Good morning. My name is Christy, and I will be your conference operator. At this time, I would like to welcome everyone to ADP's First Quarter Fiscal 2019 Earnings Call. After the speakers remarks there will be a question-and-answer session. Thank you. I will turn the conference over to Mr. Christian Greyenbuhl, Vice President, Investor Relations. Please go ahead.

Thank you, Christy, and good morning, everyone, and thank you for joining ADP's first-quarter fiscal 2019 earnings call and webcast. With me today are Carlos Rodriguez, our President and Chief Executive Officer, and Jan Siegmund, our Chief Financial Officer. Earlier this morning we released our results for the first quarter of fiscal 2019. These materials are available on the SEC's website and our Investor Relations website at investors.adp.com where you will also find quarterly investor presentation that accompanies today's call as well as our quarterly history of revenue and pre-tax earnings by reportable segment. During our call today we will reference non-GAAP financial measures which we believe to be useful to investors and that exclude the impact of certain items in the first quarter and full year of fiscal 2019 as well as the first quarter and full year of fiscal 2018. A description of these items and a reconciliation of these non-GAAP measures can be found in our earnings release. Today's call will also 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 factors that could cause actual results to differ materially from our current expectations. Finally, I would like to remind you the last quarter we outlined various changes to our disclosures and reporting which are now fully implemented. As a result of some of these changes, we noted a desire for supplemental information regarding our new PEO disclosures and guidance. Accordingly, we have provided you with additional slides in our accompanying investor presentation which we believe will help enhance the understanding of these new disclosures. As always, please do not hesitate to reach out should you have any questions. With that, I'll now turn the call over to Carlos.

Thank you, Christian, and good morning, everyone. This morning we reported our first quarter fiscal 2019 results with revenue of $3.3 billion, up 8% reported and 7% organic constant currency. We are pleased with this revenue growth which was above our expectations and which was aided in part by the better-than-expected performance of our PEO segment and continued strengthen our Employer Services downmarket offerings. Our adjusted diluted earnings per share grew 28% to $1.20 per share and in addition to strong revenue and margin performance benefited from fewer shares outstanding as well as a lower effective tax rate. We also so positive momentum in our Employer Services new business bookings which grew 8% in the first quarter, slightly ahead of our expectations. In addition while we no longer report consolidated bookings, we were especially pleased that the renewed momentum in our PEO from last quarter has continued into the first quarter of fiscal 2019 with strong double digit bookings growth. In both Employer Services and the PEO, we once again saw improvements in our overall client satisfaction scores and we also continue to expect a 25 basis point to 50 basis point improvement in ES revenue retention for fiscal 2019. Overall, we are pleased with our start to the fiscal year which supports our confidence in our long-term strategy and our efforts to accelerate our pace of change with care. At our June Investor Day, we had the opportunity to discuss with you our efforts around innovation and we were excited to continue those discussions in September when we attended HR Tech in Las Vegas and the following week at our annual Industry Analyst Day at our Chelsea innovation Lab. At each of these events we discussed our transformation from a service company supported by technology, to a technology company…

Thank you, Carlos, and good morning, everyone. Our consolidated revenue this quarter was $3.3 billion, up 8% reported and 7% organic constant currency, both above expectations. On a reported basis, earnings before income taxes increased 14% while our adjusted earnings before interest and taxes or adjusted EBIT increased 18%. Adjusted EBIT margin was slightly above our expectation and was up about 180 basis points compared to last year's fiscal quarter despite about 50 basis points of pressure from acquisitions and a $12 million charge related to the write-off of certain internally-developed software costs following our acquisition of Celergo. Overall, our margin performance continues to benefit from improvements in our IT infrastructure spend, the lapping of dual operating costs related to our service alignment initiative and the successful execution of our broader transformation initiatives including our voluntary early retirement program. We were also particularly pleased with our international businesses where the results of our automation efforts continue to generate positive momentum. Clearly, our efforts to reduce our costs while also improving our service are beginning to pay off and we are pleased with the progress that we're making. Our adjusted effective tax rate was positively impacted by unplanned stock compensation tax benefits which drove approximately 330 basis points of benefit for the quarter or $0.05 on our adjusted diluted earnings per share. Adjusted diluted earnings per share grew 28% to $1.20 and, in addition from benefiting from our margin performance and a lower effective tax rate, was also aided by fewer shares outstanding compared with a year ago. As you can tell from these overall results, we are off to a good start this year and we're progressing well as we execute on our strategic plans that we outlined at our June Investor Day. Now let me take you through our…

