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Modern Board 2022-ADP

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The HR software and services company has <a href="https://seekingalpha.com/article/4492107-12-top-stocks-bear-market">received analyst praise</a> for steady cash flow, stability of demand for its offerings, and strong dividends. William J. Ready, president of commerce at Google, and Francine Katsoudas, chief people officer at Cisco, are also ADP board members. The company <a href="https://finance.yahoo.com/news/adp-adp-1-9-since-163004806.html">projects steady (6%) revenue growth</a> for its employer services arm in 2022, along with 13% to 15% growth for its PEO (professional employer organization) division.

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GPTW New York Large 2022-ADP

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F500-2020-227-Automatic-Data-Processing

Automatic Data Processing, more commonly known as ADP, provides HR solutions including electronic payroll systems in more than 140 countries.

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Automatic Data Processing, or ADP, provides cloud-based human resources products to organizations around the world. The company has two primary segments: one for employer services and the other focused on professional employer organizations. These parts of the business include platforms and services for payroll, HR management, tax compliance, benefits administration, and talent management.

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Automatic Data Processing (ADP): Company Profile, Stock Price, News, Rankings

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Automatic Data Processing

automatic data processing

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 Third Quarter twenty twenty five Earnings Call. I would like to inform you that this conference is being recorded. After the prepared remarks, we will conduct a 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 third quarter fiscal twenty twenty five earnings call. Participating today are Maria Black, our President and CEO Don McGuire, our CFO and Peter Hadley, our Treasurer. 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'll 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 their 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. Before discussing our third quarter results, I want to take a few moments to acknowledge this morning's press release announcing our CFO transition. Don McGuire has enjoyed a remarkable career at ADP, initially joining ADP Canada in 1998 as vice president of finance. He would go on to profoundly shape our international business, serving in a number of key leadership roles around the world, including his 02/2018 appointment to the position of president, employer services international. In 2021, Don returned to his finance roots, taking on the role of ADP's CFO, where he has provided strong financial stewardship and valued strategic counsel, in particular as I transitioned into my role as ADP's CEO.

I am honored to call him a colleague and more importantly, a friend. Dawn, thank you from the bottom of my heart for your countless contributions to ADP. And with that, as part of our orderly succession planning, I'm excited to share that Peter Hadley will succeed Don as CFO effective July 1, with Don assisting with this transition through the September. Many of you already know Peter through his participation in various investor meetings and calls over the course of the last year. He joined ADP in 02/2002 and is also a global citizen, having held roles in both finance and operations for ADP in Europe, Asia, and The United States, including as CFO of our international and enterprise business units, president of Asia Pacific, and most recently as corporate treasurer.

Peter brings deep financial expertise, extensive knowledge of ADP and our industry, and strong leadership and strategic skills to the position. You will have the opportunity to hear more from Peter at our Investor Day on June 12. In the meantime, I hope you will all join me in wishing Don well and in welcoming Peter to the CFO role. Now on to our results. This morning, we reported solid third quarter results that included 6% revenue growth, 10 basis points of adjusted EBIT margin expansion and 6% adjusted EPS growth.

I'm excited to share the progress we continue to make against our strategic priorities, but let's first review some additional financial highlights from the quarter. We delivered another solid quarter of Employer Services new business bookings growth. In particular, we were pleased with the results across our U. S. Offerings with our small business, mid market and enterprise as well as compliance solutions offerings all performing well.

We meanwhile experienced a softer quarter for international bookings as a result of macroeconomic uncertainty in some of our key international markets. With healthy new business pipelines, we remain focused on delivering overall bookings growth within our guidance range. Employer services retention again modestly exceeded our expectations, declining slightly compared to the prior year. This continued strong retention performance reflects client satisfaction scores reaching record highs for a third quarter and on a fiscal year to date basis, with the most meaningful improvements coming from our enterprise, international and HRO businesses. Our US clients continue to hire in the third quarter as our employer services pays per control growth remained at 1%.

And last, PEO revenue growth of 7% exceeded our expectations, helped by higher wages, strong retention, and continued growth in zero margin pass throughs. Now let's turn to our continued execution on our strategic priorities, which include leading with best in class HCM technology, providing unmatched expertise in outsourcing and benefiting our clients with our global scale. Our momentum with enterprise clients continued in the third quarter. New business bookings for ADP Lyric HCM increased substantially and our pipeline for new Lyric business doubled compared to last year. Among the new clients to start on Lyric during the third quarter was a leading provider of home health care services with more than 36,000 employees.

