The conference call is being led by Michelle, the operator, and Matt Keating, Vice President of Investor Relations. Maria Black, President and CEO, and Don McGuire, CFO, are also participating. Non-GAAP financial measures will be referenced and forward-looking statements will be made. The previous Investor Relations lead, Danyal Hussain, is thanked and Matt Keating is officially welcomed to his first call.

ADP had a strong fourth quarter and fiscal year in 2024, with 6% revenue growth, 80 basis points of adjusted EBIT margin expansion, and 11% adjusted EPS growth. The sales and marketing team performed well, with strong new business bookings in all areas, including small business, mid-market enterprise, and international. ADP's distribution model is a competitive advantage and their client satisfaction scores reached all-time highs. Retention rates were also better than expected.

ADP's strong financial results and client satisfaction gains demonstrate the success of their product portfolio and commitment to clients. Despite challenges in the labor market, ADP saw a 2% increase in employer services and 6% growth in PEO revenue. The company's strategic priorities, including leading with best-in-class HCM technology, have also seen progress with the launch of ADP Assist, a cross-platform solution powered by generative AI. ADP Assist has already received recognition and will continue to be enhanced in the future. The company also made advancements in their next-gen initiatives.

In fiscal 2024, the company saw significant growth in their next-gen payroll and HCM clients, and their focus shifted to providing unmatched expertise and outsourcing. They implemented new technology, such as generative AI, to support their service associates and reduce manual data entry. The company also plans to provide additional tools to improve service and client satisfaction. Their third strategic priority is to use their global scale to benefit clients, and they expanded their global footprint through acquisitions and partnerships.

In the fifth paragraph, the speaker discusses the success of their iHCM platform in European countries, as well as their partnerships with other technology providers. They then highlight a new client win in the US small business sector, where ADP's retirement services solution helped simplify plan administration and reduce fees for a Texas-based insurance agency. The speaker also mentions ADP's recent recognition as the nation's largest 401(k) record keeper and their commitment to helping employers address retirement savings needs. In addition, they mention a new client in the HR outsourcing business, an orthopedic device company looking to support their future growth through a deeper HR and technology infrastructure.

In the past year, ADP has successfully integrated acquired companies onto a common platform through its comprehensive services support model, generating over $1 billion in revenue. They also welcomed a major automotive client to their next-gen HCM platform and were recognized as the world's most admired company for the 18th consecutive year. ADP credits its success to its talented associates and their dedication to delivering exceptional products and experiences.

The speaker, Don McGuire, is thanking the team for their contributions to ADP and its clients. He then discusses the strong performance of the company in Q4, with better than expected results in employer services and PEO revenue growth. The overall fiscal 2024 revenue and earnings growth exceeded expectations, with a 7% increase in revenue. The employer services segment saw a 7% increase in revenue, while the PEO segment had a 6% increase. However, the PEO margin contracted more than expected due to higher expenses and unfavorable actuarial loss development. Overall, the full-year revenue grew 7%, with a margin expansion of 220 basis points for employer services and a contraction of 240 basis points for PEO.

The company's fiscal 2025 outlook includes a 5-6% revenue growth for the ES segment, driven by a 4-7% growth in new business bookings and a decline in retention due to economic factors. The company expects below normal US payroll growth and a transition from a tailwind to a slight headwind in FX for revenue growth. The interest rate environment is also expected to impact client funds interest revenue.

In fiscal 2025, the company expects its average yield and client funds balances to increase, leading to a rise in client funds interest revenue. The ES margin is also expected to increase, while the PEO segment is projected to see revenue growth, but a decrease in margin due to higher costs. Overall, the company forecasts a 5-6% increase in consolidated revenue and a 60-80 basis point expansion in adjusted EBIT margin. The effective tax rate is expected to be 23%, and adjusted EPS is predicted to grow 8-10% with the support of buybacks.

The company is pleased with their strong bookings performance in the fourth quarter, which was broad-based across different segments. The demand for HCM remains strong and the company is well-positioned to meet the needs of employers in all markets. They are confident in their momentum and the demand environment as they enter the new quarter.

The speaker discusses the strength of pipelines in the company and expresses optimism and pride in their performance. They are then asked about the comparison of pays per control in ES and PEO, to which they respond that they expect continued growth but at a moderated rate. The next question asks about the strength of ES and the underlying factors, as well as potential scenarios that could impact their guidance.

The speaker believes that unemployment will remain low and there is good strength in new job growth. They are trying to make realistic predictions based on current knowledge. They also mention that both macro factors and company execution are driving strong sales results. The company's investments in products and best-in-class service have contributed to their success. The speaker also highlights the advantage of ADP's ability to cover the entire market.

Maria Black, the speaker, discusses the company's strong performance in the market and their ability to compete effectively. She mentions that they are present in all buying channels and offer the best product and service. When asked about competition, she states that there has not been any significant change in pricing or competition, but notes that the company itself has become stronger.

Maria Black, the CEO of ADP, was asked about the composition of bookings in different markets and regions. She mentioned that the down market had incredible strength, with 50,000 new clients onboarded in the fourth quarter alone. The mid-market sales results were also phenomenal, and the enterprise space saw record results for their next-gen HCM offering. Black also noted that international business had a fantastic year, with each quarter getting stronger than the last.