Thank you. Please ask one question with a brief follow-up. We will take our first question from the line of Jason Kupferberg with Bank of America Merrill Lynch. Your line is open. Jason Kupferberg - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Thanks. Good morning, guys. Nice job here. I just wanted to ask a little bit more about the bookings here. So you came in at the high end of the full year range in Q1, but based on the disclosures you gave us on ES bookings for last year, obviously the comps actually get a lot harder, especially in the back half, which you highlighted. It sounds like you've got a lot of confidence still in the 6% to 8%. Anything you'd highlight from a pipeline perspective, whether it's downmarket, mid-market, enterprise, et cetera? Just supporting that confidence in the full year number? Thanks.

I think our confidence is really driven by, I guess the information that we have around where we are around head count, where we are around kind of new product rollouts and where we are around productivity improvements, which are the three ways that we add up to the overall sales growth. As you know, it can vary from quarter to quarter, but I think we have – we've built a great plan, I think with the right number of people, I think with the right products, and I think we've shown over the last probably three to four quarters, I think, really improvements in underlying productivity that then support that third pillar of what leads to the overall growth. So I think we feel – I think you're right that the tone is probably one of confidence, but as always, for us, the sales number is the one that has the most variability and the most volatility because every sale is a new sale every quarter, whereas in – our revenue model is really a recurring revenue model. So there's always more variability in sales, but I would say nothing has changed in terms of the level of confidence that we have in our ability to reach our full year numbers. We did have a very strong fourth quarter. Sometimes, historically, that has led to challenges in the first quarter just because of the way our incentives work. So in some respects, I would probably say that I was pleased with the fact that we were able to – even though we had an easier comparison to the prior year, the fact that we came off of a very strong fourth quarter, I think sometimes presents some headwinds. So the ability to kind of hit the numbers that we did this quarter, which as you're seeing obviously Employer Services number, but as Jan maybe alluded to, even though we're not giving specific guidance, our PEO results were also very strong. So when you look at f new business bookings collectively, if you did it the way we used to do it, which we're not doing anymore, we would say that we were extremely pleased and it adds to our confidence for the full year. Jason Kupferberg - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. And let me just – yes. Please, go ahead, Jan. Sorry.

One comment is that the success was fairly broad-based and so when I look at the different components of our sales force, the different channels and the different market segments that we sell into, it was really a broad-based contribution of many. So it was not focused on a single segment at all actually and broad-based participation is always a good start into the year. Jason Kupferberg - Merrill Lynch, Pierce, Fenner & Smith, Inc.: For sure. Let me just ask a follow-up on PEO since you highlighted that. And I know last quarter, there was a little bit of controversy or concern there. Clearly, a nice rebound so just wanted to test the sustainability of that. Maybe you can talk about some of the strategies that you've employed to actually drive the improved performance and the outlook there. I think last quarter you were talking about tweaking some incentive programs, but any other strategies you would highlight there?

Yeah, I think that Jan probably has a couple of comments as well, but I would say that we did tweak the incentives. I would say that that's beginning to roll its way through, but I wouldn't say – I wish I could say that it all was because of how smart we were in changing those incentives, but I think we see big improvements in pipeline in the upmarket as a result of some of those incentive changes, but not necessarily yet affecting the numbers. So ironically, this was really kind of a rebound of what I would call core PEO performance. So again, that makes me, again, very optimistic about the next couple of quarters and the full year for PEO new business bookings, because we have yet to see – have the benefits of some of the incentive changes we made, which I think makes sense and I think are really just adjustments back to, frankly, prior. We didn't do anything artificial or aggressive to try to overcome some kind of externality. We were readjusting back to normal level some incentives that we had changed to other HR BPO products a couple of years ago. So I think that when I add all the things together, it feels like just really – as usual, it comes back to great execution. I think there's just more focus and more attention on kind of the basics and the core of generating new leads by our sales force, as well as making sure that they are more effective in getting the leads from the other parts of our sales force in ADP. So I think it's just overall just much better execution. And then, lastly, I would say that, again, here you have maybe the opposite effect of what I described about what usually happens when you have a strong finish, sometimes you get into a weaker start which didn't happen to us this first quarter. But in the PEO, we did have a challenging year and sometimes in some parts of our organization when you come off of a challenging year, you have a – so last year may have been not as weak as maybe it looked, and this first quarter was – I think it's probably the strongest growth we've had I think ever in the PEO. Sorry. I'm being corrected here, since Q2 of fiscal year 2014, but the numbers were already big in 2014 and they're even bigger today. So I think to generate the kind of growth rate we generated this quarter is quite impressive I think. And it shows that the value proposition is still intact and that the sales leadership and sales execution still has the ability to take advantage, if you will, of that value proposition and get it to the market in a competitive way.

