Good morning. My name is Nicole, and I'll be your conference operator. At this time, I'd like to welcome everyone to ADP's second quarter fiscal 2017 earnings call. I would like to inform you that this conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I will now turn the conference over to Christian Greyenbuhl, Vice President, Investor Relations. Please go ahead.

Thank you, Nicole. Good morning, everyone. This is Christian Greyenbuhl, ADP's Vice President, Investor Relations. And I'm here today with Carlos Rodriguez, ADP's President and Chief Executive Officer; and Jan Siegmund, ADP's Chief Financial Officer. Thank you for joining us for our second quarter fiscal 2017 earnings call and webcast. Before we begin, you have noticed in this morning's earnings release that we are now including a breakout of PEO segment net revenue and pass-through revenue to assist you in updating your models ahead of your quarterly 10-Q filing. Please refer to Footnote B on the income statement for further details. During our call today, we will reference certain non-GAAP financial measures which we believe to be useful to investors. A reconciliation of these non-GAAP financial measures to their comparable GAAP measures is included in our earnings release and in the supplemental slides on our Investor Relations website. I'd like to remind everyone that today's call will contain forward-looking statements that refer to future events and, as such, involve some risk. We encourage you to review our filings with the SEC for additional information on risk factors that could cause actual results to differ materially from our current excitations. Now let me turn the call over to Carlos.

Thank you, Christian, and thank you all for joining our call this morning. We appreciate your interest in ADP. This morning, we reported our second quarter fiscal 2017 results, with revenue up 6% to $3 billion or 7% on a constant dollar basis. This quarter, we saw the continued benefits of strong prior period new business bookings and a strengthening in our retention metric which helped to drive organic revenue growth across all market segments. Our earnings growth exceeded our expectations this quarter with adjusted diluted earnings per share growing 20% to $0.87 per share. Jan will take you through the key contributing factors to our strong earnings performance in more detail shortly. During the quarter we experienced a decline of 5% in new business bookings compared to a strong second quarter in fiscal 2016. These results reflect a continued difficult grow-over related to the tailwinds from our fiscal 2016 sales of additional modules related to the Affordable Care Act, which was expected. Additionally, within the midmarket and upmarkets in particular we also experienced the effects of political uncertainty leading up to and following on from the November U.S. elections which slowed decision making among some clients and prospects during the quarter. Our value proposition remained wrong and we have a successful track record of managing change for our clients. As you have seen with ADP many times in the past, change can provide us with significant opportunities to grow and expand our solutions to help deepen our client relationships. We expect that the environment in 2017 and beyond will be no exception and at this current uncertainty and related hesitancy, will be a short-term phenomenon. Accordingly, we continue to expect new business bookings growth in the second half of fiscal 2017, but in light of the second quarter decline,…

Thank you very much, Carlos, and good morning, everyone. Before I begin, during the quarter we completed the sale of our CHSA and COBRA businesses and realized a pre-tax gain of $205 million. The historical results of these businesses are reported in the Employer Services segment and are not reported as discontinued operations. Furthermore, we recorded a $1 million restructuring charge related to our Service Alignment Initiative. Certain non-GAAP measures in my commentary to follow exclude the impact of these two items as well as certain other one-time items recognized in the prior fiscal year. A reconciliation of these non-GAAP measures can be found in this morning's press release and in the supplemental slides on our Investor Relations website. As Carlos mentioned, ADP revenues grew 6% in the quarter to $3 billion or 7% on a constant dollar basis. Net earnings grew 50% to $511 million on a reported basis or 49% on a constant dollar basis. Adjusted earnings before interest and taxes or adjusted EBIT grew 17% or 16% on a constant dollar basis. Adjusted EBIT margin increased about 180 basis points compared to the 18% in last year's second quarter. This increase was driven by operational efficiencies and slower growth in our selling expenses. Adjusted diluted earnings per share grew 20% to $0.87 or 19% on a constant dollar basis and benefited from fewer shares outstanding compared with a year ago. New business bookings this quarter were down 5% partially due to the difficult selling compare in the second quarter of fiscal year 2016, but also from an elevated level of buyer uncertainty around the November U.S. elections leading to a slowing of buying decisions in our mid and up markets. As Carlos mentioned, our retention was up by 10 basis points in this quarter, and we are…

