to course overall high, the one

XX% with strong XX% quarter and revenue growth Our growth. had PEO average worksite employee another

all ADP. now coupled And growth. And base with robust growth PEO it was over HR the a bookings their very me that turning find As employment small let meaningful year, healthy increasingly in bookings as within performance, strong midsized function this PEO we've seen of exceptionally value to growth driven and over to portion has Maria. double-digit in businesses revenue our strong turn

Maria Black

average It's especially then, call. to be January, clients, Carlos. everyone year, UX. workflows. strong incredibly overwhelmingly made suite since has began of rollout to the over new for we we've ADP users. made Store RUN, UX been languages. the star the proactive Also great you, about to handful an of of product the some user started in progress Earlier iHCM X.X Next-Gen make active great and with expanded the of apps In Workforce in is is ADP ADP App The experience. X,XXX, underway. to downloaded Apple new from we for some to top and the excited easy we've over even this initiative app. client moved Mobile rollout take we key the important the Feedback and app Mobile intuitive, our new experience quarter, is new shared, most we And insightful, we feedback five One HCM And available upbeat a is our been front. over Now users. of and the one our few XX on UX this a on how early it It user of the to the key million positive. and In pilot business HCM Thank this updates have also XX joining we're part initiatives more the over clients we key with bases unified has

As we complete rollout coming the over months. the new UX

marketing U.S. dashboard client we leveraging our our analytics across award-winning in the This further, we and GlobalView digital and data in offerings recent with has with reached with of the more insight efforts advanced years, provides globe, a clients populations Celergo platform on, how continues at bases. Moving tools, our global would mid partner enhanced Investor clients selling launched expanded around upmarket powered more direct by Day about our network, modern our to for same new here powerful have pilot through bit hear as be our differentiators key quarter, data I one scaled DataCloud. force our advertising. employee quarter, this and Last our ADP. their decades, November, on spoke about dashboard At and even direct analytics we we we mentioned in this sales how ADP you have channel increased prospects a for growing

with work. marquee eight with together of changing our our quarter, client to the we overall were frontier there's the also of on associated California, believe powerful pleased opportunity pride team Minds learning Minds What first quarter, the a be of in-person this ADP athletic And to most force. and world-class Meeting investment time opportunity most big And This to was who ourselves events, we in impressive brand XXth digital XXXX. This the brand trustworthy opportunity golfers in latest deeply the of our initiatives, to and which PGA come the our Tour ADP the was conference. event including HCM as to and our love them investing sales additional and sharing we I and service in and this engage has to our them LPGA, with The efforts one a the group insightful clients across world we the enjoy enterprise on, asset momentum Meeting professional difference. took host of as final for clients major we out, to with sponsorships, expanded back while European continued since the is our listening support showing our from this And the brand back really first of and and event pushing as make innovations, having our is much makes by featured we perspective advance a marketing about constitute we great and in-person our professionalism, a the call data. premier ADP. also technology our continue

And because our happen. are see big for in XXth can overall, third A this of recently this initiatives, we continuous the named you was a proud a quarter our results quarter were terrific the on in consistency our on which made we in you Most culture associates key Fortune’s who of and The of our and Admired row. focus Companies a clients. we highlights our partner it make true thank our improvement, to honor being one year progress to all

Now over to Don.

Don McGuire

Thank and good you, Maria, morning, everyone.

the lower combination growth, to XX% margin and EBIT points, able strong lower adjusted a expansion adjusted XX% was basis. XX% third and growth quarter. investments share. which margin compensation the XX earnings we of expected. growth in count, tax increase than on this This much an we a currency revenue and in our despite delivered discussed incremental organic revenue a a slightly that last decline Through of basis diluted achieved quarter, adjusted basis we constant per supported in headcount rate deliver For we better on were reported turn EBIT We expansion share

contribution at to for And an Looking combination year-over-year of bookings balance growth In and has basis been was more year. about our get This funds growth, and the outcome revenue increased increase X.X% X% has per yield a nearly a supported points, quarters. nice client the ES on revenue average reported funds and of all an through that last interest performance the revenue contributing quarter our margin results, well. organic our by strong pays primarily our the growth. client and QX, with as prior currency Employer our closely Services a by client control meaningful interest funds also ahead ES double-digit year flat contributed in XX% is retention expectations we very the XXX to to increased supported more basis been which started nicely from trends. revenue long basis. X% on well several compared segment

for employees the to driver robust PEO is primary quarter. XX% revenue revenue quarter. worksite Average reaching strong the remained XXX,XXX average PEO XX%, to very worksite a growth on the remains segment. and and the very in grew PEO Moving at employee

strong a as and We workforce continue see sales impacting lower with continued the participation, well and flat normalization was by all healthy PEO seen a growth revenue average within selling good WSEs retention as strong PEO That it’s base. slightly is PEO in growth included the quarter, fairly a and worksite to of pre-pandemic the mix our recovery benefit PEO. towards higher bit mix. driven year in from is quarter wage momentum. expenses control shift to towards long, worksite growth benefits bookings a a in back growth lower employee was our atypical, said, margin lower client representing parts all than the for employee per we’ve revenue this which pays

outlook updated our the for to year. on Moving

are we up expect about guidance of raising drivers of a from increase. about For behind revenues, and There few ES previous X% are guidance X%. our that our growth now

range are a to to narrowing ES guidance XX% bookings XX% XX% of higher XX% our from prior. up to We

our a we year, uncertainty. delivering forward Europe, have in geopolitical there those this double strong with and to uncertainties, growth. strong finish in notwithstanding as realized well more contemplates delivered digit But general growth QX far year. So uncertainty a the Clearly, teens as the and look solid was we macro outlook to