I just have a few data points that really support what Carlos said. We saw not only improvement in our deals over 50 which we accelerated, but we had overall for the PEO channel there brisk new logo growth in the high double digits, so a very, very impressive broad-base. So it's not only a single thing, like a commission change for the mid-market or an incentive change in the mid-market, that drove this. It's a management focus and it created a broad-based acceleration of new business bookings that I think we've managed, also, to improve with very solid client satisfaction scores and great execution. So that created, then, our confidence to really up the guidance for that segment. Jason Kupferberg - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. Well, great. That's nice color. Thanks.

Thank you. Our next question is from Lisa Ellis with MoffatNathanson. Your line is open.

Hi. Good morning, guys. In fiscal 2018, I believe you grew client growth down in the lower end of the market in the 12% range, a really strong number. Can you give a little color as to whether that momentum and those share gains in the small and medium business market are continuing as you look into 2019?

Yeah. I think the first quarter was very consistent with the momentum and the trend we've had for – I don't think it was just fiscal year 2018. It probably wasn't quite as strong in 2017, but we've had good strong momentum I think in our downmarket business, and I think it continued into the first quarter.

First quarter is right in line with the trend that we have seen in 2018, Lisa.

Okay. Great. And then I think the complementary question is just one around the mid-market, where I know as you were going through the Workforce Now transition, you were sort of hanging on to your client counts in that market which we know it's very competitive. Now that you're through the Workforce Now migrations, are you seeing some improvement there, some growth in the client base in that market, if nothing else, just driven by improvements in retention?

Yeah. So we have seen a very consistent improvement in our retention rates out of the – from the lows that we had about 2, 2.5 years ago, and so we're very pleased with the improvement that we have seen, A, through all the clients being now on a single platform, the stabilization and improvement in the new service models that we rolled out as part of the service alignment initiative, and very, very steady, retention has been improving. And so the new sales success if I – in this market if I just take like an average for the last rolling 12 months or so, we have also seen much more stronger focus on the new logo execution that we reported to you on focusing on new distribution channels through partners as well as leveraging sales force adjustments to focus on this. And I think we're still in the early stages of seeing a full turnaround for that, but we're seeing very good signs that this new logos focus will pay off over time.

Yeah. And this quarter I would just add that this quarter, we actually happen to have good logo growth in the upper end of the mid-market which for us is, call it, 500 employees to 1000 employees or 150 employees to 500 employees in kind of that space there. And so again, quarter to quarter numbers is tricky in terms of the sales results. But I think there's definitely renewed focus and attention, and these are incentives that we adjusted different from what we were talking about in the PEO case. More, call it 18 to 24 months ago as we exited ACA, we tried to get our sales force more focused on core logo growth. And I would say that we feel like it's working and that we're making progress. And the combination of that along with improving retention, I think is, we still have work to do, but I think is getting our mid-market business into a stronger position, especially now that we're on one platform.

Terrific. Thank you.

Thank you. Our next question is from Jim Schneider with Goldman Sachs. Your line is open. James Schneider - Goldman Sachs & Co. LLC: Good morning. Thanks for taking my question. Maybe just a follow-up to Lisa's question. I understand you're not giving explicit retention metrics on a quarter-by-quarter basis, but it sounds like on the basis of the consumer satisfaction scores you talked about improving that retention probably is just directionally up year-over-year. Can you confirm if that's the case or not, and maybe just kind of talk about whether there's any pockets of down, mid, or upmarket that are kind of falling above or below your expectations?