Thank you. We'll take our first question from the line of Jim Schneider of Goldman Sachs. Your line is now open. James Schneider - Goldman Sachs & Co.: Good morning. Thanks for taking my question. Maybe to start with you, Carlos, in terms of the bookings pressure that you saw post-election, I think you highlighted that that pressure mainly came in the midmarket and upmarket segments. Can you maybe talk about your level of confidence that you're going to see a recovery, what you saw in January, and then also was that a departure from what you saw in the downmarket and small business?

It's a great question. Obviously, there are two factors that are affecting the growth in our new business bookings. One was the known factor which is the difficult grow-over and obviously, we had some sense of that and factored it in in terms of our guidance for the year because we were obviously below our long-term 8% to 10% as a result of what we knew was going to be a more limited base to sell into since we had already sold half of our clients on ACA. So that was a known factor, but the reality is we didn't know exactly how much difficulty we would have in selling additional modules of ACA over what we sold last year. So that is a factor that obviously has become more difficult to measure given the talk of the administration of repeal and replace of ACA. So I guess, in a nutshell, whatever we assumed about the difficult grow-over, I think, it became a much more difficult grow-over as we think many companies in the midmarket and upmarket are probably – have a wait-and-see attitude in terms of what's going to happen around the Affordable Care Act. I think that there's also this kind of second factor which obviously we have no scientific way of measuring which feels like people are in general just delaying and waiting to see what happens not just with ACA, but with a variety of other things that the administration is talking about. Having said all that, there are also a lot of positive things and we see that reflected in some of the public markets or the equity markets in terms of anticipation of lower tax rates and fiscal stimulus and so forth. And in particular, one of the things that I noted, I've seen…

Sure. I mean, the most obvious one is this the discussion around the Affordable Care Act, so we – as I mentioned in my prepared comments, ADP generally does well when there's change, but not when there's uncertainty about change. And so I think a protracted debate about what replacement means or what will be happening is probably not helpful to us in terms of our new business bookings results. There are a number of other items out there around, for example, overtime rules, EEOC [Equal Employment Opportunity Commission] reporting around pay equity and even DOL rules around the fiduciary responsibility that affects our retirement services business. So there's a number of things that are in play by the administration, generally speaking over 67 years we have benefited from whether it's one particular party or another particular party or one philosophy versus another philosophy because generally there's change, there's constant change and I think, employers use services like ours to help them manage through that change. So we, on a medium to long-term basis, are, I think, optimistic that whatever form comes of healthcare reform whether it's more state based or just a different way of providing because I think the administration appears to be committed to maintaining the number of people that have insurance so that will require some form of tracking and some form of enforcement or tax credits and it maybe more state based, but that's something that we hope to be able to help our clients navigate through when the administration and Congress, I think, get further along in terms of figuring out what exactly they want to do. And there's a number of other regulations that are probably less public and less significant on an individual new business bookings basis, but they all add up to quite a lot of bit of potential change which I think would be very good for ADP.

And Jim, if I add on the revenue risk that we might have for this year, I would consider that as minimal so our clients that are subscribing to our ACA solutions obviously are preparing for their filings in this fiscal year and anecdotal evidence is that our clients really look forward to ADP to help them through that change. So the actual revenue risk for this fiscal year, I would describe, as minimal. James Schneider - Goldman Sachs & Co.: Thank you.

As you can see from our retention notes, we haven't add – I think, Jan makes a great point which is what's fascinating is obviously the challenge for us right now is the new business bookings, but we haven't had cancellations or in fact we have clients that are still being implemented on ACA, but it's natural that once you've made a decision and you're committed and you're on the path and it is the law, by the way, it still is the law, it makes sense to go forward, but I can see how some people, if they're doing it in-house or doing it themselves might be hesitant to make a decision given the uncertainty around what's actually going to happen regarding the law.

