ADP - Earnings call transcript Q4 2024 | 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 Fourth Quarter 2024 Earnings Call.

I would like to inform you that this conference is being recorded. After the prepared remarks, we will conduct the question-and-answer session. at given be will that time. Instructions

now Vice President, will turn ahead. the Keating, Matt to over Investor conference I Relations. go Please

Matt Keating

Thank today everyone XXXX welcome Don McGuire, President you, Fourth and Michelle, Fiscal CFO. Quarter and to CEO; Earnings Maria are ADP's Participating our Black, our Call. and

results we the this morning, for Earlier released our quarter.

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

reference will be reconciliation we these call, in financial and measures, exclude most to our During with of of of believe we non-GAAP to found the our A comparable useful that earnings a which measures items along description investors GAAP release. to non-GAAP be certain measures the impact items. can

contain factors statements and materially to cause review our differ to future will risk. encourage for call SEC that expectations. from on the current refer forward-looking additional you events We that information could filings to some involve results Today's actual with

I'll now to it turn Maria. over

Maria Black

Matt, good and morning. you, Thank

fourth EPS to is of and and get his and take XX% included With helped thank leading shepherd Danny broader that points a Congratulations out for margin to on Hussain these minute Relations a growth. we both. We expansion, you the Keating XX a started, quarter call. CFO role, during to for Danyal through pandemic several growth, my us our Investor years. first to I'd closed strong it year lead CEO past He transitions to Before helped like pleasure EBIT moving time. to Matt officially adjusted X% his welcome adjusted basis the revenue with

expansion, EPS growth, we EBIT delivered points XX% ADP. great X% growth, adjusted For and basis year adjusted XX for another fiscal XXXX, revenue of representing margin

highlights made we've progress the with additional some but start strategic share priorities, our across our to excited results. from first, I'll X off I'm

strong of QX international QX performance was bookings as as exceptional in enterprise Our broad-based, Services new well last delivered strength top portfolio showing businesses. sales and This Employer on mid-market, business business continued a our in marketing teams small year. our and

than enterprise RUN strong for In fact, our we interest our also not clients service. sold small solution, exceeded our of business only started Similarly, momentum. the in sales, has we in to client which the but reflects and are strength HCM reputation during and solution this quarter, commitment excited strong continue in XX,XXX new the resulted to space, and next-gen expectations QX great more

high came X% guidance the of growth performance, fiscal X%, at this the of a in bookings As exceptional end to our momentum. distribution that competitive our growth of ADP's model, remains speaks result on Employer X% With power pipeline to XXXX look advantage Services This our stronger forward than we for to new which building this a time clear range. business year, last unmatched us. even

our I'm Overall, second expected our in at the fiscal year all-time for both business to in XX%. highs satisfaction the our XXXX. We year the came for consecutive for proud retention reached retention quarter Employer Services client record-level total and mid-market for business in our also full that better scores share year. drove extremely fourth than new

product testament our entire strength supporting These our the our commitment are portfolio and to to results of clients. a

satisfaction client support these results that moving retention confident are forward. We gains will our

year. clients X% a the our as increased U.S. labor resilience Our quarter moderate We seen for the happy control pays to both hire of full per have Employer Services pace. to the employees were and continued the at market

X% expectations, revenue growth PEO quarter from despite continued of fourth our exceeded client hiring Finally, slowing pressure our activity.

laid X growth. One the our that accomplishments year foundation for ago, fiscal beyond our extend future strong will our results. Our far priorities XXXX strategic I financial guide

each in of like recap to the of great progress made I'd we these some Now areas.

best-in-class transforms with HR our HCM data AI, ADP's expertise lead this that priority very first an solution experience generative into another ADP front cross-platform launched had professionals, to technology. employees. Assist, by year and to data a combines client isn't deep that as powered leaders set We solution. It's Our on actionable we busy is This and technical just insights. empower

easy-to-use Workforce ADP Assist language HR in to the deployed platforms, already from including Roll, field that across receiving all and daily of our actions. meaningful We search several are to with tasks ranging report streamline and is creation by initiating tools enhanced next-gen HCM, powered These RUN, natural AI. Now capabilities of recognition an interface search, generative

Innovation to that rolling AI fiscal Award ADP the in more out Assist We and earned AI share we are XXXX. XXXX Awards, features even proud the Generative Breakthrough very to forward look in

our In addition initiatives. embedding our continued we AI products, in next-gen advance generative to to

Our XX% payroll next-gen count nearly next-gen fiscal grew and in to live clients client we more than as XXXX, XX% increased our by of improve implementation we active times. by HCM number continued

outsourcing. Our provide next and expertise to is priority unmatched

formula our winning our technology make decades. for even And fiscal supporting been our new help key has focused greater implementing for we clients. on to to approach will impact efforts Our clients our an XXXX, that in

further unlock AI deployed guidance associates. summarization value real-time service generative to support the by To call and we of tools our our expertise,

of to risk minimize We and for generative also during reduce other in the manual invested automation and our AI data error teams implementations. capabilities implementation entry

during as our digitally of new advance, were year. to out we're half And generative and sold RUN capabilities onboarding to excited time quarter, last compared client we this accelerate new RUN this started further onboarded, progress. fourth in about X/X XX,XXX the AI the For clients example, of

