Q4 2021 Automatic Data Processing Inc Earnings Call
[music].
Good morning, My name is Sarah and I'll be your conference.
Operator.
At this time I would like to welcome everyone to Adp's fourth quarter fiscal 2021 earnings call.
I would like to inform you that this conference call is being recorded and all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer.
Conference Channel.
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To withdraw your question. Please press the pound key.
Thank you.
I would now like to turn the conference over to Mr. Daniel Hussain Vice President Investor Relations. Please go ahead.
Thank you Sarah and welcome everyone to Adp's fourth quarter fiscal 2021 earnings call for <unk>.
Dissipating today are Carlos Rodriguez, our president and CEO and Kathleen winters, our CFO.
Earlier. This morning, we released our results for the fourth quarter and full year. Our earnings materials are available on the SEC's website and our investor.
Mr Relations website at investors ADP Dot Com, where you will also find the investor presentation that accompanies today's call during our call. We will reference non-GAAP financial measures, which we believe to be useful to investors and that exclude the impact of certain items. A description of these items along with a reconciliation of non-GAAP measures to their most comparable GAAP measures.
It can be found in our earnings release.
Today's call will also contain forward looking statements that refer to future events and involve some risk. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations.
I'd also like to share that we intend to host our investor.
After day on November 15th at this time, we are planning to keep it virtual for most of our intended.
But given positive reopening trends, we do have capacity here and our Roseland, New Jersey headquarters to host our sell side analysts slide and we look forward to seeing our analyst community in person soon and with that let me turn it over to Carlos.
Thank you Daphne and thank you everyone for joining our call we reported very strong fourth quarter results, including 11% revenue growth from <unk>.
5% adjusted diluted EPS growth capping a year in which revenue and margin outperformed our expectations in every quarter.
For the full year, we delivered 3% revenue growth.
The high end of our guidance range and I'm happy to say, we reached $15 billion in revenue a big milestone for the company.
As we've discussed all year, we took a consistent approach to investing in this year, while also prudently managing expenses.
As a result, our adjusted EBIT margin was down only slightly.
And we were able to deliver 2% adjusted diluted EPS growth for the year ahead of our guidance and well ahead of our expectations at the start of the year.
I'll first cover some highlights from the quarter.
Our new business bookings results were very strong and our momentum in the market continues to build.
Compared to <unk>.
Last year's fourth quarter, we grew our employer services, new business bookings by 174%, which was slightly ahead of our expectations.
And for the full year, we delivered 23% growth in es bookings towards the higher end of our guidance.
We are very pleased with this outcome from our sales team, which booked $1.5 billion.
And new business in a year with a high degree of economic uncertainty.
This full year Es bookings performance represented an average quota carrier productivity level of roughly 90% of our fiscal 2019 pre pandemic levels.
When we delivered $1.6 billion in bookings.
Yes.
And our sales productivity continued to trend favorably in Q4.
At this point most of our U S steel quota carriers have conducted some in person meetings and we expect that to keep trending positively as our clients and prospects show increasing preference for doing so.
We.
Also reopened additional sales offices in this quarter and our current plans to have most of our major U S sales offices <unk> opened by the end of September.
Our retention was likewise, an area with very strong performance with better than expected fourth quarter results are.
Our Es segment experienced a full year increase.
<unk> of 170 basis points to a record $92 to retention.
Our PEO segment also experienced record retention for the year.
And as we've seen all year long client satisfaction remains incredibly high.
Kathleen will share how we have approached our assumptions for next year return.
Tension, but in Q for the trends remained strong.
In addition to impressive retention performance, our PEO continued to benefit from the overall resilience of our client base and in the quarter, we had 12% revenue growth driving us to 7% full year growth, which was ahead of our execution.
Expectations and guidance.
This was a result of record retention as well as stronger hiring and payroll trends within our PEO, which we believe reflects the very high quality of our client base.
And our pays per control turned positive in the quarter with 8% growth. This was in line with our expectation.
Spectation and we continue to see some gradual rehiring amid what seems like a supply constrained labor market.
For the full year, we ended up rounding to negative 3% pays per control growth right in the middle of our guidance range and the assumption that we held all year long.
During the quarter. We also continued to advance our market leading solutions and achieved some new milestones I'd like to highlight.
I'm excited to announce that this quarter, we launched and began rolling out a new user experience for run representing the most comprehensive refresh we've done since its launch.
<unk> is already the leading solution in.
Debt was 750000 clients that use it to help with payroll time, HR insurance retirement and other needs.
It's a powerful HCM product and we look forward to maintaining its positive momentum.
We're also looking forward to rolling out similar UX refreshes.
The Mark on our other major platforms in the near future.
This year, we also made a number of enhancements to our workforce management solutions.
Workforce management, which includes time attendance and scheduling offerings represents 1 of the most critical parts of our HCM suite.
This year, we launched.
Hi, I'm, keeping plus scheduling an entirely new native solution for the run platform.
And for our workforce now platform, we rolled out advanced scheduling, enabling clients to perform more complex workforce management tasks such as skills based scheduling.
Im also proud to share that this quarter we reached.
<unk> hundred thousand workforce management clients for the first time as the pandemic reinforced the need for robust workforce management solutions for our clients, while they navigate the new norm of increasingly flexible schedules and work arrangements.
Our suite of <unk> solutions also continued to deliver.
Reached a steady growth for us this year.
I already mentioned the strength in our PEO business, which had its average worksite employee count growth to $616000.
Up 12% from last year's Count and which now serves 14.500 businesses.
In addition, and in addition to these employees covered.
Delivers PEO, we have over 2 million client employees on our other HR solutions within our employer services segment, where we've seen robust demand all year long as clients look for ways to outsource parts of their HR function to a best in class provider like ADP.
Also.
So this quarter, we enhanced our return to workplace suite by adding a vaccination status tracker, allowing our clients to easily assess and track docs nations within their workforces to facilitate planning decisions.
Our clients continue to appreciate the efforts we've made to help them navigate the pandemic.
And our next Gen agenda continues to progress nicely.
Our next Gen HCM platform continues to deliver competitive takeaways in the market.
During the quarter, we also expanded our global footprint by going live in Ireland and in the U S. We're quickly adding to our implementation capacity for our pipeline of sold clients.
For next Gen payroll, we've now sold over 1000 next gen payroll clients on workforce now.
And we will by ADP, which also utilizes our next gen payroll engine is off to a great start.
Where we are running ahead of our expectations. So far as we drive micro businesses to this mobile first solution.
