Automatic Data Processing, Inc. · NASDAQ:ADP
Automatic Data Processing — Investor Day (May 2012)
79 slides from Automatic Data Processing's investor day presentation, May 24, 2012
Slide 1: Inspiring Innovation & Market Leadership
Inspiring Innovation & Market Leadership ADP Financial Analyst Conference May 24, 2012
Slide 2: Agenda
Agenda 8:30 - 8:55 Opening Remarks & Strategic Direction Carlos Rodriguez 8:55 - 9:15 Global HCM Market Opportunity Jan Siegmund 9:15 - 9:35 ADP Technology & Innovation Mike Capone 9:35 - 10:00 Client Funds Interest Chris Reidy 10:00 - 10:15 Break 10:15 - 10:35 Dealer Services Steve Anenen 10:35 - 1
Slide 3: Forward-looking Statements
Forward-looking Statements This document and other written or oral statements made from time to time by ADP may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by
Slide 4: Use of Material Contained Herein; Market Data and ADP Segments
Use of Material Contained Herein The information contained in this presentation is being provided for your convenience and information only. This information is accurate as of the date of its initial presentation. If you plan to use this information for any purpose, verification of its continued acc
Slide 5: Strategic Direction
Strategic Direction Carlos Rodriguez President and CEO May 24, 2012
Slide 6: Agenda
Agenda 1 What Is, and Is Not, Going to Change 2 Business Priorities 3 Refining our Strategic Pillars 4 Summary 2
Slide 7: What is, and is not, going to change
What is, and is not, going to change 1 New emphasis on product innovation does not diminish focus on sales and service Product Sales Service Innovation 3
Slide 8: Business priorities
Business priorities 2 Growth Bias Client Focus Developing Talent Innovation that Service that Talent that drives drives agility & supports integration results & positions us client value & drives efficiency as thought leaders 4
Slide 9: Refining our strategic pillars
To focus our efforts & capture the opportunities, we are refining our strategic pillars 3 CURRENT PILLARS REFINED PILLARS Grow integrated suite of cloud based HCM, Strengthen our core business benefits, and payroll solutions to serve the US market Invest to grow and scale our market leading Grow our
Slide 10: Foundation for success
Foundation for success 3 Integrate HRBPO Global Adjacencies Innovate Drive Service Build Talent 6
Slide 11: Summary
Summary 4 Position ADP as the global HCM market leader leveraging 1 core competencies, market trends and breadth of offering 2 Foster an innovative mindset and become more agile 3 Deliver stellar service and create raving fans 4 Achieve top quartile TSR over the long term 7
Slide 12: Global HCM Market Opportunity
Global HCM Market Opportunity Jan Siegmund Chief Strategy Officer President, AVS May 24, 2012
Slide 13: Agenda
Agenda 1 Market Opportunity & Trends for Global HCM 2 Client Challenges ADP helps to Solve 3 How ADP Will Capture HCM Opportunity 4 Summary 2
Slide 14: Profitable growth remains our top priority
Profitable growth remains our top priority…strategy aligns and focuses organization to achieve it 1 Grow integrated Grow and scale Leverage global Grow & deepen suite of HR BPO Solutions presence to Adjacencies to cloud-based Leveraging our Offer clients HCM ensure market HCM Platforms and Solutions
Slide 15: The market is large and growing
The market is large and growing -- U.S. Human Capital Management opportunity represents ~6X “payroll only” 1 Global HCM market 2012 2012 Market Size – US $B ~$90B 2 1 1 51 2 2 3 International 5 4 7 8 43% 8 57% US Growth Rate 10 7% Payroll - SW Accountants Payroll - SB Talent mgt. Retirement Insuranc
Slide 16: Among core competitors, no one has ADP's solution breadth
Among our core competitors, no one has ADP’s solution breadth 1 HR PAYROLL BENEFITS HR BPO Benefits PEO / HRIS Talent TLM Payroll 401K RPO Admin BPO Market Rank #1 Top 4 #1 #1 #1 #2 #1 Top 3 C-1 C-2 C-3 C-4 5
Slide 17: Today's employers face some new and old challenges
