67 slides from Automatic Data Processing's investor day presentation, Nov 15, 2021
Slide 1: November 15, 2021 | Roseland, New Jersey
November 15, 2021 | Roseland, New Jersey
Slide 2: Our Agenda
Our Agenda US Eastern Time 9:00 am Welcome Danyal Hussain, VP Investor Relations Vision and Journey Carlos Rodriguez, President and CEO Product Don Weinstein, Corp. VP Global Product and Technology Go-To-Market Maria Black, President Worldwide Sales and Marketing Break 10:10 am Business by Business
Slide 3: Forward Looking Statements
Forward Looking Statements This presentation 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 identifie
Slide 4: Vision and Journey
Vision and Journey Carlos Rodriguez President and CEO Copyright © 2021 ADP, Inc.
Slide 5: ADP's mission
ADP’s mission is to deliver insightful technology and solutions that meet the changing needs of our clients and their workers. Copyright © 2021 ADP, Inc. 55
Slide 6: Employers have to navigate through a lot
Employers have to navigate through a lot Equal Pay Reporting Rules Decreto n.127/2021 Kurzarbeit Complex CARES Act American Rescue FFCRA Illinois Pay Data Reporting IR Plan Act Executive Order Vaccination Response Act Canada Covid-19 Emergency and 35 Fair Chance Laws NJ Equal Pay Act Paid Sick Chang
Slide 7: The entire HCM industry continues to change
The entire HCM industry continues to change PRODUCT PURCHASE SERVICE Work Global | Distributed | Dynamic | Legal Pricing Self-Service Transparent | Consumer-like Guided | Intuitive | AI-assisted Pay Flexible | Early Wage Access | Card Decision Making Channels HR More Research | Consultative Sales Te
Slide 8: Change is good. (For ADP)
Change is good. (For ADP) Copyright © 2021 ADP, Inc. 88
Slide 9: A refreshed look at our market reaffirms it's attractive
A refreshed look at our market reaffirms it’s attractive Our Market is Big Our Market is Growing $150B Total addressable market 5-6% Expected market growth Payroll | Workforce Management | HR | Benefits in FY22 and beyond Talent | HR Outsourcing | Analytics | Payments Total addressable market data a
Slide 10: ADP occupies an enviable position in the market
ADP occupies an enviable position in the market We are the biggest, yet still We have been gaining share have significant runway (and plan to continue doing so) 7% ADP 6% Market $15B ADP Revenue in FY21 5% 4% ADP 3% $150B Addressable Market 2% Market 1% 0% Pre-Pandemic (FY18-19) During Pandemic (FY2
Slide 11: We've been on a journey to further strengthen our position
We’ve been on a journey to further strengthen our position Simplify • Fewer platforms and products • Cleaner client and associate experience • Elimination of manual effort Innovate • Build-out of Innovation Labs • Investment in talent and innovation-oriented R&D • Organic investments using modern ar
Slide 12: And we've modernized end-to-end
And we’ve modernized end-to-end Bigger and more More modern sales Digitally-enabled innovation-oriented and marketing service and R&D organization approach implementation 7 70% 7,500 70+ $100M Global Gross R&D Global sellers, all Subscale service Current run rate Innovation spend on virtually enable
Slide 13: Client satisfaction across ADP has soared
Client satisfaction across ADP has soared h11 h44 h30 Small Business Major Accounts h19 h37 National Accounts International Improvement in ADP h23 h9 Weighted Average NPS HRO / PEO Complementary over the past 5 years Solutions Copyright © 2021 ADP, Inc. 13 13
Slide 14: We've strengthened our foundation in the past five years
We’ve strengthened our foundation in the past five years 25%+ 20%+ 40%+ Increase in revenue per FTE Decrease in contacts per client Increase in total client count 7 Years h40 pt 92.2% of consecutive Top HR Product Average implementation NPS Record level retention in ES Awards at HR Tech Segment in F
Slide 15: We've also continued to lead as a corporate citizen
We’ve also continued to lead as a corporate citizen Environment Social • Commitment to Net-Zero • Commitment to and GHG Emissions by 2050 recognition for driving • Executive compensation diversity and equality efforts linked to environmental • Key HCM solutions support objectives DEI and financial w
Slide 16: Our portfolio is strong and we are excited about all of it
Our portfolio is strong and we are excited about all of it PEO Small Business Our $15B 32% 16% FY21 Revenue Portfolio: Major $2.5B Small Business Accounts $2.4B Major Accounts 16% $1.1B National Accounts $2.2B International Complementary $1.0B ES HRO Solutions National 7% ES HRO Accounts $1.1B Compl
Slide 17: What you'll hear today
What you’ll hear today We’ve become more agile than ever, and it shows with our Product continued innovation throughout our market-leading solutions We’re investing in our sales and marketing organization to Go-to-Market sustain robust bookings growth for years to come Every one of our businesses ha
Slide 18: Product
Product Don Weinstein CVP Global Product and Technology Copyright © 2021 ADP, Inc.