So I think, as you heard I think in the comments, we confirmed our forecast for increased retention of I believe it's 25 basis points to 50 basis points for the year. So you could probably interpret that as directionally up for the year. But given that we're not providing retention guidance as part of the package of – we added a lot of disclosures and I think if you look at the amount of stuff that we just put out, I think historically and in response to some extent to some of the feedback we got after the proxy contest, we're doing what we can to add additional disclosure. And I think that's one of the items that we're not going to be getting into on a quarterly basis. But I think that you should interpret our confidence and reaffirmation of our guidance as confidence that the trend of retention is up. James Schneider - Goldman Sachs & Co. LLC: That's helpful. And then maybe kind of as a follow-up. With respect to your full year guidance, I know you talked about several grow-over issues with respect to acquisitions and a couple of other things that get harder in terms of comps for the year. But I think for the full year guidance it implies that growth slows down across almost every metric relative to what you already reported in Q1. So I'm just trying to understand whether there is anything that gives you pause about a potential slowdown in growth or whether there is some wiggle room potentially baked into the guidance? Thank you.

As you can imagine, we spent some time talking about that to make sure you guys walked away with the right message which is one of confidence and optimism and pride in what really were good results. But there are some mathematical issues that I think are just important noting. So I think two that stand out for me are Global Cash Card was not quite a 1% impact but somewhere in the neighborhood of 1% impact on revenue growth. And that we lap, I believe it's in the middle of October. And then FX pressure, not just for us but for all companies, is picking up a little bit. It's not a huge headwind, but that obviously can change in either direction. But based on the information that we have today and the math, we kind of laid out what we thought was reasonable changes in guidance while trying to convey really our sense of optimism and confidence and positiveness in what the results were. So it's hard to, given that it's the first quarter, it's also, frankly, hard for us to just come out and across the board change everything given that we still have three quarters ahead of us. But we wanted to make sure you got a message of confidence and optimism and pride in the first quarter. But we want to make sure that the math rolls through in the appropriate manner. James Schneider - Goldman Sachs & Co. LLC: Received loud and clear. Thank you.

Thank you. Our next question is from David Togut with Evercore ISI. Your line is open.

Good morning. Strong start to FY 2019. I'd like to ask about pricing trends as you head into the critical year-end selling season. What are you seeing in terms of kind of price net of discounting on a year-over-year basis?

Well funny you should mention that, because back to the previous question in terms of one thing that we just don't want to take one quarter and assume that it's going to continue on. But we have seen, I would say, a better environment in terms of overall discounting in pricing and so forth. And the issue is, there is no scientific way to know how much of that is – I don't think the competition is getting any easier. I think we're getting better and stronger, our value proposition and our client satisfaction scores. There's other things that probably work into that mix. So in a very difficult environment where you have challenges like we had during ACA because of high volumes and caused some short-term deterioration in our service level, that probably leaves elevated concessions and pricing on pressure et cetera., the sales force starts to lose a little bit of its confidence. So I think we've regained a lot of that momentum, and it comes through, in part, it comes through in retention, it comes through in bookings, and it comes through in pricing and discounting. So I guess it's a long way of saying I can't answer your question because we don't know how much of what appears to be a better environment for us is related to economic versus issues around our own house being in better order versus the competition. If I had to guess, I would say it has not to do with the competition because the competition is still very fierce and there's plenty of competitors. And we are always out there sharpening our pencils, especially when we're so focused on bringing in new logos. So I think it's just – we're just doing a better job and it's translating to overall a better level. And that translates into our revenue growth, translates into retention. It has a lot of positive impacts.

Understood. And then as a follow-up, you seem very optimistic about Celergo and the potential for multicountry payroll. We haven't heard that much about international payroll processing in a while. Can you tell us how you're pulling together GlobalView, Vantage HCM and now Celergo to go to market internationally?

Yeah, David, two answers for that. Actually this quarter we had particularly strong performance of our international operations, which resulted in great new business bookings in that sector, great margin expansion. We had a very, very solid – good retention, very solid performance internationally. When we talk internationally this extends in this quarter for both the best-of-breed countries where we serve local clients outside the U.S., as well as our strength in our multicountry and multinational solutions. And Celergo and our business that we call Streamline will be fully integrated and become our multicountry solution that services client needs with smaller employee populations in those countries. And GlobalView has always been targeted for our multinational clients that have large populations in each of these countries. But both product components or service components are basically sold together today as bundles in an integrated multicountry solution. So we are so excited about it because we see that ADP is truly differentiated in our ability – basically, we would claim the only vendor who can offer multicountry solutions at this scale, at this consistency to that many clients of different needs. And we made an investment into Celergo to further expand that differentiation in the space which has been so successful for us. So view Celergo as a technology addition that will enhance our service ability for many of these clients big or small, and broaden our depth and in particular kind of enhances our differentiation versus our competitors in that space.

