All right, thanks, thanks, everyone, for joining. I think we're live, right? I think we are. Yeah, so again, my name is Tien-tsin Hu ang. I cover the Payment IT Services group. I've been covering ADP for a couple of decades now, and still learning a ton, following ADP, and really grateful to have Danny Hussain with us from Investor Relations back. You're kind of a staple here, Danny, so thank you for supporting the conference. Thank you, Tien-tsin. So, like, like we've done in the past, we've fielded a lot of questions, Danny, from investors to go through with you and hit some of the hot topics, if that's okay. But maybe we start with the obligatory question around the macro and what trends you're seeing. How are you responding to what's going on on the ground? Yeah, I think, a good way to frame this is that in the past, let's say the past several quarters, had you asked me that question, how macro factors are affecting our business and what we're seeing broadly, it would have been unambiguously positive. Mm-hmm ... across all the different metrics that we track and report. And now it's just a little more nuanced. So I bucket this into two categories. There's basically the macro drivers that are still doing above what I would consider to be normal from a, you know, a secular standpoint. So things like, bankruptcy rates, clearly still below where they were pre-pandemic, and that's, of course, helping our business. And new business formations, still very healthy, I think, surprisingly so. And then things like wage inflation, obviously tied to broader inflation in the economy, still above pre-pandemic levels. It helps our business to a, you know, a certain degree, but it is slowing. Mm-hmm. But it's, it's positive, so we would still consider that to be a tailwind. Then you move on to some other factors, right? So you think about the actual employment growth in the economy. We report a metric called Pays Per Control, which at this point is now 2% growth year-over-year. For ADP, historically speaking, 2%-3% would be more typical over the course of the cycle. And so that 2% is... it's trending downwards. It's very gradual, so it's not out of line or out of step with what we would have expected, but it is getting to the point now where it's, it's no longer a normal level. It's actually getting to be a slight drag to our, our overall performance. And then the other one I would talk about is, it's GDP, but not in the sense that, you know, reported GDP, of course, for Q2 was really strong- Yep ... as we all saw. But when we think about the effect on ADP and other software companies, GDP is a good proxy for the demand environment. And so we feel like it's normal at this point, but it's more likely to trend, you know, softer rather than- Sure. ... stronger at this point, and consistent with everyone's expectation that at best, we're heading for a soft landing. So we're no longer seeing tailwinds from a demand environment. It's a very normal and steady demand environment. But just to, again, frame the macro environment into these two buckets, you've got a few things that are still trending above normal, and then you've got others that have already reached what I would consider to be normal levels, with perhaps some room for further deceleration. So these are all watch items. Obviously, we've got all this contemplated in our outlook, but as we think about the years ahead, how, you know, exactly that macro backdrop trends is going to be important to our fiscal 25 and fiscal 26 and so forth. No, that's perfect. I like the way you laid that out. So, is there a way, Danny, to separate the cyclical from the secular? 'Cause when I think about ADP and the whole pendulum of outsourcing versus do it yourself, and we measure that with new sales as well as retention in a lot of ways, and I know it's hard to do and disaggregate, but where do you think we are in that secular debate? Yeah, that's a great question. Often, somebody new to ADP assumes that most or a significant portion of our growth is driven by cyclical factors. Mm-hmm. There is obviously an element of cyclicality to things like employment growth, business formations. But if you were to look at the performance of HCM companies over the decades, most of it is, we believe, driven by that secular demand for a combination of outsourcing and also software to help companies manage what is becoming an increasingly complex world for employers. And so we look at even a shorter time horizon, like the pandemic. We know there are secular drivers, and then we know, of course, there are cyclical factors that are very unique to that, you know, particular time period. And it actually can be very difficult to separate the two out. But what we do know is that the world has gotten more complex today versus even 3 or 4 years ago, pre-pandemic, and our salespeople feel that in the conversations that they have with our clients and our prospects. It's most acute when you think about the fully outsourced solutions that we offer and a couple of our competitors offer. This is now, in a sense, giving up on trying to manage HR on your own and really turning it over to the experts to a greater degree, to free yourself not only of, you know, the risk from a compliance standpoint, but just the hassle and the effort and time involved in managing HR function. That's especially true if you think about companies of a certain size that are... you know, have 10, 20, 30 employees. They have some degree of complexity, but they're