Automatic Data Processing (ADP) 26 Apr 232023 Q3 Earnings call transcript

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 2023 Earnings Call.

I would like to inform you that this conference is being recorded. [Operator Instructions]. the to turn now will conference Mr. over I Relations. Hussain, Vice Investor President, Danny Please go ahead.

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

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

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

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

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

I'll now Maria. to it over turn

and you, everyone, us. you, thank Thank for joining Danny,

XX% our including delivered adjusted EBIT growth. expansion XX% quarter, constant currency basis we of strong margin and results, growth, adjusted third EPS points revenue For XXX organic

our financial clients over Our the continued recurring that model. business as highly revenue the innovative performance and well solutions power world X solid HCM of around mission-critical diverse underscores serve million as our

over clients helped a In market QX, new strong user particularly record continues healthy overall. we past Services, QX, performance growth, with XX,XXX start new us Employer I'll QX quarters. sold satisfaction a bookings level bookings reach in down be some highlights has client environment from to And rate few usual, started representing where amount. was and experience The drove As our of business RUN new quarter. another the we new solid quarter these Bookings record portfolio. demand in

by but by had in offerings strong the our results only and tailwinds retirement ecosystem. not of market our also legislative down competitive supported also HCM services We positioning bookings insurance

and Demand for reached our Employer XX,XXX the Services high, mark. HR client Solutions we recently remained Outsourcing

We which we compliance-oriented in key guidance have forward our the in from within also on basis, are range the year, year-to-date our including of expectations the wage been payments, and and look differentiators bookings line with finishing saw continued tax for a booking are remittance with year and we us strength always close. to a solutions, our outset strong trending

rate came once Our than in again. retention Employer Services expected better

was normalization by international to we of our in offset to our down rate market client improving business While U.S. retention experience the mid-market strong satisfaction. of from rates, years which continue in out and benefit continue this of both businesses,

As be raising such, we're to guidance. full year our pleased retention

pays a pace. Services continues Employer gradual per for quarter control very decelerate the and grew Our at to X%

As we per at resilience, which total several have have higher pays previous end in larger companies our continued the pleased the seen this has been many layoffs quarters offset demand guidance of by year-over-year elsewhere, in now, growth. for control expect With range. employment to we're resulted labor

this we growth largest ever. QX, much while our March. This in revenue worksite see and especially PEO, decelerate quarter growth were and our a bookings We bookings performance Last, in in in in to for nicely average continued PEO on better represented reaccelerate to resulted QX than quarter. employees pleased experienced PEO

long-term Despite opportunity. secular strong execution sales our are continued focused the macroeconomic delivering growth we and remain confident PEO uncertainty, in on inflationary we the environment satisfaction, on and broad-based current client and

be are Stepping back, while pleased we track deliver financial very to on strong year results. to full

experience and journey. to of important progress are our innovation leveraging more decades scale are modernization excited on even we We continued about drive how unmatched our

more expertise employees are for ADP. we powerful for making that's we're solutions their insight our In clients, experience accessible better our all than doing and making better ever. easier to and are use, and our for better more delivering and We this, unparalleled an

mentioned of those of clients utilize to I the we experience, clients a greater digital our and implementation onboarded down onboarding time yielding X/X for tens over thousands faster clients in market, team. our start, our of happier productivity new

service period our and search This further just to them we but we interactions only our with during and also million year-end reduced with not data service had calls friction of client We the forms completed busy helped experience, our clients before tax year-end they our proactively for which the XX it. critical U.S. teams. to to for reduced number over clients enhance

and For have through clients' served channels employees our engaged directly years, we like wisely.

on overall with valuable move a envelope into over experience to can savings focus functionality used that last like we continue more the offer, add hub its XX a billion have savings $X financial and employees than better wellness outcomes. new we we to and the employee drive months education financial As to tools

X intelligent are higher insights of helping client better of employee employees month over satisfaction and interacting can Card their Voice is we already those Action clients which our million our from And engagement new employees. self-service our for solution attain feature. solution, with With thousands through drive Employee per population,

friction meaningful, reduce approaches The on years. in help will and world creating opportunity exceed and efficiency coming continue that that expectations we to in modern of value believe and is the deliver client the us work these

we I economic near mind, in want the over strategically to that to ourselves provide backdrop. some given term invest perspective With are positioning the on how

As impacted wage XXXX, we year, this inflation. higher fiscal in by shared we earlier were

of base, sales in our also added year invested we implementation to capacity the throughout products. We service client and the and our and meet to growing expectations

sustainable In to reinvestment growth ADP. about steady I committed business. coming for beyond near-term we time, prioritize that and the same fiscal which modernization position on growth how we priorities journey, critical updating quarters, At potential investments. much ongoing this require look the year, slowdown to will is into our are economic our the continued forward you are we our being we very As for thoughtful to

Resiliency Don, challenges day, each our take to helping to it especially moment recognize on amid the ADP want times. reasons to core choose among a world turning these the promise brand and uncertain partner the for in face and are over a through with I businesses the partnerships associates components continued they their Before industry. around many the represent focus clients our leader to of many

we is unrelenting years years them. years challenge between of Our through of honored support support to in count they've growth, to on, are and grown the something and

it over Don. With that, turn I'll to

everyone. Maria, more fiscal on on Thank good outlook before you, and and our 'XX QX fiscal touching results provide details I'll on our update briefly you some morning, 'XX.

