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The campaign highlights how the world of work is always changing, sometimes gradually, sometimes suddenly, and trusted business solutions must evolve with it. The theme aligns with our strategic priorities to give our clients the advantage of our leading technology, expertise, and scale. In Q2, we continue to push forward on our first strategic priority to lead with best-in-class HCM technology. ADP Assist seamlessly integrates with ADP products across multiple platforms. Using an intuitive conversational interface, it provides valuable and contextual insights which touch every aspect of HR.

We offer these findings as a unique contribution to making the world of work better and more productive by delivering actionable insights to the economy at large. So, just a multipart question on PEO and following up on some of the commentary earlier on solid bookings and moderating PPC, sorry, paper control headwinds. As we look at the WSC growth, we have continued to see a sequential improvement there, better than what we saw last year.

  1. There’s a few things, a little bit of bad debt, a little bit of headcount, et cetera, and perhaps a little bit of timing, but nothing significant to really call out as a contributor.
  2. And so, it’s too early to be talking specifically about the interest rate outlook for next year, but we would just recommend you keep that in mind.
  3. No, I think you were right to call out the payroll deferral, payroll tax deferral.
  4. But arguably, we’re having to execute on behalf of our clients with today in mind.

The down market, definitely companies are continuing to hire and they’re continuing to buy. We had tremendous second quarter results. By the way, that business has been executing incredibly well really for many, many quarters. And that’s our run offering, but it’s also all the things that are attached to run. So, think insurance services, retirement services. All of the down market is doing incredibly well.

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It’s an area for us that we’re executing very, very well. We continue to take friction away from our clients, make it easy for our clients to engage with us. We know this based on our results and retention. We know this based on our results and record NPS.

So, it’s not a change in our investment strategy at all. It’s just a change in a bit of a tweak in the way we’re actually borrowing funds in the market when we need larger amounts of – when we have larger amounts of borrowing. Thank you, Michelle, and welcome, everyone, to ADP’s second quarter fiscal 2024 earnings call.

So, I would say the value proposition is as strong as it’s ever been. The organization is focused on PEO bookings as an execution lever for us. And I’m pleased to see that we did just that in Q2, and we’ve really had – this marks the fourth quarter of positive bookings momentum from the PEO. Yes, I’ll start, and Maria can add here in a second. So, as you know, you look at our revenue as – international revenue as a percentage the total, and it’s not where we’d like it to be, even though roughly 40% of the people we bear around world are in international. So, and the reason for that is that we have fundamentally different offers in the US.

Overall, we reported a strong second quarter, with our consolidated revenue growth moderating in line with our expectations, and our adjusted EBIT margin coming in slightly better than expected. However, the interest rate backdrop has changed since we last provided our full-year outlook, and we are lightly tweaking our outlook, which I’ll detail. ES segment revenue increased 8% on a reported basis, and 7% on an organic constant currency basis, coming in slightly ahead of our expectations. As Maria shared, we continue to grow our ES new business bookings, resulting in a record second quarter bookings volume. Our small business portfolio and international business provided outsized growth contributions this quarter. And with a steady HCM demand environment and healthy pipelines, we feel on track for our 4% to 7% new business bookings growth outlook for the year.

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Happy to comment on retirement trust services. It is really a demonstration of our scale. And so, when I think about what it means to our clients, what it means to the ecosystem that you mentioned, banks, CPAs, I think it’s all incredibly positive. And trust services are a core component of any 401(k) plan. So, in terms of that, we made the decision to launch our in-house trust services. We believe that this is a great value to our clients, to the ecosystem.

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With the two changes to segment margin, we now expect our adjusted EBIT margin to increase by 60 to 70 basis points versus our prior outlook, for an increase of 60 to 80 basis points. We continue to expect an effective tax rate of around 23%, and we still anticipate fiscal 2024 adjusted EPS growth of 10% to 12%, with the middle of that range the most likely outcome given current assumptions. The release comes two days ahead of the Labor Department’s nonfarm payrolls report, which is expected to show growth of 185,000, against the 216,000 increase in December. While the ADP data can provide a barometer for private sector hiring, the two reports often differ, with ADP often undershooting the Labor Department’s numbers.


My name is Michelle, and I’ll be your conference operator. At this time, I would like to welcome everyone to ADP’s Second Quarter Fiscal 2024 Earnings adpwor 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.

US Hiring and Wage Growth Slowed in January, ADP Data Show

So, yes, let me start – Bryan, let me start with the first part of your question. So, there was a little bit of modest revenue outperformance in the quarter. So, I think that was a contributor to the margin. There’s a few things, a little bit of bad debt, a little bit of headcount, et cetera, and perhaps a little bit of timing, but nothing significant to really call out as a contributor. In terms of the GenAI spend, yes, we are spending a little bit more than we said we were going to last quarter.

I wanted to quickly just touch on PEO. So, retention is going incredibly well, right? Year-to-date retention has definitely been better than we expected. And so, I think things are fundamentally really healthy right now. One thing to keep in mind as kind of think about the outlook, is that we are, as you mentioned, we are coming off of some of the record highs that we’ve seen over the last several years. We haven’t seen it to date, but we certainly want to ensure that we’re cognizant of the fact and we believe it’s prudent – given that we have retention running at such record levels, we believe it’s prudent to plan for it in the back half to have some pressure.

The report is produced by ADP Research Institute in collaboration with the Stanford Digital Economy Lab. I think in terms of other componentry within the PEO, you mentioned a few of them. There’s payroll per works on employee. Some of these things are things that we’re still waiting to really see the outcomes.

We also have money movement services, tax services, pretty much broadly distributed. Some of those offers don’t have the same value proposition outside of the US market. So, our opportunity there is not quite the same. Perhaps it will be as time goes on, some of those services may be available in other markets, but as we speak today, they’re not there.

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