In This Article:
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Revenue Growth: 6% increase in third-quarter revenue.
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Adjusted EBIT Margin Expansion: 10 basis points increase.
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Adjusted EPS Growth: 6% increase.
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Employer Services Revenue: 5% increase on a reported and organic constant currency basis.
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PEO Revenue Growth: 7% increase, with 2% average worksite employee growth.
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Client Funds Interest Revenue: Increased more than anticipated, with full-year average client funds balance growth expectation raised to 5% to 6%.
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Fiscal 2025 Revenue Growth Guidance: Maintained at 6% to 7%, expected towards the high end.
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Adjusted EBIT Margin Expansion Guidance: Updated to 40 to 50 basis points.
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Fiscal 2025 Adjusted EPS Growth Guidance: 8% to 9% expected.
Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Automatic Data Processing Inc (NASDAQ:ADP) reported a solid third-quarter with 6% revenue growth and 6% adjusted EPS growth.
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Employer Services new business bookings showed strong growth, particularly in the US across small business, mid-market, and enterprise segments.
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Client satisfaction scores reached record highs, contributing to strong retention performance.
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PEO revenue growth exceeded expectations at 7%, driven by higher wages and strong retention.
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ADP's strategic initiatives, including the integration of Workforce Software and the acquisition of PEI in Mexico, are enhancing global payroll capabilities.
Negative Points
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International bookings were softer due to macroeconomic uncertainty in key markets.
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Employer Services retention declined slightly compared to the prior year.
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PEO margin was flat in the quarter, impacted by higher workers' compensation and SUI costs.
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There is heightened macroeconomic uncertainty, leading to projections for slower economic growth and below-normal pays per control growth.
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The integration of Workforce Software is expected to impact margins by approximately 50 basis points for the full year.
Q & A Highlights
Q: Can you provide more details on the softer international bookings you mentioned? Are there specific regions or products affected? A: Maria Black, President and CEO, explained that the softness in international bookings is due to macroeconomic uncertainty. Despite this, the international space has strong pipelines, both in-country and globally, with large deals that tend to be lumpy. The focus remains on executing these deals in the fourth quarter.
Q: What is the growth opportunity for the embedded payroll offering with Fiserv, and can it be extended to other partners? A: Maria Black highlighted the excitement around the Fiserv relationship, which is progressing well. The integration of RUN into Clover and CashFlow Central into RUN is expected to be a game-changer. There is potential to extend this reach to other ADP platforms and countries, enhancing the total addressable market.