Thank you. Our next question comes from the line of Tim McHugh of William Blair. Your line is now open. Tim J. McHugh - William Blair & Co. LLC: Yeah. Thanks. Just following up on the comments about the PEO business. I wasn't clear because you said down market, you did well and I consider that down market, but it also seems like you're saying that was another area where bookings growth was a little slower. Could you clarify and, I guess, elaborate on that?

Well, I didn't say the new business bookings growth was weak in the PEO, we don't give segment reporting with details of our bookings. I was just trying to give you a general flavor because, as you saw, we also had some weakness on the revenue growth, but that wasn't necessarily related to ACA, but just in general, I was trying to convey that there is some logical, I guess, explanation to some of what's happening in the sense that there appears to be a lot of optimism on the part of small businesses and we're seeing that reflected in parts of our business. In other parts of the business the results are mixed because we do, I think, see as a result of the fact that 50% of the PEO's business comes from referrals of our existing payroll sales force, to the extent that that sales force is encountering some slower decision-making, particularly in the midmarket, and also encountering some slow decision-making as a result of uncertainty about ACA that is expected to have and is having some impact on the PEO. But to be clear, the weakness in the revenue growth of the PEO was almost exclusively the pass-through revenues and lower inflation in health benefits and a slight slowing in benefits participation which is probably also related to a, quote unquote, peaking of ACA implementations. And by that I mean that we have seen several year decline in benefits participation rate, in other words how many eligible employees of the PEO actually take benefits and that sort of the trend upward as we got closer to the deadline. So the last, call it, two years right before ACA, given the fact that the law was intended to increase participation and companies were coming to the PEO in order to comply with the law, we saw those participation rates trend up. And now we saw the increase in the second quarter be a smaller increase than in the prior second quarter and in the quarters before that. So that slowing trend of benefits participation coupled with lower inflation of benefits per worksite employee is what led to slower growth, if you will, in the PEO, but the 12% worksite employee growth is still very, very strong, so we're still very happy with what we consider to be net revenue growth in the PEO which is now growing almost in line with worksite employees whereas historically had grown a little bit faster because of this pass-through cost pressure. So I hope that helps a little bit...

I just have one piece of information for you, Tim, is the average client size in the PEO is now around mid 40s, so it spans really the small business space as well as our midmarket up to a couple hundred employees per client, so it's affected by performance in down and midmarket in its growth. Tim J. McHugh - William Blair & Co. LLC: Okay. Thanks. And then just following up on the comment about the mid to upper markets, I understand retention was a little better overall for you, so you retained existing customers, but do you have enough data to know that – I guess, it was slower decision-making or a lack of decision by clients versus competitive win losses on new opportunities that had an impact this quarter?

We monitor obviously our competitive position in the market space and I think we have seen performance competitively according to our expectations. One element that Carlos had not mentioned is, I think, our sales force has reported relatively strong pipelines overall throughout these months, so it was really not due to a lack of interest, but it was really what we felt a slowing of the decision-making process as we forecasted certainly, but also those things together, solid competitive position as well as good pipeline gave us basically the basis for the forecast that we just made.

And it's certainly isn't for lack of head count, so we're in a strong position from a sales force capability standpoint. And I think if your question was really around did our retention – I think, you started off by asking about retention, did retention benefit from slower decision, that's possible. So it is possible that on the other side of the coin, if you will, people didn't make as many decisions than we were able to hold on to clients, it'd have very difficult for us to measure that, but it's possible. Tim J. McHugh - William Blair & Co. LLC: Great, thanks for the color.

Thank you. Our next question comes from the line of James Berkley of Barclays. Your line is now open.

Hi, guys. Thanks a lot for taking my questions, just real quick here, you've seen about 200 basis points margin expansion during the first two quarters of the year. Obviously, when it compares to your guidance, are up 50 basis points and implies a meaningful contraction in the second half. Could you just walk us through the drivers of that and the contribution to margins perhaps that are tied to ACA products in the quarter or anything else that you'd like to call out? And then just kind of keeping with that theme, you've talked about pass-through pressure being better than anticipated, helping to drive margin expansion there. And so just thinking about margins overall with PEO growing much faster than Employer Services which has got a meaningfully lower margin, how do we think about the sustainability of like 50 basis points a year over time? Like what's ultimately driving expansion against the PEO headwind? Thanks.