XX down down services the are be only our basis points. expected expectation versus and retention now our guidance, points to We employer for basis prior XX year of raising

up we assuming modest are well reasons same at this we’ve Our in prudence, all decline extremely but the outlined a retention so year has held year, far QX a long. for

our once growth to of clients. we’re in by and labor outlook the per X% combined expect again, from X% with force recovery expectation X% our U.S. participation demand growth for versus prior steady For now to raising driven the X% our control, ongoing pays labor

XXXX, modest. We fiscal expect are of in to our interest change the to to X.X% balance XX% for therefore, of remaining recent we funds slightly also months a few raising from our There’s to our to is XX% yield to purchase the rates outlook million benefit million a the $XXX range And just client from with outlook $XXX $XXX million. prior up $XXX no to growth round still curve new for yield expectation higher shifts year. million

Moving on to margin. ES

We basis points QX expect margin be the to now our raising mainly to to XXX outlook prior. XX increase in by outlook versus up XXX stronger are is revenue to points performance driven versus basis margins expectations. our XXX and up This

the Moving on PEO. to

worksite XX% narrowing to to to We continued new our bookings. versus employee are growth driven momentum average XX% XX% prior in XX% by business

XX% to We to growth margin from XX% XX% XX% raising from growth narrowing And to revenue prior. XX% PEO pass-throughs XX% are to excluding up zero are prior. likewise total PEO to growth revenues, growth we to XX% XX%

points including rather favorability workers margins our to to improvement driven basis outlook, to expect PEO for points up margin, expect expenses, the prior are prior. year. than an from to X% X% from raising compensation Putting compared XX outlook. grow XX% to it XX more pass-through up X% be we flat For we to in XX revenue guidance together now basis consolidated our for That’s down by to now our to

we to XX an For basis basis points, XXX of adjusted XX increase EBIT to up from now margin, expect points XX prior.

making XX% to no assumption. in tax to up XX% earnings adjusted are share growth XX% from diluted we And our now We rate expect per to of change XX% prior.

on move wanted touch quickly on I to XXXX. we fiscal Q&A, Before to

planning We’re still process. going our through

Day. be be some the and about and I’ll good will puts Q&A. we there going the to now for remain November focused back providing it growth Investors business forward our providing our operator for on And – that to objectives XXXX, takes in very And look turn our fiscal unique you. Clearly, laid but medium-term so are overall, specifics at we won’t to time. this we feel next momentum any quarter. We outlook out the turn we Thank

Operator

question from with will Citi. We Instructions] first take [Operator our Peter Christiansen

line open. Your is

Peter Christiansen

you on guys. talked becoming the ASO, good about a morning and a we to larger quarter, Carlos, question quarters, contributor Thank and execution for about congrats number a this had solid I HRO ES. of

you if of given thoughts to wisely, contributing products. follow-up, translate that then how how services? to a to retention that’s stickiness And the Thank at even does things the sorts any upgrades wondering across you’ve as value-added had of growth I’m given add-on on Just those platform, UI point? pay all this ancillary you. the thinking like

Carlos Rodriguez

take the I’ll Maria part and the Sure. first let I’ll takes second part.

think growth, of well. of it is be up, our almost business, unbelievable But you interesting hiring it’s retention as to solutions just year, co-employment, do On really obviously outsourcing is incredibly the Retention which which rates you the in on mean, It’s and that year. know, HRO kind performing managed overall prior you headcount I service. robust contributing the full revenues. the to was growth And able are business bookings, have to stay Not is thing holding our to just already I call to within when they a stickiness. would The about in up the improvement then you are terms holding – without nice to to they’ve somehow both have in ahead the because publicly, that kind out. And say strong and manage. up. ES, has robust quickly, or implementation there which growth execution quite just I versus hard into driving really of get been business that business, for very, very

but got of saying say – trouble be So would all in one performers. star I would other offend probably then this, that’s the the because is to I businesses, I that for that get

incredibly PEO Now business. getting that well. the can HRO a harder to you Also a isn’t obviously see little and segment, it’s doing It’s as separate big. the also see

I it’s revenue. never billion disclosed think probably mistaken, to getting I’m in – it’s if $X close not but publicly it,

front it, with to with And strong. again, business pretty retention detail, is too you much – not incredibly double growth very say. as a probably strong two digits, let’s digits that’s is revenue strong in well, robust growth is I’m So of bookings solid a but give double without right

very Just well. performing really

Maria Black

respect With user to experience. the new

during a prepared the user impact experience of it mentioned about very entire my the I the excited, bit So remarks, about portfolio. obviously across

do In or this quarter the to attach, point terms to year of for to material other what the I impacts and the it’s attach. going bookings at respect the to think even with or to any to tease experience of mentioned new you wisely user out It’s hard it relates specifically as in attach. impact

going and we’ve to definitely make. developed that’s However, we in the impact what believe

very you So ability to and more a user move also based it. is experience the it’s attach design. will. buy personalized to specifically new to It included is to just machine means for That order What to in a driven a action-oriented if buyer our to user the payroll, need as as action-oriented in the a the to as you The clients, move learning which very prospects our well really through very really if create design question, and research tiny next or that that’s on driven process experience what’s or well know bit don’t through artificial give you as the a color. leverages ability research navigation. user, to navigation, create experience your intelligence will means

remembers to of it up sequences specific the it way through how navigate serves subsequent likes following and individual that that So usage. the in system

that the fact a that person the would really new the the just user that experience actually such mobile for mobile the but also purchase of be is end not rolling will practitioner. part that wisely, the the us one experience, across things for for advantage mobile The the will as mentioned So we’re competitive experience user app. other I that become out very ADP excited

lend And future. fully user so advantage will to interface in better new web-enabled experience using the the a competitive for us itself user certainly a

as and is by gain something a more what friendly, volume so us in that as And going engage sellers you it we demo both and there, very business. can to more being to clients our able as so relates attach lot can tell this to excited to as buyers being do my commentary for well our able user

