The paragraph is an introduction to ADP's Third Quarter 2025 Earnings Call. Michelle, the conference operator, introduces the session, mentioning that it is being recorded and will include a question-and-answer segment. Matt Keating, the Vice President of Investor Relations, then takes over to welcome participants and note the availability of the earnings results on the SEC's and ADP's Investor Relations websites. He explains that the call will reference non-GAAP financial measures and forward-looking statements. Maria Black, President and CEO, thanks participants for joining and acknowledges a press release about the CFO transition involving Don McGuire.

Don, who joined ADP Canada in 1998 as Vice President of Finance, has greatly influenced ADP's international business through various leadership roles, culminating in his position as President of Employer Services International in 2018 and later as CFO in 2021. As part of a planned transition, Peter Hadley will take over as CFO on July 1st, with Don assisting until the end of September. Peter, who joined ADP in 2002, has held significant roles across different regions and most recently served as Corporate Treasurer. He brings vast financial expertise and leadership skills to his new role. The company has reported strong third-quarter results, including a 6% revenue increase, 10 basis points in adjusted EBIT margin growth, and a 6% rise in adjusted EPS. Further financial details will be discussed later.

In the third quarter, Employer Services experienced solid growth in new business bookings, especially in the U.S., across small business, mid-market, enterprise, and compliance solutions. However, international bookings were weaker due to macroeconomic uncertainty in key markets. Despite a slight decline compared to the previous year, retention exceeded expectations, reflecting high client satisfaction, particularly in enterprise, international, and HRO sectors. Employer Services' pays per control growth remained stable, while PEO revenue grew by 7%, outperforming expectations due to higher wages, strong retention, and zero-margin pass-through growth. ADP emphasized strategic priorities in HCM technology, outsourcing expertise, and global scale. New business bookings for ADP Lyric HCM significantly increased, with its client base and pipeline doubling. A notable new Lyric client includes a major home healthcare service provider, now utilizing HR, payroll, and time functions, with plans to add recruiting and talent management.

The paragraph highlights Workforce Software's strong new business bookings and increased interest in its tools across various industries. It details ADP's acquisition of PEI in Mexico, enhancing ADP's global payroll capabilities and integrating local expertise to support growth in Latin America. The acquisition also added 300 experienced employees. ADP hosted several key events, including the ReThink event in Zurich, the Meeting of the Minds in Las Vegas, and Accountant Connect Summits, to share insights and strategies on workforce management and accounting with leaders and partners worldwide.

During the third quarter, ADP advanced its partnership with Fiserv by promoting integration between Fiserv's Clover point-of-sale solution and ADP's run payroll, expecting sales to accelerate as product integration is completed. ADP received several awards for its HCM technology, including recognition for RUN, ADP Lyric HCM, and ADP Assist. The company expressed excitement about future growth opportunities and plans to share more at the upcoming Investor Day on June 12. The paragraph concludes with gratitude towards ADP’s associates for their contributions to the company's success, and Don McGuire acknowledges these efforts and expresses appreciation for the opportunity to work alongside them.

The paragraph discusses ADP's strong third-quarter performance and updates its fiscal 2025 guidance. ADP's consolidated revenue growth and adjusted EBIT margin surpassed expectations, prompting an adjustment in full-year guidance. The Employer Services (ES) segment saw a 5% revenue increase, with solid new business bookings despite macroeconomic uncertainties. ES retention exceeded expectations, leading to a forecast revision for a smaller decline or flat retention. ES pays per control growth and client funds interest revenue grew more than anticipated. Full-year client funds balance growth expectations have been raised to 5%-6%, while fiscal 2025 forecasts for client funds interest revenue and extended investment strategy impacts increased by $15 million at the midpoint. ES revenue growth forecast remains 6%-7%, with ES margin growth guidance narrowed to 50-60 basis points. The paragraph ends with a mention of moving on to the PEO segment.

