Q3 2024 Automatic Data Processing Inc Earnings Call
Michelle: Good morning. My name is Michelle, and I'll be your conference operator. At this time, I would like to welcome everyone to ADP's third quarter fiscal 2024 earnings call. I would like to inform you that this conference is being recorded. After the prepared remarks, we will conduct a question and answer session. Instructions will be given at that time. I will now turn the call over to Mr. Danyal Hussain, Vice President, Best Relations. Please go ahead.
Good morning, My name is Michelle and I'll be your conference operator at this time I would like to welcome everyone to Adp's third quarter fiscal 2024 earnings call.
Speaker Change: I'd like to inform you that this conference is being recorded.
After the prepared remarks, we will conduct a question and answer session and instructions will be given at that time.
Speaker Change: I will now turn the call over to Mr. Daniel Hussain Vice President Investor Relations. Please go ahead.
Danyal Hussain: Thank you, Michelle, and welcome everyone to ADP's third quarter fiscal 2024 earnings call. Participating today are Maria Black, our president and CEO, and Don McGuire, our CFO. Earlier this morning, we released our results for the quarter. Our earnings materials are available on the SEC's website and our investor relations website at investors.adp.com, where you will also find the investor presentation that accompanies today's call. During our call, we will reference non-GAAP financial measures that we believe are useful to investors and that exclude the impact of certain items.
Danyal Hussain: Thank you Michelle and welcome everyone to Adp's third quarter fiscal 2024 earnings call.
Danyal Hussain: Participating today are Maria Black, our president and CEO and Tom Mcguire our CFO.
Danyal Hussain: Earlier. This morning, we released our results for the quarter our earnings materials are available on the Sec's website, and our Investor Relations website at investors that ADP Dot Com, where you will also find the investor presentation that accompanies today's call.
Danyal Hussain: 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 can be found in our earnings release.
Danyal Hussain: A description of these items, along with the reconciliation of non-GAAP measures to their most comparable GAAP measures, 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'll now turn it over to Maria.
Danyal Hussain: 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.
Danyal Hussain: Now I'll turn it over to Maria.
Maria Black: Thank you, Danny, and thank you everyone for joining us this morning. This morning, we reported strong 7% revenue growth and 14% adjusted diluted EPS growth for the third quarter as we continue to make progress delivering against our strategic priorities and as the labor market and the overall HCM business environment remain stable. I'll begin with a review of the quarter's results and provide a brief update on our strategy before turning it over to Dawn to update you on our outlook and share some early considerations for next year.
Maria Black: Thank you Danny and thank you everyone for joining us. This morning, we reported strong 7% revenue growth and 14% adjusted diluted EPS growth for the third quarter as we continued to make progress delivering against our strategic priorities and as the labor market and the overall HCM business environment remains stable.
Maria Black: Begin with a review of the quarter's results and provide a brief update on our strategy before turning it to Dan to update you on our outlook and share some early considerations for next year.
Maria Black: In Q3, we delivered solid employer services and new business bookings growth, reaching record bookings for a Q3 period and keeping us on track for our full year outlook. We maintained momentum in our small business portfolio, with particularly strong growth in our retirement services offering. And in Q3, we also delivered strong bookings results in our mid market, enterprise, and international businesses. With a steady demand backdrop and a healthy new business pipeline, we are focused on continuing to execute for the remainder of the year. Employer services retention was very strong in the third quarter and once again exceeded our expectations, also reaching a new record level for a Q3 period led by our mid market business.
Maria Black: In Q3, we delivered solid employer services, new business bookings growth, reaching record bookings for our Q3 period and keeping us on track for our full year outlook, we maintained momentum in our small business portfolio with particularly strong growth in our retirement services offering and in Q3, we also.
Maria Black: Delivered strong bookings results in our mid market enterprise and international businesses.
Maria Black: But the steady demand backdrop, and a healthy new business pipeline, we are focused on continuing to execute for the remainder of the year.
Maria Black: Employer services retention was very strong in the third quarter and once again exceeded our expectations also reaching a new record level for our Q3 period led by our mid market business. Our overall retention continues to benefit from ongoing investments in our key platforms and from our commitment to delivering an exceptional.
Maria Black: Our overall retention continues to benefit from ongoing investments in our key platforms and from our commitment to delivering an exceptional client experience, which together helped our client satisfaction scores reach a new all-time high for Q3. Our employer services pace per control growth was steady at 2%, reflecting the resilient overall U.S. labor market and the fact that our clients continue to add to their workforces at a moderate pace. And our PEO revenue growth of 5% for the third quarter was in line with our expectations, despite continued short-term pressure from below-normal hiring activity we've been experiencing among those clients.
Maria Black: <unk> client experience, which together helped our client satisfaction scores reached a new all time high for a Q3.
Maria Black: Our employer services pays per control growth was steady at 2%, reflecting the resilient overall U S labor market and the fact that our clients continue to add to their workforces at a moderate pace.
Maria Black: And our PEO revenue growth of 5% for the third quarter was in line with our expectations. Despite continued short term pressure from below normal hiring activity, we've been experiencing among those clients.
Maria Black: Moving on to a broader update, we continue to push forward on our three strategic priorities, leading with the best HCM technology, unmatched service and expertise, and the broadest scale to ultimately deliver the best possible experience, not just to the buyers of our products but everyone that engages with ADP. We are investing with purpose to deeply understand and deliver value to a vast set of personas, from small business owners that count on us, to HR professionals and executives of the largest global enterprises, to millions of employees and gig workers around the world who engage with our solutions, to CPAs, banks, brokers, and other key partners, to our thousands of dedicated service and implementation associates, and to our sellers who represent ADP in the market every day. It's with these personas in mind that we continue pushing forward on our strategic priorities, and in Q3, we made steady progress. Our first priority is to lead with best-in-class HCM technology.
Maria Black: Moving on to a broader update we continue to push forward on our three strategic priorities, leading with the best HCM technology unmatched service and expertise and the broadest scale to ultimately deliver the best possible experience not just to the buyers of our products, but everyone that engages with ADP.
Maria Black: We are investing with purpose to deeply understand and deliver value to the vast set of persona is from small business owners that count on us to HR professionals and executives of the largest global enterprises to millions of employees and gig workers around the world, who engage with our solutions to CPA banks brokers.
Maria Black: And other key partners to our thousands of dedicated service and implementation associates and to our sellers who represent ADP in the market every day.
Maria Black: It's with these personas in mind that we continue pushing forward on our strategic priorities and in Q3, we made steady progress.
Maria Black: Our first priority is to lead with best in class HCM technology.
Maria Black: We've been rolling out ADP Assist these past couple of quarters, which, as a reminder, will be embedded in our key platforms and utilizes Gen-AI to surface insights, aid decision making, and streamline day-to-day tasks for our clients and their employees. In Q3, we were very excited to begin piloting a new feature that enables our small business clients to not only leverage Gen-AI to answer questions and better understand how to initiate an HR action, which we outlined in recent quarters, but also to actually allow them to issue commands to complete that HR action. For example, users can now type, I need to rehire Alex, or I would like to give Alex a leave of absence, and are expedited through that workflow.
Maria Black: We've been rolling out ADP assessed these past couple of quarters, which as a reminder, we will be embedded in our key platforms and utilizes gen AI to surface insights a decision, making and streamline day to day tasks for our clients and their employees.
Maria Black: In Q3, we were very excited to begin piloting a new feature that enables our small business clients to not only leveraged NII to answer questions and better understand how to initiate an HR action, which we outlined in recent quarters, but to actually allow them to issue commands to complete that HR action.
Maria Black: For example, users can now type I need to re hire Alex where I would like to give Alex a leave of absence in our expedited through that workflow.
Maria Black: Our second priority is to provide unmatched expertise and outsourcing. We continue to extend Gen-AI capabilities to a broader portion of our service associates. And in Q3, we started rolling out a new tool for some of our implementation teams. Now they can use GenAI to take in unstructured client-employee data, reducing manual data entry and minimizing errors during the implementation process.
Maria Black: Our second priority is to provide unmatched expertise and outsourcing.
Maria Black: We continue to extend gen AI capabilities to a broader portion of our service associates and in Q3, we started rolling out a new tool for some of our implementation teams.
Maria Black: Now they can use gen AI to taken unstructured client employee data, reducing manual data entry and minimizing errors during the implementation process.
Maria Black: While it's still early, we are excited about its potential benefits. Our third priority is to serve our clients with our global scale. The ADP marketplace remains a differentiator for us and is a perfect example of a benefit our clients receive from partnering with a leader in HCM. As a growing number of our hundreds of partners offer AI-enabled solutions, in Q3, we established ADP marketplace AI principles that require our partners to commit to the same type of responsible AI principles that govern our own products, including human oversight, monitoring, explainability, and mitigating bias.
Maria Black: While it's still early we are excited about its potential benefits.
Our third priority is to benefit our clients with our global scale.
Maria Black: The ADP marketplace remains a differentiator for us and is a perfect example of a benefit our clients receive from partnering with the leader in HCM.
Maria Black: As a growing number of our hundreds of partners offer AI enabled solutions in Q3, we established ADP marketplace AI principles that require our partners to commit to the same type of responsible AI principles that govern our own products, including human oversight monitoring explainable.
<unk> and mitigating bias.
Maria Black: Our clients put a huge amount of trust in us, and this is another example of how ADP strives to ensure the responsible use of AI throughout the ADP ecosystem. We also continue to extend our market-leading global scale, and in Q3, we reached 1 million paid employees on our IHCM platform, which continues to scale in several countries in Europe, and we made further progress in growing our presence in the APAC region, where we have recently been expanding our in-country payroll and workforce management presence in a number of markets.
Maria Black: Our clients put a huge amount of trust in US and this is another example of how ADP strives to ensure the responsible use of AI throughout the ADP ecosystem.
Maria Black: We also continue to extend our market leading global scale and in Q3, we reached 1 million paid employees on our <unk> platform, which continues to scale in several countries in Europe, and we made further progress in growing our presence in the APAC region, where we have recently been expanding our in country payroll.
Maria Black: And workforce management presence in a number of markets.
Maria Black: In 2024, we are celebrating our 75th anniversary, and we pride ourselves on having built ourselves into a brand that truly matters to employers, their employees, and the broader world of work. Our focus on our strategic priorities positions us to deliver more value than ever for our over 1 million current clients and to the tens of thousands of new clients we welcome to the ADP family every quarter. I'd like to highlight just a few of these new client wins from Q3 to give you an appreciation for the variety of ways in which we deliver value to our clients.
Maria Black: In 2024, we are celebrating our 70 <unk> anniversary and we pride ourselves on having built ourselves into a brand that truly matters to employers and their employees and the broader world of work.
Maria Black: Our focus on our strategic priorities positions us to deliver more value than ever for our over $1 million current clients into the tens of thousands of new clients. We welcome to the ADP family every quarter.
Maria Black: I'd like to highlight just a few of these new client wins from Q3 to give you an appreciation for the variety of ways in which we deliver value for them.
Maria Black: In the U.S. small business, we had a new boutique donut shop referred to us from one of our CPA partners. The client chose ADP for the strength of our run platform, our reputation for great service, our strong relationship with our CPA partners, and our ability to provide retirement services. Since this was a first-time small business owner, our sales team even took the time to help the business owner set up their business the right way, from guiding the client on obtaining a state tax ID to making sure the client obtained the appropriate workers' compensation insurance. In the U.S. mid-market, we want a multi-state operator of rehabilitation centers.
Maria Black: And U S small business, we had a new boutique donut shop referred to us from one of our CPA partners.
Maria Black: The client chose ADP for the strength of our run platform a reputation for great service, our strong relationship with our CPA and our ability to provide retirement services.
Maria Black: Since this was our first time small business owner our sales team even took the time to help the business owner setup their business the right way from guiding the client on obtaining a state tax I'd to making sure the client obtained the appropriate workers' compensation insurance.
Maria Black: In U S mid market, we want a multistate operator of rehabilitation centers. This client wasn't happy with their prior HCM provider and workforce now proved a much better fit.
Maria Black: This client wasn't happy with a prior HCM provider, and WorkforceNow proved a much better fit. What makes me the most proud in this example is how one of our ADP Marketplace partners played a key role in the decision to switch to ADP by independently highlighting the advantages we offered in terms of ease of integration, a capability we have invested in over the years. In US Enterprise, we welcomed a large luxury resort that operates multiple hotels, restaurants, and retail stores on site and was dissatisfied with a prior provider's level of client service.
Maria Black: So it makes me the most proud in this example is one of our ADP marketplace partners played a key role in the decision to switch to ADP by independently highlighting the advantages we offered in terms of ease of integrations a capability we have invested in over the years.
Maria Black: And U S enterprise, we welcomed a large luxury resort that operates multiple hotels restaurants, and retail stores onsite and whats dissatisfied with the prior providers level of client service.
Maria Black: The client was so happy following their seamless ADP implementation, which included on-site training for their HR team, that they accelerated their plans to add on features like benefits, recruiting, onboarding, wage garnishment, and tax credits. In our international business, one recent win was a leading airline that utilized ADP in certain countries and asked us to help better define their global payroll strategy. Ultimately, they expanded the scope of our services to include an additional 18 countries and started that rollout in the third quarter with plans to add other countries over the next year to enable true consolidated global reporting and analytics. And as a final example, our HRO team started a New York-based design firm after its leadership team recognized the company lacked the HR infrastructure required to adequately attract and retain the right talent.
Maria Black: Client was so happy following their seamless ADP implementation, which included onsite training for their HR team that they accelerated their plans to add on features like benefits recruiting onboarding wage garnishment and tax credits.
Maria Black: In our international business, one recent win with a leading airline that utilized ADP in certain countries and asked us to help better define their global payroll strategy.
Maria Black: Ultimately they expanded the scope of our services to include an additional 18 countries and started that rollout in the third quarter with plans to add other countries over the next year to enable true consolidated global reporting and analytics.
And as a final example, our HR O team started a new York based design firm. After its leadership team recognize the company lacked the HR infrastructure required to adequately attract and retain the right talent they turned to our PEO offering for truly comprehensive support attracted by the breadth of our offering.
Maria Black: They turned to our PEO offering for truly comprehensive support, attracted by the breadth of our offering, including features like the My Life Advisors program, which supports employees as they make benefit and other important life decisions. We also advise this client in the development of a comprehensive benefits strategy to support their multi-generational workforce and help them attract the talent that they need to grow. As you can see from these examples, it's often a combination of our technology, expertise, and overall breadth that resonates with these businesses, and the result is incredible diversity in our client base and a resilient overall business model.
Maria Black: Including features like the my life Advisors program, which supports employees as they make benefit another important life decisions.
We also advised us client and the development of a comprehensive benefits strategy to support their multi generational workforce and help them attract the talent that they need to grow.
Maria Black: As you can tell from these examples it's often a combination of our technology expertise and overall breadth that resonated with these businesses and the result is incredible diversity and our client base and a resilient overall business model, we look forward to leaning in and delivering even greater differentiation in the <unk>.
Maria Black: We look forward to leaning in and delivering even greater differentiation in the market going forward. Overall, we were pleased with the strong financial and strategic outcomes in the third quarter. I'd like to thank our associates who continue to deliver exceptional products and service to our clients, whose efforts drive these client wins and retention. Thank you again for all you do for ADP and for our clients. And now I'll turn it over to Don. Thank you, Maria, and good morning, everyone.
Maria Black: Going forward.
Maria Black: Overall, we were pleased with our strong financial and strategic outcomes in the third quarter I'd like to thank our associates, who continue to deliver exceptional products and service to our clients and whose efforts drive these client wins and retention.
Maria Black: Thank you again for all you do for ADP and for our clients and now I'll turn it over to Don.
Don Edward McGuire: I'll provide more color on our results for the quarter and our updated fiscal 2024 outlook. Overall, we reported a strong third quarter with consolidated revenue growth and our adjusted EBIT margin coming in a bit above our expectations. The interest rate backdrop has improved since we last provided our full leader outlook, so we're updating our outlook for that, as well as making a few other changes, which I'll detail. I'll start with employer services. ES segment revenue grew 8% on a reported basis and 7% on an organic constant currency basis.
Don: Thank you Maria and good morning, everyone I will provide more color on our results for the quarter and our updated fiscal 2024 outlook overall, we reported a strong third quarter with a consolidated revenue growth and our adjusted EBIT margin coming in a bit above our expectations.
Don: The interest rate backdrop has improved since we last provided our full year outlook, we are updating our outlook for that as well as making a few other changes which I'll detail.
Speaker Change: I'll start with employer services.
Speaker Change: Segment revenue grew 8% on a reported basis and 7% on an organic constant currency basis.
Don Edward McGuire: As Maria shared, we had a good quarter in ES new business bookings with broad-based growth across our client segment. We have a tough comparing Q4 following last year's strong finish, but with a steady HCM demand environment and healthy pipelines, we feel on track to deliver our 4 to 7% new business bookings growth outlook for the year. Also, as Maria mentioned earlier, our ES retention exceeded our expectations and increased slightly from last year.
Speaker Change: Reassured, we had a good quarter in Es, new business bookings with broad based growth across our client segments. We.
Speaker Change: We have a tough compare in Q4 following last year's strong finish, but with a steady HCM demand environment and healthy pipelines, we feel on track to deliver our 4% to 7% new business bookings growth outlook for the year.
Speaker Change: As Maria mentioned earlier, our Es retention exceeded our expectations and increased slightly from last year.
Don Edward McGuire: Given our continued strong retention performance, we are increasing our full-year retention outlook slightly. We now anticipate a 20 to 30 basis point decline in full-year retention, which is better than our prior forecast. ES Pays for control growth held steady at 2% in Q3, and we now expect growth to round to 2% for the year, the high end of our prior 1 to 2% growth outlook. Client Funds Interest Revenue exceeded our expectations in Q3 due to higher average client funds balances and a slightly better average yield. We are revising our full year client funds interest outlook to reflect our Q3 results and the increase in prevailing interest rates since our last update.
Speaker Change: Given our continued strong retention performance, we are increasing our full year retention outlook slightly we now anticipate a 20 to 30 basis point decline in full year retention, which is better than ours.
Speaker Change: Our prior forecast.
Yes pays per control growth held steady at 2% in Q3, and we now expect growth to round to 2% for the year. The high end of our prior 1% to 2% growth outlook.
Speaker Change: In client funds interest revenue exceeded expectations in Q3 due to higher average client funds balances and a slightly better average yield.
Speaker Change: We are revising our full year client funds interest outlook to reflect our Q3 results and the increase in prevailing interest rates since our last update.