And as a final highlight we ended the year with over 920000 clients up 7% from the 860000, we had a year ago and no doubt supported by these continuous improvements we've been making to our product portfolio.
I have to say that fiscal 2020.
Stood out as 1 of the most challenging years in Adp's history, and I'm very proud of how we executed.
It's hard to overstate the amount of effort took across the organization to quickly adapt and manage through the pandemic, while providing excellent service to our clients and in the end our organization and financial results.
Both demonstrated extraordinary resilience that is expected from us.
As we look ahead to fiscal 2022 and beyond our focus is on re accelerating our growth through an intense focus on market, leading innovation further simplification of our product portfolio continued digital transformation and.
On an unwavering commitment to best in class service.
And with that I'll now turn the call over to Kathleen for more detail on the quarter and outlook.
Thank you Carlos and good morning, everyone.
Our fourth quarter represented a strong close to the year with 11% revenue growth on a reported basis.
And 9% growth on an organic constant currency basis solidly ahead of our expectations.
Our adjusted EBIT margin was down 120 basis points better than expected and as a reminder, we did have some comparison comparison pressure versus last year's lower selling and incentive.
Compensation expenses that drove the comparative decline.
Our 5% adjusted diluted EPS growth was strong.
And in addition to the revenue and margin performance benefited from share repurchases.
For our employer services segment revenue increased 10%.
Reported basis, and 8% on an organic constant currency basis, as we lapped last year's pandemic affected Q4.
We continued to see contributions from excellent retention and strong new business bookings and growth in pays per control offset by lower client funds interest.
Es margin was down 90 basis points, due primarily to higher selling and incentive compensation expenses versus the prior year.
Our PEO also had another very strong quarter.
Average worksite employees increased to 616000 up 12% on a year over year basis.
For us on both continued retention outperformance and contribution from solid employment growth.
PEO revenue grew 12% an impressive performance as we once again benefited from higher payroll for WMC as well as stronger workers' comp and Sui revenue per WMC compared.
Priority for us.
Totally offset by lower growth in zero margin pass throughs.
PEO margin was up 340 basis points in the quarter due to an elevated workers' compensation reserve true up last year.
We are very pleased with our strong finish to the year for.
For fiscal 2000.
To fund a year heavily impacted by a pandemic, we drove strong bookings growth.
Solid 3% revenue growth.
Delivered positive EPS growth and continued to invest for sustainable growth and digital transformation.
I'll turn now to our outlook for fiscal 'twenty 2.
Beginning with Es segment revenues, we expect growth of 4% to 6% and this outlook is a product of several underlying assumptions.
We expect our es, new business bookings growth to be 10% to 15%.
This strong growth would be driven by 2 factors.
Sales head count growth.
'twenty, 1 we typically aimed to do and benefits from continuing recovery in sales productivity as we trend back to and surpassed pre pandemic levels by the back half of the year.
Please note beginning this year, we will no longer be reporting our employer services new business bookings growth.
Both on a quarterly basis.
Instead, we will focus on our full year bookings growth, which better normalizes for the inherent variability in this metric.
This also aligns to how we focus internally on bookings trends over a full year period.
We will of course continue to update.
With your bookings guidance quarterly and as we do so we will continue to provide color on our quarterly es bookings performance.
We believe our annual bookings disclosure and guidance remains an industry best practice.
Moving on to Es retention.
We're not yet seeing any.
It's a fully indications from our clients that we should expect an increase in switching behavior. However, we believe it is prudent planning to expect that a portion of the retention gains we saw over fiscal 2021 will reverse as companies reopen and reengage in the marketplace.
For the purpose of our outlook.
Specific our initial assumption is that we will experience a decline of about 75 basis points for the year.
Representing just under half of last year's improvement.
If this proves out our resulting fiscal 'twenty 2 retention rate would still be a record compared to pre pandemic levels.
But as I think we all can appreciate there is still uncertainty in this environment given the unusual year, we just experienced.
And we believe this to be a prudent middle of the road assumption to make.
We will update you in the quarters ahead, as we gain further visibility, particularly during the calendar year end period, where we.
We've historically seen the most switching.
Our pays per control outlook for fiscal 'twenty, 2 is for 4% to 5% growth and above normal growth rate that assumes a continued gradual recovery and the overall labor market.
Labor markets appear to be tight at the moment, but we do expect.
We're all employment to continue trending in a favorable direction from where we are today.
And then for our client funds interest revenue most of which sits in the ER segment, we expect some modest pressure.
The interest rate environment remains favorable to what we were experiencing earlier.
<unk> old earlier part of the pandemic, but.
But we are still expecting to reinvest at lower yields than what we were earning unsecured debt maturing this coming year.
We are also providing for the first time and added disclosure for our expected average yield on new purchases for the remainder of the fiscal year.
India, which we believe to be useful for you in understanding the direction. Our average portfolio yield is headed as the portfolio turns over.
Currently that expectation is for a 1% yield on new purchases.
All this said we are expecting balanced growth of 8% to 10%.
And an average yield of 1.4% versus 1.5% last year.
Together this would net us $405 million to $415 million in client funds interest revenue for fiscal 2022.
For our Es margins, we expect an increase of 50 to 70.
75 basis points.
And there are a few factors considered in this outlook.
As a starting point, we are benefiting more fully from operating leverage in fiscal 'twenty 2 than we did last year.
While also recognizing higher sales expenses and continuing our steady investment in product implementation.
And services.
Additionally, we expect incremental margin benefit from the continuation of our digital and other transformation initiatives in fiscal 'twenty 2 as we continue to increase the utilization of digital tools to improve efficiencies throughout the organization.
However, the benefit.
From our transformation initiatives is expected to be largely offset by a year over year increase in facilities and other returned to office expenses as well as higher <unk> expenses.
Moving on to the PEO segment, we expect PEO revenues to grow 9% to 11%.
And PEO revenues, excluding zero margin pass through to grow 10% to 12%.
The primary driver for our PEO revenue growth is our outlook for average worksite employee growth of 9% to 11%.
We expect PEO margin to be down 25% to 75 basis points.
School 2022 compared to the very strong margin result in fiscal 'twenty 'twenty 1.
This is driven partly by an assumption for stronger sales growth and associated selling expenses.
Putting it together our consolidated revenue outlook is for 6% to 7% growth in fiscal 'twenty 2.
Interest in our adjusted EBIT margin outlook is for expansion of 25 to 50 basis points.
At this time because of some comparison differences in the prior year, we expect the first quarter to have revenue growth just above the guidance range with the remaining 3 quarters in the range.
We expect adjusted EBIT margin flat to down slightly in the first half with most of the margin expansion coming in the later part of the year.