I think the only thing I would add to that which is, I completely echo all those comments. I think in the prepared comments we made a comment that it still remains one of our biggest opportunities. So that's part of why we're excited. We're excited because of the quality of the acquisition and the team that we got and the product and the technology, but also because it's a large growth opportunity for us. So there's a large market out there, even though we are, I think, a market leader, there's still a lot more opportunity there. And obviously any time that we have the ability to go into and accelerate into markets that have big opportunities, that's exciting to us.

Thank you very much.

Thank you. Our next question is from Kevin McVeigh with Credit Suisse. Your line is open. Kevin McVeigh - Credit Suisse Securities (USA) LLC (Broker): Great. Thank you very much. Hey, wonder if you could just give us a little more color on what allowed you to decrease the margin impact from the PEO on the ADP Indemnity side? It sounds like maybe it wasn't as bad as feared? Just a little more context on that.

Kevin, I appreciate the question. This has largely to do with our change in financial disclosures that we instituted for this fiscal year. Last year, and really in prior years, we undergo a process in which our workers' compensation indemnity evaluates the expected future losses that we have anticipated, and if there are changes to these expected future payments, we book adjustments. We historically have booked these adjustments in Other segment. And we changed now with our financial disclosures to include the results of indemnity into the PEO where they belong so that you have a true picture of the full performance of the PEO including these loss reserve adjustments that we book basically on a quarterly basis when warranted. And we had last year, a meaningful benefit for these loss reserve adjustments that created for us a grow-over pressure of 75 basis points, which we have not forecasted for the PEO when we gave guidance in August. And so the first quarter is now over, and we booked a loss reserve adjustment that was favorable and enhanced the results of the PEO. We had not put that into our guidance and now the results are better. So we let that positive expected loss reserve adjustment flow through and that basically adds to profit in the PEO sector.

Yeah, so I think you made the comment that it wasn't as bad as you expected. To be clear what Jan is saying is, we had a big benefit in the first quarter of last year and we were worried about whether we would have that side – because you can't really forecast these things a year in advance which is why with good intentions, we used to have this in Other, to avoid exactly these discussions and these kind of ups and downs in the PEO segment. But I think we did come to the conclusion and we believe that it does belong in the PEO segment. We're putting it there. So now we have to, going forward, make sure we give you the appropriate amount of color so you understand what's happening. So this was in essence a large benefit and gain that we had through an adjustment of loss reserves in the first quarter of last year compared to a smaller gain this first quarter. But that smaller gain was bigger than what we anticipated, if that makes any sense. Kevin McVeigh - Credit Suisse Securities (USA) LLC (Broker): No, it does. I apologize for the verbiage, it was more just I guess relative to the initial expectations of 50 basis points to 75 basis points, 50 basis points to 25 basis points. Awesome. Thank you very much.

Thank you. Our next question is from Nandan Amladi with Guggenheim Partners. Your line is open.

Hi. Good morning. Thanks for taking my question. So at the June Investor Day, you talked about the early retirement plan being more successful, I guess a higher uptake than you were initially expecting. You've touched a little bit on the backfill plans. Can you describe a little bit more what your plans are for the remainder of the year for total head count and what areas of the business you're hiring in?

Yeah. So I think one of the key words in some of the prepared comments we had, we used the word care in a few places and I just want to reemphasize that. That in June, if the implication that it was kind of more successful because it was more people. It's more successful from a financial standpoint, so on the spreadsheets it looks great. But we do have to execute on all these transformation efforts with care. We have to maintain high NPS scores and good execution. And so we, I think, adjusted our backfill plan based on the volume of uptake that we got. And also based on timing of the exits and which parts of the business were critical, it was critical for us to make sure that we had the right people in place to be able to handle the right volumes, especially at calendar year-end. And so saying all that, I think we had a plan that, as you can imagine, we would never have a voluntary early retirement program and then plan to backfill every single position. That would've not been I think probably a good use of our capital. And that was not what our intention was. So we thought that because of some of the work that we had been doing previously around transformation to take work out that we had an opportunity to, over the course of, call it 12 months, to offer this attractive package to some of our tenured associates. And it feels like it's working. And so if you think through what we've done is we hade three different waves of departures. And so they're scheduled to leave over different periods of time, over the 12 months since the date we announced the early retirement program. And we…

Thank you. Very helpful.