experienced increased Employer quite and basis segment organic revenue is the a revenue basis, into on reported some me in which with the XX% Let on Services. jump ES growth straight starting XX% an time. ES currency segments strongest we've constant

still As of the the were solid is ES full bookings business outcomes us bookings full shared, year relative the of new and our table on We kept believe our given range Maria importance year track results. bookings with outlook. on full to QX

any So do range feels middle to change believe but we point. the at our we're of most this guidance, not making likely our guidance

mostly basis we be revising better-than-expected XX down quarter XX and results, elsewhere. only to offset points full from market down points. retention, our normalized of by XX following down for is and improved will to to outlook, our again again outlook our by driven out-of-business another compared be overall expect to This the retention losses in retention year now On of basis prior decline retention we're XX ES

funds change in major compared the Pays had latest QX this about per of change. year revenue expectations, with And a X% case, interest X%. full about per year forward in which, control control in to our to for to for QX, headwind Client QX, between outlook pays percentage our ES our strong remained resulted and outlook in updating growth year outlook revenue utilizing our X are X% no prior in and X% we raising on to we're we and curve, for outlook now full is of the growth. increased there and assume headwinds point in X% line yield our FX, no

before. we're growth, be our Following up to pleased expect to growth, outlook X% raising X% our once ES about from X% to again strong QX now revenue

was expectations. XX Our QX, ES which with margin line increased basis our in in points

full our choosing and we basis sales, organization see to capitalize to of still significant invest the expansion of throughout in at opportunity to XXX expect on about margin to in this narrowing opportunity points we growth outlook are We are front now the which product juncture. year and elsewhere us, do

X% employees. by Moving on We average worksite revenue had growth driven X% PEO. in to growth the

X a this bookings control softer in per growth, the including driven growth few and years. comparisons retention As factors, reminder, is record recent experienced slow last by levels difficult pays versus we a that deceleration

and revenue bookings mainly the X% several segment. in control assumed, fiscal year, than the pays more in within about assumption prior the end growth at PEO we X%, quarters. of decelerated average now with employees in tweak This upbeat lower to expect reacceleration a and guidance the as is about we in PEO, we per of due worksite update somewhat feeling both Maria ranges. For bit growth experienced ES of coming growth to what mentioned about are the our a reaccelerating previously we the different it from revenue our QX this

anticipated. SUI to for to We revenue, margin X% of are outlook to excluding we mainly previously our rates separately QX, lower zero than pass-throughs in range lowering a due X%

XXX our basis well to mentioned. we be now reserve XX PEO QX, which I margin for lower expected favorable points fiscal are primarily 'XX. just adjustments, due up outlook not compensation basis PEO in for assumed than as had raising the increased it margin continued better was to costs SUI XX points which expect we workers' to And to as

growth we of end believe but the consolidated to still Putting towards it in expect all 'XX, of will it now be that fiscal range. revenue higher X% together, X%

now our XXX XX% compared EBIT We for of about XX%. XX% effective tax are of we outlook of prior a of growth fiscal EPS and outlook basis for adjusted XX%. to margin XX% expansion And rate our expect 'XX adjusted to to XXX maintaining points to

to I next also year. color want on to high-level provide some what for early expect

still going process to are We through this annual things there point. planning at but a are consider few our

economic could potential macro next assuming considerations. a other normal rate year, slowing a control backdrop, First, among pays growth be below per at

and the will we us growth, we At are time, I continued decades latest on the would funds also of our ES and interest good same build our contribution on appears have be some to forward give retention, curve, about that opportunity to based modest. yield likely you. upbeat very out in positioned it bookings momentum point client the performance Thank to feeling ES while success.

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

with our question will take [Operator Instructions] We first Cowen. Bryan from Bergin

fiscal to those impacts context 'XX? Really building any had call-outs across I'm the comments magnitude last you've maybe how that Street in mentioning of on it just these or you should there, just outlook the indications medium-term Don, potential slower given some relates macro of potentially the KPIs worth environment? the a in the just So of as from consider curious, past,

in thank process. early. planning our you Bryan, It's Yes, the still the We're of middle for question. still

have things to we have a sales. been have earlier. our -- fund control relatively per We're we think Bookings of continue high as Pays I good lot still we in be going strong interest. said favor client strong. and

I we broader I of pretty get going terms know is with have a today. the healthy to the be in into to all challenge macro guess guess coming what's as situation. we trying what So in we're think 'XX, we spot

it's think to as normalizing at to feel down continue retention expect. We think demand, is a But things although I little did the pretty market, this bit good pretty strong juncture. we good, in see

July of to we I'm and our to to through have little ask going us even bit the a way on year. with stay the So we we you beginning as get to macro or our our closer tuned environment closer what's as to plan, forward make bear going in X,

That's on And the PEO. just fair. Okay.

reaccelerating, control take? So Can kind worksite worksite sequentially pays growth in I and employee retention the you're long average in downtick, how you of view per the the versus PEO? to improve you bookings what in were with reconnection does the seeing down aspect And just employees. think about talk

quickly to going that have, going question about -- you and from as we're is in did with forward. we optimistic So we see continue we expect bookings Certainly, the in that as particularly continue view, those balance to do pretty by once do we to a again to. as anticipate talked things which strong PEO in how way, how see go as as get we revenue. how through won't that. little of rolls relatively we're your stuff optimistic year, back see bookings us into finish, especially to those but bookings some quickly trying mentioned, going actually time we had third to revenue. you want quarter, to the PEO the bit, in help month business, our take happy to to are a March, it's growth we're high going Things if result went to the the start But the reacceleration And how the and something we midterm like we be single-digit don't about earlier and in have