We expect our effective tax rate for fiscal 'twenty, 2 to improved very slightly to about 22, 5% next year assuming no.
No change in the corporate tax rate.
Our outlook also reflects the impact of additional corporate interest expense.
During our fourth quarter, we enhanced our capital structure by issuing $1 billion.
In 7 year notes, the proceeds of which were planning to use for additional accretive share repurchases over the.
Quarters.
This added about $3 million in interest expense in fiscal 'twenty, 1 with a full run rate of about $18 million in fiscal 'twenty 2.
At the same time, we're also contemplating further reduction in our share count beyond the typical level, we would've expected to achieve driven by these incremental share repurchase.
Purchases.
Net of this higher interest expense lower tax rate and additional share repurchases, we expect growth in adjusted diluted EPS of 9% to 11%.
As we enter fiscal year 'twenty 2 despite the continuing challenges around the pandemic we're very.
Coming merged by the signs of a continued recovery in the global economy as well as the ongoing secular growth trends in HCM.
As the world of work evolves. We believe we are very well positioned to continue adding value for our clients and differentiating ourselves in the market.
We look forward to.
Updating you on our progress.
I'll now turn it back over to the operator for Q&A.
Thank you.
If you wish to ask a question. Please press star 1.
Please be aware of the allotted time for questions. Please ask 1 question with a brief follow up.
Yeah.
<unk> will take our first question from the lineup Eugene for Muni with Moffett Nathanson. Your line is now open.
Good morning, Thank you for taking my question.
Maybe to start with a little bit of a high level macro question. So Catherine you just highlighted debt.
There is significant amount.
We would like to Laura Thanks for.
For our growth that's coming out in the HR services industry data.
Nick.
Can you speak a little bit more about where you guys are seeing the indications that the secular growth is actually helping John financial performance of ADP and how much of that is incorporated in your fiscal year 'twenty.
<unk> guidance from where it can we see better from the numbers.
Well I think there are probably a couple of highlights.
Kathleen probably has a couple of other she would she can mentioned but.
We mentioned in our prepared remarks, we're seeing around workforce management.
In terms of time tracking.
Racking and scheduling and so forth.
We also mentioned some of the products we have.
Developed for return to workplace. So there are a number of things that are probably related to what's likely to be a more hybrid work environment for white collar employees at least on a go forward basis, which.
Probably requires people to think about their investments in HCM and in terms of what they can do to maximize.
The recruiting and the retention and the engagement of.
That hybrid work for so I think that is 1 the other 1.
There's always been a secular uptrend in terms.
Regulatory related and this is on a global basis demand for HCM products in other words the more complexity.
There is around being an employer of the greater the demand for the wide wide array of services that we that we provide that secular trend has probably gotten a bit of a boost.
Based on in the U S.
Engine administrations, right, which we've had that secular growth for 70 years that ADP has existed but there are times, where it's stronger in terms of a tailwind and sometimes where it's weaker and I would say that we're heading into strong secular tailwind here.
As a result of some of.
The increased attention on regulatory.
Actions and you probably all saw I think it was yesterday or the day before that the president signed number of executive orders most of which are aimed at.
Employer employee related relationships debt.
Increase the amount of.
We're seeing in our reporting and compliance necessary on the part of employers. So those are.
Couple that I would mentioned I think our retention rate also shows.
In an indirect way secular demand improving right in the sense that people have.
Kind of rethought dropping we're switching from their HCM vendors.
Vendors, but that 1 is a little difficult to be 100% sure about because we do expect some normalization in net and our retention rates, yes, I think that.
It really covers a lot of it I mean to kind of summarize and categorize what Carlos said when you think about the complexity number 1 of being employer the ongoing.
Try and pretty significant changes that we see from a regulatory standpoint to complexity regulatory change the dynamic environment is the way people work and the employer employer relationships and employer employee relationship changes, it's a very dynamic environment.
All.
And that is you can just see in the bookings number that we have our bookings you know and I'm sure we'll get into the discussion on that but the growth was pretty broad based I mean.
We saw some channel is stronger than others, but it's pretty broad based and I think that's because of all of this dynamic change and complexity.
We see.
And in particular our.
Our comprehensive solutions are outsourcing solution have seen quite significant growth. So.
Really encouraged about the macro trends that we see in the space and again I think I've always never known what is defined.
The secular versus not secular but.
This huge demand now for talent, what's happening in the labor markets, obviously, thats a huge tailwind for all of us from the HCM space in terms of recruiting tools and engagement tools to try to hold on to people, but that could also.
B something that wins.
I think that was months that was a little harder to tell but generally speaking the war for talent.
<unk> has always been also a secular tailwind for our industry as well.
Got it got it great and then for for.
A follow up.
Related talking about the bookings growth and looking at.
At your at your guidance for 10% to 15% growth next year can you just quickly speak to kind of 2 or 3 key swing factors that you see.
Then we will define whether we're going to end up on the low end the higher end of that range as we kind of trying to corner on their recovery and go through the spirit.
Sure.
In fixed.
Actually I can probably give you 3 that would probably.
Account for kind of the way we think about this so number 1 obviously is what we just talked about is the secular and cyclical tailwind or headwinds. So if the economy continues with the momentum it's Scott, we're feeling pretty pretty good.
Obviously if.
We ended up having more challenges because of the pandemic or otherwise, but right now the amount of.
Even the existing government stimulus, even if theres no additional stimulus.
Is pretty strong and also the pent up demand and all of these the reopening that feels like a very good backdrop for us from a bookings growth standpoint.
Point and then.
As long as we have that background are that backdrop. That's positive. It really comes down to really 2 things is sales force productivity at the sales quota carrier level time number of sales quota carriers hate to be so simplistic, but at our size because we have new products and were rolling.
Now you heard how excited we are about all the new things that we're putting out there, but we sell a lot of business every year. So for a smaller company when they end up having like a new product launch that can cause all kinds of.
Growth and by the way Likewise, if you don't have any new products, but for us Brian.
From what I would consider to be a steady.
Our steady Eddy so we really grow through methodically, improving and adding new products.
Making tuck in acquisitions et cetera, a lot of them, but but the key formula for US is we cannot hit our sales plan unless we have the head count and we are continually improving our sales force productivity and that's exactly what our plan.
We had some good news over the last 4 quarters, where our sales force productivity at the average quota carrier level steadily improved throughout the year to reach 90% for the full year, but we exited.
The fourth quarter and kind of the mid <unk>. If you will in comparison to pre pandemic levels. So it feels like.