Don Edward McGuire: We now expect fiscal 24 average client fund balance growth of about 3%, and we are raising our expectations for client fund interest revenue and net impact from our client fund extended investment strategy. In total, there is no change to our fiscal 24 ES revenue growth forecast of 7 to 8%, although we are now likely to come in towards the higher end of that range. Our ES margin increased 230 basis points in Q3, driven both by operating leverage and the contribution from client funds interest revenue growth.
Speaker Change: We now expect fiscal 'twenty four average client fund balance growth of about 3% and we are raising our expectations for client funds interest revenue and net impact from client funds extended investment strategy.
Speaker Change: In total there is no change to our fiscal 2000 for Es revenue growth forecast of 7% to 8%.
Speaker Change: Although we are now likely to come in towards the higher end of that range.
Speaker Change: Our es margin increased 230 basis points in Q3, driven both by operating leverage and the contribution from client funds interest revenue growth.
Don Edward McGuire: With our strong Q3 results and the slightly more favorable client funds interest rate backdrop, we are raising our fiscal 24 ES margin outlook and now anticipate growth of 180 to 190 basis points. Moving on to the PEO, We had 5% revenue growth driven by 3% growth in average worksite employees in the third quarter, representing slight acceleration from the first half of the year. These results were largely in line with our expectations, and we were encouraged by the gradual stabilization in our PEOs' pays-per-control growth, which decelerated but only slightly from the prior quarter.
Speaker Change: With our strong Q3 results.
Speaker Change: Slightly more favorable client funds interest rate backdrop, we are raising our fiscal 2000 for es margin outlook and now anticipate growth of 180 to 190 basis points.
Speaker Change: Moving onto the PEO.
Speaker Change: We had 5% revenue growth driven by 3% growth in average worksite employees in the third quarter, representing slight acceleration from the first half of the year.
Speaker Change: These results were largely in line with our expectations.
Speaker Change: And we were encouraged by the gradual stabilization in Europe.
Speaker Change: As per control growth, which decelerated, but only slightly from the prior quarter.
Don Edward McGuire: We continue to anticipate soft pace per control growth through the end of the year and expect worksite employee growth to hold steady at about 3%, keeping us on track for a full year outlook for worksite employee growth of 2% to 3% and revenue growth of 3% to 4%. PO margin decreased 220 basis points in Q3. As we shared last quarter, we expect this year's workers' compensation reserve release benefit to be significantly lower than what we experienced these last few years, and in particular last year's $73 million benefit.
Speaker Change: We continue to anticipate soft pays per control growth through the end of the year and expect Worksite employee growth to hold steady at about 3% keeping us on track for our full year outlook for Worksite employee growth of 2% to 3% and revenue growth of 3% to 4%.
PEO margin decreased 220 basis points in Q3 as.
Speaker Change: As we shared last quarter, we expect this year's workers' compensation reserve release benefit to be significantly lower than what we experienced these last few years and in particular last year's $73 million benefit.
Don Edward McGuire: We are updating our fiscal 24 outlook to now assume a minimal release benefit. As a result, we are further revising our overall PEO margin expectation to be down 120 to 140 basis points in fiscal 24, versus our prior expectation for a decline of 80 to 100 basis points. Putting it all together, there is no change to our fiscal 24 consolidated revenue growth of 6 to 7%. With the two changes to segment margins largely offsetting one another, we continue to expect our adjusted EBIT margin to increase by 60 to 70 basis points. However, we still anticipate an effective tax rate of around 23%.
Speaker Change: We are updating our fiscal 'twenty outlook to now assume a minimal released benefit and as a result, we are further revising our overall PEO margin expectation to be down 120 to 140 basis points in fiscal 'twenty four versus our prior expectation for a decline of 80 to one.
Speaker Change: 100 basis points.
Speaker Change: Putting it all together there is no change to our fiscal 2000 and for consolidated revenue growth of 6% to 7%.
With the two changes to segment margins largely offsetting one another we continue to expect our adjusted EBIT margin to increase by 60% to 70 basis points.
Don Edward McGuire: And we continue to expect fiscal 24 adjusted EPS growth of 10 to 12%, with the middle of that range still the most likely outcome. As we look ahead to fiscal 25, I wanted to share a couple of early thoughts at this point. First, given the fullness of the labor market, we are planning for pay-per-control growth to once again be below normal levels next year and to decelerate modestly from this year's growth level in both ES and our PEO segment, with the resulting revenue pressure more apparent in the PEO segment, given its more direct revenue sensitivity to worksite employees.
Speaker Change: We anticipate an effective tax rate of around 23% and we continue.
Speaker Change: To expect fiscal 'twenty for adjusted EPS growth.
Speaker Change: 10% to 12% with the middle of that range still the most likely outcome.
Speaker Change: As we look ahead to fiscal 'twenty five I wanted to share a couple of quarterly thoughts at this point.
Speaker Change: First given the fullness of the labor market, we are planning for pays per control growth to once again be below normal levels next year and to decelerate modestly from this year's growth level in both Es and our PEO segments with the resulting revenue pressure more apparent in the PEO segment, given its more direct revenue sensitive.
Speaker Change: <unk> to Worksite employees.
Don Edward McGuire: We'll, of course, share those exact assumptions with you when we give our formal guidance in a few months. On the expense side, we're also planning to continue growing our Gen AI related spend next year. As you've heard from us all year long, there are many ways we can put Gen AI in the hands of all of the different stakeholders that work with or on behalf of ADP, including our client practitioners, their employees, our service and implementation teams, our sellers, and our developers.
Speaker Change: We will of course share those exact assumptions with you when we give our formal guidance.
Speaker Change: Two months.
Speaker Change: On the expense side. We are also planning to continue growing our gen AI related spend next year.
Speaker Change: As you've heard from US all year long there are many ways, we can put <unk> in the hands of all of the different stakeholders.
Work with or on behalf of ADP, including our client practitioners their employees, our service and implementation teams, our sellers and our developers.
Don Edward McGuire: These are critical investments, and they are the right investments for ADP, but we expect the associated benefits of productivity and growth to phase in gradually over time, likely representing overall margin pressure for the year. At the same time, we appear positioned for continued tailwinds from interest rates, though the extent of this benefit will, of course, depend on how the yield curve continues to develop. As usual, we're focused primarily on maintaining good momentum in our new business bookings and maintaining our strong client satisfaction and retention, and we remain upbeat about our strategy for the years ahead.
Speaker Change: These are critical investments and they are the right investments for ADP, but we expect the associated benefits in productivity and growth to phasing gradually over time likely representing overall margin pressure for the year.
Speaker Change: At the same time, we appear positioned for continued tailwind from interest rates. There will be extensive this benefit will of course depend on how the yield curve continues to develop.
Speaker Change: As usual, we're focused primarily on maintaining good momentum in our new business bookings and maintaining our strong client satisfaction and retention.
Speaker Change: And we remain upbeat about our strategy for the years ahead.
Don Edward McGuire: And now, over to Q&A. Thank you. If you'd like to ask a question, please press Star 1-1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press Star 1 again.
Speaker Change: And now over to Q&A.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one is.
Speaker Change: Is your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Unknown Speaker: Our first question comes from Ramsey El Asal with Barclays. Your line is open. Hi, this is Owen on... Thanks for taking our question this morning. So you're currently entering your open enrollment for Client Benefit Elections, the PEO. I was wondering if you could talk about the trends you're seeing there. Thus far, you called out some stability in regard to insurance price inflation driving more attach rates. Are you seeing any of these kind of follows?
Speaker Change: Our first question comes from Ramsey El <unk> with Barclays. Your line is open.
Speaker Change: Hi, This is Owen on for Ramsey. Thanks for taking our question. This morning.
Owen: Currently entering your open enrollment season for our client benefit elections within the PEO I was wondering if you could talk about trends youre seeing there. Thus far you called out some stability in regard to insurance price inflation driving more attach rates are you seeing any of this kind of follow through any any thoughts there might be helpful. Thanks.
Unknown Speaker: Unknown Speaker My thoughts there. My, Good morning. Go ahead. I was gonna say good morning, Owen.
Speaker Change: Hi, Good morning go ahead go ahead.
Speaker Change: I was going to say good morning, Owen how about I start and I'll, let Don chime in.
Speaker Change: The other comment would be just to start we are smack in the middle of our open enrollment season exactly as you suggested and so it's probably too early to make a call in terms of what that's going to look like from a full year perspective on the retention side, but overall, we have seen a bit a tiny bit of PEO retention improvement this year and the <unk>.
Maria Black: How about I start, and I'll let Don chime in. I think the comment would be, just to start, we are smack in the middle of our open enrollment season, exactly as you suggested. And so it's probably too early to make a call in terms of what that's going to look like from a full year perspective on the retention side. But overall, we have seen a bit, a tiny bit of PEO retention improvement this year, and the comparisons are getting a bit easier. And we do expect some improvement for the full year. So with that, I'll let Don chime in. Nope, sorry, I jumped the gun there. So Maria.
Speaker Change: Ours are getting a bit easier and we do expect some improvement for the full year, so with that I'll I'll, let Don chime in sorry, I jumped the gun there. So Maria Thank you perfect answer thank you.
Maria Black: Great, super helpful. And then, if I may, just on client retention, continues to sort of surprise me on the upside was running drivers there. I previously thought, potentially fewer bankers see it in the down market, but any expectations more longer term might be helpful. Yeah, absolutely.
Speaker Change: Great Super helpful. And then if I may just on client retention continues to surprise to the upside was wondering drivers there I previously thought potentially fewer bankruptcies and the <unk>.
Speaker Change: Market, but any expectations more longer term might be helpful. There.
Maria Black: We're very pleased with overall retention results. I think you see that in our revised outlook, you see that in the revision we made last quarter as well. And so, just kind of remind everybody just how well retention is going. Fiscal 23 was a record.
Don: Yes, absolutely.
Speaker Change: Very pleased with the overall retention results I think you see that in <unk>.
Speaker Change: Our revised outlook do you see that in the revision, we made last quarter as well and so just kind of remind everybody just how how well retention is going that's about 23 was a record that record was really driven by the mid market and international and the dawn market actually did decline a bit in fiscal 'twenty, three and we expect pretty much the.
Speaker Change: Same outlook, if you will for a full year 24, which is why we still have a down year on year retention result, but we're incredibly pleased with overall, what we're saying with the with client retention, that's really being led by a combination of things one of which is the investments we made in the product.
Maria Black: That record was really driven by the mid market and international, and the down market actually did decline a bit in Fiscal 23. And we expect pretty much the same outlook, if you will, for full year 24, which is why we still have a down year on year retention result. But we're incredibly pleased with what we're seeing with client retention. That's really being led by a combination of things, one of which is the investments we made into product, and the record results we have in terms of client satisfaction. That, in and of itself, was a record in the third quarter, along with retention.
Speaker Change: The record results, we have in terms of client satisfaction that in and of itself was a record in the third quarter along with retention. So we're very very pleased with that as mentioned, they're still down market variability and Theres dawn markets out of business, we haven't seen it thus far this year, but we still expect it to normalize a bit.
Maria Black: So we're very, very pleased with that. As mentioned, there's still down market variability, and there's down market out of business. We haven't seen it thus far this year, but we still expect it to normalize a bit further. And then, you know, there's always normal variability in retention.
Speaker Change: Further and then Theres always normal variability and retention. So we believe the retention guide is the appropriate one but certainly we're very very pleased with our record quarter and where we sit with retention thus far this year.
Maria Black: So we believe the retention guide is the appropriate one. But certainly, we're very, very pleased with the record quarter and where we sit with retention thus far this year. Great, super helpful.
Speaker Change: Great Super helpful. Thank you.
Bryan C. Bergin: Thank you. Our next question comes from Bryan Bergin with TD Cowan. Your line is open. Hi, thanks. This is Zach Asemanan for Bryan.
Speaker Change: Thank you. Our next question comes from Bryan Bergin with TD Cowen Your line is open.
Zach Asemanan: First question, just want to dig in on the ES revenue growth affirmation. Despite the higher retention at PPC views, I heard that you might come in towards the higher end of the range, but perhaps you can elaborate on some of the underlying assumptions and any offsets. Yeah, so a couple of things.
Bryan C. Bergin: Hi, Thanks. This is exactly as I've been on for Brian First question just wanted to dig in on that yes revenue growth affirmation. Despite the higher retention at PPC views heard that you might come in towards the higher end of the range, but perhaps you could elaborate on some of the underlying assumptions in any offsets.
Don Edward McGuire: Zach, Maria already mentioned that retention is in very good shape for us. So certainly, that's been helping and contributing to revenue growth. And of course, what's changed since last time around, which is making us even more comfortable with saying we're going to be towards the higher end of the range, is that client funds interest impact is very good. So I think those are the two primary drivers to why we're more confident that we're going to see revenue come in towards the higher end of the seven to eight than we perhaps were 90 days ago. I got it.
Speaker Change: Yes, so a couple of things that we already mentioned that retention is in very good shape for us. So certainly that's been helping in contributing to the revenue growth and of course, what's changed since since last time around which is making us even more.
Speaker Change: We're comfortable with saying, we're going to be towards the higher end of the range is that client funds interest impact as is.
Speaker Change: Good. So I think those are the two primary drivers to why we're more confident that we're going to see revenue come in towards the higher end of the seven to eight than we perhaps were 90 days ago.
Don Edward McGuire: And a follow up on demands. ES new business bookings were affirmed at four to 7% growth. What are the strongest segments of the market and any notable changes to call out versus the second quarter? Sure, so first and foremost, we feel good about the overall demand environment; companies are still hiring, as we saw today, and they're still investing as such in people in HCM. The call outs, I made a few of them during the prepared remarks, but it's really another down market that continues to impress us this quarter, specifically in retirement services. So I'd make a call out there.
Speaker Change: Got it and a follow up on demands Es, new business bookings affirmed at 4% to 7% growth what are the strongest segment of the market and any notable changes to call out versus the second quarter.
Speaker Change: Sure. So first and foremost we are we feel good about the overall demand environment companies are still hiring as we saw today and theres still investing as such in people and in HCM.
Speaker Change: Callouts I made a few of them during the prepared remarks, but it's really now they're a downmarket continues to impress us this quarter specifically in retirement services, So I'd make a call out there.
Speaker Change: Fantastic to see that story in retirement services come together, we talked quite a bit about secular tailwind in that space based on legislation that coupled with the investments we make.
Maria Black: It's quite fantastic to see that story and retirement services come together. We talked quite a bit about secular tailwinds in that space based on legislation that coupled with the investments we've made, been making, and incredible distribution execution. Really great to see retirement services leading the way. I think other areas that I would call out that have been remarkably strong are our mid market, as well as international. And so again, you know, a similar story to retirement services and that it's really a great story coming together between investments.
Speaker Change: Making an incredible distribution execution really great to see the retirement services, leading the way I think other areas that I would call outs that have been remarkably strong as our mid market.
Speaker Change: As well as international and so again similar story to retirement services in that.
Speaker Change: It's really a great story coming together between investments and execution and enterprise also was strong for us for the quarter.
Maria Black: And execution and enterprise also was strong for us for the quarter. And in terms of anything changing broadly, we haven't really seen anything change in the demand environment. Quite candidly, we feel really, really strong, as suggested by the overall hiring landscape and the labor demand. Thanks very much.
Speaker Change: And then in terms of anything changing broad based we haven't really seen any.
Speaker Change: Anything change in the demand environment quite candidly, we feel really really strong.
Speaker Change: Adjusted by the overall hiring landscape.
Speaker Change: The labor demand.
Speaker Change: Thanks very much.
Maria Black: Thank you. Our next question comes from Mark Marcon, with Baird. Your line is open. Good morning, and thanks for the terrific update. Client retention is obviously really strong. Obviously, your scores continue to go up. Are there any areas that you would call out that are, you know, that are standing out in terms of driving the higher NPS scores and the higher client retention? Anything that you would particularly note. Good morning, Mark. I would say to you, mid-market on both of those.
Speaker Change: Thank you. Our next question comes from Mark Marcon with Baird. Your line is open.
Mark Steven Marcon: Hey, good morning, and thanks for the terrific update.
Mark Steven Marcon: Client retention, obviously really strong.
Mark Steven Marcon: Obviously youre scores continue to go up are there any areas that you would call out that are.
Mark Steven Marcon: That are standing out in terms of driving the higher NPS scores.
Mark Steven Marcon: Higher client retention anything that you would particularly note.
Mark Steven Marcon: So mid-market is driving strong NPS scores to record highs. Mid-market is driving incredible retention. So that's the one call out. You can probably hear the optimism in my voice there because it's a fantastic story kind of coming together.
Speaker Change: Good morning, Mark I would say to you mid market on both of those so mid market is driving a strong NPS scores.
Mark Steven Marcon: It's a record high as the mid market is driving incredible retention. So that that's the one call out you can probably hear the optimism in my voice there because it's a fantastic story kind of coming together, but I think overall retention is incredibly strong.
Maria Black: But I think overall, retention is incredibly strong. The mid-market, international, and fiscal 23 were very strong. They continue to be strong. But that's really the one call out I would make is the mid-market. Great.
Speaker Change: That market international in fiscal 'twenty, three we're very strong there continue to be strong but.
Speaker Change: But that's really the the one call out I would make is the mid market.
Speaker Change: Great and then.
Maria Black: And then, you know, Maria, there's one area that, you know, investors have been asking more about, and, and you and ADP have the broadest, you know, outlook with regard to the space. So I'm asking this on the call, but some people wonder a little bit about, you know, saturation, and your new bookings continue to grow. But, you know, investors are asking a little bit more about, like, you know, how much room do we have for new solutions or how many clients have already upgraded, things of that nature. Your results and the results of some of your peers continue to belie those concerns. But I'm wondering if you could address one question. Yeah, absolutely, Mark. I'll give it a shot.
Speaker Change: Maria There is one area that investors have been asking more about.
Speaker Change: And you have you an ADP has the broadest outlook with regards to the space. So I'm asking this on the call, but some people wonder a little bit about saturation. Your your new bookings continue to grow.
Speaker Change: But investors are asking a little bit more about like how much room do we have four for new solutions or how many clients have already upgraded things of that nature to your results in the <unk>.
Speaker Change: So some of your peers continue to pull either concerns, but I'm wondering if you could address those.
Maria Black: And certainly happy to have Don chime in. Maybe he can talk a little bit about our growth opportunities and international. But I think broadly speaking, when you think about the total addressable market of the HCM space, and where we all play, and we all compete, and it's highly competitive, and there's been a lot of investments coming into the space over the past few years, what I would suggest is there's still a tremendous amount of growth and growth upside for all of us.
Speaker Change: Yeah, absolutely Mark I'll I'll give it a shot and certainly happy to have Don chime in maybe he can talk a little bit about our growth opportunity in international but I think broadly speaking when you think about the total addressable market of HCM space, and and where we all play and we all compete in it's highly competitive and theres been a lot of investments.