The speaker, Maria Black, discusses the strong performance of the company's international business in the fourth quarter. James Faucette compliments her and another analyst, Ramsey El-Assal, asks about the balance between pricing and retention. Don McGuire responds, saying they are careful not to get greedy with pricing and are confident in being able to take 100 basis points without negatively affecting retention. He also mentions their ability to target pricing in the right places. El-Assal then asks about generative AI.

Maria Black discusses the potential for monetization of generative AI in the long term. She believes that it will contribute to revenue directly and also drive soft dollars to retention and new bookings. The focus is on using generative AI to feed the ADP model and improve sales, retention, NPS, and efficiency. While the current investments are focused on short-term use cases, there are also long-term opportunities for monetization.

The speaker discusses the goals of their business cases, including revenue growth and transformation opportunities. They mention that it is too early to share these goals broadly, but revenue growth is a key part of their strategy. The next question asks about the PEO guidance, and the speaker explains that while revenue is growing, the biggest contributor is zero margin pass-throughs. They also mention pressure on pays per control and workman's compensation margins, and a focus on reaccelerating sales.

Maria Black, a long-time employee at ADP, discusses the company's ability to drive value and maintain strong performance even in a slowing economic backdrop. She highlights the durability of ADP's offering and its ability to adapt to changing demand environments. While a significant decline in the macro environment may impact bookings, Black is confident in the company's ability to flex and adjust its value proposition. She has seen this flexibility in action throughout her time at ADP and trusts that the team will continue to do so.

The speaker discusses the strong bookings and retention in the fourth quarter. The small business side, specifically RUN, saw 50,000 new clients. The source of these clients is not specified, but could include competitive solutions or brand-new business formations.

Maria Black, from ADP, discusses the strength and takeaways from the down market, specifically in terms of bookings. The bookings are broad-based and come from digital inbound, new businesses, and the ecosystem of channels. There has been a shift in mix, with less coming from new business formations and more from balance of trade and competition. This resulted in an incredible 50,000 units in the fourth quarter. Next-gen HCM also saw a 50% increase in new sales, with wins coming from both ADP upgrades and new logos, as well as takeaways from enterprise competitors.

The speaker discusses the company's strong performance in the market, with wins against competitors and high client satisfaction scores. The improved satisfaction is attributed to investments in technology and service. The company is prudently guiding for retention, but remains optimistic about future growth.

Maria Black discusses the company's retention outlook for the upcoming fiscal year. She mentions that they have been expecting a normalization in the down market for the past couple of years, but it has not yet happened. The company's goal is to avoid any bankruptcies or out of business situations. On the margin front, there may be some incremental margin outlook for fiscal 2025 due to potential investments in G&A and workforce rebalancing.

The company is constantly evaluating its workforce to ensure the right people are in the right positions. There may be some margin pressure from investments in Gen AI and lower pricing and interest, but this is not abnormal. PEO bookings showed strong growth but moderated slightly in the back half of the year. However, the demand for the PEO offer and the company's pipelines remain strong.

The company is working towards getting back to high single-digit or double-digit revenue growth, but it will take some time. They are currently seeing margin pressure in their PEO division due to investments in the sales force. It will take some time to reach the guidance given three years ago. The first half of the year is expected to have slower margin expansion compared to the second half, but this is due to spending patterns and not revenue expectations. The company is also making progress in expanding into new countries and geographies.

Maria Black, a representative from a large company, discusses the importance of international expansion for their business. She explains that international growth is a top priority and a key part of their strategic plan. The company has been building its international presence for over 50 years and has a strong infrastructure in place to support clients in 141 countries. They see international expansion as a way to serve clients with a global perspective, as well as to differentiate themselves in the market. The company's multi-country business is a competitive advantage in the international space.

The speaker discusses the duration of the company's portfolio and explains that they have a laddered strategy. They mention the maturity schedule and reinvestment rates for 2025 and state that there is still opportunity for growth. They also mention that the portfolio is continuing to grow, though at a slightly slower rate. The speaker emphasizes that they base their strategy on the current yield curve and do not try to outguess the market. The questioner thanks the speaker and the call moves on to the next question.

The speaker, David Paige, asks about the workforce optimization charge and if there will be further changes in 2025. Don McGuire responds by saying they always make decisions for the future and are happy with the current guidance. Kartik Mehta asks if there have been any changes in enterprise sales, and Maria Black says they are at a new normal with longer sales cycles and more decision-makers involved.

The process of deals in the enterprise global space has slowed down compared to the height of the pandemic, but it is still moving along at a typical pace. There is a focus on global systems of record and next-gen HCM in this space. The deal cycle involves more decision-makers and prudency, but there is no decrease in the number of modules. In terms of small businesses, the pace of new business formation is still elevated but down from last year. The company is also monitoring the number of clients suspending payroll to stay informed about the economy.

The speaker thanks the company's 64,000 associates for their hard work and commitment to providing the best technology and service. They also express gratitude to their 1.1 million clients and the listeners on the call. The speaker also reflects on the company's 75th anniversary and the impact they have had on their clients' success.

This summary was generated with AI and may contain some inaccuracies.