not at the scale at which they would hire a full-time HR department. So these types of companies are struggling to manage and navigate the, you know, global complexities right now of being an employer. It's true in the U.S., it's true in, a lot of European markets, and that helps us. So where we see that is in our new business bookings. Mm-hmm. So we're able to sell a variety of solutions to these prospects and clients. We also benefit from cyclical factors like new business formation. So ADP, given our brand presence, is often, you know, given almost first dibs, if you will, on small businesses that are looking for a payroll solution. They're familiar with the name. We often get in front of them first, given our relationship with different channel partners, and that helps us, but it is a smaller piece of the total secular, I would say, force in HCM. So we look at the cyclical headwinds. We acknowledge that, you know, sometimes it is tougher to sell, but that usually doesn't detract from, you know, our investments in solutions that are gonna help our clients manage through long-term secular challenges in HCM and in managing the HR department. Okay, so maybe we can drill down. So we led with macro, we talked about the secular. Let's drill down a little bit across small, mid, and large. I know, I know in small, we learned a lot around cyclicality from some of the public peers, whether it's, you know, BILL or some of the Paycom that, that you all look at. Anything you wanna call out here that maybe is misunderstood or maybe not fully appreciated across small, mid, and large for ADP? Yeah. I'll provide a high-level overview of where ADP stands. Small business is firing on all cylinders- Right ... for a variety of reasons. We talked about the cyclical factors being very healthy still for small businesses. So I think everyone is comfortable in saying that there was excess liquidity in the small business market, and you had fewer bankruptcies than, you know, normal run rate, and you've had higher new business formations. All that helps us, and it's still running at those levels, but at the same time, ADP is particularly well-positioned in the small business market because of how strong our product is, how much we've invested in distribution, and how high our client satisfaction is. So you put all of that together, and we've had really strong growth, not just in new clients, but also in upselling our existing small business clients to solutions like our PEO or retirement solutions or insurance services, time and attendance, and so forth. So that whole business has been doing really well. The mid-market for ADP has been... It's a more mature part of our portfolio, and so more of the growth historically has come from upselling existing clients to solutions like the PEO or our other outsourcing solutions. We generally rely less on client growth because we already have such high market share in that part of the market. That really was where ADP got started in payroll. That doesn't mean, going forward, we don't have the ambition to drive more growth from new client wins. That certainly is on the roadmap, but at the moment, more of the growth does come from getting more revenue per employee, and that typically comes in the form of outsourcing or a fully, you know, full bundle like the PEO. And then, moving to the enterprise space, very stable part of the market generally, so it's less susceptible to the cycles, also fewer employees added during the upswing as well. And so it provides a buffer within our business. It's a very stable force that hasn't, for ADP, driven a lot of growth, mainly because we are still going through a platform journey in which we are closing down a few older platforms. We're selling more and more clients on a new platform called Next Gen HCM, and we couple that with a very strong global payroll offering for clients that have that need. Mm-hmm. So it's in this transition, and it's holding steady, but it, at the moment, isn't a major driver to our growth. And so that's just something that we are gonna continue to work through these coming years. And then globally, you have all of these different stories, you know, brought together, depending on what market you're looking at. So we have some really great growth out of our multinational solutions, where we have more modern platforms. And then, if you look at certain markets where we have perhaps higher market share, and it's an older platform, the growth is, it's lower. In many cases, we're just maintaining GDP-type growth in those markets. But we do have a long-term plan to accelerate even those markets following a migration to more modern platforms. So that, likewise, is gonna be a multi-year journey for ADP. Between our U.S. enterprise space and our international in-country space, we're excited about the coming many years ahead, where we actually do get to transition to more modern solutions, and we think, of course, that'll benefit our long-term growth rate. For sure. Okay, good. Now, thanks for going through that. So maybe if we jump into the quarter, somewhat out of character for ADP to make a revision so early in their fiscal year, it seemed like things were generally stable, with the exception of some weakness in some of the same-store hiring within your PEO base. So but maybe... Is that correct? And share with us what surprised ADP. Yeah, I think it helps to share that even though the PEO for ADP has been a secular grower, it's been one of the fastest-growing