Automatic Data Processing, Inc.

Good morning. My name is Crystal and I'll be your conference operator. At this time, I would like to welcome everyone to ADP's first quarter fiscal 2021 earnings call. I would like to inform you that this conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press the pound key. I will now turn the conference over to Mr. Daniel Hussain, Vice President, Investor Relations. Please go ahead.

Thank you, Crystal. Good morning, everyone, and thank you for joining ADP's first quarter fiscal 2021 earnings call and webcast. Participating today are Carlos Rodriguez, our President and Chief Executive Officer, and Kathleen Winters, our Chief Financial Officer. Earlier this morning, we released our results for the quarter. Our earnings materials are available on the SEC's website and our investor relations website at investors.adp.com, where you will also find the investor presentation that accompanies today's call, as well as our quarterly history of revenue and pre-tax earnings by reportable segment. During our call today, 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 the 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. As always, please do not hesitate to reach out should you have any questions. And with that, let me turn the call over to Carlos.

Thank you, Danny, and thank everyone for joining our call. This morning, we reported excellent first quarter fiscal 21 results, and I'm very pleased to say that across the board, we delivered a very strong start to the year that was well in excess of our expectations. For the quarter, we delivered revenue of $3.5 billion, down just 1% on both reported and organic constant currency basis, and our adjusted EBIT margin was up 120 basis points. Coupled with a slight increase in the effective tax rate versus last year and a share count reduction, our adjusted diluted EPS grew 5 percent, much better than our expectation three months ago, which was for a meaningful decrease in EPS. On this call, we'll discuss the changes that drove ADPs better than expected start to fiscal 2021. In Q1, macroeconomic conditions continued to gradually improve, and we executed extremely well in several key categories. including better-than-expected sales performance, a continued commitment to client service, and prudent expense management. Let me start by covering key macro-related trends to provide context to our results, specifically on pays-per-control, out-of-business losses, and client funds interest. During the first quarter, pays-per-control, which as a reminder, declined 11% in the fourth quarter, was in line with our expectation for high single-digit decline with a year-over-year decline of 9%. And in a continuation of the trend we saw into our fiscal 2020 year-end, employment at small businesses continued to show the most improvement, while large businesses actually showed some degradation as we exited the first quarter. Out-of-business losses performed better than expected, as small business losses stabilized and a substantial number of clients that had gone inactive last quarter have restarted processing activities over the last three months. Finally, average client funds interest rates declined in line with our expectations for the quarter, but client funds balances were favorable to our expectations, declining 7% compared to our double-digit expectation. With that said, let me shift to the highlights resulting from our own execution. We delivered positive 2% growth in Employer Services' new business bookings, which was significantly ahead of our expectations and marked a record Q1 performance. As you may recall from our commentary last quarter, we did expect some amount of sequential improvement relative to our Q4 bookings performance as economic conditions stabilized. However, we delivered a much faster reacceleration as our sales force started strong in July and carried that momentum through the end of the quarter. We attribute the rapid reacceleration to a few key factors. First, we did see our clients and prospects show greater willingness to engage and purchase. But second, and most importantly, we took action. By maintaining our overall investment in sales and marketing, applying our best-in-class inside sales expertise to continue training our field sales force, and utilizing innovative demos and other HCM content to start conversations, we've designed a client acquisition funnel that is successful even in the current environment. our teams delivered across the board. That's everything from the down market where RUN continues to grow, and in fact, we've now exceeded 700,000 RUN clients for the first time, surpassing pre-COVID levels, to the mid-market where we're seeing clients showing more interest in fully outsourced HRO solutions, to the enterprise space where we had strong traction in compliance-related solutions. Our international sales were also strong, as we closed several larger deals that were previously put on hold as prospects were waiting for a more stable environment to proceed. And our attach rates on many of our solutions continued to increase as well. This quarter, our workforce management solutions, also referred to as time and attendance, reached the 90,000 client milestone for the first time, and we're pleased to see that continue to grow. Our revenue outperformance was also driven by stronger retention. We are very proud to report that we hit record employer services retention levels for a Q1 period, and our PEO performance likewise experienced stronger than expected retention. While our retention likely benefited from having some clients delay decisions to switch HCM vendors given elevated uncertainty, higher client satisfaction clearly contributed as well. You may recall that last quarter we delivered record NPS scores across our businesses as we helped our clients manage through government programs like the PPP. This quarter, I'm happy to say that across our businesses, we either maintained or reached new record NPS levels. We believe these results show that our commitment to providing outstanding service to our clients is paying off and will continue to do so. Combination of stronger bookings and retention in Q1 drove better revenue performance, and the high incremental profitability associated with those revenues, plus prudent expense management, ultimately drove stronger margin performance as well. This is another great example of execution by our associates, and in a few minutes Kathleen will cover our margin performance in more detail. I'd like to now provide an update on the progress we continue to make in driving innovation. Earlier this month, as part of the annual HR Tech Conference, ADP was given the Top HR Product Award. This marks a record-setting sixth consecutive year that we have been recognized at the conference for our breakthrough technology innovations, which is representative of how we remain committed to leading the industry with the premier HCM technology. This year, we were recognized for our next-gen payroll engine. And as we highlighted in our February Innovation Day, The benefits of this new engine include a policy-based framework that enables easy self-service and powerful transparency that allows practitioners and employees to more easily understand the effects of regulatory, policy, or potential life changes, and is designed to be scaled globally. We continue to deploy our next-gen engine to the market, and we added another 100 clients during the first quarter. We remain excited about expanding its availability and driving adoption and the feedback so far has been overwhelmingly positive. Ultimately, we expect a higher level of satisfaction to generate even better retention and higher win rates, supporting our long-term revenue growth trajectory. And we continue to innovate throughout our ecosystem. This quarter, the ADP marketplace reached 500 app listings, and we are pleased to offer an expanding suite of offerings as we continue to drive millions of daily API transactions for tens of thousands of clients than our current users. And just this past week, we hosted our annual ADP Marketplace Partner Summit, where we further strengthened our partner relations and provided actionable ideas to help our partners grow their business. Also, earlier in Q1, we released our Return to Workplace solution that helps clients bring their employees back to work safely through a comprehensive set of tools designed to streamline and manage the process. We now have thousands of clients using the Return to Workplace solution, and we expect usage to grow over time as more clients start to gradually bring their employees back to the office or the work site. As I said, we are very pleased with the start to the year, and I'd like to recognize our associates, from sales to service to implementation, and all the others who support them for their continued efforts and outstanding performance during this time. They continue to come through for our clients when it matters most. And with that, I'll now turn the call over to Kathleen.