This client is now live with HR payroll and time and plans to add recruiting and talent this quarter. We were also pleased with Workforce Software's new business bookings with ongoing strong interest for its time and attendance, absence management, and scheduling tools from organizations across a variety of industry verticals and geographies. We continue to make progress in our work to tightly integrate the acquired workforce software business with key ADP HCM platforms. We further strengthened our global payroll capabilities with our acquisition of PEI in Mexico in the third quarter. Based in Mexico City, PEI has provided robust payroll solutions, HCM expertise, and technology to local and multinational clients for thirty years and has been a valued ADP global payroll partner since 02/2009.

By integrating PEI's payroll expertise Mexico with ADP's global reach and comprehensive HCM solutions, we enhance the experience we can provide to our local and global clients. In addition to PEI's products and solutions, the acquisition added nearly 300 experienced associates who bring deep local expertise as we continue to pursue growth opportunities across the Latin America region. We supported our clients and partners by hosting a number of signature events during the third quarter. At the ADP Rethink event in Zurich, leaders from the world's largest organizations came together to share insights and lessons learned from their global transformations and to discuss challenges and opportunities in a rapidly changing HCM landscape. At the ADP Meeting of the Minds event in Las Vegas, we hosted enterprise clients from across all industries, sizes, locations together with industry experts to focus on one important mission, making work better.

And at our Accountant Connect Summit, we provided more than 10,000 partner attendees with access to thought leaders who are shaping the future of the accounting profession. During the third quarter, we also continued to advance our embedded payroll partnership with Fiserv. We are actively referring our clients and prospects to Fiserv's Clover point of sale solution, while Fiserv is referring its merchant clients to ADP's run payroll. We expect our sales to accelerate as we complete our product integration work this year, enabling us to offer a differentiated integrated solution. We are excited by this relationship as well as the broader opportunities we see to grow our embedded payroll solution over time.

Finally, our focus on best in class HCM technology led to several recent awards, including RUN being named number one on g two's best software products for small business, ADP Lyric HCM being named Data Solution of the Year for Human Resources in the 2025 Data Breakthrough Awards, and ADP Assist being named a winner in the 2025 Artificial Intelligence Excellence Awards presented by Business Intelligence Group, earning recognition for driving innovation and possibilities in AI. We look forward to sharing more details around the strength of our product portfolio as well as our innovation roadmap at our upcoming Investor Day on June 12. Overall, we were pleased with our strong financial and strategic outcomes in Q3. I'd like to thank our associates who continue to deliver exceptional products and service to our clients and whose efforts drive our client wins, industry recognition and record client satisfaction levels. Thank you again for all that you do for ADP and for our clients.

Thanks, Maria, and good morning to everyone on the call. Before I start, I would just like to thank you, Maria, for the kind words. It has truly been a privilege to contribute to ADP's success over the years and to work alongside so many talented and committed colleagues. I am also happy to see ADP's CFO position being assumed by such a capable and innovative leader, and I look forward to working with Peter to ensure a seamless transition in the coming months. Now for some color on our results for the quarter and our updated fiscal twenty twenty five guidance.

Overall, we reported a solid third quarter with our consolidated revenue growth and adjusted EBIT margin coming in above our expectations. We are adjusting our full year guidance to reflect our better than expected Q3 results, as well as making a few other changes, which I'll detail. Let me begin with our Employer Services results and guidance. ES segment revenue increased 5% on a reported and organic constant currency basis in the third quarter. As Maria mentioned, ES new business bookings growth was solid.

Given the current macroeconomic uncertainty, our recent softer international bookings and the importance of the fourth quarter, a range of new business bookings outcomes remains for fiscal twenty twenty five, and we are reiterating our 4% to 7% growth guidance. With ES retention again coming in better than expected in Q3, we now forecast a decline of 20 basis points to flat for the year, which is better than our prior guidance. ES pays per control growth was 1% in Q3, and we now expect 1% growth for the full year. Client funds interest revenue increased by more than we anticipated in Q3, driven by stronger average client funds balance growth. We are raising our full year average client funds balance growth expectation to 5% to 6%.

Our fiscal twenty twenty five forecast ranges for client funds interest revenue and the net impact from our extended investment strategy each increase by $15,000,000 at the midpoint. In total, there is no change to our fiscal twenty twenty five ES revenue growth forecast of 6% to 7%. Our ES margin increased 20 basis points in the third quarter, and we are narrowing our fiscal twenty twenty five ES margin guidance to now expect growth of 50 to 60 basis points. Moving on to the PEO, we had 7% revenue growth and 2% average worksite employee growth. PEO revenue excluding zero margin pass through growth of 8% was supported by higher wages and strong retention.