James, that is a fairly comprehensive margin question, I would say. So let me start, I think you are isolating some of the factors that create more margin pressure in the second half of our fiscal year. So number one is the easier compare that we had in the first half of the fiscal year due to our ACA related investments is clear. So in the beginning of 2016 fiscal year we had largely selling and implementation expense for ACA and then we started to receive revenues for these products in the third and fourth quarter of last fiscal year. And so the upcoming quarters don't have that easier compare and so the margin expansion that we experienced in the first two quarters is not going to repeat itself due to the growing into our more steady ACA revenue base. Secondly, we expect of course sales to grow as we indicated in our prepared remarks, and so that means of course also selling expense is anticipated to grow and in this case contribute to the margin pressure. And we're also continuing our investments into product and innovation, which is in this case at an equal basis contributing to the margin pressure.

I think we also have – I think our expectation is a little bit of a return of the growth of the PEO pass-through cost, which I think that just mathematically also adds to – I think the last part of your question was a broad PEO margin pressure question about ADP, but in this first half, second half it is a factor. Based on our current forecast, just the expectation for our pass-through cost for the second half alone causes some pressure in the second half. And I think your broader question about overall pressure is a very, very good question which we spend a lot of time looking at and talking about. But this year in particular, because of lower benefits inflation costs, we actually, as you could tell from the first half of the year, it actually helped us. It took some of the pressure that we had historically had off. So even though the PEO has an absolute lower margin, the fact that its margin has been improving as much as it has combined with the slower growth of pass-through costs made this a moot point for the first two quarters of this year. And I think what you have from us is a commitment to really make sure that we have a lot of transparency around because we do a lot of what-if scenarios around the next two to three years what the PEO margin expectation is versus the ES margin expectation and the overall ADP. And we feel comfortable at least right now that we are in a place where we're able to still achieve the guidance that we've provided on a long-term basis, but over time that could change. If we have a lot of inflation and pass-through costs, we might have to revisit that topic just because of the pure mathematics, not because of the quality of the business or the strength of the business, just because of the math that I think you're implying. But I think for now, I think we're in an okay position.

Thanks a lot, that's really helpful. I know I threw a lot at you there. Just real quick, a much shorter question, just what's driving the unchanged EPS guide? That was obviously nice to see. You raised it last quarter, and you were able to keep it steady here despite declining top line. Is it just tax rate and a step up in buybacks versus prior expectations or maybe some conservatism on your end in the past, or something else that maybe I'm missing?

No, I think that – Jan may have something to add, but we had a great quarter earnings-wise, so that helps because we obviously provide guidance based on what we really think is going to happen. And as I think we were clear in our comments, the second quarter exceeded our expectation. So in fairness, we got a little bit of tailwind from the second quarter going into "maintaining" our guidance for the year on earnings. So I think we feel good about where we are in terms of our expenses, even though Jan described very well this issue of we've lapped our ACA revenues, and we had already lapped our ACA expenses for the last two quarters. So those kind of factors are what helped boost the margins in the first two quarters of the fiscal year which we don't get in the second two quarters of the fiscal year. But in general when we look at the quality and the trajectory of the business, we feel pretty good other than this issue in new business bookings, which ironically helps our margin in the first half of the fiscal year. Other than that factor, we feel pretty good about where we are.

Thanks a lot. I appreciate your time.

Thank you. Our next question comes from the line of Gary Bisbee of RBC. Your line is now open.

Hey, guys. Good morning. Let me follow that up with one more question about margins. Can you give us a sense, how much of the margin improvement this quarter was the operating efficiencies versus the lower sales commissions? I noticed you said them in that order. So was that done by design based on the impact? And then what were the costs in the quarter and the first half I guess for the service alignment changes? And is it still that the vast majority of that cost has not happened yet happens in the back half? Thank you.