Slide 19: We are innovating across ADP's portfolio
We are innovating across ADP’s portfolio New User Experience Small Business Midmarket / Upmarket Upmarket / International International Run Workforce Now Next Gen HCM HCM Platforms iHCM Global Payroll DataCloud Next Gen Payroll Workforce Management Next Gen Tax Marketplace ADP Ecosystem Digital Serv
Slide 20: Small Business
Small Business ~1-49 employees IN MARKET NOW COMING NEXT Easy to use solutions powering small businesses Run • Modern look and feel • All new HR experience across the US • Personalized, powerful search • Compensation benchmarks • Intuitive workflows, more 750K+ Run clients self-service ~40K Channel
Slide 21: Midmarket
Midmarket ~50-999 employees IN MARKET NOW COMING NEXT Workforce Now, the market- leading full-suite, single database HCM platform 75K+ Workforce Now (“WFN”) clients 1K+ Clients sold on WFN Next Gen • Next Gen public cloud tech stack • Adoption of ADP’s new UX design including Next Gen Payroll • Rede
Slide 22: Upmarket
Upmarket ~1,000+ employees IN MARKET NOW COMING NEXT Deep functionality and platform flexibility meeting Workforce • Gaining momentum in 1-3K • Next Gen Payroll experience broad client needs Now employee clients for WFN upmarket clients • Majority of new upmarket 2.5K+ Upmarket HCM & HRO clients sal
Slide 23: Global
Global Unparalleled global reach and IN MARKET NOW COMING NEXT compliance capabilities iHCM • Multi-country HCM solution • Adoption of ADP’s new UX design • 1,500+ clients migrated 60K+ International clients from legacy • Continued client migrations and legacy • Marketplace integration 3K+ iHCM clie
Slide 24: DataCloud
DataCloud Data-driven insights in the IN MARKET NOW COMING NEXT flow of work DEI Dashboard & Benchmarks Talent Market Insights Companies included 920K+ in database Unique employees 90M+ paid last 10 years Active monthly 140K+ users of mobile insights ~55% 30M+ Active DEI client users have seen Activ
Slide 25: Wisely
Wisely IN MARKET NOW COMING NEXT A personalized pay and financial wellness experience Savings and Rewards Leading Financial Wellness Tools for workers 20+ Monthly transactions per cardholder 4.8 Stars Store on Apple App • Savings envelopes with customized • Seamless Earned Wage Access goals and auto
Slide 26: Digital Service and Implementation
Digital Service and Implementation A modern client and associate experience for satisfaction, speed and efficiency Efficient onboarding Intuitive client self-service Digital support Digital tools that automate Empowering clients to view data and Automated or interactive, real-time implementation pro
Slide 27: Focus Areas in Product and Technology
Focus Areas in Product and Technology Innovating on all Enhancing Delivering on Next Gen HCM strategic HCM platforms our ecosystem and Next Gen Payroll • New, intuitive and universal UX • Proactive Talent Insights in • Continued expansion of Next Gen • Public cloud re-architecture the flow of work i
Slide 28: Client Perspective: Amazon
Client Perspective: Amazon “Amazon is excited about ADP’s Next Gen platform, and its continuous calculation payroll approach that we expect will enable us to complete payroll processing in near-real time, providing faster visibility to pay and pay delivery for our employees.” - Greg Harmer, Director
Slide 29: Go-To-Market
Go-To-Market Maria Black President Worldwide Sales & Marketing Copyright © 2021 ADP, Inc.