Peter Christiansen

Thank the again, on both. result. Congrats you, you. Thank solid

Operator

Our comes JPMorgan. with from next question Huang Tien-tsin

line Your is open.

unmute. telephone is If please muted, your

Tien-tsin Huang

hear sorry some sure. I’m that. can results me. you Forgive you’re Hope again. share looks about now. taking like It me for Great

PEO just sure beneath WSE growth to I revenue unusual. it side, I the the make On you understood coming want in said I know PEO was growth.

for Some a of of of I’m it trying if that sort about? was Or you’re is we maybe participation should understand salary better focus and benefits mean driven. that in? honing to might trying just to there persist and just reversion a change some that more that time. quality But it trend talking is understand

Carlos Rodriguez

question. get exactly glad universe. term I’m mean Listen, also and it’s for the into what large powerful Because And answer, you it the reversion the glad in businesses in is And because force right? for that’s large business when I’m a favorite economies, my is.

same the our If employment. in the of reported in in away the is participation most initial thing the remember, us collar the there of rates. you to pandemic, were generally jobs terms don’t experienced of that lower gray stages the That of benefits was though Fed terms that and happened high general kind in by white with some PEO this that PEO. collar, the wage quickly quantity we went in Even the have data of by jobs

wages mix the like that of – our of rising, were the everything the time, employee So collar but mean benefits was this ironically looked though you even have and like it and per worksite And shift. and growing at averages PEO. reversion white in because jobs going we is are are now as the would want it exactly growing, because where really expect employee

a because who people lot that unusual more coming jobs this back of are pandemic the have with don’t You benefits. have thing

philosophy slower change a grow back the any kind benefits it it But of to before. it’s kind re-normal So normalization really in or to policy or with a than or were makes employee change nothing revenue in just has opinion do worksite the our my of where number. we

long that’s are we to rates, market, quarter another lower second in coming trying some takes the rates. unemployment have a is unemployment few assess it’s think in the other going because filing factor which that strong though actually probably it’s than it’s I a that direction. in two. people contributing large to That’s what’s for and a kind how factor. expected problems states Obviously they a bit big We’re factor. initially a employment had There’s of unemployment. happening, And a this, were terms – that now little that not unemployment going rates of because because not or thought of state even raised they states have lowered huge to It’s

treat issue one is mean this think you as other, I it don’t because we shift mathematically a reversion that we the explanation. By necessarily know, and mind mix pass-through. the of revenue way, way the or is XX% benefits as the

really profit no there’s margin. no So and

So us explain we it’s to for business. manage obviously have not community. it our to how relevant Other of sales terms the in we than really

Tien-tsin Huang

the Yes. helpful. answer. really Thank you It’s for complete Thanks.

Operator

comes Cowen. from question Bryan with next Our Bergin

is Your open. line

Bryan Bergin

bookings. around Good you. Question Thank Hi. morning.

range cited first of an that below the year. of high half XQ you the end tracking acceleration So you in the in toward were the and

I improvements So that curious, confident on it the sales drivers some sounds the you as, fiscal the in what converting like larger the well And saw is force of Omicron Was productivity I’m XQ? potential just removal are that then through here conservatism. guess, outlook momentum for in year, carrying as you were were better or of performance that trends? deals key it

to So was that if I fair. just clarify wanted

Maria Black

in did third quarter. We strength enough. see the Fair

of the our quarter was specifically. with As saw we strength full in higher mentioned, that the guidance year you in third line end

So result. an accelerated

We that did expected that. market strength delivered businesses. and in we We see our down

sales platform as So retirement specifically as well RUN services. the

think HRO prepared And saw services saw have the with least, strengths. our Carlos we specific his PEO the I We then in strength during entire remarks, but last not mentioned is booking employer did portfolio, strength in business. that also which reported what’s international in

employer So the RUN, international again, quarter. fourth feel we services, saw retirement, of that’s we the where HRO that’s in terms the stepping the into and down strength market, how

end you March. that the the to quarter, we of the In as And in the if quarter guidance really of actually narrow toward step will, terms heading that gave strength saw and into delivered we end fourth optimistic with respect fourth quarter the quarter, was the confidence to our into the feel us overall macroenvironment.

There And that quarter. so we to of are see in new economic we we facing market, the tight you the mentioned XX% us the that XX% labor out see we the the that quarter. businesses to the are And And guidance as to lot legislation materialize. narrow Omicron here continue giving noded things as tailwinds right to are for execute that are the in last a the the with sit to of the increased that We complexity we that fourth and today, didn’t the challenges that year full confidence range felt will market. it outlook. such,

Don McGuire

when we bookings. really I’m I about mentioned you about talk remember all Maria a think just And bookings, as that we talk it, sure of ES and reminder,

when format better years PEO of disclosures couple disclosures approach we changed in for we would the bookings if PEO they really were terms. included growth crystal the where But It’s a talked our about to to in very ADP. talk easy bookings, overall employees. those been were worksite kind PEO math because ago So have thought we a you meaningfully in in that do be higher that to in the clear, of

Bryan Bergin

That’s we should or the shot. want this Okay. to dynamics takes it that you give thinking year? carry fiscal next may call be don’t from relate to forward? helpful. I’ll not are outlook to this XXXX year Anything some necessarily and of What fiscal I as may yet. And comps a know for quantify out puts about want you

