Q1 2026 Automatic Data Processing Inc Earnings Call

We'll conduct a question and answer session and instructions will be given at that time.

I'll now turn the conference over to Matt Keating, Vice President Investor Relations. Please go ahead.

Thank you Michelle and welcome everyone to Adp's first quarter fiscal 2026 earnings call participating today are Maria Black, our president and CEO and Peter Hadley, Our CFO earlier. This morning, we released our financial results for the quarter. Our earnings materials are available on the Sec's website, and our Investor relations website at investors.

<unk> Dot ADP dot com, where you'll also find the investor presentation that accompanies today's call during our call. We will reference non-GAAP financial measures, which we believe to be useful to investors and that exclude the impact of certain items. A description of these items along with a reconciliation of non-GAAP measures to their most comparable GAAP measures 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.

Thank you, Matt and thank you everyone for joining us. This morning, we reported solid first quarter results that included 7% revenue growth and 7% adjusted EPS growth. We achieved these financial results, while also making meaningful progress across our strategic priorities.

I will briefly review some additional highlights from our results before discussing our strategic progress.

We delivered solid employer services, new business bookings with growth accelerating from our fourth quarter last year, resulting in a record sales volumes for our first quarter growth was healthy in our small business portfolio, which includes our retirement and insurance services businesses. We were also happy to see growth reaccelerate in our employer.

He says HR outsourcing business after a softer finish to last year.

Overall, HCM demand remained relatively stable and we experienced specific strength in ADP lyric HCM.

Our employer services retention rate continued to exceed our expectations and only declined slightly our overall client satisfaction score reached a new all time high for a first quarter, reflecting improvements in each of our business units.

Employer services pays per control growth continued to moderate and rounded down to zero percent for the first quarter with clients remaining cautious around adding head count in the current environment.

And last our PEO revenue growth of 7% exceeded our expectations helped by growth in zero margin pass throughs and higher wages.

We are proud of our first quarter financial results and excited by the progress made across our three strategic business priorities.

I will start with what we are doing to lead with best in class HCM technology.

And the small business space, we continue to scale, our embedded payroll solution.

Embedded payroll saves small business owners time by bringing payroll directly into the software platforms. They are already using to run their businesses we.

We are pleased with our early embedded payroll sales collaboration and look forward to adding more partners over time to further extend the reach of our small business distribution network.

We also continue to add functionality to our existing small business offerings.

For example earlier this month, we launched our benefits recommendation tool designed to help guide small business clients on the most suitable benefits options.

Today. These recommendations cover group health and individual coverage health reimbursement arrangements or aircraft and they will expand in the future to include our PEO.

Our insurance services business also recently launched a digital option that enables small businesses to purchase aircraft plans directly on our run platform through our partner <unk>. This opens up more choice for employees by allowing every team member to pick the plan that is right for them health dental vision all in one place.

In the mid market, we accelerated the deployment of workforce now Nexgen, we reached an important milestone in the first quarter with more than 80% of our new mid market clients in the 50 to 150 employee space were sold on this next Gen version of workforce now.

Moving forward, we will continue to extend the solution to larger mid market prospects to enable them to also benefit from its modern tech stack and enhanced functionality.

In the enterprise space ADP lyric HCM continues to experience strong momentum lyrics.

<unk>, new business bookings exceeded our expectations for the first quarter and its new business pipeline continues to grow.

Among the many enterprise clients that started on lyric during the first quarter was the large travel management company.

Maria Black: Payroll solution. Embedded payroll saves small business owners time by bringing payroll directly into the software platforms they are already using to run their businesses. We are pleased with our early embedded payroll sales collaboration and look forward to adding more partners over time to further extend the reach of our small business distribution network. We also continue to add functionality to our existing small-business offerings. For example, earlier this month, we launched a benefits recommendation tool designed to help guide small business clients on the most suitable benefits options. Today, these recommendations cover group health and individual coverage health reimbursement arrangement, or ICRA, and they will expand in the future to include our PEO. Our insurance services business also recently launched a digital option that enables small businesses to purchase ICRA plans directly on our RUN platform through our partner, Fiserv.

This client selected lyric reports AI, driven automation and flexible architecture. They are using ADP for payroll HR time benefits and talent in both the U S and Canada.

Highlighting it as a positive reception in the market lyric was recently recognized by HR executive as a top HR product of 2025 and honored at the HR Tech Conference in September.

With respect to our workforce software acquisition, we continue to make meaningful progress.

By unifying workforce management, and HR and payroll, we help our clients to gain better visibility simplify their operations and lower overall costs our.

For example, earlier this month, we launched a benefits recommendation tool designed to help guide small business clients on the most suitable benefits options.

Our differentiated approach helped us win the time and attendance business I'm in existing payroll client in the student transportation business with thousands of employees.

Today, these recommendations cover Group Health, and individual coverage Health reimbursement, Arrangement or icra and they will expand in the future to include our peo.

And just this morning, we announced the acquisition of equity and innovative compensation management software provider. This.

Maria Black: This opens up more choice for employees by allowing every team member to pick the plan that is right for them, health, dental, vision, all in one place. In the mid-market, we accelerated the deployment of Workforce Now NextGen. We reached an important milestone in the first quarter when more than 80% of our new mid-market clients in the 50 to 150 employee space were sold on this NextGen version of Workforce Now. Moving forward, we will continue to extend this solution to larger mid-market prospects to enable them to also benefit from its modern tech stack and enhanced functionality. In the enterprise space, ADP Lyric HCM continues to experience strong momentum. Lyric's new business bookings exceeded our expectations for the first quarter, and its new business pipeline continues to grow. Among the many enterprise clients that started on Lyric during the first quarter was a large travel management company.

This acquisition will broaden adp's capabilities to support the complex compensation planning needs of our clients, who are looking for insight driven compensation solutions that help them make informed pay decisions.

Our insurance services business. Also recently launched a digital option that enables small businesses to purchase icra. Plans directly on our run platform through our partner. Thatch this opens up, more choice for employees by allowing every team member to pick the plan. That is right for them. Health dental vision all-in-1 place,

Underscoring our commitment to leading with best in class HCM technology. We also continue to advance our AI initiatives.

We deliver purpose built AI to solve real world problems for HR teams.

In the mid-market, we accelerated the deployment of Workforce. Now, NextGen we reached an important milestone in the first quarter when more than 80% of our new mid-market clients in the 50 to 150 employee space were sold on this NextGen version of Workforce Now,

Our latest enhancements to ADP assessed use the power of generative AI to analyze and resolve things like payroll anomalies by automatically identifying inconsistency or deviations in the data analytics requests that can take days to fulfill and routine compliance tasks, which pulled teams away from strategic work.

Moving forward, we will continue to extend the solution to larger, mid-market prospects, to enable them to also benefit from its modern tech stack, and enhanced functionality.

In the Enterprise space ADP lyric HCM continues to experience strong momentum.

Utilization of ADP assessed is also increasing with more than $5 5 million client conversations over the last year. This helps reduce the need for clients to contact us as our questions are answered proactively within our products.

Lyrics, new business, bookings. Exceeded our expectations, for the first quarter in its new business pipeline continues to grow.

Maria Black: This client selected Lyric for its AI-driven automation and flexible architecture. They are using ADP for payroll, HR, time, benefits, and talent in both the U.S. and Canada. Highlighting its positive reception in the market, Lyric was recently recognized by HR Executive as a top HR product of 2025 and honored at the HR Tech Conference in September. With respect to our WorkForce Software acquisition, we continue to make meaningful progress. By unifying workforce management, HR, and payroll, we help our clients to gain better visibility, simplify their operations, and lower overall costs. Our differentiated approach helped us win the time and attendance business of an existing payroll client in the student transportation business with thousands of employees. Just this morning, we announced the acquisition of Pequity, an innovative compensation management software provider.

Among the many Enterprise clients that started on lyric during the first quarter was a large travel management company.

As we look ahead, our vision for ADP assist includes simple agents to handle everyday tasks advanced agents to execute multi step processes autonomous agents to go further managing workflows from start to finish being sure to keep humans in the loop where it matters.

This client selected lyric for its AI driven Automation and flexible architecture. They are using ADP for payroll HR time benefits and talent in both the US and Canada.

Highlighting its positive reception in the market. Lyric was recently recognized by HR executive as a top HR product of 2025 and honored at the HR Tech Conference in September.

What makes our approach different from others is the scale of the data we use to power our agents and how we train them to work together.

With respect to our Workforce software acquisition, we continue to make meaningful progress.

Actions sets off the right follow ups for employees managers and HR practitioners. It isn't these connections where the real value is produced.

By unifying workforce management HR and payroll we help our clients to gain better, visibility simplify their operations, and lower overall costs.

We have an opportunity to use AI not just to speed up the client workflows, but rather fundamentally shift how work gets done.

Our differentiated approach helped us win the time and attendance business. I'm an existing payroll client in the student transportation business with thousands of employees.

It's the difference between using AI to do things better and faster than before and using AI to do things better and faster than anyone else.

Maria Black: This acquisition will broaden ADP's capabilities to support the complex compensation planning needs of our clients who are looking for insight-driven compensation solutions that help them make informed pay decisions. Underscoring our commitment to leading with best-in-class HCM technology, we also continue to advance our AI initiatives. We deliver purpose-built AI to solve real-world problems for HR teams. Our latest enhancements to ADP Assist use the power of generative AI to analyze and resolve things like payroll anomalies by automatically identifying inconsistencies or deviations in the data, analytics requests that can take days to fulfill, and routine compliance tasks which pull teams away from strategic work. Utilization of ADP Assist is also increasing with more than 5.5 million client conversations over the last year. This helps reduce the need for clients to contact us as their questions are answered proactively within our products.

In just this morning, we announced the acquisition of equity and Innovative compensation management software provider.

Our new AI capabilities empower our associates to deliver on our second strategic priority, providing clients with unmatched expertise and outsourcing solutions. These.

This acquisition will broaden adp's capabilities to support the complex compensation planning needs of our clients who are looking for insight driven, compensation solutions, that help them make informed pay decisions.

These internal AI tools provide our sales implementation and service teams with client specific insights to address market shifts resolve unique challenges and ultimately deepen client engagement.

Underscoring our commitment to Leading with best-in-class HSM technology. We also continue to advance our AI initiatives.

We deliver purpose-built AI to solve real world problems for HR teams.

Additionally, all of our developers are now equipped with coding co pilot tools that are leading to measurable productivity gains.

We also continue to expand our use of digital implementation for both small business and PEO clients.

These AI initiatives create additional time for our associates to engage and higher value added activities that support our clients' growth.

Our latest enhancements to adps assist use the power of generative AI to analyze and resolve things like payroll anomalies by automatically identifying inconsistencies or deviations in the data analytics requests that can take days to fulfill and routine compliance tasks, Which pull teams away from strategic work.

Finally, we continue to execute on our third strategic priority benefiting our clients with our global scale.

Utilization of ADP Assist is also increasing, with more than 5.5 million client conversations over the last year.

We bring value to our clients through our unmatched footprint in over 140 countries and continue to add to our global capabilities during.

Maria Black: As we look ahead, our vision for ADP Assist includes simple agents to handle everyday tasks, advanced agents to execute multi-step processes, autonomous agents to go further managing workflows from start to finish, being sure to keep humans in the loop where it matters. What makes our approach different from others is the scale of the data we use to power our agents and how we train them to work together. A single action sets off the right follow-ups for employees, managers, and HR practitioners. It is in these connections where the real value is produced. We have an opportunity to use AI not just to speed up the client workflows, but rather fundamentally shift how work gets done. It's the difference between using AI to do things better and faster than before and using AI to do things better and faster than anyone else.

This helps reduce the need for clients to contact us as our questions are answered proactively within our products.

During the first quarter. We also went live with our first global view client in Costa Rica, where we now serve one of the worlds largest employers.

Further underscoring the quality of our global products ADP was recently positioned as a leader in multi country payroll by Nelson Hall, and its payroll re imagine 2025, neat and as an overall leader and multi country payroll solutions by Everest and it's 2025 peak matrix.

We remain confident in our ability to advance our strategic goals drive our competitive differentiation and deliver strong financial results and with that I would like to take a moment to recognize our associates, whose efforts and outstanding performance helped us consistently deliver for our clients and maintain a record high client satisfaction.

As we look ahead, our vision for ADP, assistant includes simple agents to handle, everyday tasks, Advanced agents to execute multi-step processes. Autonomous agents to go further managing workflows from start to finish being sure to keep humans in the loop where it matters, what makes our approach different from others is the scale of the data. We use to power our agents and how we train them to work together. A single action sets off the right follow-ups for employees managers and HR practitioners it is in these connections where the real value is produced.

We have an opportunity to use AI, not just to speed up the client workflows, but rather fundamentally shift how work gets done.

Section levels. Thank you all and now I'll turn the call over to Peter.

Maria Black: Our new AI capabilities empower our associates to deliver on our second strategic priority, providing clients with unmatched expertise and outsourcing solutions. These internal AI tools provide our sales, implementation, and service teams with client-specific insights to address market shifts, resolve unique challenges, and ultimately deepen client engagement. Additionally, all of our developers are now equipped with coding copilot tools that are leading to measurable productivity gains. We also continue to expand our use of digital implementation for both small-business and PEO clients. These AI initiatives create additional time for our associates to engage in higher value-added activities that support our clients' growth. Finally, we continue to execute on our third strategic priority, benefiting our clients with our global scale. We bring value to our clients through our unmatched footprint in over 140 countries and continue to add to our global capabilities.

It's the difference between using AI to do things better and faster than before and using AI to do things better and faster than anyone else.

Thank you Maria and good morning, everyone.

I will start by providing some more color on our first quarter results and then update our fiscal 2026 outlook.

Ities Empower, our Associates to deliver on our second strategic. Priority providing clients with unmatched, expertise and Outsourcing Solutions.

Let me begin with our employer services results and outlook.

<unk> segment revenue increased 7% on a reported basis and 5% on an organic constant currency basis in the first quarter.

These internal AI tools, provide our sales implementation and service teams with clients specific, insights to address Market, shifts, resolve unique challenges, and ultimately deepen, client engagement.