We're getting back to quote unquote trend from an from an average sales productivity standpoint, and if we can get back to that trend.
And we deliver on our on our head count additions, we should be able to hit our new business bookings number.
Got it thank you very much.
Thank you.
Our next question comes from the line of Pete Christiansen with Citi. Your line is now open.
Good morning, Thanks for the question.
Carlos you talked about a lot of new logo wins, this year, which is pretty impressive.
But I was curious.
To hear how you think about how this may have changed your.
Adp's cross sell upsell opportunity set I would imagine the runway there has expanded quite a bit.
And perhaps how you're thinking about the strategy.
That land and expand strategy to really take advantage of this of this opportunity.
Thank you.
Yeah, So 1 of the.
In case somebody asked it.
1 of the 1 other questions. We sometimes get is related to what you are asking is the mix of how much is new logo sales versus how much is add on sales and it's really been very steady over many years. It was only during the period where.
We had a little bit of a tilt more towards.
Incremental add on sales, but it's for a long time been around 50, 50, and it's still kind of in that neighborhood. So that I think bodes well because the more clients. We add the more opportunities we have to pursue that land and expand I think our approach that you just.
Described so I would say that we're bullish on the opportunity to continue to go back to.
The new logos that we sold which in many cases, we sell with multiple modules, but theres always.
Additional room for new products as well to go back to that existing client base. So I think that underlying.
Logo growth I think is another kind of supportive factor if you will for our new business bookings, because we do get about 50% of our bookings from our existing client base.
That's helpful and then as a follow up.
I was just hoping if you could juxtapose the global view business versus the other.
Adjusted.
Yes, I know they haven't.
Totally I think during this recovery.
What are you seeing there of late.
<unk> wise.
And as you look towards the outlook.
Is that part of the business considered a laggard behind.
For the remainder of the App store.
There is some variability there that investors should be aware.
It's actually a little bit of the opposite maybe we maybe we may have confused some people I think in prior calls, but I think global views probably could be at the top of our list.
In terms of performance this year like large multinational companies have been I think looking for ways.
I think this pandemic rates raised probably some.
Issues and concerns around control I think for the HR leaders that probably raised some issues around.
Engagement.
And making sure that you are connected to your global workforce and that you had global reporting et cetera, There's a lot of factors that probably went into.
It was incredibly strong demand and very positive sales growth. So I would say it again, we don't disclose individual product lines, but I would say the global <unk> sales were 1 of the stronger.
<unk> and <unk>.
Line items I think for for us.
And I'll add debt to your question about differences between the businesses I think all of our business has really performed well it's kind of hard to really comes down to trying to point out which ones were spectacular versus just good and I would.
I would say that global view and even our international business.
Really were.
Standouts and it really is very impressive because some of the situations in Europe for example were very challenging.
In terms of dealing with the pandemic, but I didn't really stop people from looking for solution.
Solutions and it didn't stop our sales force from finding them, even though they had to do that from obviously from a remote.
Workplace, So I guess summary, as global view is a shining star for US yes. They saw good momentum as we closed out the year in fact day with a particularly strong close with a good number of multinational deal.
Yields on global view coming through at the end of the year and we're looking at fiscal 'twenty 2 for them to be.
<unk> again and again, it's true.
The only again doesn't make a huge difference in the overall ADP revenue numbers, but the strong bookings remember will really translate into revenue and call. It 6 months to 18 months.
These are large typically large multinationals that take some time to implement but that should be a positive thing for us kind of looking forward. If you will in that 6 to 18 month horizon.
Thank you great color and.
Really nice execution good job. Thank you. Thank you.
Because thank you. Our next question comes from the line of James Faucette with Morgan Stanley. Your line is now open.
Great. Thank you very much and good morning wanted to ask quickly and I think it's tied into some of the comments you made around.
Your guidance, but specifically how are you thinking about like the well publicized.
It's difficult for you as employers are having attracting employees and that kind of thing how is that factoring into your guidance and your formulation and are you expecting low resolution of that as we go through the fiscal year, just trying to get a little bit of color of how you're putting the macro environment and the forecast.
Well I mean, I would I would probably put that in the bucket of.
Secular tailwind or cyclical tailwind depending on your view of whether it's short term or longer term, but it does it does seem like.
If this kind of resolve itself, there's a couple of scenarios, but if if it's transitory in terms of the.
You saw the friction of getting people into the range.
And then 6 months from now some of this has passed by the time, we get to that point on.
Unemployment might be down into kind of a 4% to 5% range, which then creates a whole another wave of <unk>.
Need for employers in terms of finding talent and and kind of fighting.
The talent is over so it feels to us like this is a multi year cycle here, where employers are going to be.
Really scrambling to find people and I think that generally creates conversation opportunities. So we don't have a magic formula unnecessary and necessarily we're not a staffing firm, but we do have tools.
And we have technology and we have people that can help our clients be more competitive as they look for for solutions as they look for the right employees in the right place at the right time at the right pay level, that's our sweet spot and so I'd say, we're right in the middle of this what I would call Super cycle of.
Lighting print for for Labor that is probably short term related to kind of friction where people are just not in the right places.
And people are probably also some theres some hesitation still theres issues with childcare and elder care. There is a number of factors.
We assume like other economists that this will be debt part will be transitory.
Demand, but that the.
The need for people will not be given just the obvious low unemployment rate, which we will be at by the end of call. It calendar year 'twenty 2.
That's really helpful Carlos and then.
As it relates to sales productivity.
<unk>, you highlighted that youre expecting and seeing improvement there at the same time you indicated that there you are being able to get your salespeople in front of more.
Count on potential accounts, how closely tied do you expect those 2 things to be as we go through the rest of the.
Fiscal year.
Tori.
Since we're in uncharted territory, it's a little hard to give a scientific answer because this last year, we were not able to get in front of.
A lot of our processing or actually most of our process until recently and yet we delivered I would say very solid and strong bookings results. So I.
So this is really about us being able to adapt which is our job towards the market wants right with the clients want and what the prospects want.
And the fact for the matter is it about half of our cash of the workforce out there, which probably translates into half of our clients.
They actually kept going to workplaces, they kept making things.
Delivering things and going to workplaces, the rest of the some of the white collar employees didn't so that segment of the of the prospect from client they expect us to be available if they want to meet with them in person, we're not going to go for anyone to meet in person we're.
We're happy to meet them, where they want to be met whether it's virtually online or in person, but we want to be ready for whatever the market once and for whatever the market demands and thats exactly our plan, but to answer your question, it's really hard to know.
Which factor is the most important factor.
We think.