Carlos Rodriguez

Yes.

of we sure we well first quarter more into I We going we’re color in a earnings wait and think that we’re year. did we making the we’re spot. XXXX. appropriately XXXX, before quarter said But referenced earlier, we next the have for challenges overcome for I until comfortable give going that good call no staffed that terms have. we some very last busiest on We’ve specifics the to business as the of all, with that bigger we’re think the of of now the in fundamentals

good better than the you flow cetera. interest balances, all clear Certainly, guys shape. we potential Certainly, client next that’s me So have numbers what’s year. are it’s in probably on pretty at et fund will higher from the impact that

sure ended certainly in even come that that go and on Day much, of when to we I on. we’re we release to ready how very make we those not XXXX. the though certainly sure There’s yet, we’re targets much quite mind, we we more will be mindful in in of rates things However, of seeing get lots lots going up, there’s have I’ll November. And volatility prepared Investor way rates. what my the at was will the we information back share prepare with But as everybody remarks that

Don McGuire

client interest funds will lot. a safe that say non-GAAP but be a up And it’s to it’s term,

Bryan Bergin

you very Thank much. right. All

Operator

Simuni Our next from MoffettNathanson. Eugene question with comes

open. is line Your

Eugene Simuni

Thank you. Good morning. level a question. I’ll start macro with

slides has obviously finger ADP its very on pulse the So U.S. of with large the economist.

it’s you now client markets of real of of see pockets of always strength of volatile what’s bit of your your base, that time client the interesting perspective on different on across So kind guys we’re going very that to read hear across you do us little and base what kind you a today macroenvironment. mind commentary in experiencing with weakness? providing Would especially

Carlos Rodriguez

Sure.

easier also quite intention, harder exceed consumer sector question get fulfil get or consumers of they markets. navigated economy, on be on five absolute X.X% as appropriately years Because years, Like and related not with said kind think control. own of eye make from had recovering levels. it I the labor who in, I that, are commentary an serving increase absolute growth, comparisons from the around XX that comparisons, And keep in reports this surpassed about you that two in about “soft growth reasonable to morning, federal GDP seven and to they’re And to things now in having year interest to to business. the absolute from the in labor the slow as higher end will is GDP percentages you looking like the obviously which pandemic But is landing”. spending, year, is in the gradually as almost you control think GDP our months And obviously because right? also per speaking, But have through labor in historically what’s point our all I expected rates growth we about world at ends to previous are the generally on Having happening right at trend been alluded mean, that people are inflation the before, matter in the employment. or based under to get pays Fed some are decisions the market quarter back on I up was markets. As But things that X%, the comments the can priced months that demand. is I to fact order whether call we’re about obviously or which now. think strong, of or a economy We But all have obviously client percentages. focused numbers but before some XXXX we we XXXX inflation don’t like service already it or are on XXX I XX impact have perspective generally reserve strong, speaking growth. And real that of think that of and think what obviously GDP two, robust a we year to have our numbers, people I who XXXX in is the that an see to are people call hiring relatively, year, Like that line in know, markets, our the which have which already the the real hearing some are is on you up helping next that terms the right? and pre-pandemic you next Finance fully we now. will right? our really would XX generally tell our the very as your call basis, robust. I through labor much would GDP, growth, XX from recovered. mean, have dollars growth fund factor interest on are trend live will from And the the is

results go we we’ve outstanding of all X.X% X% from pretty X% period like time. X%, if or stakeholders So, And delivered some that. GDP for think I that the of or growth, we kind during

good be is, markets. not – business administration for like strong terms one level. also in not a well more midterms that a of we the three behind else and our what a like of will call an be in in we as that despite macro have things the very it a to recession, favorable regulation think for generally the favorable So that, us employment now seeing need best going and And indicators towards would happens – no labor U.S. I a on believe just just on underlying the think, we the necessarily is in forward. right that I is that – recession. But another seat that macro years, we’re if are going would really all are like you Because doesn’t tailwind

we rates If like us, slows standpoint. where at not to think for rates pretty that recession, there's the a interest the I like the particularly they're of years, gradually is scenario us homerun really that which would for that but be large best where the point and five a frankly, a a tailwind to growth bottom at, the So kind stay the from is three seven line environment. and

Eugene Simuni

Don. and this And puts give you the helpful. follow-up, inflation? quickly Can then inflation Got the takes my with influenced your of obviously a us the Very, it. you for quick for is staying quarter? theme, it. maybe were in macro Got P&L running What very high, overview impacted results from think how so you. Thank inflation

Don McGuire

Yes.

did said, whole. were make done increase we've as couple on off-cycle the and So happy sure of and we salary that kept we the going to we things last an quarter, our a over to we call associates last

So that was positive.

programs and We conditions, bonus accrued booked in sales the some programs also had anticipated and some that were certainly quarter.

So those we still side, we are deliver were the able things – improved and from do a cost margins. to

that do. for positive think to was us very So we

is price yet installed of with we price of yet increases. price base. side haven't haven't of this, although and two increases course, Certainly, increases, aspects large our other initiated the planned, we the – The

that's accordingly, competitive in importantly will make that what an on still though new clients us have great we we those environment. offer We quarter. on sure had in last do either. call we new have things year increased our minimal a won't impact of some we as our we sales certainly and get impact the QX we well, having reflecting sales that value our And do full this enormous and the inflation – in did But pricing offers, sure to reflecting and make on from the signaled the a last very most

our rate new to making we've base is focused pricing making that and we keep opportunities, on are sure and we're and prospects service that have. we our the we're retention in the deliver high So the levels adjusting both new that that contributing employees wage with to delivered sure good