In the article, the company reports a 7% revenue growth and a 2% increase in average worksite employee growth. Despite a modest deceleration in PEO "pays per control" growth from the second quarter, they are revising their full-year PEO revenue growth forecast upwards to 6-7%, excluding zero-margin pass-through growth now expected at 5-6%. The PEO margin remained flat due to strong revenue growth and favorable developments in workers' compensation reserves, but higher workers' compensation and SUI costs are expected to result in a PEO margin decrease of 60-80 basis points for the full year. The company maintains its 2025 consolidated revenue growth guidance of 6-7%, now aiming for the higher end, and updates its adjusted EBIT margin expansion guidance to 40-50 basis points. They anticipate an effective tax rate of 23% and forecast an adjusted EPS growth of 8-9% for fiscal 2025. Looking ahead to fiscal 2026, the company anticipates slower economic growth due to macroeconomic uncertainties, expecting below-normal pays per control growth and continuing to monitor impacts on international sales, especially in larger multi-country deals.

The paragraph discusses a company's financial strategy and international business performance. The company is benefiting from a laddering strategy that allows them to achieve higher yields from their client funds portfolio than the average yield of their maturing securities. They aim to maintain growth in new business, client satisfaction, and investment in products and people for sustainable growth. During a Q&A session, Ramsey El-Assal from Barclays asks about international software bookings. Maria Black responds, noting that while international bookings have been strong over several quarters, there was a slight downturn in Q3 due to macroeconomic uncertainty. However, she expresses optimism, citing strong pipelines for both local and multi-country deals, despite these deals being somewhat unpredictable in nature.

In the conversation, Ramsey El-Assal inquires about the growth opportunities related to the Fiserv relationship and the embedded offerings. Maria Black expresses excitement about the progress of their Fiserv partnership, highlighting the integration and distribution benefits that will be realized as RUN is embedded into Clover and CashFlow Central into RUN. She notes that this integration will allow them to tap into new markets, including mid-market and international opportunities. Additionally, Black mentions the potential to expand their embedded offerings beyond Fiserv, disclosing that they are exploring other platforms to extend their market reach.

During a Q&A session, Dan Dolev from Mizuho questions Don McGuire about the mixed signals between strong results and ongoing uncertainty. McGuire acknowledges that while the base business remains stable with low unemployment and some hiring, there's apprehension regarding large multinational deals due to their complexity and global reach. Despite this, the situation isn't vastly different from pre-pandemic conditions. McGuire emphasizes that their internal metrics, such as monitoring bankruptcies and client activity, indicate stability, even though external narratives suggest uncertainty. Overall, they remain optimistic.

The paragraph features a discussion during an earnings call, where Mark Marcon from Baird thanks Don for his service and welcomes Peter. Marcon asks Maria Black about any uncertainties affecting mid-market and smaller companies, specifically regarding delays in hiring within the PEO (Professional Employer Organization) business. Maria reassures that the company feels solid about their international pipelines and execution, particularly in the fourth quarter. She notes their satisfaction with the current quarter’s results and mentions that, unlike discretionary spending areas like the payments business, companies continue to invest in their human capital, hiring, and talent because it's essential for their operations.

In the article's paragraph, ADP reports steady demand across various markets, noting growth in PEO bookings despite a slight decline from the second quarter. Retention and pipeline support indicate solid growth prospects through fiscal 2025. Don McGuire highlights a 2% growth in worksite employees and better-than-expected pays per control. Mark Marcon and Maria Black discuss ADP's successful modernization efforts, specifically the integration of WorkForce Software completed in October. The integration is progressing well, with an emphasis on merging pipelines and sales force alignment. Overall, Maria Black is optimistic about the ongoing developments.

The paragraph discusses the positive response from large enterprise clients to a new offer introduced in October, which has led to unexpected wins and excitement about future opportunities. The speaker, Don McGuire, addresses a question from Tien-tsin Huang from JPMorgan regarding a deceleration in a specific segment (referred to as "ES") in Q3. Don explains that they anticipated a softer Q3 due to a stronger Q2, a strengthening dollar, and declining short-term rates. Despite this, Q3 revenue performed better than expected. Looking ahead to Q4, they anticipate reacceleration without any calendar anomalies.