Yes.

to think, Bryan, can works you That guided QX real on perspective, for mentioned we still we and growth noticed obviously, quarter-over-quarter are growth from definitely I medium sequential we the is to term the on something that. just think that as well, and that, QX if comment as a have worksite as to I employee committed from the the mentioned, Don I medium-term quick employees.

retention retention, sequential as and were a that it, relates that think the it I noticed a situation, piece we're before QX of bit that, as expected. thing obviously, sequentially really And call you timing also that really quarter look it's QX, case of than is cited to that's you year-on-year. the And to same softer right? of result quarter-over-quarter, hopeful be and to really about, we And quarter-to-quarter, So quarter-on-quarter. we the the which if you about a ideal but that's we've noticed. However, byproduct the the see third kind timing, not won't results,

function Is a type that of just of PEO? the client within Okay.

In typing. the terms of

more Like white collar?

function of don't white know a that more it's I collar.

been I pandemic of through it, that of of, of some function really kind have the rippling it's as think we call a the really the PEO. feelings renewals business post the have

softness byproduct the byproduct we we and really the of saw saw quarter. of of that it's then really post-pandemic this in quarter-on-quarter second some quarter retention the first quarter so impact So it's a PEO the in past that the and

the So think it's I of -- strong in in retention albeit market. do the normalizing it's We down a mid-market. necessarily continues, byproduct don't bit very because have retention a

year bit retention, have We tiny also than less market. the strong in down albeit last

I a of the kind really collar, environment really base So think byproduct byproduct the I don't a it's client of of or it's post-pandemic think a in white PEO.

with comes Deutsche Bank. Our from next Keane question Bryan

the organic. Employer strong guess growth Services, trying to just at I look really in XX% quarter,

it deceleration. the into back you If quarter, a like little guidance a bit for of fourth looks

you get growth. think X% to something I around

versus So for quarter? takes just to understand results the trying third the puts and strong the there the fourth quarter guide in

the tax for by quarter. terms the see guess, of The far cetera, thanks are Yes, to quarter is biggest would fund from impact, I strongest certainly, interest strong the growth to given But client going QX for seasonality continue growth in fourth in receipts, just of et question. us. the we be

coming course, Last see It's control we and growth to down be would expect we that even is per coming And think quarter, as we a of little higher than that starting bit, well though drivers. expected to bit I the moderate. So see. did it a down. certainly one pays to of key mention softening

side, And the Got on it. strong. it. Got bookings although then were bookings

as Services? the I revenue commented the Employer think of to of about If us X% models future maybe just help growth start you translate about just can and can will year range you we bookings fiscal set just end 'XX. us, our maybe into how lower the for -- remind think X% thinking or and towards you get

Yes.

we anticipate relate on from range. remarks I'll we But perspective, bookings overall Don do on revenue of is middle how the that to what in kind comment the models bookings the the the an -- the prepared cited So of let the side.

constant. keep did the we So range

outset So it's with of it's also the constant quarter's with constant year, the last guidance.

point, So X% the range. X% range. that keeping this of to we do We that are middle anticipate at

look also we've we will, at and the taking when ago. And but you new if take quarter heading lapping into confident a ecosystem that exited of of how we feel tenure gain at the fourth March, year hires as into sellers we had, a number a sellers have, the pretty made the because we're those look lot we we a investments actually ultimately

the So pretty that. part other excited as we step of in

really seeing overall pipeline. is what it about Confidence the as to relates we're

of strong. We're it, deal still comment. top are of That's type and pipelines enterprise seeing international more So activity call funnel large in the a, the or tremendous upmarket. of

formations. seeing So and also the what increases by down we're business continues really in formations in supported generate new inbound to market leads. us, shine those for seeing new business that's We're continued

activity side. good digital seeing the we're So on

on where then for we let translates quarter as fourth comment us fourth how into confident in and feel step I'll year. into the ultimately the the that and quarter, next land Don -- how we So revenue

Yes.

on growth. in to impacts us side, annually So the $XX modeling in X% change bookings growth the ES $XX a million million roughly revenue on

that's models. your about think So kind of how we

I think consistent. that's been pretty

is it quickly. roll revenue business. down you view Bryan, And performance global to the cases, Yes. year, can will the other at extreme, several if to timing depends market that Obviously, in of even a than the in. more more strong the And in the some much take impact end sales have strong on months --

for thumb for of But So the throughout see course, full typical the us been rule to the bookings a of us. have year impact. quarters pretty is consistent couple of

And wouldn't standpoint. the real so I any callouts expect timing from revenue

MoffettNathanson. question comes with from next Eugene Our Simuni

question bit, positioning if market. on Maybe market? maybe that what know to supporting that get are Maria, as contrast you I down elaborate a little it's are for about if And factors, path still pick strong for little that macro up there still with us on doing point with the that? back what the a levers to could of is, competitive I you're get the mid-market. a And what's able your to a that's you comments wanted is to pull to the down going the break there? bit on in mid-market But well. your

Absolutely.

just seeing So down I'll top kind the funnel. start to strength of market, there we're of reiterate with the

the performance are what pleased ecosystem. very saw the also of with of down we inclusive in So market down That's we the market.

