Q3 2026 Automatic Data Processing Inc Earnings Call Transcript
Key Points
- Automatic Data Processing Inc (ADP) reported strong third-quarter results with 7% revenue growth, 80 basis points of adjusted EBIT margin expansion, and 10% adjusted EPS growth, all ahead of expectations.
- Employer Services new business bookings showed solid growth, particularly in international and compliance solutions, contributing to overall revenue growth.
- ADP's Employer Services retention rate and overall client satisfaction levels reached new record highs for a third-quarter.
- ADP's AI initiatives, such as ADP Assist agents, have led to significant time savings and efficiency improvements, enhancing client satisfaction and operational productivity.
- ADP's global scale and extensive data foundation, built over 77 years, provide a competitive advantage in delivering compliant HCM solutions across 140 countries.
- PEO segment margins decreased by 120 basis points in the third-quarter, driven by higher selling expenses, higher SUI costs, and lower positive reserve releases compared to the previous year.
- Employer Services pays per control growth remained at a modest 1% for the third-quarter, indicating limited growth in this area.
- The company faces ongoing macroeconomic uncertainty, which could impact new business bookings and retention rates.
- ADP's reliance on seat-based revenue models could be affected by AI-driven changes in workforce dynamics, potentially impacting revenue.
- The competitive landscape remains intense, with new entrants and existing competitors posing challenges, particularly in the back half of the fiscal year.
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 fiscal 2026 earnings call. I would like to inform you that this conference is being recorded.
(Operator Instructions).
I will now turn the conference over to Matthew Keating, Vice President, Investor Relations. Please go ahead.
Thank you, Michelle, and welcome everyone to ADP's third-quarter fiscal 2026 earnings call. Participating today are Maria Black, our President and CEO; and Peter Hadley, our CFO.
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 will 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.
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