Don: Coming into the space over the past few years, what I would suggest is there's still a tremendous.
Don: Amount of growth and growth upside for all of us and as he mentioned, we continued to deliver that and the results that we see on the new business bookings side and so I think overall there is still runway. There is still plenty of space I think the part for us outside of our incredible distribution organization, which has always been a competitive advantage in how we go to market.
Maria Black: And as you mentioned, we continue to deliver that, and the results that we see on the new business booking side. And so I think overall, there is still runway, there's still plenty of space. I think that the part for us, outside of our incredible distribution organization, which has always been a competitive advantage and how we go to market, distribution is also anchored to our ability to upsell to the base. So you mentioned, you know, this ability to upgrade and how much it has upgraded.
Don: That distribution is also anchored to our ability to to the upsell to the base. So you mentioned this ability to upgrade and how much is upgraded and are we all the way there what I would suggest to you is where we're still at about 50% as it relates to new business bookings coming from call. It new business net new <unk>.
Don: <unk> versus upgrades, which suggests to me that we still have a tremendous amount of opportunity even within our base and that's a lot of the focus that we have as an organization whether it's in the PEO getting smarter about which clients with an employer services that we target to offer to the PEO or it's the work that we're doing on generative AI.
Don: To try to get upsell and offering the right product to the right client at the right time and in.
Maria Black: And, you know, are we all the way there? What I would suggest to you is we're still at about 50% of the market. The right product to the right client at the right time. And in my mind, bending the curve and continuing to focus on attach rates, whether that's at the point of sale or on the attach later, it's definitely an opportunity for us to continue to deliver bookings in a very broad market that still has a tremendous amount of opportunity for all of us.
Don: In my mind bending the curve and continuing to focus on attach rates, whether that's on the point of sale or on the attach.
Don: At a later time, it's definitely an opportunity for us to continue to to deliver bookings in a very broad market that still has a tremendous amount of opportunity for all of us, but Moreover, where we continue to execute and deliver on that so I don't know Don if you want to comment a little bit on international in terms of the opportunity there perhaps.
Maria Black: But moreover, where we continue to execute and deliver on that. So I don't know, Don, if you want to comment a little bit on international in terms of the opportunity there. Yeah, perhaps to add a little bit more color.
Don Edward McGuire: I think we're still very optimistic about growth opportunities beyond the US or the North American market. So, Mark, as we talked before, you know, we're on the ground in 40 plus countries outside of the US. We're present in multiple segments in those markets as well.
Don: To add a little bit more color I think we're very still very optimistic about growth opportunities beyond the.
Don: The U S or the North American market. So Mark I think we've talked before we are on the ground in 40 plus countries outside of outside of the U S.
Don: <unk> present in multiple segments in those markets as well.
Don: <unk> got some great great things happening in Southeast Asia, where we're rolling out a single platform across.
Don: Forgetting in India, but many countries surrounding India in the southeast Asian market.
Don: We're excited we often talk about the fact that we pay over 1 billion people in India every payroll every pay day.
Don: <unk>.
Don: Price points are still a bit low, but we expect those things to to work for us. It works in our favor in the future. So I think still lots and lots of opportunity for ADP.
Don: From a growth perspective, and certainly we don't worry about saturation being a limiter to our future.
Speaker Change: That's what I thought thanks.
Speaker Change: The complete answers.
Don Edward McGuire: Thanks for the... I appreciate the complete answer. Thank you. Our next question comes from Scott Wurtzel with Wolfe Research. Your line is, Hey, good morning, and thanks for taking my questions.
Speaker Change: Thank you. Our next question comes from Scott <unk> with.
Scott: Wolfe Research your line is open.
Scott Darren Wurtzel: I just wanted to go back to some of the early thoughts that you provided on fiscal 25 and talking about the Gen AI investments. And I think you had mentioned that there could be some margin pressure associated with that. And just wanted to kind of clarify, were you talking about potentially leading margin to be down year over year? Or are there other offsets with general operating leverage and interest income that can potentially offset the margin pressure from those? Yeah, Scott, thanks for the question. I think it's still early.
Scott: Hey, good morning, and thanks for taking my questions I just wanted to go back to some of the early thoughts John that you provided on fiscal 'twenty five and talking about the Gen. AI investments and I think you had mentioned that there could be some margin pressure associated with that and just wanted to kind of clarify where you're talking about yes, that's essentially leading margins to be down year over year or.
Don: Are there other offsets with general operating leverage and interest income that could potentially offset the margin pressure from those investments. Thanks.
Don Edward McGuire: I think the intent here was to give some very early guidance on what 25 could look like. So, you know, we still expect to see some improvements in margins. It's just, you know, do we expect to see as much of an improvement given some of the Gen AI pressures and expense pressures that we may see? Of course, CFI, at this point in time, depending on what the yield curve does, once again, things have changed a fair bit in the last 90 days. And if I were to, not that I have a crystal ball, but I don't think many folks right now are expecting anything to change from the interest rates perspective in the U.S. before September.
John: Scott. Thanks for the question I think it's still early I think there are 10 here was to give some very early guidance on what 25 could look like so we still expect to see some improvements in margins do we expect to see as much of an improvement given some of the journey II pressures expense pressures that we may see of course EFI at this point in time.
Don: Depending what the yield curve does once again things have changed a fair bit in the last 90 days and if I was to not that I have a crystal ball, but I don't think many folks right now we're expecting anything to change from a rates perspective in the U S before September.
Don Edward McGuire: So I think we're going to get some some tailwinds from that. So we're not really trying to signal here, not signaling a decline in our margins. What we're signaling, perhaps, is perhaps a slower growth in the margins as we look into 25. Got it, got it, that's super helpful.
Don: So I think we're going to get some some tailwind from that so we're not really trying to signal here not signaling a decline in our margins, what we're signaling perhaps as perhaps a slower growth and the margins as we look into 'twenty five.
Speaker Change: Got it got it that's Super helpful. And then just wanted to go onto the PEO segment and sort of going back to some of the verticals that we've talked about over the last year in technology and professional services. Just wondering if you can kind of update us on some of the trends you're seeing there with pays per control growth I'm, even looking at the employment report that you guys released this morning, it looks like professional service.
Don Edward McGuire: And then just wanted to go on to the PEO segment and, you know, sort of going back to some of the verticals that we've talked about over the last year in technology and professional services, just wondering if you could kind of update us on some of the trends you've seen there with Pays per Control Growth. I mean, even looking at the employment report that you guys released this morning, it looks like professional services are stabilizing and increasing, but technology information kind of seems a little bit choppy. So just wondering if you can kind of talk about trends in the PEO with respect to the program. Sure.
Speaker Change: There's is stabilizing and increasing technology information kind of seems a little bit choppy. So just wondering if you can kind of talk about trends in the PEO with respect to those verticals.
Don Edward McGuire: So if I, you know, Maria talked a little bit about bookings, I think we've been, you know, happy with our bookings; they softened a little bit in Q3, but we had a very, very strong Q2 on PO bookings. Now we can move on kind of to PPC growth. You know, back in Q1, it decelerated a little bit more than we anticipated, and a significant amount of that deceleration was attributed to the technology and professional services sectors. And in Q2, that stabilized.
Speaker Change: Sure. So if I were you talked I talked a little bit of a bookings I think so we've been we were happy with our bookings, we softened a little bit in Q3, but we have a very very strong Q2 on PEO bookings, we can move on kind of the PPC growth.
Speaker Change: Back in Q1, it decelerated, a little bit more than we anticipated and a significant amount of that.
Speaker Change: Saturation was attributed to the technology and professional sector the services sector and.
Don Edward McGuire: So that was good for us. While there are still some headwinds in PPC, including from technology and service sectors, there were no surprises in Q3. So it's important to note that worksite employee growth accelerated about 1% over Q2, despite the modest incremental pressure we had from PPC. And so, and that, of course, is a function of the year-to-day booking success that we've had. So nothing really to call out.
Speaker Change: And in Q2 that stabilized.
Speaker Change: So that was that was good for us.
Speaker Change: While there is still some headwinds in PPC, including from technology and service sectors.
Speaker Change: There were no surprises in Q3, so it's important to note that worksite employee growth accelerated about 1% over Q2, despite the modest incremental pressure we have from PPC pressure.
Speaker Change: And that of course is a function of the year to date bookings success that we've had so nothing really to call out.
Speaker Change: More stability, if you will in PPC pressure then.
Speaker Change: And we've talked about previously.
Speaker Change: Great. Thanks, guys.
Don Edward McGuire: More stability, if you will, in PPC pressure than we talked about previously. Great. Thanks, guys. Thank you. Our next question comes from Tianzhen Huang with J.P. Morgan. Your line is open. Good morning. Thanks for going through all this.
Speaker Change: Thank you. Our next question comes from Tien Tsin Huang with Jpmorgan. Your line is open.
Speaker Change: Good morning. Thanks.
Speaker Change: Thanks for going through all this.
Tianzhen Huang: Anything on the pricing side worth sharing? Maria, I'm just thinking about some of the peer commentary out there. Any call outs or interesting observations? I, in terms of from the standpoint of our price or pricing in the market from your pricing, yeah, your pricing or as you're thinking about resetting prices as you go into the usual seasonal time changes, price changes, and any thoughts there. So but for new renewals, as well as new new deal bids. Yeah, absolutely.
Speaker Change: Particularly on the pricing side, just thinking about some of the peer commentary out there I mean callouts are interesting observations.
Speaker Change: Okay.
Speaker Change: In terms of.
Speaker Change: From the standpoint of our price or pricing in that market from your pricing your pricing or as youre thinking about resetting prices as you go into the usual.
Speaker Change: Seasonal time changes price changes.
Speaker Change: Any thoughts there, but for new renewals as well as new new deal bids.
Maria Black: So I think, you know, my general sentiments, and then Don can give the kind of a little more direction, but my general sentiments around price remain that we're very thoughtful and very measured as it relates to how we think about price, whether that's on the new business side or it's on the renewal side, as you mentioned. And so for us, it's about understanding kind of by segment. So you heard my commentary in the prepared remarks, just how broad, deep, and diverse ADP is with respect to our client base. As you can imagine, we think about a down market price increase differently than perhaps an enterprise. Some of those are also long-term contracts that have indexes attached.
Speaker Change: Yeah, absolutely. So I think you know.
Speaker Change: My General sentiments, and then Don can get the kind of a little more directional but my general sentiments around price remain that we're very thoughtful and very measured as it relates to how we think about price whether that's on the new business side.
Speaker Change: Or it's on the on the renewable side as you mentioned and so for US it's about understanding kind of by segment. So you heard US you heard my commentary in the prepared remarks, just a broad and deep and diverse.
Speaker Change: With respect to our client base. So as you can imagine we think about a down market pricing creates differently than perhaps an enterprise. Some of those are also long term contracts that have index as attached and so all of that lends itself to a very surgical approach right to ensure that the price value equation.
Maria Black: And so all of that lends itself to a very surgical approach, right, to ensure that the price-value equation remains the right one for the market and for our clients. And obviously, at the same time, what we're doing is also monitoring what's happening in the HCM space with respect to the peer group and pricing overall. And I would say, from a competitive lens, you know, we haven't seen anything unusual as it relates to price from us or the others, even though it continues to be a highly competitive environment.
Speaker Change: Names the right one for the market and for our clients and obviously at the same time.
Speaker Change: We're doing is also monitoring what's happening in the HCM space with respect to the peer group and pricing overall and I would say from a competitive lens, we haven't seen anything unusual as it relates to price from us or the others, even though it continues to be a highly competitive environment and so as such our approach.
Maria Black: And so as such, our approach this year to price, which I'll let Don comment on, has been very thoughtful. And I would expect us to take that same measured approach as we head into 20. Yeah, so, you know, pricing, the price increase this year was relatively well received. You know, we were in the 100-150 basis point range. We're closer to the 150.
Speaker Change: This year to price, which I'll, let Don comment on has been very thoughtful and I would expect us to have to take that same measured approach as we head into 'twenty five.
Don: Yes so.
Don: Pricing the price increase this year was relatively well received we were.
Don: We're in the.
Don: We're in the 100 150 basis point range, we're closer to the $1 50.
Don: So happy with where we're at but back to Maria's comments, we're in the middle of our planning cycle right now and we will look very carefully at that whole value equation, making sure that we keep our retention of our NPS is supporting that and.
Don Edward McGuire: So happy with where we are, where we are. You know, back to Maria's comments, we're in the middle of our planning cycle right now. And we'll look very carefully at that whole value equation, making sure that we keep our retention up. Our NPS is supporting that, and we'll make sure that we're mindful and thoughtful about what we do with pricing going forward. So I'm sure you'll be thoughtful about it. Thank you for that.
Don: We will make sure that we're mindful and thoughtful about what we do with pricing going forward.
Don Edward McGuire: Just on the GMAI front. I respect the investments there. I'm curious if you were to, Transcripts provided by Transcription Outsourcing, LLC. Both. The answer is both.
Speaker Change: I'm sure it would be thoughtful about it. Thank you for that just on the G&A front.
Speaker Change: I respect the investments there I'm curious if you were to.
Speaker Change: Classified as either driving expense efficiency versus driving better sales efficiency. What are you really aiming for with some of these investments here.
Speaker Change: Fiscal 'twenty five.
Maria Black: So I think it's really about solving for all of the users that interact with ADP, right? So if you think about all the personas, our clients, our clients, employees, and our service agents, our sellers, it's really about putting Gen AI in every part of our ecosystem. So in terms of, you know, what are we solving for? The answer is both.
Speaker Change: Both the answer is both.
Speaker Change: So I think it's really it's really about solving for again all of the users that interact with ADP right. So if you think about all the persona our clients our clients employees and.
Speaker Change: Our service agents, our sellers, it's really about putting gen AI in each and every part of our ecosystem.
Speaker Change: So in terms of what are we solving for the answer is both we're trying to drive.
Speaker Change: Later service efficiency I think we've proven out that through digital transformation and taking friction out of our products and making those investments we have the ability to drive up our NPS results and.
Maria Black: We're trying to drive greater service efficiency. I think we've proven that through digital transformation and taking friction out of our products and making those investments, we have the ability to drive up our NPS results, and record client satisfaction tends to lead to similar record retention. So definitely working on ensuring that we're driving up retention. Obviously, the more happy clients we have, the easier it is for our sellers.
Speaker Change: Record client satisfaction tends to lead to similar record retention so.
Speaker Change: So definitely working on.
Speaker Change: Ensuring that we're driving up retention, obviously, the more happy clients, we have the easier. It is for our sellers were also investing in degenerative AI for our sellers to become more productive. So it is about service productivity. It's about seller productivity. It's about client experience client experience lends itself to retention. So I guess it was just one happy virtuous cycle, but I think our answer.
Maria Black: We're also investing in generative AI for our sellers to become more productive. So it isn't about service productivity. It's about seller productivity.
Maria Black: It's about client experience, and client experience lends itself to retention. So I guess it's just one happy virtuous cycle.
Speaker Change: My answer is both and all of it is what we hope to gain.
Maria Black: But I think my answer is both, and all of it is what we hope to gain. Now, again, kind of back to the investments we're making and what Don alluded to in terms of any pressure we would have with respect to margin on those investments. You know, some of these investments are the right thing for ADP, but they will take time to ultimately garner all of the results in all of these categories that I just mentioned.
Speaker Change: Now again kind of back to the investments, we're making and what Don alluded to in terms of any pressure, we would have with respect to margin on those investments.
Speaker Change: These investments we know they are the right thing for ADP, but they will take time to ultimately garner all of the results in all of these categories that I just mentioned and so as it stands today, we have some really exciting things that we're seeing if you think about something like call summarization that I've spoken about in the past and we're shaving off roughly a minute per call.
Maria Black: And so as it stands today, we have some really exciting things that we're seeing. If you think about something like call summarization, which I've spoken about in the past, and we're shaving off roughly a minute per call, that doesn't probably sound that exciting. But you think about a minute per call over time, and you think about how many calls we take broadly across ADP in a given year, the math lends itself to tremendous efficiency and, again, hopefully, a better experience, right? So I think the answer is all of it.
Speaker Change: That doesn't probably sound that exciting, but do you think about a minute per call over time, and you think about how many calls we take broadly across ADP in a given year you know the math the math lends itself to over time tremendous efficiency.
Speaker Change: And again, hopefully a better experience right. So I think the answer is all of it for solving for all of us.
Speaker Change: Understood. Thank you.
Maria Black: We're solving for all of it. Okay. Thank you. Thank you. Our next question comes from James Faucette with Morgan Stanley. Your line is, Hi everyone, it's Michael in Fontana for James. Thanks for taking our question. Just one for me today.
Speaker Change: Thank you. Our next question comes from James Fawcett with Morgan Stanley. Your line is open.
Micron: Hi, Ron It's Micron fan town for James Thanks for taking our question just one for me today.
James Eugene Faucette: You mentioned coming in at the higher end of the range on ES for the full year, which makes sense given some of your commentary on booking strength, better retention, and pay-per-control improvement in the flow benefit that we're seeing. But given all of those factors, it looks like ES in the quarter came broadly in line with our expectations despite all of those tailwinds. So I'm curious, given your commentary about price coming in towards the higher end of your historical range, what does that imply just in terms of what you're seeing on the net new side as well as cross-sell and up-sell? Thanks.
Micron fan: You mentioned coming in at the higher end of the range on Es for the full year, which makes sense given some of your commentary on bookings strength better retention pays per control improvement and the benefit that we're seeing but given all of those factors. It looks like es in the quarter came broadly in line with our expectations. Despite all of those tailwind.
Micron fan: I'm curious given your commentary about price coming in towards the higher end of your historical range, what does that imply in terms of what youre seeing on the net new side as well as cross sell and up sell.
Don Edward McGuire: Yeah, Michael, thanks for the question. I think that, first of all, the price, there's no change in that. I think we've been calling that out for most of the year, certainly in the 1 to 150 range. So not much of an incremental impact, if you will, for Q4 and, therefore, for the year in total. So not a lot of change from that.
Speaker Change: Yes, Michael Thanks for the question I think that.
Speaker Change: First of all the price there is no change in that I think we have been.
Michael: Calling that out for most of the year certainly in the one to $1 50 range. So not much of an incremental impact if you will for for Q4, and therefore for the year in total so.
Don Edward McGuire: Yeah, I mean, you know, bookings, we called out, you know, we're still in the hunt for delivering on the range, as we declared, so we're still in that. So, but not really a lot to drive incremental revenue other than, you know, some of the float, but as the year shortens, or we have fewer months or days left in the year, the impact from higher CFI is going to be somewhat muted as we look. Hey, Michael, it's Danny.
Michael: Got a lot of change from that.