Thank you. Our next question is from Bryan Keane with Deutsche Bank. Your line is open.

Good morning. Just wanted to follow up on that. On Employer Services, besides hiring, is there any other additional reasons why the margins would drop back down to the fiscal year 2019 guidance range?

Again, another one we spent a lot of time talking about. I think that that's a fair question. One of the items is that one. I think that we have – the FX headwind is probably some part of it because we did have some FX benefit, just to clarify, even though we had a FX headwind on the revenue side, we had some FX benefit in the first quarter, as some of our costs that we have overseas went down faster than planned or more than what we had planned. Specifically, we have a large offshore operation in India, and I think that cost came in very favorable in the first quarter and well ahead of our plan. So I think there's probably a number of things that when you roll them together, including the fact that it's only the first quarter and so we're just not prepared – for example the strength that I mentioned in terms of improvement in concessions and pricing and so forth, if you roll those things forward and you assume they're going to continue, than we would expect a better second, third and fourth quarter. We're just not prepared this early in the year. And I think it's traditional for us. The fact that we raised our PEO guidance is unusual for us because – and I think it's prudent and I'm not sure what other companies do, but until we have more visibility and until we get to the calendar year-end – as a reminder, the next quarter, this quarter that we are in now today, is an important part of our new business bookings for the year and also December 31 represents an important measure of retention because clients tend to switch providers at that time of the year. So I think you should expect us coming out of the second quarter to have a stronger view and position.

Okay. No. That's helpful.

If I could add...

Go ahead, Jan. Yeah. Go ahead.

I'm sorry. To add a few more comments of insights about the drivers of our margin expansion that may help you to do. And so part is that we hire in anticipation for our work, but we are also – I think as it turns out, the second half is not as good as the first half. And I think there is a little bit of this left in our asymmetry of margin that compares to prior years. So the second half is a little bit more difficult grow-over I think for us, and some of the success that we had with some of the initiatives that we initiated in the last half of the fiscal year. We had great scale, for example in our I&O organization. Our IT infrastructure is making progress and contributed. We had exceptional productivity improvements in our sales force for the start of the year, that would be not reasonable to assume that that type of level of productivity improvement is continuing throughout the year as we go through. So there are like some just natural business reasons that make you think as early in this fiscal year to kind of keep the margin expectations as we had them.

Got it. Got it. And then I wanted to ask about the U.S. outlook. ADP has a great look at the U.S. economy and currently lots of concern in the market. Are you guys seeing any cracks in the U.S. economy at this point?

Zero.

Yes. All right. Well, that's a good sign. All right. Thanks so much.

Thank you. Our next question is from David Grossman with Stifel Financial. Your line is open.

Thank you. Good morning. Carlos, maybe you could spend a little bit more time just on the upmarket. Obviously, we've been making some product modifications and you talked a little bit about sale strategies in the upmarket. Could you give us a little more detail in terms of where we are, not necessarily focusing on the quarter, but just kind of how you feel about that business and the progress that you're making?

Feeling really good about the progress that we're making there. I think we talked about, several quarters ago, the fact that we kind of more institutionalized our ability to sell Workforce Now in the lower end of the upmarket. Think 1,000 worksite employees to 3,000 worksite employees or 3,000 worksite employees to 5,000 worksite employees where we think that Workforce Now can really compete very strongly with certain parts of that segment. Whereas, Vantage can compete in that segment but competes even better in larger, more complex clients in the upmarket. So I think that adjustment in strategy has paid off. When you combine the new logo growth in the upmarket between Workforce Now and Vantage, I would say we're very pleased by the progress. And I think new logo growth, as you can hear in our comments, we're constantly talking about that because we love additional revenue from other products, we love incremental sales to existing clients, but the heart and soul of the strength of the business is market share and new logo growth. And I think on that metric, we're feeling good about the progress that we're making in the upmarket. It's still early days for some of the next-gen solutions that we're selling, but we're making some headway there also where we have a handful of clients. So clearly at our size and our scale, a handful of clients isn't making a difference on the numbers, but it's building confidence in both our sales force and in the marketplace. And so, by the way, we're also seeing really good progress in client satisfaction scores in the upmarket which I think are usually leading indicators of retention and also of new business bookings. And even if I look at the underlying revenue growth of that business, it's better than it was last year. We still have work to do, but we're feeling good about the progress.

