Financial Data and Key Metrics Changes - The company reported a 6% revenue growth for the second quarter, with an 80 basis points expansion in Adjusted EBIT margin and an 11% growth in Adjusted EPS [4][17] - Client funds interest revenue increased more than anticipated, leading to an increase in the forecast for average client funds balance growth to 4%-5% for fiscal 2026 [18][22] - The overall fiscal 2026 consolidated revenue outlook has been increased to about 6% growth, with Adjusted EPS growth forecast raised to 9%-10% [22] Business Line Data and Key Metrics Changes - Employer Services (ES) segment revenue increased by 6% on a reported basis and 5% on an organic constant currency basis, with solid new business bookings growth [17][18] - Professional Employer Organization (PEO) revenue growth was 6%, while excluding zero-margin pass-throughs, it was 3% [21] - PEO average worksite employee growth is now expected to be about 2% for fiscal 2026, with PEO revenue growth forecasted at 5%-7% [21] Market Data and Key Metrics Changes - The company serves over 70,000 clients outside the United States, paying more than 16 million wage earners across over 140 countries [14][15] - The international business is showing strong performance, with a notable win from a large European bank with over 75,000 employees [15][26] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, with strong traction in its Workforce Now Next Gen and ADP Lyric HCM platforms [7][8] - The introduction of a pooled employer plan (PEP) within retirement services aims to provide clients with robust retirement plan benefits while reducing administrative burdens [13][14] - The company continues to invest in AI and automation to enhance its offerings and improve client experiences [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the business environment and high levels of client satisfaction, noting that the overall client satisfaction results represented the best quarter in ADP history [6][16] - The management team remains optimistic about the demand environment for PEO and other outsourcing services, despite some moderation in growth metrics [6][21] Other Important Information - The company was recognized by Fortune Magazine as one of the world's most admired companies in 2026, marking its twentieth year on this annual ranking [16] - The board authorized the purchase of $6 billion of common stock, signaling a commitment to driving shareholder value [22] Q&A Session Summary Question: International opportunity and profitability comparison - Management highlighted the strength of their international offerings and the potential for growth, noting that while international operations have lower margins, they have high retention rates comparable to U.S. businesses [26][30] Question: PEO growth outlook and contributing factors - Management acknowledged solid bookings in the PEO segment but noted that growth has been slightly below expectations, with continued investment in distribution and product capabilities [32][35] Question: Margin cadence and pricing environment - Management expressed confidence in achieving margin expansion in the second half of the year, with pricing expected to contribute around 100 basis points to fiscal 2026 [43][75] Question: AI impacts on employment and sales productivity - Management indicated that while AI has made salespeople more efficient, there has been no change in headcount strategy, and they continue to invest in sales personnel and tools [94][95]

Financial Data and Key Metrics Changes - The company reported a 6% revenue growth for the second quarter, with an 80 basis points adjusted EBIT margin expansion and an 11% adjusted EPS growth [4][17] - Adjusted EBIT margin increased by 50 basis points in Q2, driven by operating leverage and client funds interest revenue growth [19] - Client funds interest revenue forecast was increased by $10 million to a range of $1.31-$1.33 billion due to higher average client funds balance growth [18] Business Line Data and Key Metrics Changes - Employer Services (ES) segment revenue increased by 6% on a reported basis and 5% on an organic constant currency basis [17] - PEO revenue growth was 6% in Q2, while excluding zero-margin pass-throughs, it was 3% [19] - PEO new business bookings growth was solid but slightly below expectations, impacting average worksite employees growth [20] Market Data and Key Metrics Changes - The company serves over 70,000 clients outside the U.S., paying more than 16 million wage earners across over 140 countries [14] - The international business is showing strong performance, with a significant win from a large European bank with over 75,000 employees [15][26] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, with strong traction in Workforce Now Next Gen and ADP Lyric HCM platforms [7][8] - The introduction of a pooled employer plan (PEP) within the retirement services business aims to reduce administrative burdens for employers [13][14] - The company continues to invest in AI and automation to enhance client offerings and streamline processes [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the business environment and high levels of client satisfaction, noting the best client satisfaction results in ADP history [6][16] - The demand environment for PEO and other outsourcing services remains healthy, with expectations for continued growth in new business bookings [6][18] - The company raised its fiscal 2026 consolidated revenue outlook to about 6% growth and adjusted EPS growth forecast to 9%-10% [22] Other Important Information - The company was recognized by Fortune Magazine as one of the world's most admired companies in 2026, marking its twentieth year on the list [16] - The board authorized the purchase of $6 billion of common stock, signaling a commitment to returning excess cash to shareholders [22] Q&A Session Summary Question: International opportunity and profitability comparison - Management highlighted the strong performance in international markets and the potential for growth, noting that while international operations have lower margins, they have high retention rates [30][31] Question: PEO growth outlook - Management acknowledged slower growth in PEO but emphasized the ongoing investment in distribution and product capabilities, indicating a strong long-term opportunity [32][36] Question: Margin cadence and pricing environment - Management expressed confidence in achieving margin expansion in the second half of the year, with a consistent pricing environment expected to contribute around 100 basis points to revenue [74][75] Question: Impact of AI on employment - Management noted that while there are headlines about layoffs, the empirical data does not indicate significant job losses in the sectors they monitor, and hiring levels remain stable [55][56]