That being able and willing and available to meet in person with prospect is an important element of our sales success for fiscal 'twenty, 2 but I can't really put.
A number on it because we were successful in 'twenty, 1 without without doing that.
Yes, I think the key is that.
To make sure.
Sure. We can continue to be nimble just as we were in fiscal 'twenty 1.
Sure.
Certain regions are points in time, where.
Finally for scale back a little bit in the face to face to face I think we're nimble enough to do that was true when we could do that but we're certainly ready and have been out there doing face to face and hope for that to continue.
Yes.
Thanks, Kevin Thanks Carlos.
Thank you.
Thank you. Our next question comes from the line of Dan <unk> with Mizuho. Your line is now open.
Hey, guys great results, Thanks for taking my questions.
So.
Can you discuss how the retention has varied by.
Sort of the 3 es by the 3 sub segments SMB mid market.
And upmarket and what happens to the Smbs once the PPP rolls off so how should we think about kind of.
Your <unk>.
Items.
For retention versus like those those 3 vectors and then I have a very short follow up thanks.
That's a good question I think.
Probably have a little bit of additional color, but I would tell you that.
I think your insinuation that the PPP loans may have something to do with these.
As elevated retention rate is something that we've heard kind of out there in terms of other as a buzz.
And.
Again, thats very hard to like put our finger on in terms of how to quantify that and whats the whats the impact but for sure 1 of the strongest there as we've had in <unk>.
Retention is our Downmarket business and that is why I think we've prudently planned for some <unk>.
Give back on that next year, having said that I would tell you that this year fiscal 'twenty, 1 and the 2 months before that we're probably the greatest.
Example of Adp's business model in terms of ability to deliver we call. It services you can call it compliance from call. It whatever you want but when the chips, we're down and people needed help and needed to talk to someone about their PPP loan and.
They werent, calling their banker they didn't haven't have to apply for a loan and they didn't have to go through.
Ink, but you can go do your channel checks to see how many banks were actually answering the phone or getting people advice because they were completely overwhelmed as we work for.
We actually figured out a way to handle it and we were there for our for our clients and so I think that what we just did over the last year and I get it among them.
Pregnancies. So memories are short and we have to continue to impress and continue to deliver for our clients, but I think we just proved to hundreds of thousands of clients and hopefully the prospects from a reputation standpoint that if you want.
To have someone who's a partner it's ADP if you want software.
Where you can buy software, but if you want great technology and great software, but you want someone who is going to be able to deliver on the service side. Then you should be with ADP and so I think that that is going to have some is going to be some factor and hopefully, allowing us to hold onto some of this retention on a more.
Permanent basis, because I think the when the chips were down I think people saw the difference between not having someone that you can get help from and having someone that you can reach out to and get a device and get your problems.
Problem solved but the Bottomline is we clearly are are prudent and and aware.
Permanent debt some of this normalization could could result in some lower lower retention rates, particularly in the down market. As you are I think alluding to.
And that covers a lot of debt.
In fiscal 'twenty, 1 look we saw strong retention across almost all of our channels our businesses.
Particularly in small business and mid market as well, though and you can actually on the international side, where the retention is very high we saw a little bit higher there as well too so pretty.
Pretty much strong across the board, but look we want to be prudent from a planning perspective, and while we haven't seen.
Are there any change yet in terms of switching or.
Along those lines I do think it's prudent to plan that theres going to be I'll call. It a little bit of give back in fiscal 'twenty 2.
I think we are going to hold onto some of the gains were certainly attempting to do that we want to do.
But I do think it's prudent to plan for a little bit of give back which we've done and that would be primarily with regard to small business segment.
Back to pre pandemic levels, but to be clear there is no I'm not aware of a particular theres nothing that ties a client.
That is for anyone else because of the PPP loans, what I've heard the theory that some people have is that somehow some kind of a psychological thing that it will just make things more difficult if you switch.
I'm, obviously, not a small business owner, so we talked for small business owners and we're just not we're just not hearing that.
But it feels logical.
So it could be a factor but to be clear. There is no particular trigger that on November 15th we're going to lose 100000 clients because their PPP loans have been repaid or expiring thats not the way the program works.
Understood and then my quick follow up and I think it's somewhat tied to this is the margin.
<unk> guidance when you hear us.
Moving from investors as it might be maybe slightly.
<unk> expectations.
Our expectation is that somewhat tied to the mix shift next year.
There anything else that you could pull items the margin guidance.
Okay, well listen after 10 years of doing this I've never heard anyone say that your margin guidance.
<unk> was too aggressive and too high so let me just start off with that with that comment and part of that is that we're always trying to balance.
Short term and long term investors I'm, not sure which ones you were hearing from.
But our.
Our intent here is to continue.
The machine right and the momentum.
<unk> has led to.
Multiple decades here of compounded growth in <unk>.
<unk> of value over a very long period of time and that requires delivering short term results as well as long term results.
And those long term results I think require some investment including on the R&D side.
But in particular this year really the biggest factor is selling expense and sales investment.
Has happened to us in the past we've had other times in call. It 2000, 2001, or 2 and then <unk> 10, because I was around for those where as we reaccelerate and take advantage of.
Demand back to the secular growth opportunity.
The way our business model works as we incur a lot of upfront selling and implementation expense now there's some accounting rules that allow you to defer some of that but.
Generally speaking you get elevated selling expenses and implementation expenses and it's pretty significant.
Significant so I would say that that is a significant part of what.
Would've made otherwise been higher higher margins for 'twenty, 2 but when that business then is on the books.
High incremental margin business that then in 'twenty 3 'twenty for and then for the next 12 months to 13 years with us how long we keep our clients on.
Average creates an annuity so as you can imagine we never turned down the incremental opportunity to add business never because of just the way the value creation model works and we're going to make hay, while the Sun is shining here and with 67% GDP growth.
Last quarter and what's likely.
Incredibly strong GDP in the next year or 2.
We're going to take every possible opportunity and unfortunately that requires from selling expense and some implementation expense. In addition to the ongoing investments in technology and some of the other things that we do so.
So just big picture the way to think about margin.
To be sure anywhere.
Very.
Happy that we're able to kind of guide for this 25 to 50 basis points of margin expansion.
Look we always look to do better than then.
The plan, but that's what we're comfortable with right now the way to think about it is look we're going to.
For next operating leverage to a greater extent in fiscal 'twenty 2 obviously.
But we've also got the investments that we want to continue to make as Carlos just articulated it.
<unk> and sales and in digital transformation importantly, and you know we do have some some.
Offsets Carlos mentioned the sales expense.
But we also have things like return to office and ramping up <unk> versus what we where we were in fiscal 'twenty 1.