It's this of attach our our Those XX,XXX offering, also, onboarding the insurance have think third I quarter platform. talked incredible. RUN retirement services offering. clients. many rates our of clients I them So is about services pretty

performing we're well portfolio, is for by So definitely time. macro. seeing the it's what has and entire down for us quite driven It market some

reiterate are just way, so X%, new of on year-on-year, as they're what we've kind it. And pandemic, you seen by call as year business the I formations still up up

So they're U.S. So formations right? business the a versus week. or look year current actually Census if pre-pandemic, X,XXX XXXX, is the you it's all actually Bureau. at of from new so This

So from are clients demand I think demand ultimately, our clients the is emanate there pipelines is the that leads, standpoint us, of seeing the and coming inside of where and are what and of in do and digital into We these So funnel. with kind into the right? we're to double-digit strong. SEO/SEM ads top those growth inbound have our meeting sellers the we're

the In Services it the also it strength terms softer also Outsourcing in mid-market. That mid-market, HR offering, last are have which excited a we're was in we only, the, than tech do quarter our that Employer quarter. of pipelines was the very about we the call mid-market specifically the that bit the touches seeing mid-market said, this

our between about tremendous of a well tell That's to like our of So It's business the landscape. about there when new you are mid-market resonating landscape market. competitive it. those talk there also and to terms And like do a sellers. sales. our businesses, seeing with attached about next-generation are they XX% competitive will mid-market I we to overall and it's incredibly the a to growth always sign resonating is more and engine good It's it in question We we what to wins. from your growth, see demo that's resonating combined, in XX% the they position payroll have path excited around, is

both mid-market of And market a there's path. the product be what and as we're the in exciting to investing feel ecosystem in, that have an story so is down the we us. a That's for definitely as

not discussed the blocking helpful back time, PEO premiums, you Very it. I order? I Got follow-up, quickly color. kind kind macro insurance any talk about that still the come want attach Can a to then last insurance to And specifically of longer? the bit a growth. little think headwinds PEO the of Is the PEO. rates, my for or for we factor

that PEO would Yes. I What say the strong. demand remains is

And bullish bullish about tailwinds secular We're the proposition. PEO. so value the the about of we're

as and of likes lot clients out there to attached. benefits lot know cetera, there surveys relates it making I there's the discussions, different from et As are relates benefits Kaiser, to of a a choices. of it our

benefits relates our as see of that we that. more peripheral base just the of be, to What the there's in PEO they And the that, value for on within is big as allows bit being the white that what perhaps still benefits. collar think to our it, margin, call We kind of some more definitely the sensitivity case. skew sellers our and of is of on surgical to need price I PEO. asks it a in perhaps go really component market. But terms a proposition

model a a bit our different. little is with to that, fully insured model addition In

name And companies the and of be piece of offer employers environment, game. are want are still of of and choice in so the to where this that talent They our companies that. is a that PEO still employers to especially benefits as the such want we macro one, choice, benefits attract a

I we're seeing huge what signs. would So is say not

benefit with take you revenue at a if ex the be revenue. able even [ ], of VNPT what's look see think you'd to kind I happening

there's huge benefits not in shift signs attractiveness. there's a So that

see rates call as the and they shift have value just right it, need clients. that the the right we think sharpness sellers the and, that proposition position our the is the I to to plans right

with McVeigh comes question Suisse. next Kevin Credit from Our

kind help should the And expect that? typically Where forward? be? that XX,XXX you quarter. us think I Can dimensionalize you of would evolve Maria, we going RUN how new about clients to that in talked

that XX,XXX the So clients specifically are platform. RUN down the specific mentioned to I our market,

XX,XXX actually that's that we clients So started.

United the some So but would all us where about really things if it's funny be States, They a to of be trying you to that they from amazing through the effort come will, pretty if will. business you the would channel I'm not the they about we -- it, over volume about if be? you throughput, ecosystem. and come think They of today, talked through new also us our clients, formation, to

So we've made a lot of investments into the our relationships we have banks. with our CPAs, with

it the volume In what the terms of us for does the look obvious obviously quarter quarter-on-quarter, third like stating is quarter. highest

of of it's because because, I throughput say So that would happen But why the many they're model of the of quarter to relates the Does strength a strength units place, that's and ADP do ecosystem. typical distribution that for as business. that's kind of starts the the overall out answer us in all in and kind of January to over number question, give a our that our fun not and the come through Kevin? quarter to it shout this arguably, they

And more a -- Was to then QX there? accelerating it I much I trying last if those should XX,XXX in I there. profitability? a know how understand is of of mean, that's maybe QX Just it was did. the trying we're momentum guess is It a think word at get third just sounds sense to traditional digital we onboarded, how what's a relative profitable ones than like to XX? of onboarded, watermark. are digitally How an I the about year? like onboarded? terms growth just the Because just high that client point inflection like the are

trip don't a I higher What both quarter. in myself it's performance. fair that is -- I Listen, than you the would quarter-on-quarter in also revenue, number. meant It's volume. and obviously giving share I tell Yes. It's unit higher to know into enough. I higher last

leave So at that. kind I of it suppose I'll

the experience through is things. onboarded -- terms onboarding, is yields the of NPS results, for what us and call, very So retentive which that happier digital our high, to few which we a a clients. In what one Kevin, digital of to business more better a with client, term, client happier new that happier, third right? clients client comes a the have starts So yields client it right? long when and yields