Today’s employers face some new and old challenges…. 2 Expanding Increased Global Margin Workforce Pressure Growing Intensifying mobile and Compliance remote Burden workforce 6
Slide 18: Buyers are favoring integration and usability
…and buyers are favoring integration and usability above all else 2 “What is the most important factor when selecting an HCM solution?” 28% Usability 33% Integration 11% Other 2% Vendor stability 23% Deep functionality 4% Delivery model 7 Source: 2010 Knowledge Infusion & HR Executive Talent Managem
Slide 19: HR, Payroll & Time are considered standard in a global system of record
HR, Payroll & Time are considered standard in a global system of record, “core” ADP competencies 2 “How important is the following functionality in a Global System of Record?” Less than 1k employees More than 1k employees Portal / ESS Portal / ESS Performance Portal / MSS Portal / MSS Performance Co
Slide 20: ADP is well positioned with the most comprehensive HCM offering
ADP is well positioned to meet market needs with the most comprehensive offering in HCM 3 HCM View by Market Small Clients Medium Clients Large Clients MARKET SEGMENT w/less Complex w/more Complex w/complex, Needs Needs Global Needs STRATEGIC Vantage HCM RUN WorkforceNow PLATFORM GlobalView HCM HR41
Slide 21: New Sales Attach Rates: Workforce Now Example
New Sales Attach Rates: Workforce Now Example Attach Rates • Clients have flexibility to choose Benefits 20-30% solution that fits their needs • Attach rates are up 60% since introduction of Workforce Now Payroll 100% • 24,000 clients “live” TLM 40-45% • Early indication for Vantage exceeds 70% atta
Slide 22: Outsourcing clients experience ~25% savings vs. software vendors
ADP clients who outsource multiple processes experience ~25% savings vs. using software vendors 3 Total Cost of Ownership (Per Employee per Year) 15% 24% $1,202 $1,020 $910 Outsourcing Solution*- Common Platform In-House Solution* – Common Platform In-House Solution* – Multiple Platforms * HCM, Payr
Slide 23: Increased product competitiveness and market share
Increasing product competitiveness in HCM and strong execution has resulted in increased market share 3 Starts / Market share FY12 Market share losses (per % change since 2006 units) % HR HR / Talent 4.5 6-7% 45-50% Retirement 2.1 4-5% 55-60% Benefits Services H&W 3.8 5-6% 85-90% 3.2 HRBPO /PEO HRBP
Slide 24: Summary
Summary 4 We have solutions for companies of all sizes, with simple 1 to complex needs, that support the needs of a global and mobile workforce 2 ADP’s portfolio helps simplify and improve our clients’ productivity while ensuring global compliance Our outsourcing value proposition for mid-large clie
Slide 25: ADP Technology & Innovation
ADP Technology & Innovation Mike Capone Chief Information Officer May 24, 2012
Slide 26: ADP is the largest global SaaS provider of cloud-based enterprise software
ADP is the largest global Saas provider of cloud- based Enterprise software >250,000 SaaS clients 2011 - Rank #7 >13 Million users 81 countries & expanding 2010 & 2011 Widest breadth of HCM solutions Best-of-breed depth of features 2011 – ADP BPO/Service offerings extend reach #87 beyond
Slide 27: Integrated HCM product suite across all market segments
Our integrated HCM product suite delivers a unique breadth of solutions across all market segments Small Market Mid Market Complex Global Do-it-Yourself Payroll Speed of Implementation Broad & Deep functionality Extensive geographic Easy to Use Broad functionality Extensible footprint
Slide 28: New user experience in cloud-based integrated HCM solutions
An exciting new user experience is delivered as part of our cloud- based, integrated HCM solutions Rich Web 2.0 User Experience Rich Interactive Graphical Design Personalization Easy to Use Object/Task/Process Oriented Activities Browser Revolution UI Framework Open Integration Architecture
Slide 29: Robust growth in RUN solution for small business
