Q2 2026 Automatic Data Processing Inc Earnings Call Transcript
Key Points
- Automatic Data Processing Inc (ADP) reported a strong second quarter with 6% revenue growth, 80 basis points of adjusted EBIT margin expansion, and 11% adjusted EPS growth.
- The company achieved solid Employer Services new business bookings growth, with notable strength in international US enterprise and compliance businesses.
- ADP's client satisfaction reached the highest levels in the company's history, contributing to a stable business environment.
- The Workforce Now NextGen and ADP Lyric HCM platforms are gaining traction, with significant new business bookings and expanding pipelines.
- ADP's strategic focus on AI and automation is enhancing client services, with new AI-driven tools like ADP Assist improving HR and payroll processes.
- Employer Services retention rate experienced a modest decline in the second quarter, aligning with expectations but indicating some challenges in client retention.
- PEO new business bookings growth was solid but slightly below expectations, impacting average worksite employee growth.
- PEO margins decreased by 70 basis points due to zero-margin pass-through growth and higher selling expenses.
- The international business, while a strategic priority, has lower margins compared to domestic operations, affecting overall profitability.
- ADP anticipates a slight moderation in retention rates for the full year, with potential impacts from macroeconomic factors and out-of-business rates.
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 second 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 Matt Keating, Vice President, Investor Relations. Please go ahead.
Thank you, Michelle, and welcome, everyone, to ADP's second 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. A
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