And are there any milestone dates we should think about in terms of product enhancements or anything like that coming up?

Well not that we can share with you, because we've had some challenges with competitors saying things that are not accurate in the marketplace around our products and our strategy, which is a shame, because we usually try to take the high road. I won't mention who those competitors are, but I think it's not helpful for us to talk about specific dates, because we're trying to provide investors with transparency and clarity and so forth. And, unfortunately, some people take advantage of that situation. But I think at Investor Day we gave you a decent amount of information around what we were doing around Vantage and then also what our plans were in terms of our next-gen product. And I think I would probably refer back to that.

And we're on plan and feeling good about those plans.

Okay. Got it. Thanks. And just one last one just in terms of you mentioned these changing employment models. And I know you've made some acquisitions there. But can you give us any sense of just how impactful, or the timing of when that really becomes an important competitive dynamic in the marketplace to have those capabilities? Or maybe it's happening right now, I don't know.

I mean I think that it's an important competitive dynamic right now. I think it helps our value proposition and our story which is part of the – what's important is the value proposition and the outcomes you deliver. I think on that front, given our scale and the size of these acquisitions, we haven't rolled these products out to 100% of our client base, or even to probably even 1% of our client base. But it does add to the strength of our sales force in terms of what they have as a value proposition in the marketplace. And medium to long term, I think we believe it's going to be a very significant enhancement. So I'd say in the short term, the biggest short-term benefit has been and probably will continue to be Global Cash Card because it's such an in-demand product and it's such a strong and good value proposition. And they're executing so well. And they were already somewhat large in comparison to some of the other acquisitions that we've made that I would say that's the one that has the most immediate short-term impact. But I think Celergo, WorkMarket and I'll even go back to TMBC, The Marcus Buckingham Company, all these acquisitions are big strengtheners to our value proposition and our ability to win share in the marketplace.

Got it. Thanks very much.

Thank you. Your next question is from Tien-Tsin Huang with JPMorgan. Your line is open.

Thanks. Good results here. On the PEO, the 8% to 9% worksite employee growth, I'm curious, how would you benchmark that against industry growth for PEO – because we've had mixed reviews or mixed numbers, figures from the peer group. So I thought I'd ask you.

I would say that if you take the two numbers that you have that you're referring to and you average them, ours is higher.

Yeah. Yeah. Simple math.

The PEO industry has long-term growth that we shared with you in the Investor Day. And we are obviously aiming to be and getting back to all double digits, which has been a big discussion for us, in particular since the last quarter. And we're well on our way. And that would help us to drive market – continue our long story of market share gains.

It's impressive, like this is a big PEO now, with a lot of worksite employees. And the number of new worksite employees that we have to sell each month and each quarter to generate the kind of growth rate that we just generated this quarter is impressive.

Yeah. You're the biggest player; that's not lost on us. Thanks for that. On the bookings, just to clarify. I know you've noted the tougher second half comps. Just curious, can you replenish the backlog and produce enough new sales and still land in that 6% to 8% zone in the second half of the year? I suppose mathematically you can go to 5%, 6% and still be at the low end. But I'm curious because it's such a big comp as the year progresses.

Yeah, look, there's different selling seasons in our business, and different markets have different things. When I compare the first half of growth to our second half of growth, it looks pretty good. Not quite as good. We clearly recognize the fourth quarter is difficult, so we have a different thing, but the confidence in the sales force to achieve the overall plan, which has obviously helped us to establish our guidance, is high, so.

We're definitely not trying to manage to the full year number.

No. We want to go as fast as we can.

I mean, our goal would be to do what you just described, which is we want to outperform and not just get what we need in order to meet the forecast.

Understood. Thanks for the time.

Thank you.

Thank you. Our last question is from James Berkley with Wolfe Research. Your line is open.