Speaker Change: Yes, I mean bookings, we called out we're still in the hunt for the for delivering on the range.
Speaker Change: As we declared so we're still in that so but.
Speaker Change: Not really a lot to drive incremental revenue other than some of the float but as the year shortens or we have fewer months days left in the year the impact from higher <unk> is going to be somewhat muted as we we look to finish the year Hey, Michael its Danny if you're wondering whether there is some offset somewhere else theres a little bit.
Don Edward McGuire: If you're wondering whether there is some offset somewhere else, there is a little bit from FX moving adversely relative to our prior expectations. Got it. Thank you both. Thank you. Our next question comes from Pete City.
Danny: FX moving adversely relative to our prior expectations.
Speaker Change: Got it thank you both.
Danny: Thank you. Our next question comes from Pete Christiansen with Citi. Your line is open.
Pete: Your line is open. Good morning. Thank you for the question. Maria, you give a great explanation of the WalletShare offer, left earlier, PEO, propensity modeling with Gen AI, and then international. I want to dig into the international side, particularly some of the newer markets that you're getting into. I'm just hoping if you can give us a bit of a progress report on a lot of the last mile infrastructure that you've been putting in place, ramping that up.
Peter Corwin Christiansen: Good morning, Thank you for the question Mario.
Peter Corwin Christiansen: You have great explanation of the wallet share opportunity that still left earlier PEO propensity modeling with Gen. III and then international I wanted to dig into the international side, a little bit, particularly some of the newer markets that you are getting into I was just hoping if you can give us a bit of a progress report on a lot of the last mile infrastructure that <unk> bin.
Pete: And I'm just curious, should we think of the deployment of PI, the next-gen payroll engine, and international as a real catalyst for the next leg of bookings growth? Thank you. Yeah, thanks, Pete. I think that was a solid like three, four questions in one.
Pete Christiansen: Putting in place go to market ramping that up and I'm. Just curious should we think of like the deployment of pie. The next Gen payroll engine in international is a real catalyst to.
Speaker Change: For the next leg of bookings growth. Thank you I appreciate it.
Maria Black: So I will, I'll do my best to weave through it here. But, As Don mentioned, we're on the ground in 40 countries. We do payroll across 140 countries, inclusive of our partner network. In terms of the final mile, or the last mile, as you referenced, the first thing I would comment on is we've been building that for 50 years, right? So when I think about international and everything we've done over the course of decades to build that infrastructure, it's a tremendous lead, is what I would suggest.
Speaker Change: Yeah. Thanks, Pete I think that was a solid like three or four questions. In one so I will I'll do my best to waive through it here, but.
Maria Black: And you see that in our international bookings results, right? So we had a solid Q4, but also next year. In terms of, you know, where we continue to expand, I mentioned it in my prepared remarks. AsiaPAC or APAC is something that, you know, our Asian business has been relatively modest, but we see significant growth over time. Obviously, that growth is a direct byproduct of our clients' demand growth as it relates to the activities of our clients and where they're moving associates and where they're moving business. So we believe that continuing to lean into AsiaPAC is important for us.
Speaker Change: As Don mentioned, we're on the ground in 40 countries, we do payroll across 140 countries inclusive of our partner network in terms of the final mile or the last mile. As you referenced the first thing I would comment on is we've been building that for 50 years right. So when I think about international and everything we've done over the course of decades.
Speaker Change: To build that infrastructure, it's a tremendous.
Speaker Change: Lead is what I would suggest and you see that in our international bookings results right. So we had a nice first quarter and international we accelerated that in the second quarter, we had an even better Q3.
Speaker Change: Out of that is being driven by our multinational growth. So think about our celerity offering our global view offering these were especially strong for us in the third quarter and I do believe it's the overall demand environment, coupled with our on the ground strategy. If you will if you will and and by the way the international pipelines.
Speaker Change: I remain healthy and we believe it's going to position us for a solid Q4, but also next year in terms of where we continue to expand.
Speaker Change: I mentioned it in my prepared remarks.
Speaker Change: Asia Pac or APAC, it's something that.
Speaker Change: Our Asia business has been relatively <unk>.
Speaker Change: But we see significant growth over time, obviously that growth is a direct byproduct of our clients' demand growth as it relates to the activities of our clients are where theyre, moving associates, and where theyre moving business.
Speaker Change: So we believe that continuing to out to lean into Asia Pac is important for us.
Maria Black: And so as a result of that, you know, we are kind of continuing to lean in there. I think we mentioned last quarter the acquisition of a company in the Nordics, specifically in Sweden. So that's an area that is also a high growth area from a client perspective. And so I think, you know, our strategy over time has been, as we get further into a country and we see the demand, we will fold in our partners at times. And you've seen that, obviously, in the Nordic countries, and you've seen that in many countries prior to that.
Speaker Change: And so as a result of that.
Speaker Change: Kind of are continuing to lean in there I think we mentioned last quarter the acquisition of a company in the Nordics.
Speaker Change: Glee in Sweden. So that's an area that also has a high growth area from a client perspective, and so I think our strategy over time has been as we get further into a country and we see the demand times, we will fold in our partners and you've seen that obviously in the nordics and you've seen that in many countries.
Speaker Change: Prior to that but that ecosystem is vast across 140 countries. It's a decades of building that final mile is a clear competitive differentiator in the market you can feel see and yes, it's really palpable on the heels of the last earnings call I was actually over at our rethink event, which is where we bring together.
Maria Black: But that ecosystem is vast across 140 countries. It's decades of building that final mile. It's a clear competitive differentiator in the market; you can feel, see, and it's really palpable. On the heels of the last earnings call, I was actually over at our Rethink event, which is where we bring together a few hundred of our very largest global MNC clients. And the spirit of how we're executing in that market is really palpable when you hear it directly from our clients. And I believe it's a tremendous opportunity for us to continue to drive growth. So I think I covered all of that, Pete. Thank you, Maria.
Speaker Change: A few hundred of our very largest global MMC clients and the spirit of how we're executing in that market is really palpable. When you hear it directly from our clients and I believe it's a tremendous opportunity for us to continue to.
Speaker Change: Drive growth, so I think I covered all of that Pete.
Pete: Just a quick follow-up. Do you think that the deployment of next-gen payroll is a catalyst for going to market in some of those new Yes, of course. So Next Gen Payroll, for sure, our intent is to continue to drive Next Gen Payroll across various international markets. We have it deployed in a few of our markets today.
Peter Corwin Christiansen: Thank you Maria.
Speaker Change: Follow up do you think that the.
Peter Corwin Christiansen: The deployment of next Gen payroll as a catalyst for go to market and some of those newer markets.
Peter Corwin Christiansen: Yes of course.
Peter Corwin Christiansen: So next gen payroll for sure our intent is to continue.
Maria Black: To drive our next gen payroll across various international markets. So we have it deployed and a few of our markets today.
Maria Black: And that coupled with these offers that again have the lead of Salergo and Global View, over time, we'll just further the growth narrative and the story over there. But that is absolutely the intention and the strategic direction of Next Gen Payroll. Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open. Hi, this is David Page on behalf of Ashish.
Peter Corwin Christiansen: And that coupled with these offers that again have the lead up flare going global view over time will just further the growth narrative in the story over there, but that is absolutely the intention and the strategic direction of next Gen payroll.
Speaker Change: Thank you for the comprehensive color.
Speaker Change: Thank you. Our next question comes from Ashish Ashish <unk> with RBC capital markets. Your line is open.
Peter Corwin Christiansen: Hi, This is David page on for Ashish.
Ashish Sabadra: It was great to hear about your results and growth in the mid-market. I was wondering if you could just give a little bit of an overview of the competitive landscape there. Are you guys taking share or is the entire market going, or just... Yeah, absolutely. So the mid market is a great, great segment for us. It's certainly not getting any easier to be an employer in the mid market.
David: It was great to hear about your results and growth.
Speaker Change: Mid market.
David: I was wondering if you could just give a little bit of an overview on the competitive landscape there.
Peter Corwin Christiansen: You guys, taking share or the entire market cargo.
Speaker Change: Whats the outlook or the environment in terms of competition in the market. Thank you yeah, absolutely so the mid market.
Maria Black: It's littered with complexity and all sorts of challenges to navigate. Just, you know, even if you look at the last 30 days, you can see legislation that mid-market employers are having to navigate. And so it's a strong market. It is a highly competitive space. That's not new.
Speaker Change: Great great.
Speaker Change: Segment for us.
Speaker Change: Really not getting any easier to be an employer on the mid market, it's littered with complexity and all sorts of challenges to navigate just even if you look at the last 30 days you can see legislation that midmarket employers are having to to navigate and so it's a it's a strong market. It is a highly competitive space, that's not new I think for.
Maria Black: I think, from a competitive landscape perspective, it's always been competitive, and I don't know that we've seen noticeable changes in the competitive landscape. What we have seen is incredible distribution, execution, incredible satisfaction, execution on our end; we've made great investments in the product set, it's winning in the market. You marry that strategy with great execution on the seller side and great execution on the retention side. That, to me, is what's changing in the mid market is that we've gotten stronger. Great, thank you, Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open. Hi, this is Caroline Latta. I'm for Jason.
Peter Corwin Christiansen: Sure you know from a competitive landscape perspective, it's always been competitive and I don't know that we've seen noticeable changes in the competitive landscape.
Peter Corwin Christiansen: What we have seen is incredible distribution execution incredible satisfaction execution on our end we've made great investments into the product set it's winning in the market you marry that strategy with great execution on the seller side and great execution on the retention side that to me is what's changing in the are in the mid March.
Peter Corwin Christiansen: Is that we've gotten stronger.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open.
Speaker Change: Okay.
Speaker Change: Hi. This is Caroline later on for Jason Thanks for taking our question sorry to double down on price just given the way inflation isn't dropping off maybe the way the market was hoping or expecting recently do you have any updated expectations about ADP and like the broader peer group's ability to raise pricing heading into the fourth quarter and 2025.
Jason Alan Kupferberg: Thanks for taking our question. Sorry to double down on price, but just given the way inflation isn't dropping off, maybe the way the market was hoping or expecting recently, do you have any updated expectations about ADP and the broader peer groups' ability to raise pricing heading into the fourth quarter and 2025 without like significant pushback? Hi Carolyn.
Speaker Change: Without significant pushback.
Don Edward McGuire: Thanks. Thanks for the question. You know, I think it just continues to come back to the same concepts, and that's making sure that we offer good value to our customers over a 10 plus year lifespan. So we're always mindful of making sure that clients are getting good value and that we keep those clients for a very, very long time. So it's that client life cycle, the total return on the entire life of a client. So we're always very, very careful not to overstep on pricing. Having said that, we, of course, watch what the competition is doing. We have our ears to the ground.
Speaker Change: Hi, Carolyn thanks, Thanks for the question.
Speaker Change: I think it just continues to come back to the same concepts and that's making sure that we offer good value to our customers over a 10 plus year lifespan. So we're always mindful of making sure that clients are getting good value.
Speaker Change: And that we keep those clients for a very very long time, so it's that.
Speaker Change: Lifecycle of the <unk>.
Speaker Change: Total return them.
Speaker Change: The entire life of our clients. So we're always very very careful not to overstep on pricing, having said that we of course watch what the competition is doing we have our ear to the ground our salespeople have the ear to the ground, we're trying to make sure and understand what's happening from the competition. So we will continue to look at it we will continue to knock around some.
Don Edward McGuire: Our salespeople have their ears to the ground. We're trying to make sure and understand what's happening from the competition. So we will continue to look at it. We'll continue to toss around some ideas and some models and see what the impact could be. But I don't want to signal exactly what I think we're doing because, as I said earlier, we are still, as I said earlier, in the midst of our planning cycle here. But we always look at it.
Speaker Change: Some ideas and some models and.
Speaker Change: See what the impact could be but.
Speaker Change: I don't want to I don't want to signal signal exactly where I think we're doing because we're still as I said earlier in the midst of our planning cycle here, but.
Speaker Change: We always looked at it.
Speaker Change: We take price usually every year, where we can.
Speaker Change: <unk> some of the contractual commitments, we have some of our larger clients, but just something we're very very careful and cautious about doing.
Don Edward McGuire: We take prices usually every year where we can, not including some of the contractual commitments. We have some of our larger clients, but just something we're very, very careful and cautious about. Awesome. Thank you. That's a lot of color.
Speaker Change: Awesome. Thank you that's all the color.
Kartik Mehta: Thank you. And our last question comes from Kartik Mehta with North Coast Research. Your line is open. Good morning.
Speaker Change: Thank you and our last question comes from Kartik Mehta with Northcoast Research. Your line is open.
Maria Black: Maria, as you look at the mid market and the success ADP is having, who are you winning market share from? Is it traditional payroll companies? Is it companies that are maybe using other software products that you wouldn't consider payroll companies?
Kartik Mehta: Good morning.
Kartik Mehta: As you look at the mid market and the success ADP is having who who are you winning market share from traditional payroll companies and the companies that are you may be using other software products that you wouldn't consider payroll companies I'm just wondering.
Kartik Mehta: Where the success is coming from.
Maria Black: I'm just wondering where the success is coming from everywhere. I candidly listen, from a mid market perspective, again, the demand is, is healthy, and the competitive environment is competitive. And we continue to remain laser focused on all of the competitors, specifically, you know, the ones that have been talking a lot about us over the last few years. And I think the way that we've been focused is really about the investments we've made, investments into a best-in-class product, investments into focus on distribution, and into a digital transformation that's driving great client satisfaction. And so that really has allowed us to have a winning story as it relates to really all of the players.
Kartik Mehta: Everywhere.
Kartik Mehta: Well I candidly lesson from the mid market perspective again, the demand is healthy the competitive environment is competitive and we continue to remain laser focused on all of the competitors specifically the ones that have been talking a lot about us over the last few years.
Kartik Mehta: And I think the way that we've been focused is really about the investments we've made investments into a best in class product investments into focus on distribution investments into a into a digital transformation, that's driving great client satisfaction and so that that really has allowed us to out to have a winning story as.
Kartik Mehta: It relates to our really all of the players.
Maria Black: And then just one follow-up question, just on the PEO business. As you look at the long-term growth perspective of that business, obviously, there's been a couple things that have happened that maybe have slowed the growth down in the last year or so. I'm wondering, you know, just your outlook on the PEO business. And if you think anything has changed in that business or demand for the product? Yeah, so I'm happy to start and, you know, certainly happy to have Don chime in too on the PEO. I'm always very, very bullish on the PEO value proposition. I've been close to that business for a long time. And I will tell you, it's stronger than it's ever been.
Kartik Mehta: And then just one follow up just on the PEO business as you look at the long term growth perspective that business. Obviously, there has been a.
Kartik Mehta: Couple of things have happened that maybe have slowed the growth down in the last year or so I'm wondering just your outlook on the PEO business and if you think anything has changed.
Kartik Mehta: That business or demand for the product.
Speaker Change: Yeah, So I'm happy to start and certainly happy to have Don chime into on the PEO.
Don: I'm always very very bullish on the PEO value proposition I I've been close to that business for a long time and I will tell you it's stronger than it's ever been so despite the strangeness that we've had in the PEO from a kind of the component tree.
Maria Black: So despite the strangeness that we've had in the PEO, from a kind of the component tree, heading into the pandemic, during the pandemic, after the pandemic, and then, you know, now call it a little bit post-pandemic, what I would suggest to you is it has nothing to do with the fundamentals of that business and what we would expect over time from a growth perspective, long term. And so the value proposition is strong.
Don: Heading into the pandemic during the pandemic after the pandemic and then you know now about call. It a little bit post post pandemic, what I would suggest to you is it has nothing to do with the fundamentals of that business and what we would expect over time from a growth perspective long term and so the value proposition is strong.
Maria Black: Nothing, you know, from our end, has changed there as it relates to the overall demand from the business. And we see that just in the, you know, we continue to have 50% of our clients in the PEO coming from the base. So it's responding with our existing clients, it's responding with the open market, and it continues to be a very strong offering for us. So I don't know, Don, if you wanted to add anything there. Thank you very much.
Don: From our end has changed there as it relates to the overall <unk>.
Don: <unk> from the business and we see that just in the we continue to have a 50% of our clients into the PEO coming from the base.
Don: It's resonating with our existing clients and it's resonating with the open market and it continues to be a very strong offering for us I don't know Don if you wanted to add anything there is nothing nothing to add value.
Don: The value proposition is as strong as ever and the fundamentals of the business are continuing to be quite strong.
Don: Thank you very much I really appreciate it.
Don Edward McGuire: I really appreciate it. Thank you. We have one more question from Dan Dole with Mizuho. Your line is open.
Don: Thank you we have one more question from Dandle with Mizuho. Your line is open.
Don: Okay.
Dan Dolev: Hey, guys, thank you for taking my question. And apologies, I was on a different call. But I know it's kind of maybe early, but do you have any views about, um, you know, the next year, your next fiscal year, maybe something like early views, as we head into the fourth quarter? Thank you. Yeah, Dan, just a couple of things.
Dandle: Hey, guys. Thank you for taking my question and apologies I was on a different call but.
Dandle: No it's kind of maybe early but do you have any views about.
Dandle:
Dandle: Your next fiscal year, maybe sounds like early view.
Dandle: As we head into the fourth quarter. Thank you.
Dandle: Yes.
Don Edward McGuire: Thinking about next year, we do think that it's early, so we didn't share too much. Although, you know, we did say that the pace of control will continue to be under a little bit of pressure given the fullness of the labor market. So that's a kind of continuing story that we've been telling. We will continue some of our Gen-AI spending and related spending, making the right investments for ADP. And, of course, we're going to get some tailwind from interest rates.
Speaker Change: Yes, Dan just just a couple of things.
Dan: Thinking about thinking about next year.
Dan: We do think that its early so we didn't hear too much although we did say that the.
Dan: Pays per control will continue to be under a little bit of pressure given the fullness of the labor market. So.
Dan: That's kind of continuing story that we've been telling we will continue some virgin AI spending related spending.
Dan: The right investments for ADP.
Dan: And of course, we're going to get some tailwind from interest rates.
Don Edward McGuire: So I think those are the three primary things. And, of course, we always remain very, very focused on bookings and our strong client retention and client experience.
Dan: So I think those are the three three.
Dan: Three primary things that of course, we always remain very very focused on bookings and our strong client retention and client experience. So I think those would be the the highlights for 425.
Dan: Okay.
Dan Dolev: Okay, I appreciate it. And again, apologies again if this was already addressed; I was on a different call. I appreciate it. Thank you. There are no further questions.
Speaker Change: Okay I appreciate it and apologies again, if this was already addressed.
Speaker Change: On a different color I appreciate it.