So I we're over learning it's as those of the, think we're seeing profile results. that, clients but margin bit like us still very in call about what optimistic it, a or terms of look for lifetime the value time,

clients. complications taxes much better yield that's experience something for around competitor a I think onboardings, be should if clients efficiency actually to implementation other complex or more So the us it implementation, or allows right? the at think digitally more the from a their is, for will, person ability yields those allows higher maybe you it also to coming level, clients if the also involved these having an organization, which have about demands to their onboarded our perhaps focus remain are a you there, to with

So seeing we're also that.

and thing they're happier So ones come in new on cited board clients we're overall, are we digital are I seeing but they the than the happier it than non-digital, prepared all seeing, The remarks, the happier. good retentive lifetime nature time relates value. bring to what a is clients over it to those they as of in which us for will year, last were us terms of and

our And with question next James comes Morgan Faucette Stanley. from

wanted Maria, question. clarifying quickly, ask I Great. a to

things that address I the about just kind But can want more or that to and things to in macro? versus of sounds ADP that doing be there. segment. the you're of of do to issues objectives you of On do sure perspective clear, mid-market, it's some things that I'm from your understanding it make to like kind list talked just your

mid-market a with type solid attention we're softness of Absolutely. we point, macro experiencing The that and mid-market close don't to don't close QX from I has We're the of my byproduct so demand saw environment. paying vantage a -- paying attention still for necessarily it's QX pipelines. us think still versus right? sales, in And I We're -- to cycles.

seeing or little -- might we're does maybe, 'XX, concern mid-market. not approval something layers like mid-market, there more I looks tiny more may than in perhaps a pre-pandemic are of of terms be there's necessarily bit really the macro there approvals like much in tell elongation. that it a cycles some that elongated, that there of cycle be it that that looks a us would you, and bit In belief and the give are a more it involved, some would

say and complex you if macro getting a would so it the the in is it's clients, think customers environment to not side, right? be any What continue for about to I does increase. on easier client, mid-market mid-market the the And

so HCM for talent, with work, regulation. help they're hybrid as solving providers they're to us, solving for compliance, that. solving of for And such they're to turning all And they're

the we I think and continue our environment macro including HRO. for mid-market So strong to mid-market growth, expect the do to very have supports a

Got you a it. the then maybe seeing competitive guess that, from changes with bit speak environment? And you seeing I any it. there? you're are And can Or dovetailing Got little what about customers? you Is to kind newer the of flight can what landscape? the entrants? a there some us is of of players a Just competitive quality the give and of regional maybe impact state versus

actually it landscape, to competitive is the changed hasn't say think would about way I one it that much. Sure.

calling We've a not macro I seen plan clients on I a environment. what's there a at at of against look and and few others would very and sure. calls to players, happened happening material we recently all position -- looking environment, asking as what that just surgical major way. We it relates things we've of strong in But of had world. is our mid-market years is few but say offer competitive some it's just that, What we in think those have retention, based flight last have to We've the and specifically this our the the this completed I is process, some the a over handful in at closely. the So competitive items, quality, time when of us which would the about one the strategic in mid-market. been about

international. strong retention We also very have in

near-record We have NPS. a highs in

past. of at trade, our I positioning we from that retention, our if it's are have competitive our if proposition away from so balance than winning you also we would And in say more you -- look and years will, a competitors the value proof,

quality And about at a lot it getting have our investments clients of better bit kind think but And the investments perhaps little of so NPS think better. a do results. to look is the the again, on it's wind with I to providing, I inside our the Certainly, when the that the same serve so that I that we're made, year-on-year, our organization does into position we've side.

drive better for talked actually leveraging. our I clients, employees new things out. The friction self-service, the likes to that of of Some drive experience to about, products and their AI drive we're

investments So then into And creating new is product. investments I say, for us. would that lastly, again, better wins into products

with Kartik Northcoast from Research. Our comes question next Mehta

especially is control preliminary for know on because the an the you I gave guidance. about offset things there moderating. company, pricing you Don, the FY a 'XX do opportunity talked inflation side? -- obviously still one of there payroll running pays you think is high And for is But be could and

question. good a it's Kartik, Yes,

think So control decelerating. mentioned talked -- risk called about I I a decelerates growth that certainly, per And out. there's that We for it 'XX, earlier, further. also we've pays

So we'll see what have there. happens watch to and

On our the plan. inflation side still FY in 'XX and days of the early pricing, we're

it watching So we're carefully.

I -- we -- NPS of accepted, decisions strong We results I are 'XX. happy readily say those our with had by our of we the took think in with the by scores continued impact retention. that the higher pricing guess, can reflected price we

always as an to this So haul clients, ability with in us. take retention important we're the most back But is to, thing long-term our come we for to we have their long the price.

to cetera. the get prices, much can what that to looking price sure But take, once we Kartik, definitely bed. to at as proposition it's absolute that closer putting we continue So how between something et the good evaluate again, we and make to plan we have trying to value need we're

just on any And got they side, a and it for expensive that the to then, Maria, related had PEO them. attrition -- could the is too just customers PEO of deciding maybe

understanding the decided Any of while can for a they've So better a move the get economy. like in to what's until changes that? happening of out PEO they

I the would case. say that's always

we've that the to ADP and think cited I tend somewhat into our to go the about buy base you environment, clients into and non-PEO the choosing XX% way. that exit think multiple existing cycle, as the from, the same times our the through XX% comes go from get are PEO. new of year, least at have that clients that that I obviously, comes through renewals, I choosing When have you where business return are PEO to we we PEO every would at that we from suggest clients year-end as them come we look a

trend always that that's don't the So and the a us that's been this times, generally time believe in don't, I customers don't there's speaking, there clients between case. larger say But at think has not PEOs. toward past. that than trade other we to the I

in pandemic we it's impact cycle, saw kind that think, will. again and I byproduct the this headed what really into of the with renewal selling what of really, as post a end, we of if the you

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

I I'm the reacceleration. much also a I'm how particularly from the just versus your of your PEO question trend? And is of external is wanted that better trying to follow versus comes reacceleration of in environment of push I sustainable up when curious sort on sort and confidence to demand a kind underlying is out the on reacceleration sales figure changes it recovery. strategy? is how guess this much level that just to that pull bookings

Ramsey. you, Thank Fair.

