Automatic Data Processing (ADP)
Q3 2011 Earnings Call
May 02, 2011 4:30 pm ET
Elena Charles - Vice President, Investor Relations
Gary Butler - Chief Executive Officer, President and Director
Christopher Reidy - Chief Financial Officer and Corporate Vice President
Adam Frisch - Morgan Stanley
Julio Quinteros - Goldman Sachs Group Inc.
David Togut - Evercore Partners Inc.
Michael Baker - Raymond James & Associates, Inc.
Tien-Tsin Huang - JP Morgan Chase & Co
Kartik Mehta - Northcoast Research
Rod Bourgeois - Sanford C. Bernstein & Co., Inc.
Ashwin Shirvaikar - Citigroup Inc
Mark Marcon - Robert W. Baird & Co. Incorporated
Giri Krishnan - Credit Suisse
David Grossman - Stifel, Nicolaus & Co., Inc.
James Macdonald - First Analysis Securities Corporation
Gary Bisbee - Barclays Capital
James Kissane - BofA Merrill Lynch
Timothy McHugh - William Blair & Company L.L.C.
Previous Statements by ADP
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Thank you. I'm here today with Gary Butler, ADP's President and CEO; and Chris Reidy, ADP's Chief Financial Officer. Thank you for joining us for our Third Quarter fiscal 2011 Earnings Call and Webcast.
Our slide presentation for today's call and webcast is available for you to print from the Investor Relations homepage of our website at adp.com. As a reminder, the quarterly history of revenue and pretax earnings for our reportable segments has been posted to the IR section of our website. These schedules have been updated to include the third quarter of fiscal 2011. During today's conference call, we will make some forward-looking statements that refer to future events and, as such, involve some risks, and these are discussed on Page 2 of the slide presentation and in our periodic filings with the SEC.
With that, I'll now turn the call over to Gary for his opening remarks.
Thank you, Elena, and thanks to all of you for joining us on this Monday evening. Before we get in to the third quarter discussion, however, I wanted to take a few moments and this opportunity to say a few words about Henry Taub, ADP's founder, who, regrettably, recently passed away.
Henry was a true entrepreneur, and it was his vision back in 1949 when ADP began. And that vision created the industry of processing other companies' payrolls. Henry recognized from the beginning that helping companies to outsource this important function to an expert would allow those companies, which at that time were small and midsize businesses, more time to focus on what matters, and that's growing their business.
Henry also recognized the importance of delivering excellence in client service, which is the essence of the culture that defines ADP to this very day. We're all especially grateful for Henry's vision, support and counsel over these many years of his involvement at ADP. Henry's passing is truly a loss to the ADP family, and we will miss him deeply.
Now let me turn to the discussion for the third quarter. I'll begin today's call with some opening remarks about our third quarter results. Then I'll turn the call over to Chris Reidy, our CFO, to take you through the detailed results, after which, I'll return to provide you with our updated forecast for fiscal '11, and before we take your questions, I'll provide some concluding remarks. I'm now turning to Slide 4.
Overall, I'm quite pleased with ADP's third quarter results for fiscal '11. Particularly noteworthy is that the investments ADP continued to make over the last several years are having the desired impact, which is accelerating the growth in the business.
Starting with Employer Services, the investments in our solution and in our sales force have translated into strong new business sales growth of 13% worldwide in the quarter, which was led by strong double-digit growth in the Small Business marketplace.
Sales in our International businesses were also up double-digits, led by strength in Canada and in GlobalView. To remind you, we started to see new business sales rebound toward the end of last fiscal year, resulting in a strong year-over-year growth of 25% in last year's fourth quarter. This will obviously put some pressure on the growth comparisons in this upcoming year's fourth quarter, or next quarter. Having said that, we remain highly confident that we are on track to achieve our full year forecast of high-single-digit new business sales growth.
We're also getting excellent returns on our investments in client service. We have completed this critical calendar year end retention period with strong retention results in Employer Services. The quarter's increase of almost 200 basis points puts us on track this fiscal year to actually exceed the record retention levels that we achieved in fiscal 2008.
Growth in our U.S. pays per control same-store sales employment metric was once again ahead of our expectations. The increase of 2.7% in the quarter represents the largest quarterly year-over-year increase in 4 years.
In Europe, however, the employment levels have been slower to recover than in the U.S. Pays per control in Europe are still down about 2% compared with the year ago. As many of you know, client-fund balances are seasonally highest during our third fiscal quarter and on into April. It's noteworthy that we reached a new record high level of client balances in mid-April at $35.4 billion. And then just last week, we surpassed that number with another new record balance of nearly $37 billion in one day.