Hi, guys. Congrats on the quarter, and thanks for squeezing me in. Just a quick follow-up on an earlier PEO question. Do you see any risk to your 11% to 14% medium term guidance? I assume there's no reason to back off of that given the strength you're seeing now. And could you quantify maybe in growth or basis point terms what the headwind is that you saw or are seeing still from some extent from the incentive changes and then the ACA related downgrades and other factors you mentioned on last quarter's call, just so we can get a feel?

Yeah. Let me tie this back to the long term outlook that we gave in our Investor Day. There are two main factors that I would think about this as related to achieving our revenue targets for the PEO in the longer term. One is a thing that we don't control which is the growth of our zero margin pass-through revenue growth, which is actually the biggest factor. And so we have changes in healthcare inflation, changes in participation rates and the health insurance rate that are driven by industry dynamics that we don't control. And so that trend had shown some pressure in the last fiscal year and is ongoing really, if we think so. So that will put pressure on that long term goal. It will have zero economic impact to ADP, but so from that I think that's a pressure that we would have acknowledged and that is there for the revenue number. But for the bottom line number, it would have no impact. And then the second component is clearly what we have been focusing on in this call which is the drive of our worksite employee growth, which is of course a factor of our sales execution as well as our retention. And we feel optimistic that our sales force has enough potential to sell these new clients even though the scale is big and is hard work. But the increased momentum in the last two quarters of our sales gives us optimism that the model reacts to it. And you saw that we are upticking our worksite employee and revenue growth already after couple of quarters of good sales success. So that works for us, and it has been aided also by very good retention particularly this quarter in the PEO. So those factors drive the revenue growth more than anything that we control, and we have a lot of focus on the management team on it. So I think we, aside from that pass-through pressure that I really don't work to offset here in order to make the revenue number, we feel good about the strategic outlook of the PEO.

Okay. Thanks. And then just lastly, on the multinational side I think you said it grew low double digits in the quarter. I don't know if you possibly could just kind of size that and what you think maybe the TAM is for that? And talk about your recent acquisitions and the potential for that to maybe accelerate? And just kind of your plans in the international market or multinational space in general?

Yeah. For a very long time, our multinational solutions have really grown in the mid-teens very consistently, and those are our plans. We execute, and there's really no change in our outlook. I think the Celergo thing is just another component if you think in the longer term that drives our differentiation, will enhance our opportunities for an ambitious growth rate.

And I think the TAM is large. We have it somewhere in the data that I get, but I honestly can't remember offhand. But when you look at our market share and you look at the size of the market, I think we actually may have even had it in our Investor Day materials if you want to go back and refer to it. But one of the things that Jan mentioned in his comments – he used the term multicountry payroll. So we have these multinational solutions which are – in some cases, we're referring to very large companies that are in 15, 20 countries, but there also are a lot of companies that are operating in two or three countries, maybe in France but you have two other countries in Europe or a couple countries in Asia and they may be midsize companies. So the TAM is also something that is probably growing over time as people realize that the market is actually bigger than what we thought. So I think if you talk to our international leaders, they would say that this was very, very crucial because of the size of that multicountry payroll market that was underserved. So we're hoping that that opens up new opportunity as well.

And just to state the obvious, in this market our clients are not only HCM clients of ourself, but we partner a lot with ERP systems and large ERP vendors for clients who choose to partner with us on a multicountry payroll solution. So the market size that we address really spans a variety of client types which allows us really a longer sustained revenue growth.

Thanks a lot. Great quarter.

Thank you.

Thank you. And this does conclude our Q&A portion for today. I am pleased to hand the program over to Carlos Rodriguez for closing remarks.

So thank you very much for your questions today. As you probably could tell, we're off to a really good start. Even though we have a lot to accomplish still, we're very pleased with the progress that we've made. I also want to thank our associates because besides having our investors embrace change in our transformation, I think it can't happen without the support of our associates and our leaders. So I really appreciate the support we're getting internally as we drive our transformation so that we create, as Jan just referred to, a long and sustainable revenue growth for another 70 years. So next – I believe it's next June, we actually reach our 70 birthday and we didn't get here by not making it through multiple changes in technology and economic cycles. And this transformation effort is intended to position us to be successful for another 70 years. So I think we're well on our way to doing that, at least positioning ourselves for the 70 years, not the actual 70 years, but we appreciate the support of all of our stakeholders including all of you but also our associates in what has obviously been a very fast-changing environment for us. So with that, I will thank you once again and appreciate your continued interest in ADP.

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