Let me start about the Service Alignment Initiative. The Service Alignment Initiative causes us in the fiscal year to take a restructuring charge of approximately $100 million throughout, and we took the first 40-some million dollars in the first quarter and just very little in the second quarter. In addition to those restructuring costs, we incur about a 20 bps margin pressure through dual operations, which is not part of the non-GAAP measure. And that is incurring throughout the fiscal year, so there's not a great variation in this throughout. The second question to you, about 0.5%, a little less than 0.5% of the margin improvement in the first half is due to our lower MDE – our lower selling expense – selling and marketing expense in the first half, and then about 120 basis points was operating efficiencies of scale.

Great. And then just a quick follow-up, on the bookings, is there any way to have any confidence that this is really short-term driven related to uncertainty around the election rather than the changes that come out of the new administration dampening demand for the product? So the overtime rules, ACA you've already been clear on. I think we understand that. But do you get that kind of color from clients, or is it more you think just no one wanted to step up because there was and probably still is so much uncertainty?

While we have noodled this question now a number of ways, I tried to add a few elements to it. If the changes in economic policy lead to sustained economic growth, that is the most important driver for our success of new business bookings. So if the belief that is currently I guess reflected in bullish equity markets and other things, business confidence comes true, I think that will be naturally a good thing because we are positively correlated to good economic environment, and good employment helps ADP. So the fundamental – that's the most important driver for our new business bookings growth is a healthy economic environment. Now economic – changes in the regulatory environment contribute maybe to economic growth and they also contribute to change in regulatory requirements in the HR space, which help ADP. I would guess that change will happen over time and the number of changes that are coming down to our clients is high, so I don't think there's a principal change in need for compliance solutions in the HR space to be foreseen in any near-term future. So net-net, I think, if the economic positive outcome materializes, I think that will be good news for ADP overall and we remain confident in our ability to sell.

Jan, I think to add to that, I think we have some historical data to support Jan's points like, obviously, we don't have any historical data to really be able to ascertain what's happening, what month and with what regulation. But the first point about the economy is indisputable that when ADP is obviously a very – from a recurring revenue model standpoint on our revenues and our profitability and so forth a relatively defensive steady company, but new business bookings is a little bit different. And when you look at 20 years of data, our new business bookings growth over the course of rolling four quarters because obviously any one quarter can have issues like we just experienced. We can have a new regulation that requires a new product. We had for example Y2K 20 years ago but, in general, follows very, very closely almost a smooth line what's happening with the economy, as does our pays per control growth. So our pays per control growth when unemployment is going up, tends to go down and vice versa. So we are in new business bookings, I think, somewhat tied to the strength of the economy and so, as Jan said – and we are, obviously, we try to be as transparent as possible. We were sitting here talking about potentially entering a recession. We would have to, I think, temper our optimism based on that 20 years of history. But since that doesn't appear to be the environment that we're entering at least for now, we feel that we're going to rely on this historical data and I think plan on returning to historical growth rates in our new business, and our new business bookings. In terms of this issue of the specific regulations and change and so forth, there's also a lot of history in ADP. There's more than 20 years of history where even though there are bumps along the road in terms of the amount of regulation and the type of regulation, in general the trajectory has been in one direction. And that's a global statement, not just a U.S. statement because governments try to effect public policy through employment and through employers, whether it's around safety, or taxes, or a variety of healthcare in this case. And so we like where we are, we like the space we operate in, and we're optimistic about, I think, the future, although obviously, we're not exactly happy about what's happening in the short term here.

Great, thank you. I appreciate all color.

Thank you. Our next question comes from the line of Lisa Ellis of Bernstein. Your line is now open. Lisa D. Ellis - Sanford C. Bernstein & Co. LLC: Hi. Good morning, guys. Can you talk about the timeline and monetization model for the rollout of your reporting and benchmarking modules? Exactly where they are in terms of rolling out and just directionally what the magnitude is that you expect coming in from those modules in terms of new business bookings and revenues over time?

