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 third quarter fiscal 2023 earnings call. I would like to inform you that this conference is being recorded. After the prepared remarks, we will conduct a question and answer session. Instructions will be given at that time. 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 third quarter fiscal 2023 earnings call. Participating today are Maria Black, our President and CEO, and Don McGuire, our CFO. 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 can cause actual results to differ materially from our current expectations. I'll now turn it over to Maria.

Thank you, Danny, and thank you, everyone, for joining us. For our third quarter, we delivered strong results, including 10% organic constant currency revenue growth, 110 basis points of adjusted EBIT margin expansion, and 14% adjusted EPS growth. Our continued solid financial performance underscores the power of our innovative and mission-critical HCM solutions that serve over 1 million diverse clients around the world, as well as our highly recurring revenue business model. As usual, I'll start with some highlights from the quarter. The demand environment was healthy overall, and in Q3, we drove another quarter of solid employer services, new business bookings growth, representing a record Q3 bookings amount. Bookings performance continues to be particularly strong in our down market portfolio. In Q3, we sold and started over 60,000 new run clients, where our new user experience has helped us reach record-level new client satisfaction rates these past few quarters. We also had strong bookings results in our insurance and retirement services offerings, supported not only by legislative tailwinds, but also by the competitive positioning of our down-market HCM ecosystem. Demand for our employer services HR outsourcing solution remained high, and we recently reached the 10,000 client mark. We also saw continued booking strength in our compliance-oriented solutions, including tax remittance and wage payments, which have always been key differentiators for us. On a year-to-date basis, we are within our bookings guidance range and are trending in line with our expectations from the outset of the year, and we look forward to finishing the year with a strong close. Our employer services retention rate came in better than expected once again, While we continue to experience normalization in our down-market, out-of-business rates, this was offset by the strong retention rates in our U.S. mid-market and international businesses, both of which continue to benefit from years of improving client satisfaction. As such, we're pleased to be raising our full-year retention guidance. Our employer services pace for control grew 4% for the quarter and continues to decelerate at a very gradual pace. As we have seen for several quarters now, layoffs at many larger companies have been offset by the labor demand elsewhere, which in total has resulted in year-over-year employment growth. With this continued resilience, we're pleased to expect the higher end of our previous Pays for Control guidance range. Last, on our PEO, while growth in revenue and average worksite employees continued to decelerate this quarter, we were pleased to see PEO bookings growth re-accelerate nicely in Q3, especially in March. This represented much better performance than we experienced in Q2 and resulted in our largest quarter for PEO bookings ever. Despite the current inflationary environment and broad-based macroeconomic uncertainty, we are focused on our PEO sales execution and on delivering continued strong client satisfaction, and we remain confident in the long-term secular growth opportunity. Stepping back, while we are pleased to be on track to deliver very strong full-year financial results, we are even more excited about how we are leveraging our unmatched scale and decades of innovation experience to drive continued progress on our important modernization journey. We are making our solutions more powerful and easier to use, and we are making our unparalleled insight and expertise more accessible than ever. In doing all this, we're delivering an experience that's better for our clients, better for their employees, and better for ADP. I mentioned the tens of thousands of new clients we onboarded in our down market, Over a third of those clients utilized our digital onboarding experience, yielding a faster time to start, happier clients, and greater productivity for our implementation team. We just completed our busy year-end period, during which we helped our clients with over 75 million US tax forms. And to further enhance the client experience, we proactively surfaced critical year-end data to our clients before they had to search for it. This not only reduced friction for them, but also reduced the number of calls and interactions with our service teams. For years, we have directly engaged and served our clients' employees through channels like Wisely. As we focus on the overall employee experience we can offer, we continue to add valuable functionality like a savings envelope that employees have used to move more than a billion dollars into savings over the last 12 months and a new financial wellness hub with tips, tools, and education to drive better financial outcomes. With our new intelligent self-service solution, we are already interacting with over three million client employees per month through our action card feature. And our voice of employee solution is helping thousands of clients obtain better insights from their employee populations, which can drive higher engagement and satisfaction for those employees. The opportunity to continue creating value and efficiency in the world of work is meaningful, and we believe these modern approaches that reduce friction and exceed client expectations will help us deliver on that in the coming years. With that in mind, I want to provide some perspective on how we are strategically positioning ourselves to invest over the near term given the economic backdrops. As we shared earlier this year in fiscal 2023, we were impacted by higher wage inflation. We also added to our service and implementation capacity to meet the expectations of our growing client base, and we invested throughout the year in sales and product. As we position for potential economic slowdowns beyond the fiscal year, we are being thoughtful about how we prioritize our investments. At the same time, we are very much committed to our ongoing modernization journey, which is critical to our sustainable growth, and that will require continued, steady reinvestment into the business. In the coming quarters, I look forward to updating you on near-term growth priorities for ADP. Before turning it over to Don, I want to take a moment to recognize our associates for their continued focus on helping our clients through the many challenges they face each day. especially amid these uncertain times. Resiliency and partnership represent core components of the ADP brand promise and are among the many reasons businesses around the world choose to partner with a leader in the industry. Our unrelenting support through years of growth, years of challenge, and the years in between is something they've grown to count on, and we are honored to support them. With that, I'll turn it over to Don.