businesses within ADP- Mm-hmm ... it is more exposed to cyclical factors like employment growth. In our Employer Services segment, which is much more diversified and has a number of different revenue drivers, a slight change in the employment growth rate or in bankruptcy rates is buffered by drivers elsewhere. In the PEO, it's a much more simple business model in some sense. We're tied very much to the number of paid employees. And ordinarily, you have, of course, a more stable backdrop when it comes to employment growth. And so even if you miss on, let's say, the amount of hiring your clients do, it's by a small amount, obviously well within the guardrails of our guidance framework, or perhaps it happens later in the year. In this particular case, we've seen fairly rapid deceleration in Pays Per Control in our PEO, as well as our Employer Services segment. Mm-hmm. It persisted into Q1. It has been plateauing, so we're happy to see that, but it persisted for a little bit longer. Because this is early in the year and because there really is no offset to a loss of employment within our client base, we felt it was prudent to lower our outlook at this point. The thing that we have to continue to focus on as a company is to bring new clients into the PEO. So from an execution standpoint, that's where the company is focused, and our management team is absolutely focused on our Q2 and Q3 selling season. In Q2, you bring in a lot of prospects and clients, and you try to close the deal to begin in Q3. So between those two quarters, we've got a lot of focus, and we're, we're optimistic, and leads look great. The demand is there. So that's the part that we can control. Back to your original question, the outlook change was really on the piece of growth in the PEO that we don't control, which is hiring. I know a lot of us like to orient the outlook against your midterm growth rates, and I think Employer Services, for this year at least, is running a little bit above your midterm outlook, and PEO is running a little bit below. Should that, in any way, inform our thinking around the attainability of the midterm outlook? Has the world changed, whether it be from a cyclical or a secular standpoint? That's a fair question. The broader HCM environment, the value prop, nothing of that has changed- Okay. in any meaningful way. And the PEO still has a long runway in front of it. Penetration is still very low, and so we are no less optimistic about the opportunity to drive growth in the PEO, or in the ES segment, just because there are some shorter-term cyclical headwinds. But that said, it's hard to speak to the medium-term targets because that was intended originally to be a macro-neutral outlook. Right. As we've all seen, these last couple of years have been anything but macro-neutral. We'll see what next year brings or the year after, but I can share that our focus and ambition when it comes to driving new client growth, that hasn't changed. The actual end financials is going to depend on other factors, though. Things like employment growth and bankruptcy rates and client funds contribution. Some of those have helped us, and some are a drag at this point. If you extract all of that out, we feel comfortable with the overall direction of the company. Again, nothing has fundamentally changed in the HCM landscape. Yeah. I think when you say that, you're probably also referring to the competitive landscape as well, correct, Danny? I know with Paycom and their earnings, there was a pretty harsh reaction to some of the impacts that they saw with their next-gen product. Has the threat from SaaS changed at all, whether it be positive or negative? We don't think so. Okay. I think what the market is coming to appreciate is that in the mid-market, which is where we have a lot of these public competitors, there has been consolidation of market share. Yeah. That's the place where it's felt most acutely. You see that in other parts of HCM as well. The mid-market has now several competitors competing for a gradually shrinking pool- Mm-hmm ... if you will, and that's the remaining regional vendors, subscale vendors, that really don't belong in this market long term. Mm-hmm. So we do expect this consolidation to continue in the years ahead. ADP, having a diverse revenue base across all client sizes, all types of service models, and of course, U.S. and global, we don't get too hung up on, you know, a high level of, concentration or penetration in any one particular market, because we have all these other growth opportunities available to us elsewhere. What often happens in ADP's case is that we can flex. We can choose to grow our headcount in parts of the market that, at the moment, have the highest return, and in many cases, that might be a part of the market that's not U.S. mid-market. Some of these competitors that have one offering in one part of the market don't have that luxury, and the market is, of course, very sensitive to even a slight slowdown. What we saw from our competitors this quarter was maybe some recognition that growth has to slow. It naturally can't sustain at the pace that it's been growing at for those particular competitors. Mm-hmm. And then from one of the competitors in particular, there was an unusually rapid slowdown. Yeah. It seemed to be very idiosyncratic to them. You know, the revenue issues that they described are either completely irrelevant to their competitors or immaterial to their competitors, and that would include us as well. So