Maria Black: I'd like to turn the call back over to Maria Black for any closing remarks. Yeah, thank you. And thank you once again to everyone who joined us today. Whether full time or late, we always appreciate the questions and the interest. And we certainly look forward to speaking with all of you again soon and looking forward to the close of the year. Thanks. Thank you for your participation. This does conclude the program, and you may now disconnect.
Dan: Thank you there are no further questions I'd like to turn the call back over to Maria Black for any closing remarks.
Maria Black: Yeah. Thank you and thank you once again to everyone, who joined US today, whether the full time or late we always appreciate the questions. The interest and we certainly look forward to speaking with all of you again soon and look forward to the close of the year.
Michelle: Everyone have a great day. Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www.microsoft.com.ca [inaudible] Good morning. My name is Michelle, and I'll be your conference operator. At this time, I would like to welcome everyone to ADP's third quarter fiscal 2024 earnings call.
Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.
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Michelle: Good morning, My name is Michelle and I'll be your conference operator at this time I would like to welcome everyone to Adp's third quarter fiscal 2024 earnings call.
Michelle: I would like to inform you that this conference is being recorded. After the prepared remarks, we will conduct a question and answer session, and instructions will be given at that time. I will now turn the call over to Mr. Danyal Hussain, Vice President, Best Relations. Please go ahead.
Dan: To inform you that this conference is being recorded.
Dan: After the prepared remarks, we will conduct a question and answer session and instructions will be given at that time.
Dan: I will now turn the call over to Mr. Daniel Hussain Vice President Investor Relations. Please go ahead.
Thank you, Michelle, and welcome everyone to ADP's third quarter fiscal 2024 earnings call. Participating today are Maria Black, our President and CEO, and Don McGuire, our CFO. Earlier this morning, we released our results for the quarter. Our earnings materials are available on the SEC's website and our investor relations website at investors.adp.com, where you will also find the investor presentation that accompanies today's call. During our call, we will reference non-GAAP financial measures that we believe are useful to investors and that exclude the impact of certain items.
Danyal Hussain: Thank you Michelle and welcome everyone to Adp's third quarter fiscal 2024 earnings call.
Danyal Hussain: Participating today are Maria Black, our president and CEO and Tom Mcguire our CFO.
Danyal Hussain: Earlier. This morning, we released our results for the quarter our earnings materials are available on the SEC website, and our Investor Relations website at investors that ADP Dot Com, where you will also find the investor presentation that accompanies today's call.
Danyal Hussain: 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 can be found in our earnings release.
A description of these items, along with the reconciliation of non-GAAP measures to their most comparable GAAP measures, 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'll now turn it over to Maria.
Danyal Hussain: 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.
Danyal Hussain: Now I'll turn it over to Maria.
Thank you, Dany, and thank you, everyone, for joining us this morning. This morning, we reported strong 7% revenue growth and 14% adjusted diluted EPS growth for the third quarter, as we continue to make progress delivering against our strategic priorities and as the labor market and the overall HCM business environment remain stable. I'll begin with a review of the quarter's results and provide a brief update on our strategy, before turning it over to Don to update you on our outlook and share some early considerations for next year.
Maria Black: Thank you Danny and thank you everyone for joining us. This morning, we reported strong 7% revenue growth and 14% adjusted diluted EPS growth for the third quarter as we continued to make progress delivering against our strategic priorities and as the labor market and the overall HCM business environment remained stable.
Danyal Hussain: Begin with a review of the quarter's results and provide a brief update on our strategy before turning it to Dan to update you on our outlook and share some early considerations for next year.
In Q3, we delivered solid employer services and new business bookings growth, reaching record bookings for a Q3 period and keeping us on track for our full year outlook. We maintained momentum in our small business portfolio, with particularly strong growth in our retirement services offering. And in Q3, we also delivered strong bookings results in our mid market, enterprise, and international businesses. With a steady demand backdrop and a healthy new business pipeline, we are focused on continuing to execute for the remainder of the year. Employer services retention was very strong in the third quarter and once again exceeded our expectations, also reaching a new record level for a Q3 period, led by our mid market business.
Danyal Hussain: In Q3, we delivered solid employer services, new business bookings growth, reaching record bookings for our Q3 period and keeping us on track for our full year outlook, we maintained momentum in our small business portfolio with particularly strong growth in our retirement services offering and in Q3, we also.
Danyal Hussain: So delivered strong bookings results in our mid market enterprise and international businesses.
Danyal Hussain: With a steady demand backdrop, and a healthy new business pipeline, we are focused on continuing to execute for the remainder of the year.
Danyal Hussain: Employer services retention was very strong in the third quarter and once again exceeded our expectations also reaching a new record level for our Q3 period led by our mid market business.
Our overall retention continues to benefit from ongoing investments in our key platforms and from our commitment to delivering an exceptional client experience, which together helped our client satisfaction scores reach a new all-time high for Q3. Our employer services pace per control growth was steady at 2%, reflecting the resilient overall U.S. labor market and the fact that our clients continue to add to their workforces at a moderate pace. And our PEO revenue growth of 5% for the third quarter was in line with our expectations, despite continued short-term pressure from below-normal hiring activity we've been experiencing among those clients.
Danyal Hussain: Our overall retention continues to benefit from ongoing investments in our key platforms and from our commitment to delivering an exceptional client experience, which together helped our client satisfaction scores reached a new all time high for a Q3.
Danyal Hussain: Our employer services pays per control growth was steady at 2%, reflecting the resilient overall U S labor market and the fact that our clients continue to add to their workforces at a moderate pace.
Danyal Hussain: And our PEO revenue growth of 5% for the third quarter was in line with our expectations. Despite continued short term pressure from below normal hiring activity, we've been experiencing among those clients.
Moving on to a broader update, we continue to push forward on our three strategic priorities, leading with the best HCM technology, unmatched service and expertise, and the broadest scale to ultimately deliver the best possible experience, not just to the buyers of our products but everyone that engages with ADP. We are investing with purpose to deeply understand and deliver value to a vast set of personas, from small business owners that count on us, to HR professionals and executives of the largest global enterprises, to millions of employees and gig workers around the world who engage with our solutions, to CPAs, banks, brokers, and other key partners, to our thousands of dedicated service and implementation associates, and to our sellers who represent ADP in the market every day. It's with these personas in mind that we continue pushing forward on our strategic priorities. And In Q3, we made steady progress. Our first priority is to lead with best-in-class HCM technology.
Danyal Hussain: Moving on to a broader update we continue to push forward on our three strategic priorities, leading with the best HCM technology unmatched service and expertise in the broader scale to ultimately deliver the best possible experience not just to the buyers of our products, but everyone that engages with ADP.
Danyal Hussain: We are investing with purpose to deeply understand and deliver value to the vast set of personas from small business owners that count on us to HR professionals and executives of the largest global enterprises millions of employees and gig workers around the world, who engage with our solutions to CPA banks brokers.
Danyal Hussain: And other key partners to our thousands of dedicated service and implementation associates and to our sellers who represent ADP in the market every day.
Danyal Hussain: It's with these personas in mind that we continue pushing forward on our strategic priorities and in Q3, we made steady progress.
Danyal Hussain: Our first priority is to lead with best in class HCM technology.
We've been rolling out ADP Assist these past couple of quarters, which, as a reminder, will be embedded in our key platforms and utilizes Gen-AI to surface insights, aid decision making, and streamline day-to-day tasks for our clients and their employees. In Q3, we were very excited to begin piloting a new feature that enables our small business clients to not only leverage DEN AI to answer questions and better understand how to initiate an HR action, which we outlined in recent quarters, but also to actually allow them to issue commands to complete that HR action. For example, users can now type, I need to rehire Alex, or I would like to give Alex a leave of absence, and are expedited through that workflow.
Danyal Hussain: We've been rolling out ADP assessed these past couple of quarters, which as a reminder, we'll be embedded in our key platforms and utilizes gen AI to surface insights a decision, making and streamline day to day tasks for our clients and their employees.
Danyal Hussain: In Q3, we were very excited to begin piloting a new feature that enables our small business clients to not only leverage NII to answer questions and better understand how to initiate an HR action, which we outlined in recent quarters, but to actually allow them to issue commands to complete that HR action.
Danyal Hussain: For example, users can now type I need to re hire Alex or I would like to give Alex a leave of absence in our expedited through that workflow.
Our second priority is to provide unmatched expertise and outsourcing. We continue to extend Gen-AI capabilities to a broader portion of our service associates. And in Q3, we started rolling out a new tool for some of our implementation teams. Now they can use GenAI to take in unstructured client-employee data, reducing manual data entry and minimizing errors during the implementation process.
Danyal Hussain: Our second priority is to provide unmatched expertise and outsourcing.
Danyal Hussain: We continue to extend gen AI capabilities to a broader portion of our service associates and in Q3, we started rolling out a new tool for some of our implementation teams.
Danyal Hussain: Now they can use gen AI to taken unstructured client employee data, reducing manual data entry and minimizing errors during the implementation process.
While it's still early, we are excited about its potential benefits. Our third priority is to serve our clients with our global scale. The ADP marketplace remains a differentiator for us and is a perfect example of a benefit our clients receive from partnering with a leader in HCM. As a growing number of our hundreds of partners offer AI-enabled solutions, in Q3, we established ADP marketplace AI principles that require our partners to commit to the same type of responsible AI principles that govern our own products, including human oversight, monitoring, explainability, and mitigating bias.
Danyal Hussain: While it's still early we are excited about its potential benefits.
Danyal Hussain: Our third priority is to benefit our clients with our global scale.
Danyal Hussain: The ADP marketplace remains a differentiator for us and is a perfect example of a benefit our clients receive from partnering with the leader in HCM.
Danyal Hussain: As a growing number of hundreds of partners offer AI enabled solutions in Q3, we established ADP marketplace AI principles that require our partners to commit to the same type of responsible AI principles that govern our own products, including human oversight monitoring explainable.
Danyal Hussain: <unk> and mitigating bias.
Our clients put a huge amount of trust in us, and this is another example of how ADP strives to ensure the responsible use of AI throughout the ADP ecosystem. We also continue to extend our market-leading global scale, and in Q3, we reached 1 million paid employees on our IHCM platform, which continues to scale in several countries in Europe, and we made further progress in growing our presence in the APAC region, where we have recently been expanding our in-country payroll and workforce management presence in a number of markets.
Danyal Hussain: Our clients put a huge amount of trust in US and this is another example of how ADP strives to ensure the responsible use of AI throughout the ADP ecosystem.
Danyal Hussain: We also continue to extend our market leading global scale and in Q3, we reached 1 million paid employees on our <unk> platform, which continues to scale in several countries in Europe, and we made further progress in growing our presence in the APAC region, where we have recently been expanding our in country payroll.
Danyal Hussain: And workforce management presence in a number of markets.
Danyal Hussain: Yeah.
In 2024, we are celebrating our 75th anniversary, and we pride ourselves on having built ourselves into a brand that truly matters to employers, their employees, and the broader world of work. Our focus on our strategic priorities positions us to deliver more value than ever for our over 1 million current clients and to the tens of thousands of new clients we welcome to the ADP family every quarter. I'd like to highlight just a few of these new client wins from Q3 to give you an appreciation for the variety of ways in which we deliver value to our clients.
Danyal Hussain: In 2024, we are celebrating our 70 <unk> anniversary and we pride ourselves on having built ourselves into a brand that truly matters to employers and their employees and the broader world of work.
Danyal Hussain: Our focus on our strategic priorities positions us to deliver more value than ever for our over $1 million current clients and to the tens of thousands of new clients. We welcome to the ADP family every quarter.
Danyal Hussain: I'd like to highlight just a few of these new client wins from Q3 to give you an appreciation for the variety of ways in which we deliver value for them.
In the U.S. small business, we had a new boutique doughnut shop referred to us from one of our CPA partners. The client chose ADP for the strength of our run platform, our reputation for great service, our strong relationship with our CPA partners, and our ability to provide retirement services. Since this was a first-time small business owner, our sales team even took the time to help the business owner set up their business the right way, from guiding the client on obtaining a state tax ID to making sure the client obtained the appropriate workers' compensation insurance. In the U.S. mid-market, we want a multi-state operator of rehabilitation centers.
Danyal Hussain: And U S small business, we had a new boutique donut shop referred to us from one of our CPA partners.
Danyal Hussain: The client chose ADP for the strength of our run platform our reputation for great service, our strong relationship with our CPA and our ability to provide retirement services.
Danyal Hussain: Since this was a first time small business owner our sales team even took the time to help the business owner set up their business the right way from guiding the client on obtaining a state tax I'd to making sure the client obtained the appropriate workers' compensation insurance.
Danyal Hussain: In U S mid market, we want a multistate operator of rehabilitation centers.
This client wasn't happy with a prior HCM provider, and WorkforceNow proved a much better fit. What makes me the most proud in this example is how one of our ADP Marketplace partners played a key role in the decision to switch to ADP by independently highlighting the advantages we offered in terms of ease of integration, a capability we have invested in over the years. In U.S. Enterprise, we welcomed a large luxury resort that operates multiple hotels, restaurants, and retail stores on site and was dissatisfied with a prior provider's level of client service.
Danyal Hussain: Client wasn't happy with their prior HCM provider and workforce now proved a much better fit.
Danyal Hussain: So it makes me the most proud in this example is one of our ADP marketplace partners played a key role in the decision to switch to ADP by independently highlighting the advantages we offered in terms of ease of integrations a capability we have invested in over the years.
Danyal Hussain: And U S enterprise, we welcomed a large luxury resort that operates multiple hotels restaurants, and retail stores onsite and whats dissatisfied with the prior providers level of client service.
The client was so happy following their seamless ADP implementation, which included on-site training for their HR team, that they accelerated their plans to add on features like benefits, recruiting, onboarding, wage garnishment, and tax credits. In our international business, one recent win was a leading airline that utilized ADP in certain countries and asked us to help better define their global payroll strategy. Ultimately, they expanded the scope of our services to include an additional 18 countries and started that rollout in the third quarter with plans to add other countries over the next year to enable true consolidated global reporting and analytics. And as a final example, our HRO team started a New York-based design firm after its leadership team recognized the company lacked the HR infrastructure required to adequately attract and retain the right talent.
Danyal Hussain: Client was so happy following their seamless ADP implementation, which included onsite training for their HR team that they accelerated their plans to add on features like benefits recruiting onboarding wage garnishment and tax credits.
Danyal Hussain: In our international business, one recent win with a leading airline that utilized ADP in certain countries and asked us to help better define their global payroll strategy.
Danyal Hussain: Ultimately they expanded the scope of our services to include an additional 18 countries and started that rollout in the third quarter with plans to add other countries over the next year to enable true consolidated global reporting and analytics.
Danyal Hussain: And as a final example, our HR team started a new York based design firm. After its leadership team recognized the company lacked the HR infrastructure required to adequately attract and retain the right talent they turned to our PEO offering for truly comprehensive support attracted by the breadth of our offering.
They turned to our PEO offering for truly comprehensive support, attracted by the breadth of our offering, including features like the My Life Advisors program, which supports employees as they make benefit and other important life decisions. We also advise this client in the development of a comprehensive benefits strategy to support their multi-generational workforce and help them attract the talent that they need to grow. As you can see from these examples, it's often a combination of our technology, expertise, and overall breadth that resonates with these businesses, and the result is incredible diversity in our client base and a resilient overall business model.
Danyal Hussain: Including features like the my life Advisors program, which supports employees as they make benefit and other important life decisions.
Danyal Hussain: We also advised us client and the development of a comprehensive benefits strategy to support their multi generational workforce and help them attract the talent that they need to grow.
Danyal Hussain: As you can tell from these examples it's often a combination of our technology expertise and overall breadth that resonated with these businesses and the result is incredible diversity and our client base and a resilient overall business model, we look forward to leaning in and delivering even greater differentiation in the <unk>.
We look forward to leaning in and delivering even greater differentiation in the market going forward. Overall, we were pleased with the strong financial and strategic outcomes in the third quarter. I'd like to thank our associates who continue to deliver exceptional products and service to our clients, whose efforts drive these client wins and retention. Thank you again for all you do for ADP and for our clients. And now I'll turn it over to Don. Thank you, Maria, and good morning, everyone.
Danyal Hussain: Going forward.
Danyal Hussain: Overall, we were pleased with our strong financial and strategic outcomes in the third quarter I'd like to thank our associates, who continue to deliver exceptional products and service to our clients and whose efforts drive these client wins and retention.
Danyal Hussain: Thank you again for all you do for ADP and for our clients and now I'll turn it over to Don.
I'll provide more color on our results for the quarter and our updated fiscal 2024 outlook. Overall, we reported a strong third quarter with consolidated revenue growth and our adjusted EBIT margin coming in a bit above our expectations. The interest rate backdrop has improved since we last provided our full leader outlook, so we're updating our outlook for that, as well as making a few other changes, which I'll detail. I'll start with Employer Services. ES segment revenue grew 8% on a reported basis and 7% on an organic constant currency basis.
Don: Thank you Maria and good morning, everyone I will provide more color on our results for the quarter and our updated fiscal 2024 outlook overall, we reported a strong third quarter with a consolidated revenue growth and our adjusted EBIT margin coming in a bit above our expectations.
Don: The interest rate backdrop has improved since we last provided our full year outlook, we are updating our outlook for that as well as making a few other changes, which I will detail.
Speaker Change: I'll start with employer services.
Danyal Hussain: <unk> segment revenue grew 8% on a reported basis and 7% on an organic constant currency basis.
As Maria shared, we had a good quarter in ES new business bookings with broad-based growth across our client segment. We have a tough compare in Q4 following last year's strong finish, but with a steady HCM demand environment and healthy pipelines, we feel on track to deliver our 4 to 7% new business bookings growth outlook for the year. Also, as Maria mentioned earlier, our ES retention exceeded our expectations and increased slightly from last year.
Danyal Hussain: As Maria shared we had a good quarter in Es, new business bookings with broad based growth across our client segments.
Danyal Hussain: We have a tough compare in Q4 following last year's strong finish.
Danyal Hussain: With a steady HCM demand environment and healthy pipelines, we feel on track to deliver our 4% to 7% new business bookings growth outlook for the year.
Danyal Hussain: Also as Maria mentioned earlier.
Speaker Change: Yes retention exceeded our expectations and increased slightly from last year.
Given our continued strong retention performance, we are increasing our full-year retention outlook slightly. We now anticipate a 20 to 30 basis point decline in full-year retention, which is better than our prior forecast. ES pays for control growth held steady at 2% in Q3.
Danyal Hussain: Our continued strong retention performance, we are increasing our full year retention outlook slightly we now anticipate a 20 to 30 basis point decline in full year retention, which was better than our.
Danyal Hussain: Our prior forecast.