PEO pays per control growth decelerated modestly from the second quarter. To reflect our Q3 results, as well as the ongoing benefits anticipated from higher wages, we are increasing our full year PEO revenue growth forecast to 6% to 7%, and PEO revenue excluding zero margin pass through growth to 5% to 6%. We are maintaining our 2% to 3% average worksite employee growth guidance for the year. PEO margin was flat in the quarter, as strong revenue growth and favorable actuarial loss development in workers' compensation reserves were offset by higher workers' compensation and SUI costs. We now expect PEO margin to decrease between sixty and eighty basis points for the full year, which is slightly better than our prior forecast.

Putting it all together, we are maintaining our fiscal twenty twenty five guidance for consolidated revenue growth of 6% to 7% and now expect to come in towards the high end of this range. We are updating our adjusted EBIT margin expansion guidance to 40 to 50 basis points. We continue to anticipate a full year effective tax rate of around 23 and now expect fiscal twenty twenty five adjusted EPS growth of 8% to 9%. As we look ahead to fiscal twenty twenty six, we wanted to share a few early thoughts. First, heightened levels of macro uncertainty are leading to projections for slower economic growth.

With this in mind, we expect our pays per control growth to continue at below normal levels next year. We will also continue to monitor any impacts from the uncertainty in the global macro environment on international sales, particularly our larger multi country deal activity. As a result of our laddering strategy, we remain positioned for continued tailwinds from our client funds portfolio as anticipated reinvestment rates remain above the average yield of our maturing securities, driving overall yields expected on the portfolio above fiscal twenty twenty five levels. As always, we will remain focused on driving growth in our new business bookings, maintaining strong client satisfaction and retention levels and investing in our products and people to deliver sustainable revenue growth and margin expansion over time. Thank you.

And I'll now turn it back to the operator for Q and A.

Thank you. Thank you. Please ask one question with a brief follow-up. We will take our first question from the line of Ramsey El Assal with Barclays. Your line is open.

Hi, thank you for taking my question and it's been great working with you Don. Best of luck in the future and also congratulations to Peter. Maybe I could ask about the softer international bookings that you called out a little more color there. Is it sort of a particular regions, products, any other color that you could give us there would be helpful.

Yeah, sure. So good morning, Ramzi, and thanks for joining us today. So I'll comment on the international bookings. So overall, the international space had executed and we had several quarters of consistent strength. And what we saw in Q3 was a bit of softness.

And undoubtedly, we think the softness is anchored in the uncertainty in the macro environment. That said though, the international space in general, these are large deals, they tend to be lumpy. We have strong pipelines. So from a broad based perspective, the pipelines are strong both in country as well as the global view offers and things of that nature, the multi country deals. However, we have a lot to get done, I guess, in the fourth quarter, so it is a little bit of a lumpy environment out there.

These are lumpy deals, but the pipeline supports a solid finish to the year.

Got it. Okay. Thank you. Also, the you called it the Fiserv relationship. I guess just more broadly on that embedded offering, what do you think of the growth opportunity there in the addressable market?

Is there a large opportunity for embedded across potentially other distribution channels and partners?

Sure. So, we are very, very excited about the Fiserv relationship. It is progressing well. This year, we are going to roll out the integration. I think that'll be a leapfrog stage for both of us.

So thus far, we're sharing referrals back and forth. We are perfecting the model from a distribution. So you imagine our distribution being folded together with their distribution across our go to market, but also across our bases in terms of the over a million clients that we have and run. And I think they're shy of a million, but nonetheless, the overlap is not 100%. So there's a tremendous amount of opportunity for us to address each other's bases.

And so we do think the game changer, though, will be when RUN is embedded into the Clover offer and Cash Flow Central is embedded into the RUN offer. And that's forthcoming, so we're really excited about that. We do think that's big. That said, we also believe that there might be an opportunity to extend that reach across multiple additional ADP platforms. So think taking it into potentially the mid market, into other countries.

We're both global businesses. So we think the reach just even within Fiserv is meaningful for us. But to your question, beyond that, we're very excited about our embedded offer. We have it across a couple other places. And in my mind, this is the proof point of really seeing how the integration can work from a technology perspective.

But certainly, we are looking at other places that we have the ability to extend our reach through our embedded offering to really extend the total addressable market, if you will.

