The paragraph is an introduction to ADP's First Quarter 2025 Earnings Call. The conference is being hosted by Michelle and involves key speakers including Matt Keating, Vice President of Investor Relations, Maria Black, President and CEO, and Don McGuire, CFO. The company has released its quarterly results, which show 7% revenue growth, 130 basis points of adjusted EBIT margin expansion, and 12% adjusted EPS growth. These results are available on the SEC's and ADP's Investor Relations websites. The call will include discussions on non-GAAP financial measures and forward-looking statements with associated risks. Maria Black is set to discuss the company's strategic priorities and financial highlights.

The company had a strong start to the year in Employer Services, with record first-quarter new business bookings and good growth across its small business, mid-market, HR Outsourcing, and International segments. Client satisfaction reached an all-time high, supporting retention rates. PEO revenue grew by 7%, exceeding expectations due to new business, despite a slight deceleration in pays per control growth. Additionally, they acquired WorkForce Software to enhance their ability to provide dynamic Workforce Management Solutions for global enterprises, aligning with their strategy to address employers' evolving needs.

The acquisition of WorkForce Software enhances ADP's capabilities in workforce management by adding advanced time and attendance, absent management, and scheduling tools. WorkForce Software's solutions, known for serving large, complex organizations, will complement ADP's existing offerings. With this acquisition, ADP aims to continue driving workforce management innovation. Furthermore, ADP introduced "Lyric," a newly branded, flexible, and intelligent global HCM platform incorporating Generative AI for enhanced insights and predictive analytics. Lyric supports payroll in over 75 countries, and its launch has generated significant interest, positioning ADP to broaden its international reach.

The paragraph discusses the company's strategic initiatives to enhance its enterprise HR solutions through the acquisition of WorkForce Software and the launch of Lyric. They are investing in Generative AI to improve client interactions and support their associates, implementing tools like call summarization and virtual knowledge assist. Early feedback is positive, particularly in small business support. Additionally, they introduced Intelligent Workflow Automation in Workforce Now to improve employee experiences and reduce manual HR tasks. These efforts align with their strategic priorities of leading in HCM technology, offering unmatched outsourcing expertise, and leveraging global scale to achieve robust financial outcomes.

In the paragraph, Don McGuire discusses the first quarter results and fiscal 2025 outlook, focusing on the Employer Services (ES) segment. ES segment revenue increased by 7%, surpassing expectations, and new business bookings were solid. Despite a slight decline in retention, the overall growth guidance for the year remains at 4% to 7%. ES pays per control growth met expectations, and client funds interest revenue exceeded estimates due to strong average client funds balance growth. However, the overall forecast for client funds interest revenue is reduced by $10 million for the year. Despite changing yield curves, the impact is mitigated by lower borrowing costs, maintaining the net impact forecast from the client funds extended investment strategy.

In response to strong Q1 performance and the acquisition of WorkForce Software, the company has increased its fiscal 2025 revenue growth forecast for its Enterprise Solutions (ES) segment to 6% to 7% and expects an ES margin increase of 40 to 60 basis points. The Professional Employer Organization (PEO) segment also exceeded expectations with 7% revenue growth and a 3% increase in average worksite employees, leading to revised forecasts of 5% to 6% revenue growth and 2% to 3% average worksite employee growth. Despite a PEO margin decline of 80 basis points in Q1, the full-year margin is expected to be down 70 to 90 basis points, which is better than previously anticipated. Consolidated revenue growth for fiscal 2025 is forecasted to be 6% to 7%, but the WorkForce Software acquisition is expected to pressure adjusted EBIT margin, with an expansion forecast of 30 to 50 basis points. Additionally, the company issued $1 billion in 10-year notes in September to enhance its capital structure.

The paragraph discusses a corporate earnings call where financial projections and company performance are addressed. The company expects a $40 million increase in corporate interest expenses for fiscal 2025 and a full-year effective tax rate of around 23%. After considering a recent acquisition and debt issuance, they anticipate adjusted EPS growth of 7% to 9% for fiscal 2025. During the Q&A session, Zack Ajzenman inquires about employer services' demand and bookings, highlighting the first quarter's performance. Maria Black responds positively, mentioning strong demand and solid sales across various sectors, especially in Retirement Services, HR Outsourcing, and international markets. Despite complexities in the mid-market, the company sees consistent demand overall.

In the paragraph, Maria Black discusses the positive performance in PEO (Professional Employer Organization) worksite employee retention, which exceeded expectations in Q1, primarily due to strong new business bookings. Despite Q1 typically being light for PEO, there is a focus on accelerating new business bookings to offset the slowing growth in worksite employee pays per control. Retention is contributing to this positive trend but only has a modest impact compared to new business bookings. Don McGuire adds that the pays per control growth is expected to be lower in PEO compared to Employer Services, indicating slowing growth in PEO. The discussion also includes interaction with analyst Zack Ajzenman, and the conversation transitions to another question from David Paige.

