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 third 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, please press the pound key. Thank you. 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 third 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. 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. And with that, let me turn it over to Carlos.

Thank you, Danny, and thank you, everyone, for joining our call. This morning, we reported another strong set of quarterly results that were ahead of our expectations, with a revenue growth of 1% and adjusted EBIT margin down 90 basis points. combining for a modest adjusted diluted EPS decline of 2%. This, of course, was the final quarter before we begin to lap the impact of the pandemic, and I'm very proud of our organization's ability to have delivered positive revenue and earnings growth for the first nine months of the fiscal year, despite unprecedented challenges in the economy and the labor markets. I'll start with a review of some of our key performance drivers and an update on the operating environment we've been experiencing. This quarter, our employer services new business bookings re-accelerated, and we delivered 7% growth, a strong result for the team. The improved year-over-year growth compared to the second quarter was driven by every business unit. Importantly, we ended the quarter on a particularly strong note with record March sales performance that was well above pre-pandemic fiscal 2019 levels, which we see as a positive signal for client engagement in the quarters ahead. The selling environment will likely continue to evolve month to month and with differences on a regional basis as COVID cases and the reopening trajectories stabilize. We are optimistic that with vaccine deployment progressing steadily, our clients are in the best position since the pandemic started to begin making buying decisions again. Also encouraging is that we started to hold more in-person sales meetings. with over a third of our field sales force having conducted at least one in-person meeting this quarter. We expect in-person engagement to pick up over the coming quarters as well. With our Q3 performance and the trajectory we see in Q4, we're pleased to narrow our bookings range around a higher midpoint. We now expect growth of 20 to 25 percent for the year versus 15 to 25 percent prior. Achieving this growth rate would put us at first full-year sales productivity close to 90% of pre-pandemic levels, which would be an incredible achievement for our sales associates. Our retention, which has been a key driver for our strong results this year, was a positive development once again and performed slightly ahead of even our revised and elevated expectations. Retention remains at record levels. Many of you have been asking about how sustainable this improved retention performance is for ADP. It's a great question and hard to answer with precision given the unpredictable environment we're all in. But our belief is that during the pandemic, there have been some temporary benefits from client hesitancy to make major decisions, plus lower out-of-business losses given government support in North America and Europe. But we also believe there will be enduring benefit resulting from the record client satisfaction we've seen as our product and service both have continued to improve. Next quarter, we expect to be in a better position to talk about retention expectations for fiscal 2022, but clearly we feel very good about what we've achieved this year. On the back of our record Q3 performance, we're pleased to raise our guidance and now expect full-year retention to be up at least 125 basis points from 2020 versus our prior guidance of up 100 basis points. As a reminder, this guidance would put us in record territory for the year. Moving to the overall employment picture, our pace for control metric performance was softer than expected as it improved only modestly from Q2 and rounded again to a decline of 6% for Q3. But that said, we are encouraged by the recent trends in employment data, particularly in the U.S., as more of the economy reopens. As of April, we've now started to lap the pandemic-affected Pays-per-Control figures and have been pleased with the positive year-over-year growth we've seen so far in Q4. So, we're making no change to our full-year Pays-per-Control outlook of down 3 to 4 percent. I'd like to now provide an update on some of our key product and strategic initiatives. In February, we announced the launch of ROLL, a new payroll and tax filing product for small businesses. Role combines the simplicity of an AI-driven chat-based interface with the power and scale of our payroll and tax filing expertise, sold digitally and delivered through an app-only interface. With this offering, we believe we can expand our reach into the U.S. small business market beyond the businesses we've historically targeted with RUN, as the target clients for Role users is with simpler needs who prioritize a mobile-first, fully chat-based interface. This is a different set of users compared with the target clients for a more comprehensive RUN solution. We look forward to sharing Roll's progress with you in the quarters ahead. Parallel to this, we're also making great progress in increasing the amount of digital onboarding we're conducting with RUN. and we've continued to scale up this capability since we discussed it with you during our Innovation Day in early 2020. This quarter alone, 15,000, or over one-third of our new-run clients, onboarded themselves digitally, enabling a better experience for the clients as well as cost savings for ADP. This initiative is just one of many digitally-enabled efforts we are making to drive improved efficiency at ADP, and as we've mentioned in the past, We have more to look forward to as our digital transformation continues. Our next-gen payroll engine also continues to scale up and demonstrate success in the mid-market. In this quarter, we sold hundreds more clients and continue to expand our capability set to accommodate more complex payroll needs. We now have over 400 clients live on Workforce Now with our next-gen payroll engine, and we expect to accelerate this further in the coming quarters. In addition to its improving position in the mid-market, Workforce Now continues to scale nicely into the enterprise market. In this quarter, ADP was recognized as a customer's choice leader in Gartner's voice of the customer for cloud HCM suites from North American companies with 1,000 or more employees. This is a great milestone for the team and strong validation of the flexibility of Workforce Now as we've continued to sell it to larger clients in recent years, while, of course, concurrently scaling implementation and service of our next-gen HCM platform. Ultimately, these product enhancements are all designed to drive growth, and I'm happy to report that this quarter our client count reached 900,000, a remarkable achievement, particularly during the pandemic. This is a testament to both the strong retention we've experienced this year as well as better-than-expected year-to-date sales performance. We're very proud of our execution so far this year, and we look forward to putting the impact of the pandemic behind us. On that front, we recognize there's a lot of interest in our potential growth and earnings profile for next year. As you can appreciate, it's still early to discuss fiscal 2022 with any precision, given the dynamic environment and the fact that we're still going through our operating plan process for next year. But Kathleen will share some additional perspective on fiscal 2022 in a moment. I'd also like to share that we plan to host a virtual investor day later this calendar year, where we plan to update you on our strategy and discuss our post-pandemic aspirations. We are tentatively aiming for November and we'll share a date shortly. For now, we remain focused on maintaining our very positive momentum as we close out this fiscal year. And with that, I'll now turn the call over to Kathleen for more detail on the quarter and the outlook.