As Maria should yes, new business bookings were solid to start the year with a relatively stable demand backdrop and continued healthy pipelines, we are maintaining a 4% to 7% full year growth guidance.

Additionally, all of our developers are now equipped with coding co-pilot tools that are leading to measurable productivity gains.

He is retention declined slightly in Q1 versus the prior year, but still came in better than we anticipated.

We also continue to expand our use of digital implementation for both small business and peo clients.

We are continuing to forecast a 10 to 30 basis point decline in full year retention.

These AI initiatives create additional time for our Associates to engage in higher value, added activities that support our clients growth.

He is pays per control growth ran it down to zero percent for the first quarter coming in slightly below our expectations.

Finally, we continue to execute on our third strategic priority benefiting our clients with our global scale.

We are now forecasting pays per control to remain about flat for the full year.

Client funds interest revenue increased more than we anticipated in Q1.

Maria Black: During the first quarter, we also went live with our first GlobalView client in Costa Rica, where we now serve one of the world's largest employers. Further underscoring the quality of our global products, ADP was recently positioned as a leader in multi-country payroll by NelsonHall in its Payroll Reimagined 2025 NEAT, and as an overall leader in multi-country payroll solutions by Everest Group in its 2025 Peak Matrix. We remain confident in our ability to advance our strategic goals, drive our competitive differentiation, and deliver strong financial results. I would like to take a moment to recognize our associates whose efforts and outstanding performance help us consistently deliver for our clients and maintain our record-high client satisfaction levels. Thank you all. Now I'll turn the call over to Peter.

We bring value to our clients through our unmatched footprint, in over 140 countries, and continue to add to our Global capabilities.

A stronger average client fund balance growth.

While the yield curve has declined marginally since our last update.

During the first quarter, we also went live with our first global view client in Costa Rica where we now serve 1 of the world's largest employers.

It was more than offset by a stronger client funds balance growth.

We are now forecasting average client funds balances to grow 3% to 4% in fiscal 'twenty six and we are continuing to expect an average yield of approximately three 4%.

Further underscoring, the quality of our Global products ADP was recently positioned as a leader in multi-country, payroll by Nelson Hall and its payroll reimagine 2025 neat.

Accordingly, we are increasing our full year forecast for client funds interest revenue by $10 million to a range of $1 three zero to 132 billion.

and as an overall leader in multi-country Payroll Solutions by Everest in its 2025 Peak Matrix,

We are also increasing our expected net impact from our extended investment strategy by $10 million to a range of $1 two six to $1 2 billion.

We remain confident in our ability to advance our strategic goals. Drive, our competitive differentiation and deliver strong financial results.

Overall, we are maintaining our full year es revenue growth forecast of 5% to 6%.

Don McGuire: Thank you, Maria, and good morning, everyone. I will start by providing some more color on our first quarter results and then update our fiscal 2026 outlook. Let me begin with our Employer Services results and outlook. ES segment revenue increased 7% on a reported basis and 5% on an organic constant currency basis in the first quarter. As Maria shared, ES new business bookings were solid to start the year. With a relatively stable demand backdrop and continued healthy pipelines, we are maintaining our 4% to 7% full-year growth guidance. ES retention declined slightly in Q1 versus the prior year, but still came in better than we anticipated. We are continuing to forecast a 10 to 30 basis point decline in full-year retention. ES pays per control growth rounded down to 0% for the first quarter, coming in slightly below our expectations.

And with that, I would like to take a moment to recognize our Associates whose efforts and outstanding performance. Help us consistently deliver for our clients and maintain our record high client satisfaction levels. Thank you, all. And now I'll turn the call over to Peter.

Oh, yes margin decreased 50 basis points in Q1, reflecting integration and acquisition related costs associated with the workforce software acquisition, which closed last October.

Thank you Maria and good morning everyone. I will start by providing some more color on our first quarter results. And then update our fiscal 2026 Outlook,

Let me begin with our Employer Services results and outlook.

Moving onto the PEO.

Revenue growth of 7% represented a solid start to the year with average worksite employee growth of 2% in the quarter.

Yes, revenue increased 7% on a reported basis and 5% on an organic, constant currency basis in the first quarter.

We saw continued growth in PEO new business bookings.

As Maria shared, yes, new business bookings were solid to start the year.

<unk> pays per control growth moderated in the quarter.

As a result, we are continuing to expect fiscal 2026, PEO revenue growth of 5% to 7% and average worksite employee growth of 2% to 3%.

With a relatively stable, demand, backdrop and continued healthy pipelines. We are maintaining our 4 to 7% full year growth guidance.

Retention declined slightly in Q1 versus the prior year but still came in better than we anticipated.

EBITDA margin decreased 140 basis points in Q1, mainly driven by higher selling expenses the timing of state unemployment insurance costs zero margin pass through revenue growth and some one time costs connected with the retroactive change in the deadline for filing certain employee.

We are continuing to forecast at 10 to 30 basis point decline in full year retention.

Don McGuire: We are now forecasting pays per control to remain about flat for the full year. Client funds interest revenue increased more than we anticipated in Q1, helped by stronger average client funds balance growth. While the yield curve has declined marginally since our last update, this impact is more than offset by our stronger client funds balance growth. We are now forecasting average client funds balances to grow 3% to 4% in fiscal 2026, and we are continuing to expect an average yield of approximately 3.4%. Accordingly, we are increasing our full-year forecast for client funds interest revenue by $10 million to a range of $1.30 billion to $1.32 billion. We are also increasing our expected net impact from our extended investment strategy by $10 million to a range of $1.26 billion to $1.28 billion. Overall, we are maintaining our full-year ES revenue growth forecast of 5% to 6%.

ESP pays per control, growth, rounded down to 0% for the first quarter, coming in slightly below our expectations.

We are now forecasting Pace per control to remain about flat for the full year.

<unk> tax credit claims.

Putting it all together we are maintaining our fiscal 2026 consolidated revenue outlook for 5% to 6% growth in our forecast for adjusted EBIT margin expansion of 50 to 70 basis points.

Client funds, interest Revenue. Increase more than we anticipated in, q1 helped by stronger, average client funds. Balanced growth.

While the yield curve has declined marginally since our last update. This impact is more than offset by our stronger client funds, balanced growth.

We continue to expect our effective tax rate to be around 23% for the year.

We also continue to forecast fiscal 2026, adjusted EPS growth of 8% to 10% supported by share repurchases.

We are now forecasting, average client funds, balances to grow 3 to 4% in fiscal 26. And we are continuing to expect an average yield of approximately 3.4%.

I would also like to add a quick reminder of how we reflect the impact of our client funds investment strategy in our segment reporting.

The results of our client funds interest revenue are reflected in our employer services segment.

Accordingly. We are increasing our fully a forecast for client funds. Interest Revenue by 10 million to a range of 1.3 0 to 1.32 billion.

While corporate extended interest income, which represents the interest generated from the portfolio on the days that we borrow as well as the related short term financing costs are both recorded in our other segment.

We are also increasing our expected net impact from our extended investment strategy by $10 million to a range of $1.26 billion to $1.28 billion.

Don McGuire: Our ES margin decreased 50 basis points in Q1, reflecting integration and acquisition-related costs associated with the WorkForce Software acquisition, which closed last October. Moving on to the PEO. Revenue growth of 7% represented a solid start to the year, with average worksite employee growth of 2% in the quarter. We saw continued growth in PEO new business bookings. However, PEO pays per control growth moderated in the quarter. As a result, we are continuing to expect fiscal 2026 PEO revenue growth of 5% to 7% and average worksite employee growth of 2% to 3%. PEO margin decreased 140 basis points in Q1, mainly driven by higher selling expenses, the timing of state unemployment insurance costs, zero margin pass-through revenue growth, and some one-time costs connected with the retroactive change in the deadline for filing certain employee retention tax credit claims.

Overall, we are maintaining our fully es Revenue growth forecasts of 5 to 6%.

Accordingly from a Sigma geography perspective, some of the benefit we expect to receive from our overall client funds investment strategy in fiscal 2026 is recorded in our employer services segment.

Our es margin decreased 50 basis points in q1, reflecting integration and acquisition related costs. Associated with the workforce software acquisition which closed last October.

While the balance of this overall benefit is recorded in our other segment.

Moving on to the poo.

This dynamic played out in our first quarter and we expect it to continue throughout the rest of our fiscal year.

Revenue growth of 7% represented a solid start to the year with average work site employee growth of 2% in the quarter.

Thank you and I'll now turn it back to the operator for Q&A.

Thank you.

We saw continued growth in peo new business, bookings. However, poo pays per control growth moderated in the quarter.

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As a result, We are continuing to expect fiscal 2026, peo Revenue growth of 5 to 7% and average work site employee growth of 2 to 3%.

One moment for questions.

Our first question comes from some <unk> with Jefferies. Your line is open.

Hi, good morning, and thanks for taking my questions Maria I'll start with you it sounds like the bookings side is going well both in employer services and PEO.

EO margin decreased 140. Basis points in q1, mainly driven by higher selling expenses. The timing of state unemployment insurance costs zero margin pass through Revenue growth and some 1-time costs connected with the retroactive change in the deadline for filing certain employee retention tax, credit claims.

Don McGuire: Putting it all together, we are maintaining our fiscal 2026 consolidated revenue outlook for 5% to 6% growth and our forecast for adjusted EBIT margin expansion of 50 to 70 basis points. We continue to expect our effective tax rate to be around 23% for the year. We also continue to forecast fiscal 2026 adjusted EPS growth of 8% to 10%, supported by share repurchases. I would also like to add a quick reminder of how we reflect the impact of our client funds investment strategy in our segment reporting. The results of our client funds interest revenue are reflected in our Employer Services segment, while corporate extended interest income, which represents the interest generated from the portfolio on the days that we borrow, as well as the related short-term financing costs, are both recorded in our Other segment.

It would be helpful. Maybe you can update us on what the backdrop looks like in terms of deal cycles, just looks like and then how you are thinking about.

Just time to close and if theres been any change in what youre seeing in deal timelines, particularly with larger customers and then I have one follow up for Peter.

Putting it all together, we are maintaining our fiscal 2026 consolidated revenue outlook for 5% to 6% growth and our forecast for adjusted EBIT margin expansion of 50 to 70 basis points.

We continue to expect our effective tax rate to be around 23% for the year.

Sure Good morning, Smart and thank you for the question. So overall, we feel okay about the HCM demand backdrop, I think we are referred to it as relatively stable and thats exactly what I would suggest that it is a it really doesn't feel like a lot has changed as it relates to the dynamic of the the demand backdrop, we can.

We also continue to forecast, fiscal 2026, adjusted, EPS growth of 8, to 10% supported by share repurchases.

I would also like to add a quick reminder of how we reflect the impact of our client funds investment strategy in our segment reporting.

Called out a bit of pipeline aging.

The results of our client funds. Interest Revenue are reflected in our employer Services segment.

Throughout fiscal 'twenty five we saw that kind of continue into Q1. So we're really back to kind of those pre pandemic I used to call. It I suppose the are the new normal or the old normal I think it's just kind of normal. So I think it felt largely the same as it did as we finished up the year.

Don McGuire: Accordingly, from a segment geography perspective, some of the benefit we expect to receive from our overall client funds investment strategy in fiscal 2026 is recorded in our Employer Services segment, while the balance of this overall benefit is recorded in our Other segment. This dynamic played out in our first quarter, and we expect it to continue throughout the rest of our fiscal year. Thank you, and I'll now turn it back to the operator for Q&A.

While corporate extended interest income, which represents the interest generated from the portfolio, on the days that we borrow, as well as the related short-term financing costs are both recorded in our other segments.

In terms of really across the board, whether it's in the down market, where we're measuring things like new appointments or it's in the upmarket that you asked about some odd with respect the deal cycles I would say, we haven't observed any meaningful changes in Q1.

Accordingly from a segment geography perspective, some of the benefits. We expect to receive from our overall client funds investment strategy in fiscal 2026 is recorded in our employer Services segment.

While the balance of this overall benefit is recorded in our other segments.

Great and then Peter as I think about that.

This dynamic played out in our first quarter, and we expect it to continue throughout the rest of our fiscal year.

Guidance and.

I appreciate the color on the individual pieces and how you came to maintaining it and I know, it's still early in the fiscal year, but particularly unemployed services. If I think about some of the underlying pieces. It feels like there is a little bit of a downtick, whether thats pays per control, whether thats retention. So how do you get confidence in the range and maybe just as we.

Thank you and I'll now turn it back to the operator for Q&A.

Operator: Thank you. If you wish to ask a question, please press *1. If your question has been answered and you wish to move yourself in the queue, please press *1 again. Please be aware of the allotted time for questions. Please ask one question with a brief follow-up. One moment for questions. Our first question comes from Samad Samana with Jefferies. Your line is open.

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Please be aware of the allotted time for questions. Please ask 1 question with a brief follow-up.

Think about shorter term into the next fiscal quarter, how should we think about maybe where that you're tracking if theres any one time things I think maybe there was one less processing day last fiscal last year. This time last year. So just maybe help us think of the guidance.

1 moment for questions.

Yes, sure Smedes. So I think there are a number of things none of them are individually, particularly significant but going in different directions. So as you pointed out we have.

Our first question comes from Samad Sama with Jeffrey's, your line is open.

[Analyst 1]: Hi, good morning, and thanks for taking my questions. Maria, I'll start with you. It sounds like the booking side is going well, both in Employer Services and PEO. I thought it would be helpful if maybe you can update us on what the backdrop looks like in terms of deal cycles, what this looks like, and how you are thinking about just time to close, and if there's been any change in what you're seeing in deal timelines, particularly with larger customers. I have one follow-up for Peter.

Lower though now.

<unk> control guidance to the lower end of that range. So again, when we're talking about tens of basis points of movement. There. There's obviously some revenue and margin attached to that.

Inversely, we have a relatively small uplift in.

Hi. Good morning and, and thanks for taking my questions. Uh, Maria I'll start with you. It sounds like the booking site is going. Well, both an employer services and peo and I thought it would be helpful. If maybe you can update us on what the backdrop looks like in terms of deal Cycles just looks like and then how are you thinking about?

Sure.