We continue to see robust growth in our RUN solution for small business Key Highlights: 160,000 clients using RUN Over 11,000 mobile users New Enhancements: Do-It-Yourself eFile/ePay capabilities for enhanced integration with more channels (Accountants, Banks, etc) Enhanced HR capabilities t
Slide 30: WorkforceNow serves the less complex mid-market
“WorkforceNow” offers the broadest integrated HCM solution set to serve the less complex mid-market buyer Key Highlights: 24,000 clients Unique, differentiated cloud-based solution set with fully integrated HR, Benefits, real time Payroll, Talent, and imbedded TLM Plug & Play application modul
Slide 31: ADP Vantage HCM serves the complex Enterprise
ADP Vantage HCM serves the complex Enterprise Key Highlights: Plug and Play application modules include core HCM functionality, extensible to complete HCM suite Building migration capability for existing large Enterprise clients New Enhancements: Significantly higher multi-module attach rate:
Slide 32: GlobalView extends HCM leadership globally
GlobalView extends our HCM leadership globally Key Highlights: Single, consolidated reporting across 81 countries – ability to serve 98% of the worlds multinational employees 110 clients with >1 million ee’s live Client growth across integrated HCM suite up to 40% attachment rate New Enhanceme
Slide 33: ADP Labs
Innovation Labs ADP Labs Thought leadership and innovation that drive m arket leadership 9
Slide 34: Innovation: ADP Mobile
Innovation: ADP Mobile Just 6 months into launch… More than 270,000 users Over 25,000 clients 50 Customer Reviews – 4.5 rating # 7 on “What’s Hot” for Business Category apps on iTunes 10
Slide 35: Summary
Summary ADP continues to be a global leader in cloud-based HCM solutions Investments in technology innovations are driving excitement and success across all markets Accelerated migration to strategic platforms and the leveraging of products across BUs & Countries has simplified and strengthened our
Slide 36: Client Funds Interest: A Thought Process for FY13 and Beyond
Client Funds Interest: A Thought Process for FY13 and Beyond Chris Reidy Chief Financial Officer May 24, 2012
Slide 37: Client Funds Investment Strategy
Client Funds Investment Strategy Ladder/extend the maturities, and employ short-term financing arrangements to satisfy short-term funding requirements relating to Client Funds Obligations, allowing us to average our way through an interest rate cycle FY13 At risk to interest rate changes 100% of Cli
Slide 38: Client Funds – Distribution by Maturity
Client Funds – Distribution by Maturity $17.6B Distribution By Maturity at 3/31/12 = $17.0B Client Long and Extended ($ Million) ($ Million, at Cost) $4,500 2.3% $4,000 $3,500 2.9% 4.6% 4.6% 4.4% $3,000 July 2011 – $3.0B Full- year FY12 reinvestment $2,500 amount @ 4.6% 2.0% $2,000 4.3% $1,500 3.6%
Slide 39: Where we were this time last year
Where we were this time last year May 2, 2011 Earnings Call – FY11 Guidance vs. FY10 Net Benefit from Client Funds Strategy = $605 – 610 M ($15 - 20M) FY12 Thought Process - Different Client Balance Growth and Interest Rate Scenarios 0% Balance Growth 5% Balance Growth 10% Balance Growth Futures FY1
Slide 40: Last year, expected cross-over point was FY14
Last year, expected cross-over point was FY14 May 2011 embedded maturity yields and new purchase rate projections 6.0% May 2011 forward curves 5.0% 4.0% 3.0% May 2011 Ext’d & Long 2.0% Embedded Yields 1.0% 0.0% FY11 FY12 FY13 FY14 FY15 FY16 3 1/2 Year Agency forward rates May 2011 5 Year Agency forw
Slide 41: Current forward rates are down significantly vs. a year ago
Current forward rates are down significantly vs. a year ago 3 ½ Year Agency Forward Rates 5 Year Agency Forward Rates 6.0% 6.0% May 2011 May 2011 forward curve forward curve 5.0% 5.0% May 2012 4.0% 4.0% Down May 2012 Down forward curve forward curve ~230 bps ~210 bps 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.