client and deliver better, record we additional service, our levels. allow to provide Finally, reaching plan help to tools new to our continue satisfaction scores associates faster

to partner clients clients business further and work. Sweden, on-the-ground benefit the and growing this scale We bring offering together solutions, our changing Globally, our extended to strengthen the unmatched in priority the our best-in-class, footprint, include third help integrated Our APAC our we XXXX, an is service expertise region. scope with global and the expanding fiscal global navigate to presence footprint, Iceland, our of and world leverage our to employees In acquiring strategic industry-leading of continued to of business. in our Celergo we payroll their scale. global our payroll

platform countries iHCM and serves in to clients X more pays also client Our several than and now more employees. than X,XXX million European continued scale

several leading support deepened partnerships our simplify to provide broaden technology providers of our we HCM existing can other with we spectrum further Finally, processes clients. and the

clients. client industry innovation we Next, I'd retirement new small workforce some new like continue U.S. for to leading business, to In share in successfully highlight how delivering to verticals. across from we're wins our multiple and value onboard clients services QX

made by and the the ADP's Texas-based processes technology management a added plan simplified we of was briefings the multiple plan and easy its manual up. plan with oversight, providing as on and providers. critical insurance clients' The set of ADP fees. lowered quarter, well the the reduced During by and of plan the challenged management fiduciary advanced the as transition client regular administration, team solutions stress-free transfer its agency, plan which manual the process,

of new This is retirement of our year. the X to services every who turn just solution clients thousands

Defined by recently nation's XXX(k) top the In in we fact, plans Magazine recordkeeper took Sponsor the Plan plans the Recordkeeping total Survey. Contribution XXXX spot largest total and as XXX(k)

the to fiscal momentum XXXX. in XXX,XXX over continuing business clients, so me Americans. of look see Retirement in services retirement many We address and We our Services savings helping joy employers the retirement how great needs brings forward ADP is serve it to

In company, needed had infrastructure recognized and its acquisition, extensively our a business, future HR orthopedic who to device deeper an grown HR technology through Outsourcing support growth. it

to future. look onto in it forward helping acquired common the services its support to companies our So a platform. turned comprehensive current client's model supporting expand We needs and integrate to this it

Services its $X and milestone long leaning look differentiator. launch This Additionally, in XXXX, year. crossed billion we our business revenue forward in fiscal Comprehensive since to a business XXXX, generating for more major in into outsourcing way the as come a a has than

the one In automotive the to next-gen U.S. of platform. HCM in we enterprise, our Midwest largest welcomed dealers

years address growth, HR current our of points. To client review its and this advanced conducted wanted a and rapid to structure HCM help, and future several to the a HCM organization's deep HCM went next-gen site of position strategy. developed plan practices strategy. tools flexible reimagine team leverage current that We would their other and platform, on our pain management Following

included shape the client We of benefits, later look solution future helping and initial added talent and the management. forward and to Our recruiting payroll, time their HR, workforce together.

celebrated strategic Admired we and extremely with financial ADP also outcomes our year. Overall, straight for year, Fortune past XXX. we on XXth In by consecutive year XXth Company was our Most fiscal XXXX, this Magazine World's the strong were pleased as and the the Fortune recognized

is XXth of our some also may you know, As XXXX anniversary.

of the to and for performance constant satisfaction the for on for associates support who ADP the on on our XX reflect to clients. dedicated we've XX,XXX continue world recognition take you them highs. I to received the their it recent our our impact strong ADP's new talented drive experiences, our for great our work, financial do associates. we As and and or the deliver all Thank clients, our client of years and moment incredible scores you want products a one to journey owe I recognize is to contributions. accolades exceptional for our enduring Be

call the I'll to now And over Don. turn

Don McGuire

by fiscal Thank QX our everyone. outlook. and 'XX Maria's and our you, Maria, expanding then financial I'll on start cover good morning, around results, comments

fiscal high growth 'XX end our was very earnings to performance QX of the helping drive expectations. strong overall, revenue towards and

broad-based strength from Employer quarter with better-than-anticipated expected. business growth retention, in PEO pays the better in in exceptional previously bookings, revenue than per we Services As benefited came growth. and control mentioned, new stable also

revenue Our full revenue strong $XX.X billion. fiscal QX our year to 'XX of bringing results contributed X%, growth to our

funds contribution For These slightly bolstered a XXX points increased on our basis our organic reported basis. results the Employer quarter, client interest, better-than-expected fourth which the ES constant X% revenue in a and from by in exceeded expectations. were expanded Services segment, our both margin quarter currency

reported grew For organic a expanded XXX and our the points. our margin constant currency an X% ES revenue X% on basis ES year, basis, and full on basis

increased on more points, revenue development accelerated segment, we slightly higher anticipated, expenses PEO QX. quarter quarter from loss a X% workers' the increased XXX,XXX. in margin XXX employees the actuarial X% fourth to worksite the unfavorable basis and contracted operating than due For year-over-year reserves. as Average PEO to for compensation growth basis in

loss development average and margin our less with favorable contracted year, For increased in reserves workers' X%, to revenue year. X%, versus due actuarial employees mostly basis XXX the grew contraction the compensation margin the prior worksite PEO points, full