In our client fund interest revenue driven by the balances again, that's sort of a counteract we also have a little bit of favorability on FX and sort of one or two other things. So I definitely feel very confident I think with respect to to.

Uh just time to close and if there's been any change in what you're seeing in Deal timelines, particularly with larger customers and then I have 1, follow-up for Peter.

Maria Black: Sure. Good morning, Samad, and thank you for the question. Overall, we feel okay about the HCM demand backdrop. I think we refer to it as relatively stable, and that's exactly what I would suggest that it is. It really doesn't feel like a lot has changed as it relates to the dynamic of the demand backdrop. We called out a bit of pipeline aging throughout fiscal 2025. We saw that kind of continue into Q1. We're really back to those pre-pandemic, I used to call it, I suppose, the new normal or the old normal. I think it's just kind of normal.

So the guidance we've shared there.

In terms of the quarterly cadence. So we actually had one extra processing day in Q2 last year. We also had some sui revenue in the PEO pulled in into Q2 last year. So we have to grow over that in the second quarter there may be a.

Not a material difference I would say absent the the anniversary of the workforce software acquisition at the end of this quarter. So when you take that out and go back to sort of an organic constant currency.

Maria Black: I think it felt largely the same as it did as we finished up the year in terms of really across the board, whether it's in the down market where we're measuring things like new appointments or it's in the up market that you asked about, Samad, with respect to deal cycles, I would say we haven't observed any meaningful changes in Q1.

Level.

The material difference, maybe a slight downtick in them in.

And the revenue growth rate for the quarter, just growing over that extra processing day in the U S and a little bit of that Sui revenue pull forward. There at this point, we're not anticipating in Q2, but but in terms of.

The full year and in terms of employer services I think the the movements are relatively small and somewhat offsetting each other so again, we feel just as comfortable with the with the range is what we were three months ago. When we when we issued our initial guidance.

Sure, good morning smod and thank you for the question. So overall we feel okay about the, uh, HCM demand backdrop. I think we, uh, referred to it as relatively stable. And that's exactly what I would suggest that it is. Uh, it really doesn't feel like a lot has changed, uh, as it relates to the dynamic of the, uh, the demand backdrop. We called out a bit of pipeline aging, uh, throughout fiscal 25. We saw that kind of continued into q1, uh, so we're really back to kind of those pre-pandemic. I, I used to call it. I, I suppose the, uh, The New Normal or the old normal. I think it's just kind of normal, so I think it felt largely the same as it did, as we finished up the year, uh, in terms of, uh, really across the board whether it's in the down Market where we're measuring things like new appointments, uh, or it's in the up Market that you asked about Samad with respect to the deal Cycles. I would say, we haven't observed any meaningful changes in q1.

[Analyst 1]: Great. Peter, as I think about the guidance, and I appreciate the color on the individual pieces and how you came to maintaining it, I know it's still early in the fiscal year, but particularly on Employer Services, if I think about some of the underlying pieces, it feels like there was a little bit of a downtick, whether that's pace for control, whether that's retention. How do you get confidence in the range? Maybe just as we think about shorter term into the next fiscal quarter, how should we think about maybe where that should track? If there's any one-time things, I think maybe there was one less processing day last fiscal year, this time last year. Just maybe help us think of the guidance.

Thank you best of the color and good to see the solid results have a great day.

You.

Thank you.

Next question comes from Mark Marcon with Baird. Your line is open.

Good morning, and thanks for taking my questions.

And congratulations on the on what.

It sounds like pretty good start from a from a sales perspective Maria.

Great. And then, Peter as I think about the the guidance and I appreciate the color on the individual pieces and how you came to maintaining it. And I know it's still early and fiscal year, but particularly on employer Services, if I think about some of the underlying pieces, it feels like there is a little bit of a downtick whether that's pace for control, whether that's retention. So, how do you get confidence in in the range? And maybe just as we think about shorter term into the next fiscal quarter? How should we think about maybe where, where that should track? And if there's any 1 time, things, I think maybe there is 1 less processing day. Last

And there were a number of different areas.

High school last year this time last year. So just maybe, help us think of the guidance.

Don McGuire: Yeah, sure, Samad. I think there are a number of things. None of them are individually particularly significant, but going in different directions. As you pointed out, we have lowered our price per control guidance to the lower end of that range. Again, we're talking about tens of basis points of movement there. There's obviously some revenue and margin attached to that. Conversely, we have a relatively small uplift in our client funds interest revenue driven by the balances. Again, that's sort of a counteract. We also have a little bit of favorability on FX and sort of one or two other things. I definitely feel very confident, I think, with respect to the guidance we've shared there. In terms of the quarterly cadence, we actually had one extra processing day in Q2 last year. We also had some SUE revenue in the PEO pulled into Q2 last year.

In terms of new bookings.

What area was the most surprising from your perspective.

In addition to that can you just describe a little bit more about what you're doing on the embedded side like how how widespread is that on the lower end of the market in terms of percentage of sales and does that have any impact with regards to the economics of the business.

Yeah. Thank you and thank you Mark as always for the the.

Congrats on a good start and we feel exactly that way so I wouldn't say it surprised us, but it's certainly pleased us to see that growth did accelerate in the first quarter and I called out some of the highlights within our small business space. We saw specific highlights within retirement services and insurance, we were really pleased to see that they're in.

Don McGuire: We have to grow over that in the second quarter. There may be not a material difference, I would say, absent the anniversary of the WorkForce Software acquisition at the end of this quarter. When you take that out and go back to sort of an organic constant currency type level, not a material difference, maybe a slight downtick in the revenue growth rate for the quarter just growing over that extra processing day and a little bit of that SUE revenue pull forward that at this point, we're not anticipating in Q2. In terms of the full year and in terms of Employer Services, I think the movements are relatively small and somewhat offsetting each other. We feel just as comfortable with the range as what we were three months ago when we issued our initial guidance.

Employer services HR outsourcing business that we talked a lot about last quarter a lot of those big complex deals that are big transformations. We are excited to see those cross the finish line.

And certainly continue to out to build the pipeline. There and then we were pleased also to see the continued interest in demand for Leerink HCM. So I wouldn't say that it surprised us I think it pleased us to see.

Into Q2 last year. So we have to grow over that in in the second quarter, there may be a, you know, not a material difference. I would say absent, the the anniversary of the workforce software acquisition at the end of this quarter. So when you take that out and go back to sort of, you know, an organic constant currency type, um, uh, level at not a material difference, maybe a slight downtick in, um, in, um,

The quarter kind of evolve that way that said, though as everybody knows we still have the bulk of the year ahead of us.

As it relates to our execution kind of broadly across each one of those areas to.

To speak to embedded payroll specifically it is still very much early days I think you know we're very committed to our partnership that we have specifically with with Pfizer. We're also really excited about continuing.

To make.

To make progress on the embedded offering in general and other partnerships. So it is a big piece of our growth agenda and growth strategy within the Downmarket that said, though we just rolled out the the opportunity across the the back book, if you will of our partner or just in October so the bulk of.

In the revenue growth rate for the quarter, just growing over that extra processing day in the S. And a little bit of that sooie Revenue pool forward that where at this point, we're not anticipating in Q2, but, um, but in terms of the, of the full year and in terms of employer Services, um, you know, I think the, the movements are relatively small and, and, um, somewhat offsetting each other. So again, we feel just as comfortable with the, uh, with the range as what we were 3 months ago. When we, uh, when we issued our initial guidance.

[Analyst 1]: Thank you both for the color. Good to see the solid results. Have a great day.

Maria Black: Thank you.

Thank you both for the color and good to see the solders UPS. Have a great day.

Thank you.

Operator: Thank you. Our next question comes from Mark Marcon with Robert W. Baird & Co. Your line is open.

Thank you. Our next question comes from Mark, marhan with beard. Your line is open.

[Analyst 2]: Good morning, and thanks for taking my questions. Congratulations on what sounds like a pretty good start from a sales perspective. Maria, you went through a number of different areas in terms of new bookings. What area was the most surprising from your perspective? In addition to that, can you just describe a little bit more about what you're doing on the embedded side? How widespread is that on the lower end of the market in terms of % of sales, and does that have any impact with regards to the economics of the business?

Call. It the bookings contribution from embedded is really ahead of us it really doesn't contribute thus far.

And the numbers through the first quarter and so we're excited about the sales collaboration and the progress we've made to integrate and scale. The offering. We're also really excited to put cash flow central inside of the runoff are towards the tail end of this year. If you will so again definitely a part of the strategic agenda hasn't really contribute.

Good morning, and thanks for taking my questions. Um, and congratulations on the on what sounds like, pretty good start from a, from a sales perspective. Maria, you went through a number of different areas on, in terms of new bookings, what area was the most surprising from your perspective.

They had much to the the sales results thus far the bulk of that contribution is ahead of us.

Great for <unk>.

Follow up to <unk>.

And um, in addition to that can you just describe a little bit more about what you're doing on the embedded side, like, how how widespread is, is that on, on the lower end of the market, in terms of percentage of sales? And does that have any impact with regards to the economics of the business?

Maria Black: Thank you. Thank you, Mark, as always, for the congrats on the good start. We feel exactly that way. I wouldn't say it surprised us, but it certainly pleased us to see that growth did accelerate in the first quarter. I called out some of the highlights within our small-business space. We saw specific highlights within Retirement Services, insurance. We were really pleased to see that the Employer Services HR outsourcing business that we talked a lot about last quarter, a lot of those big complex deals that have big transformations. We are excited to see those cross the finish line and certainly continue to build the pipeline there. We were pleased also to see the continued interest and demand for ADP Lyric HCM. I wouldn't say that it surprised us. I think it pleased us to see the quarter kind of evolve that way.

Mentioned in terms of majors nextgen.

Yeah, thank you. And

Mark, as always,

Basically comprising 80% of the new sales in the core area within majors can you talk a little bit about.

What youre seeing in terms of the utilization of Nextgen with the clients.

To what extent is the client satisfaction rate going up what does that make you feel from a retention perspective as that continues.

And any sort of.

Impacts from a profitability perspective.

Yeah, Great question and it is exciting it's incredibly exciting to finally see the nextgen, making progress at the levels that we reflected so 80% across that core space of the mid market. Obviously, our goal is to extend the reach throughout this fiscal year or two out to broadly cover the mid market and part of that excitement is the anchoring entire.

Maria Black: That said, as everybody knows, we still have the bulk of the year ahead of us as it relates to execution broadly across each one of those areas. To speak to embedded payroll specifically, it is still very much early days. I think you know we're very committed to our partnership that we have specifically with Fiserv. We're also really excited about continuing to make progress on the embedded offering in general and other partnerships. It is a big piece of our growth agenda and growth strategy within the down market. That said, we just rolled out the opportunity across the backbook, if you will, of our partner just in October. The bulk of, call it, the bookings contribution from embedded is really ahead of us. It really doesn't contribute thus far in the numbers through the first quarter.

And what you just suggested which is that we are seeing faster time to implementation, we are seeing a better implementation.

On the, the good start. And we, we feel exactly that way. So I, I wouldn't say it surprised us, but it certainly, pleased us to see that growth that accelerate in the first quarter. And I called out some of the highlights, uh, within our small business space. We saw specific, uh, highlights within Retirement services and insurance, we were really, uh, pleased to see that the employer Services HR Outsourcing business. That we talked a lot about last quarter. A lot of those big complex deals that have big Transformations. Uh, we are excited to see those cross the finish line, uh, and certainly continue to uh, to build the pipeline there. And then we were pleased also to see the continued interest and demand for lyric HCM. So I wouldn't say that it surprised us. I think it pleased us to see uh the quarter kind of evolved that way. That said though, as as everybody knows, we still have the bulk of the year ahead of us. Uh, as it relates to uh, execution kind of broadly across each 1 of those areas uh to speak to embedded, payroll specifically. Uh, it is still very much early days. I I think, you know, we're very committed.

Satisfaction, we are seeing upticks in overall satisfaction. So as the mid market has been making these investments into the products and the platforms and we've been able to simplify really the experience for the clients, but also that experience for our associates to service our clients, whether that's while they're onboarding them or while they are.

Our servicing them its definitely making an impact and that is exactly the journey, we've been on and it's greatly contributed overtime as nextgen has been scaling in the mid market to those record level NPS results that we've been talking about in the mid market and certainly we've talked a lot about the mid market retention over the last few years.

Maria Black: We're excited about the sales collaboration and the progress we've made to integrate and scale the offering. We're also really excited to put Cash Flow Central inside of the RUN offer toward the tail end of this year, if you will. Again, definitely a part of the strategic agenda, hasn't really contributed much to the sales results thus far. The bulk of that contribution is ahead of us.

We're confident that the product investments, we're making specifically nextgen are driving a sustainable improvement.

Improvements in client satisfaction broadly across the mid market.

And I think just on the profitability piece.

Mark at the end there.

Also anticipating that this will lift our productivity certainly.

To our partnership that we have specifically with with fiser. We're also really excited about continuing uh to uh, to make progress on the embedded offering in general and other Partnerships. So it is a big piece of our growth agenda and go growth strategy within the down Market that said, though, uh, we just rolled out the, uh, the opportunity across the, uh, the back book if you will, of our, our partner just in October. So the bulk of call it, the bookings contribution from embedded is really ahead of us. It really doesn't contribute thus far, uh, in the numbers, uh, through the first quarter. And so, we're excited about the sales collaboration, and the progress we've made, uh, to integrate and scale to offering. We're also really excited to put cash flow central inside of the Run offer, uh, toward the tail end of this year if you will. So uh, again, definitely a part of the Strategic agenda hasn't really contributed much to the, um, the sales results, thus far the bulk of that contrib.

Is ahead of us.

[Analyst 2]: Great. For a follow-up, you mentioned in terms of majors, NextGen, basically comprising 80% of the new sales in the core area within majors. Can you talk a little bit about what you're seeing in terms of the utilization of NextGen with the clients? To what extent is the client satisfaction rate going up? What does it make you feel from a retention perspective as that continues, and any sort of impacts from a profitability perspective?

We observe as Maria said, it's not just more smooth implementations, but easier implementations the ability for more digital onboarding as well as the.