The paragraph discusses the financial aspects and strategic decisions of a company. It mentions that foreign exchange (FX) rates are becoming more favorable, and client fund balances are positively impacted by higher wages. The second half of the fiscal year will see some benefit from higher rates, but the integration of WorkForce Software is expected to cost about 50 basis points for the full year, affecting margins. FX is anticipated to be less unfavorable in the fourth quarter. The conversation then shifts to the acquisition of PEI, a long-time partner based in Mexico. The acquisition, valued at under $10 million, is focused on the domestic Mexican market, but there is hope for growth and expansion within the region.

The speaker expresses enthusiasm for their deep expertise and contributions from Mexico while emphasizing a strong focus on global expansion, particularly in Latin America, including Brazil and Chile. The conversation then shifts to Bryan Bergin from TD Cowen, who congratulates Don and looks forward to working with Peter before asking about the business outlook for 2026. Don McGuire acknowledges the question but shares limited information to avoid preempting their Investor Day. He notes that the company is well-prepared to handle potential macroeconomic slowdowns, having weathered such events before. Additionally, he mentions that the company will have more insights to offer on June 12.

The paragraph discusses the resilience of the ADP business model despite potential economic downturns. While acknowledging that a less positive economy might affect the sales pipeline, it highlights that ADP can leverage various mechanisms, like adjusting sales commissions and R&D focus, to mitigate potential impacts. Historically, ADP has managed such challenges successfully. In a follow-up, there's a discussion about client hiring trends through the third quarter, noting that growth in pays per control is currently at the lower end of the historical range at 1%, with no significant industry-specific variations noted.

In the paragraph, Samad Samana asks Maria Black about the source of growth in the Lyric bookings pipeline, specifically if it comes more from existing customers upgrading or from capturing market share from competitors. Maria expresses enthusiasm for Lyric, emphasizing its strong market reception due to its modern, human-centric design, and adaptability. While she does not detail the specific contributions from upgrades versus new business, she affirms that both are contributing to growth. The response to Lyric, combined with Workforce software, is positive among CHROs, leading to optimism about continued business growth throughout the year.

The paragraph is part of a conversation involving Don McGuire, Samad Samana, and James Faucette. Samad inquires about ADP's hiring plans in the context of core business conditions, international market softness, and macroeconomic factors. Don responds that there are currently no changes anticipated in their hiring plans, as the business is doing well and they remain optimistic heading into their budgeting cycle. However, he notes that hiring could slow if unexpected issues arise. The conversation then shifts as James from Morgan Stanley asks about trends in client behavior within the Professional Employer Organization (PEO) segment, specifically regarding benefits enrollments and shifts towards lower-cost benefit plans due to perceived macroeconomic pressure. Maria Black begins addressing this question, noting that such shifts are always present and mentioning the recent completion of their renewal cycle.

The paragraph discusses the positive performance and strong retention of the company's Professional Employer Organization (PEO) business in the third quarter. Despite modest tailwinds, the company anticipates growth in PEO results through 2025. Benefits are a key part of their value proposition, and stability or slight improvements in benefit attachment indicate that this value is resonating with clients. The company's success may be attributed to differences in target industries compared to competitors, contributing to better growth from a higher base. The speaker highlights that not all PEOs are the same and believes their offering is superior due to these distinct constructs.

The paragraph discusses the differences in company focus and industry distribution, with some companies leaning towards white-collar sectors while others focus on less professional industries. It highlights the advantage of having a fully insured model in volatile health benefit cycles, which offers predictability and stability. Moreover, the company benefits from an additional sales distribution engine through its existing payroll seller network, which contributes to better results. The conversation then shifts to Jason Kupferberg from Bank of America, who asks a question about bookings, sales cycles, and macroeconomic factors, particularly focusing on client hesitancy in the U.S. market due to recent tariff uncertainties, and whether this behavior differs from international clients.