The paragraph discusses the strategic significance and financial implications of ADP's acquisition of WorkForce Software. Maria Black highlights the excitement surrounding the acquisition, noting WorkForce Software's global client base of around 1,000 well-known brands and the expertise of its team. This acquisition is seen as a growth opportunity for ADP, aiming to enhance its Workforce Management Solutions. Don McGuire is set to elaborate on the financial impact, mentioning that revenue expectations have been raised on the ES side due to the acquisition.

In this paragraph, the company discusses its fiscal year 2025 revenue growth outlook, highlighting a 1% increase driven partly by WorkForce Software and strong performance in other business areas. It details how the recent acquisition of WorkForce Software, though small, provides strategic benefits by enabling the company to offer broader services to global clients. Despite anticipating some financial pressure, primarily from integration costs and debt intangibles related to the acquisition, the company notes it operates efficiently with minimal expense synergies expected. The first quarter was positive, and overall, the company's other businesses are mitigating the financial drag from the acquisition, with anticipated EBIT margin pressure of about 0.5 points and slightly over 1% EPS drag in fiscal 2025.

The paragraph outlines a discussion during a corporate earnings call, where integration costs, amortization, and interest expenses are causing temporary financial dilution. The speaker anticipates the company's acquisition will become financially beneficial after a few quarters once the integration is complete. David Paige expresses satisfaction with the details provided, and Mark Marcon from Baird congratulates the company on a strong first-quarter performance, noting high client satisfaction scores. Maria Black attributes these high scores to broad-based strength, investments in products, and tools provided to service organizations, particularly highlighting success in the mid-market segment.

The paragraph discusses the integration and impact of Generative AI tools in the SBS service organization, highlighting that investing in client ease and reducing friction has led to improved Net Promoter Scores (NPS) and retention rates. It notes that mid-market, enterprise, and HR Outsourcing sectors have seen significant year-on-year improvements, with record levels for the first quarter. Mark Marcon questions the integration plan for Workforce Software, asking about the timeline, potential joint sales, client base overlaps, market penetration opportunities, and domestic and international strategies. Maria Black responds positively, noting these are the same questions considered as they assess the organization post-acquisition.

The paragraph discusses ADP's strategy to integrate new offerings into its global and enterprise markets, emphasizing the potential overlap of existing marquee clients. The focus is on enhancing their go-to-market growth opportunities by adding these new solutions, including collaborations with Lyric and WorkForce Software, to expand their reach in the global multinational corporation space. ADP aims to strengthen its Workforce Management Solutions through a mix of products and partnerships across various market levels. The speaker expresses excitement about future growth and addresses questions about their strategic intentions, with a conversation transition to another participant.

In the paragraph, Maria Black discusses the success and focus on the Professional Employer Organization (PEO) segment at ADP, emphasizing the strong execution and intensified sales strategy that has reaccelerated bookings. This success is attributed to the appealing value proposition of the PEO, particularly in providing competitive health benefits, workers' compensation programs, and retirement services, which are crucial for target market companies. Black highlights the increased complexity for companies in being employers, which further strengthens ADP's position. In a follow-up, Scott Wurtzel asks about the potential to expand the enterprise-focused WorkForce Software acquisition to serve mid-market customers, seeking insight into additional revenue opportunities.

In the paragraph, Maria Black discusses the company's approach to managing its diverse range of offerings across various market segments and global operations. She emphasizes their client-centric strategy, ensuring tailored solutions for each client. Maria mentions the integration of WorkForce Software's offerings into their ecosystem, particularly focusing on mid-market clients. Later, Samad Samana from Jefferies asks about ADP's acquisition strategy following a significant deal with WorkForce. Don McGuire is expected to respond to questions about whether this acquisition indicates a broader trend towards more mergers and acquisitions (M&A) activities for ADP.

The paragraph discusses ADP's acquisition strategy, emphasizing that while the recent acquisition is larger in terms of absolute dollars, the company's overall size has increased since previous acquisitions. ADP's M&A strategy remains focused on seeking opportunities that are additive, complementary, and do not complicate their offerings, ensuring fewer platforms doing the same thing. The paragraph also touches on the importance of a recurring revenue model. It concludes with a question to Maria Black about the rebranding of Lyric from Lifion, inquiring if it reflects achieving product market fit or signals a change in market strategy, with expectations of increased demand. Maria expresses her appreciation for the question.

The paragraph discusses the launch of ADP Lyric HCM, which is the new name for what was previously called Next-Gen HCM. The name "Lyric" is appreciated for its emotional resonance and alignment with modern work environments. This new offering is highlighted as flexible, intelligent, and human-centric, incorporating features like flexible workflows and Generative AI for tasks such as anomaly detection. It boasts unique global capabilities in HCM, payroll, and service. The market and ADP are prepared for this launch, and while there's strong demand and positive feedback, it's still early, and its financial contribution to ADP will take time.

The paragraph discusses the positive retention performance of ADP, attributed to best-in-class service and product investments that improve customer experience, as evidenced by high Net Promoter Scores (NPS). Maria Black explains that while retention slightly declined, small businesses (SBS) remained stable, and the company expects retention rates to almost normalize to pre-pandemic levels but anticipates some potential pullback. The modeling for the year accounts for high retention levels from the previous fiscal year and assumes some decline, particularly in the down market, though no significant pullback was observed in the first quarter.

