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 Insights - ADP has integrated Thatch's ICHRA platform into its RUN payroll system, enabling over 900,000 small businesses to offer flexible and affordable health coverage directly through their payroll workflow [1][4][6] Company Overview - ADP has been a leader in HR and payroll solutions for over 75 years, continuously innovating to address business challenges for clients of all sizes [7] - Thatch, launched in 2023, specializes in providing personalized healthcare benefits through ICHRA, helping over 1,000 companies improve healthcare coverage while managing costs [10] Integration Benefits - The integration allows employers to request quotes and enroll in ICHRA benefits seamlessly, automating payroll deductions and carrier payments, thus reducing administrative burdens [4][8] - Employees gain the flexibility to choose from various health, dental, and vision plans tailored to their needs, all within the existing payroll system [8][9] Strategic Importance - This partnership exemplifies ADP's strategy of accelerating innovation by collaborating with startups, enhancing client impact through embedded solutions [2][6] - The integration is positioned as a significant advancement in healthcare access and affordability for small businesses, enabling them to compete for talent more effectively [6][3]