Slide 42: And worse than last year's expected exit rates
And worse than last year’s expected exit rates 3 ½ Year Agency Forward Rates 5 Year Agency Forward Rates 6.0% 6.0% May 2011 May 2011 forward curve forward curve 5.0% 5.0% May 2012 4.0% 4.0% Down May 2012 Down forward curve forward curve ~230 bps ~210 bps 3.0% 3.0% 2.0% Expected June 2011 2.0% exit r
Slide 43: Cross-over point has shifted out nearly 2 years
And, the cross-over point has shifted out nearly 2 years May 2012 embedded maturity yields and new purchase rate projections 6.0% 5.0% May 2012 Ext’d & Long Embedded Yields 4.0% 3.0% May 2012 2.0% forward curves 1.0% 0.0% FY12 FY13 FY14 FY15 FY16 FY17 3 1/2 Year Agency forward rates May 2012 5 Year
Slide 44: Updated thought process for FY13 and beyond
Updated thought process for FY13 and beyond – FY13 drag worsens FY12 Guidance vs. FY11 Net Benefit from Client Funds Strategy = $555 – 560M ($50 - $55M) FY13 – FY14 Thought Process - Different Client Balance Growth and Interest Rate Scenarios 0% Balance Growth 5% Balance Growth 10% Balance Growth FY
Slide 45: FY13 expected to be the bottom
FY13 expected to be the “bottom” $ Million $800 $700 Rate Balance Balance Rate Rate Balance $600 Balance Rate Balance Rate Rate Balance $500 Balance Balance Rate Rate Rate Balance $400 Rate Balance Balance Rate Up $5-15M* $300 Down YOY Down $35-45M* $50-55M Down YOY YOY $70-80M* YOY $200 FY04 FY05 F
Slide 46: Return from laddered strategy clearly evident over cycle
Return from laddered strategy clearly evident over cycle $ Million $800 Client Funds Strategy Avg. Yield Overnight Yield 6.00% $700 5.00% Rate Balance Balance Rate 4.00% Balance Rate $600 Balance Rate Rate Balance Rate 3.00% Balance $500 Balance Balance Rate Rate Balance Rate $400 2.00% Rate Balance
Slide 47: Summary
Summary Significant deterioration in market interest rates vs. a year ago Average rates for 3 ½ and 5-year agency forward yield curves 210 - 230 bps Crossover of embedded yield and new purchase rates pushed out nearly 2 years from FY14 a year ago toward FY16 under current view Year-over-year
Slide 48: Appendix
APPENDIX
Slide 49: Client Funds Investment Philosophy
Client Funds Investment Philosophy Objectives Safety of principal – Prudent Investment Guidelines reviewed by ADP Board of Directors – Strict credit quality, maturity, and exposure limits to ensure an overall portfolio quality of AAA/AA – Strict credit guidelines by asset class – Significant holdi
Slide 50: Client Funds - What Does ADP Not Own?
Client Funds - What Does ADP Not Own? Sub-prime Mortgages Alt-A Mortgages Sub-prime Auto Loan Bonds Collateralized Debt Obligations Collateralized Loan Obligations Credit Default Swaps Asset-backed Commercial Paper Derivatives (options, futures, etc.) Auction Rate Securities Stru
Slide 51: Client Funds – What Does ADP Own?