Great. And then for a follow-up, just you mentioned in terms of majors next-gen.

The number of client context for fruit nextgen clients is meaningfully lower than than on the current Gen solutions. So suddenly.

Profitability opportunity there as we roll it out further or close to the mid market place.

That's great to hear thank you.

Yes.

Um, you know, basically, comprising, uh, 80% of the new sales in the core area within Majors, can you talk a little bit about, um, you know, what you're seeing in terms of the utilization of NextGen with the clients? Um, you know, to what extent is the client satisfaction?

Thank you. Our next question comes from Jason Kupferberg with Wells Fargo Securities. Your line is open.

Hi, This is Cathy Chan on for Jason This is Matt.

Quick question for me and maybe a follow up so I mean, obviously you guys talked about U S PTC coming in flat for the quarter or maybe a little bit below expectation and now you guys are expecting a full year guide to be flat I guess, just diving a little bit deeper what drove that weakness and what did you guys confident that it won't maybe even decelerate or be down through F. 'twenty.

Maria Black: Yeah, great question. It is exciting. It's incredibly exciting to finally see the NextGen making progress at the levels that we reflected. So 80% across that core space of the mid-market. Obviously, our goal is to extend the reach throughout this fiscal year to broadly cover the mid-market. Part of that excitement is anchored entirely in what you just suggested, which is that we are seeing faster times to implementation. We are seeing better implementation satisfaction. We are seeing upticks in overall satisfaction. As the mid-market has been making these investments into the products and the platforms, and we've been able to simplify really the experience for the clients, but also that experience for our associates to service our clients, whether that's while they're onboarding them or while they are servicing them, it's definitely making an impact. That's exactly the journey we've been on.

Rate going up, what does it make you feel? From a retention perspective, does that continue? And any sort of, you know, impacts from a profitability perspective?

Thank you.

Yeah, I'll take that one so I think we're talking about relatively small movements here.

Tens of basis points of movement, we were at a zero to one range, where we're just really getting now into the lower end of that range. So it's not a I would say, it's not a huge shift where we where we draw.

Oh God format projection froman out confidence I guess is.

Is just with our own data I mean, we obviously, we look at a lot of external reports, we have our own.

National Employment report on this sort of stuff, but really we're looking at the hiring in our own base. The patents that we see and I think we feel we feel confident that just given the magnitudes involved that.

Maria Black: It's greatly contributed over time as NextGen has been scaling in the mid-market to those record-level NPS results that we've been talking about in the mid-market. Certainly, we've talked a lot about the mid-market retention over the last few years. We're confident that the product investments we're making, specifically NextGen, are driving a sustainable improvement in client satisfaction broadly across the mid-market.

That is the right guide for now and in.

In terms of revenues and margins.

Not a not a meaningfully different.

Point from from our initial guide, albeit surrounding obviously has moved to the low end of the range from call. It the midpoint, which I think even the.

Previous earnings call I think we did suggest that.

Don McGuire: I think just on the profitability piece, Mark, at the end there, we're also anticipating that this will lift our productivity. Certainly, you know, we observe, as Maria said, not just more smooth implementations, but easier implementations, the ability for more digital onboarding, as well as the number of client contacts for NextGen clients is meaningfully lower than on the current-gen solution. Certainly a profitability opportunity there as we roll it out further across the mid-market base.

What you just suggested which is that we are seeing faster, time to implementation, we are seeing uh, better implementation, uh, satisfaction. We are seeing upticks in overall satisfaction. So, as the mid-market has been making these investments into the products and the platforms. And we've been able to simplify really the experience for the clients but also that experience for our Associates to service our clients, whether that's while they're onboarding them or while they are serving them, it's definitely making an impact. And that's exactly the journey we've been on. And it's greatly contributed, uh, over time as NextGen has been scaling in the mid Market, to those record level MPS results of we've been talking about in the mid market. And certainly, we've talked a lot about uh, the mid-market retention over the last few years. Uh, and we're confident that the product Investments we're making specifically NextGen are driving a sustainable uh, Improvement in client satisfaction. Broadly across the mid Market.

At that point, the midfield midpoint felt more likely now were removed a number of call it tens of basis points more towards the lower end of that range. We also sit in the in the prepared remarks that were rounding down to zero at the same at this point and we expect that likely will continue through the.

Through the balance of the fiscal year, unless things change meaningfully in the macro environment.

Okay. That's helpful. And then just on margins I think you guys did around flat margins for the quarter and then you're maintaining the 50 to 70 basis points expansion for the full year I guess, how are you expecting the rest of the year to shape up in terms of expenses and the margin dynamic there just so we have that modeled correctly. Thank you.

And I think just on the profitability piece, uh, Mark at the end there. Um, we're also anticipating that this will will lift our productivity certainly, um, you know, we we, we observe as Maria said it's not just more smooth implementations, but easier implementations the ability for for more digital onboarding, as well as, um, the number of client contacts. For, uh, for next-gen clients is meaningfully lower than than on the current gen solution. So certainly a profitability opportunity there as we roll it out for the midmark.

Good place.

[Analyst 2]: That's great to hear. Thank you.

That's great to hear. Thank you.

Operator: Thank you. Our next question comes from Jason Kupferberg with Jefferies. Your line is open.

Yes sure so.

[Analyst 3]: Hi, this is Kathy Chan on for Jason. Just a quick question from me and maybe a follow-up. Obviously, you guys talked about USPPC coming in flat for the quarter, maybe a little bit below expectations, and now you guys are expecting the full-year guide to be flat. I guess just diving a little bit deeper, you know, what drove that weakness and what gives you guys confidence that it won't maybe even decelerate or be down, you know, through F2026? Thank you.

Goodies, your line is open.

Actually quite happy with that.

Treating for flat, but we were quite happy with sort of beat our expectations.

We alluded to the fact, we are expecting some margin decline, mostly due to the due to the fourth quarter of the of the workforce software acquisitions. So the acquisition related expenses.

Integration cost there. So we actually felt we actually ended up a little better than what we expected in the first quarter that certainly helps that anniversaries.

Hi, this is Cathy Chan on for Jason. Um, just a quick question from me and maybe a follow-up. So, I mean, obviously you guys talked about USPS coming in flat for the quarter, maybe a little bit below expectations. Now, you guys are expecting a full-year guide to be flat. I guess just diving a little bit deeper, you know, what drove that weakness? And what gives you guys confidence that it won't maybe even decelerate or be down, you know, through FY26? Thank you.

Don McGuire: Yeah, I'll take that one. I think we're talking about relatively small movements here, tens of basis points of movement. We were at a 0 to 1% range. We're just really guiding now to the lower end of that range. It's not a huge shift. Where we draw our guide from, our projection from, and our confidence, I guess, is just with our own data. I mean, we obviously look at a lot of external reports. We have our own national employment report on this sort of stuff. Really, we're looking at the hiring in our own base, the patterns that we see. I think we feel confident that just given the magnitudes involved, that is the right guide for now.

It's actually an anniversaried about two weeks ago. So that's cool.

That drag is illumina is behind us.

The rest of the year.

We feel pretty good about where the range is we.

We excuse me we.

We have a little bit of ramp in the second part of the year, which we are contemplating.

Again, some of that is due to some efficiencies that we're driving in the business. Some of the effects of some of that Gen II investments.

But you should expect us to do it.

Again, when you adjust for the workforce software acquisition in the first quarter to see something similar in terms of the net result in the in the second quarter, and then a little bit of a ramp in the back half of the year.

Don McGuire: In terms of revenues and margins, again, not a meaningfully different sort of point from our initial guide, albeit the rounding obviously has moved to the low end of the range from, call it, the midpoint, which I think in the previous earnings call, we did suggest that at that point, the midpoint felt more likely. Now we've moved, call it, tens of basis points more towards the lower end of that range. We also said in the prepared remarks that we're rounding down to 0% at this point, and we expect that likely will continue through the balance of the fiscal year unless things change meaningfully in the macro environment.

Great appreciate it.

Yes.

Thank you. Our next question comes from Kartik Mehta with Northcoast Research. Your line is open.

Yeah, I'll take that 1. So you know, I think we're talking about relatively small movements here. Um, you know, tenza basis, points of movement, we were at a 0 to 1 range. We're, we're just really guiding now on to the lower end of that range. So, it's not a not, I would say it's not a, a huge shift where we, where we draw, you know, our our guide from our projection from, and our, our confidence. I guess is, um, is just with our own data. I mean, we, we obviously, we look at a lot of external reports, we have our own, uh, you know, National Employment report on this sort of stuff, but really, we're looking at the hiring in our own base, the patterns that we see, and, you know, I think we feel, we feel confident that, um, just given the magnitudes involved that, um, um, that, you know, that that is the right guide for for now. And, um, in terms of revenues and, and margins, you know, again not a not a meaningful difference sort of

Kartik.

Adam.

Yes.

Good morning.

Peter wanted.

Just start off with you I think when you originally gave guidance.

At least for wide swings that you anticipated that pricing.

You're about 100.

At this point benefit.

A little bit lower than what it had been a little bit after COVID-19, a little bit higher than pre COVID-19 and I'm wondering if your expectations are still the same.

Point from uh, from our initial guide, albeit the rounding obviously has moved to the low end of the range from call at the midpoint, which I think in the previous earnings call, I think we did suggest that that, at that point the mid felt midpoint felt more likely. Now we're we're we're moved, you know, a number of call it tens of basis points more towards the lower end of of that range. We also said in the, in the prepared remarks, that we're rounding down to, to 0% at this point, and we expect that likely will continue through the, um, through the balance of the fiscal year. Unless things change meaningfully in the macro environment.

[Analyst 3]: Okay, that's helpful. Just on margins, I think you guys did around flat margins for the quarter, and you're maintaining the 50 to 70 basis points expansion for the full year. I guess, you know, how are you expecting the rest of the year to shape up in terms of expenses and the margin dynamic there just so we have that modeled correctly? Thank you.

Considering the environment has changed a little bit at least the economic environment.

Yes, absolutely no change at all actually in our price expectations.

Not seen anything in the first quarter that makes us feel like.

Don McGuire: Yeah, sure. We're actually quite happy, not that we're shooting for a flat, but we were quite happy it would sort of beat our expectations. We alluded to the fact we're expecting some margin decline, mostly due to the fourth quarter of the WorkForce Software acquisition, so the acquisition-related expenses, some integration costs there. We actually felt we actually ended up a little better than what we expected in the first quarter. That certainly helps. That anniversary is actually an anniversary to about two weeks ago. That, call it, that drag element is behind us. You know, the rest of the year, we feel pretty good about where the range is. We have a little bit of ramp in the second part of the year, which we are contemplating.

For the quarter and then you're maintaining the 50 to 70 basis points expansion for the full year. I guess, you know, how are you expecting the rest of the year to shape up in terms of expenses, and the margin Dynamic there? Just so we have that model correctly. Thank you.

I feel like that needs to change we do expect as you said contact you may come in a little lower than where we were last year on price.

Again, our philosophy has not changed in terms of sort of a long term value proposition prices a piece of that an important piece of that but but not the only piece of it so in terms of.

The receptivity in the market and the client base, we feel like our price assumptions are appropriate and I'm not expecting any necessarily anything meaningfully more or less and.

And what we communicated last quarter.

Perfect and just a follow up Murray you talked about it.

Yeah, sure. So um um, we're actually quite happy with not that we're shooting for a flat but we were quite happy. It was sort of beat our expectations. Uh, we, we alluded to the fact we we expecting some margin decline mostly due to the, um, due to the fourth quarter of the the workforce software acquisition. So the acquisition related expenses, some integration costs there. So, we actually felt we actually ended up a little better than what we expected in the first quarter. That certainly helps that anniversaries, um, uh, actually an anniversary to about 2 weeks ago. So that call at that drag is element is behind us. Um,

AI rollout, especially for the sales force and although it's helping them become a little bit more productive and I'm wondering where you are in that rollout maybe I'm not sure. If you can give a percentage of the salespeople that are able to use AI or.

You know, the rest of the year, we feel pretty good about where the range is. Um, we...

Don McGuire: Again, some of that is due to some efficiencies that we're driving in the business, some of the effects of some of our generative AI investments. You should expect us to, again, when you adjust for the WorkForce Software acquisition in the first quarter, to see something similar in terms of the net result in the second quarter and then a little bit of a ramp in the back half of the year.

What the plans are for kind of full rollout of that program.

Yes, Great question, and you know I love this topic and loves speaking about our sales force and our distribution and the investments that we make in them and their ecosystem and specifically their technology, we talked a lot about at Investor day, what we call the zone, which is adp's.

In the first quarter to see something similar in terms of the, the net result in the in the second quarter. And then a little bit of a ramp in the back half of the year.

[Analyst 3]: Great, appreciate it.

Operator: Thank you. Our next question comes from Kartik Mehta with Northcoast Research Partners. Your line is open. Kartik, if you're comfortable.

Paul that we are rolling out across the sellers.

Leveraging generative AI to make them more productive and so that's everything we've talked about in terms of sales modernization over the last year or so with respect to I'll call Summarization pre call planning coaching things of that nature I believe at Investor Day, we cited but it was deployed across I think roughly 40% of our sellers that.

Thank you. Our next question comes from Kartik Mehta with North Coast Research. Your line is open.

[Analyst 2]: Sorry about that. Good morning. Peter, I wanted to start off with you. I think when you originally gave guidance for Employer Services, at least for FY2026, you anticipated that pricing would be about a 100 basis point benefit, a little bit lower than what it had been a little bit after COVID, but a little bit higher than pre-COVID. I'm wondering if your expectations are still the same considering the environment has changed a little bit, at least economic environment.

Carter, give your telephone.

Yeah.

Has increased Kartik I don't know that I want to be in a position where every quarter. We're giving you the update but it's definitely north of that at this time, we actually just had all of our sales leadership together across ADP at a meeting and I have to tell you I had.

A chance to see the preview of what's coming with respect to kind of the next iteration of generative AI inside of these tools and it is it is unbelievable and somebody who used to do this job or the sales job for a living although I still do.