March stretch. saw specifically final about excited are and feel the how this we what into in stepping PEO reacceleration, obviously, we We

the I'm and the proposition. I demand the finish, PEO strong. on the pipelines but for What would think is tell bullish is about too the you early in the market it comment I overall that value to are

well as things relates the else positioned I So right? if we're all demand, PEO. will, well as you equal, as overall I guess, it anybody being to think

So I PEO. seller top of funnel into don't more of investments the think the it's and in lot a of byproduct -- We pipelines. filling a made ecosystem mind, our my was the reacceleration a really,

incentives pull. can that have We we

base our and that into we've ADP intelligence on about across artificial think talked clients. where at these call ADP it, seller to that, the at right right, invested I actually to to -- I've the base addition try We've In looks the it to actually PEO right a times up looking we're invested the serve a project into calls. time of couple to

getting we're exist. terms PEO using it technology that job outside getting smarter. of on in good smarter doing who saying didn't I'm we So a of not we're are targeting the today actually

reacceleration would So of team to we that are execution that and think strong drive is to PEO we continue. and expect see sales that will would that optimistic all I has yielded a by of I what say to the the excited it kind

Are worrisome areas Okay. seeing quick are follow-up. you estate eye Great. or And keeping maybe commercial real the an or a any any of you're When look services? verticals that tech of business, vertical-specific softness, on? across there you kind financial

PEO Are macro? you referring or to overall specifically the the

should I been clear. know. I have more

there Just guys more pretty business, any there's I'm if concern broadly areas recent the broad across And have macro view. -- of in are any specific causing are you terms curious just a any trends? that

Yes, in. maybe I'll jump

of everyone distribution things and seeing the certainly it's broad. verticals, the about estate client base, of look That's our commercial reading reports we at terms the the else all in pretty and all real breadth think that I -- is.

there's any it seeing the tech. it layoffs this sure is upmarket concern cetera more reported, mentioned in announced, So the are undue any in has enterprise us particularly I'm not that I et been space, remarks, space been say, so particular Maria at the prepared causing that verticals would lot we're where a time. certainly,

that. So though part our said at business. that's the not the We've we in of past biggest looking are

market, So offset success there's more end that even -- though some than having mid-market. the in of the the more down being the by in softness we're it's in

particular. nothing particular So from a in vertical,

comes question Samad Our from next Samana with Jefferies.

Maria. one, Maybe first

what on into? think about Can about to change the investing company adjusting when and well. line? -- as the a help investment the philosophy maybe maybe more you're in And talking better that pulling are? around both more impacting understanding the hiring? top Is wanted better macro redirecting evolving about just back understand that environment I you of as you're get maybe maybe where bottom we translates maybe that how Is Just should us just resources a to maybe that

about about of journey us us. will, you Thanks, I'm if kind margin, for talk one Yes. think we've can of are think happy important modernization. it to up a Samad, company. prepared that's all what really you my for future on And probably my as been really to set growth how and I future the And about of and it's topics modernization remarks. as It's from it's all learning favorite

product modernizing I I for make suggest to undergoing for ADP in easier undergoing our for we've better invested clients years been years. us we've would think transformation. it in investing XX been We've modernization been that for last has as to efficient, more a technology become actually we've and the been business and as make to in things them.

out first modernization all a And friction. that really It's The about so right? I is the a about client that's really it's cited. think lens, new taking not I think So I way about cycle. things

a it's it's us The modernization has way modernization really in for over I time to continue because invest imperative journey think the reinvest about are is is, an the we And Samad, investment, result and question, us the which to in allowed in of able of growth a as your business. And to do that committed growth the and to we've been continued this. way really reinvest margin. to

it to We efficient. shareholders, our you and invest it's cycle think for And which very make It's So it's things easier, really we and better. will, invest about more allows really in our in to make been expansion. both. We for on company [indiscernible], really them So right? time, a make long about into us growth virtuous that us, for we've in growth we better about clients, the back a that margin this is and if allows as become -- us things I margins.

really as [indiscernible] it will story forward. it's key and ADP is be a it's an us and for we So key go and to who

quarter. the middle the we're in mentioned it I and earlier, relates as thinking process choices terms make been of business, the that it the our margin. we've about of planning to trying the very an if make we around growth to backdrop, time best assured and strategic commentary decisions the I company end-to-end, very to through trade-offs in a it right as made is sure In to rest right gone will, how we've the outcomes important the last we're macroeconomic that the you And as best have are making

maybe within ES, range one appreciate that I bookings that guidance result just of then being the expenses that? quick float And purely was forward? is curious Great. help the out better, Don. for -- was that. please? it so by I'm of Just segment that range, looks driven? at the like you drove follow-up it being lower pulled understand end. Or just narrowed just -- the me more at just settled why margin is it the Is what at I looking the and contribution to lower end for the the

