Automatic Data Processing, Inc. (ADP) Q2 2011 Earnings Report, Transcript and Summary

Good morning. My name is Amanda, and I will be your conference operator today. At this time, would like to welcome everyone to ADP's Second Quarter 2011 Earnings Webcast. [Operator Instructions] Thank you. I would now like to turn the conference over to Ms. Elena Charles, Vice President, Investor Relations. Please go ahead.

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 Second 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 second 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. Chris, Elena, and I arrived in Barcelona, Spain yesterday. We're here to participate in Employer Services Global Meeting of the Minds, which is a large client event. This is an annual meeting where over 100 GlobalView clients and prospects meet with ADP management and exchange ideas relating to their global HR needs. It's a great networking event and very well attended. I'll begin today's call with some opening comments about our second quarter. Then I'll turn the call over to Chris Reidy to take you through the details, 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. Overall, I am quite pleased with ADP's second quarter results for fiscal 2011. As you saw in the press release this morning, the positive trends in our key business metrics continued in the second quarter. New business sales grew a very strong 16% in the quarter, with pretty good results across the board in all of our markets. There was continued strength in the Small Business marketplace, including the PEO, with double-digit growth, and we were successful in closing a number of significant transactions in our national accounts space, which as you may recall, had been slower to regain momentum as the economy stabilized and began to turn up. One quarter double-digit growth does not make a trend line, but we are feeling much better about the National Accounts market. And importantly, the pipeline for new business is solid. We also posted good growth in Major Accounts and believe that our investments in the Workforce Now solution will continue to position us well against the competition. New business sales in our International business were also up nicely, excluding GlobalView sales, which were down slightly year-over-year. To remind you, these are very large transactions with long sales cycles. The pipeline for GlobalView new business is quite strong, and I am optimistic about GlobalView's growth opportunities. You can see from our year-to-date results with new business sales now up 8% that we are clearly on track to achieve our full year forecast for high single-digit growth for the year. As we look at retention, I am pleased that once again, we saw good improvement in client retention revenue this quarter. We're not completely through the critical calendar year end retention period, but we are confident that we will come through it with continued strong retention rates. Our January results, albeit not official, anecdotally look very strong as well. In the U.S., our pays per control same-store sales employment metric was up 2.4% in the quarter and ahead of our expectations. This represents the largest quarterly year-over-year increase since the third quarter of fiscal 2007. In Europe, pays per control are still down slightly compared with a year ago, but the decline is clearly decelerating. Growth in average clients funds balances was once again higher than anticipated, increasing 9% in the quarter, driven primarily by higher wage growth and increased pays per control. It's also noteworthy that the average number of worksite employees paid in our PEO business grew 11% in the quarter. Acquisition activity was once again good during the quarter, and we closed three transactions. Two of those acquisitions were in Employer Services, MasterTax and Byte Software, which is the largest payroll provider in Italy. In Dealer Services, we closed the previously announced acquisition of the Kuwaiti-based PACC, a distributor of our international Dealer Management System platform auto line in the Gulf States since 1992. Moving on to Dealer, the automotive landscape continues to stabilize and dealership closings, excluding the few remaining Saturn closings that were completed this quarter, are down the levels we experienced back in 2007 and 2008. The worst is clearly behind us, and we have good momentum in Dealer. Near-term, we expect revenues to still be impacted negatively by the carry-forward effect of the previous dealership closings. However, we are confident that ADP will continue to compete very effectively in the emerging healthier automotive sector. With that, I'll turn it over to Chris to give you the details of our results.