Carlos Rodriguez

not other what's I I obviously, always driving higher these the add directly interest, thing we client inflation inflation the as funds but beating dead And the linked am horse is may that would also necessarily but only that balances. driven here, drive capped, not It capped. example tax federal business, balances happens are lot taxes are our of to to wages, higher also some A of but withholding rates. by those taxes interest for our

inflation fed that their forget our more of float from clearly, their more and – paid, to is our five various inflation base about own three Overall funds rate wage obviously remit you can own there. is impact inflation, all in we directly of and wages helping two see in which the an But for in what factored and interest Fed all what's to have sure. wages Don our need is is importantly, it's portion driving expectation to So year, to – are the taxes expectations. the more obviously happening driving and collect And year, that balances. there balance is now for into people rise controls year being our agencies client rates of get is though a already growth with even the a obviously the the related employees really inflationary – referring the that's rather year, terms to, but one rapidly, belief

Eugene Simuni

it. Got you comprehensive. Very Got very Thank much guys. it.

Operator

Our Mehta with next comes Kartik from question Research. Northcoast

open. Your line is

Kartik Mehta

forward? to historical a levels, be opportunity or maybe to was a and get at pricing compared bit the think to you you about getting – maybe good will are of kind hoping to comments has pricing more I you to to made way morning. on Good good what going little that you just the and it able what way a look compared anticipate quantify if just ADP

Carlos Rodriguez

that right I finalized we us our have yet the as as XXXX think plan. thing finalized operating safest Don said, to we now really haven't not because, say for

relatively the new accurate. to will. the on was XXX% Don we and that of been lot pricing directional a the Don a timing-wise, that's that of have price out we business, giving work, something is think doing team of whereas of policy, the fact lot or appropriate I if that unnatural of Maria and to book decided go because doing what's We've kind changes not it's through, we cycle you and been cycle. you business, we color, anything which have easy a do on mentioned So control work

decision still competitive, we used Don of think in the I But a us. in of kind that word live that So front vacuum. not do is

are with to based competitors. but also do we what's with happening appropriate going so, with what's happening on inflation, And what's

to So competitive – don't doing going and competitors what But hearsay we're is watching our have there. since insight from sidelines into obviously everyone you signaling you here what are the from doing. be very and the any obviously get direct we carefully get

percent the alluded guess – a describe to what So consistent of cost, to X% increase safe build just historically to our it is we're terms you it's you looking had in been already all inflation kind of represented but of own now not of to our I It's probably way had Don things, it's years own wage and what and kind say in X% your terms of our were costs it revenue. of at we as higher best that because be in have to, almost XX whatever those conclusions to it for telling safe was price draw that's going costs And higher. associates. you our infer for we've kind if could which was X%, to in

have We costs. other

company we services other those cover things are to that other costs. us provided and other got like have every We to are and being that

philosophy I with market. in the be to happening like we our in is think would line what's

Kartik Mehta

question. last just, Don, then one And

going float the and volatility the are longer, on at because thoughts rates of or least Just near-term? you or shorter portfolio, the any it about how in just manage where changing

Don McGuire

of keep liquidity in. and often. end question to and of the safety this the get what that's the same And back we We invest at coming thing, the diversification day, we

so, to changes we're the it's to invest make going any unlikely funds. we And major way

certainly that. to we so I our but and think be we we to we'll want – do want with portfolio, continue to well to want be also prudent do

So for term. make changes those in we've there's any or funds been really long imperative mid the to us the near, no way impeditive managing to to

Carlos Rodriguez

it's have the benefit portion long compared is it's an think this our HCM goes I And really up nice smaller forth. for we it we much this ago, ten a and a to And however that economy say in interest float technology so that and line. that run and and down think business, side income, we've I philosophy been based our years also is on And services this of company. rates safe to bottom

said in liquidity, said trying earnings the to that are market, been all as portfolio trying and having good about would market, is better safety as long puts and clear rates. because And fluctuations so, the primarily that had to my it ladder enjoyed much not focus. much running that, also bad, as our and gain and as interest we but interest is HCM driven and time the us I business, an ADP's technology But right. they more low were. a more services tenure both we by where in security as they a for now because my were And our rates not we're that's we're life not philosophically it's Don position lot reason it's core have are not

Kartik Mehta

very much. I really appreciate you Thank it.

Operator

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

line open. Your is

Ramsey El-Assal

results for margins my the Nice in on question. quarter. taking thanks Hi,

a sales the you we beat number despite, also help think, that could pretty and drivers? our those about performance sort primary guys I headcount expansion thinking how puts move levers or of forward? productivity – terms handily in you're of as other with us increase takes You think for And through that margin

Don McGuire

Yes.

a number very happy the of people with our service So ability as busiest year. quarter into I time going because minutes hire a we're – obviously ago, third said into implementation few the this that's quite the to of going

because got we people clients on as they're did are and And as retention think I we've continued many in could rates we we suggesting our good well. to the a behalf we quite made do sticking that So sure of that around. job

very very, positive. So

would we we really been we – about comment at going I add And means. if to it's results. to continue different sales back forward, and things to there that we're what But to staffed had too impact our the the putting back very think than once time we any to and anticipated. certainly, on well. last reverting it's make a know, have the going very together. as still be the little We've well, we've accordingly. coming continue And not bit we than successful I to Maria, – to sales a we've that I margin talked change you continue and dramatically good much as not we sure know go hiring And about said color overall again, want don't you're to don't Going as productivity plan to we'll make not productivity, grow, doing other