Financial Data and Key Metrics Changes - The company reported a 6% revenue growth for Q2 2026, with an 80 basis points adjusted EBIT margin expansion and an 11% adjusted EPS growth [4][17] - Client funds interest revenue increased more than anticipated, leading to an updated forecast for average client funds balance growth to 4%-5% for fiscal 2026 [18] - The overall consolidated revenue outlook for fiscal 2026 has been increased to about 6% growth, with adjusted EPS growth forecast raised to 9%-10% [21] Business Line Data and Key Metrics Changes - Employer Services (ES) segment revenue increased by 6% on a reported basis and 5% on an organic constant currency basis [17] - PEO revenue growth was 6% in Q2, while excluding zero-margin pass-throughs, it was 3% [20] - The average worksite employee growth for PEO is now expected to be about 2% for fiscal 2026 [20] Market Data and Key Metrics Changes - The company achieved solid new business bookings growth across various segments, with broad-based strength noted in international, U.S., enterprise, and compliance businesses [4][5] - The international business is expected to contribute positively to overall margins, although it operates at slightly lower margins compared to domestic businesses [29] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, with strong traction in its Workforce Now Next Gen and ADP Lyric HCM platforms [6][8] - The introduction of a pooled employer plan (PEP) within retirement services aims to reduce compliance burdens for employers [12][13] - The company continues to invest in AI and automation to enhance client offerings and improve operational efficiency [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the business environment and high levels of client satisfaction, noting a record high in client satisfaction results [5][16] - The demand environment for PEO and other outsourcing services remains healthy, with expectations for continued growth in new business bookings [5][20] - Management acknowledged the complexity of the employment landscape but emphasized the strong value proposition of their PEO offerings [38] Other Important Information - The company was recognized by Fortune Magazine as one of the world's most admired companies in 2026, marking its twentieth year on this annual ranking [16] - A new stock repurchase authorization of $6 billion was announced, replacing the previous $5 billion authorization, indicating a commitment to returning excess cash to shareholders [21] Q&A Session Summary Question: Can you discuss the international opportunity and profitability compared to the U.S.? - Management highlighted that international operations are a strategic priority, with strong performance and high retention rates, although they operate at lower margins compared to domestic businesses [26][29] Question: What is contributing to slower growth in PEO? - Management noted solid bookings in PEO but acknowledged slight moderation in growth metrics, emphasizing ongoing investment in distribution and product capabilities [31][34] Question: How is the overall bookings environment trending? - Management reported solid performance in Q2 with broad-based contributions across all business segments, indicating healthy pipelines moving into the second half of the fiscal year [50] Question: What is the pricing environment like? - Management indicated confidence in their pricing strategy, expecting around 100 basis points of contribution from price in fiscal 2026, consistent with previous years [72]

NON-GAAP MEASURES Adjusted EBIT, adjusted EBIT margin, adjusted diluted earnings per share, adjusted effective tax rate, and organic constant currency are all non-GAAP financial measures. Please refer to the Q2 fiscal 2026 earnings release available at investors.adp.com for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their closest comparable GAAP financial measures. ADP Earnings Call & Webcast Q2 Fiscal 2026 January 28, 2026 Copyri ...

