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 2022 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 remark, 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 will now turn the conference over to Mr. Daniel Hussain, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle, and welcome everyone to ADP's second quarter fiscal 2022 earnings call. Participating today are Carlos Rodriguez, our CEO, and Don McGuire, our CFO. Also joining us for Q&A is Maria Black, President of ADP. 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 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. And with that, let me turn it over to Carlos.

Thank you, Danny, and thank you everyone for joining our call. We're pleased to have delivered strong second quarter results, including 9% revenue growth, 20 basis points of adjusted EBIT margin expansion, and a 9% increase in adjusted diluted EPS, all ahead of our expectations. This remains a very dynamic and challenging business environment for our clients and prospects, but we believe the value of working with a trusted HCM partner with more than 70 years of expertise is more compelling than ever. And we see evidence of this reflected in our continued sales momentum, as well as our very high levels of client satisfaction and retention, which continue to drive upside to our results. As usual, let me start with some highlights from the quarter. Our employer services new business booking results were strong despite the onset of Omicron variant at the end of the quarter. We experienced a record Q2 bookings level, and like Q1, we were pleased to be ahead of pre-pandemic sales productivity levels. We experienced robust double-digit growth in nearly every one of our ES businesses. And as we saw earlier in the year, we experienced even stronger performance in our PEO segment, where demand is especially robust. As we outlined at our November Investor Day, the pandemic and the dynamic macroeconomic environment have made running HR more challenging for our clients. Today, our clients must navigate a tight labor market across their organizations, higher than usual worker turnover, new legislative requirements, and in many cases, staffing challenges specifically within their payroll and HR departments. The strong broad-based demand across our ES and PEO segments reflects the fact that clients of all sizes are increasingly looking for greater levels of assistance and expertise to help address their needs, in some cases seeking our intuitive yet comprehensive software offerings, while in other cases seeking a more fully outsourced solution. We believe we provide extraordinary value through all business environments, and today's environment supports a continuation of a positive, decades-long secular trend in global HCM. Moving on to employer services retention, we are pleased to have experienced continued strength. Although our retention in the quarter did decline very slightly versus last year's elevated level, it declined by less than we had anticipated and would have represented a record Q2 if you were to exclude last year's pandemic-impacted retention levels. With overall client satisfaction once again reaching a record level this quarter, this strong retention is not surprising to us. Moreover, early January results look strong, giving us greater confidence for the rest of the year, and we are pleased to be raising our retention guidance once again. Our ES page for control metric came in slightly better than expected at 6% growth in the quarter. We are very pleased to see the U.S. unemployment rate back below 4%, which reflects the U.S. economy's ongoing improvement and resulting strong demand for workers. Meanwhile, labor force participation is gradually recovering, and as it does, we should continue to benefit from higher than usual pace for control growth. Over the first half of the fiscal year, we've tracked ahead of our expectations and are now raising our pace for control outlook for the full year. In the second quarter, our PEO had stellar performance once again and was well ahead of our expectations with 15% revenue growth and 16% average worksite employee growth, representing acceleration from last quarter despite a slightly harder growth comparison. The across-the-board strength in our PEO continues to be driven by several factors, including better than expected retention and bookings contributing to client growth, better-than-expected hiring within the PEO client base further adding to work-side employee growth, and better-than-expected wage levels further adding to revenue growth. While some of these tailwinds will normalize over time, we remain very confident in the outlook of our PEO business over the coming years. During our November Investor Day, we also outlined key aspects of our growth strategy by product and by business unit, and we are confident about sustaining healthy growth in our fast-growing businesses and optimistic about accelerating our growth in our businesses that continue to transition to our most modern offerings. One aspect of our growth strategy that we discussed is an overall greater focus on marketing, which we believe will allow us to better activate our existing scale distribution. We believe at ADP we can deliver a lot of incremental value from tactical investments, and we look forward to sharing more in the very near future. One key product initiative we talked about during Investor Day that cuts across our businesses is the development of a new unified user experience. And in the second quarter, we were pleased to have made further progress on this effort. As a reminder, we shared last quarter that we moved our run client base over to the new ADP UX. And now, only a quarter in, early indicators suggest that clients are, in fact, finding it more intuitive, resulting in fewer client service contacts. In Europe, we have been gradually transitioning our client base over to our award-winning IHCM platform, and in Q2, we seamlessly moved those clients over to the new ADP UX. And we're now very excited that just this month, we began our pilot of the new ADP user experience for Workforce Now, which when coupled with our next-gen payroll engine, makes for an even more differentiated offering for what is already the market-leading HCM solution in its target markets. And in terms of a few other highlights, I'm pleased to share that we reached a new milestone by running 1 million payslips for a single client on a single day for the first time. And at the other end of the spectrum, our ROLL mobile app, which serves the micro segment, continues to outperform our initial expectations. In another milestone, in calendar 2021, the ADP mobile app had over 1 billion logins, highlighting the growing amount of direct engagement we have with employees and managers around the world. To that point, this month, our Return to Workplace mobile solution, part of the ADP mobile app, was awarded the Business Intelligence Group's 2022 Big Innovation Award. And as a final highlight, just this week we launched our Bill Pay feature in the Wisely app. Bill Pay is free to Wisely users and fully integrated into the app, and has been a top requested feature from our user base. We believe this addition will further drive engagement and retention, and we look forward to continuing to expand the Wisely ecosystem. Overall, Q2 represented a solid outcome on both the financial front, as well as with respect to key strategic initiatives. I'd like to thank our associates who continue to deliver these exceptional products and outstanding service to our clients, and I'll now turn the call over to Don.