Good morning. Peter me. Uh, I wanted to start off with you, I think, when you originally gave guidance for, yes, at least for FY 26, you anticipated that pricing would be about 100% benefit, uh, a little bit lower than what it had been a little bit after Co, but a little bit higher than preco, and I'm wondering if your expectations are still the same, um, considering the environment has changed a little bit, at least economic environment.

Don McGuire: Yeah, absolutely. No change at all, actually, in our price expectations. We've not seen anything in the first quarter that makes us feel like that needs to change. We do expect, as you said, Kartik, we're going to come in a little lower than where we were last year on price. Again, our philosophy has not changed in terms of sort of the long-term value proposition. Price is a piece of that, an important piece of that, but not the only piece of it. In terms of, you know, call it receptivity in the market and the client base, we feel like our price assumptions are appropriate and not expecting necessarily anything meaningfully more or less than what we communicated last quarter.

I have to tell you that that stuff is way ahead of its time. If ahead of a lot of the tools and technology vendors that we even leverage we're helping guide their road maps.

And it is going to be a game changer and I think the most meaningful thing that I would say is sitting in that room with all of those sales leaders is their willingness to engage in these tools to help.

Yeah, absolutely. Um, no change at all actually in our price expectations. Um, we've not seen anything in the first quarter that makes us, you know, feel like, um, feel like that needs to change. We we do expect, as you said kartik, we're going to come in a little lower than where we were last year on price. Um, again, our our philosophy has not changed in terms of sort of the long-term value proposition prices, a piece of that, an important piece of that, but um, but not the only piece of it. So um, and in terms of, you know, call it receptivity in the market in the client base, you know, we

James the workflow of how our seller is actually a.

Go to market and engage in prospect in close and sell and even past the implementation and I think that's exactly the types of responsible leaders that we have that are willing to train these tools and make them useful.

We feel like our price assumptions are appropriate and um, and not expecting any necessarily anything meaningfully more or less than, um, than what? We communicated last quarter.

[Analyst 2]: Perfect. Just to follow up, Maria, you talked about an analytic AI rollout, especially for the sales force, and how that was helping them become a little bit more productive. I'm wondering where you are in that rollout. Maybe I'm not sure if you can give a percentage of the salespeople that are able to use the AI or what the plans are for kind of full rollout of that program.

And.

Have those tools impact their sellers productivity, because that's really the angle. So I don't want to unveil all of those things to your right here on the earnings call I really look forward to the day that we got to show these things to you alive, but they're pretty.

Perfect. And just a follow up. Maria, you know, you talked about that analysts the AI roll out especially for the sales force and that was helping uh them become a little bit more productive and I'm wondering where you are in that roll out. Maybe I'm not sure if you can give a percentage of the sales people that are able to use the AI or uh what the plans are for kind of full roll out of that program.

Maria Black: Great question. I love this topic and love speaking about our sales force and our distribution and the investments that we make in them and their ecosystem and specifically their technology. We talked a lot about at Investor Day what we call the Zone, which is ADP's tool that we are rolling out across the sellers, leveraging generative AI to make them more productive. That's everything we've talked about in terms of sales modernization over the last year or so with respect to call summarization, pre-call planning, coaching, things of that nature. I believe at Investor Day we cited that it was deployed across, I think, roughly 40% of our sellers. That has increased, Kartik. I don't know that I want to be in a position where every quarter we're giving you the update, but it's definitely north of that at this time.

They're pretty incredible and as you can tell I'm always bullish on the investments, we're making into our distribution as you know, it's a big competitive differentiation for us here at ADP.

Great. Thanks, very much. Thank you for all the detail.

Thank you. Our next question comes from Bryan Bergin with TV Cowen Your line is open.

Hi, This is actually Jared Levine on for Brian today to start here on the P. OWS just wanted to confirm that actually came in line with your expectations for <unk> and I guess, what drives the confidence that you can accelerate that growth to hit the midpoint of the guide.

Yes, Jared it's Peter.

Yeah broadly in line with our expectations, maybe 10 basis points or so above actually so so we were we were happy with where the first quarter came in with respect to <unk>.

Maria Black: We actually just had all of our sales leadership together across ADP at a meeting. I have to tell you, I had a chance to see the preview of what's coming with respect to kind of the next iteration of generative AI inside of these tools. It is unbelievable. As somebody who used to do this job or the sales job for a living, although I still do, I have to tell you that this stuff is way ahead of its time. It's ahead of a lot of the tools and technology vendors that we even leverage. We're helping guide their roadmaps. It is going to be a game changer.

Yeah, great question. And, you know, I love this topic and love speaking about our sales force and our distribution and the Investments that we make in them and their ecosystem and specifically their technology, uh, we talked a lot about at investor day. What we call the Zone, uh, which is 80 PS, um, tool that we are rolling out across the sellers, uh, leveraging generative AI to make them more productive. And so that's everything. We've talked about in terms of sales modernization over the last, uh, year. Or so, with respect to, uh, call summarization pre-call planning coaching, uh, things of that nature. I believe that investor day, we cited that it was deployed across. I think roughly 40% of our sellers that has increased kartik. I don't know that. I want to be in a position where every quarter, we're giving you the update but it's definitely north of that at this time, we actually just had all of our sales leadership together across

Confidence that we do have a little bit of a.

Rent, but again not meaningfully different percentages, but if you're talking at 10 or 20 basis points, a little bit of a ramp in the second half of the year, which is really a bookings driven bookings driven assumption, we're not anticipating in.

In the same way, we spoke about with a yes, we're not anticipating any ramp through the year and in the PEO pays per control metric.

So it really it's a bookings driven assumption and we are investing in the team. We feel the team is very well placed to deliver on that objective.

Maria Black: I think the most meaningful thing that I would say is sitting in that room with all of those sales leaders is their willingness to engage in these tools to help change the workflow of how our sellers actually go to market and engage and prospect and close and sell and even pass to implementation. I think that's exactly the types of responsible leaders that we have that are willing to train these tools and make them useful and have those tools impact their sellers' productivity because that's really the end goal. I don't want to unveil all those things to you right here on the earnings call. I really look forward to the day that we get to show these things to you live, but they're pretty incredible. As you can tell, I'm always bullish on the investments we're making into our distribution.

Great and then in terms of the PEO July one enrollment period can you talk about your performance. There did you witness any change in participation rates enrollment rates or any kind of behavior.

Yeah happy to take that.

Youre absolutely right we just.

Finished the enrollment period are proud of how the team executed through the cycle I think that there's there's no secret out there that health benefits are topical and on employers mines. So continue to see the value proposition of the PEO and specifically, how we structure. Our PEO went out there in the market and really help them.

ADP at a meeting. And I have to tell you, I had a uh, a chance to see the preview of what's coming with respect to kind of the next iteration of generative AI inside of these tools. And it is, it is unbelievable. If somebody who used to do this job or the sales job for a living, although I still do. Um, I have to tell you that this stuff is way ahead of its time, uh, if ahead of a lot of the, uh, tools and Technology, uh, vendors that we even leverage, we're helping guide their road maps, uh, and it is going to be a game changer. And I think the most meaningful thing that I would say is sitting in that room with all of those sales leaders, is their willingness to engage in these tools to help, uh, change the workflow of how our sellers actually, uh, go to market and engage and Prospect and close and sell and even passed to implementation. And I think that's exactly the uh the the types of uh, responsible leaders that we have, that are willing to train these tools and make them

Useful. And

Lawyers navigate these changing times I will tell you health benefits are and remain the norm for all of the higher wage industries that our PEO targets are those participation rates that we've seen there actually the highest for us that they have been.

Maria Black: As you know, it's a big competitive differentiation for us here at ADP.

Have those tools impact, their sellers productivity because that's really the end goal. So, I don't want to unveil all those things to you right here on the earnings call. I really look forward to the day that we get to show these things to you, uh, live but they're pretty. Um, they're pretty incredible. And as you can tell, I'm always bullish on, uh, the Investments we're making into our distribution. As you know, it's a big competitive differentiation for us here at ADP.

At the highest levels. If you will for the last four years or so so we have seen actually a bit of a participation uptick that's great to see because it does substantiate that we're selling to the right industries and those industries do value.

[Analyst 2]: Thanks very much. Thank you for all the detail.

Thanks, thanks very much. Thank you for all the detail.

Operator: Thank you. Our next question comes from Bryan Bergin with TD Cowen. Your line is open.

[Analyst 2]: Hi, this is actually Jared Levine on for Bryan today. To start here on the PEOs, just want to confirm that actually came in line with your expectations for Q1. I guess what drives the confidence that you can accelerate that growth to hit the midpoint of the guide?

Line is open.

Benefits as part of their offering to out to drive their overall employment, our employer value proposition. So I think our PEO.

<unk> into how difficult it is for employers to navigate in that size today out there.

Don McGuire: Yeah, Jared, it's Peter. Came in, yeah, broadly in line with our expectations, maybe 10 bps or so above, actually. We were happy with where the first quarter came in with respect to WSEs. Our confidence there, we do have a little bit of a ramp, but again, not meaningfully different %. If you're talking at 10 or 20 bps, a little bit of a ramp in the second half of the year, which is really a bookings-driven assumption. We're not anticipating, in the same way we spoke about with Employer Services, we're not anticipating any ramp through the year in the PEO pace per control metric. It's a bookings-driven assumption. We are investing in the team. We feel the team is very well placed to deliver on that objective.

Alright, thank you.

Thank you. Our next question comes from Ashish <unk> with RBC capital markets. Your line is open.

Hi, Good morning. This is David page on for Ashish I was wondering if you could just.

A little color on the acquisition that you made in the quarter.

It was needed and I guess, what are the benefits and maybe financial profile. If you add one thank you.

Yeah.

I'll start if my my voice here holds up I'm. So glad you asked we're really excited.

As you know here at ADP, one of our strategic priorities is to lead with best in class HCM technology and that's it.

Excuse me.

Yeah uh Jared it's Peter um uh came in. Yeah, broadly in line with our expectations, maybe 10 basis points or so above actually. So so we were, we were happy with where the first quarter came in, with respect to wsc's, um, you know, our confidence. We do have a little bit of a, a a ramp, but again, not meaningfully different percentages. But if you're talking at 10 or 20 basis points a little bit of a ramp in the second half of the year, which is really a booking driven, um, bookings driven assumption, we're not anticipating, uh, in the same way, we spoke about with the es. We're not anticipating any ramp through the year in in the Poo Pace per control metric. Um, so really, it's a, it's a booking striven assumption. And we are investing and the team, you know, we feel the team is very well placed to, um, to deliver on on that objective.

[Analyst 2]: Great. In terms of the PEO July 1 enrollment period, can you talk about your performance there? Did you witness any change in participation rates, enrollment rates, or any kind of buy-down behavior?

And that's exactly what this what this acquisition brings for us and so we're focused on bringing the best products and services to our clients and while we've currently had offerings within this space. This is.

Maria Black: Yeah, happy to take that. You're absolutely right. We just finished the enrollment period. Proud of how the team executed through this cycle. I think there's no secret out there that health benefits are topical and on employers' minds. Continue to see the value proposition of the PEO and specifically how we structure our PEO, win out there in the market, and really help employers navigate these changing times. I will tell you, health benefits are and remain the norm for all of the higher wage industries that our PEO targets. Those participation rates that we've seen, they're actually the highest for us that they have been, the highest levels, if you will, for the last four years or so. We have seen actually a bit of a participation uptick.

Great. And then, in terms of the, um, peo, uh, July 1, enrollments there, did you win this? Any change in participation rates, enrollment rates, or any kind of, by down Behavior?

Above and beyond what we've currently been offering and we're really excited to fold this technology into our existing existing offer and I think this acquisition is a great approach of how we're thinking about innovation and how we're thinking about the value proposition to our clients.

Companies certainly need innovative compensation management software that's exactly what this is and so we're really excited to bring it.

Into our portfolio and into our various platforms for both existing.

Yeah, happy to take that. Um, you're absolutely right. We just uh, finished the uh, the enrollment period. Uh proud of how the team executed through the cycle. I think there's there's no secret out there that health benefits are topical and on employers Minds. Uh so continue to see the value proposition of the peo and specifically how we structure, our peo went out there in the market and really help employers navigate these these Changing Times. I will

This thing and prospective clients. So again really excited about it and excited to announce that and certainly I will take the opportunity just to add to welcome all of the associates of faculty into ADP are really excited about the work that we'll do it together and then Peter if you want to talk about the the financials about yes, absolutely.

Maria Black: That's great to see because it does substantiate that we're selling to the right industries and those industries do value benefits as part of their offering to drive their overall employment or employer value proposition. I think our PEO fits squarely into how difficult it is for employers to navigate in that size today out there.

David.

It's a small company today, so the financial profile is.

Meaningful in the context of ADP for this fiscal year were excited as Maria said about the opportunities for the product it says.

It's an acquisition or strategic acquisition, but in terms of the financials not really noticeable in the context of ADP and has been contemplated in the outlook that we've we've reaffirmed today. So that's that's what I would have to say on the financial side of it.

How you help benefits are and remain the norm for all of the higher wage industries that our peo targets, uh, those participation rates that we've seen. They're actually the highest for us that they have been, uh, the highest levels if you will for the last 4 years or so. So we have seen actually a bit of a participation uptick that's great to see because it does substantiate that we're selling to the right Industries and those Industries do value, uh, benefits as part of their offering to, uh, to drive their overall employment or employer value proposition. So I think our peo, uh, fits squarely into, uh, how difficult it is for employers to navigate in that size. Uh, today out there.

[Analyst 2]: Thank you.

Thank you.

Operator: Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open.

Oh, great. Thank you so much I appreciate the color.

Thank you. Our next question comes from Ashish sabadra with RBC Capital markets. Your line is open.

[Analyst 3]: Hi, good morning. This is David Page on for Ashish. I was wondering if you could just provide a little color on the acquisition that you made in the quarter, why it was needed, and I guess what are the benefits and maybe financial profile if you had one. Thank you.

Thank you. Our next question comes from Daniel Jester with BMO capital markets. Your line is open.

Great. Good morning, Thanks for taking my question I appreciate all the color on the demand environment. So far maybe I'll just tackle it from a little bit of a different angle.