Danyal Hussain: Yes pays per control growth held steady at 2% in Q3, and we now expect growth to round to 2% for the year. The high end of our prior 1% to 2% growth outlook.
And we now expect growth to round to 2% for the year, the high end of our prior one to 2% growth outlook, and Client Funds Interest Revenue to exceed our expectations in Q3 due to higher average client funds balances and a slightly better average yield. We're revising our full year client funds interest outlook to reflect our Q3 results and the increase in prevailing interest rates since our last update. We now expect Fiscal 24 Average Client Funds Balance Growth of about 3%, and we are raising our expectations for Client Funds Interest Revenue and Net Impact from our Client Funds Extended Investment Strategy.
Danyal Hussain: In client funds interest revenue exceeded our expectations in Q3 due to higher average client funds balances and a slightly better average yield.
Danyal Hussain: We are revising our full year client funds interest outlook to reflect our Q3 results and the increase in prevailing interest rates since our last update.
Danyal Hussain: We now expect fiscal 'twenty four average client fund balance growth of about 3% and we are raising our expectations for client funds interest revenue and net impact from client funds extended investment strategy.
In total, there is no change to our fiscal 24 ES revenue growth forecast of 7 to 8%, although we are now likely to come in towards the higher end of that range. Our ES margin increased 230 basis points in Q3, driven both by operating leverage and the contribution from client funds interest revenue growth.
Danyal Hussain: In total there is no change to our fiscal 2000 for Es revenue growth forecast of 7% to 8%.
Danyal Hussain: Although we are now likely to come in towards the higher end of that range.
Danyal Hussain: Our es margin increased 230 basis points in Q3, driven both by operating leverage and the contribution from client funds interest revenue growth.
With our strong Q3 results and the slightly more favorable client funds interest rate backdrop, we are raising our fiscal 24 ES margin outlook and now anticipate growth of 180 to 190 basis points. Moving on to the PEO, We had 5% revenue growth driven by 3% growth in average worksite employees in the third quarter, representing slight acceleration from the first half of the year. These results were largely in line with our expectations, and we were encouraged by the gradual stabilization in our PEOs, Pays Per Control growth, which decelerated but only slightly from the prior quarter.
Danyal Hussain: With our strong Q3 results and a slightly more favorable client funds interest rate backdrop, we are raising our fiscal 2000 and for Es margin outlook and now anticipate growth of 180 to 190 basis points.
Danyal Hussain: Moving onto the PEO.
Danyal Hussain: We had 5% revenue growth driven by 3% growth in average worksite employees in the third quarter, representing slight acceleration from the first half of the year.
Danyal Hussain: These results were largely in line with our expectations.
Danyal Hussain: And we were encouraged by the gradual stabilization in our <unk> pays.
Danyal Hussain: Pays per control growth, which decelerated, but only slightly from the prior quarter.
We continue to anticipate soft pace per control growth through the end of the year and expect worksite employee growth to hold steady at about 3%, keeping us on track for a full year outlook for worksite employee growth of 2% to 3% and revenue growth of 3% to 4%. PO margin decreased 220 basis points in Q3. As we shared last quarter, we expect this year's workers' compensation reserve release benefit to be significantly lower than what we experienced these last few years, and in particular last year's $73 million benefit.
Danyal Hussain: We continue to anticipate soft pays per control growth through the end of the year and expect Worksite employee growth to hold steady at about 3% keeping us on track for our full year outlook for Worksite employee growth of 2% to 3% and revenue growth of 3% to 4%.
Danyal Hussain: PEO margin decreased 220 basis points in Q3.
Danyal Hussain: As we shared last quarter, we expect this year's workers' compensation reserve release benefit to be significantly lower than what we experienced these last few years and in particular last year's $73 million benefit.
We're updating our fiscal 24 outlook to now assume a minimal release benefit. As a result, we are further revising our overall PEO margin expectation to be down 120 to 140 basis points in fiscal 24, versus our prior expectation for a decline of 80 to 100 basis points. Putting it all together, there is no change to our fiscal 24 consolidated revenue growth of 6 to 7%. With the two changes to segment margins largely offsetting one another, we continue to expect our adjusted EBIT margin to increase by 60 to 70 basis points. However, we still anticipate an effective tax rate of around 23%.
Danyal Hussain: We are updating our fiscal 'twenty outlook to now assume a minimal release benefit and as a result, we are further revising our overall PEO margin expectation to be down 120 to 140 basis points in fiscal 'twenty four versus our prior expectation for a decline of 82.
Danyal Hussain: 100 basis points.
Danyal Hussain: Putting it altogether there was no change to our fiscal 2000 and for consolidated revenue growth of 6% to 7%.
Danyal Hussain: With the two changes to segment margins largely offsetting one another we continue to expect our adjusted EBIT margin to increase by 60 to 70 basis points.
And we continue to expect fiscal 24 adjusted EPS growth of 10 to 12%, with the middle of that range still the most likely outcome. As we look ahead to fiscal 25, I wanted to share a couple of early thoughts at this point. First, given the fullness of the labor market, we are planning for pay-per-control growth to once again be below normal levels next year and to decelerate modestly from this year's growth level in both ES and our PEO segment, with the resulting revenue pressure more apparent in the PEO segment, given its more direct revenue sensitivity to worksite employees.
Danyal Hussain: We still anticipate an effective tax rate of around 23% and we continue to expect fiscal 'twenty for adjusted EPS growth of 10% to 12% with the middle of that range still the most likely outcome.
Danyal Hussain: As we look ahead to fiscal 'twenty five I wanted to share a couple of clearly thoughts at this 0.1st.
Speaker Change: First given the fullness of the labor market, we are planning for pays per control growth to once again be below normal levels next year and to decelerate modestly from this year's gross level in both Es and our PEO segments.
Danyal Hussain: With the resulting revenue pressure more apparent in the PEO segment, given its more direct revenue sensitivity to worksite employees.
We'll, of course, share those exact assumptions with you when we give our formal guidance in a few months. On the expense side, we're also planning to continue growing our Gen AI related spend next year. As you've heard from us all year long, there are many ways we can put Gen AI in the hands of all of the different stakeholders that work with or on behalf of ADP, including our client practitioners, their employees, our service and implementation teams, our sellers, and our developers.
Danyal Hussain: We will of course share those exact assumptions with you when we give our formal guidance in a few months.
Danyal Hussain: On the expense side. We are also planning to continue growing our gen AI related spend next year.
Danyal Hussain: As you've heard from US all year long there are many ways. We can put gen AI in the hands of all of the different stakeholders.
Danyal Hussain: Work with her on behalf of ADP, including our client practitioners their employees, our service and implementation teams, our sellers and our developers.
These are critical investments, and they are the right investments for ADP, but we expect the associated benefits of productivity and growth to phase in gradually over time, likely representing overall margin pressure for the year. At the same time, we appear positioned for continued tailwinds from interest rates, though the extent of this benefit will, of course, depend on how the yield curve continues to develop. As usual, we're focused primarily on maintaining good momentum in our new business bookings and maintaining our strong client satisfaction and retention, and we remain upbeat about our strategy for the years ahead.
Danyal Hussain: These are critical investments and they are the right investments for ADP, but we expect the associated benefits in productivity and growth to facing gradually over time likely representing overall margin pressure for the year.
Danyal Hussain: At the same time, we appear positioned for continued tailwind from interest rates. So the extent of this benefit will of course depend on how the yield curve continues to develop.
Danyal Hussain: As usual, we're focused primarily on maintaining good momentum in our new business bookings and maintaining our strong client satisfaction and retention and.
Danyal Hussain: And we remain upbeat about our strategy for the years ahead.
And now, over to Q&A. Thank you. If you'd like to ask a question, please press star 11. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 1 again.
Speaker Change: And now over to Q&A.
Speaker Change: Thank you.
Speaker Change: If you'd like to ask a question. Please press star one one is.
Speaker Change: Is your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Our first question comes from Ramsey El Asal with Barclays. Your line is open. Hi, this is Owen on...
Speaker Change: Our first question comes from Ramsey El <unk> with Barclays. Your line is open.
Danyal Hussain: Hi, This is Owen on for Ramsey. Thanks for taking our question. This morning. So Youre currently entering your open enrollment season for our client benefit elections within the PEO I was wondering if you could talk about trends youre seeing there. Thus far you called out some stability in regard to insurance price inflation driving more attach rates are you seeing any of this kind of follow through.
Thanks for taking our question this morning. So you're currently entering your open enrollment period for Client Benefit Elections, the PEO. I was wondering if you could talk about trends you're seeing there thus far. You called out some stability in regard to insurance price inflation driving more attached rates. Are you seeing any of these kind of follows?
Danyal Hussain: Any any thoughts there might be helpful. Thanks.
Unknown Speaker... thoughts there. My, Good morning. Go ahead. I was gonna say good morning, Owen.
How about I start, and I'll let Don chime in. I think the comment would be, just to start, we are smack in the middle of our open enrollment season, exactly as you suggested. And so it's probably too early to make a call in terms of what that's going to look like from a full year perspective on the retention side. But overall, we have seen a bit, a tiny bit of PEO retention improvement this year, and the comparisons are getting a bit easier. And we do expect some improvement for the full year. So with that, I'll let Don chime in. Oh, sorry. I jumped the gun there. So Maria.
Speaker Change: Hi, Good morning go ahead go ahead.
Speaker Change: I was going to say good morning, Owen how about I start and I'll, let Don chime in I think the comment would be just to start we are smack in the middle of our open enrollment season exactly as you suggested and so it's probably too early to make a call in terms of what that is going to look like from a full year perspective on the retention side, but overall we have.
Speaker Change: <unk> seen a bit a tiny bit of PEO retention improvement this year and the compares are getting a bit easier and we do expect some improvement for for the full year, so with that I'll I'll, let Don chime in sorry.
Don: Jumping on there so Maria Thank you perfect answer thank you.
Great, super helpful. And then, if I may, just on client retention, continues to sort of surprise me on the upside was running drivers there. I previously thought, potentially fewer bankers see it in the down market, but any expectations more longer term might be helpful. Yeah, absolutely.
Don: Great Super helpful. And then if I may just on client retention continues to surprise to the upside was wondering drivers there.
Don: Obviously thought potentially fewer bankruptcies in the down market, but any expectations more longer term might be helpful. There.
We're very pleased with overall retention results. I think you see that in our revised outlook, you see that in the revision we made last quarter as well. And so, just kind of remind everybody just how well retention is going. Fiscal 23 was a record.
Don: Yes, absolutely we're very pleased with overall retention results I think you see that in our revised outlook you see that in the revision we made last quarter as well and so just kind of remind everybody just how how well retention is going so that's about 23 was a record that record was really driven by the mid market and.
Don: International and the dawn market actually did decline a bit.
Don: 'twenty three and we expect pretty much the same outlook. If you will for a full year 24, which is why we still have a down year on year retention result, but we're incredibly pleased with overall, what we're saying with the with client retention, that's really being led by a combination of things one of which is the investments we made into <unk>.
That record was really driven by the mid market and international, and the down market actually did decline a bit in Fiscal 23. And we expect pretty much the same outlook, if you will, for full year 24, which is why we still have a down year on year retention result. But we're incredibly pleased with what we're seeing with client retention. That's really being led by a combination of things, one of which is the investments we made into product, and the record results we have in terms of client satisfaction. That, in and of itself, was a record in the third quarter, along with retention.
Don: The record results, we have in terms of client satisfaction that in and of itself was a record in the third quarter along with retention. So we're very very pleased with that as mentioned theres still down market variability and there's a market out of business, we haven't seen it thus far this year, but we still expect it.
So we're very, very pleased with that. As mentioned, there's still down market variability, and there's down market out of business. We haven't seen it thus far this year, but we still expect it to normalize a bit further. And then, you know, there's always normal variability in retention.
Don: To normalize a bit further and then there is always normal variability and retention. So we believe the retention guide is the appropriate one but certainly we're very very pleased with our record quarter and where we sit with retention thus far this year.
So we believe the retention guide is the appropriate one. But certainly, we're very, very pleased with the record quarter and where we sit with retention thus far this year. Great, super helpful.
Speaker Change: Great Super helpful. Thank you.
Thank you. Our next question comes from Bryan Bergin with TD Cowan. Your line is open. Hi, thanks. This is Zach Asemanan for Bryan.
Speaker Change: Thank you. Our next question comes from Bryan Bergin with TD Cowen Your line is open.
First question, I just want to dig in on the EF's revenue growth affirmation. Despite the higher retention at PPC views, I heard that you might come in towards the higher end of the range, but perhaps you can elaborate on some of the underlying assumptions and any offsets. Yeah, so a couple of things.
Bryan C. Bergin: Hi, Thanks. This is exactly as I've been on for Brian First question I just wanted to dig in on that yes revenue growth affirmation. Despite the higher retention at PPC views heard that you might come in towards the higher end of the range, but perhaps you could elaborate on some of the underlying assumptions in any offsets.
Zach, Maria already mentioned that retention is in very good shape for us. So certainly, that's been helping and contributing to revenue growth. And of course, what's changed since last time around, which is making us even more comfortable with saying we're going to be towards the higher end of the range, is that client funds interest impact is very good. So I think those are the two primary drivers of why we're more confident that we're going to see revenue come in towards the higher end of the seven to eight. Than we perhaps were 90 days ago. Got it.
Bryan C. Bergin: Yes, so a couple of things Zach I already mentioned that retention is in very good shape for us. So certainly that's been helping in contributing to the revenue growth and of course, what's changed since since last time around which is making us even more.
Bryan C. Bergin: More comfortable we're saying we're going to be towards the higher end of the range is that client funds interest impact is is very good. So I think those are the two primary drivers to why we're more confident that we're going to see revenue come in towards the higher end of the seven to eight than we perhaps were 90 days ago.
And a follow up on demands. ES new business bookings were affirmed at four to 7% growth. What are the strongest segments of the market and any notable changes to call out versus the second quarter? Sure, so first and foremost, we feel good about the overall demand environment. Companies are still hiring, as we saw today, and they're still investing as such in people in HCM. The call-outs, I made a few of them during the preparator marks, but it's really, you know, the down market continues to impress us this quarter, specifically in retirement services. So I'd make a call-out from there.
Speaker Change: Got it and a follow up on demands Es, new business bookings affirmed at 4% to 7% growth what are the strongest segments of the market and any notable changes to call out versus the second quarter.
Speaker Change: Sure. So first and foremost we are we feel good about the overall demand environment companies are still hiring as we saw today and they are still investing as such in people and in HCM.
Speaker Change: Callouts I made a few of them during the prepared remarks, but it's really now the dawn market continues to impress us this quarter specifically in retirement services. So it'd make a call out there it's quite fantastic to see that story in retirement services come together, we talked quite a bit about secular tailwind in that space based on legislation that coupled.
It's quite fantastic to see that story and retirement services come together. We talked quite a bit about secular tailwinds in that space based on legislation. That, coupled with the investments we've been making and incredible distribution execution, it's really great to see the retirement services leading the way. I think other areas that I would call out that have been remarkably strong are our mid-market, as well as international. And so, again, a similar story to retirement services in that it's really a great story coming together between investments and execution, and enterprise also was strong for us for the quarter.
Speaker Change: The investments, we make make been making an incredible distribution execution really great to see the retirement services, leading the way I think other areas that I would call outs that have been remarkably strong as our mid market.
Speaker Change: As well as international and so again similar story to retirement services in that.
Bryan C. Bergin: It's really a great story coming together between investments and execution and enterprise also was strong for us for the quarter.
And in terms of anything changing broadly, we haven't really seen anything change in the demand environment. Quite candidly, we feel really, really strong, as suggested by the overall hiring landscape and the labor demand. Thanks very much.
Bryan C. Bergin: And then in terms of anything changing broad based we haven't really seen.
Bryan C. Bergin: Anything change in the demand environment quite candidly, we feel really really strong as suggested by the overall hiring landscape on the.
Bryan C. Bergin: The labor demand.
Speaker Change: Thanks very much.
Thank you. Our next question comes from Mark Marcon with Baird. Your line is, Good morning, and thanks for the terrific update. Client retention is obviously really strong. Obviously, your scores continue to go up.
Speaker Change: Thank you. Our next question comes from Mark Marcon with Baird. Your line is open.
Mark Steven Marcon: Hey, good morning, and thanks for the terrific update.
Mark Steven Marcon: Okay.
Mark Steven Marcon: Retention, obviously really strong.
Mark Steven Marcon: Your scores continue to go up are there any areas that you would call out that are.
Are there any areas that you would call out that are, you know, standing out in terms of driving the higher NPS scores and the higher client retention? Anything that you would particularly note? Good morning, Mark.
Mark Steven Marcon: That are standing out in terms of driving the higher NPS scores in the.
Mark Steven Marcon: Higher client retention anything that you would particularly note.
I would say to you, mid-market, on both of those. So mid-market is driving strong NPS scores, and to record highs, mid-market is driving incredible retention. So that's the one call-out. You can probably hear the optimism in my voice there because it's a fantastic story kind of coming together.
Speaker Change: Good morning, Mark I would say to you mid market on both of those so mid market is driving a strong NPS scores to record highs. The mid market is driving incredible retention. So that that's the one call out you can probably hear the optimism in my voice there because it's a fantastic story kind of coming together, but I think overall return.
Speaker Change: Churn is incredibly strong.
Speaker Change: That market international in fiscal 'twenty, three and we're very strong and they continue to be strong but.
But I think overall, retention is incredibly strong. The mid-market, international, and fiscal 23 were very strong. They continue to be strong. But that's really the one call-out I would make is the mid-market. Great.
Mark Steven Marcon: But that's really the the one call out I would make is the mid market.
And then, you know, Maria, there's one area that, you know, investors have been asking more about, and, and you and ADP have the broadest, you know, outlook with regard to the space. So I'm asking this on the call, but some people wonder a little bit about, you know, saturation, and your new bookings continue to grow. But, you know, investors are asking a little bit more about, like, you know, how much room do we have for new solutions or how many clients have already upgraded things of that nature. Your results and the results of some of your peers continue to belie those concerns. But I'm wondering if you could address one question. Yeah, absolutely, Mark. I'll give it a shot.
Speaker Change: Great and then.
Speaker Change: Maria there's one area that investors have been asking more about.
Speaker Change: And you have you an ADP has the broadest outlook with regards to the space.
Maria Black: I'm asking this on the call, but some people wonder a little bit about saturation.
Maria Black: Your new bookings continue to grow but investors are asking a little bit more about like how much room do we have.
Maria Black: Or for new solutions or how many clients have already upgraded.
Maria Black: That nature your results and the results of some of your peers continue to Belive. It concerns, but I'm wondering if you could address those.