Thanks, Gary. And now turning to Slide 4. We are pleased that total revenues increased 9% to $2.4 billion in the quarter, including acquisitions. Revenues were negatively impacted nearly 1% from unfavorable foreign exchange rates as the dollar strengthened during the quarter compared with last year. However, our forecast assumes that foreign exchange impacts will turn favorable later in the fiscal year and have no impact on the full year as compared to a year ago. On an organic basis, revenues grew 5% in the quarter. Pretax earnings were up 1%. Last year's second quarter included a favorable tax item, which reduced the tax provision $12.2 million or $0.02 a share. We have shown the effective tax rate net earnings and earnings per share comparisons to a year ago including and excluding last year's favorable tax item. On a comparable basis for the year ago, net earnings increased 2% and earnings per share from continuing operations increased 3% on fewer shares outstanding. As anticipated, second quarter margins were lower than a year ago due to the negative impact of recent acquisitions as we integrate them, acquisition-related costs and our expenses from the investments we made over the second half of fiscal 2010 to drive growth. As you will hear when we speak about the full-year forecast in a few minutes, the pretax margin pressures from these investments are expected to ease during the second half of the year as we anniversary the increased spend levels. During the quarter, we bought back in excess of 1.1 million shares for approximately $52 million. Let's turn to Slide 5 and go through the business unit results for the quarter. Employer Services' total revenues grew 7%, 4% organically for the quarter. Revenues in our Payroll and Tax Filing business in the United States were flat due to higher average client fund balances, improved client retention, and increased pays per control, offset by timing of certain revenues related to calendar year-end activities. An early look at January does show that these revenues will be recognized. Our beyond payroll revenues in the U.S. continued to grow with 16% growth in the quarter, with nearly 5% growth coming from acquisitions. Tax Credit Services, Time & Labor Management, ASO, our BPO offering at the low end of the market and HR services all grew nicely during the quarter. As anticipated, ES's pretax margin declined 80 basis points as leveraged from higher organic revenues was more than offset by the following items: higher selling expenses from strong sales growth in the quarter, the grow-over impact of the incremental hiring in sales and service over the second half of fiscal 2010 and the impact of acquisition activity. Pays per control, which is our same-store sales employment metric, increased 2.4% in the quarter, which was higher than we had anticipated. To put this in perspective for you, this is a strong increase but last year's second quarter pace declined 5% to have just gained back almost half of what we lost a year ago. All geographies across the U.S. showed increases with the most significant in the Northeast and Central regions. Our clients represent several industries and the pays in most have turned positive with the exception of accommodation and food services, public administration and construction. The number of pays in Europe declined in the quarter compared with the year-ago on a same store sales basis. Though as Gary noted in his early comments, the declines continued to improve. Client revenue retention continued to improve with another notable increase of 0.8 percentage points year-over-year. Gary took you through the new business sales so I'll just repeat that the strong sales results were overall in line with our expectations for the quarter and also remind you that new business sales represents the expected new annual recurring dollar value of these sales, and our incremental recurring revenues to our existing recurring revenue base. Let's continue with the quarter's results. Turning to slide six and the PEO. The PEO reported 15% revenue growth for the quarter, all organic, from increased pass-through revenues and an increase in the number of worksite employees paid. Pretax earnings increased 10%, but pretax margin declined 40 basis points, pressured by higher pass-through revenues as well as increased selling expenses and headcount. Year-over-year for the second quarter, average worksite employees increased 11% to about 221,000. Moving on to Dealer Services on Slide 7, Dealer Services revenues grew 26% for the quarter, benefiting primarily from the Cobalt acquisition closed last quarter. Organic revenue growth was 4%. The automotive marketplace continued to stabilize, transaction revenues also showed growth this quarter. Dealer's pretax margin declined 260 basis points due to the drag of over 300 basis points from acquisition-related costs. Dealer Services continued to gain market share with strong competitive win rates. Let's turn now to Slide 8. Before we get into the results of our investment strategy for client funds, I want to remind everyone that the safety, liquidity and diversification of our client funds continue to be the foremost objectives of our strategy. Client funds are invested primarily in fixed income securities and in accordance with ADP's prudent and conservative investment guidelines. To