PEO growth moderated year. fiscal from new the bookings business rate also prior XXXX Our

fiscal our I'll for 'XX. outlook now share

to While with while uncertain, are believe the deliver in invest we consistent remains positioned financial results strategic growth, future our we overall priorities. our solid macro to well backdrop continuing

the Our moderation activity of some year. fiscal XXXX over in economic the assumes outlook course

expect following key the segment, by X%, Beginning we growth with the revenue assumptions. driven X% to ES of

end high of business expect same fiscal We representing solid to new ES guidance bookings of in after the X% the X%, in coming growth growth 'XX. at

For result ES basis we point decline forecast XX the a from to 'XX. XX retention, fiscal XX% for

think from We our economic expect client to continue to are retention growth recent business slightly small by encouraged higher out-of-business but record levels it's slower scores, we and overall. some prudent pressure satisfaction

U.S. prior forecast normal moderation see fiscal growth As X% we the potential outlook call, pays view X% sector our U.S. and consistent below mentioned the per economists' for our This payroll assumes control on growth. year. most in to growth private for we continued earnings for is XXXX, with in

XXX contributed the and line in ES closer which overall revenue price both in 'XX, with fiscal we to to benefit points around anticipate moderation inflation. XXX 'XX, fiscal a in After fiscal growth points basis is in 'XX basis

to to FX fiscal expect headwind tailwind growth fiscal 'XX. ES in We transition to from slight 'XX revenue a modest a also in

we is funds the client reflects forecast it's revenue, rate continue important dynamic. current short-term client move forward for remember to 'XX. backdrop market's during this in yield from interest to remains the fiscal to expect the At increase which evolve interest likely funds X.X% through in 'XX And yield interest which fiscal for 'XX, as decrease rates our we interest to average curve, to the fiscal revenue year. contemplates point, X.X% And our to expectations

billion from increase $X.XX Meanwhile, range fiscal billion fiscal net 'XX. billion funds to expect grow in fund 'XX. fiscal from $X.XX funds those billion to revenue 'XX our to client 'XX. balances to X% We billion expect in strategy expect together, X% average our to we $X $X.XX to interest Putting fiscal impact our client of $X.XX to a in of in to increase a we range client

contribution by strategic XXX XXX offset expect in 'XX, revenue, operating ES increase as ongoing to to margin continued key fiscal as to by funds basis investments We interest priorities. driven leverage client points advance well from our partially

Moving the PEO on to segment.

fiscal pass-throughs margin excluding We and X% grow PEO 'XX. to X% expect in to to zero revenue X%, to PEO X% grow revenue

Our our continued X%. and our growth offset be pays business to bookings PEO employee to growth modestly better below declining remains by outlook PEO experience. revenue growth assumes new historical average for reflects retention growth of worksite control X% expectation that per This

XX anticipated from faster expect 'XX. increase than margin to points our accelerating to in grow for We forecast decline fiscal This PEO workers' margin PEO to basis new PEO pass-throughs growth. and our reflects decrease expense compensation an costs, bookings zero selling revenue, XXX in business higher margin

basis Adding consolidated our outlook X% for 'XX, of adjusted it revenue up, is to in EBIT for points. XX X% margin our fiscal is all and to XX outlook growth expansion

expect of effective EPS X% by XX%, tax to expect rate XX%. fiscal be to adjusted growth we around We And our supported buybacks. 'XX

modest the before ramp more We margin half XXXX. cadence. One basis anticipate quick adjusted of our on year the on expansion of year-over-year fiscal a in be half the second first trends EBIT to note in margin

I'll Q&A. Thank Michelle you. to back And for it now turn

Operator

Our Bryan from Bergin with Cowen. first Instructions] question TD comes [Operator

Bryan Bergin

start want bookings with to I here.

like pretty based And July, at more demand on year. So changes size you the general, geography? solid employer into you're I the on color when or in to across close it guess any bookings Can sounds the business? performance of a looking that provide just attribution

Maria Black

about Bryan, by exceptional overall an in bookings, from great to by talking truly you. performance Sure. fourth hear the what of on heels the love quarter. the I was the especially team

question, To answer it was part the of first broad-based. the

see did enterprise and small our we business, across So mid-market, international. in growth strength

as to to momentum product, the receptivity proud result X% led that to really execution, see it the we're overall offerings, moved for the pleased of So team quarter, exceptional the with really the how the which to through to and the relates the year. we at the

demand remains and would demand the that see, environment what of environment we strong. I overall is the terms what In offer HCM

actually And we And any to paid, have imperative not of that. do associates HR a the navigate getting it's that's employer. you're in for a certainly unique an they such, fit to tools. need business. we as not -- is the easier, their upmarket, into it's run mid-market, need HCM not their to what company whether squarely things an it's One about downmarket, is nice-to-have, They being

good momentum stepping out stepping feel demand a feel the the quarter. So perspective we about the good of strong. quarter. the Pipeline about from into We year-on-year environment looks

proud and of we're the So performance. very optimistic

Bryan Bergin

compare assumptions my PPC then here. in performance I PEO? pays performance on pays any versus appreciate you're Okay. and per just as 'XX? the control the seeing you contrast kind kind And what and ES control of that. follow-up, go cadence per on Can through here you of sale same-store And