So kind of all of that goes into the mix net net we've got this 25 to 50.
At this point margin expansion, we're going to do our best to deliver on that end.
We continue to work our digital transformation and it's possible to do even more and 1 just 1 other factor because if you have any doubts about adp's ability to drive margin.
1 small thing hasn't come up yet, but we had this like small.
The problem this year with interest rates, where they created a $110 million.
<unk> net contribution and 100, almost $125 million in topline and bottom line in terms of client funds interest revenue. So our revenue growth would have been almost a point higher.
Our margins.
Little.
For this year in a pandemic would've been up 70 basis points instead of down 40 basis points had we not had that headwind now we did have a headwind. So it's always hard to say if we didn't have this and we didn't have that but thats a pretty easy thing to isolate that has no.
No operational.
Margin has to do with operations, we have no control over and we have to just ride that cyclical wave, which hopefully that cyclical wave is heading in a very positive direction for us over the next 2 to 3 years, but trying to make sure you understood that because I think that tells you just how much control we have over.
For our.
No fences and over our business model and over our long term value creation objectives.
Sorry, if I was interest does continue to be headwinds for us in fiscal 'twenty, 2 very modest headwind.
Per to what we experienced in fiscal 'twenty, 1, but it doesn't help us whereas in years past it.
<unk> significant help to us.
Got it thank you for the detail appreciate it.
Thank you.
Thank you. Our next question comes from the line of Ramsey El <unk> with Barclays. Your line is now open.
Hi, Thanks for taking my question.
I wanted to follow up on your comment.
It was on retention and prudently planning for retention to increase as the market normalizes, whether it does or not we'll see but can you describe your toolkit on the sales of our technology side that you can use to prevent attrition and I'm sure a lot depends on the underlying underlying sort of reasons for the attrition, but can you be more proactive.
Proactive on that front and sort of.
Stemmed the tide a bit if push comes to shove Abbott.
Absolutely I think and again, we probably have a couple of examples we could give of things that we've done over the last year, but it's usually a methodical multiyear approach to making our products.
Comments from when we talk about innovation innovation is partly about new business bookings, but it's also about making our solutions easier to use and more intuitive and you heard in our in our comments.
And we shouldnt gloss over it like the the UX experience investments we've made in both run but now in some of our other platforms.
<unk> is a significant factor in today's world of whether or not a client sticks with you or not so we get that that's why however, many years ago, we kind of got it and we said we need to become a technology company. In addition to the services company that we are and so I would say number..1 is you have to have great products they have to be EBIT.
<unk> to us and they have to have new friction.
That will help with retention I think the other the other things that I think you can point to or really just around availability. So our business model and our promise is not just technology and software, but it's to help with compliance and as to help with advice and is to provide expertise.
And that really means that we have to have well trained associates, who are there to answer questions, whether it's chat whether it's by phone. It doesn't matter. However, the client wants to reach us, but the stuff. We do is complicated and being an employer is complicated and it requires.
And you can either get the help from us or you can call an attorney or you can call a consultant, but most people do not just do this stuff on their own and we happen to package. The 2 things together, great technology with Great service. So I would say we have great technology, and we have great service, we're going to be able to hold on to hopefully a lot of that improvement.
Hello patent retention, even if we have a little bit of give back in the in the down market.
I see so it's not a question of running analytics at the right time, its really more of a longer term kind of blocking and tackling and product innovation approach.
Maybe 1 point of analytics too. So we have for example, we have a lot of data around.
Around like we track individual clients, how many times they call. We actually can monitor we have voice recognition that tells us.
Certain key words that people use when they are because we record all phone calls and that really gives us deep insight into our clients that are at risk and then we have.
<unk>, we've obtained that can.
Follow up with those clients to make sure that whatever palm. They had has been has been resolved, but that's I would call that trench warfare, which but if you want to get into those details I can go in the trenches with you, but we have.
Very deep analytical tools that.
Give us a lot of insight.
Specialty ample in our down market I mean, our clients don't call that often because hopefully they don't have problems very often because we do a nice job of preventing problems.
But 1 of our small business clients has we detect has multiple calls in a month that requires a reach out for that client or a deeper investigation in a triage.
Free cash to make sure that we don't lose that climb because that's usually a sign that there is something wrong with that with that client and we have other techniques and other approaches and other tools to identify.
We would call hotspots, we also monitor pricing very carefully.
When we do our price changes.
Yes.
Triage code for price increases, we we do that very carefully using a lot of analytical tools to make sure that we.
Do that in the smartest possible way, if you will to maximize retention.
Okay.
Thanks for that and a quick follow up for me how would you characterize the demand <unk>.
Environment for for office.
As for on demand payroll is that something that that you see getting quite a bit more popular or sort of remain kind of a niche service over time.
I mean, it's clearly popular because I know a lot of people are talking about it and so that only leaves the popularity right as soon as someone talked about it it becomes popular.
I think that it's.
Again like a lot of things, we've been saying over the last 2 or 3 years. So many things are inevitable are going to happen and we are preparing for them so things like real time payroll.
And this 1 that you're referring to is kind of 1 that we just heard over the last couple of days.
From that we've been thinking about for many many years and we have solutions, where someone needs to get paid like for example.
Cycle beforehand, if someone is terminated from their job you'd have to give them. Their final paycheck like immediately and so that is difficult to do through the normal process. So we have solutions for that that we've had.
For quite some time and so I think the increasing popularity is probably more related to.
Ample income increasing discussion about it but also to technological advances.
Advances that allow more options right in terms of instant payments and or faster payments. So so I would say the answer is yes that is an important.
Thing and for certain sectors like if you have.
2 a high turnover hourly workforce your ability to provide that solution is crucial but we have that ability to provide us with a true but you can't for example, sell a client in California, and not be able to provide instant.
Instant pay upon termination so it's.
You have to have that.
Got it alright, thanks, so much.
Thank you.
Our next question comes from the line of Bryan Bergin with Cowen. Your line is now open.
Hi, good morning, Thank you.
And then can you talk about how you're thinking about the cadence of the pays per control projected you've assumed.
Assume during fiscal 'twenty, 2 and what does the fourth box net build imply in the base relative to pre pandemic levels.
We're digging for that.
I think the quarterly again, it's probably when you look at the comps the.
The fourth quarter, we will have.
Weaker than.
Then expected growth, but I don't know Dan if you have the yes, Brian It's just a mirror image of what we saw effectively last year and so there is a stronger Q1 performance and PPC thats baked into our assumptions and it gradually tails off.
But we don't have an explicit.