Thank you. Our next question comes from Dan Dolev with Mizuho. Your line is open.

Hey, guys. Great results and it was you know, a pleasure working with you working with you, Don. You know, it's it's I feel like everyone is a little bit confused. Results are great. You're talking about uncertainty.

You know, some of the payment companies out there are still saying things are good. Can you maybe tell us a little bit more in terms of when when you say uncertainty, how much is it, you know, holding back on on on on hiring, or is it just people are worried? Maybe just like concerns, maybe you could parse out concerns versus actual actions, I would say, from your clients. That would, I think, really be helpful for investors.

Jan, thanks for the comments, and thanks for the question. What we're seeing, we're seeing a lot of stability in our base. Mean, the underlying economic factors are still pretty strong for us in terms of unemployment's low, and yes, we are still rounding down to 1% PPC growth, so people still are hiring. There's some of that happening. I think the uncertainty that we're seeing though, as Maria mentioned earlier in the bookings comments, is these very large deals that perhaps span multiple countries.

I think there's some apprehension there, if you will, to make decisions, although the pipelines are very strong and these deals are always a long time in the making because they are complicated and complex and they do reach into several corners of globe. But, you know, in in having said that, we're we're not terribly far off what we saw pre pandemic where it was always hard to find people to get signatures, etcetera. So we're still optimistic. And as we said, we our own base, things are still going well. We watch bankruptcies.

We watch clients who are are active but not not billing. So things seem to be pretty calm for us, but we can't deny what we're hearing and what you're reading, we're all hearing. So hopefully these things settle down, but in our own base and day to day business, things are still pretty strong.

That's great. Thank you. I think this definitely helped clarify what's out there. Really appreciate it.

Thank you. Our next question comes from Mark Marcon with Baird. Your line is open.

First, Don, it's been a pleasure working with you. Hope you have all the best enjoy your retirement. And Peter, welcome. Maria, you mentioned international and we just talked a little bit about the uncertainty, but I'm just wondering if you could delve a little bit more with regards to what you're seeing in terms of mid market companies, the smaller companies that would typically use run. Are you hearing anything or is your sale or your sales folks hearing anything about any sort of uncertainty pushing out delays or how is that impacting the PEO business?

We heard from a different player yesterday that ended up indicating that they were seeing a slowdown with regards to potential hires in their PEO business. So wondering about that, and then I've got a follow-up.

Sure, so I'll start. I think we talked a little bit about international and Don shared that broadly speaking, feel solid about the pipelines, we feel solid about the execution. I think it's really about we have a lot to get done as we always do in the fourth quarter. So I think with respect to the mid market, the down market and the PEO and the rest of your question mark, broadly speaking, we're very pleased with our results this quarter. They're solid.

And so I think from a distribution standpoint, we continue to execute, we continue to see that clients are investing in their people. So if you think about our industry versus what was shared earlier from Dan around, call it the payments business, if you will, HCM is not discretionary as it relates to companies are investing in their people, they're investing in hiring, they're investing in talent, and candidly, they have to pay people. And so we're not seeing from a distribution and HCM demand perspective. Demand feels okay. It feels as it relates to pipelines in the down market and PEO, we measure that more with respect to activity in terms of how many appointments our sellers are going on, how many RFPs are going through the PEO model.

PEO bookings, there was growth in the third quarter. It was a little bit less than the second quarter, but at the same time, we have line of sight of good solid growth in the PEO to round out fiscal 'twenty five. We also see good strength in the PEO and retention. So I think all things being equal, we feel good about the demand. It feels okay out there in the down market, mid market, up market PEO.

Even international has pipelines to support the broad range of bookings guidance that we have.

Yeah, maybe Maria, just to add on the PEO question, Mark, that you asked. Our PEO bookings were good in the quarter. We were happy with them, and we did have 2% worksite employee growth. So our pays per control were also little bit better than we expected. So, we were happy with PO in the quarter for sure.

That's great. And then, ADP has been doing a great job in terms of modernizing. Can you give us an update with regards to workforce software in terms of that being integrated and maybe even a little bit more color with regards to Lyric? Sounds like things are going really well from that perspective.

They are, Mark. Things are going incredibly well. So just a reminder for everyone, we closed on that integration in October. We've been very busy since then. So part of that busyness was the overlap of the pipelines and really seeing the go to market come together.