Don McGuire

Bryan, Yes, I'll one. take that

et than other look to at you some expected. better And So the mean was JOLTS market BLS, as you look that think day, the a still at control, Labor we came that cetera. pretty I room are look participation down factors number market go, resilient. at of pays but got still in rate, unemployment the the report do labor look force it we we is -- to. if per there

they're are they're here So of nor there, kind benign. jobless claims

think the there is strength market. still So good in we continued

do Having be said we to growth pays have the do PEO we that pays and think to it stronger said expect we're as going X% PEO. per But forward somewhat we're ES we lower to control in per into than control expect 'XX. will would go thinking that, we be is that there's we ES. in still certainly, But the I optimistic is say that that be growth than had. expect we X% moderate, to

Operator

Mizuho. comes with question next from Dan Our Dolev

Dan Dolev

internally the of of how Just could maybe ES, know the things the go again underlying the much maybe kind And and you're lay on is could to versus about that the that it. and terms strength can then wrong asking be and like of in macro. out again, you is, touch guidance, what well macro macro, That would guide. follow-up idiosyncratic doing like to I want like go what for the

Don McGuire

Dan. Yes,

So still unemployment worsen. lows to the There -- jobs. it no could going broader of spectrum low that, say will strength decade it's think just good strength, I decade up remain on good there It's at as is as has to new comparable I to that to seems across indication or you lows. been? would that follow there's be

earlier to report NER out we're new the see jobs. and came today So continuing

out growth imagining. So I kinds PPC think prefer number could issues, that We any we a that's that? change all do imagine there not put realistic. What to I of macro could but

we can on trying today. we we're what what think I based to do know

So think as than that to to we question, stronger likely PEO. is earlier we certainly pretty good. I I today what be Bryan's have that is recognize mentioned ES But

Maria Black

add And driven results? by with Dan, respect are on answer Is My side, it just if to: just we can the would both. driving be to the sales macro? I you being

a And have and strong we And fits how on that execution demand really Bryan's that across touched terms so during think of a environment. the business. environment. I I into offer in broad-based question that's demand entire squarely it our

the our best-in-class NPS investments that well. service, retention as the we've have. the results we that By in it's made results. it's way, see that see into in So the products, We we our

I been think so stronger. stronger and we've And getting

our an would the we of imperative say, I incredibly are then the well offer executing again, value I yes, proposition for businesses. sales we think what once differentiation. full is And spectrum of across

ability I mentioned advantages in Part that our to one competitive the market. canvass prepared of has. the greatest it remarks, be of I that ADP entire consider the to is

a And well. product we all and they're we I their best or of the think things, at executing a to into to like we very and right is every out the breast there. up of those are lean buyer result with as that trying through service single trying or they're a trying turn, buy buy show way, digitally whether traditional So to channel buy

Dan Dolev

Great Thank you. results.

Operator

Our with James next Stanley. question comes from Morgan Faucette

James Faucette

wanted I ask to on Great. competition.

have price on of more been your getting from and recent now? of meaningful in your some perspective, Some it of right down Have there's our the competitors, you from conversations compression competitive others the those in observed quo with that kind mid industry fairly Or some market indicated price? segments. particularly is status

Maria Black

what James, offer is quo. it's status pretty would I

things meaningful nature. any those We of compression, observed really price haven't of that

that run I for much atypical spent it's seem doesn't and we some there's watching year. all see years landscape obviously, sales lot compete, always throughout terms it -- of the environment. how of in and us of me. that say And would whether think we times Given do things of I would But that at a the competitive various promotions the I've

So I haven't anything seen anomalous.

I changed specifically that's us. is think landscape the one the in thing competitive

when our been. execute, best everything record we're so think record I stronger to I incredible And execution sales, ability just think about retention, we've NPS, mentioned, I than product, ever by

it I'd every So the purposes, lean we environment that's day. shift. a But single say competitive still into our from it's and

James Faucette

And and we Great. And of to more Glad if also, you hear business? down think market. in in bit then as a mid-market about give color improve? that. you international over to regions And points potential bookings, on how there between continue the little can should what especially uplift price enterprise, time wondering lower-cost seeing composition are the the

Maria Black

the down strength, incredible way, offer market last that had I What top would on by year. strength of is the incredible

in mentioned business started XX,XXX did onboarded, fourth the think during and clients quarter I in we alone. sold or I small prepared mention -- we new remarks, I the

market in are So space. we're our million down officially that got X.X XXX,XXX of clients

so continue are we see to we broad-based that. very on demand. well And just And again, executing

results mid-market phenomenal. Our sales were

and what next-gen I remarks stronger, about space. Again, by our enterprise HCM saw in getting been that. an prepared the newer also respect so in our execution we specifically has to with the incredible offering. good mentioned Just really feel product team. the

I'm more about significantly general that are more One of reasons yet. we seeing than And we're anticipated, than we we excited record this anticipated. seeing the at so results, we're even is not availability quite

that market for to buy and me this stepping opportunity. that excited is wanting enterprise the into suggests space what offering that see about clients -- we're And from in is the to market this We ready offering. the is ADP,

kind strong that's of strength. the distribution. Very So

had International a year You fantastic asked about international overall. specifically.

of So story it X was the quarters. really

first last first think I over of was strong quarter 'XX. year year-on-year of quarter

even got quarter Second stronger.