Maria Black: Yeah, perhaps I'll start if my voice here holds up. I'm so glad you asked. We're really excited. As you know, here at ADP, one of our strategic priorities is to lead with best-in-class HCM technology. That's exactly what this acquisition brings for us. We're focused on bringing the best products and services to our clients. While we've currently had offerings within this space, this is above and beyond what we've currently been offering. We're really excited to fold this technology into our existing offering. I think this acquisition is a great approach of how we're thinking about innovation, how we're thinking about the value proposition to our clients. Companies certainly need innovative compensation management software. That's exactly what this is. We're really excited to bring it into our portfolio and into our various platforms for both existing and prospective clients. Again, really excited about it, excited to announce it.

Hi, good morning. This is David Paige on for Ashish. I was wondering if you could just provide a little color on the acquisition that you made in the quarter, why it was needed, and what the benefits are. Additionally, if you have any insights on the financial profiles, that would be great. Thank you.

Any anything that you'd call out with regards to the difference between sort of the U S and international markets I know last fiscal year.

A little bit of Choppiness on the international side, but just wondering kind of what youre seeing in that mix. Thank you.

Yeah. So perhaps I'll start if my uh my voice here holds up, I'm so glad you asked. Uh we're really excited. Um as you know, here at ADP, uh, 1 of our strategic priorities is to lead with best-in-class HCM technology and that's

Excuse me.

Yeah sure Thanks, Daniel and choppy as one word I think we'd like we'd like lumpy better than choppy and that's not atypical for for international for US. It's it's generally these are large complex deals they do have a bit of a lumpy pattern to them.

And that's exactly what this uh, what this acquisition brings for us. And so, we're focused on bringing the best products and services to our clients. And while we've currently had offerings within this space, uh, this is

And certainly while we did see.

A little bit of a softer quarter with international in the third quarter. We also saw incredible strength in the fourth quarter with international So international this quarter Q1 of fiscal 'twenty six.

Again, a bit bit softer for us, but that's mainly again back to kind of the lumpy nature of it it's not a typical on the heels of what was an incredible finish the pipeline is solid they're executing well and they continue to remain laser focused on executing throughout this fiscal year. So that they can reaccelerate that growth.

Maria Black: Certainly, I'll take the opportunity just to welcome all of the associates of Pequity into ADP. Really excited about the work that we'll do together. Peter, if you want to talk about the financials a bit.

The finish.

Great. Thank you and then maybe to go back to an earlier topic of conversation on the workforce now next gen for the 20% of new bookings, who choose not to take it is.

Don McGuire: Yeah, absolutely. David, it's a small company today. The financial profile is not meaningful in the context of ADP for this fiscal year. We're excited, as Maria said, about the opportunities for the product. It's an acquisition, a strategic acquisition, but in terms of the financials, not really noticeable in the context of ADP and has been contemplated in the outlook that we've reaffirmed today. That's all I would have to say on the financial side of it.

Is there any commonalities in terms of why that is or friction that you are seeing and should the expectation be for that segment of the market at some point this fiscal year that gets to 100% or how should we be thinking about that thank you. So much.

Above and beyond what we've currently uh been offering and we're really excited to fold this uh technology into our existing existing offer. And I think this acquisition is a great approach of how we're thinking about Innovation, how we're thinking about the value, proposition to our clients. Uh, companies certainly need Innovative compensation management software. That's exactly what this is. And so, we're really excited to bring it, uh, into our portfolio and into our various platforms, uh, for both existing and prospective clients. Uh, so again, really excited about it, excited to announce it. And certainly, uh, I'll take the opportunity just to, uh, to welcome all of the associates of equity into ADP, uh, really excited about the work that we'll do together and then Peter, if you want to talk about the, uh, the financials a bit. Yeah, absolutely. The um, David the, it's a small company today. So the, the financial profile is, is not meaningful in the context of ADP, for this fiscal year.

It is a fantastic question, one that I like to ask myself very often the real answer is I don't know that we will get to a 100% at the end of this first call because of our clients in that space.

Said about the opportunities for the product. It's as it, it's an acquisition, a strategic acquisition, but in terms of the financials, not really noticeable in the context of ADP and has been contemplated in in the Outlook that we've uh, We've reaffirmed today. So that's, that's all I would have to say on the financial side of it.

[Analyst 3]: Oh, great. Thank you so much. Appreciate the color.

Oh great, thank you so much. Appreciate the color.

Operator: Thank you. Our next question comes from Daniel Jester with BMO Capital Markets. Your line is open.

The mid market is a space that does a lot of acquisitions things of that nature adds locations. So clients will always want to ensure they have kind of one one offering if you will so the bulk of that 20% of our clients that are or call. It knockouts and some capacity. The most common knockout as a client that's adding a location or adding a company to their existing portfolio.

Thank you. Our next question comes from Daniel Gesture with BMO Capital Markets. Your line is open.

[Analyst 1]: Great. Good morning. Thanks for taking my question. Appreciate all the color on the demand environment so far. Maybe I'll just tackle it from a little bit of a different angle. Anything that you'd call out with regards to the difference between sort of the U.S. and international markets? I know last fiscal year, there's maybe a little bit of choppiness on the international side, but just wondering kind of what you're seeing in that mix. Thank you.

Oh.

So that's kind of where it stands.

Thank you.

Thank you. Our next question comes from Tien Tsin Huang with Jpmorgan. Your line is open.

Maria Black: Yeah, sure. Thanks, Daniel. Choppy is one word. I think we like lumpy better than choppy. That's not atypical for international for us. It's generally, these are large, complex deals. They do have a bit of a lumpy pattern to them. Certainly, while we did see a little bit of a softer quarter with international in the third quarter, we also saw incredible strength in the fourth quarter with international. International this quarter, Q1 of fiscal 2026, we're again a bit softer for us, but that's mainly, again, back to kind of the lumpy nature of it. It's not atypical on the heels of what was an incredible finish. The pipeline is solid. They're executing well, and they continue to remain laser-focused on executing throughout this fiscal year so that they can re-accelerate that growth for the finish.

Any anything that you'd call out with regards to the difference between sort of the US and and international markets? I know last fiscal year, uh there's maybe a little bit of choppiness on the international side but just wondering kind of what you're seeing in that that mix. Thank you.

I think just a couple of questions one on the on the PEO side thinking about Ws season, and how that's tracking and your benchmarking versus.

Your peers, how would you.

So rate your performance there I'm curious if we're seeing some pretty.

Yeah sure thanks Danielle and and choppy is 1 Word. I think we like we like lumpy better than choppy and that's not a typical for uh for international for us. It's it's generally, these are large complex Fields. They do have a, a bit of a, a lumpy pattern to them. Uh and certainly while we did see, uh,

A wide variance in where that's coming up so does it feel like GDP is doing well from insurance side, but just wanted to get your impressions about.

Yeah, So I think Oh.

<unk>, we feel really positive about the momentum in our PEO, we did see PEO bookings growth continued through the first quarter, although listen it moderate a little bit based on kind of finished that PEO had in the fourth quarter. So there was a tiny bit of moderation, but it's still.

The growth continued through the first quarter, we actually were just down all of US last week down meeting with our PEO business and spending time with their leadership and their management and their they're squarely focused both on bookings there they're focused on driving our retention, which improved slightly last year and we continue to see slight improvements.

A little bit of a softer quarter with International and the third quarter. We also saw Incredible strength in the fourth quarter with International. Uh, so International Discord, or q1 of fiscal 26, uh, we're again a bit bit softer for us, but that's mainly again, back to kind of the lumpy nature of it. It's not a typical, uh, on the heels of what was an incredible finish. Uh, the pipeline is solid, uh, they're executing well and they continue to remain laser focused on executing throughout this fiscal year, uh, so that they can react that growth, uh, for the Finish.

[Analyst 1]: Great. Thank you. Maybe to go back to an earlier topic of conversation on the Workforce Now NextGen, for the 20% of new bookings who choose not to take it, is there any commonalities in terms of why that is or frictions that you're seeing? Should the expectation be for that segment of the market at some point this fiscal year that gets to 100%, or how should we be thinking about that? Thank you so much.

And that is really what what is going to drive that W. W. S. E growth I would say in the context of others I think where we're winning we have a winning hand structurally we have a winning leadership team really impressed with how they are aligned towards execution and how focused they are specifically on growth and <unk> growth.

Great, thank you. And then maybe to go back to an earlier topic of conversation on the Workforce. Now, NextGen for the 20% of the new bookings you chose not to take, is there any commonality in terms of why that is or friction that you're seeing? And should the expectation be...

Maria Black: It is a fantastic question, one that I like to ask myself very often. The real answer is I don't know that we will get to 100% at the end of this fiscal because there are clients in that space. Certainly, the mid-market is a space that does a lot of acquisitions, things of that nature, adds locations. Clients will always want to ensure they have kind of one offering, if you will. The bulk of that 20% are clients that are, call it, knockouts in some capacity. The most common knockout is a client that's adding a location or adding a company to their existing portfolio. That's kind of where it stands.

For that segment of the market, at some point this fiscal year, that gets to 100%, or how should we be thinking about that? Thank you so much.

Don't know Peter if you have any comments with respect to our WCS and versus the others, but I think certainly we feel as though we have a winning hand in the context of the other P. S.

Just say attention I think even though to see.

Everyone has a slightly different accounting convention for many of these things in the landscape. So.

In terms of in terms of what we measure and how we measure our business as Mario said I think we're really happy.

I answered the question earlier this quarter was slightly ahead, but not meaningfully but slightly ahead as opposed to the alternative which is always good. So slightly ahead of our expectations on ws season, and as we both said we expect we have a we have a winning team there and we are expecting more booking success through the year that will drive the number up a little bit but not mark.

It is a fantastic question 1 that I like to ask myself very often. The real answer is I don't know that we will get to 100% uh at the end of this fiscal because there are clients in that space. Uh, certainly the mid-market is a space that does a lot of Acquisitions things that that nature adds locations. So clients will always, you know, want to ensure they have kind of 1 1 offering if you will. So the bulk of that 20% are clients that are are call it Knockouts and some capacity. The most common Knockout is a client that's adding a location or adding a company to their existing portfolio, uh, so that that's kind of where it stands.

[Analyst 1]: Thank you.

Thank you.

Operator: Thank you. Our next question comes from Tien-tsin Huang with JPMorgan Chase & Co. Your line is open.

Thank you. Our next question comes from Tenzin Huang with JP Morgan. Your line is open.

Thirdly, we're still squarely in the two to three range.

[Analyst 3]: Hi, thanks. Just a couple of questions. One on the PEO side, thinking about WSEs and how that's tracking and your benchmarking versus your peers, how would you sort of rate your performance there? I'm curious because we're seeing some pretty wide variance in where that's coming out. It does feel like ADP is doing well from a share side, but just wanted to hear your impressions of that.

Okay, no glad to hear that just my quick follow up I have to ask them here for you Maria is nice to see you at the <unk>.

I think just just a couple of questions, 1 on the, on the pto's, thinking about wsc's, and how this tracking, and, and your benchmarking versus

Customer confidence.

Morning results.

Your your peers, how would you?

Now as well and the stock's down quite a bit because theyre going through quite a bit of change cultural shift.

Rate your performance there. I'm curious if we're seeing some pretty.

So just the commitment on obviously <unk>.

At the event shows the commitment but does this alter some of the.

Uh, wide variance and and where that's coming out. So it does feel like ADP is doing well from a sheriff's side but just wanted to keep your impressions of that.

Maria Black: Yeah, I think, you know, overall, we feel really positive about the momentum in our PEO. We did see PEO bookings growth continue through the first quarter, although it moderated a little bit based on kind of the finish that PEO had in the fourth quarter. There was a tiny bit of moderation, but the growth continued through the first quarter. We actually were just down, all of us last week, meeting with our PEO business and spending time with their leadership and their management. They're squarely focused both on bookings and on driving retention, which improved slightly last year. We continue to see slight improvements, and that is really what is going to drive that WSE growth. I would say in the context of others, I think we're winning. We have a winning hand structurally.

Maybe the targets that you're expecting.

From the partnership given Theyre going through some some restructuring there I don't know how much.

[noise] insight you have on that.

Ask you on the call.

Yeah No I appreciate the question and thank you listen it was an honor to be there I think it's almost exactly one month to the day that I was on stage with the CEO of Pfizer.

We're very committed to this partnership we're very committed to the sales collaboration.

Setting up on that stage and looking out into a a sea of analysts, but also potential clients partnerships banks would I have to tell you is what we are doing with fiserv and other embedded partners by serving up run in the platforms that they are <unk>.

Live and operate as a game changer, and we see that by the way. We also see it inside of our our own ecosystem of distribution you know one of my favorite examples that I heard this quarter was a CPA that we've worked closely with for for years in our Downmarket bring us a client of theirs are that is currently leveraging clove.

Maria Black: We have a winning leadership team, really impressed with how they're aligned toward execution and how focused they are specifically on growth and WSE growth. I don't know, Peter, if you have any comments with respect to our WSEs versus the others, but I think certainly we feel as though we have a winning hand in the context of the other PEOs.

Yeah, so I think, um, you know, overall we feel really positive about the momentum in our peo, uh, we did cpeo. Bookings growth continues through the, uh, the first quarter. Although listen moderate a little bit, uh, based on kind of the finish that peo, uh, had in the fourth quarter. So, there was a tiny bit of moderation, but it's still, uh, the growth continued through the first quarter. Uh, we actually were just down all of us last week down, uh, meeting with our peo business and spending time with their leadership, and their management and their, their squarely focused both on bookings. There's they're focused on driving uh, retention, uh, which improved slightly last year and we continue to see slight improvements. And that is really what, what is going to drive that W? Wse growth, I would say in the context of others, I think we're we're winning. We have a winning hand. Uh, structurally. We have a winning leadership team, really impressed, uh, with how they're aligned toward execution, and how focused they are specifically on growth and wc growth.

And we have the ability to put a again ADP inside of that clover relationship with that client and it made.

Don McGuire: Yeah, no, I would just say intentionally, I think you know this, everyone has a slightly different accounting convention for many of these things in the PEO landscape. In terms of what we measure and how we measure our business, as Maria said, I think we're really happy. I answered the question earlier. The first quarter was slightly ahead, not meaningfully, but slightly ahead as opposed to the alternative, which is always good. Slightly ahead of our expectations on WSEs. As we both said, we expect we have a winning team there, and we are expecting more booking success through the year that will drive the number up a little bit, but not markedly. We're still squarely in the 2 to 3 range.