Lisa, yeah, our big data and analytics capabilities we view as one of our strategic differentiators in our product set. And we're planning actually to capture the benefit of this capability that is quite unique in a variety of methods. And the most fundamental is that we're going to be incorporating many of those analytics, benchmarking and predictive analytics, into our core product and differentiate the core bundle with a better solution. So for example, data and DataCloud is an integral part of our Vantage offering and is available to all Vantage clients, and is part of what makes Vantage a differentiated product. In the mid-market we're selling it as an incremental module for now, and clients buy it on a recurring revenue basis. We have a few thousand clients having bought the product in the last 12 months or so. So we're kind of in the very early stages of rolling out these capabilities to it. I encourage everybody to think about the data analytics capability as a broad differentiator that will not only affect our core product for our clients, will improve our service and implementation capabilities, and will be – we're kind of right now in the very beginning stages of seeing those benefits coming through.

And I think – I'll just add that I think we are working on these types of products and others in order to drive not just incremental revenue from the products themselves, but to gain market share and to win more new business. Because the reality is that when we wake up every morning we're thinking about how you grow over $1.75 billion in new business bookings. And to give you a specific answer like in the next year or two we don't plan on sharing on this call that it had the same impact as ACA. Because again, the numbers are just so large that unless we simultaneously generate incremental revenues from new products, while driving – using those new products to drive better differentiation and more net new wins in the marketplace to gain market share, then we're not going to be able to grow the business. I think Jan described it well which is it's a very broad strategy around differentiation and strengthening our products, as well as we don't mind earning a little bit of extra revenue and income from selling those types of products. Lisa D. Ellis - Sanford C. Bernstein & Co. LLC: Terrific. Thanks, and then just quickly for my follow-up, can you give the 20 second update on the Workforce Now migrations and whether you're still on track to finish them by the end of the year?

Yes, we're still on track. We feel pretty good. I think, Jan, may have the...

We're steered away from the digital numbers here, but we're committed to substantially complete the migrations in our-market space by the end of the fiscal year. And I think we're going to have a few stragglers into the first quarter, but substantially we are on plan with those migrations.

And very excited about it. Lisa D. Ellis - Sanford C. Bernstein & Co. LLC: Great. Thank you.

Thank you. Our next question comes from the line of Tien-Tsin Huang, JPMorgan. Your line is now open.

Thank you. Good morning. Just, I guess, on the bookings front, have you changed your assumption on bookings specific to selling additional ACA modules? I think in the past, you've said that you've sold about half your ACA base already there. Does this shift to flat bookings cover that?

Yes, it does. So one big chunk, of course, is the adjustment to our selling expense expectations that we had for that product. As you might imagine that is significantly down and our new guidance incorporates that thinking.

All right. Thanks, Jan. And then on the – just the acquisition of the Marcus research – Buckingham, is it more of a people-based, so I get the technology side of it. But it seems like they do some consulting and perhaps some people-based services as well at this Marcus Buckingham Company. I'm just curious if you can give a little more on the addition there? Thank you.

So we like it so much because there's a service component in addition to a technology component which actually fits well with our business model, so you're right. There is a – they have deep, deep data analytics and insights in their own business, and so there's a lot of research-based, data-driven decision-making in how they deliver their products. I think the belief by them and by us is that we have obviously a very big data set to be able to enhance the work that they do to really help people create a better workforce. And so I think the combination of the coaching, the data and the analytics along with combining that with ADP, I think, we think that we could really do something special here. So again, caution that given the $12 billion of revenue, if it wasn't obvious from our comments, this is not an immediate game changer from a revenue growth standpoint, but it's an immediate game changer from a strategic standpoint and from a brand standpoint.

Right. Yeah, no. It seems powerful to put on top of your platform. Thank you. Go ahead.

Thank you. Our next question comes from the line of David Grossman of Stifel. Your line is now open.

Thank you. So just to put the bookings provision in context, it seems that everything else being equal the impact is less than $100 million of annualized revenue given the booking space. Are we thinking about that right? And I know it's still early, but is there anything else we should think about in the context of next year's revenue growth trajectory other than obviously the easier comparison?

No. I think that that's as good a math as – for example, when we had some challenges with retention in the last year, that's kind of the way to look at things is to use simple math to put things in perspective. And so we obviously fully expect to return to stronger new business bookings growth as these compares get a little bit easier and hopefully as some of this uncertainty wears off, but I think that your math is dead on, which is why you hear us still remaining optimistic. We would obviously prefer to have $100 million then to not have the $100 million, but I think in the context of what we're trying to accomplish for the company from a value generation standpoint, EPS, share buybacks, et cetera, it really doesn't – for now, it doesn't have a major impact.