Third even And you'll quarter, quarter got that. guess, got than even stronger stronger probably fourth than that.

business well. So international overall, fantastic had our year a as just

Operator

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

Ramsey El-Assal

more than that pricing that speak could really you if striking is comment you've without you you confident how are to wonder you being your the pre-pandemic, able of of taking and you XXX How balance take take balance I less which -- direction? I confidence also retention just and that sort the been level are basis took thinking of about on you're can how sort inflationary this in a points to about between tipping than -- environment. in retention wrong think although pricing,

Don McGuire

Yes, great it's don't a because that Thanks really, for making think get sure about the question, hard decisions really greedy. question we Ramsey. we and pricing always

what in is As we've shared interested long-term occasions, on value of we're many lifetime clients clients. those the and

we're careful on to not So price. very, over-rotate very always

you're was were inflation And is points And back back go into looked and on the very we right, XXX in we basis that basis If able 'XX. basis very, take the but we 'XX was virtually to pre-'XX the different 'XX then, we XXX environment not inflation look moderating environment, more range, points teens, and existent. at have realistic. XX the and we thought we been points as about to

can So we're it in confident can the points. We're places. we that right basis get confident that XXX target we

to target. So a it is expectation is something reasonable us for we that think

Ramsey El-Assal

more me this curious of long soft about framing follow-up about something Obviously, you're new to if how in terms up to generative a retention, monetization. for kind the revenue And Okay. will about benefit AI. we expense an bookings? long-term Is there's talk of directly? how But just dollars internally. AI think the ever over that opportunity Or is that And of just could is could -- generative this is sort something about term. it contribute you drive should I'm there

Maria Black

both. would question. My great It's answer be to you a

a about that I perspective, it. just generative again AI at I to during from length this love know it talked speak about you prepared know morning the so remarks. I And

across, offer focus the putting with generative is AI, Assist Assist I work ADP products, one all and that each it's whether ADP of doing into across sales to practitioners, What or it's putting the of into the help would our we're that we about our think service feed is exactly and the way suggested, or associates, our first foremost, it, own and ADP I should help market what associates model. the it you is which have

its should about relates form, in And product X company as efficiency NPS. ADP it and driving about this AI simplistic about Assist we're machine and it's I recurring everything have, And metrics right? when the think about sales, it, most the that of revenue retention, model it's offering we that our to about feed, those model, it's call it's and generative

we they're more drive keep we happier be and efficiency. should we also And turn, have should relates in Why? to a better then Because NPS. sales, experience they able So have it clients. as to

a the of investments the the that's lot and outcome think of making. I output we're So

you at look is inclusive like use trying growth. revenue That both do of business that our and it imagine, of stuff accomplish, AI as can on opportunities. long-term generative cases, as we look coming monetization one could each of the said, goals clear what ultimately the years, has we're of And as we see cases working what as we're to that vision in all well the the short-term

of is as transformation we've we our piece some that market. been that opportunities as a sharing But I certainly, a driving years across of type broadly sure making company. the to strategy, think of to continue those drive start too for that's the early big it's

Operator

Our next Samad comes question from with Samana Jefferies.

Samad Samana

for you. Don, maybe one

difference just I a Or the this to WSE and to make And slightly to I last the guided lower you're versus last this just apologize this assumptions there? back guidance, thing, mechanical If WSE but reconcile kind and growth, better was actually slightly those is the trying revenue to look question, retention actually just there of PEO dumb a you understood X but some is And I had comps? trying question sure big X%. year year. Just things. if it's Is to assuming guidance easier year, to better X% you I growth. assumption, it. I'm I understand on other PEO want year,

Don McGuire

question. Samad, No, a it's great

if revenue there things you forward are the biggest but growth So few is happening pass-throughs. the growing, is 'XX, a zero contributor look to revenue to margin

largest and that's the component, what's there. happening So that's

And under earlier pays per we've that course, mentioned then, control of are pressure.

an then answer, on I I to think pressure little said focus we thing to area. the for ES, sales in as do have bit earlier continue And X% margin. So compensation low workman's that on the of end from to X% area of PEO more a get for and we we towards the And guess the reaccelerating. third is the

employees. get selling more certainly to have worksite baked to to we our top So expense business in make grow we sure to the continue that help drive line and

Samad Samana

the if a happening strong seems Maria, that's right back, one take like I now, slowing. huge that in and is just backdrop business is is step And it Understood. very what

business seen still been slowdown for in you value a I because performance at ADP drive backdrop? a things of historically to backdrop, wondering, so able these has kind of impressed in you've strength slow was by and that you broader I just just are you durability the how even remind the slowdown us what just multiple you've been may of in the periods, And the cycles, time, see think all can be the the when as we're long

Maria Black

And Samad. Thanks, right. you're Yes.

environment that it a change. bit that HCM, in of different I should macro terms it spoke I we I durability the the is a to what think itself think durability earlier the offer, imperative to of of also lends

in great times and in offering the also environment. might great our you pressure as of conduit sales be employer So as is in a force it's growth, steady, great times the ADP, will, if there of it's of

have in we playbook. the as quickly of terms the adjust proposition, it value offer what -- We And environment very is we that very, shift. so a demand the can and demand environment

should course, macro, the be will be impacted. there a we huge decline said, in of that Now

bookings. is But very things and the imperative. of durable being is HCM getting from proposition, of the standpoint is it the that at One a of of result very durable, value that it time, same a does up impacted self-adjustment as an end

ability feel so our about we to And flex. good

seen I've that, student And and over the all same. have seen great team time, confidence the flex to time your of been that and Samad, ADP's a point, long that the here would I've as I've distribution, do a

