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 2025 earnings call. I would like to inform you that this conference is being recorded. After the prepared remarks, we will conduct the question and answer session. Instructions will be given at that time. I will now turn the conference over to Matt Keating, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle, and welcome everyone to ADP's fourth quarter fiscal 2025 earnings call. Participating today are Maria Black, our president and CEO, and Peter Hadley, 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 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 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, Matt, and thank you everyone for joining us. We closed out fiscal 25 with a strong fourth quarter that included 8% revenue growth 40 basis points of adjusted EBIT margin expansion and 8% adjusted EPS growth. For the full year, we delivered 7% revenue growth, 50 basis points of adjusted EBIT margin expansion and 9% adjusted EPS growth. We achieved these financial results while also making significant strides across our strategic priorities. I will briefly review some additional highlights from our results before discussing this strategic progress. We delivered approximately $2.1 billion in employer services, new business bookings, and fiscal 25, representing 3% growth. While this was below our expectations, we were able to produce another year of growth, notwithstanding the uncertainty in the macro backdrop in the second half of fiscal 25. Taking a closer look, our small business suite and our domestic enterprise offerings saw solid bookings growth in fiscal 25. we did experience a softer finish in our employer services HR outsourcing business where the uncertain macro backdrop appeared to impact client decision making. And while our international bookings improved during the fourth quarter, it was not enough to offset the softness from earlier in the fiscal year. Importantly, our pipelines remain healthy and we are laser focused on accelerating employer services new business bookings growth in fiscal 26. We were very pleased that our employer services retention exceeded our expectations once again, increasing 10 basis points to 92.1% for the year and approaching our record high of 92.2%. Our strong retention stems in part from our company-wide client satisfaction scores reaching new record highs for the year. These impressive results were broad-based and are a testament to the product investments we are making to improve the client experience. Employer services pace per control increased 1% in both Q4 and fiscal 25. Our clients continue to hire, albeit at a slightly slower pace as we move through the year. Finally, our PEO new business bookings growth accelerated in the fourth quarter and for the full year, contributing to fiscal 2025 PEO revenue growth of 7% at the high end of our expectations. In our fiscal 25 accomplishments, extends far beyond our strong financial results. We drove meaningful momentum across all three of our strategic priorities, leading with best-in-class HCM technology, providing unmatched expertise and outsourcing, and benefiting our clients with our global scale. First, it's been a great year for innovation at ADP. Since its launch, ADP Lyric HCM has continued to gain momentum in the market. our number of clients sold increased by more than 50% in fiscal 25, with new logos representing the majority of our new Lyric sales, and we secure these clients from a diverse set of competitors. Our number of live clients also doubled compared to the prior year, and our pipeline has continued to grow. On the AI front, we continued the rollout of ADP Assist, which provides the latest AI-driven capabilities into our products, and we are seeing fantastic engagement from our clients with millions of interactions in fiscal 25. To further build on our unmatched expertise, we have also deployed these tools across ADP to thousands of our associates, driving efficiencies in our sales, service, and technology functions. By coupling our decades of experience with our significant data insights and AI investments, we are simplifying work for our associates and elevating the end-to-end client experience. Finally, we continue to benefit our clients with our global scale. In fiscal 25, we enhanced our unmatched global payroll capabilities by expanding our offer in markets with exciting growth opportunities like Japan and Saudi Arabia, and by acquiring payroll businesses like PEI in Mexico. In addition, we expanded our embedded payroll offering to enhance our small business distribution ecosystem. We also acquired workforce software in fiscal 25, which meaningfully enhanced our capabilities in the time and attendance space, allowing us to serve the broader workforce management needs of our clients. Now, as we look to fiscal 26, we are excited to make even more progress across our strategic priorities as we advance several company-wide initiatives. The AI landscape is evolving fast, and we are making sure that we stay ahead. Our vast data set is key to this. We benefit from the largest HCM data set with over 1.1 million clients and 42 million workers paid. This data allows us to expand our offering from simple agents to autonomous agents, and our broad and granular data set puts us in a strong position to deliver smarter and more tailored HCM agents that will be truly differentiated in the market. To accomplish this, we have invested in establishing our own proprietary tools to help scale our agent development in a compliant, explainable, observable, and secure manner. We have already rolled out a few role-based agents, and client adoption and sentiment have been strong. We will also continue to harness AI advances to drive operational efficiency, reduce service friction, and deliver even greater value for our clients as we expand ADP Assist into our products and throughout our organization. By extending the reach of our next-gen solutions, we will build on the momentum Lyric and next-gen payroll are experiencing. Finally, our acquisition of workforce software and the maturity of Lyric are serving as catalysts for the evolution of our global offering. We believe we have an opportunity to deliver a differentiated product and client experience that wins in the global multinational market. The success we achieved in our fiscal 25 financial results And across our strategic priorities is a testament to the extraordinary efforts of our 67,000 dedicated associates around the world. And I want to take a moment to thank our associates for their commitment to our clients, to each other, and to the world of work. As I look ahead, I am energized by the opportunities in front of us. We operate in a dynamic market. It's large, it's growing, it is always evolving, and we are ready for what's next. We have decades of HCM experience and a track record of leading in innovation. We have a leading go-to-market and distribution strategy and the ability to support clients of all sizes, be it a one-employee small business on Main Street or the largest enterprise with more than 1 million employees. And we have an established reputation for dependability. We understand the mission-critical importance of helping our clients meet the HCM needs of their employees. At ADP, we are always designing for people. They are at the center of every decision we make. And as we move forward, we will continue to focus on people, to leverage our unparalleled data insights and innovative technology, and to build a world of work that is smarter, easier, and more human. We are very excited about that future. And now I'll turn the call over to Peter.