• Revenue Growth: 6% increase in third-quarter revenue.
• Adjusted EBIT Margin Expansion: 10 basis points increase.
• Adjusted EPS Growth: 6% increase.
• Employer Services Revenue: 5% increase on a reported and organic constant currency basis.
• PEO Revenue Growth: 7% increase, with 2% average worksite employee growth.
• Client Funds Interest Revenue: Increased more than anticipated, with full-year average client funds balance growth expectation raised to 5% to 6%.
• Fiscal 2025 Revenue Growth Guidance: Maintained at 6% to 7%, expected towards the high end.
• Adjusted EBIT Margin Expansion Guidance: Updated to 40 to 50 basis points.
• Fiscal 2025 Adjusted EPS Growth Guidance: 8% to 9% expected.

• Warning! GuruFocus has detected 5 Warning Signs with BLCO.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Automatic Data Processing Inc (NASDAQ:ADP) reported a solid third-quarter with 6% revenue growth and 6% adjusted EPS growth.
• Employer Services new business bookings showed strong growth, particularly in the US across small business, mid-market, and enterprise segments.
• Client satisfaction scores reached record highs, contributing to strong retention performance.
• PEO revenue growth exceeded expectations at 7%, driven by higher wages and strong retention.
• ADP's strategic initiatives, including the integration of Workforce Software and the acquisition of PEI in Mexico, are enhancing global payroll capabilities.

Negative Points

• International bookings were softer due to macroeconomic uncertainty in key markets.
• Employer Services retention declined slightly compared to the prior year.
• PEO margin was flat in the quarter, impacted by higher workers' compensation and SUI costs.
• There is heightened macroeconomic uncertainty, leading to projections for slower economic growth and below-normal pays per control growth.
• The integration of Workforce Software is expected to impact margins by approximately 50 basis points for the full year.

Q & A Highlights

Q: Can you provide more details on the softer international bookings you mentioned? Are there specific regions or products affected? A: Maria Black, President and CEO, explained that the softness in international bookings is due to macroeconomic uncertainty. Despite this, the international space has strong pipelines, both in-country and globally, with large deals that tend to be lumpy. The focus remains on executing these deals in the fourth quarter.

Q: What is the growth opportunity for the embedded payroll offering with Fiserv, and can it be extended to other partners? A: Maria Black highlighted the excitement around the Fiserv relationship, which is progressing well. The integration of RUN into Clover and CashFlow Central into RUN is expected to be a game-changer. There is potential to extend this reach to other ADP platforms and countries, enhancing the total addressable market.

Q: How is client behavior evolving in the PEO segment regarding benefits enrollments, especially with macroeconomic pressures? A: Maria Black noted that while there are always some changes in client preferences, the PEO retention remains strong, indicating the value of the benefits proposition. The PEO model's fully insured nature provides stability, which is advantageous in volatile times.

Q: Can you discuss the competitive landscape in the down market and how ADP is positioned? A: Maria Black stated that while the market is competitive, ADP's RUN platform has a strong client base and partnerships, such as with Fiserv, which enhance distribution. The mid-market also benefits from strong NPS and retention, supported by best-in-class platforms and service.

Q: What are ADP's early thoughts on fiscal 2026, considering potential macroeconomic slowdowns? A: Donald McGuire, CFO, mentioned that ADP is well-insulated against economic slowdowns, with a resilient business model. While macro uncertainty could impact international sales, ADP's laddering strategy and focus on client satisfaction and retention provide stability. The company is prepared to adjust hiring and investments if necessary.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.