It's also the integration of the overall offer and call it the organization into ADP. So we are still working on the technology integration, and that's coming along incredibly well. We're really excited to see the sales forces come together. And from a go to market perspective, I know I mentioned our Rethink events, mentioned our Meeting of the Minds event. I think the thing that I wouldn't say has surprised us, but has really pleased us since October, is how well this offer is resonating with our large clients in the enterprise and in the global space.

So we're really excited. In fact, we have a few wins that we were excited to see come through this quarter that candidly wouldn't have been wins without this offer in portfolio, if you will. So we're really excited about the progress we've made. We're excited to see the integration come together. And I think it's going to continue to drive tremendous opportunity for us going forward.

Great, thank you very much. Look forward to seeing you June 12.

Thank you. Our next question comes from Tien Tsin Huang with JPMorgan. Your line is open.

Hey, thanks so much and all the best to Don, of course. I want to ask on ES. It decelerated a couple of points and is running below the full year range. I know you reiterated for the full year and you're running on the higher side in the first half, but just wanted to make sure I understood what the factors were there for the change.

Yeah, Tien Tsin, thank you. So on the revenue side, I think as we set up the third quarter, we mentioned that we had some poor calendar for us, so we had a bit of a stronger Q2 than Q3, so we expected that softness. There was a strengthening dollar at that time that was causing us some grief, we also expected that we were going to have some impact from declining short term rates. So we positioned Q3 to be a bit softer, And then we actually did better in Q3 on the revenue side than we had anticipated because those things didn't come to fruition, but there was less impact. As we look forward to Q4, we do expect a little bit of reacceleration.

There's no anomalies in in the calendars. FX is a little bit more favorable and of course, fund balances are really making an impact. They're growing based on higher wages more positively than we had expected. But then, know, if we look at the second half, we look at ES and we think about margins, the real story on the margin side is that we would have had better acceleration in our margins. Certainly, we're getting some some benefit from the higher rates.

We are getting an offset to that though. We said workforce software integration was going to cost us about 50 bps, and we continue to think that's about the number for the full year, so that's having an impact. So that's other aspect, and FX should be a little bit less unfavorable on the compare in the fourth quarter. So I think those are really the drivers for ES.

Okay. Yeah, thanks for the complete answer. I knew we had to leap year thing in there, but I just, yeah, I want to make sure we caught all that. Just my quick follow-up just on the PEI, the Mexico acquisition, can you roughly size that for us? And I'm curious, can that be extended or pushed into other parts of the region, Latin America, etcetera?

So PEI has been a long time partner of ours since I think 02/2009. So it's been with us for quite some time. This is really a domestic Mexico company. It's important for us to yeah. So it's important for us to get in the ground.

It's I didn't don't even think it shows up in the cash flow statement. It it was a sub $10,000,000 acquisition. So company we've working with for a very, very long time. And but it's very much domestic Mexico, but certainly we're enthusiastic and hopeful that we can grow in the domestic Mexican market and use it, continue to use it as a Salergo partner as we have for many, many years now.

Yeah, think the only comment I would make is we're really excited about their deep expertise and obviously the local contribution that it will make from a Mexico perspective, but we are also incredibly focused on our global expansion. And we have a big business in Brazil, big business in Chile. I was there actually just a couple weeks ago. So we continue to remain focused on overall international expansion, but specifically Latin America.

Thank you. Our next question comes from Brian Bergen with C. D. Cowen. Your line is open.

Hi, good morning. Thank you. And Don, congrats on best wishes. And Peter, we're looking forward to working with you. My first question is on '26.

So I appreciate the comments on PPC. Was hoping you just dig in a little bit more on early twenty twenty six thoughts. Any important considerations on implied 4Q twenty twenty five exit rates across the business that may be stickier versus those that may be at more risk? And can you remind us just how to think about relative insulation in the business model in the face of a potential macro slowdown?

Okay. I'll say a little bit about '26 beyond what we said in the prepared remarks. I mean, I think we wanted to make sure everyone understood the float impact and how our laddering strategy is going to work. If you have more detailed questions like that, can certainly ask Peter. He's in the room here with us, he can answer that question if we want him to do that.

But I think I also don't want to ruin Investor Day coming up on June, so not too much to to say on twenty sixth beyond what we shared in in the prepared comments. But I I would say that, when we think about the potential of a slowdown, ADP has weathered these types of storms many, many times, and our business is well insulated. So, it took several quarters for the slowdown to the prior slowdown to show itself in our results. So answered the question earlier, the business activity continues to be good. And so if things were to start to materialize or manifest themselves in a kind of a less positive economy, we would certainly see things in the pipeline, etcetera, the sales pipeline.