Slide 30: Our go-to-market scale and reach is unparalleled
Our go-to-market scale and reach is unparalleled $1.8B+ 7.5K+ 170K+ in worldwide new sellers, all new logos business bookings virtually enabled sold annually 140 50%+ countries with of new logos sold sales coverage through partnership All metrics fiscal 2021 Copyright © 2021 ADP, Inc. 30 30
Slide 31: We drive bookings growth through five levers
We drive bookings growth through five levers Products Productivity Marketing Channels Headcount Access new Meet buyers where Amplify marketing Drive market share Invest strategically markets, increase they want and through simplified, through our where the share of wallet and enhance seller personal
Slide 32: Products: We're continuously adding to our portfolio
Products: We’re continuously adding to our portfolio Next Gen Roll by ADP New HCM modules Data Solutions Copyright © 2021 ADP, Inc. 32 32
Slide 33: Products: Improved products for even greater resonance
Products: Improved products for even greater resonance Greater innovation R&D spend Focused on a simpler portfolio Yielding better products Win more clients Copyright © 2021 ADP, Inc. 33 33
Slide 34: Products: Leveraging ADP Marketplace for differentiation
Products: Leveraging ADP Marketplace for differentiation • 800+ ADP and third-party apps across all segments and internationally • Simplified experience with pre-built integrations • Differentiated offering with vertical-specific partners Copyright © 2021 ADP, Inc. 34 34
Slide 35: Productivity: Meeting buyers where they want to be met
Productivity: Meeting buyers where they want to be met Enhanced Storefront Virtual Selling ▪ New buyer-centric digital storefront ▪ Self-discoverable content ▪ Omni-channel approach Increased End-to-End Digital Self-Discovery ▪ Digital purchase and .com implementation Copyright © 2021 ADP, Inc. 35 3
Slide 36: Productivity: Sales tools and technology
Productivity: Sales tools and technology We are adopting tools to reimagine our sellers’ day-to-day Buyer-relevant Content Cadence Tool Coaching Platform 8:00 10:00 12:00 2:00 4:00 6:00 am am pm pm pm pm 360 Client / Prospect View Arsenal of Advocates Calendar Tool Copyright © 2021 ADP, Inc. 36 36
Slide 37: Marketing: Simplified brand architecture and experience
Marketing: Simplified brand architecture and experience Clear framework to explain what we offer Clear Personalized Assertive Copyright © 2021 ADP, Inc. 37 37
Slide 38: Marketing: Data-driven engagement with prospects
Marketing: Data-driven engagement with prospects Personalization driven by persona, industry and experiences Clear Personalized Assertive Copyright © 2021 ADP, Inc. 38 38
Slide 39: Marketing: More assertive marketing
Marketing: More assertive marketing More Comparative | More Direct Clear Personalized Assertive Copyright © 2021 ADP, Inc. 39 39
Slide 40: Channels: Bookings influenced by Partners
Channels: Bookings influenced by Partners Our sellers go to market with our unmatched scale of partners across all segments Small Business Midmarket Upmarket Accountants Financial Advisors Benefits brokers ERP/Product & Technology partners Banks Franchises Private Equity & Consultants Partner levera
Slide 41: Headcount: Almost doubled since FY10 with more runway
Headcount: Almost doubled since FY10 with more runway ▪ Continued opportunity to add Seller Headcount headcount by segment, product and geography FY22 ▪ Significant addressable opportunity in 100% virtually enabled International FY16 ▪ Headcount growth to cover new partnerships ▪ New products and ad
Slide 42: Targeting 7-8% growth medium term
Targeting 7-8% growth medium term Employer Services New Business Bookings ($B) Post Pandemic 2.5B Thousands The Covid-19 Swoosh 2.0B The ACA Years 1.5B Post Great Recession Targeting 1.0B 7-8% Growth 0.5B 0.0B FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e Medium Term 6% CAGR 1. F
Slide 43: Business-by-Business Panel
Business-by-Business Panel Hosted by Chris D’Ambrosio Debbie Dyson Chief Strategy Officer National Account Services John Ayala Virginia Magliulo ES North America ES International Laura Brown Brian Michaud Major Account Services Smart Compliance Joe DeSilva Alex Quevedo Small Business Solutions PEO &
Slide 44: Financial Outlook
Financial Outlook Don McGuire Chief Financial Officer Copyright © 2021 ADP, Inc.