Yes.

interest. little particular, a pays we QX, a to control, client I in lots there's benefit think on. certainly, of And we're of price have -- tailwinds certainly in continuing we from per bookings couple stronger. and things tailwinds going are growth, retention, all getting lots One, from of fund are bit

very So us. for helpful been that's

bit client perspective slow in a things from a QX. little fund The interest

flow So on course, those funds have advantage in reinvest extra is the business was. the we modernization. it business to or helpful of Maria And we that are not to as as of -- as in invest just invest of mentioned, are, we continue certainly taking that some

trying it's So the to still -- as about, guidance. higher find end earnings think, we prediction I or and share balance of all the right per the mentioned, delivering

continue forward. go right we it's and deliver So as in improvements will to to balance, all find and we invest the modernization

And our David next Togut ISI. comes question with Evercore from

release basis revenue the pretty PEO could PEO QX? expansion seems in you unpack margin notable particular, And reserve of in deceleration in of given in through XXX walk growth. the size the QX? you It workers' the compensation Could points

million. was $XX It

the[ compared ] in Q it year. last see to $X You'll million

So it wasn't amount. huge a

But those X impacts. are the

biggest impact reserve the other adjustment the So the And item SUI costs. is the lower there workers' comp. big was on

SUI. margins on So there's virtually no

comes top, certainly the improves SUI it the So down margins. at

PEO. X major would margin in those be impacts the improvement So the on

shifting curve got pretty as And inverted it. follow-up, the your managing going means more on filing through all tax of then borrow the to invest flow investment in the just portfolio it's medium-term now, expensive Got paper a you at actually walk bonds. commercial year forward? We've and right strategy steeply in a the thinking which market Are you Don, could duration yield float you for ahead?

for realized strategy. place benefit or billion that had that And we've incremental strategy some XX so. We years in $X.X about from of

to these revisit what But in have I'm seventh been strategy inflow because strategy have to if continues, we certainly, this there benefit for we the is balance funds do, inverted not place. XX at term, the and time always curve we'll of It's follow committed to a strategies so we big that QX. big us. -- There's continue Near it that calendar the anything, a at sure. to we've And and We it something quarter in look But years. true them. is How to yield closely. change of and see a benefited we long we that forward. look need go in as

if need any make strategy. decide to investment changes So and we'll to look to forward, we material the continue we the opportunities as go at

point this worth has David, before. one clarifying because come up

It emphasizing is are our actually see different borrowing dollars client up, costs long client at long thing our look think worth because portfolio. we beneficial more cause just places, often to be to can and it's that But our to hurtful actually have us which and have not X in the shows up confusion. short invested in margins. these higher earnings of would you went short In of the short-term net to and I short. interest If last if and up the a other you'll client extended earnings up disaggregation we rates slide presentation, words, And exposed one is long. that,

Our next question comes from Mark Baird. Marcon with

opportunities? one And you you terms about you're that modernization. I'm particularly in what international Can in about is and Maria, of the interested emphasis? there areas talked seeing talk area of

Sure.

end-to-end. So overall, is I really think about modernization

if making you're the across next-generation certainly well it product investments of our think pieces products case ensuring we're portfolio, continuing are will. you technology. in investments make the of and generation, next many and in as of So to And aware our that's

product is of piece it. think I a big

is internal modernization. the I other think

So the everything go-to-market it, seller modernization. from that ecosystem would to be call

I a actually we think as I've how in past spoken to our as well clients. the that quite serve bit

reference today. we And that again,

been our kind area back very So have that this that to in our have. an about international. definitely going excited opportunity about excited And Very modernization We're position is we specifically of modernizing. in the international. opportunity in we

and So offers over time. today about have if XXX that country countries you over we every think serve that we each

been We consolidating Mark, your that been not platforms, platforms. done. we've modernizing to But is have work point, the and

that is also have we and platforms, make the we're on investments of still that And as overall But to drive how been so serve continue. continue focused we that, to we we we've journey ensuring we're the that really continue going on do that journey the to investments the we make international further, call it, to to into ecosystem our the opportunity. clients

there, we're countries certain it's growth don't we offer still even I'll a also things and has in more big about where it to anybody places because exist for back opportunity. And yield opportunity probably -- within relates growth world a our places leave strategy. so But that there it though we I countries next still -- are us else, such and than as modernization countries we'll our there's in to should more be as are quarter international, of think all segments international still there with talk that that

overall were excited the international we're we're And so space that we the we doing work and where incredibly are, going. where about

an that international, of from terms of are that of early quite levels just I'm ongoing things time. macro about the That's pickup HR across of is obviously, interest globe? a been you bit stages in RFPs modernization a a we Maria, Certainly globe. of speaking, the But what just hearing in And notwithstanding? terms can of others systems talk appetite across some seeing level be that And of it's But are diverse occurring U.S. the at could and you greater little it's great. is? HCM trend and for the broadly in there that higher the nature growth,

over conversation shifted in suggest, years, definitely up. and is could international has What last space I the would the picked I the thing, Mark, a suggest few the it's that that is bit, same which

today lead of conversation with to record that so And of kind offer, conversation. more global of global a system tends

country-by-country we can a serve ability today you you can multiple to would not client a together countries with was are tie a it see an have have in about conversation. years than Today, we unified that it where client how versus, walk conversation for across we conversation. So really countries it and many of more and more perhaps make more starts of multi-country a a help experience it's and say, with -- all to X, and how more often ago, I we in XX