I don't think there's any read-through or bleed-through from that particular competitor, but I think the truth still remains that you can't sustain that type of growth rate going after one part of the market. One thing ADP has done well over the decades is broaden its exposure, and it's a hard thing to do. You can't have one platform and go after the entire global HCM market. You have to either do it through M&A or through long-duration type investments in organic platforms. Either way, it's hard work, and for us, we feel like a lot of that work is behind us, so we feel well-positioned relative to those competitors. Yeah. No, I, I would think so. I, I would agree with that. You know, we've been hearing. You know, I was at the Fiserv yesterday. We just heard from Max at, at his keynote, and, and how embedded payments is becoming more important, and payroll is, is a part of that. And I know Maria's been talking a lot about new products. So what would you highlight from a product standpoint that, that you're excited about, Danny, that can maybe move the needle? There are a lot of product initiatives across the different business units. Big picture, under Carlos, we had some really big rocks to improve our product, namely, to get onto fewer platforms and then overhaul the, you know, the target platform, which is exactly what we did in our U.S. down market, which has worked out very well. It's exactly what we have been doing in the mid-market, which likewise is really starting to bear fruit, and it's what we're doing now in the enterprise and globally. So the work is not done, but there's a huge amount of work now that's behind us. And what that allows us to do is focus now on taking the existing best-in-class product and really trying to make it the market leader. So this was an explicit part of Maria's strategy to lead with best-in-class HCM technology, and that's not puffery. We really do expect that every single one of the platforms that we go to market with should be the best one. How you do that is not always by just throwing as many features as possible into it. Sometimes it's just focusing on the client and thinking about what'll make their life easier. So something like API Central or the Sora acquisition that we did is intended to help them, not purely in the HCM realm, but also just to integrate better with other platforms. And so, again, driving that client satisfaction in ways besides throwing features and functionality at them is definitely one priority. From a product standpoint, another one that's, that's clearly a priority for ADP and other companies is figure out exactly how much Gen AI to integrate into the product. Sure. We've already pushed forward with some pilots in some of our platforms. We had already a chat-based AI solution called Roll, so it was very easy to flip that over to Gen AI, and really what that meant was the level of conversation increased, and it's able to answer more questions much more quickly, and it feels more authentic. But in our more scaled platforms, like Workforce Now or RUN, we started to roll out something called ADP Assist. So now we're talking about a real HR practitioner, a full-time HR professional, who's engaging with the platform in a way that they didn't before. Mm. So we used to have guided tutorials, and we used to, of course, give them frequently asked questions and allow them to serve themselves as best as possible while supporting them with the ADP service organization behind that. All that's still true, but with Gen AI, now there's a way to engage more with the platform than you could in the past, and also give you more flexibility around, for example, creating a report. You may have had to do a drag-and-drop report creation in the past. Now you can interact with it in a more seamless way, and it can prompt you with ideas based on what other people are doing as well, just like we've seen with all the other Gen AI, you know, consumer use cases. You get ideas, and then it can actually stimulate more feature creation. So we're excited about that. We're likewise working on Gen AI on the back end and how we service and implement our clients, so there's a lot of ways that we'll improve the overall experience. But for sure, embedding it in the product is a big opportunity for us, and the organization's focused. All right. Good. 7 minutes left. Should we see if there's any questions from the audience? Any questions, we're happy to take them. Yep, in the back. Excuse me. Hi, thank you. Can you hear me? Can't quite hear you. Hi, thank you. So you mentioned the mid-market was a shrinking pool in the US specifically. I was just wondering if you could elaborate on that a little bit more. Thanks. Absolutely. To clarify, the addressable market of regional vendors, so the number of clients that are served by a subscale vendor, not, let's call it, a non-public company, is shrinking as we grow our client count and other public companies grow their client count. U.S. economy, of course, does grow. There's about 250,000 of those companies out there, but every year that goes by, every one of the public companies is growing, and so the remaining portion of those clients that are not served by one of the public companies is shrinking gradually. Anyone else? Yeah, Connor. On the deceleration and pays Per control, is there anything from, like, a geographical standpoint or vertical standpoint you'd call out that's driving that? We called out a few things from a vertical standpoint in the context