And, David, while that quantitative estimate is that kind of scopes it, but obviously, key assumptions for revenue growth also are impacted by your belief in retention as well as we pointed out in this point of time of year, in particular around the pass-through revenue growth of the POE, those would be the two other factors that I think could have meaningful or somehow an impact on your revenue growth expectations for the longer term.

Right. And then just secondly, and I may have missed this, you may have mentioned this, but I was just looking, pays per control were roughly in line with trends, so just trying to understand the context of where the weakness was, if you can call this out? But was it primarily in unit growth? Or was it revenue per client? Or is it just kind of both without any real noticeable trend?

You're referring to new business bookings? Or...

Yes.

I'm not sure I understand, sorry, the question. The...

I think we indicated that we had new business bookings weakness in the mid and up market. That was stronger impacted by the slowing of the buying decisions. And if you refer – I think, I can tell you that our client growth continues to be very solid, mostly driven by our success in the down market, so really very nice performance in the small business market with unit growth. So mathematically, I guess, what it boils down is a mix of all of that together.

Okay. So just then looking at the mid and up market then, Jan, was there any real distinction between unit growth and revenue per client in terms of the shortfall? Or was it just a combination of both?

No. Not really. Not a change. I think both fell a little bit short. Clearly, it's always clouded right now by this difficult compare about the ACA, and we have emphasized this in a number of calls. The ACA modules themselves are easy to identify, but ACA has triggered a lot of buying decisions for broader product bundles. And it's hard to analytically differentiate between what was the true ACA impact and what was just enhanced buying cycles because this triggered a buying event in what was just regular course of business. So we're a little bit hesitant to say that. But overall, in the mid and upmarket, I think we have seen continuation of trends and new logo growth as we call it and upselling. It's just at a lower level.

Jan, I think that – sorry. Maybe I didn't at first understand the question, but I did look last night at sales force productivity over the last few years. And as you can imagine, now our average productivity per sales rep is down, but largely driven by ACA. If you exclude ACA, our sales productivity is still in line with our expectations. So I think what we've had is we had – and I think we've been every quarter I think very, very clear. We haven't been pretending that it was either sustainable or that we had done something magical to all of a sudden create such a huge increase in productivity in our sales force. I wish we had. Clearly, we got help from and lift from ACA sales. We had two years of 13% and 12% new business bookings growth, fiscal years, and I don't know the last time that we had ever done that. So clearly, maybe we didn't emphasize enough how much help we were getting. And certainly now it's difficult to go back to the sales force and remind them that we had help and now the help isn't there anymore. We've got to now focus on fundamentals. We've got to go back to selling new clients and the old-fashioned approach of ADP of having a reasonable mix of head count growth and productivity growth. And I think when I look through the numbers and try to normalize for ACA, we feel pretty good about where we are in terms of head count and also sales force productivity.

Great, thanks very much.

Thank you. Our next question comes from the line of David Ridley-Lane, Bank of America. Your line is now open.

Sure, good morning. Over the last few years, ADP has leaned pretty heavily on regulatory and compliance offerings. As the U.S. labor market looks to tighten and perhaps wage inflation picks up, what are some of the more growth-oriented offerings that you have for clients?