<unk> for you.
On what this means for reported unemployment rate the same way that we gave you that guidance last year at the outset and the average for the year for patient control refresh my memory is for.
45% to 5%.
So you I would anticipate if I were you I would probably assume that for the fourth quarter, it's going to be.
Back to I don't know 2.3% or somewhere to look somewhere in the lower range, because we're growing over the 8 and in the first 3 quarters, particularly the first quarter it will be higher.
Higher.
Okay.
Follow up then on M&A, how are you thinking about areas of potential acquisitions for capabilities.
And then also can you comment on how the market has been for for book of business acquisitions curious Covid has changed that dynamic during fiscal 'twenty, 1 and into fiscal 'twenty 2.
We've had actually a pretty good success in terms of client based acquisition.
Youre right that I myself was surprised that there.
There was.
An opportunity to do that and that we were able to execute on it but we had 1 that I think we mentioned last year in the fourth quarter and kind of spilled a little bit over into the first quarter, but it was mostly I think fourth quarter. We had 1 of the year before that for the significant also in the fourth quarter and in this year.
We've had a number of what I would call smaller ones, but they add up and so I would say that the news. There is good and is ongoing and we created a nice ability to.
To do these conversions and make it.
Good for us in terms of the growth back to the question around cross sell.
Usually have a much broader set of.
Since then.
Other people that we are making these acquisitions from which creates upside opportunity right in terms of value creation for us.
On the kind of overall M&A common side I would say that we've where we've been most active is looking for someone.
Of our international low.
<unk> solutions in markets, where I think we have very low market share and we still have.
Needs for example for add on products, whereas in the U S. We're not really looking to add additional platforms for either benefits or payroll and so forth. So it really has to be things that are adjacency.
<unk> location right in the HCM in the HCM space, but not duplicative because as you know we've been on this kind of simplification push for many many years and trying to build things organically and invest in technology organically. So that doesn't mean that we won't.
Acquired because we have a couple of years, we just haven't done anything for a couple of years.
Adjacent do welcome the opportunity to add additional ancillary benefits as long as they fit into our technology roadmap and they're not disruptive or add on and we're not doing it just to get the quote unquote revenue pop, but on the international side. We typically don't have those those factors at play as much.
But with a place where we're still excited and we still see a lot of greenfield opportunity too to expand through M&A.
Okay. Thank you.
Thank you. Our next question comes from the line of Kartik Mehta with Northcoast Research. Your line is now.
<unk> and <unk>.
Hey, good morning Carlos.
You talked about the PEO business, obviously, it performed well in the fourth quarter and it seems like trends are coming back I'm wondering if you've seen any.
Secular changes I know that word maybe you don't like but any secular changes in demand for the product or if you anticipate any changes.
Now we've gone through with Covid.
I mean again my experience tells me that because.
Because I actually ran that business for many years at ADP and I have been watching it for.
Can't believe I'm going to say this for 25 years and when you head into this kind of economic environment, It's usually a positive secular.
Tailwind for.
I guess back to like Southern I don't like that word, but I would say that there have been positive secular trends for the PEO for 20 years to 30 years.
Then they can get enhanced I think by cyclical factors like a strong economy.
People, sometimes say that the PEO will do well.
Well, our outsourcing will do well when there's a recession because people are looking to save money.
And that there is some truth to that but it's not what the data supports for shows right. It's usually when you have very strong economic growth and strong GDP and people are scrambling for talent and they're competing for offering the right benefit that's 1.
And outsourcing tend to I think do better so I would say that based on experience, which you have to discount because we just went through a pandemic. So.
Most of our experiences we should park somewhere outside the door, because we may end up being wrong, but all things being equal this kind of economic environment.
It's usually very strong for for the PEO.
As for the last.
It's 18 months, what we saw there is it's a long cycle sale and it's a high involvement decision. So I think we've been clear that we've had good great results there from a booking standpoint and probably.
Pete.
Other than we would have thought was possible, but definitely not as strong as yes in kind of the early stages of the recovery of our bookings, we expect that to reverse and that is our plan in 2002 in other words, we expect very strong bookings and strong recovery on the PEO and we're seeing some signs of that.
That in the in the fourth quarter, because what happened is in this kind of hunkering down mode. We saw very high retention in our PEO, but not as much it was more difficult to sell new new clients with the existing clients.
It was unbelievable value that we deliver to them because it was beyond just.
<unk> loans it was how.
How do I downsize might workforce or how do I put people on furlough and what are the rules in this day around benefits I mean, our people were busy I mean, all of our people who were all of ADP. We're busy this year, while maybe other people were less busy but our people were busy.
And in the PEO they were extra busy so I think that that bodes well those anecdotal stories and that reputation along with kind of some of these cyclical tailwind I think bode well for the for the PEO here in the next year or 2.
Just as a follow up on the Es business.
To do anything out of the ordinary in terms of.
Just people price.
Price competition or just providing promotions.
Have we done anything or you're saying or is the market I guess have you had to do anything too.
Because of course competition is done so or have you had to do anything out of the ordinary on the Es business.
No.
Perfect. Thank you.
Thank you.
Our last question comes from the line of Mark Marcon with Baird. Your line is now open.
Hey, good morning, everybody and thanks for squeezing me in I was wondering if you could talk a little bit about.
The strong bookings performance and just unpacking that.
In terms of where you I heard the 50.50 mix in terms of upsells versus new logos, but as it relates to new logos, where where are you seeing the strongest.
Success was that down market in terms of the new business formations was that across.
The board and who do you think you were winning the most against.
But I mean, we would always squeeze you and Mark there is no no question about that.
Couple a couple of highlights.
We think we mentioned in our prepared comments, but are non PEO HR solutions. So these would.
Would be kind of mid market and upmarket outsourcing solutions that are what I would call a more comprehensive if you will.
Really we're probably 1 of the real highlights and I think that was again related probably to.
People realizing.
Probably within months after the pandemic debt.
Like this stuff is.
Hard to do especially if you have to pivot very quickly right you have to make sure. Your systems are still up like you can't you can't have a server in a closet somewhere that you are using to run payroll because you still do this internally and then people who go to the office to key in the payroll. It's like the stuff is just a lot of people all of a sudden woke up and.
From a business continuity standpoint, and from a support standpoint, I need help and it needs to be more than just software right and basic service. So these HR solutions.
Really where an incredible a bright spot and then I think.
Kathleen mentioned, our upmarket and our ESI book.
<unk> results were also very very strong.
Yes, new business formation helped in the down market and we're very we're pleased with all of our results on the bookings side it was across the board.