Maria Black

ecosystem The investments making be the continue there. happy that we're overall Yes, very to into balanced. sales to add

seller So it's the about really enablement. all

we have many an clients to So directly with world-class definitely we that's products them last pivot enable between force That's as seller of entire as times, modern investing, spent our and distributing especially the sales continue mentioned virtual. there ecosystem where years this we in-person couple out tools. of wanting and

a is I advertising. That's investments productivity don't it in great continue we should huge we're really see advertising. I again, list, seeing but that also an piece And brand that in big and So seeing that to marketing there, shifts taking, of digital that terms of we balanced and the the approach take. to invest. approach area laundry balanced mention in

see and execution year-on-year there. terms market the that mid-market continue performance down an our in we area in of to that's So our significant

things sales about we've year this that continuing are to going execution these seen strong and had of all forward. the the that enable So really approach we've

Don McGuire

of about to One and I mix think would the PEO just that something on compared growth Services. by that that get overall been margins a last the years margin rate thing we've because add the PEO impacted is of for talking does it's ADP I Employer reminder

we're if have it clearly, profile important out only business I would But So right separately margin from for margin of the a different two to, in do right from a approach. those raised happens at that sometimes underlying zero strength hurts different you margin it to pass-through think approach from zero doesn't shift think getting very this have GAAP our overall is zero standpoint, to you'd margin sometimes higher you that's hence that the a you and at. issue example, as businesses we tell because you that that and we underlying us thing of look the it's the pass-throughs SEC mix for case, include a took and do much believe ADP. a are. pass-throughs very have those that PEO, of believes that's I I that terms you that because And what the story, look appropriate necessarily us, result because Because in mix. pressure is the margin to the margin of but the helps of guide

Ramsey El-Assal

prioritization? Okay. of That's capital and/or us terms of – seeing change? in that your very you helpful. M&A on opportunity, on you And backdrop, how are just macro context up your of strategy? the could sort internally the opportunities And priority current comment are or you in Or allocation the framing update M&A

Don McGuire

Yes.

assess of around So review, I'll start always, Certainly, floating as shortage opportunities. things et there to is cetera. just things and with and no

But there, than if ever do that. we had there, we said over So going period to we said here of as tuck-in – we've to continue which time, have and long anything Carlos and a and has did we're do and disciplined our not keep we're products a other portfolio QX. in other have products adding sure where can we in very one But as making that additional making tuck-in we're already that sure clean here than just possible. we as

continue we the come. when look time we evaluate should and will to time the So – and the make choices opportunities things at right

don't On the our overall philosophy. I – of just think our in philosophy, we've terms changed

share higher. We committed that buybacks little we bit XX% committed to a we've in to the XX% were the continue to range, dividends although to be

expectations the the back there just reflected haven't really little the I with number little their more, XX% markets of operations, think for seeing people, a that even though even are last what that their range. to were that committed but are to XX% still the we expectations markets bit, adjusted we're and opportunities think the a in – do off at a looking to to current are we're though I are are year, quite to something bit valuations who XX% M& the out or off, high, market.

any something And that we things will see or will appropriate. watch, if So we'll sense, not but yet, we evaluate. easier It's make it's we do.

Ramsey El-Assal

well. very it Thanks much. Got so

Operator

with comes next Baird. Mark from Our question Marcon

is line open. Your

Mark Marcon

businesses there. more bit versus how dig saw takeaways? was from would talk new in taking Good the haven't RUN? service takeaways? can little questions. to a morning little you're for have can they thanks and bit you much bit a up Workforce there? also competitive to biggest lastly, on your How technology about And my You of Are are that seeing able about you're and characterize of Rochester? in there? Can solutions what the I Or And sort commentary. the you bit locals and talk and to then competitive keep changes? been And wanted regards a little regionals little you from you with the you that the with strong retirement Just growth bookings competitor a Now with any you that seeing discuss seeing depth what mid-market?

Maria Black

be here start of in So terms one the to in to happy strength the bookings.

on to there takeaways our I what of would the I think focus competitive in terms not specifically Mark, So competitors around others, Rochester commentary in has the say waned. RUN, is and continued

anchored of formations that RUN new terms amount sales and the continued to in it's the actual business In performance, see. of strength of bookings partially we've

portfolio. a as lack certainly that, minute but the of there, you to in strength there's definitely about since is house. the touch for attach To not terms there services interest our for definitely say competitive in there a RUN And of on well would asked tailwinds specific retirement of so, I side

environment that in we that as you're state to a us sell and and And legislative have RUN that and compelling because in tailwind the yielded certainly and there market. environment new the ability in of type our in of the so logos of combination incredibly that that's an the state, have out in competitive significant well aware, impact happened changes as is makes takeaways offer for by compete retirement of terms an this terms an as to retirement

if Carlos, add know, don't have else I to that. So you to anything

Carlos Rodriguez

and – really one I share of balance but durability is the we kind of like mean, of kind this any we about market in And it's I – would I it try most quarter business think stay do in talk obviously comments sustainability, things terms trade being to of competitors, specifically grow our SBS, carefully. specific to making important for units. in important able long-term me, away I very No, from about terms that us of say of of is every watch to

competitors, important improved large share also wallet cetera, et that seeing of second and that's additional remains the quarter national We at versus love sell to third least to us. figures but And trade in in and terms our we balance we're of business, positive our love the the of quarter.

are on and doing we are warfare balance about right a track that products I me those strategies. and And think share. very market everyone, tells think to doing and keep that. in the we're in me market. national have competitors, of has said feel good I but no we in all data the of terms trade that So place in good still including competitive things, go-to-market I we're of of well some that of competitively competing think the question terms trenches also that And good with trench pretty good based it's day every our of we having that There's that competitors a in we some that