Core Viewpoint - Automatic Data Processing, Inc. (ADP) faces challenges that may hinder its growth, leading to a downgrade by Jefferies from Hold to Underperform, with a reduced price target of $230 from $245 [2] Financial Performance - In fiscal Q1 2026, ADP reported a revenue increase of 7% and adjusted EPS growth of 7% [2] - The quarter included record sales volume, with healthy growth in the small business portfolio and a resurgence in Employer Services HR Outsourcing [2] Strategic Initiatives - ADP announced the acquisition of Pequity, a compensation management software provider, enhancing its capabilities in complex compensation planning [3] - Management emphasized progress on key strategic priorities, indicating stability in HCM demand and specific strength in ADP Lyric HCM [2][3] Market Position and Challenges - Jefferies highlighted market saturation, competition from larger firms, and falling interest rates as significant headwinds for ADP's growth in 2025 [2] - The analyst expressed concerns that ADP's medium-term targets may be difficult to achieve due to these challenges [2]

Core Viewpoint - Automatic Data Processing (ADP) is a stable and reliable company in the payroll processing industry, recognized as a Dividend King due to its consistent dividend increases over 51 years, making it an attractive option for income-focused investors [2][6][15] Company Overview - ADP operates in a mission-critical sector, providing payroll and human capital management services that are essential for businesses, leading to high switching costs and customer loyalty [3][7] - The company reported a revenue increase of 7% year-over-year to $5.2 billion and adjusted earnings per share growth of 7% to $2.49 in the first quarter of fiscal 2026 [8] Dividend Performance - In mid-November, ADP's board approved a quarterly dividend increase of $0.16 per share to $1.70, representing a 10% increase [5] - ADP's 51 consecutive years of dividend increases place it among a select group of Dividend Kings, highlighting its business durability [6] Growth Potential - ADP is implementing strategies to accelerate sales growth, including expanding within its existing customer base and attracting new customers through innovative channels [9][10] - The company is integrating payroll services into existing software platforms used by small businesses, reducing friction and enhancing distribution [10] - Management noted strong momentum for its ADP Lyric HCM platform, with new business bookings exceeding expectations [11] Financial Metrics - ADP has a market capitalization of $106 billion, a gross margin of 50.30%, and a dividend yield of 2.41% [13] - The company maintains a payout ratio of about 59%, indicating potential for future dividend growth alongside earnings momentum [13] Long-term Outlook - Management projects full-year fiscal 2026 earnings-per-share growth of 8% to 10% year-over-year, suggesting a positive long-term outlook for ADP [15]

Core Insights - ADP has integrated its 1-rated workforce management solution, ADP WorkForce Suite, into its leading payroll and HCM platforms, enhancing access for employers and employees across 140+ countries [1][8] - The integration aims to transform the global employer and employee experience by providing a unified time, pay, and HR experience with advanced workforce management tools [2][8] - ADP WorkForce Suite is designed to streamline operations, improve accuracy, and lower costs by connecting workforce management, HR, and payroll functions [3][6] Product Features - The suite offers global compliance capabilities, supporting various industries such as manufacturing, retail, healthcare, and education, ensuring accurate workforce management across different geographies [3][4] - Key functionalities include automated enforcement of labor rules, role-based dashboards, predictive analytics, and mobile access for remote workers [4][5] - The platform simplifies people operations and supports complex industries, catering to organizations of all sizes, from mid-sized companies to large enterprises [4][6] Market Position - ADP WorkForce Suite has been recognized as the market leader for 11 consecutive years by Nucleus Research and has received accolades for its measurable business impact [7] - The integration of WorkForce Software into ADP's platforms represents a significant shift in the market, allowing organizations to consolidate their HR technology stack without compromising on quality [8] - The solution is designed to reduce operational complexity and enhance the employee experience, aligning with the industry's trend towards unified HR solutions [8]

