ADP(US:ADP)2025-07-30 13:30Financial Data and Key Metrics Changes - The company reported an 8% revenue growth in Q4 2025 and a 7% revenue growth for the full fiscal year [5][18] - Adjusted EBIT margin expanded by 40 basis points in Q4 and 50 basis points for the full year [5][18] - Adjusted EPS grew by 8% in Q4 and 9% for the full year [5] Business Line Data and Key Metrics Changes - Employer Services (ES) revenue increased by 8% in Q4 and 7% for the full year, with margins expanding by 50 basis points in Q4 and 100 basis points for the year [18][19] - Professional Employer Organization (PEO) revenue grew by 7% in Q4 and for the full year, with average worksite employee growth of 3% [19][20] - PEO margins contracted by 20 basis points in Q4 and 60 basis points for the full year due to higher zero-margin pass-through benefits revenues [19][20] Market Data and Key Metrics Changes - The company achieved approximately $2.1 billion in new business bookings for employer services, representing a 3% growth [6] - Small business suite and domestic enterprise offerings saw solid bookings growth, while HR outsourcing experienced a softer finish [6][7] - International bookings improved in Q4 but did not offset earlier softness in the fiscal year [6] Company Strategy and Development Direction - The company is focused on accelerating employer services new business bookings growth in fiscal 2026, with a healthy pipeline and strong client retention [7][11] - Investments in HCM technology, AI capabilities, and global payroll capabilities are key strategic priorities [10][11] - The company aims to leverage its extensive dataset to enhance product offerings and client experiences [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a dynamic and growing market with opportunities for innovation and client support [13][14] - The macroeconomic environment remains uncertain, but the company is positioned to deliver solid financial results while investing for future growth [20][25] - Management expects a slight moderation in the macroeconomic environment but remains confident in achieving revenue growth of 5% to 6% in fiscal 2026 [20][25] Other Important Information - The company has made significant strides in client satisfaction, achieving record highs [7] - The acquisition of workforce software is expected to enhance capabilities and contribute to growth in multinational markets [10][50] Q&A Session Summary Question: Demand and HRO softness - Management noted that the softness in HR outsourcing was due to complex opportunities with long sales cycles, but the pipeline remains strong with active deals [28][31] Question: Confidence in bookings reacceleration - Management highlighted product maturity, investments in sales headcount, and technology as key factors for confidence in bookings growth [33][36] Question: Pricing contribution in fiscal 2026 - Pricing assumptions for fiscal 2026 are expected to be in the 100 basis points range, reflecting recent trends rather than pre-pandemic norms [45] Question: Retention performance - Retention results were broad-based, with no specific callouts, and management was pleased with the performance across all segments [46] Question: Workforce software integration - Early results from the integration of workforce software have exceeded expectations, contributing positively to bookings and sales [49][50] Question: PEO guidance and pass-through revenue - Higher expected contributions from zero-margin pass-through revenues are driven by medical health insurance inflation and state unemployment insurance costs [99] Question: Embedded payroll and Clover partnership - The partnership with Clover is progressing well, with expectations for broader deployment and contributions to bookings in fiscal 2026 [102][104] Question: Sales channel management and partnerships - Partnerships are enhancing visibility into results and pipelines, allowing for better forecasting and opportunity identification [110][111]