Client Funds – What Does ADP Own? Fair Value of Available-for-Sale Securities as of March 31, 2012 (US$ Millions) Asset Class AAA AA A BBB Total Yield @ 03/31 Corporate bonds $1,648 $2,819 $2,644 $1 $7,113 3.4% U.S. Treasury and direct obligations of U.S. government agencies 6,639 6,639 2.7% - Feder
Slide 52: Client Funds – Investment Strategy
Client Funds – Investment Strategy Client balances vary daily FY12(F) Client Avg. x Avg. = Fund Balance Yield Revenue Client Short ~$3.4B x ~0.3% = ~$10M N A T Client Extended $7.6 – 7.7B x 2.8 – 2.9% = $215-220M U R A L Client Long FY12 Low $6.9 – 7.0B x 3.8 – 3.9% = ~$265M Point:$8.2B H E = Client
Slide 53: Client Funds Investment Strategy: Multiple Layers of Liquidity
Client Funds Investment Strategy (cont.) Multiple Layers of Liquidity $6.75B Commercial Paper Program Strong & consistent operating cash flow Corporate cash on hand $7B Reverse Repurchase capability with highly liquid U.S. Government Agencies & Canadian Government fixed-income investments –
Slide 54: Dealer Services
Dealer Services Steve Anenen President, Dealer Services Division May 24, 2012
Slide 55: A Refresher: About ADP Dealer Services
A Refresher: About ADP Dealer Services Technology $1.7 B (F) Revenue provider to Vehicle 8,000 Associates Manufacturers and Dealers in nearly Core Segment is 100 countries N.A. Automotive Total Market Opportunity = $17.5 Billion Segments Auto Heavy Truck PowerSports RV Marine Heavy Equip Agriculture
Slide 56: Industry Outlook
Industry Outlook N.A. – $1.3B (81% of DS Revenue) Asia Pacific – $40M (2% of DS Revenue) U.S. strong new vehicle sales, better than China expected – Market softening → up 1.3% in Q1 – Up 13% in Q1 – Overall automobile market growth slowed in – Revised analyst consensus mid-14M, up 13% y/y 2011
Slide 57: Enable Automotive Retail Transformation
Enable Automotive Retail Transformation Innovations at Each Step of the Consumer Journey Research & Pre-Approval Influence: Financing Ownership / Advertising & Service Sale Social Media Attract & Engage Transact Retain 4
Slide 58: Social Media and Reputation Management
Attract & Social Media and Reputation Management Engage Launched automotive’s first network directory listing service Reputation management launching with two major manufacturers: new growth strip 5
Slide 59: Flex Digital Advertising Spend
Flex Digital Advertising Spend: Making the Attract & Complex Simple for Dealers Engage Key source of competitive advantage to secure manufacturer spend Dynamically adjusts ad spend at Dealer level Long-term opportunity: ADP part of all major manufacturer marketing campaigns 6 6
Slide 60: Enable Automotive Retail Transformation
Enable Automotive Retail Transformation Innovations at Each Step of the Consumer Journey Research & Pre-Approval Influence: Financing Ownership / Advertising & Service Sale Social Media Attract & Engage Transact Retain 7
Slide 61: Flex Websites
Flex Websites: Unique Balance of Ease-of-Use, Transact Flexibility and Control • Modern drag & drop design • Patented content distribution • Strikes the balance between Mnfr / Dealer Brand • Largest automotive retail mobile platform 8
Slide 62: How it Changes Websites
How it Changes Websites: Our Unique Advantage: Transact Same Experience Throughout, In-store and out Dealer gets lead on their mobile phone Find vehicle, build a quote, apply for financing to “stop the clock” 9
Slide 63: How it Changes the Phone
How it Changes the Phone: Transact Integrated Phone is Key Bundled as extension of DMS and CRM Systems to manage leads log leads, click to call, phone pops, etc. Not tethered to the desk – Freedom to Interact Largest integrated phone provider to automotive dealerships – over 120K connections Next
Slide 64: How it Changes the In-Store Deal
How it Changes the In-Store Deal: Transact Finance & Sales Going Completely Paperless Instantaneous electronic MNB Motor Vehicle Retail Installment Contract & CREDIT “handshake” Security Agreement Addendum Between Buyer, Seller and Metro Credit Corp as identified on Contract & Below (“The Contract
Slide 65: Enable Automotive Retail Transformation
