Automatic Data Processing, Inc.

Good morning. My name is Michelle, and I'll be your conference operator. At this time, I would like to welcome everyone to ADP's second 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. Thank you. I'll now turn the conference over to Mr. Daniel Hussain, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, everyone, and thank you for joining ADP's second 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 the reconciliation of non-GAAP measures to the most comparable GAAP measures, can be found on 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 you, everyone, for joining our call. This morning, we reported results reflecting our continued strong business performance and momentum, with our second quarter revenue margins both outperforming our expectations as our business continued to demonstrate resilience in the face of ongoing economic headwinds. We reported revenue of $3.7 billion, up 1% on a reported basis and flat on an organic constant currency basis, with adjusted EBIT margin down 30 basis points. Coupled with a slight increase in the effective tax rate versus last year, a share count reduction, our adjusted diluted EPS was flat versus last year, much better than the decrease we were expecting. During the second quarter, we continue to see signs of improvement in the overall operating environment, with positive implications for pace for control, new business bookings, and retention. Our pace for control metric performed slightly better than expected as it improved sequentially to a decline of 6% versus the larger declines we experienced in Q1 and the latter part of fiscal 2020. Underlying employment trends in Q2 were consistent with what we experienced in Q1, with larger enterprises somewhat slower to show improvement, but with small and mid-sized businesses demonstrating a healthy level of hiring. We performed well on employer services new business bookings. Even though bookings declined 7% this quarter, this was well ahead of our initial expectations earlier this year and in line with the revised expectations we communicated last quarter. And it's important to point out that our new business bookings for the first half nearly matched last year's half, despite the very difficult environment. As we had anticipated, more modest sales contributions from items we noted last quarter, such as new business formations and multinational deals, coupled with a resurgence in virus case levels, contributed to lower growth rate compared to Q1. But underlying trends have remained strong, including improving demand in our mid-market and HRO solutions, as well as continued acceleration in leading indicators and a solid sales pipeline more broadly. Moreover, with the change in U.S. administration and the continuing dynamic regulatory environment, We expect momentum for our solutions to improve as companies continue to recognize the value of partnering with ADP, given our deep compliance expertise and reliability. And as a final point, with what we believe to be the most challenging six months of the fiscal year behind us, we are now even more confident in our expectation for bookings performance to improve further. As a result of all these factors, we are raising our new business bookings guidance range by another 5% to 15% to 25%. Pays-per-control and bookings trends were both positive, but retention was the main highlight for us the second quarter, with ES and PEO retention both reaching record levels. We saw strong performance across the board, with the biggest improvement for the ES segment coming out of the U.S. down market and mid-market businesses, as our client satisfaction scores remained at record levels across the board. Following this incredibly strong performance and an early read of Q3, We're very pleased to be able to raise our retention guidance significantly, a sign of our improving competitive position. And the retention we are now expecting would represent a record high ES retention for a full year. Now, on to another critical topic and one that remains a key focus for us. Our product teams continue to execute well, and we reached a number of milestones this quarter. I'll start with Run and WorkforceNow, our two highest revenue platforms. For RUN, we continue to make a range of enhancements to make client onboarding seamless and, in some cases, digitally automated, improving the implementation process for tens of thousands of RUN clients we bring on every year. We also made further enhancements this quarter to our Accountant Connect platform, already a big differentiator for us, and we now provide even more insights to our critical accountant partners. For Workforce Now, we continue to build momentum by leveraging our next-gen payroll engine, And as we discussed earlier this year, we are live with hundreds of clients who have been very pleased with the solution and continue to rate their experience very highly. In addition, we launched a new workforce management solution that, along with our next-gen payroll engine, enables real-time punch-to-net payroll calculations, all delivered from the public cloud. And based on feedback from our clients and sales associates, We believe a significant portion of the hundreds of sold NextGen payroll clients were incremental to what we would have sold without NextGen, which of course has positive implications for market share and competitiveness in the mid-market as long as we continue to execute. Also, we continue to scale up our NextGen HCM. In this quarter, we went live with our first client in Mexico. Importantly, we did this with enhanced speed-to-market, as we partnered with a third party to localize and implement, which speaks to the power of our federated architecture and the native global capability of our next-gen HCM and next-gen payroll platforms. For our data cloud platform, we had a number of exciting new launches. To support our clients around ESG objectives, we launched a pay equity storyboard that allows clients to identify equal pay gaps and calculate effective distribution models close these differentials across their organization. We also continue to leverage the power of data cloud outside our core HCM base. And earlier this month, launched a partnership with New York Stock Exchange owner ICE, which will pair ICE Data Services market expertise with ADP's HR and compensation data. We are very excited about continuing to explore opportunities related to our differentiated and robust data set, which is the most expansive in the industry. to drive insight both within and beyond traditional HCM use cases. This quarter, we also continue to receive industry accolades and won a number of awards for our solutions, including G2 and Captera awards for the number one user-rated workforce management solution. We continue to reach all-time high client counts on all of our key platforms, including Run, WorkforceNow, Vantage, GlobalView, and of course, NextGen HCM. And within our HCM platforms, we continue to reach new client count milestones for individual solutions, such as retirement services. Moving on, I'd like to once again acknowledge our associates for their ability to stay focused on finding innovative solutions and driving higher NPS in what has been an incredibly challenging and dynamic environment. It's because of this execution that we were able to demonstrate such resilience such resilient performance year-to-date, with revenue flat, adjusted earnings per share up, and retention at record levels. Now, with the worst of the pandemic-related headwinds hopefully behind us, and vaccine programs positioning us for continued recovery, we are increasingly focused on re-accelerating growth in the quarters and years ahead. To that end, we have already reinvested some of our Q2 outperformance into product development acceleration, a digital transformation push, and selective sales and marketing expansion ahead of our key selling quarters. While it's too early to talk about fiscal 2022 in any detail, we expect our fourth quarter revenue growth to accelerate significantly, and our goal will be to sustain that momentum. We are very pleased with our performance year to date and the fundamental strength of our business, and we are very optimistic about the quarters ahead. And with that, I'll turn it over to Kathleen. Thank you.