Slide 45: We have an attractive business model and a shareholder-friendly financial strategy
We have an attractive business model and a shareholder-friendly financial strategy. Copyright © 2021 ADP, Inc. 45 45
Slide 46: Why own ADP
Why own ADP Consistent and Growing Robust Cash Flow Strong Balance Sheet Revenue and Earnings ✓ Leader in industry with secular ✓ Low capital requirements ✓ Highest credit rating in HCM tailwinds and significant runway ✓ Efficient model allows ample ✓ Strong investment grade credit for growth reinve
Slide 47: Our cash flow priorities remain consistent
Our cash flow priorities remain consistent 1 Organic reinvestment to drive both revenue and margins 2 M&A that meet our strategic goals 3 Return cash to shareholders with a balance of dividends and share repurchases Copyright © 2021 ADP, Inc. 47 47
Slide 48: We have high-return options for our organic investment
We have high-return options for our organic investment Product Go-To-Market Service Innovative R&D Grow our Sales Force Digital Transformation • 10% CAGR in Innovation R&D • Expand beyond 7,500 sellers • Invest to further improve client and product spend FY18-FY21 • Focus headcount growth where expe
Slide 49: For M&A, we will remain thoughtful but disciplined
For M&A, we will remain thoughtful but disciplined Global deal pipeline remains active, and we look for assets that can enhance our product or footprint At the same time, we remain disciplined on: • Desire for continued simplification of product suite • Valuation and risk profile of target companies
Slide 50: We remain committed to returning shareholder capital
We remain committed to returning shareholder capital $ Billions 3.0 2.5 2.5 1.4 Share Repurchases 2.3 2.2 1.6 2.1 2.1 1.0 ~1% annual net share count 1.3 0.9 1.5 1.6 1.2 1.0 reduction historically 1.4 1.4 1.5 0.8 0.7 0.7 0.6 0.7 1.5 1.6 Dividends 1.3 1.0 1.1 55-60% target payout ratio 0.9 0.9 0.9 0.7
Slide 51: Our capital structure approach is balanced
Our capital structure approach is balanced Commitment to Strong Investment Grade Rating • Currently $3 billion in gross debt • Prudent use of debt within AA ratings category • Ongoing enhancement reflecting growth in debt capacity Key ADP considerations for credit rating: • Access to the A1/P1/F1 co
Slide 52: Interest income has become a smaller part of our story
Interest income has become a smaller part of our story 38% 13% FY08 FY21 Client Funds Interest Net Impact as a % of Pretax Income1 1. Earnings from continuing operations before income taxes Copyright © 2021 ADP, Inc. 52 52
Slide 53: Our investment of client funds will remain prudent
Our investment of client funds will remain prudent Primary Objectives Secondary Objectives Safety of Principal Liquidity ✓ Maximize book yield • Prudent Investment • Portfolio includes $5 billion Guidelines reviewed by ADP’s of highly liquid U.S. ✓ Minimize interest income Board Government Agency an
Slide 54: Our financial look ahead.