In the paragraph, Maria Black discusses the company's positive performance and outlook across different market segments. She notes that despite complexities, clients are still investing in talent, and they see strength in both the down market and mid-market activities. In the enterprise space, pipelines have grown year-on-year, particularly with multinational clients, although there's some pipeline aging. The company is executing a strong pipeline, especially in the international and enterprise spaces, with offerings like Lyric and Workforce software contributing to their success. Sales cycles seem to be returning to pre-pandemic norms, and they are focused on executing well in Q4. Jason Kupferberg then inquires about the competitive landscape, especially concerning privately held cloud-based providers in the down market.

In the paragraph, Maria Black discusses the competitive landscape of their business in Q4, highlighting the strength of their RUN platform in the down market and Workforce Now platform in the mid-market. She emphasizes the success and client satisfaction of their offerings, and a partnership with Fiserv to enhance distribution. Black mentions strong retention and net promoter scores (NPS) as indicators of success. When Bryan Keane from Deutsche Bank inquires about the proportion of international bookings, Black states that 88% of revenue is from the U.S., with international bookings closely aligning with that distribution. Keane also inquires about the enterprise's move towards Lyric and Workforce Software Solutions.

The paragraph involves a discussion about the company's margins and retention rates during a financial briefing. Don McGuire mentions that although some of the 50 basis points drag on margins—due to intangible amortization and financing costs—won't be recovered, certain integration and deal expenses will be recouped. The emphasis is on not overanalyzing these numbers as they are not significant across the ES margin. Maria Black highlights the company's strong retention performance and improvements in their Net Promoter Scores (NPS), leading to an increased retention guide. Don McGuire also notes record or near-record NPS scores across most business units, which he attributes to less customer switching.

The paragraph discusses the financial performance and strategy of a company. It highlights that the company has a high Net Promoter Score (NPS) and strong customer retention, which supports their positive financial guidance for the year. Kevin McVeigh inquires about the increase in client funds and extended strategy funds, questioning the disparity in average balances. Treasurer Peter Hadley explains that the increase is primarily due to higher wage levels and a strong bonus season in Q3, leading to more short-term funds held and reduced borrowing. The company is well-hedged against short-term rate fluctuations, which stabilizes their financial position, and the balance increase contributes approximately $11 million to $12 million in annual revenue.

The paragraph discusses a question about whether ADP, as an American company, is facing pushback from international clients due to geopolitical uncertainties. Maria Black clarifies that there is no pushback related to being a U.S. company. ADP operates in nearly 50 countries with local presence and offers localized services in 140 countries. The focus for international discussions is on closing large deals in the fourth quarter, not on their American origin. Don McGuire adds that ADP operates locally and is integrated into local systems like social security and income tax in various countries.

The paragraph is a transcript of a financial discussion, primarily focusing on different business segments and their performance. Kartik Mehta inquires about the performance of PPC in both the PEO and Employer Services, noting they are converging towards 1%. Don McGuire confirms this trend, indicating PPCs in PEO are slightly stronger. Afterward, Ashish Sabadra asks about POX pass-through revenue growth, concerned about a potential slowdown implied in the guidance. Don McGuire responds that the third-quarter performance exceeded expectations due to factors like higher zero-margin pass-throughs and retention, but downplays any major concerns for the fourth quarter. Ashish then shifts to asking about progress on GenAI, and Maria Black expresses enthusiasm about the topic.

The paragraph discusses the excitement and progress ADP is making with their Generative AI offerings, particularly ADP Assist. The company is enthusiastic about integrating Generative AI into products for clients, service associates, and sellers, emphasizing an ongoing strategy to enhance efficiency and product development. While acknowledging it's still early days, they are pleased with the progress and awards received. Ashish Sabadra congratulates Don and Peter, while Maria Black expresses gratitude to the team and pride in recent brand updates. The operator then concludes the program.

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