But generally speaking, it takes quite a while for that to work its way through the ADP business model, which is very resilient. As Maria said just a few minutes ago, we're not discretionary. So so that works well for us. And then, of course, we have the levers that we've had in the past, and we can use them. There's some naturally self correcting items like sales commissions, etcetera.

If things were to progress or continue, there's implementations would be slower, etcetera. A number of things changing our focus on some of our R and D initiatives. So there's many things and many levers we can pull to soften any potential blows and I think our history has shown that we've been able to do that on a pretty successful basis many times before.

Okay. Okay. Understood. And on follow-up on client hiring. So can you comment on what you saw as you move through the third quarter kind of month to month through 3Q and through April?

Is there any notable variation by industries that may be more directly exposed to tariff versus not?

No, I think generally, and I think I made the comment on the last call last quarter that we rounded down to 1%. We're still rounding down to 1% and yes, so things are softer. In normal years, we go back 'sixteen to 'nineteen and we look at pays per control growth, they're in the two percent to 3% range. So at 1%, we're at the lower end. But there was nothing specific, no specific industries that kind of jumped out at us.

So we would prefer to have higher PPC growth, of course, but it's still positive and rounding down to one.

Thank you. Our next question comes from Samad Samana with Jefferies. Your line is open.

Hi, good morning. And I will echo the comments of many congrats Don and look forward to working with you as well. Peter and Maria, just maybe a question for you. When I think about the Lyric bookings pipeline, again, I think for the last several quarters, you sounded much more optimistic about trends upmarket, specifically with Lyric plus rebrand. How much of that's from existing customers that are converting over to it versus gaining share from competitors as you've now kind of established a beachhead with some core customers there?

Yeah. So it's a great question. So I should reiterate my incredible excitement and optimism for Lyric as a whole, not just the rebrand, which by the way, it is an incredible brand. And certainly, we love the name Lyric. But that offer is resonating really well.

So we talked about the pipelines building. We don't delineate necessarily. We obviously know, but we don't disclose how much of the pipeline is upgrades and or new business bookings or net new logos, if you will. But the answer is both. It is resonating really well with CHROs in the market.

I would say at these events, be it rethink and meeting of the minds that I mentioned, the excitement was there around workforce software, but it was also there around Lyric and the combination of the two. And what I would say to you is CHROs are liking this modern offer because it is arguably the most modern technology that's out there at this point. It's human centric in its design, it's adaptable. We consider it groundbreaking. It appears based on the response we're seeing in the market and in the pipelines that the market agrees with that sentiment.

So yeah, we're really, really optimistic about what we're seeing with the market receptivity and how that is resulting in the pipelines and the new business bookings that we've seen with Lyric and expect to continue through this year.

Understood. And then maybe a follow-up, Don. Just as I think about the commentary between what's going on with the core business and maybe some of the international softness that you've seen and then the kind of the macro side that you called out. If I take all that together, how should we think about maybe ADP's own hiring plans? Are you guys going to still track to maybe what you anticipated in terms of headcount growth for fiscal 'twenty five?

Or should we think about a change in either direction in terms of hiring more or less than you originally anticipated, especially as we contextualize it with what's happened maybe over the last several weeks?

Yes, Samana. I think that we're not expecting to make any changes at this time. Things are going pretty well. The business is solid. So we have no changes to our plans.

Of course, you know, just building off the prior question from Brian, should something come up, then we'll do it definitely slow hiring, etcetera. But as we sit here today, things are solid, and we have no changes to our plans as we actually go into our budgeting cycle next week. So we're full speed ahead and still optimistic.

Great. Look forward to seeing you all in a few

Thank you. Our next question comes from James Faucette with Morgan Stanley. Your line is open.

Great, thank you so much, and offer my congratulations to Don and Peter as well. I wanted to ask quickly on PEO. Just wondering how client behavior in the PEO segment has evolved regarding benefits enrollments, and are you seeing any shifts in preference towards lower cost benefit plans, particularly as there's a little bit of macro pressure, perceived macro pressure?

was gonna say, yeah, so I guess we can both answer that, but I'll start. From a PEO perspective, listen, there's always some of that. We actually just completed our renewal cycle, And so we're really pleased with what we've seen with respect to our execution through that. The team's done an incredible job moving through the motions of that. But moreover, PEO retention was strong in the third quarter.

Automatic Data Processing (ADP) Q3 2025 Earnings Call Transcript

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