of our PEO business. It's true also of our Employer Services segment, too. By the way, all of this is reflected in the ADP NER. You have to create a pivot table, play with it. Mm-hmm. But financials, down year-on-year. Tech, so information is the category, the way we characterize it. That was down. Manufacturing is down year-on-year. Offsetting that, you still, of course, have strong leisure and hospitality, so that's still up... and natural resources and mining, I think, is up meaningfully. So between BLS data, NER data, you can see it and calculate the year-on-year growth as well. Nothing terribly surprising, but the good news is that we are seeing stabilization. So things aren't falling off a cliff, so to speak. They're stabilizing, and the big question, of course, becomes: What happens in the next 24-48 months? Anyone else? No, I know ADP margin expansion is a hallmark for the company. But Danny, with everything that you talked about from a macro perspective, what kind of insight can you share on the OpEx outlook here for ADP? Where could there be room to protect margins to the extent needed, and what's not negotiable? For the time being, we have a growing client base, and our priority is to make sure those clients are happy and, of course, to drive growth through sales and marketing investments. In the sense that we wanna continue to prioritize that, those are non-negotiable. Until the demand environment falls off, if it ever does happen in the next recession, we continue to invest in sales and marketing. There's no reason not to do that. Likewise, from a product standpoint, anything that's gonna improve the client experience makes absolute sense to continue to invest in. There are certain investments that can be pre-, prioritized or reprioritized, either based on the next best investment... For example, Gen AI presented a lot of opportunities, and we did shift priorities, not because we were trying to save on margin, but because we had a pool of talent that we wanted to, you know, be focused on what we felt was the nearest and best investment that we could be making from a product perspective. When we go into a slowing economy, our preference is to take a patient and disciplined approach. The benefit of our business model is we are largely a people organization, and when the economy slows, we can take our time to react and hopefully avoid overreacting. Mm-hmm. In doing so, if we have a better sense for, for example, how long a recession might be, we can avoid overreacting. The last thing we would want is to lay off, you know, a portion of our organization just to rehire them six months later and retrain them and lose a lot of productivity along the way. So you've seen this approach in the pandemic, and you saw a similar approach even in the financial crisis, so it's our preferred approach. With that said, there are some naturally adjusting expenses. Of course, if sales are down, commissions are down and variable comp goes down, and so some things naturally adjust. But on the margin, if a recession is likely to be shorter in duration, or at least if that's our expectation, we're less likely to cut on spend, just to preserve, you know, the immediate margin. Yeah. Makes sense. Time for one last question. Maybe Andrew, can I ask you? Make you run up a little bit. Thank you. Thanks, Danny. There's one question I had. Maria talked about on the call last quarter, verticalization and Workforce Now for construction. Is that something we could expect to see more of over the years with ADP? That's a good question. We, we did roll out specifically a Workforce Now solution for mid-market construction companies, and that was new in the sense that this is the first time we have a really dedicated vertical solution. There are a couple other verticals where this may make sense, but ADP serves companies of all verticals, and we, we have for a long time. We don't think it makes sense to try to verticalize the entire suite of solutions that we have. So this really did feel like a one-off case, and there may be a couple more of these one-off cases, that you may hear about. But I would view it as, an opportunity that we saw and are seizing, but probably without, significant long-term strategic implications. All right. Good. Maybe I'll get you out here, if you don't mind me asking, just with Maria being in the seat for a bit. I know Maria's not new to the company, and I've always liked Maria quite a bit when she was... We had access to her. But have you seen any change or any observable change, either from a culture standpoint or from a, you know, from a outreach standpoint? Maria brings a lot of energy to the company. I would say, no major change culturally. Carlos and, and Maria bring the same culture, hustle, grit, hardworking, very well-liked people within the organization. The changes right now relate probably more to the environment that we're in. So we are further along in our, our product consolidation journey. Gen AI is being handed to us as an opportunity, and it's moving fast. So the organization is focused on a lot of these near-term initiatives, and that would have been true under Carlos as well. So I think that's the bigger, distinction I can make at this point. But for sure, Maria is excited and has laid out a, a pretty clear strategy that the whole company is, is really focused on, and, and hopefully, all of you guys can, come along for the ride. Yeah, for sure. Danny, thank you for the time. Means a lot. Thank you. Thank you, sir.