The paragraph discusses a conversation between Ramsey El-Assal and Don McGuire about PEO (Professional Employer Organization) margins, which came in better than expected due to stronger revenue driven by increased Worksite Employee growth and higher wage rates. There was also a small $4 million reserve release that contributed to the margin improvement. However, the company does not anticipate further releases of workers' compensation reserves in their forecast. Additionally, Tien-Tsin Huang from JPMorgan inquires about the strong pipeline and whether there are any changes in visibility or decision-making across markets, particularly in relation to upcoming elections.

Maria Black emphasized that there has been no change in business conditions, with strong pipelines maintained from the fourth quarter and no observed shifts in buying behaviors despite global circumstances. She mentioned the normal ebb and flow of business cycles and confident pipeline projections across various markets. Tien-Tsin Huang inquired about cross-selling opportunities with WorkForce Software, noting the presence of notable brands. Black responded positively, highlighting the exciting potential in their market approach and the company's success in attracting prestigious clients.

The paragraph is from a conversation or an earnings call where participants discuss the impact of partnering with ADP, highlighting the benefits of their collaboration on growth due to ADP's scale and brand. This optimism extends to global clients and how these partnerships promise mutual invitations to business opportunities. The discussion also touches on generative AI initiatives, with Don McGuire noting that investments continue modestly, yielding positive results in areas like call summarization, sales, and technology without requiring significant additional investments. Caroline Latta finds this information helpful, and the dialogue moves on to a question from Kartik Mehta.

In the paragraph, Maria Black discusses the current state of small businesses, noting that while the market is nearly normalized, new business formations have slightly declined year-on-year, although they remain elevated compared to pre-pandemic levels. Despite this slight pullback, small businesses continue to show strong demand and execution. Kartik Mehta then asks Don McGuire about potential changes in portfolio strategy considering rising yields. McGuire responds that they have examined the situation and believe they have benefited from their longstanding laddering strategy over the past 20 years.

The paragraph discusses financial updates and strategic decisions related to investment and borrowing. It mentions a previous opportunity cost due to an inverted yield curve, which is now normalizing, allowing for potential benefits. Despite a reduction in the client fund interest estimate by $10 million, borrowing is now cheaper, so the company expects to meet its initial financial guidance. There is no plan to change the portfolio structure. Don McGuire remarks on industry-standard amortization related to a $1.2 billion deal, suggesting a 30% value with a seven to eight-year period to estimate EBIT drag. The company has maintained a pricing strategy of 100 to 150 basis points increase over recent years but aims for around 100 basis points as inflation decreases, with no recent changes to this strategy.

The paragraph discusses the impact of price increases tied to inflation indices on the company's quarterly revenue, noting that the contribution was minimal and did not alter their pricing strategy. Maria Black addresses a question from Pete Christiansen about the opportunity with WorkForce Software, indicating that it involves both acquiring new customers and scaling their solutions within ADP's existing customer base. She highlights the sizable total addressable market (TAM) for Workforce Management, noting its potential for expansion both domestically and internationally in the longer term.

The paragraph discusses the growth potential and strategy for ADP, particularly in addressing the needs of global companies over the next decade. It highlights the opportunity for expansion and success in new areas, emphasizing ADP's commitment to evolving with market demands. Pete Christiansen and Don McGuire address questions about financial aspects, including handling debt from a recent transaction and potential interest expenses. They also touch on the potential revenue impact of a recent acquisition, while noting it is still too early to predict specific outcomes. The discussion conveys excitement about ADP's future opportunities and growth trajectory.

The paragraph discusses the early stages of collaboration between sales forces following a recent deal. There is optimism about the opportunities for growth, particularly through the combination of WorkForce Software's technology and ADP's financial strength. However, it is still too early to specify the impact in numbers. Zachary Gunn from FT Partners inquires about the impact timeline for Lyric, noting a 30% year-over-year client increase. Don McGuire responds, highlighting the growing number of live clients and increased pipeline, but emphasizes that significantly impacting revenue will take time.

In the discussion, Don McGuire confirms that there is expected growth in PEO pays per control for the year, although it will be less than the growth observed in Employer Services. The company did not provide specific growth figures for Employer Services bookings for the quarter but maintains a 4% to 7% guidance range for the full year. McGuire emphasizes strong demand and a successful first quarter in terms of new business bookings. James Faucette inquires about factors that could influence the company's performance towards the higher or lower end of their projected growth range.

In the paragraph, Don McGuire discusses strong and stable demand for Human Capital Management (HCM) and payroll services, citing economic indicators like GDP, inflation, and labor numbers to support this view. The company's performance in the first quarter was solid, and they are maintaining their growth forecast of 4% to 7%. Maria Black concludes the call by expressing excitement about the solid quarter and the advancements in their strategic priorities, thanking her team and welcoming WorkForce Software to the company. The call is then closed by the operator.

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