Things that much easier for the small business, which is the entire goal, but also much easier for the CPA. So we're serving the ecosystem as well and giving that client and the CPA the ability to kind of see their end to end cash flow and so that's really exciting I have to tell you. The work that we've done from a technical perspective, it's great from a sales collaboration.

Uh, so I don't know Peter, if you have any comments with respect to RWC and versus the others, but I think uh certainly we feel as though we have a winning hand in the context of the other peos. Yeah. No. I would just say intention. I think, you know this the everyone has a slightly different counting convention for many of these things in the PO landscape. So, um, you know, in terms of, in terms of what we measure and how we measure our

Great from a marketing perspective is great. There's no shortage of commitment to it that said, though we did just roll it out across the back book I mentioned that a bit earlier I think we're not perhaps mark was asking about it and so the bulk of the opportunity is still in front of us. It's very much early innings for us, but there's no lack of commitment.

[Analyst 3]: Okay, good. No, glad to hear it. Just my quick follow-up. I have to ask you here for you, Maria. It was nice to see you at the Fiserv customer conference. The reporting results, you know, right now as well, and stock's down quite a bit because they're going through quite a bit of change, cultural shift. Just the commitment on, obviously, your being at the event shows the commitment, but could this alter some of maybe the targets that you're expecting, you know, from the partnership given they're going through some restructuring there? I don't know how much insight you have on that, but thought I'd ask you on the call.

Business as Maria said. I think we're we're really happy. I answered the question earlier, the first quarter was slightly ahead, but not meaningfully, but slightly ahead as opposed to the alternative, which is always good. So, slightly ahead of our expectations on wsc's. And, and as, as we've both said, you know, we expect we have a, we have a winning team there and we are expecting, you know, more booking Success Through the year, that will drive the number up a little bit. But not, um, not markedly. We're still squarely in the 2 to 3 range.

Okay perfect. Thank you.

Thank you. Our next question comes from Kevin Mcveigh with UBS. Your line is open great.

Great. Thanks, so much I know you talked about the impact of the one processing day can you just remind us what that sensitivity is in terms of.

Um, so just the the commitment on, obviously, if you being at the event shows the commitment. But could could this Alters some of the, uh,

What the impact is Q1 to Q2.

Yes.

I don't have the number to hand, Kevin, but it's it's not a it's not a big number.

Maybe the the targets that you're expecting, um, you know, from the partnership given. They're going through some, some restructuring there. I don't know how much, uh,

Maria Black: Yeah, no, appreciate the question, and thank you. Listen, it was an honor to be there. I think it's almost exactly one month to the day that I was on stage with the CEO of Pfizer. We are very committed to this partnership. We're very committed to the sales collaboration, sitting up on that stage and looking out into a sea of analysts, but also potential clients, partnerships, banks. What I have to tell you is what we are doing with Pfizer and other embedded partners by serving up run in the platforms that they live and operate is a game changer. We see that. By the way, we also see it inside of our own ecosystem of distribution.

Insight you have on that but thought I'd ask you on the call.

Matt I'm, just looking at Matthew that's around 10 million.

Most importantly, full number and all number it's not going to be you know, you'll see it a little bit but not much not much when I. When I was talking about it earlier I'm talking about in terms of the revenue growth rate I think the main driver in terms of the second quarter revenue growth rate is versus first quarter as the full of the acquisition.

Anniversary I should say of the acquisition effect.

We might be talking 10, 10 ish basis points.

Something like that for the for the processing day, but I don't recall the exact number but it's not a meaningful number just something you may observe in the in the in the growth rate cadence from Q1 to Q2.

Yeah, no, appreciate the question and thank you. Listen, it was an honor to be there. I think it's almost exactly 1 month to the day that I was on stage with the, uh, the CEO of Fiserv. Uh, we are very committed to this partnership. We're very committed to the sales collaboration, sitting up on that stage and looking out into a, a sea of analysts. Uh but also potential, clients Partnerships Banks. Uh, what I have to tell you is what we are doing with Fiserv and other embedded partners by serving up, run in the platforms that they

Maria Black: One of my favorite examples that I heard this quarter was a CPA that we've worked closely with for years in our down market bring us a client of theirs that is currently leveraging Clover. We had the ability to put, again, ADP inside of that Clover relationship with that client. It made things much easier for the small business, which is the entire goal, but also much easier for the CPA. We're serving the ecosystem as well and giving that client and the CPA the ability to kind of see their end-to-end cash flow. That's really exciting. I have to tell you the work that we've done from a technical perspective is great, from a sales collaboration is great, from a marketing perspective is great. There's no shortage of commitment to it. That said, we did just roll it out across the backbook.

That's very helpful. And then can you just remind us because it was great to see that the increase in the fluid on both the client funds and the extended strategy, but obviously the balances are pretty meaningfully different in terms of the principle right.

And just remind us why because both went up about $10 million is that just purely the difference in rate or timing. It just it's a pretty interesting phenomena.

Yes, so the.

live and operate. Uh, is a game changer. And we see that, by the way, we also see it inside of our, our own ecosystem of distribution. You know, 1 of my favorite examples that I heard this quarter was a, a CPA that we've worked closely with for, for years, uh, in our Dawn Market, bring us a client of theirs. Uh, that is currently leveraging Clover. And we have the ability to put uh, again ADP inside of that Clover relationship with that client. And it made, uh, things much easier for the small business, which is the entire goal, but also much easier for the CPA. So we're serving the ecosystem as well and giving that client and the CPA, the ability.

Our yield expectations essentially haven't moved yet is it.

Slight moves within the within the three 4%, but because we did have.

A marginal adjustment if you like to the forward curves back in late July when we produce our initial guidance to two you know when we produce this this reaffirmation.

Maria Black: I mentioned that a bit earlier, I think when perhaps Mark was asking about it. The bulk of the opportunity is still in front of us. It's very much early innings for us, but there's no lack of commitment.

Now, but it's really a balance driven thing. So we saw as you'll see I think in the reporting we did for the first quarter. We saw very strong balanced growth in the first quarter a lot of that is driven by continued strength in wage growth.

[Analyst 3]: Okay, terrific. Thank you.

Ability to kind of see their end-to-end cash flow, and so that's really exciting. I have to tell you the work that we've done from a technical perspective is great; from a sales collaboration, it is great; and from a marketing perspective, it's great. There's no shortage of commitment to it. That said, though, we did just roll it out across the bakbuk. I mentioned that a bit earlier, I think when Press Mark was asking about it. So, the bulk of the opportunity is still in front of us. It's very much early innings for us, but there's no lack of commitment.

Okay, perfect. Thank you.

Operator: Thank you. Our next question comes from Kevin McVeigh with UBS. Your line is open.

We have contemplated both in the in the client fund interest as well as in the PEO.

[Analyst 3]: Great. Thanks so much. Hey, I know you talked about the impact of the one processing day. Can you just remind us of what that sensitivity is in terms of what the impact is Q1 to Q2?

Excuse me some moderation to to wage growth in the rest of the year, which is why we're we're guiding to 3% to 4% as opposed to the 7% that we delivered in the first quarters, but with the $10 million is really coming from the balances from the denominator not so much from the from the movement in yields.

Thank you. Our next question. Comes from Kevin McVay with UBS. Your line is open. Great. Thanks so much. Hey, I, I know you talked about the impact of the 1 processing day. Can you just remind us of what that sensitivity is uh, in terms of what the impact is q1 to Q2?

Don McGuire: Yeah, I don't have the number to hand, Kevin, but it's not a big number. I've got Matt, I'm just looking at Matt here, around $10 million.

Thank you very much.

You're welcome.

Thank you. Our next question comes from Dan Donlan with Mizuho. Your line is open.

[Analyst 2]: It's a modest impact, Kevin.

Don McGuire: Small number.

[Analyst 2]: Small number. It's not going to be, you know, you'll see it a little bit, but not much.

Hey, sorry, and I was in a different call. So I apologize. If the question was asked but can you maybe touch again on that pays per control.

Don McGuire: When I was talking about it earlier, I'm talking about in terms of the revenue growth rate. I think the main driver in terms of the second quarter revenue growth rate versus first quarter is the falloff of the acquisition, the anniversary, I should say, of the acquisition effect. We might be talking 10-ish basis points, something like that for the processing day, but I don't recall the exact number. It's not a meaningful number. It's just something you may observe in the growth rate cadence from Q1 to Q2.

Lower baseband control that would be helpful. We're getting a lot of questions about it and apologies if that was addressed.

No that's okay, Dan I'll take that.

Again, we've you can say, we've narrowed our range to the to the low end of the range. So again, we're talking about probably tens of basis points of movement in that.

Yeah. It's I don't I don't have the number to hand Kevin, but it's it's not a it's not a big number. I I've got Matt. I'm just looking at Matt here around 10 million it's a it's a modest impact Kevin full number small number. It's not going to be, you know, you'll see it a little bit but not by not much. When I when I was talking about it earlier, you know, I'm talking about in terms of the revenue growth rate. I think the main driver in terms of the second quarter Revenue, growth rate is versus first quarter is the is the fall off of the acquisition. Uh, you know, the anniversary I should say of the acquisition effect. Um, you know, we we might be talking, you know, 10 10 spaces points,

Projection on a full year non.

Not meaningful amounts of revenue not meaningful amounts of margin, it's there, but it's not particularly meaningful.

Um, something like that for the for the processing day. But I don't, I don't recall the exact number, but it's it's not a meaningful number. It's just something you may observe in the in the, in the growth rate, Cadence from q1 to Q2.

[Analyst 3]: That's very helpful. Can you just remind us, because it was great to see the increase in the flow on both the client funds and the extended strategy, but obviously the balances are pretty meaningfully different in terms of the principal, right? Just remind us why, because it both went up about $10 million. Is that just purely the difference in rate or timing? It's just, it's a pretty interesting phenomenon.

Really it's just come from from the data, we see in our own client base in terms of hiring levels.

I should add to that.

That in the context, we're also seeing very low levels of of layoffs in the base. So it's a very static situation. It felt like a move to the lower end of the range. We previously quoted as is appropriate.

Don McGuire: Yeah, so our yield expectations essentially haven't moved. Yes, there's slight moves within the 3.4%, but because we did have a marginal adjustment, if you like, to the forward curves back in late July when we produced our initial guidance to, you know, when we've produced this reaffirmation now. It's really a balance-driven thing. We saw, as you'll see, I think in the reporting we did for the first quarter, very strong balance growth in the first quarter. A lot of that is driven by continued strength in wage growth. We have contemplated both in the client funds interest as well as in the PEO, excuse me, some moderation to wage growth in the rest of the year, which is why we're guiding to 3% to 4% as opposed to the 7% that we delivered in the first quarter.

It's very helpful and then can you just remind us because it was great to see that the increase in in the flow on both the the client funds and the the extended strategy. But but obviously the balances are pretty meaningfully different in terms of the principle, right? Just remind us. Why? Because it both went up about 10 million dollars is, is that just purely the the difference in rate or, or timing it just it's a pretty interesting phenomena.

Given where the macro is if that were to change obviously.

yeah, so they're, they're our

Options may evolve through the fiscal year, but but right now I don't think it's a big surprise that.

That hiring is tight and as such we've just narrow down our expectation you know within the range that we previously guided towards the low end.

Got it and hopefully I'm not redundant again cause.

I should be it should be on the entire coal, but on these recent announcements, whether it's amazon or whatever is that changing their customers or it's already included in your expectations.

Not really I mean, these things make they make news obviously their headline worthy, but we have a very large base of $1 1 million clients and 26 million workers.

Our yield expectations essentially, haven't moved. Yes. There's, there's slight moves within the within the 3.4%, but because we did have a, a marginal, uh, adjustment. If you like to the forward curves back in Late July, when we produce our initial guidance to to, you know, when we've produced this, um, this reaffirmation, um, uh now. But but it's it's really a balanced driven thing. So we saw as, as you'll see, I think in the reporting we did for the first quarter, we saw very strong balanced growth in the first quarter. A lot of that is driven by continued strength in wage growth. Um, we have contemplated both in the in the client fund interest as well as in the peo.

In the U S.

We pay Amazon in fact, and you know that's a small fraction of a very small fraction of the number of work as we pay for Amazon. So these things are contemplated in our guidance again.

Don McGuire: The $10 million is really coming from the balances, from the denominator, not so much from the movement in yields.

What we're seeing in the in the wider macro data is certainly reduced hiring levels, but also as I said, a moment ago very much reduced layoff levels to sort of lows, we haven't seen in a number of years. So the the whole hiring situation is relatively static and we believe contemplated in our guidance.

Excuse me, some moderation to uh, to wage growth in the rest of the year, which is why we're why we're guiding the 3 to 4% as opposed to the 7% that we delivered in the first quarter. But but the 10 million is really coming from the balances. From the denominator, not So Much from the, um, you know, from the movement in um, in yields.

[Analyst 3]: Thank you very much.

Don McGuire: You're welcome.

Thank you very much. You're welcome.

Operator: Thank you. Our next question comes from Dan Dolev with Mizuho. Your line is open.

Thank you. Our next question comes from Dan Dolev, with Meizuo. Your line is open.

[Analyst 1]: Sorry, I was on a different call, so apologies if the question was asked. Can you maybe touch again on that pace per control, you know, lower pace per control? That would be helpful. We're getting a lot of questions about it. Apologies if that was addressed.

Great well great quarter again.

Good job.

Thanks, Dave.

on that, uh, pacebutler control

Thank you. Our next question comes from James Faucette with Morgan Stanley. Your line is open.

Hi, Robin it's Michael <unk> on for Jim Thanks for taking my question.