It's actually a fantastic question because this afternoon I'm actually going to speak to our midmarket sales force about some of the things that we can and need to do in terms of getting ourselves reset here for a different environment. I think, as we said multiple times today, we're not going to a zero regulation environment. So 99% of the laws and regulations that affect employers are still in place today that were in place two months ago, and they're probably going to be in place a year and five years from now, and there may be new ones. And so we have always been there to help our clients with compliance and with regulation. Having said that, we're clearly entering a period of time with tightening labor markets where I think many employers' attention is going to turn to how to attract and retain a workforce. And this is something that we've been building to over the last four to five, six, seven years by investing in our talent management suites. by investing in tools to help our clients use data and analytics to run their business better and manage a better workforce. So we've been preparing fortunately for this strategic opportunity here for many years, and it's coming and it's coming fast because I believe we reported the ADP Employment Report this morning, and that's only going to add to I think the tighter labor markets. Because as we've seen multiple times in the last 20 to 30 years, as unemployment gets to the level that it's at now and we understand that there might still be a little bit of slack as a result of labor force participation, but that slack will also inevitably come out of the system, whether it's in 6 months or in 12 months. It may have already come out, we don't know. But besides higher interest rates, which are going to be beneficial to ADP, we think this is going to be beneficial to ADP's new business bookings and to our approach to the market, which is to help our clients and products exactly with this topic. How do you attract and retain the best workforce when everyone else is trying to do the same thing? So we're not ready to say there's a war for talent yet, but clearly there are pockets of that. And I think when that happens, I think some of the products and solutions that we've developed, this acquisition that we've just done with TMBC, I think, position us well to help our clients with that.

Great. And then I know that the revenue contribution from the acquisition is pretty small, but bigger picture you've been focused mainly on organic development over the last few years. Should we read this acquisition as potentially suggesting you're open to a bit more tuck-in acquisitions going forward?

I think we always have maintained a position that we view our balance sheet and our capital strength as one of our assets, and we have been evaluating and looking at acquisitions all along. And so you should anticipate that we'll keep an open mind around those going forward, and they will need now a joint evaluation of augmenting us strategically, like the talent management acquisition of Marcus Buckingham fits right into this talent search, manage your workforce better, so strategically fitting well, but also not adding in a disproportionate way to the complexity of our operations as we have focused so much to simplify our varying environment. And we're going to, as a management team, evaluate those acquisitions to maximize the value really eventually for the shareholder over time.

Thank you very much.

Thank you. And we have time for one more question. Our last question comes from the line of Bryan Keane of Deutsche Bank. Your line is now open.

Hi. This is Ashish Sabadra calling on behalf of Bryan Keane. Just to follow up on questions regarding the ACA, the new administration is pretty keen on repealing the ACA, and I was wondering. Is there a way to quantify what percentage of ADP's existing revenue may be directly or indirectly linked to ACA, like the ACA module or other revenues which may be linked to ACA and could be potentially impacted by the repeal? Thanks.

We have reported that last year we filed for approximately 10 million employees 1095 forms, so that gives you a rough revenue estimate, between $150 million and $200 million of ACA revenue in our business. But it is with very – we have to be very thoughtful about what will happen to them. Clearly, it could go away, but it could also maintain new solutions, certain reporting requirements which are at the core of the value proposition of the ACA. So we at this point are really not in a position to estimate what part of this revenue is at risk or if there could be even further growth in that ACA revenue, but it gives you a rough estimate about the size of our directly ACA-related revenues, about $150 million to $200 million.

Thanks a lot. Thanks for the color.

Thank you.

Thank you. This concludes our question-and-answer portion for today. I am pleased to hand the program over to Carlos Rodriguez for closing remarks.

So as we mentioned, obviously some of the uncertainties that have been created as a result of this change in administration and the talk about repeal and replace of ACA are certainly not helping us in terms of our new business bookings here in the second quarter, but we still are pretty positive about our business model. I think you've heard that from us today that we're well positioned for helping our clients with what are becoming very, very tight labor markets, and we're also optimistic that there will be some change. We know there's going to be change, so repeal is clearly in the eye of the beholder, but given that there's a commitment to maintaining 20 million Americans on insurance we believe there will be some new form of tracking of regulation and that we will have something that we can help our clients with if not the current ACA products that we have today. In the meantime, we're going to rely on our historical track record of being able to navigate through obviously these uncertain times and wait for the inevitable pickup in the economic activity as well as government activity around some of these changes. We continue to invest in simplifying our portfolio, as Jan said, including using that as one of the criteria for acquisitions. You've heard us talk about how we're aligning our service model. We're very excited about what that's going to do for the quality and long term cost of our service, and as you heard from us today, we're certainly not backing down on our distribution channel. So we continue to invest in our sales force and grow our sales force because we plan on continuing to grow. So we appreciate your time today. Thank you for joining us, and we appreciate your interest in ADP.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Everyone, have a great day.