I relates different also Don you model in could should market, will, it that shift financial think self-adjusts to financial macro. the a -- about also talk how as if in something the the maybe the model, playbook,

Don McGuire

certainly. We've But today. the talked word lips frequently or XX a back or more I Yes, year on people's months, we before. think than -- recession it was if lot go about is maybe this a so,

think seen I latest well. as next read a XX% the months. XX some that's that there's of the probability recession somewhere I'm in says sure about survey survey the that you rest of I've have

the recession news we XX is as isn't all-weather a good over unlikely do the what months. But looks company, discretionary. it have So we're an to that going very next certainly,

sales in I lot to need levers it. a implementations if a for looked find as do itself we adjustment. cetera. headcount, that slow, much as it long et time think saw The et don't XXXX, we a like in have, to slow, slow, place commissions have But if took You of we cetera, ADP

recession those to. about But thinking we that is use and the survey months. So I'll correct tools need in nobody with, hopefully, we should just think a next finish we can XX is that again

Operator

with comes Mark Baird. question Marcon next Our from

Mark Marcon

extremely the clients. talk getting wanted as the would using the you were as the side, source Were strength characterize formations? RUN on from? business strong small those really and little Maria, cited deeper Were clients both. strong clients the to in you regards competitive Can are well doing the of new XX,XXX How business are? about that? takeaways bit dive what quarter fourth that those With strong bookings bit into a Where well, little the solutions? brand-new the seeing they retention. on I you a you bookings, to Congrats

Maria Black

Sure.

that from them down market. from right? we canvass getting entire So broad-based, are we're banks, it of inbound, engaging where businesses, we channels, so relates getting CPAs. bookings, We're ecosystem the getting them new we them Again, again our on clients as the getting bookings digital the So market are through with to are them? are specifically the

seen, That elevated but said, it business new still pressurized. formations, an we things Mark, the is of year-on-year have rate, some at that it's

minus X%, to still sorry, but it's it's compared norm. elevated So year-on-year,

so less as new we of from that, result a time did see And coming business formations. this

Now more we also we saw competition. from but business the trade, had a in lot coming an come balance increase of from some formation, new

rolled up this shifted would say incredible mix All XX,XXX result the a fourth broadly the bit terms of down I what how little in we to that in units quarter. So of is canvass market.

there but that, are broad-based, bit question answer it's tiny So specifically. of within to shifts your

Mark Marcon

pickup in Great. competitors? you then mentioned of from talk transitioning of what competitors, fully And XX% terms source older Or bit of sales. this in clients platforms? on new also And wins are before you're are a competitors? it's the what of that you a they GA. little Can there HCM, terms the sort is And if from are ADP next-gen these about from are coming

Maria Black

The Sure. and against is head-to-head both, also competition. answer

did more seen some we've upgrades. than logos We are So ADP new see before. them of

So ADP. we're new really wins net to excited the about

Some of those were from takeaways enterprise competitors. wins and

same head-to-head competitors, Some market said offer why them is about wins the competing enterprise were appears that choosing we is the I'm and have it, probably in which, optimistic against are clients incredibly well so because ADP. it of the again, that

Mark Marcon

client the underlying, trend you're both? or drivers regards satisfaction your service But scores set? great. a That's with solution up. then characterize Is is it client Or And continue like of a retention, combination it the it satisfaction? would guiding to improved the for prudently to you client the of normalization. primary know I How seems

Maria Black

of combination NPS both. fantastic. a is It's

for was as the year the record. single business quarter well NPS as a So at a full every record NPS. is Almost

taking both, out, making that So what It that And So products modern, making them our this our right? is years investments been the best-in-class is we've friction into more made drives products. NPS? these more is investments making newer it and self-service. and we've

All service, business. into record the those have NPS with best-in-class is that that broad having we of best-in-class things HCM coupled these across investments, go driving technology, the

So a correlator retention. to as is a such, record that direct

really we're of so XX%. proud And the

at still And is reason we've you year had We're is, into is thoughtful perhaps as the every into prudently that again. single guiding the step We retention behind normalization that and know, many right. almost that just there You're also times, to we the guide business. conversation sure executing make across all-time be want as prudent. highs because this that happen, to the are some could we year is

Operator

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

Tien-Tsin Huang

Perfect.

okay. on side, but outlook more if the Just that's on want retention, extend the to

any of on the large? you've know balance didn't you're expectation-wise anything mid already, Just different seeing small, of expectations know retention. commented across segments, and I terms but I if trade on in callouts

Maria Black

year, we offer Yes, that it's the in I that this same guided this just year into is the expected fair. the down that year, would we closed, normalization we potential the way What reason did, market. it's

that Now -- entirely it of for I've isn't the I market to know. pre-pandemic. isn't back It been saying where down years. last couple The normalized yes, was

the bankruptcies, the see and to some point, that's Now there out we business. of it's be it that just X years believe that we suggest seen that business all I And that of uptick But at may have prudent it's an we that ago used we that some get could new be, normalization. such, in levels as haven't normal. to in still at

really be, suggesting. it the happened been again. to have we've happen course, same And it's of would yet. So that It just hasn't our goal thing not