Don McGuire

asked Now you Mark, bookings. And Workforce about

Workforce HRO the on double-digit really which business, some well didn't color the in business, shared doing uses but addition which Workforce HCM it also And then we the mid-market and very just PEO we of solution, that also already, well is did So this Now. but growth. there's call uses out, to Now,

Carlos Rodriguez

its one demand. or services. think are a to the going potentially and become it's was with new, tailwinds And I of make some strong wins, to first first you going get, has already support as the about and terms to wave significant business, Congress some you first it's SECURE way That through one changes I I last because version was of in that because the SECURE created like bipartisan know the going probably other think they're called that of looks the retirement has asked X.X GaelForce think regulatory Act with

state addition a to requiring provide already was happening plan. level, where to businesses several to mandatorily the required were In states small what at retirement

of would for a problem are that like It's head be enough around business those meet have. good its as good and well, trying one have, problem been – incredibly things to to businesses all describe that I've to still tailwinds it's but keep So to problem. know doing those long demand. water is above would are trust this me that these I a But to a

our trying be staffed a And and so appropriately we're resources to busy adding it's in engine. business, RF growth definitely because

Mark Marcon

becoming mean, wins. of Carlos, GaelForce terms of – you in size we're the Can aware it I

to up whole? being going the meaningful end how on it's wondering to Just you

Carlos Rodriguez

just say would range. I general

So example. sense for you some the it's have than smaller business, HRO

So that a that it's images have it many start big maybe you half-ish call too shouldn't don't so don't assume business. grandeur. get of for I rates, terms I the faster think bookings one $X we But of and our dollars. before getting somewhere hundreds billion businesses of both think I business, of know, millions into of of around you I in trouble, also But business, for Danny, growing, here at revenue. and

Mark Marcon

the we look income at Carlos, description just, your and for how of mentioned And is interest of float when much Great. next discussion up a Day terms Analyst then that, take year, the you margin in know typically follow on the the flow you how of how but margin are aren’t you through? XXXX giving ex-float, let float just philosophically, the us you We discussions. look about I much at would that? expansion guidance, the thinking non-GAAP the

Carlos Rodriguez

of all, philosophically, hide first Well, we don't anything.

there's you that math. that nice to do a the little know, schedule include as So everyone we allows

to that you give since we in hold forecast yields is you the you'll we'll rates allowing only invested give higher fairly sure the a since or flow of X issue are forecast actually our going is year, are next math to is a money going we'll which do know come you the that maturing what's because percent benefits balance new through give And also to you'll as relevant And really maturing because balances we well year. to the of as what the in are from maturity. I'm you is so ask And that how be math. straightforward. year, And to ladder next in the be. going growth you're what quarter, us aren't what We

we to income and our take what can I that like of other other to question client factors client what variable are no easy would final up that all do. funds led And because do things of interest wages very the in we have side higher the one make EBIT is we on in math, quiz to, just reported terms math through what of be and sure then to inflation you'll before – ledger changed multiple interests to that's figures terms finalize that ways, us or quarter it'll are you'll the have from in another for think the Don be So including as you case we guided to or other is much of that in do communicate And up want net is right. Day way the we rates on think way the alluded can, forecast there's and figures. that funds also – Investor that that is that that, the interest plans the our

accrued of our had So for on talent bonuses, to you but increase primarily not are and we yet off-cycle Day, handy are some hold for trying in yet increase, or had taken fully action merit come driven Investor now when incentive we performance, are we this when not an to by we which of competing had talent. which wage

being, have are think then to factor price now. of Don increases, And things land talked about those the have where kind so weigh I an we And all does last also that will that finally impact.

guarantee transparency. there's you is I rack you up. So, have is up for all can think parts But I more us we And important for thing think make moving and will it all then us. sure few typical it I add one to a it's

Mark Marcon

Always Thank appreciate you, Carlos. that.

Operator

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

open. line is Your

Mihir Bhatia

for you or pricing seeing Jason. morning. back calling there? is about you lot so competitive segments This you that us at we you're in environment a question. ask Thank a the the bit Are promotional and I any little out I changes, know Maybe mix help talk the and competitors different just levels worth intensity Good Mihir a about even, particular on anything for across trends, segments, to actions. wanted pre-pandemic taking pre-pandemic pricing of compete aggressiveness in and can of the currently.

Maria Black

Yes.

Carlos the competitive So intensity. alluded to

called case. you that's and think I the it certainly trench warfare

I that and pricing with competitive the as terms it. both of pricing to to being as element warfare would promos, the pre-pandemic we're it respect the be levels, intensity to definitely back trench think reflective relates prior years, as well in of seeing of

it's think to fair I So that competitive. still very assume it's

side country-by-country, part that's on the existing it's our think about we or business on we're being base, as incredibly whether thoughtful think to the terms equation it price overall product-by-product remain the continue client new market-by-market, I increases of of does reason that keep price that ensure call segment-by-segment, in us that remaining environment. to competitive thoughtful the pricing we value in a

on we market So I has continues to and we to that and It continue would equation. that take continue there, and confident say a waned. win not the the competitors very intensity that approach the formidable balanced out we're in value price

Mihir Bhatia

then the can you. worksite broad just can maybe there? And Thank you about additional provide it seeing you're turning employees, strength in verticals? in talk color based, what any you Is is Great. to you. Is particular average growth it the there? Thank driving

Carlos Rodriguez

I been This no biggest talk in the you the a not or rate than either would all phenomenon the no, and hadn't really we they pays hiring probably good – very diversified big answer because to very bookings mean, themselves right with too the same and or also geographic basically or had hired have verticals the about It's base. Services, PEO they shrunk whatnot. control at growth are recovering, the and clients that specific during or We're have pandemic. that. the think in where verticals faster picture, per strong is Employer too I it's of there's client retention

which base, is minus with are happening then And losses. is biggest for And obviously but the factors the the PEO, what's that tailwind a so also sales strong.

