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What is Automatic Data Processing's gross profit margin?

- **Revenue & EPS Growth**: 7% YoY revenue and 7% adjusted EPS growth, driven by strong new business bookings.
- **AI & Innovation**: Expanded AI capabilities (e.g., ADP Assist) and acquired Pequity to enhance compensation management.
- **Client Satisfaction**: Record-high satisfaction scores, with 80% mid-market clients adopting Next-Gen Workforce Now.
- **Financial Guidance**: FY26 revenue 5-6%, EPS growth 8-10%, despite flat pays per control growth.
- **PEO Momentum**: PEO revenue up 7% YoY, WSE growth 2% in Q1, aligned with 2-3% FY26 target.

**【CEO Summary Section】**
- **Revenue Growth**: 7% year-over-year (YoY) revenue growth, driven by strong new business bookings in Employer Services and PEO. Adjusted EPS grew 7% YoY.
- **Strategic Initiatives**: Expanded AI capabilities (e.g., ADP Assist for payroll anomalies) and embedded payroll solutions for small businesses. Acquired Pequity to enhance compensation management software.
- **Client Satisfaction**: Record-high client satisfaction scores, with 80% of mid-market clients adopting Next-Gen Workforce Now.
- **Global Expansion**: Launched GlobalView in Costa Rica, reinforcing ADP's global payroll leadership.

**【CFO Financial Commentary】**
- **Financial Highlights**: GAAP revenue $4.2B (7% YoY), PEO revenue up 7% YoY. Client funds interest revenue increased by $10M to $1.30B-$1.32B.
- **Margins**: Maintained 50-70bp EBIT margin expansion guidance. ES segment margin down 50bps due to WorkForce Software integration costs.
- **Guidance**: Full-year revenue growth 5-6%, adjusted EPS growth 8-10%. Client funds balances expected to grow 3-4%.
- **Macro Impact**: Pays per control growth rounded down to 0% for Q1, with flat guidance for FY26 due to cautious headcount additions.

**【Q&A Key Highlights】**
- **Booking Trends**: ES new business bookings strong, with small business and mid-market demand stable. PEO new business growth exceeded expectations.
- **PEO Performance**: WSE growth 2% in Q1, aligned with 2-3% FY26 guidance. PEO margin pressure from higher selling expenses and retroactive tax credits.
- **AI Impact**: AI tools (e.g., ADP Assist) reduced client inquiries by 5.5M conversations. Sales productivity gains from generative AI tools.
- **Macro Risks**: Flat pays per control growth reflects cautious hiring environment. Client funds yield curve decline offset by balance growth.
- **Acquisition Update**: Pequity acquisition to enhance compensation planning, with no material financial impact in FY26.

Automatic Data Processing, Inc. (ADP) Q1 2026 Earnings Call Transcript

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