Tien-Tsin Huang

guidance just outperform, okay. year obviously, I the to so check. you did Yes. you set wanted this last time, No, And

said you've -- that. and I totally again, prudent agree think this with

expansion. it's my Just I very quick margin typical just the is follow-up front. margin know on

bit It for investment last maybe quarter in Anything outlook margin little like call you a the a 'XX? incremental you rebalancing think terms fiscal workforce fourth I in in different did look does have more quarter, of it well. G&A. as

I sure So to on margin we front. puts call takes and just there the want make the it

Don McGuire

Yes.

for So question. Tien-Tsin, the thanks

you the people in got the I we're sure people right start the in where think the and always we've I'll places. We're right making we're workforce right of -- -- and numbers ended always there. at that looking with the right places

don't think looking we're on at specific So any there's callouts real margin. the always that. I

modest, are things XX, there, but attract to speak. they are think so are bps they some Gen But XX These do I AI considered. investments. and modest that here all there

bit of control, pressure half. pricing client can margin Certainly, would lower specifically lower lower increases out from But pays all read called through. from the the those fund that back are I per and next year we've things and from interest, a think get little you specifically -- in most

abnormal. So nothing

Tien-Tsin Huang

it's well. and glad congrats And see No, Danny to as Yes. Matt to typical.

Operator

next Keane from comes with Our Bank. question Deutsche Bryan

Bryan Keane

Congrats On in on of accelerating were the fiscal but 'XX ES. fiscal year. year the the quarter really bookings strong in recovering the PEO, and end towards moderated

what understand to changed there. want just the marketplace in So

Maria Black

Thank a Sure. congrats. And was That perspective, it appreciate moderate there year-on-year PEO way. from still I as back did PEO the said, in the in by did a bit you, half. the well. strong bookings bookings. growth moderate

feel And proposition my the we the demand equation a value PEO. is for was It about still the the moderation really so offer, feel vantage for of incredibly the PEO. solid pipelines solid from and strong year-on-year. demand point, the the in slight offer, about We

requests the And PEO, appointments, in of activity as things for it's the nature. with new market, proposals, more about in that know, you pipelines

strength bit a the all the show in bellwether did that it the but half. So moderate still there, is signals PEO back

Bryan Keane

just Yes. PEO it follow-up growth previously? to would what that single-digit or And was targeted with to just thinking get back revenue take high a double-digit

Don McGuire

sure we pressure some going. it's sales a some that to ago, making to think as time we little of kind the investments bit Investor years going we X going those were take is build I because guidance PEO, it's get back. that more force bookings we're to to working, I Bryan, of margin of Day mentioned seeing realistically, and some make take can But the that in earlier, time. Yes. to provided and in get to of we're And

focused So we're on definitely and focused that, getting on we're definitely there.

going if in But time a see lots the control, the pays put to get were course, we to be. of per little to Of that in we where it's of bit some want wind back take sails. to reacceleration would to

Bryan Keane

congrats And sense. makes again. that No,

Operator

question Research. Scott Our Wolfe Wurtzel comes next from with

Scott Wurtzel

slower context expansion to wanted the the the like maybe anything the or more to I drivers half. revenue, do second you it first could of on side? seems does us back that the Is if of guidance cost on the walk half in go and to have shape through there. versus margin just Wondering

Don McGuire

the some of consistent first are specific of we patterns have expenses. the No. expectations on spending the nothing year, in really shape Good question, throughout Revenue Scott. call year but really to More It's pretty quarter-to-quarter. half out. the

up to the that back think stronger first. want give to a in the going than heads we're Just folks half be we

Scott Wurtzel

you're love side. Got the it. into hear and on about your That just sort where kind good seems it it of I internationally. follow-up incremental makes heading sense. year, a investments is international to of to And the a relative like seeing maybe expectations making maybe of And international you opportunities in much for how business other as this for on you're traction countries priority just some and mean geographies. we'd

Maria Black

Yes, fair, Scott. It is a very large priority for us.

squarely years. our is may business priority. We've for our strategic building International this benefit with you strategic clients that global priority fits into to As our remember, scale. third XX-some-odd been

countries we as are the to relates moreover, behalf competition well serve we've the on and clients, it our We out. number ahead in of built countries that that those infrastructure the of of

to clients that sometimes countries, of So we do very to complex, speak across it's complex that all sometimes we often large certainly, our mile have to offer. countries. final our the complex But ensure a pay the and clients things and the piece big ability or small very

move continue this employees as continue they as have to they system chains supply record as globe, and companies in think their globalization, distributed continue have of the perspective from they about world in to world. smaller think of I across global to workforces around a to remote want the countries

continue clients more, we growth network incredible today they of support in or add countries, are in become as -- economies again, is the clients XXX the and and where it's have to heading. to if our terms ability We this what prudent

MNC is big space. a for us our of piece growth And our big it's advantage our But It's international in in business the differentiation marketplace. piece ] a of competitive clear story. multi-country the a [

Operator

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

Caroline Latta

your average duration number the strategy on is outlook year-over-year about the how XX the investment portfolio? This maybe to that And yield the We you based portfolio is for rate a to Jason. on see up months. Can for might on adjusting next be Caroline the the be of cuts talk being of rate forecast. little based you the surprised FXX were interest for expected

Don McGuire

Caroline, thanks for the question.