And certainly happy to have Don chime in. Maybe he can talk a little bit about our growth opportunities and international. But I think broadly speaking, when you think about the total addressable market of the HCM space, and where we all play, and we all compete, and it's highly competitive, and there's been a lot of investments coming into the space over the past few years, what I would suggest is there's still a tremendous amount of growth and growth upside for all of us.
Speaker Change: Yeah, absolutely Mark I'll I'll give it a shot and certainly happy to have a Don chime in maybe he can talk a little bit about our growth opportunity in international but I think broadly speaking when you think about the total addressable market of the HCM space and and where we all play and we all compete in it's highly competitive and theres been a lot of.
Don: Coming into the space over the past few years, what I would suggest is there's still a tremendous amount of growth and growth upside for all of us and as he mentioned, we continue to deliver that and the results that we see on the new business bookings side and so I think overall there is still runway, there's still plenty of space I think the part for us outside of.
And as you mentioned, we continue to deliver that, and the results that we see on the new business booking side. And so I think overall, there is still runway, there's still plenty of space. I think the part for us, outside of our incredible distribution organization, which has always been a competitive advantage, and how we go to market, that distribution is also anchored to our ability to upsell to the base. So you mentioned, you know, this ability to upgrade and how much it has upgraded.
Don: Our incredible distribution organization, which has always been a competitive advantage in how we go to market that distribution is also anchored to our ability to to the upsell to the base. So you mentioned this ability to upgrade and how much is upgraded and are we all the way there what I would suggest to you is where we're still at about 50%.
Don: As it relates to new business bookings coming from call. It new business net new business versus upgrades, which suggests to me that we still have a tremendous amount of opportunity even within our base and that's a lot of the focus that we have as an organization whether it's in the PEO getting smarter about which clients with an employer services.
Don: That we target to offer to the PEO or it's the work that we're doing on generative AI to try to get upsell and offering the right product to the right client at the right time and.
And, you know, are we all the way there? What I would suggest to you is we're still at about 50% of the market. The right product to the right client at the right time. And in my mind, bending the curve and continuing to focus on attach rates, whether that's at the point of sale or on the attach later, it's definitely an opportunity for us to continue to deliver bookings in a very broad market that still has a tremendous amount of opportunity for all of us.
Don: In my mind bending the curve and continuing to focus on attach rates, whether that's on the point of sale or on the attach.
Don: At a later time, it's definitely an opportunity for us to continue to to deliver bookings in a very broad market that still has a tremendous amount of opportunity for all of us, but Moreover, that where we continue to execute and deliver on that so I don't know Dan if you want to comment a little bit on international in terms of the opportunity there yes.
But moreover, where we continue to execute and deliver on that. So I don't know, Don, if you want to comment a little bit on international in terms of the opportunity there. Yeah, perhaps to add a little bit more color.
I think we're still very optimistic about growth opportunities beyond the US or the North American market. So, Mark, as we talked before, you know, we're on the ground in 40 plus countries outside of the US. We're present in multiple segments in those markets as well.
Dan: To add a little bit more color I think we're very still very optimistic about growth opportunities beyond.
Dan: The U S or the North American market. So Mark I think we've talked before we are on the ground in 40 plus countries outside of outside of the U S.
Dan: We're present in multiple segments in those markets as well.
Dan: Some great great things happening in Southeast Asia, where we're rolling out a single platform across.
Dan: Forgetting in India, but many countries surrounding India in the southeast Asian market.
Dan: We're excited we often talk about the fact that we pay over 1 billion people in India every payroll every pay day.
Dan: Price points are still a bit low.
Dan: But we expect those things to to work for us at work in our favor in the future. So I think still lots and lots of opportunity for ADP.
Dan: From a growth perspective, and certainly we don't worry about saturation being a limiter to our future.
Speaker Change: That's what I thought thanks for.
Speaker Change: I appreciate the complete answers.
Thanks for that. I appreciate the complete answer. Thank you. Our next question comes from Scott Wurtzel with Wolf Research. Your line is, Hey, good morning, and thanks for taking my questions.
Speaker Change: Thank you. Our next question comes from Scott <unk> with Wolfe Research. Your line is open.
I just wanted to go back to some of the early thoughts, Don, that you provided on fiscal 25 talking about the Gen AI investments. And I think you had mentioned that there could be some margin pressure associated with that. And just wanted to kind of clarify, were you talking about potentially leading margin to be down year over year? Or are there other offsets with general operating leverage and interest income that could potentially offset the margin pressure from those? Yeah, Scott, thanks for the question. I think it's still early.
Scott: Hey, good morning, and thanks for taking my questions I just wanted to go back to some of the early thoughts John that you provided on fiscal 'twenty five and talking about the Gen. II investments. So I think you had mentioned that there could be some margin pressure associated with that and just wanted to kind of clarify where you're talking about essentially leading margins.
Scott: On year over year or are there other offsets with general operating leverage and interest income that could potentially offset the margin pressure from those investments. Thanks.
I think the intent here was to give some very early guidance on what 25 could look like. So, you know, we still expect to see some improvements in margins. It's just, you know, do we expect to see as much of an improvement given some of the Gen AI pressures and expense pressures that we may see? Of course, CFI, at this point in time, depending on what the yield curve does, once again, things have changed a fair bit in the last 90 days. And if I were to, not that I have a crystal ball, but I don't think many folks right now are expecting anything to change from the interest rate perspective in the US before September.
John: Thanks for the question I think it's still early I think the intent here was to give some very early guidance on what 25 could look like so we still expect to see some improvements in margins. It just do we expect to see as much of an improvement given some of the journey high pressures expense pressures that we may see of course EFI at this point in time.
Scott: Depending what the yield curve does once again things have changed a fair bit in the last 90 days and if I was to not that I have a crystal ball, but I don't think many folks right now we're expecting anything to change from a rates perspective in the U S before September.
So I think we're going to get some some tailwinds from that. So we're not really trying to signal here, not signaling a decline in our margins; what we're signaling perhaps is perhaps a slower growth in the margins as we look into 25. Got it. Yeah, that's super helpful.
Scott: So I think we're going to get some tailwind from that so we're not really trying to signal here not signaling a decline in our margins what we're signaling perhaps as perhaps a slower growth in the margins as we look into 'twenty five.
And then just wanted to go on to the PEO segment and, you know, sort of going back to some of the verticals that we've talked about over the last year, like technology and professional services. Just wondering if you could kind of update us on some of the trends you've seen there with pay-per-control growth. I mean, even looking at the employment report that you guys released this morning, it looks like professional services are stabilizing and increasing, but technology information kind of seems a little bit choppy.
Speaker Change: Got it got it that's Super helpful. And then just wanted to go onto the PEO segment sort of going back to some of the verticals that we've talked about over the last year in technology and professional services. Just wondering if you can kind of update us on some of the trends you're seeing there with pays per control growth I mean, even looking at the employment report that you guys released this morning, it looks like professional services.
Scott: As is stabilizing and increasing both technology information kind of seems a little bit choppy. So I was wondering if you can kind of talk about trends in the PEO with respect to those verticals.
So just wondering if you can kind of talk about trends in the PEO with respect. Sure. So if I, you know, Maria talked a little bit about bookings, I think, so we've been, you know, we were happy with our bookings. They softened a little bit in Q3, but we had a very, very strong Q2 on PO bookings.
Speaker Change: Sure. So if I were you talked to talked a little bit of our bookings I think so we've been we were happy with our bookings they softened a little bit in Q3, but we had a very very strong Q2 on PEO bookings, we can move on to the PPC growth.
Speaker Change: Back in Q1, it decelerated, a little bit more than we anticipated and a significant amount of that.
Scott: <unk> was attributed to the technology and professional sector the services sector.
We can move on kind of to PPC growth. You know, back in Q1, it decelerated a little bit more than we anticipated, and a significant amount of that deceleration was attributed to the technology and professional services sectors. And in Q2, that stabilized. So that was good for us. While there are still some headwinds in PPC, including from the technology and service sectors, there were no surprises in Q3.
Scott: And in Q2 that stabilized so that was that was good for us.
Scott: While there is still some headwinds in PPC, including from technology and service sectors.
Scott: There were no surprises in Q3, so it's important to note that worksite employee growth accelerated about 1% over Q2, despite the modest incremental pressure, we have from PPC pressure and so and that of course is a function of the year to date bookings success that we've had so nothing really to call out.
So it's important to note that worksite employee growth accelerated about 1% over Q2, despite the modest incremental pressure we had from PPC pressure. And so, and that, of course, is a function of the year-to-day booking success that we've had. So nothing really to call out.
More stability, if you will, in PPC pressure than we talked about previously. Great. Thanks, guys. Thank you. Our next question comes from Tianzhen Huang with J.P. Morgan. Your line is open. Good morning.
Scott: More stability, if you will in PPC pressure then.
Scott: And we've talked about previously.
Speaker Change #100: Great. Thanks, guys.
Speaker Change: Thank you. Our next question comes from Tien Tsin Huang with Jpmorgan. Your line is open.
Scott: Okay.
Thanks for going through all this. Anything on the pricing side worth sharing? Maria, I was just thinking about some of the peer commentary out there. Any call-outs or interesting observations? In terms of from a standpoint of our price or pricing in the market from a demand point of view? Yeah, your pricing as you're thinking about resetting prices as you go into the usual seasonal time changes, price changes, and any thoughts there. So but for new renewals, as well as new, new deal bids. Yeah, absolutely.
Speaker Change #101: Hey, Thanks, good morning.
Speaker Change: Thanks for going through all this.
Speaker Change #102: Particularly on the pricing side, we are sharing just thinking about some of the peer commentary out there any callouts or interesting observations.
Scott: Okay.
Scott: In terms of.
Scott: From a standpoint of our price or pricing in the market from your pricing your pricing or as Youre thinking about resetting prices as you go into the usual.
Scott: Seasonal time changes price changes.
Scott: And any thoughts there, so but for new renewals as well as new new deal bids.
So I think, you know, my general sentiments, and then Don can give the kind of a little more direction, but my general sentiments around price remain that we're very thoughtful and very measured as it relates to how we think about price, whether that's on the new business side or it's on the renewal side, as you mentioned. And so for us, it's about understanding kind of by segment. So you heard my commentary in the prepared remarks, just how broad, deep, and diverse ADP is with respect to our client base. As you can imagine, we think about a down market price increase differently than perhaps an enterprise. Some of those are also long-term contracts that have indexes attached.
Speaker Change: Yeah, absolutely so I think.
Speaker Change: My General sentiments and then Don can give the kind of a little more directional but my general sentiments around price remain that we're very thoughtful and very measured as it relates to how we think about price whether that's on the new business side.
Don: Or it's on the on the renewable side as you mentioned and so for US it's about understanding kind of by segment. So you heard US you heard my commentary in the prepared remarks, just a broad and deep and diverse ADP is with respect to our client base. As you can imagine we think about a down market price increase differently than perhaps an enterprise. Some of those are also long.
And so all of that lends itself to a very surgical approach, right, to ensure that the price-value equation remains the right one for the market and for our clients. And obviously, at the same time, what we're doing is also monitoring what's happening in the HCM space with respect to the peer group and pricing overall. And I would say, from a competitive lens, you know, we haven't seen anything unusual as it relates to price from us or the others, even though it continues to be a highly competitive environment. And so, as such, our approach this year to price, which I'll let Don comment on, has been very thoughtful. And I would expect us to take that same measured approach as we have into 2015.
Don: Term contracts that have index is attached and so all of that lends itself to a very surgical approach to ensure that the price value equation remains the right one for the market and for our clients and obviously at the same time, what we're doing is also monitoring what's happening in the HCM space with respect to the.
Don: Pier group in pricing overall, and I would say from a competitive lens, we haven't seen anything unusual as it relates to price from us or the others, even though it continues to be a highly competitive environment and so as such our approach this year to price, which I'll, let Don comment on has been very thoughtful on that.
Don: I'd expect us to have to take that same measured approach as we head into 'twenty five.
Yeah, so, you know, pricing, the price increase this year was relatively well received. You know, we were in the 100-150 basis point range, but we're closer to 150.
Don: Yes, so pricing the price increase this year was relatively well received we were in the.
Don: We're in the 100 150 basis point range, we're closer to the $1 50.
Don: So happy with where we're at.
So happy with where we are. You know, back to Maria's comments, we're in the middle of our planning cycle right now, and we'll look very carefully at that whole value equation, making sure that we keep our retention high. Our NPS is supporting that, and we'll make sure that we're mindful and thoughtful about what we do with pricing going forward. I'm sure you will be thoughtful about it. Thank you for that. Just on the GMAI front end.
Don: Back to Maria's comments, we're in the middle of our planning cycle right now and we will look very carefully at that whole value equation, making sure that we keep our retention up.
Don: NPS is supporting that.
Don: We will make sure that we are mindful and thoughtful about what we do with pricing going forward.
Speaker Change #103: I'm sure it'd be thoughtful about it. Thank you for that just on the G&A front.
I respect the investments there. I'm curious if you were to, Transcripts provided by Transcription Outsourcing, LLC. Both. The answer is both.
Speaker Change #104: I respect the investments there I'm curious if you were to.
Speaker Change #104: Classified as either driving expense efficiency versus driving better sales efficiency. What are you really aiming for with some of these investments here.
Don: Fiscal 'twenty five.
So I think it's really about solving for, again, all of the users that interact with ADP, right? So if you think about all the personas, our clients, our clients' employees, and our service agents, our sellers, it's really about putting Gen AI in every part of our ecosystem. So in terms of what are we solving for, the answer is both.
Speaker Change #105: Both the answer is both.
Speaker Change: So I think it's really it's really about solving for again all of the users that interact with ADP right. So if you think about all the persona our clients our clients employees and.
Speaker Change: Our service agents, our sellers, it's really about putting gen AI in each and every part of our ecosystem.
Speaker Change: So in terms of what are we solving for the answer is both we're trying to drive.
We're trying to drive greater service efficiency. I think we've proven that through digital transformation and taking friction out of our products and making those investments, we have the ability to drive up our NPS results, and record client satisfaction tends to lead to similar record retention. So definitely working on ensuring that we're driving up retention. Obviously, the more happy clients we have, the easier it is for our sellers.
Speaker Change: Later service efficiency I think we've proven out that through digital transformation and taking friction out of our products and making those investments we have the ability to drive up our NPS results and <unk>.
Speaker Change: Record client satisfaction tends to lead to similar record retention.
Speaker Change: So definitely working on.
Speaker Change: Ensuring that we're driving up retention, obviously, the more happy clients, we have the easier. It is for our sellers were also investing in degenerative AI for our sellers to become more productive. So it is about service productivity. It's about seller productivity. It's about client experience client experience lends itself to retention. So I guess, it's just one happy virtuous cycle, but I think our answer.
We're also investing in generative AI for our sellers to become more productive. So it is about service productivity. It's about seller productivity. It's about client experience. Customer experience lends itself to retention. So I guess it's just one happy virtuous cycle.
But I think our answer, my answer is, both, and all of it is what we hope to gain. Now, again, kind of back to the investments we're making and what Don alluded to, in terms of any pressure we would have with respect to margin on those investments. You know, some of these investments are the right thing for ADP, but they will take time to ultimately garner all of the results in all of these categories that I just mentioned.
Speaker Change: My answer is both and all of it is what we hope to gain.
Speaker Change: Now again kind of back to the investments, we're making and what Don alluded to in terms of any pressure, we would have with respect to margin on those investments.
Speaker Change: Of these investments we know they are the right thing for ADP, but they will take time to ultimately garner all of the results in all of these categories that I just mentioned and so as it stands today, we have some really exciting things that we're seeing if you think about something like call summarization that I've spoken about in the past and we're shaving off roughly a minute per call.
And so as it stands today, we have some really, you know, exciting things that we're seeing. If you think about something like call summarization, which I've spoken about in the past, and we're shaving off, you know, roughly a minute per call, that doesn't probably sound that exciting. But you think about a minute per call over time, and you think about how many calls we take broadly across ADP in a given year, you know, the math lends itself to tremendous efficiency over time, and again, hopefully, a better experience, right? So I think the answer is all of it. We're solving for all of it. Okay.
Speaker Change: That doesn't probably sound that exciting, but do you think about a minute per call over time, and you think about how many calls we take broadly across ADP in a given year the math the math lends itself to overtime tremendous efficiency and again, hopefully a better experience right. So I think the answer is all of it we're solving for all of it.
Speaker Change #107: Understood. Thank you.
Our next question comes from James Faucette with Morgan Stanley. Your line is, Hi, everyone. It's Michael in Fontana for James. Thanks for taking our question. Just one for me today.
Speaker Change: Thank you. Our next question comes from James Fawcett with Morgan Stanley. Your line is open.
You mentioned coming in at the higher end of the range on ES for the full year, which makes sense, given some of your commentary on booking strength, better retention, and pay-per-control improvement in the float benefit that we're seeing. But given all of those factors, it looks like ES in the quarter came broadly in line with our expectations, despite all of those tailwinds. So I'm curious, given your commentary about price coming in towards the higher end of your historical range, what does that imply, just in terms of what you're seeing on the net new side, as well as cross-sell and up-sell? Thanks.
Speaker Change: Hi, Ron it's Micron Fontana for James Thanks for taking our question just one from me today.
Micron Fontana: You mentioned coming in at the higher end of the range on Es for the full year, which makes sense given some of your commentary on bookings strength better retention pays per control improvement in the flow benefit that we're seeing but given all of those factors. It looks like es in the quarter came broadly in line with our expectations. Despite all of those tailwind.
Speaker Change: I'm curious given your commentary about price coming in towards the higher end of your historical range. What does that imply just in terms of what youre seeing on the net new side as well as cross sell and up sell.
Yeah, Michael, thanks for the question. I think that, first of all, the price, there's no change in that. I think we've been calling that out for most of the year, certainly in the one to 150 range. So not much of an incremental impact, if you will, for Q4 and, therefore, for the year in total. So not a lot of change from that.
Speaker Change: Yes, Michael Thanks for the question I think that.
Speaker Change #109: First of all the price there is no change in that I think we've been.
Yeah, I mean, you know, bookings, we called out, you know, we're still in the hunt for delivering on the range, as we declared, so we're still in that. So, not really a lot to drive incremental revenue other than, you know, some of the float, but as the year shortens, or we have fewer months or days left in the year, the impact from higher CFI is going to be somewhat muted, as we saw when we said, Hey, Michael, it's Danny. If you're wondering whether there is some offset somewhere else, there is a little bit from FX moving adversely relative to our prior expectations. I got it.
Michael: Calling that out for most of the year certainly in the one to $1 50 range. So not much of an incremental impact if you will for for Q4, and therefore for the for the year in total so.
Speaker Change: Not a lot of change from that.
Speaker Change: Yes, I mean bookings, we called out we're still in the hunt for the for delivering on the range.