that the from And so you've appears -- others, of in international narrative suggests the I which think shifting. what is all heard is it

relates greater global than for are HCM now think offerings ever as been. to companies I more is there international demand that in it they've

transformation actually, a ability for bit. a about ability MNC, that different also ADP see clients And just is together and both. able that for have in-country. has ability be environment piece. conversation them. of and to topic the times, And a HCM It's decisions is workforces the was event. the the this headcount across And decisions, the countries. I that solve we we solve multiple have ago. our multi-country And partnership we them quarter, of to the all very the we international a And had certainly, the recently, accelerated of have, to of clients, their with at about it's the we And solve companies we that to their hybrid lot make That's today the just to think when than for beauty see we it their have few years an And a mix transformation. talent

our have about And in clients these it's a options really to so very serve in way. we partnership the unique flexibility

Tien-Tsin with for from And We JPMorgan. more have time that question. comes one Huang question

in success already. You market the just the bookings on I down here. lot covered given wanted the side, a

even changing into versus here, PSO sales 'XX maybe investing if prioritization ASO your more -- I'm the less, versus there? curious thinking we're if in thinking the any in ecosystem? curious then seller that's fiscal as in change going maybe or Just there's and digital

leaned have we've the terms down the investments into in we So made. market of

market. made into the the and the we I them, So are as when channels, those in pleased with actually the headcount as investments and investments the investments into that productivity how because gaining And been I that more earlier -- the the It so think referenced nature. primarily here into head I have of around things setting is stretch is final down seller headcount of all we've headcount in turns we ecosystem tenure.

most So again, the organization, think inside our services, of comes digital SBS retirement the as also our also that sales. the services, into sales insurance known platform,

So the to if the leaned is to what we long from lean to our the into it the of into this exists, as we will demand, there. sales down I really are making -- that demand is at suggest will. that drive you out into serve We've would And driving continue down point, as that and demand we're the investments growth inside market viewpoint market.

it. I'm glad No, to Yes. hear

you more mind If don't one question.

of mentioned, Maria, generative been to with you ChatGPT. have and ask Just a since We've AI lot AI. you getting I questions on

PEO you You are about your standpoint? mentioned business when better, a that delivery how generative up also a how But perspective, just the might run perspective, speaking, right help you thinking smarter around AI but and at support being from broadly serving both sales time. from necessary

you Yes. just -- AI. real about question the incredibly thrilled seems this else, answer excited call I definitely I'm it is, But counting Thank it's we're I'm it generative like Tien-Tsin. during the everybody du was asked because you, this topic like because actually on jour.

We AI quite have been very for some about time. excited

that's for about our making You time doing efficient. in to invest broad-based what mentioned been sellers. AI work long PEO, that more doing been a us and our in sellers continue example That the we've is into we've for

even as as to that technologies associates really make sellers we there how We similar service look investments are our are can making well out our the at new productive. with more

some things So about support can will, that AI that generative all tools and very different And of today you to of drive we're a level if think the efficiency. agent, an excited. you the a does client

that tools also the have industry, we look notwithstanding are it work a take to think around leverage ways internally. like underway different streams it's at currently these different something opportunity We That's I that can right? creates XX for that our

HCM is HCM pull nature inside from administrative terms are job reviews, the they it's which really be if industry, there times think to that descriptions, many that at in want doing in performance do, handbook, practitioner still very partner. about of of whether what are are tactical back maybe things So that things that things you the a are very strategic

so tools to these into. really to be to excited our clients also our able and And practitioners lean we're product for into put our

work. I thing standards. such, as we've also So said, important, of now, doing very we out is point we're very topical is all good excited that a been this because would and the have about which opportunity. right lot news One And it's it's that the

kind ethical we and of comes are, the million you the data, way wage parity the XX with have we to will, nature that if a ADP behind who pay. earners and have big that that think We about given at we

industry, the all exciting. that about with it's secure, industry ADP. and it Tien-Tsin, in product much the opportunity for serve this us also much creates And from making our about more are But so and internally it things the we that would this, the and really that for more and no opportunity that make excited of applicable, us to entire right, strategic that creates when doubt, doing lens the you compliance, all sure we with expect think of way it's it right it's the that

question. great So

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

you. Thank Yes.

you, for joining and foremost, and the appreciate interest. Really the first everybody, today. So questions thank

As lot you I here role quarter can of a questions. get sit imagine, CEO new I my and X into as

up Just said to?" "What you last days?", text another would And I quarter?", have were night, what "How I the "how the here's that first been first offer. got XXX is

for ADP, my excitement throughput but in our volumes ADP in where And quarter and and about really the quarter third it it of you've the today, shine. finest The heard you some heard is tone quarter. my you third is see it

kind have you season you that selling season, year-end, have have come all of You busy together.

economic our in I and more be In couldn't this that world, quarter, be be questions what strangeness for I execution here would is would happening couldn't in, the some X associates. say more the grateful pleased. quarter of more and say share sitting couldn't what's adding about I excited. I I

the of felt So ADP I breadth its this at finest. depth quarter and

to associates take minute call today. company. be with couldn't stakeholders to great thank And want thank our more for and this partners to this I excited company. all everything like and proud I do that, on everyone listening the just about also I'd our that another power of more they to and

with And we will up wrap call. the that,

program. This the concludes

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