Automatic Data Processing, Inc. (NASDAQ:ADP) Q1 2024 Earnings Call Transcript

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But arguably, we are actively looking kind of case by case and really picking the ones that we believe sequentially will be the most accretive to drive the most amount of productivity, the most amount of value back to our shareholders, but candidly, the most amount of value to our clients.

Mark Marcon: Terrific. Thank you.

Operator: Thank you. We have time for one more question and that question comes from Scott Wurtzel with Wolfe Research. Your line is open.

Scott Wurtzel: Great. Good morning, guys, and thanks for squeezing me in here. Just on the launch of the construction vertical software. I’m just wondering, is this sort of part of a bigger shift to develop more vertical specific HCM solutions for your clients? I understand, construction may be a more complex vertical, but wondering if there’s more of a vertical specific strategy that could develop beyond the construction vertical. Thanks.

Maria Black: So I’d like — what you’re suggesting, and I think the answer to that could be yes. And I think when I think about — back to selling 27 years ago, I used to sell construction companies and the complexity that they have has always existed and candidly, a lot of the features and functionality that we have and are now pulling together to make it an actual solution for that vertical existed many years ago. And that’s everything from things like job costing, obviously, compliance and reporting, think about certified, compliance type of reports for payroll, things of that nature. And so it’s really about pulling it together and marrying it with a service organization that can support the complexity of that vertical. I think that, to me, is a big change, so we did add some features.

But a lot of these things we’ve had, and we pulled them together and we’re marrying it with the ecosystem of a dedicated service org that can actually really help the construction industry and this vertical saw the complexity of being in that industry. So I think what I would offer is that, it’s an exciting time for the construction industry, specifically for our Workforce Now clients, and I see this, just as you suggested at the beginning of other places that we could pull together our existing tech with a dedicated type of service model and solve real challenges in the business for various verticals.

Scott Wurtzel: Got it. That’s helpful. And just a quick follow-up. Just wondering if you can give an update on sort of Next Gen HCM and Next Gen Payroll, attach rates and how we’re sort of trending there, relative to expectations?

Maria Black: So Next Gen Payroll. That was the question?

Scott Wurtzel: Both.

Maria Black: Both. Okay, just making sure I heard it right. So I think I touched base really quickly on Next Gen HCM. And I think I noted to the excitement that we have that we continue to see the strength in the Next Gen HCM offering into Q1. So we had a strong fourth quarter. What I would suggest is that we actually brought in more Next Gen HCM in the first quarter than we saw all of last fiscal year. But again, one quarter these things can sometimes be lumpy. But I think for me, it’s really about the sentiment. And so we recently had an Analyst Day. We had a handful of our clients up on stage that, shared with us the impact, the platform is making for them. And as you would remember, we spent a lot of our discussions over the last year talking about scaling implementation, on-boarding the backlog.

So pretty exciting to see some of that backlog that’s no longer backlog on stage, speaking to the value proposition, and that’s supported by continued strength which means our sellers are excited to continue to sell the Next Gen HCM offering. So I think that’s all very, very positive. Similarly, we have continued focus in the Next Gen Payroll. And so what I would offer there as we continue to make headway. So as it’s not deployed across the entire mid-market. We continue to make headway to solve for more complex features, things of that nature, that will pull it further into the upmarket of the mid-market. But as you know, that Next Gen Payroll engine is also what’s attached to the Roll offer. So the other exciting part about that engine is it is the thing that’s taking us into the SMB space internationally.

So I feel really excited about the road map for that offering and the contributions that it’s making into the mid-market today, but also into the long-term growth of the company internationally.

Scott Wurtzel: Awesome. I appreciate the color. Thank you.

Operator: Thank you. This concludes our question-and-answer portion for today. I’m pleased to hand the program over to Maria Black for closing remarks.

Maria Black: Yeah. So thank you, Michelle. And listen, it’s hard for me not to sit here and reflect on a year ago. And so I was driving in this morning and feeling candidly a bit nostalgic because it’s exactly one year ago that Carlos and I sat here and announced the transition of me becoming CEO of this amazing company. And so I’m incredibly nostalgic and proud today. I’m proud of our first quarter results. I’m really proud of the execution of the team, both with respect to the results, but also with everything that you heard in terms of the progress we are making on a very cohesive and strong strategic outline and priorities. But mostly what I would offer is that I remain incredibly humbled by the — over 60,000 associates that I’ve had an opportunity to engage with over the last year who continue to make this company everything that it is and absolutely amazing.

And I just wanted to say that I’d like to thank each and every one of them for inspiring me every day. So with that, that is the conclusion of our call and until we meet again.

Operator: Thank you for your participation. This does conclude the program and you may now disconnect. Everyone, have a great day.

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