Our financial look ahead. Copyright © 2021 ADP, Inc. 54 54
Slide 55: Our medium term objective for ES Bookings
Our medium term objective for ES Bookings ES New Business Bookings ($B) 6% CAGR 2.5 12–16% 2.0 Guide1 1.6 1.5 1.5 1.5 1.5 1.4 1.3 1.2 1.1 1.2 1.2 7-8% 0.9 0.9 1.0 Growth 0.5 0.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e Medium Term Sales Headcount Products Marketing Channels
Slide 56: Our medium term objective for ES Retention
Our medium term objective for ES Retention ES Retention Rate 95% 91.7% 92.2% Guide1 91.2% 91.0% 91.3% 91.4% 91.4% 90.0% 90.4% 90.0% 90.4% 90.8% 90.5% 90% Stable ES 85% Retention 80% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e Medium Term Improving Products Increasing Satisfacti
Slide 57: Our medium term objective for PEO Average WSEs
Our medium term objective for PEO Average WSEs PEO Average WSEs (000) 1,000 10% CAGR 800 11-13% Guide1 547 571 582 600 504 412 462 High Single 364 400 227 255 277 319 Digit Growth 203 200 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e Medium Term Secular Tailwinds Investments in
Slide 58: Our medium term objective for Client Funds Interest
Our medium term objective for Client Funds Interest CFI Revenue ($M) 600 543 540 562 545 493 467 420 – 500 421 422 4301 3.6% 374 378 377 397 400 3.2% 2.8% 300 2.2% 2.2% High Single 1.9% 2.1% 1.4%1 Digit Growth 200 1.8% 1.7% 1.7% 1.7% 1.5% 100 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Slide 59: Our medium term Revenue objectives
Our medium term Revenue objectives Employer Services PEO 6% Growth 10 to 12% Growth 7-8% growth in ES bookings High single digit growth in average WSEs Stable ES retention Low single digit lift from zero-margin pass- 50bps contribution from price throughs and wage inflation 50bps contribution from 2
Slide 60: Margin considerations
Margin considerations Medium-Term Margin Considerations All ADP businesses benefit from scale (some more than others). Our shift to increased Scale and Operating Leverage digital implementation and service delivery will further support operating leverage Discrete Expense Initiatives Continue to exec
Slide 61: Our medium term financial objectives
Our medium term financial objectives 7 to 8% 10 to 12% Revenue Growth Adjusted EBIT Growth Organic Constant Currency; Supported by approximately 75bps About 6% ES and 10 to 12% PEO Segment Growth annual Adj. EBIT Margin expansion 11 to 13% 13 to 15% Adjusted EPS Growth Total Shareholder Return Assum
Slide 62: Final thoughts as we look ahead
Final thoughts as we look ahead Favorable industry Consistent strategy Positioned well for tailwinds and driving results with compounding growth macro backdrop long runway in the years ahead • Increasingly complex and • More innovation concentrated • Targeting robust 7-8% organic dynamic world of wo
Slide 63: Appendix
Appendix Copyright © 2021 ADP, Inc. 63 63
Slide 64: Additional detail on today's revenue disaggregation
Additional detail on today’s revenue disaggregation $2.5B Small Business HCM solutions for U.S. businesses with typically 50 or fewer employees $2.4B Major Accounts HCM solutions for U.S. businesses with typically 50 to 1,000 employees $1.1B National Accounts HCM solutions for U.S. businesses with t
Slide 65: Non-GAAP Financial Metrics
Non-GAAP Financial Metrics In addition to our GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods: Adjusted Financial Measure U.S. GA
Slide 66: Non-GAAP Financial Metrics
Non-GAAP Financial Metrics Twelve Months Ended June 30, 2018 2019 2020 2021 Consolidated revenue growth as reported 8% 6% 3% 3% Adjustments: Impact of acquisitions (1)% (1)% –% –% Impact of foreign currency (1)% 1% 1% (1)% Consolidated revenue growth, organic constant currency 6% 7% 4% 2% Copyright
Slide 67: Copyright © 2021 ADP, Inc.
Copyright © 2021 ADP, Inc. 67 67