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 fourth quarter fiscal 2023 earnings call. I would like to inform you that this conference is being recorded. After prepared remarks, we will conduct a question and answer session. Instructions will be given at that time. I would now like to turn the conference over to Mr. Daniel Hussain, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle, and welcome everyone to ADP's fourth 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 and full year. 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 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. I'll now turn it over to Maria.

Thank you, Danny, and thank you, everyone, for joining us. We closed out the year with a strong fourth quarter that included 9% organic constant currency revenue growth, 270 basis points of adjusted EBIT margin expansion, and 26% adjusted EPS growth. And for our full year, fiscal 2023, we delivered 10% organic constant currency revenue growth, 130 basis points of adjusted EBIT margin expansion, and 17% adjusted EPS growth, representing another strong year for ADP. I'll start with some highlights from the quarter. Our worldwide sales and marketing team delivered exceptional Q4 employer services new business bookings growth that was well in excess of our expectations with strong double-digit overall growth on top of a difficult comparison. The ACM demand environment has been healthy despite a gradually slowing macroeconomic backdrop, and we have been capitalizing on this steady demand. Our strong bookings results were broad-based. We had continued strength in our down market and employer services HRO offerings. We also had better than expected results in our mid-market, as well as a great finish from our compliance and international businesses. This Q4 performance brought our full-year employer services bookings growth to 10%, compared to our 6% to 9% guidance and our medium-term goal of 7% to 8% growth that we laid out at our 2021 Investor Day. We are, of course, thrilled with this result and excited to keep the momentum going. Our employer services retention rate was another highlight in Q4 and came in better than we expected. For the full year, we delivered a retention rate increase of 10 basis points and are back to our record level retention rate of 92.2%, all while absorbing the impact of normalization in the down market at a business rate This strong result was driven by record-level retention rates, specifically in our U.S. mid-market and international businesses, and by record-level overall client satisfaction across our major businesses in the fourth quarter. Our employer services paid-for-control growth was 3% for the quarter, as the overall labor market continued to show resilience, bringing the full-year paid-for-control figure to 5%. We have been pleased all year to see such durable labor demand from our clients. And last, while our PEO revenue growth performed in line with our expectations this quarter, we were pleased to experience a further acceleration in PEO bookings with strong double-digit growth in Q4, representing another record-level sales quarter. Moving on, while Don will cover our fiscal 2024 financial outlook, I wanted to spend a few minutes sharing our strategic priorities as we look ahead. Change and increase in complexity are secular growth drivers for the HCM industry, and our breadth enables us to address nearly any HCM challenge our clients may face and meet them wherever they may be on their HR journey. From startup to enterprise, from software only to fully outsourced, and from local to global, We see a tremendous growth opportunity in front of us, and while our specific growth initiatives will vary by business, there are three key strategic priorities which apply across all of ADP that I see as critical to enabling our growth in the years ahead. The first strategic priority is to lead with best in class HCM technology. Put simply, our goal is to design, develop, and deliver the very best and most innovative solutions that will help our clients navigate the full life cycle of employment, from hiring employees to onboarding and training them, providing insurance for them, paying them and filing payroll taxes, and even setting them up for retirement. As much as we offer today, we see an incredible opportunity to improve on our current and next-gen solutions, tactically use partnerships and inorganic means to further accelerate our pace of innovation and continue to offer industry-leading HCM products. And we expect to have a busy fiscal 2024. For U.S. small businesses, we are rolling out several product enhancements that will serve our 850,000 run clients, including a new tax ID registration service, learning management to help with small business employee training, and an insurance inspector tool that utilizes AI to help clients manage their workers' compensation insurance policies and annual audits. For U.S. mid-sized businesses served by Workforce Now, our focus is to continue our great momentum in the deployment of our next-gen payroll and time engine and to drive our win rates and client satisfaction even higher. In the U.S. enterprise space, we expect to nearly finish the migrations of three of our remaining legacy platforms by the end of this fiscal year, representing an important step in our multi-year journey to move our clients to more modern platforms. We are also pleased to have advanced the velocity of our next-gen HCM implementations, and we expect our next-gen HCM sales to contribute in a more