Enable Automotive Retail Transformation Innovations at Each Step of the Consumer Journey Research & Pre-Approval Influence: Financing Ownership / Advertising & Service Sale Social Media Attract & Engage Transact Retain 12
Slide 66: How it Changes Service: Online Scheduling and Write-up
How it Changes Service Retain Online Scheduling and Write-up Schedule Service Service Write-up 13
Slide 67: Mobile Service Write-Up
Retain Mobile Service Write-Up Complete Walk-Around 14
Slide 68: Mobile Service Write-Up -- Signature Capture
Retain Mobile Service Write-Up -- Signature Capture Higher Productivity More Money per Repair Order Better Customer Experience Estimate & Sign Authorized Repair Order 15
Slide 69: Comprehensive Mobile Innovation Roadmap
All Part of Comprehensive Mobile Innovation Roadmap Employee-Facing Customer-Facing Streamline Your Service Drive Reach and be Reached by Customer, Customer Reception Wherever They Are… Vehicle Inspection Book Service Appointments RO Creation / Authorization Send Texts for Appointment Reminders, Veh
Slide 70: Service & Process Innovation
Service & Process Innovation Regina Lee President of Major Accounts, National Account Services, Canada and GlobalView May 24, 2012
Slide 71: ADP's Vision for Service Excellence
ADP’s Vision for Service Excellence Addressing Clients’ Evolving Priorities 2
Slide 72: Service and Process Innovation Focus
ADP’s Service and Process Innovation Focus Centered around all aspects of the client experience On-Boarding Service Reduce Take into resources/time account the full required, apply client best practices relationship Product Communication Seamless experience and Interact with access to data clients v
Slide 73: Product: Seamless experience and access to data
Product: Seamless experience and access to data National Account Services (1000EE+) ADP Vantage HCMSM A single solution for HCM Major Account Services (50-999EE) ADP Workforce NowTM Small Business Services 24K clients, 67% multi-solution (1-49EE) RUN Powered by ADP® Online and mobile solutions Mor
Slide 74: On-Boarding: Reduce resources/time required
On-Boarding: Reduce resources/time required, apply best practices • RUN Payroll starts in 2 business days • Workforce Now Express Payroll – 10 day start-up Faster Start-Up • Leverage 24 workday via offshore staff to deliver customization more cost-effectively` • Unified products such as WFN and Vant
Slide 75: Service: Take into account the full client relationship
Service: Take into account the full client relationship Product/ Transaction Relationship Focus – Orientation OneADP view of client •Different service •Unified client experience experience and with a knowledgeable organizations based on generalist and access to product (payroll, HR, specialists wher
Slide 76: Communication: Spectrum of Support
Communication: Interact with clients via the methods that they prefer Spectrum of Support Live Online Interaction Online Access Social • Continue to • Digital options to • Online for • Social/online provide live service day–to-day expected needs communities to support based on simpler needs such as
Slide 77: Client-driven process innovation
Client-driven process innovation is how we will drive enhanced delivery of Service Excellence for our clients Leverage client insights to Net Promoter grow and deliver business (NPS) results Collaborate on intellectual assets to enhance service excellence. Client- Business driven Knowledge Process I
Slide 78: Net Promoter Score – Closed Loop System
Net Promoter Score – Closed Loop System – Measuring our success as defined by our clients Net Promoter Score Closed Loop Process: • Listening to customers • Acting on the data • Communicating back intended actions • Validating the results through improved NPS and business outcomes • Improved Client
Slide 79: Service and Process Innovation Impact
Service and Process Innovation Impact Balance Service Excellence & Process Improvement Eliminate manual processes Streamline the client Process experience Improvement Reduce operating costs to drive enhanced margins Improve client satisfaction Service Increase client loyalty / Excellence r