Summary of Automatic Data Processing (ADP) FY Conference Call - May 13, 2025 Company Overview - **Company**: Automatic Data Processing (ADP) - **Industry**: Human Capital Management (HCM) and Payroll Services Key Points Retention and Demand - ADP has reported strong retention rates, which have improved compared to pre-pandemic levels, attributed to investments in product and service tools [3][4][5] - International bookings showed some softness, which was noted as a change from previous quarters, but overall demand in international markets remains solid [6][8] - The company is optimistic about its international pipelines despite elongation in sales processes [7][8] Outsourcing Trends - There is a discernible trend towards HCM outsourcing, driven by increasing complexity in compliance and talent management [10][11] - ADP's extensive sales force of 8,500 sellers across multiple countries supports this trend [12] Competitive Landscape - ADP maintains a competitive edge through its broad offerings and strong retention, although competition remains fierce across various market segments [21][22] - The company has seen an increase in its balance of trade, indicating a positive competitive position [20][21] Product Development: Lyric - ADP introduced "Lyric," a next-generation HCM offering designed to be adaptable and user-friendly, which has received positive market feedback [27][30] - The integration of Lyric with the workforce software acquisition is expected to enhance ADP's market position and drive bookings [31][32] Digital Transformation and AI - ADP is on a continuous digital transformation journey, focusing on making products frictionless and incorporating generative AI into its offerings [35][36] - The company aims to leverage AI for both efficiency and growth, enhancing the onboarding process and sales productivity [45][50] Strategic Acquisitions - Recent acquisition of PEI in Mexico is part of ADP's strategy to strengthen its local expertise and global scale [56][58] - The company continues to pursue acquisitions that align with its strategic pillars of growth and efficiency [66][68] Partnership with Fiserv - ADP's partnership with Fiserv aims to enhance distribution channels and create a revenue-sharing model that benefits both companies [73][74] Future Outlook - ADP plans to showcase its progress and strategic initiatives at the upcoming Investor Day, emphasizing its commitment to innovation and client service [81][82] Conclusion - ADP is positioned well in the HCM industry with strong retention, a focus on outsourcing trends, innovative product offerings like Lyric, and a commitment to digital transformation and strategic acquisitions. The company is optimistic about future growth and market opportunities.

Financial Data and Key Metrics Changes - The company reported a solid third quarter with 6% revenue growth, 10 basis points of adjusted EBIT margin expansion, and 6% adjusted EPS growth [7][17] - Employer Services (ES) segment revenue increased by 5% on a reported and organic constant currency basis [17] - PEO revenue growth was 7%, exceeding expectations, supported by higher wages and strong retention [20] Business Line Data and Key Metrics Changes - New business bookings for Employer Services showed solid growth, particularly in U.S. offerings, while international bookings experienced softness due to macroeconomic uncertainty [8][9] - PEO revenue excluding zero margin pass-through growth was 8%, with average worksite employee growth at 2% [20] - The integration of Workforce Software is progressing well, enhancing the overall offerings [51] Market Data and Key Metrics Changes - The company experienced a decline in international bookings, attributed to macroeconomic uncertainty, but maintains a strong pipeline for future growth [9][27] - U.S. clients continued to hire, with pays per control growth remaining at 1% [10] - Client funds interest revenue increased due to stronger average client funds balance growth, leading to an updated growth expectation of 5% to 6% for the year [18] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology and providing unmatched expertise in outsourcing [11] - The acquisition of PEI in Mexico is aimed at strengthening global payroll capabilities and enhancing local expertise [12][13] - The partnership with Fiserv is expected to accelerate sales and expand the embedded payroll solution [14] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is macroeconomic uncertainty, the underlying economic factors remain strong, with low unemployment and continued hiring [38][40] - The company expects pays per control growth to continue at below normal levels next year due to economic conditions [22] - Management remains optimistic about the strong pipelines and execution against them, particularly in the enterprise space [100] Other Important Information - A CFO transition is underway, with Peter Hadley set to succeed Don McGuire effective July 1 [5][6] - The company received several awards for its HCM technology, indicating strong market recognition [15] Q&A Session Summary Question: Can you provide more color on the softer international bookings? - Management indicated that the softness is due to macroeconomic uncertainty, but strong pipelines remain for a solid finish to the year [26][28] Question: What is the growth opportunity for the embedded offering with Fiserv? - The company is excited about the partnership and sees significant opportunities for growth across various distribution channels [30][32] Question: How is the company addressing client hesitancy in hiring? - Management noted stability in their client base, with continued hiring despite some apprehension regarding large deals [38][40] Question: What are the expectations for PEO business in the current environment? - The company reported solid growth in PEO bookings and strong retention, indicating a positive outlook [46][48] Question: How does the company view the competitive landscape, particularly in the down market? - Management acknowledged the competitive nature but emphasized their strong offerings and client satisfaction as key differentiators [102][105] Question: What percentage of bookings come from international markets? - Approximately 88% of the company's revenue is derived from the domestic U.S. market, with the remainder from international [110] Question: How will margins be affected going forward? - The company expects some recovery in margins but noted that certain costs will persist, impacting overall margin profiles [111] Question: How is client behavior evolving in the PEO segment regarding benefits enrollments? - Management reported strong retention and stability in benefits offerings, indicating a positive response from clients [85][87]

Financial Data and Key Metrics Changes - The company reported a solid third quarter with 6% revenue growth, 10 basis points of adjusted EBIT margin expansion, and 6% adjusted EPS growth [9][19] - Employer Services (ES) segment revenue increased by 5% on a reported and organic constant currency basis [19][21] - PEO revenue growth was 7%, exceeding expectations, supported by higher wages and strong retention [21][22] Business Line Data and Key Metrics Changes - New business bookings for Employer Services showed solid growth, particularly in U.S. offerings, while international bookings experienced softness due to macroeconomic uncertainty [10][11] - PEO revenue excluding zero margin pass-through growth was 8%, with average worksite employee growth at 2% [22] - The integration of Workforce Software is progressing well, with strong interest in time and attendance solutions [13][55] Market Data and Key Metrics Changes - The company experienced a decline in international bookings, attributed to macroeconomic uncertainty, but maintains a strong pipeline for future growth [11][30] - U.S. clients continued to hire, with pays per control growth remaining at 1% [11][20] - The company anticipates a continued focus on growth in the Latin America region following the acquisition of PEI in Mexico [14][66] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology and providing unmatched expertise in outsourcing [12][17] - The partnership with Fiserv is expected to enhance distribution and accelerate sales through integrated solutions [15][34] - The company aims to maintain strong client satisfaction and retention levels while investing in products and people for sustainable growth [25][73] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is macroeconomic uncertainty, the underlying economic factors remain strong, with low unemployment and continued hiring [42][44] - The company expects pays per control growth to remain below normal levels in fiscal 2026 due to economic conditions [24][25] - Management remains optimistic about the strength of the pipeline and the potential for growth in the fourth quarter [30][102] Other Important Information - A CFO transition was announced, with Peter Hadley set to succeed Don McGuire effective July 1 [6][8] - The company received several awards for its HCM technology, indicating strong market recognition [17] Q&A Session Summary Question: Can you provide more color on the softer international bookings? - Management indicated that the softness is due to macroeconomic uncertainty, but strong pipelines remain for future growth [30] Question: What is the growth opportunity for the embedded offering with Fiserv? - Management expressed excitement about the partnership, highlighting the potential for significant growth through integrated solutions [34] Question: How is the company addressing client hesitancy in the current macro environment? - Management noted stability in their client base, with continued hiring and strong pipelines, despite some apprehension regarding large deals [42][44] Question: What are the expectations for PEO business in the current environment? - Management reported solid growth in PEO bookings and strong retention, indicating a positive outlook for the segment [51][52] Question: How does the company view its hiring plans in light of current conditions? - Management confirmed no changes to hiring plans, maintaining optimism about business performance [85] Question: What percentage of bookings come from international markets? - Management stated that approximately 12% of revenue comes from international markets, with the majority being domestic [113] Question: How does the company plan to manage margins going forward? - Management indicated that while some margin pressures exist, they expect to recover some costs through integration and operational efficiencies [114]