Speaker Change: As we declared so we're still in that so but.
Speaker Change: Not really a lot to drive incremental revenue other than some of the float but as the year shortens our rehab fewer months days left in the year the impact from higher <unk> is going to be somewhat muted as we we look to finish the year Hey, Michael its Danny if you're wondering whether there is some offset somewhere else theres a little bit.
Danny: FX moving adversely relative to our prior expectations.
Speaker Change #110: Got it thank you both.
Danny: Thank you. Our next question comes from Pete Christiansen with Citi. Your line is open.
Thank you both. Thank you. Our next question comes from Pete in City.
Your line is open. Good morning. Thank you for the question. Maria and Don, you give a great explanation of the wallet share, left earlier, PEO, propensity modeling with Gen AI, and then international. I want to dig into the international side, particularly some of the newer markets that you're getting into. I'm just hoping if you can give us a bit of a progress report on a lot of the last mile infrastructure that you've been putting in place, ramping that up.
Peter Corwin Christiansen: Good morning. Thank you for the question. Tom You gave great explanation of the wallet share opportunity that still left earlier PEO propensity modeling with NII and then international I wanted to dig into the international side, a little bit, particularly some of the newer markets that you are getting into I was just hoping if you can give us a bit of a progress.
And I'm just curious, should we think of the deployment of PI, the next-gen payroll engine, and international as a real catalyst for the next leg of bookings growth? Thank you. Yeah, thanks, Pete. I think that was a solid like three, four questions in one.
Peter Corwin Christiansen: As reported on a lot of the last mile infrastructure and that that you've been putting in place go to market ramping that up and I'm. Just curious should we think of like the deployment of pie. The next Gen payroll engine in international is a real catalyst for the next leg of bookings growth. Thank you I appreciate it.
So I will, I'll do my best to weave through it here. But, As Don mentioned, we're on the ground in 40 countries. We do payroll across 140 countries, inclusive of our partner network. In terms of the final mile, or the last mile, as you referenced, the first thing I would comment on is we've been building that for 50 years, right? So when I think about international travel and everything we've done over the course of decades to build that infrastructure, it's a tremendous lead, is what I would suggest. And you see that in our international booking results, right? So we had Q4, but also next year.
Speaker Change #111: Yes, Thanks, Pete I think that was a solid like three four questions in one sorry.
Speaker Change #106: Do my best to wait through it here, but.
Speaker Change #106: As Don mentioned, we're on the ground in 40 countries, we do payroll across 140 countries inclusive of our partner network.
Speaker Change #106: The final mile or the last mile as you referenced the first thing I would comment on is we've been building that for 50 years right. So when I think about international and everything we've done over the course of decades to build that infrastructure, it's a tremendous.
Speaker Change #106: Lead is what I would suggest and you see that in our international bookings results right. So we had.
Speaker Change #106: A nice first quarter and international we accelerated that in the second quarter, we had an even better Q3, a lot of that is being driven by our multinational growth. So think about our celerity offering our global view offering these were especially strong for us in the third quarter and I do believe it's the overall demand environment coupled with our.
Speaker Change #106: On the ground strategy. If you will if you will and and by the way the international pipelines remain healthy and we believe it's going to position us for a solid Q4, but also next year in terms of where we continue to expand.
In terms of, you know, where we continue to expand, I mentioned in my prepared remarks that Asia PAC or APAC is something that, you know, our Asia business has been relatively modest, but we see significant growth over time. Obviously, that growth is a direct byproduct of our clients' demand growth as it relates to the activities of our clients and where they're moving associates and where they're moving business. So we believe that continuing to lean into Asia PAC is important for us.
Speaker Change #106: Mentioned it in my prepared remarks.
Speaker Change #106: Yeah.
Speaker Change #106: Asia Pac or APAC something that.
Speaker Change #106: Our Asia business has been relatively.
Speaker Change #106: Modest, but we see significant growth over time, obviously that growth is a direct byproduct of our clients' demand growth as it relates to the activities of our clients and where theyre moving associates and where they're moving business. So.
Speaker Change #106: So we believe that continuing to ethylene into Asia Pac is important for us.
Speaker Change #106: And so as a result of that.
And so as a result of that, you know, we are kind of continuing to lean in there. I think we mentioned last quarter the acquisition of a company in the Nordics, specifically in Sweden. So that's an area that is also a high growth area from a client perspective. And so I think, you know, our strategy over time has been, as we get further into a country and we see the demand, you know, at times, we will fold in our partners, and you've seen that, obviously, in the Nordics, and you've seen that in many countries prior to that. But that ecosystem is vast across 140 countries.
Speaker Change #106: Kind of are continuing to lean in there I think we mentioned last quarter the acquisition of a company on the Nordics specifically in Sweden. So that's an area that also has a high growth area from a client perspective, and so I think our strategy over time has been as we get further.
Speaker Change #106: Into a country and we see the demand at times, we will fold into our partners and you've seen that obviously in the nordics and you've seen that in many countries prior to that but that ecosystem is vast across 140 countries. It's a decades of building that final mile. If a clear competitive differentiator in the market you can feel.
It's decades of building that final mile. It's a clear competitive differentiator in the market. You can feel, see, and it's really palpable.
Speaker Change #106: <unk> C and it's really palpable on the heels of the last earnings call I was actually over at our rethink event, which is where we bring together a.
Speaker Change #106: A few hundred of our very largest global MMC clients and the spirit of how we're executing in that market is really palpable. When you hear it directly from our clients and I believe it's a tremendous opportunity for us to continue to.
On the heels of the last earnings call, I was actually over at our Rethink event, which is where we bring together a few hundred of our very largest global MNC clients. And the spirit of how we're executing in that market is really palpable when you hear it directly from our clients. And I believe it's a tremendous opportunity for us to continue to drive growth. So I think I covered all of that, Pete.
Speaker Change #106: Drive growth, so I think I covered all of that Pete.
Thank you, Maria. Just a quick follow-up. Do you think that the deployment of next-gen payroll is a catalyst for go-to-market and some of those new... Yes, of course.
Peter Corwin Christiansen: Thank you Brad.
Speaker Change #116: Follow up do you think that will.
Peter Corwin Christiansen: The deployment of next Gen payroll as a catalyst for go to market and some of those newer markets.
So Next Gen Payroll, for sure, our intent is to continue to drive Next Gen Payroll across various international markets. We have it deployed in a few of our markets today. And that coupled with these offers, which again have the lead of Salergo and Global View, over time, we'll just further the growth narrative and the story over there. But that is absolutely the intention and the strategic direction of Next Gen Payroll. Thank you for the comprehensive question. Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open. Hi, this is David Page on Ashish.
Peter Corwin Christiansen: Yes of course, so next gen payroll for sure our intent is to continue.
Brad: To drive our next gen payroll across various international markets. So we have it deployed and a few of our markets today.
Brad: And that coupled with these offers that again have the lead up flare going global view over time will just further the growth narrative in the story over there, but that is absolutely the intention and the strategic direction of next Gen payroll.
Speaker Change #112: Thank you for the comprehensive color.
Speaker Change #112: Thank you. Our next question comes from Ashish <unk> with RBC capital markets. Your line is open.
Speaker Change #112: Hi, This is David page on for Ashish.
It was great to hear about your results and growth in the mid-market vertical. I was wondering if you could just give a little bit of an overview of the competitive landscape there. Are you guys taking share or the entire market? Absolutely. So the mid market, you know, is a great, great segment for us. It's certainly not getting any easier to be an employer in the mid market.
Speaker Change #112: <unk>.
David: It was great to hear about your results and growth.
David: Mid market.
David: I was wondering if you could just give a little bit of an overview on the competitive landscape. There are you guys taking share or require market cargo.
Speaker Change #117: Whats the outlook or the environment in terms of competition within the market. Thank you yeah, absolutely so the mid market.
It's littered with complexity and all sorts of challenges to navigate. Just, you know, even if you look at the last 30 days, you can see legislation that mid-market employers are having to navigate. And so it's a strong market. It is a highly competitive space. That's not new.
Speaker Change #118: Great great.
Speaker Change #113: Segment for us.
David: Really not getting any easier to be an employer on the mid market. It is littered with complexity and all sorts of challenges to navigate just even if you look at the last 30 days you can see legislation that mid market employers are having to to navigate and so it's a it's a strong market. It is a highly competitive space that's not new.
I think, from a competitive landscape perspective, it's always been competitive, and I don't know that we've seen noticeable changes in the competitive landscape. What we have seen is incredible distribution, execution, incredible satisfaction, execution on our end; we've made great investments in the product set, it's winning in the market. You marry that strategy with great execution on the seller side and great execution on the retention side. That, to me, is what's changing in the mid market is that we've gotten stronger. Great, thank you, Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open. Hi, this is Caroline Latta. I'm for Jason.
David: I think for from a competitive landscape perspective, it's always been competitive and I don't know that we've seen noticeable changes in the competitive landscape. What we have seen is incredible distribution execution incredible satisfaction execution on our end we've made great investments into the product set it's winning in the market.
David: Marry that strategy with great execution on the seller side and great execution on the retention side that to me is what's changing in the in the mid market is that we've gotten stronger.
David: Okay.
Speaker Change #119: Great. Thank you.
Speaker Change #119: Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open.
Speaker Change #119: Hi. This is Caroline later on for Jason Thanks for taking our question sorry to double down on price, but just given the way inflation isn't dropping off maybe the way the market was hoping or expecting recently do you have any updated expectations about ADP and like the broader peer group's ability to raise pricing heading into the fourth quarter.
Thanks for taking our question. Sorry to double down on price, but just given the way inflation isn't dropping off, maybe the way the market was hoping or expecting recently, do you have any updated expectations about ADP and the broader peer groups' ability to raise pricing heading into the fourth quarter and 2025 without like significant pushback? Hi Carolyn.
David: <unk> and 2025 without like significant pushback.
Thanks. Thanks for the question. You know, I think it just comes and continues to come back to the same concepts.
Speaker Change #120: Hi, Carolyn thanks, Thanks for the question.
Speaker Change #114: It just continues to come back to the same concepts and that's making sure that we offer good value to our customers over a 10 plus year lifespan. So we're always mindful of making sure that clients are getting good value.
And that's making sure that we offer good value to our customers over a 10 plus year lifespan. So we're always mindful of making sure that clients are getting good value and that we keep those clients for a very, very long time. So it's that client life cycle, the total return on the entire life of a client.
Speaker Change #114: We keep those clients for a very very long time, so it's that client lifecycle of the total return on the.
So we're always very, very careful not to overstep on pricing. Having said that, we, of course, watch what the competition is doing; we have our ears to the ground, our salespeople have their ears to the ground. We're trying to make sure and understand what's happening with the competition. So we will continue to look at it, we'll continue to bounce ideas off some ideas and some models, and see what the impact could be.
Speaker Change #114: The entire life of our clients. So we're always very very careful not to overstep on pricing, having said that we of course watch what the competition is doing we have our ear to the ground our salespeople have the ear to the ground and we're trying to make sure and understand what's happening from the competition. So we will continue to look at it we will continue to knock around some.
Speaker Change #114: Some ideas and some models and see what the impact could be but.
Speaker Change #114: I don't want to I don't want to signal signal exactly where I think we're doing because we're still as I said earlier in the midst of our planning cycle here, but we.
But I don't want to give away exactly what I think we're doing because, as I said earlier, we're still, as I said earlier, in the midst of our planning cycle here, but we always look at it. We take prices, usually every year, where we can, not including some of the contractual commitments we have some of our larger clients, but just something we're very, very careful and cautious about.
Speaker Change #114: We always looked at it.
Speaker Change #114: We take price usually every year, where we can.
Speaker Change #114: <unk> some of the contractual commitments, we have some of our larger clients, but just something we're very very careful and cautious about doing.
Awesome. Thank you. That adds a lot of color.
Speaker Change #121: Awesome. Thank you that's all the color.
And our last question comes from Kartik Mehta with North Coast Research. Your line is open. Good morning, Maria. As you look at the mid market and the success ADP is having, who are you winning marketshare from? Is it traditional payroll companies? Is it companies that are maybe using other software products that you wouldn't consider payroll companies?
Speaker Change #121: Thank you and our last question comes from Kartik Mehta with Northcoast Research. Your line is open.
I'm just wondering where the success is coming from everywhere. I candidly listen, from a mid market perspective, again, the demand is, is healthy, and the competitive environment is competitive. And we continue to remain laser focused on all of the competitors, specifically, you know, the ones that have been talking a lot about us over the last few years. And I think the way that we've been focused is really about the investments we've made, investments into a best-in-class product, investments into focus on distribution, and into a digital transformation that's driving great client satisfaction.
Kartik Mehta: Good morning.
Kartik Mehta: As you look at the mid market and the success ADP is having who who are you winning market share from traditional payroll companies and the companies that are you may be using other software products that you wouldn't consider payroll companies I'm just wondering.
Kartik Mehta: Where the success is coming from.
Kartik Mehta: Everywhere.
Speaker Change #123: Candidly less.
Speaker Change #123: From a mid market perspective.
Speaker Change #123: The demand is as healthy or the competitive environment is competitive and we continue to remain laser focused on all of the competitors specifically the ones that have been talking a lot about us over the last few years and I think the way that we've been focused is really about the investments we've made investments into a best in class Prada.
Kartik Mehta: <unk> investments into focus on distribution investments into a into a digital transformation, that's driving great client satisfaction and so that that really has allowed us to out to have a winning story as it relates to our really all of the players.
And so that really has allowed us to have a winning story as it relates to really all of the players. And then just one follow-up on the PEO business: you know, as you look at the long-term growth perspective of that business, obviously, there's been a couple things that have happened that maybe have slowed the growth down in the last year or so. I'm wondering, you know, just your outlook on the PEO business and whether you think anything has changed in that business or demand for the product.
Kartik Mehta: And then just one follow up just on the PEO business in Europe as you look at the long term growth perspective of that business, obviously theres been a.
Kartik Mehta: Couple of things that have happened that maybe have slowed the growth down in the last year or so I'm wondering just your outlook on the PEO business and if you think anything has changed.
Kartik Mehta: That business or demand for the product.
Yeah, so I'm happy to start and, you know, certainly happy to have Don chime in too on the PEO. I'm always very, very bullish on the PEO value proposition. I've been close to that business for a long time, and I will tell you, it's stronger than it ever was. So despite the strangeness that we've had in the PEO, from a kind of the component tree, heading into the pandemic, during the pandemic, after the pandemic, and then, you know, now call it a little bit post-pandemic, what I would suggest to you is it has nothing to do with the fundamentals of that business and what we would expect over time from a growth perspective, long term.
Speaker Change #125: Yes, I'm happy to start and certainly happy to have Don chime into on the PEO.
Don: I'm always very very bullish on the PEO value proposition I I've been close to that business for a long time and I will tell you it's stronger than it's ever been so despite the strangeness that we've had in the PEO from.
Don: From a kind of the componentry.
Don: Heading into the pandemic during the pandemic after the pandemic and then now call it call. It a little bit post post pandemic, what I would suggest to you is it has nothing to do with the fundamentals of that business and what we would expect over time from a growth perspective long term and so the value proposition is strong.
And so the value proposition is strong. Nothing, you know, from our end, has changed there as it relates to the overall demand from the business. And we see that just in the, you know, we continue to have 50% of our clients in the PEO coming from the base.
Don: From our end has changed there as it relates to the overall demand from the business and we see that just in the we continue to have 50% of our clients into the PEO coming from the base. So it's resonating with our existing clients and it's resonating with the open market and it continues to be a very strong offering.
So it's responding with our existing clients, it's responding with the open market, and it continues to be a very strong offering for us. So I don't know, Don, if you wanted to add anything there. Nothing, nothing to add other than the value propositions as strong as ever in the fundamentals. Thank you very much. I really appreciate it. Thank you. We have one more question from Dan Dole with Mizuho. Your line is open.
Don: For Us I don't know Don if you wanted to add anything there is nothing nothing to add.
Don: The value proposition is as strong as ever and the fundamentals of the business are continuing to be quite strong.
Speaker Change #126: Thank you very much I really appreciate it.
Don: Thank you we have one more question from Dan <unk> with Mizuho. Your line is open.
Don: Okay.
Hey, guys, thank you for taking my question. And sorry, I was on a different call. But I know it's kind of maybe early, but do you have any views about, um, you know, the next year, your next fiscal year, maybe something like early views, as we head into the fourth quarter? Thank you. Yeah, Dan, just a couple of things. Thinking about next year, we do think that it's early, so we didn't share too much.
Dan: Hey, guys. Thank you for taking my question.
Dan: Apologies I was on a different call but.
Dan: Kind of maybe early but do you have any views about.
Dan:
Don: Your next fiscal year, maybe sounds like early view.
Don: As we head into the fourth quarter. Thank you.
Don: Okay.
Although, you know, we did say that pay-as-per-control will continue to be under a little bit of pressure given the fullness of the labor market. So that's a kind of ongoing story that we've been telling. We will continue some of our Gen-AI spending and related spending, making the right investments for ADP. And, of course, we're going to get some tailwind from interest rates. So I think those are the three primary things. And, of course, we always remain very, very focused on bookings and our strong client retention and client experience. So I think those would be the highlights for 2025.
Don: Yes, Dan just just a couple of things.
Don: Thinking about thinking about next year.
Dan: We do think that its early so we didn't hear too much although we did say that.
Don: Our pays per control, we will continue to be under a little bit of pressure given the fullness of the labor market. So.
Don: That's kind of continuing story that we've been telling we will continue some virgin AI spending related spending making the right investments for ADP.
Don: And of course, we're going to get some tailwind from interest rates.
Don: So I think those are the three three.
Don: Three primary things and of course, we always remain very very focused on bookings and our strong client retention and client experience. So I think those would be the the highlights for 425.
Don: Okay.
Okay, I appreciate it. And again, apologies again if this was already addressed; I was on a different call. Thank you. There are no further questions. I'd like to turn the call back over to Maria Black for any closing remarks. Yeah, thank you.
Speaker Change #124: Okay I appreciate it and apologies again, if this was already addressed.
Speaker Change #122: On a different call I appreciate it.
Speaker Change #122: Thank you there are no further questions I'd like to turn the call back over to Maria Black for any closing remarks.
And thank you once again to everyone who joined us today. Whether full time or late, we always appreciate the questions and the interest. And we certainly look forward to speaking with all of you again soon. And look forward to the close of the year. Thanks. This does conclude the program, and you may now disconnect. Everyone have a great day.
Maria Black: Yes. Thank you and thank you once again to everyone, who joined US today, whether the full time or late we always appreciate the questions. The interest and we certainly look forward to speaking with all of you again soon and look forward to the close of the year. Thanks.
Speaker Change #127: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.