Very strong performance.
I would say that there were other places that had even stronger.
Bookings from a global view, our tax filing and compliance business, which does a lot of standalone business, where again companies realize that.
Having a bunch of people subscale doing this stuff from you don't even know where they are and if they can get to the office or if they can do it from home, but it's mission critical are looking to outsource or did outsource.
I talked a lot of that stuff to us and then we did have a couple of what I would call volume based businesses like employment verification and screening in a couple of things that <unk> also came back a little bit.
It was really across the really across the board honestly like so those are a couple of just strong.
Across the board Carlos.
For us at all of those.
At this point in particular.
For the way of down market really led the way in recovery during the quarter for the year.
In fact, you can correct me if I'm wrong on this but I believe SCS had their biggest Q for ever.
Including the retirement and ensure.
<unk> solutions.
Yes, I wrote it down somewhere but I can't find it I think we had record Q4 bookings and a number of different categories, but that's also probably happens other years to where we have so many things were so broad that theres always a few bright spots, but honestly compared to what we would've expected at the beginning of this year.
Carlos to be saying, we had record bookings in any business line is really good news.
So that's fantastic.
With regards to the new logos in terms of if there wasn't moving towards outsourcing solution that was previously done in house was there any sort of commonality with regards to competitive takeaways.
But you ended up seeing.
A source.
I would say that when I look when I look at the.
And what we call the balance of trade.
Later, I would say that we are.
Again, I'd like to think we're doing a little bit better we don't provide a lot of color and disclosure around because I don't think it is helpful and im not looking to pick a fight with.
And with specific competitor, but I would say that we're pleased with our progress like the combination of stronger retention, which means we lose less to some of those competitors that you are talking about and our strong bookings performance means we won more against some of those competitors I think as you probably paint the picture that there.
Theres, probably a few competitors, where our balance of trade.
Improved which it did and admittedly in some a couple of competitors. It didn't state, but I don't think theres really any place where we went backwards that im aware I'm trying to think back but I think the balance of trade situation. We are very focused on this we're trying to become more.
For focused on logos in units and more focused on our competitors because our competitors are focused on us.
And we are sick and tired of it.
Understood and then along those lines you have made a number of our product enhanced.
And you've highlighted a number of them including in terms of.
Workforce solutions workforce planning and time and attendance.
And then obviously highlighting nextgen payroll, just wondering which ones do you think are going to have the greatest incremental contribution I know it all leads to sales force productivity.
But.
But just which ones should we look for the.
The greatest benefit from.
Perhaps.
It's a tough 1 because its like picking your favorite child.
I mean, I haven't view I think what we do from an investment perspective in ongoing kind of refresh and modernization and you Act on all of.
Our strategic platform is critical and we're doing that all the time and that is critical to our.
Ongoing satisfaction with our product as we talked about earlier in our NPS score so that constant refresh from a U S perspective is really really important Carlos you may have other things you'd want to know.
And Thats well said because.
I am excited about all of them I think that the next gen payroll.
Who is literally could be the biggest.
Mover in the last multiple decades for ADP for us, but it really it's really workforce now and roll and other things that are in front of it that are.
Digital right because that's really just an engine for gross to net engines, but the added flexibility that it provides and the process improvement that it provides and the back office could be.
A step change game changer for ADP in terms of our competitiveness and in terms of our efficiency, but the truth is the next day client focus.
<unk> right and most important thing the client sees.
What they interact with rate and I think that is mostly around the UX and our front end solutions. So I think thats, probably the right the right place to focus.
This next gen payroll.
The plan for this year.
In terms of.
Percentage of.
Workforce now that ends up getting converted or that should be on it.
We're not really we're probably dabbling in a few conversions, especially not our number 1 priority yet we started kind of in the lower end of our mid market to begin with so in call. It a 50 to 150 is where we are.
I think really we call it core major accounts kind of in the lower end of major accounts.
And we're pretty happy as you can tell from our total when we've talked about in the last couple of quarters with our progress there and we have a plan I don't think it's really great for us to share it because I think competitors listen to these calls too.
But we have a very methodical plan to eventually get to a 100% of our core sales being on next gen payroll while at the same time, then gradually moving into the other parts of major accounts call it for $150 to.
1000.
And then selling.
100% of those clients onto next Gen payroll and then as we're going along we will start some conversions, but it's not a huge priority because I can remember workforce now as the front end on both of these and this is all intended to be transparent. This is not 1 of those migrations that you heard about 5.7 years ago at ADP will disrupt everything.
Hang in.
The clients are going to see very little.
Change other than some enhancements in terms of self service capabilities.
And other things that obviously, we think we're going to be net positives from both the selling and a client retention standpoint, but generally speaking they're experienced will not change any.
Efficient in a significant way.
Terrific congratulations.
Thank you.
Thank you. This concludes our question and answer portion for today.
I am pleased to hand, the program over to Carlos Rodriguez for closing remarks.
Well, thanks, I appreciate everybody joining the.
Today I think.
In the prepared comments, we talked about what a year. This has been I'm sure. Every company has the same view in terms of the challenges that the day faced but I'm just incredibly grateful to our associates for what they did first and foremost for our clients when the chips were down and.
Coffee delivered it started obviously in the fourth quarter of last year with all the government regulation changes that needed to be put in place and the huge volume of inquiries were getting about PPP loans et cetera, but it really continued into this fiscal year as well and it was just an incredibly challenging environment, while people have personal challenges rate.
Including health challenges in there and their family and so again I'm just.
Look back to where mission driven company and you can see it in the in the culture and I am grateful for my predecessors, and the culture that was built over all of these decades that allowed us to.
It wasn't.
And we really are incident and it wasn't easy, but we really got through it I think we delivered for our clients we delivered for.
The economy, because we are a mission critical service in the economy and I just couldn't be prouder of our associates, including our back office associates to support our frontline associates as well.
Wasn't with our sales force, who as we've talked about a lot today continue to plow through and allow us to continue to grow our business. Despite were unprecedented headwinds so but first and foremost I'm just so glad that despite obviously, we have some short term challenges here with.
The new Delta variant and so forth but.
Well as I mean, clearly we're heading in the right direction and we're very optimistic.
Both for ourselves for our families for our associates and for our clients and we look forward to better times ahead here over the next couple of quarters, where inevitably we will have some ups and downs of some challenges here and there.
But it is it's great that.
Everything is on the right track at least in the United States and we're hoping that other parts of the world followed closely behind given that we have very significant business in Europe, Asia, and Latin America, as well and we appreciate your interest in ADP and your support and thank you for tuning in today.
Lady.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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