Mihir Bhatia

Thank you.

Operator

one line question of comes from it the have last We with for James Morgan and Faucette Stanley. time

Your open. line is

James Faucette

the guess, out. is so deterioration, in slight for you expectation you up playing that question I do talked some with I your it much. intensity, previously but like follow to to And has improving. fact, retention Thank a isn't seems you on it about, competitive outlook Great. but wanted had and

You anything and you business any performing are of mentioned other contributors, there? are seeing helping but the main terms market better, out mid-market that contributors or are down international also in that's closures in

Carlos Rodriguez

it, the think mid-market, I usual, also multiple the as by but was way in kind really to think underestimated there the particular, parts. all moving I are we're international, with we best accurate of way, like that describe happy

had you pandemic So the at work.

mid-market, before but our that single completed we migrations by Now platform, platform, process right. initiatives kind the to And underlying looking John within some of strength forgotten at pandemic, that right had really before so before there would Ayala modern the we were the Workforce were XX that the but also a team onto that we huge historical normalization is be the right pandemic, improvement led which trends one of not improved there and XX thoughts, months our and business,

get that into get pandemic you the So then you noise. and

but Now and way or if apart, scientific business you not a you it forward, in our a really nut level the way that's to the floor come mid-market a before, least it at of to was right our way but will, news. that's right there's retention does it looks is it, than floor, higher out describe new the has feel no going of now, all pandemic new so that's good pull like hope that

is business we which again expected, is declares to way business get from down you at kind school big they're government the declare question, of that really of the they they everyone really bankruptcy, works bankruptcy. our some you're The into but stop other playing level that, because market it's way mentioning, their the reported and the sense, on of never item that market the a out more if of people business pretty small like of business look figures, bankruptcies we and out subscribers the and flat, not common

proxy is that a one only one. not it's it's good the but So and indication,

what way non-controllable seen normalization the that in our we news have we which have to of some of And losses, good market And that above. impossible planned part better it business, we enough because we a of that believe in The of the out why big right, segment is all so the fast the normalized It's factor would bankruptcies, it as than that call expected. performed is wouldn't we did. include controllable we as business losses normalize, hasn't down it's thought. that which business other

because net-net, better And but in isn't have the you that best you've it doesn't are thought, retention year. previous second ever so down had, the from we shape we just mean than

so a because others be defy. perspective clear may And wanted have I crystal would just on on that to which different

and forth of and because the down of related market. one-one-one are losses I think just economy to theories the – finance significant number percentage forth the the so in so

PPP is like which see company, stimulus they to that up. expected. but companies, interest in companies. out and going going like a system for so and And you when this these that would've coming us, some rates incredibly still check amount a above unfortunately, the net-net stimulus are all you they're think or person the will that's have outcome is we their small are normalize gratifying way stimulus of stuff check, stimulus And when one the It what and loans five checks, you consumers, tailwind, remember just with about unbelievable of businesses of forth person get was when put so and

Don McGuire

with market second that to clarify respect was high. it all-time was that, comment only. best Just James down the an Overall,

James Faucette

thought, down should that that deterioration Yes, does thanks as market some then versus that whereas should for you it retention still hasn't you're fast as actually you that to far or we still mid-market drivers so happened that. prevent platform your we the better And on expect normalizes, particularly as new like, then – that but are improve because help maybe that thought. there, the as interpret so feeling mean as what can

still you still thought, and be of some assessment? you not one may net-net, permanent and one deterioration, thing but to much that's fair a there So kind as happen that that's as have is

Carlos Rodriguez

think you details hope what's for that further the but you should what – we expect next not in we that outcome quarter important our assessment described there's next calendar guidance overall more the I our enough is retention. is several for have businesses, are quarter about SBS just is year, fiscal I that gave for business, of because color. exactly terms other we and a you I fair for are stand happen think for outside of by other another the business fourth next we'll And you months What have guys just frankly the But I And that then. the mean, you talked the to kind by and see year. factors outperforming of think I next I mid-market HRO business, business quarter, I economic is next information some of outperforming. think

conclusions, So correct. it's appropriate exactly to thesis is really I your not jump yet any to but think general

James Faucette

much, Thank everybody. great. That's very you

Operator

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

Carlos Rodriguez

joining that else here, We on like the and Ukraine in folks Well, think to in hate of would like note see for today. conflict. us happening for the to a violence what's end of I are for acknowledge, all it's our that midst you down I us the thanks for end. important express sympathies obviously to but everyone

do very Europe. We revenue Russia Ukraine, decent a and sized business we and and have from a associates a small in but Eastern of in standpoint exposure quite number business have

various I why, associates We who painful. relief when our reaction colleagues the in we've we this fellow certainly and had of had see end so our see we've some personally doing crisis. going to on violence the people other companies for to families and relief to with to I and truly you And our part along And But to of reaching our in global to for what kind me me to what's what the but do own mean, is pocketbooks everything agencies. not to Ukraine. – just citizens. it's think globally wanted to ever been of humanitarian done behind leaving been is pictures really what's horrifying. would contribution and their have children to efforts match, people flee able ADP, into any not to and personally, And their gratifying love spread, provide amounts because increased most to see very having through our our through provide and And largest matching been foundation we global obvious it's help the associates

involved thank and XXXX that, So you information those to to that once our us again we leaders you folks earnings the very for the and of Thank hearts And we some will year for But sort on of all resolution I look of with you the you're pray come end go out forward looking can all fiscal participating today. much. call. next with to giving violence.

Operator

program. concludes the This

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

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