Uh, you know, lower pacebutler, that would be helpful. Uh, we're getting a lot of questions about it and apologies, if that was addressed,

Don McGuire: That's okay, Dan. I'll take that. Again, you could say we've narrowed our range to the low end of the range. Again, we're talking about probably tens of basis points of movement in our projection on the full year, not meaningful amounts of revenue, not meaningful amounts of margin. It's there, but it's not particularly meaningful. Really, it's just come from the data we see in our own client base in terms of hiring levels. I should add to that in the context, we're also seeing very low levels of layoffs in the base. It's a very static situation. It felt like a move to the lower end of the range we previously quoted is appropriate, just given where the macro is. If that were to change, obviously, our assumptions may evolve through the fiscal year. Right now, I don't think it's a big surprise that hiring is tight.

It would be great to get your perspective on on a stable client topic potentially being used as a mechanism to pay employees, we can obviously sort of debate.

And then two the adoption, but how do you think about your intention to support that.

Our rail and how do you think about some of the regulatory compliance or tax constraints that would have to be cleared in the interim.

Yeah. It's a great question, we think about it a lot we think about it from the Ey exactly what you're suggesting suggesting which is from a regulatory perspective. So I think that's the big piece.

That we are keeping a keen eye on is with respect to the.

The regulatory environment and ultimately once that that clears, how ultimately we will be able to support our clients as they navigate that is an offer in terms of our payment should that happen. So I think those are the questions that we are keeping a keen eye on both in Washington.

Don McGuire: As such, we've just narrowed our expectation within the range that we previously guided towards the low end.

[Analyst 1]: Got it. Hopefully, I'm not redundant again because I should be on the entire call. On these recent announcements, you know, whether it's Amazon or whatever, is that changing the calculus or it's already included in your expectations?

No, that's okay, Dan, I'll take that. Um, again, we've we've you could say we've narrowed our range to the to the low end of the range. So again, we're talking about probably tens of basis points of of movement in in, in our projection on on the full year. Not not meaningful amounts of Revenue, not meaningful amounts of margin, it's there, but it's not particularly meaningful. Um, really it's just come from from the data, we see in our own client base in terms of hiring levels. Um, I should add to, to, to that in in the context, we're also seeing very low levels of, um, of layoffs, you know, in the base. So, it's a very static situation. It felt like, um, you know, a move to the lower end of the, the range we previously quoted is is appropriate. Um, just given where the macro is, if that were to change, obviously, we our assumptions May evolve through the fiscal year, but, um, but right now, I don't think it's a big surprise that um, that you know, hiring is tight. And as such, we've just narrowed our, our expectation, you know, within the range that we previously guided towards the lower,

End.

As well as kind of through the banking environment, but certainly as it relates to the the bank the banking side from our end in terms of real time and rails.

We are preparing ourselves for all possibilities.

Don McGuire: Not really. I mean, these things make news, obviously, they're headline-worthy, but you know, we have a really large base, you know, 1.1 million clients and 26 million workers paid in the U.S. We pay Amazon, in fact, and you know, that's a small fraction of, a very small fraction of the number of workers we pay for Amazon. These things are contemplated in our guidance. Again, what we're seeing in the wider macro data is certainly reduced hiring levels, but also, as I said a moment ago, very much reduced layoff levels to sort of lows we haven't seen in a number of years. The whole hiring situation is relatively static and we believe contemplated in our guidance.

But it in in hopefully, I'm not redundant again because I should be, I should be on the entire call, but on, on these recent announcements, you know, whether it's Amazon, or whatever, is that changing the calculus or it's already included in in your expectations.

These things evolve and from a strategic perspective, that's an imperative for us to always make sure that we are in a position to support how client employees want to get paid and certainly if things of all will be right at the ready to us to do it.

Thanks, Brian.

Thank you we have time for one more question and that question comes from Zachary <unk> with Ft Partners. Your line is open.

Hey, there thanks for squeezing me in here.

Wanted to go back to last quarter. There was some commentary around the full year guide assuming a continued moderation in the macro and I recognize as tightening the range on pays per control more rounding the basis points, but I just wanted to see if that if the guide still has some level of moderation baked in or if we've seen the macro news.

[Analyst 1]: Great. Great quarter again. Good job.

Don McGuire: Thanks, Dan.

Oh, really? I mean, these things make they make news, obviously, they're they're a headline worthy. But, you know, we have a very large base, you know, 1.1 million, clients and 26 million workers paid in the US. Um, we pay Amazon in fact, and, you know, that's a small fraction of, uh, very small fraction of the number of workers. We pay for Amazon. So, these things are contemplated in in our guidance again. Um, you know what, what we're seeing in the in the wider macro data is is certainly reduced hiring levels. But also, as I said a moment ago, very much reduced layoffs levels to sort of lows we haven't seen in a number of years. So the the whole hiring situation is relatively static and and we believe contemplated in our guidance. Great, well, great quarter again, uh, good job.

Thanks. Thanks.

Operator: Thank you. Our next question comes from James Faucette with Morgan Stanley. Your line is open.

Thank you.

Stanley, your line is open.

[Analyst 2]: Hi, Bryan. It's Michael in for James. Thanks for taking our question. Maria, it'd be great to get your perspective on the stablecoin topic potentially being used as a mechanism to pay employees. We can obviously sort of debate the magnitude of adoption, but how do you think about your intention to support that as a rail? How do you think about some of the regulatory compliance or tax constraints that would have to be cleared in the interim? Thanks.

Towards those expectations. Thanks.

I think I mean, I think we we have seen a little bit of that.

Any metrics I'm talking about is pays per control. So again, we said we expected to low sorry, we rounded down to zero percent in the first quarter, which was a little lower expectations. So I think we have seen some of that flow through but again I would say.

Hi everyone. It's Mike on font town for James. Thanks for taking our question, Maria. It'd be great to get your perspective on on the stable coin topic. Potentially being used as a mechanism to, to pay employees. We can obviously sort of debate, the, the magnitude of adoption, but how do you think about your intention to, to support that at

System with what I've been answering some of the earlier questions, but I don't think these are material moves away from where we were we originally envisaged things you can obviously see that Oh God. It's been it's been reaffirmed and hopefully you can tell that we feel confident about our ability to deliver on that God.

Maria Black: Yeah, it's a great question. We think about it a lot. We think about it from exactly what you're suggesting, which is from a regulatory perspective. I think that's the big piece that we are keeping a keen eye on, with respect to the regulatory environment. Ultimately, once that clears, how ultimately we will be able to support our clients as they navigate that as an offer in terms of a payment should that happen. I think those are the questions that we are keeping a keen eye on both in Washington as well as through the banking environment. Certainly, as it relates to the banking side from our end in terms of real-time and rails, we are preparing ourselves for all possibilities as these things evolve.

Has a rail. And how do you think about some of the regulatory compliance or tax constraints that would have to be cleared in the interim? Thanks.

Particularly when it comes to unit revenues impacted by things like pays per control, we have float income going a little bit Neal opposite direction. So.

I think I think we have the macro contemplated of course things can change outside of our control that.

Maybe none of us are aware of yet, but that's not our base case assumption I think our base case assumption really is very similar to what we said three months ago with just sort of refining.

At the margins a little bit.

Some of it some of the metrics like client fund interest in like workplace put control, who either within or very close to edges of the range as we previously shared.

Maria Black: From a strategic perspective, that's an imperative for us to always make sure that we are in a position to support how client employees want to get paid. Certainly, if things evolve, we'll be at the ready to do it.

Thank you I'd now like to turn the call back over to Maria Black for any closing remarks.

A lot, we think about it from a exactly what you're suggesting suggesting which is from a regulatory perspective. So I think that's the big piece, uh, that we are keeping a Keen Eye on is uh, with respect to uh, uh, the regulatory environment. And ultimately once that that clears, how ultimately we will be able to support our clients as uh, they navigate, uh, that as an offer, in terms of a, a payment should that happen. So I think those are the, the questions that we are keeping a kind, a Keen Eye on both in Washington, uh, as well as kind of through the, uh, the banking environments. Uh, but certainly, as it relates to the, uh, the bank, the banking side from our end in terms of real time and rails. Uh, you know, we are preparing ourselves for all possibilities as these things evolve. And from a strategic perspective, uh, that's an imperative for us to uh, always make sure that we are in a position to support how client employees want to get paid. Uh, and certainly, if things evolve will be right at the ready to, uh, to

Thanks, Michelle and thank you to everyone. This morning for your interest I have to say the last few weeks have been a time that I've been thinking deeply about all of our stakeholders all of our investors. Our analysts are the community and our associates and I've been thinking a lot about who ADP is that in.

To do it.

[Analyst 2]: Thanks, Brian.

Thanks for

Operator: Thank you. We have time for one more question. That question comes from Zachary Gunn with FT Partners. Your line is open.

[Analyst 2]: Hey there. Thanks for squeezing me in here. I just want to go back to last quarter. There was some commentary around the full-year guide, assuming a continued moderation of the macro. I recognize just tightening the range on pace per control, more rounding on basis points. I just wanted to see if the guide still has some level of moderation baked in or if we've seen the macro move towards those expectations. Thanks.

Thank you. We have time for 1, more question. And that question comes from Zachary gun with ft Partners. Your line is open.

Fabric and and at our core and I want to take a minute to really thank our associates for their undying commitment to our clients it's really.

It's really incredible to watch our values driven culture come to life one of those values driven culture attributes is as a company we provide insightful expertise so its with that I want to take a minute to genuinely thank and acknowledge ADP research and the team over.

Hey there, thanks for squeezing me in here. Um I just want to go back to last quarter. There's some commentary around the full year guide. Assuming a continued, moderation of the macro and I recognize this timing, the range on Pace for control more rounding on basis points. But I just wanted to see if that if the guy still has some level of moderation, baked in, or if we've seen the macro move towards those expectations, thanks.

Don McGuire: I think we have seen a little bit of that. The main metric I'm talking about is pace per control. Again, we said we expected to, sorry, we rounded down to 0% in the first quarter, which was a little below our expectation. I think we have seen some of that flow through. Again, I would say consistent with what I've been answering in some of the earlier questions, I don't think these are material moves away from where we originally envisaged things. You can obviously see that our guide has been reaffirmed, and hopefully, you can tell that we feel confident about our ability to deliver on that guide, particularly when it comes to revenues impacted by things like pace per control. We have our float income going a little bit in the opposite direction. I think we have the macro contemplated.

There, who has been tirelessly and diligently innovating and executing over the past several weeks to bring it to life a weekly estimate of the ADP employment NASA.

National Employment report known as the any our pulse that was made available to all of our stakeholders at the same time.

Yesterday. So this weekly measure is going to bring to life really the mission that they've had at ADP research, all along which is about making the future of work more productive through data driven discovery I have to say that we really mean it when we say that we're always designing for people here at ADP, it's in the fabric of who we.

We are and I'm incredibly proud to be ADP red.

Don McGuire: Of course, things can change outside of our control that maybe none of us are aware of yet, but that's not our base case assumption. I think our base case assumption really is very similar to what we said three months ago. We're just sort of refining at the margins a little bit, some of the metrics like client funds interest and like pace per control, call it either within or very close to the edges of the range as we previously shared.

Thank you for your participation. This does conclude the program you may now disconnect everyone have a great day.

With what I've been answering some of the earlier questions. I don't, I don't think these are material moves away from where we where we originally envisage things, you can obviously see that our guide has been uh has been reaffirmed and and hopefully you can tell that we feel confident about the our ability to deliver on that guide. Um, particularly when it comes to, you know, revenues impacted by things like Pace per control, we have, you know, our float income going a little bit in the opposite direction. So, you know, I think um, I think we have the the macro contemplated. Of course, things can change outside of our control. That that maybe none of us are aware of yet, but that's not our. Our base case assumption. I think our base case. Assumption really is very similar to what we said. 3 months ago. We're just sort of refining, you know, at the margins a little bit, um, you know, some of the, some of the, the metrics, like client fund interest and like, um, like Facebook control call it either within or very close to, you know, edges of of the ranges. We previously shared

Operator: Thank you. I'd now like to turn the call back over to Maria Black for any closing remarks.

Maria Black: Thanks, Michelle. Thank you to everyone this morning for your interest. I have to say the last few weeks have been a time that I've been thinking deeply about all of our stakeholders, all of our investors, our analysts, the community, our associates. I've been thinking a lot about who ADP is in our fabric and at our core. I want to take a minute to really thank our associates for their undying commitment to our clients. It's really incredible to watch our values-driven culture come to life. One of those values-driven culture attributes is, as a company, we provide insightful expertise.

Thank you. And now I have to turn the call back over to Maria black for any closing remarks

Thanks Michelle and thank you to everyone this morning uh for your interest. Uh I have to say the last few weeks have been a time that I've been thinking, deeply about all of our stakeholders, all of our investors uh our analysts uh the community uh our Associates. And I've been thinking a lot about who ADP is in in our Fabric and and and at our core and I want to take

Maria Black: With that, I want to take a minute to genuinely thank and acknowledge ADP Research and the team over there who has been tirelessly and diligently innovating and executing over the past several weeks to bring to life a weekly estimate of the ADP Employment National Employment Report, known as the NER Pulse, that was made available to all of our stakeholders at the same time yesterday. This weekly measure is going to bring to life really the mission that they've had at ADP Research all along, which is about making the future work more productive through data-driven discovery. I have to say that we really mean it when we say that we're always designing for people here at ADP. It's in the fabric of who we are, and I'm incredibly proud to be ADP Red.

Minutes to really thank our Associates for their undying commitment to our clients. It's really, it's really incredible to watch our values. Driven culture come to life, uh, 1 of those uh values. Driven culture attributes is as a company. We provide, uh, insightful expertise. Uh, so it's with that, I want to take a minute to genuinely thank and acknowledge ADP research, uh, and the team over there who has been tirelessly and diligently innovating and executing, uh, over the SE past several weeks to bring to life a weekly estimate of the ADP employment, uh, National Employment report, uh, known as the uh, ner pulse, uh, that was made available to all of our stakeholders at the same time uh yesterday. So this weekly measure is going to bring to life really the mission that they've had uh at ADP research all along, which is about making the future work. More productive through data driven.

Discovery. I have to say that, you know, we really mean it when we say that we're always designing for people here at ADP. It's in the fabric of who we are. And I'm incredibly proud, uh, to be ADP red.

Operator: Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.

Thank you for your participation. This does include the program, you may now disconnect everyone have a great day.