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth and a 7% adjusted EPS growth for the first quarter of fiscal 2026 [5][16] - Employer Services segment revenue increased by 7% on a reported basis and 5% on an organic constant currency basis [16] - Client funds interest revenue increased more than anticipated, leading to an increase in the full-year forecast for client funds interest revenue by $10 million to a range of $1.30 billion to $1.32 billion [17][19] Business Line Data and Key Metrics Changes - Employer Services new business bookings showed solid growth, resulting in record sales volume for a first quarter [5] - PEO revenue growth of 7% exceeded expectations, driven by growth in zero margin pass-throughs and higher wages [7][18] - Employer Services pays per control growth rounded down to 0% for the first quarter, reflecting client caution around adding headcount [6][16] Market Data and Key Metrics Changes - Overall client satisfaction score reached a new all-time high for a first quarter, indicating improvements across business units [6] - The company experienced specific strength in ADP Lyric HCM, with new business bookings exceeding expectations [9][10] - International market performance was described as "lumpy," with a solid pipeline but some softness in the first quarter [68] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, including the scaling of Embedded Payroll Solutions for small businesses [8][11] - Continued investment in AI initiatives aims to enhance operational efficiency and client engagement [12][14] - The acquisition of Pequity is expected to broaden the company's capabilities in compensation management, aligning with its strategic priorities [10][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the relatively stable HCM demand backdrop and maintained full-year growth guidance of 4%-7% for Employer Services [16][24] - The company anticipates a slight decline in Employer Services retention but remains optimistic about achieving its growth targets [16][18] - Management highlighted the importance of ongoing investments in technology and client services to drive future growth [14][19] Other Important Information - The company announced the acquisition of Pequity, which is expected to enhance its compensation management offerings [10][62] - The company was recognized as a leader in multi-country payroll solutions, underscoring its global capabilities [15] Q&A Session Summary Question: Update on deal cycles and time to close - Management indicated that the demand backdrop remains stable, with no significant changes observed in deal cycles during Q1 [24] Question: Confidence in Employer Services guidance amid slight downticks - Management expressed confidence in the guidance, noting that movements in pays per control and retention are relatively small and offsetting [26][28] Question: Surprising areas of new bookings growth - Management highlighted strong growth in small business services, particularly in retirement services and HR outsourcing [32] Question: Performance of PEO enrollment period - Management reported the highest participation rates in four years, indicating strong demand for health benefits among targeted industries [57] Question: Insights on the recent acquisition - Management emphasized the strategic importance of the acquisition for enhancing compensation management capabilities, although its financial impact is currently minimal [62][64] Question: Differences between U.S. and international markets - Management described international performance as "lumpy," with solid execution expected to drive growth in the future [68] Question: Impact of recent layoffs in the market - Management stated that recent layoffs are not expected to significantly impact guidance, as hiring levels remain static [99]

Financial Performance - Total revenues increased by 7% to $5.175 billion in Q1 Fiscal Year 2026[11], compared to $4.833 billion in Q1 Fiscal Year 2025[11] - Adjusted diluted EPS grew by 7% in Q1 Fiscal Year 2026[11] - Employer Services (ES) revenues increased by 7% to $3.491 billion in Q1 Fiscal Year 2026[15], compared to $3.261 billion in Q1 Fiscal Year 2025[15] - Professional Employer Organization (PEO) revenues increased by 7% to $1.688 billion in Q1 Fiscal Year 2026[24], compared to $1.575 billion in Q1 Fiscal Year 2025[24] Segment Highlights and Outlook - ES margin declined by 50 bps, primarily due to integration and acquisition-related expenses associated with WorkForce Software[16, 18] - The outlook for ES revenues is projected to grow by 5% to 6%[20] - The outlook for PEO revenues is projected to grow by 5% to 7%[28] - Average worksite employees (WSEs) in PEO increased by 2% to 754,000[29] Client Funds and Interest - Average client funds balances were $37.6 billion in Fiscal Year 2025[31] - Client Funds Interest Revenue is expected to be between $1.3 billion and $1.32 billion[31] - Net impact from Client Funds Extended Strategy is projected to be between $1.26 billion and $1.28 billion[31]

Core Insights - ADP's Lyric has been recognized as a Top HR Product of 2025 by HR Executive, highlighting its innovative approach to human capital management [1][6] - The award will be presented during the HR Icons Awards Evening at HR Tech 2025 on September 15, 2025 [1] Product Overview - The Top HR Products competition evaluates solutions based on innovation, value to HR functions, user experience, and integration capabilities [2] - Lyric is designed to support enterprise organizations with personalized guidance, global adaptability, and proactive insights through integrated AI and automation [3][6] Features and Benefits - ADP Lyric HCM offers a unified platform for HR, payroll, talent, and workforce management, tailored for borderless work environments [7] - Key features include ADP Assist for proactive insights, automated workflows to reduce administrative overhead, and flexible position management [6][7] Industry Context - The recognition of Lyric aligns with the industry's need for HR technologies that address current and future challenges, enabling HR leaders to be proactive and strategic [4] - HR Tech is a premier event showcasing innovative HR solutions, further establishing the importance of advancements in human resource management [9][10]