meaningful way to our bookings growth in fiscal 2024. Outside the U.S., we intend to scale our IHCM mid-market platform in fiscal 2024, adding at least 1,000 clients over the course of the year. I am also incredibly excited to share that we will begin offering ROLL outside the U.S. in fiscal 2024 to drive incremental growth. We plan to launch initially in two countries in Europe and expand its reach from there. And we intend to continue growing our Asia-Pacific business in part by leveraging our recent acquisition of a strong mid-market time product to supplement our existing payroll functionality. And across a few of our platforms, including Workforce Now and Roll, we intend to deploy GenAI-powered features to help our clients more quickly and easily tackle certain HR transactions. Our second strategic priority is to provide unmatched expertise and outsourcing to our clients. We pride ourselves on serving as a true partner to each and every one of our 1 million clients. Our culture of client service applies equally across our entire business, from a basic payroll client to a fully outsourced client where we run part or all of the HR department. Our expertise and partnership approach has been key to ADP's winning formula for decades, and we will continue to lean into it. We expect that to manifest in a few ways in fiscal 2024. We have recently been piloting a number of tools powered by GenAI that can help our service and implementation associates deliver an even better client experience, and we will begin deploying these more broadly in early fiscal 2024. Given the significant number of clients we onboard and interact with every year, We expect to learn quite a bit this year about the longer-term benefits we and our clients might realize from GenAI. Meanwhile, demand for our HR outsourcing solutions remains very strong, and in fiscal 2024, we are focused on reaching new clients and further improving the experience for existing ones. Our employer services HRO businesses have been performing incredibly well, and our focus for fiscal 2024 is to continue delivering strong bookings and keep client satisfaction and retention at current levels or perhaps even reach new record levels. And our focus for our PEO business in fiscal 2024 is to maintain our recent strong bookings momentum by continuing to add to our Salesforce headcount, grow our referral partner network, and use data and machine learning to identify existing ADP clients who may be a strong fit for an upgrade. Our third and final strategic priority is to leverage our global scale for the benefit of our clients. Our size and scale are unmatched in the industry. Across the globe, we not only offer robust platforms and a commitment to industry-leading service and expertise, but we also provide a scaled ecosystem and a unique on-the-ground presence in over 30 countries. This combination positions us to interact routinely with local governments and tax authorities, meet stringent certification and data requirements, and stay on top of complex and shifting legal requirements. Globally, we bring together our incredible data, an array of partners, and integrated solutions, and one of the biggest and best business-to-business sales forces in the world to help our clients and prospects navigate the changing world of work. In fiscal 2024, we will continue to build on that scale for the benefit of our clients. Our GlobalView platform supports hundreds of the world's largest multinational companies with scaled workforces in over 40 countries, and our Solergo platform helps us serve thousands more in up to 140 countries. In fiscal 2024, we expect to expand on both as we add additional countries to GlobalView's broad reach and as we potentially make tuck-in acquisitions to enhance our native in-country footprint. After establishing an ADP in-country presence in five new markets in 2023, we expect to expand further in fiscal 2024. Our world-class global scale distribution led by over 8,500 sellers, is being supported by headcount and marketing investment in 2024, and as we've shared with you in the past few quarters, our sellers will continue to be paired with a best-in-class sales tech stack, which we plan to enhance with Gen AI functionality in the coming months. And our ability to provide data-driven insights will continue to grow in fiscal 2024, ADP serves more clients and pays more people around the world than ever, and as we continue growing the number of employees we serve globally, the power of our insights will likewise continue to increase and benefit our clients. I am incredibly excited about these three strategic priorities for ADP and the differentiation and growth they will continue to drive. But before turning it over to Don, I wanted to take a moment to recognize our associates for their effort and performance over the course of this year. Our associates embody our core values, like insightful expertise, service excellence, and being results-driven. In fiscal 2023, ADP was recognized as the world's most admired company by Fortune magazine for the 17th consecutive year, signifying the incredibly strong culture we have and the important role we play in the world. Additionally, We were recently recognized for the first time as one of the best companies for innovators by Fast Company, a true testament to the direction we are headed in. We owe these accolades, as well as our strong, consistent financial performance, to the commitment and effort of our 63,000 associates that make up the ADP family. With that, I'll turn it over to Don.