So strategy. we have a do laddered

see point you release, So at can have think refer schedule the for you and $X X.X%. at I think, to billion our our X.X%, if for page earnings the investments. that's in can of the, is reinvestment time this And the maturing 'XX, that, I in you see we actually last roughly example, maturity

strategy opportunity for this have client by that that growth. this So a its years, strategy. there's still having much shows where very we as lots yield strength. to we I we're funds some over of normalize, opportunity seeing and inverted did of is to But because say lots of the ADP's think laddering curves fair last place opportunity, of yield still couple cost It's have start interest that the curve,

still year, I X% maybe it couple past in seeing have much would continuing to of X% as as growing area. that the the But in per grow. moderated wages portfolio It's we're not moderated has because a bit, little to add little just again years pays that good that a is growth next control to bit.

still opportunity. have we lots So of

market. can these those current We're say. put general And most not forecasts fund using our the on the here, to we're together thing and our what is the outguess comment in curves on interest the trying curve. on looking this market that important at has We're strategy, rates. yield to guidance to we base of of these whole important make commitments most yield The all all I or expectations

Operator

next question Markets. from RBC comes Capital Our with Sabadra Ashish

David Paige Papadogonas

million. expect of further Ashish. workforce $XX as for workforce for benefit on EPS optimization Paige guidance the 'XX to the we David much to we how I And had back just that there, to quarter circle charge XXXX? of Should wanted is the that yes, This the in if well? optimization what's in

Don McGuire

needs be it earlier, has the to size always it make to needs Maria we've the David, looking be. sure I that shared workforce places and got we're to as at mean, the in

behalf on So those we employees. had difficult made of decisions some we to those of that make

this. But needed And over we done be to done forward. look the ADP we've always you to years, at what at always look if go

the say margin So that and very as we're at we I here that with put leave well. out the guidance it happy guidance and would just

and and So what But we we're we'll done that we to we've to we the sure do looking sit do will make need future do, execute, brings. future. need to what see today, what forward we we here to as the

Operator

Our question Northcoast Mehta with Kartik Research. next comes from

Kartik Mehta

from and asking been maybe a demand status to it modules bookings Are about enterprises bit. has standpoint? change an or lengthening cycle talked there's cycle buy quite you've a in of strength the less enterprise no sales And they any sales if been in standpoint pretty just Is Any much sales change really know kind I or change. I'm have wondering at quo the all? past? a the from

Maria Black

It's question. great Fair. a

decision-makers relates it which we think is bit are the there where what elongated from a it arguably, it perhaps as of But of year, more and it The new process quarter normal about we're overall talked during really that sales to the last has throughout used cycles. It's a at involved. I pandemic. look bit like to reminiscent pre-pandemic. was the a the height

in motions they're as was that one are moving motions. through say at But certainly, not But the point the typically. as moving would pretty time. fast the deals I it's it through

seeing modules. But we're not less

into things are where big HCM again this conversation big demand. of around is conversation which record, next-gen global global, of seeing fits squarely system We that nature, a that around a

So necessarily bit, global space not really how of we've over that the the what a a byproduct but of new seen in as that's Kartik. last shifted enterprise conversation clients years news, couple It's operate.

offer best international that what leading and the kind we're how that's enterprise certainly, space. So across of

being the or to it less but not made, seen and similar to decisions is we've But modules pretty from that cycle nature. involved of as that prudency throughout are anything year, a decision-makers which this deal relates standpoint, more it's necessarily what

Kartik Mehta

that that economy, just people on at or in about is you give as concern would behavior? you get look of change mean, the just business, changing anything And then the anything small health business as the the or small worried I side,

Maria Black

Great Yes. question.

so things, many pace That of earlier, which from right? So tends is of elevated it we bellwether. them still to monitor down be these new the it's of spoke year-on-year. norms, is formation. bit one business Again, I So a to but

are that are we've how you We that all call happening years suspend of time, looking payroll monitoring it of for metrics will. We're sitting we're if capacity. real and seeing things in of is monitored type our what that clients ensure business. many These kind are at to that also own and out

of the the pockets, of But been us say things items at would Quite same the this yet. our there there juncture the pause. I it formation, make time, watch What to relates is of new opposite. sure business it one. that we to have kind gives these don't one eye as monitoring be we None are surprised at shift similar on. we're little get to very hasn't great But should that there

Operator

remarks. call you. Thank any are the There no Maria I'd back to Black further like closing for turn over to questions.

Maria Black

Great. you. Thank

end is which like to I our I'd will So XX,XXX take I associates. to this where started, thank opportunity

byproduct service, are that Don global technology, the of committed results the best are and they all I that of the this the to have scale. and incredibly getting broadest having biggest, All pleasure a XX,XXX the of call best-in-class on to represent, associates

sellers, to and a is And aligned service would associates, I from our it do, product client we on contracting everything our commitment suggest centricity. company whether the to what to entire our takes process, being it's really innovation client to

spirit, we to about celebrated XXth million tell moment the thank XX we've I'd like a their impacted quite that to had of to the I honor all will years navigation. think of as that clients to just also you, our success X.X over contributing ADP, was of In journeys remarkable a anniversary it and the minute take clients. and

take to honor So a definitely minute clients. to all want of our

look all And with interest investment you soon. And in appreciate ADP. but least, joining us. in then not I forward speaking who your last your you dialed to you I I and of appreciate today.

Operator

you participation. Thank your for

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

Automatic Data Processing (ADP) 31 Jul 242024 Q4 Earnings call transcript