give you a quick understanding of how to read the schedule as most of you have previously seen, this schedule shows the overall impact of our client funds portfolio extended investment strategy with the average balances and interest yield shown on the top half of the slide and the corresponding pretax P&L impact shown on the lower half, all color coded to help you transition from the top half to the bottom half of the slide. Getting into the details for the quarter, the results were slightly better than we had anticipated primarily due to higher-than-expected client fund balance growth. For the quarter, average client fund balances were up $1.2 billion or 9% compared with the year-ago period, and the average yield on the Client Funds portfolio declined 30 basis points to 3.5% resulting in a slight increase of $1.3 million in interest on funds held for clients on the P&L. In the Short portfolio, we actually saw an increase in yield compared to last year as a result of higher Canadian overnight rates. However, lower new purchase rates impacted the Extended and Long portfolios as anticipated with the average yields earned with 20 to 60 basis points lower than last year. You can see the impact of the lower new purchase rates on the corporate extended yield as well. Average borrowings were up slightly in the quarter, and the average interest rate paid on those borrowings increased to a blended average borrowing rate of 0.3% from 0.2% last year, also attributable to the increase in Canadian short rates. The result was about $1 million negative impact to the P&L. So focusing your attention on the net P&L impact on the lower portion of this slide, taking into consideration the entire extended strategy presented here, the result was a $3 million P&L decrease before tax or a decline of 2%. The natural hedge of the Short portfolio and the borrowings means that you are left with the average yields of 3.6% in the Extended and 4.3% in the Long portfolios. So when you look at the bottom line, $152 million earned in the quarter on the $14.7 billion in average balances, the overall yield of the bottom line impact calculates to 4.1% compared to 4.6% last year. Now let's turn to Slide 9, where I'll take you through the extended investment strategy updated forecast for fiscal 2011. Before I get into a discussion of the detailed forecast, I'd like to update you on the credit quality of the portfolio and what we are seeing in the market place regarding the current fixed income investment landscape. Approximately 85% of our Fixed Income portfolio continues to be invested in AAA or AA rated securities. Fully consistent with our Client Fund portfolio objective of safety, liquidity and diversification, we're again able to take advantage of the supply of new investment grade corporate fixed income securities and add more corporate bonds to our portfolio as we did in Q1. In addition, as was also the case last quarter, the steep yield curve continued to present greater opportunities at the longer end of the maturity curve in both the Extended and Long portfolios, and as a result, the duration lengthened slightly to 2.9 years at the end of the second quarter compared to 2.8 years at September 30. I want to be clear that we have not decreased the credit quality of the portfolio, and there has been no change to our board-approved investment guidelines or our intent to hold the securities to maturity. Since we do not believe it's possible to accurately predict future interest rates, the shape of the yield curve or the new bond issuance behavior of corporations, we continue to base our interest assumptions and our forecast on Fed funds' future contracts and forward yield curves for the 3.5 year and five year U.S. government agencies. Now the fiscal 2011 forecast, this slide summarizes the anticipated pretax earnings impact of the extended investment strategy for the Client Funds Investment portfolio for fiscal 2011. And it's important to keep in mind that 15% to 20% of the investments are subject to reinvestment risk each year. We have updated our forecast for growth and average client fund balances to 7% to 8% growth, which is up from our prior forecast of 5% to 7% growth. The increase is driven by better-than-anticipated wage growth, net pay and pays per control, offset somewhat by the impact of the recently enacted legislation that reduces the employee portion of the Social Security wages for calendar 2011. You'll recall that the first quarter average client balances also grew 9%. We continue to expect tougher comps in the second half of fiscal 2011. We saw higher wage growth in the second half of fiscal 2010 influenced by over 30% growth in bonuses, a return to merit increases and higher SUI rates. As a result, we're not expecting to maintain the level of year-to-date growth in balances for the full year. We are anticipating a yield on the Client Funds portfolio of 3.2% to 3.3%, down 30 to 40 basis points from fiscal 2010. We are anticipating a decline of $15 million to $20 million in client funds interest as the lower interest yield will more than offset the expected growth in balances. Average new purchase rates for the remainder of the fiscal year are expected to be over, 280 basis points lower than the embedded rates on maturing investments based on 3.5 and five year agencies. We're anticipating that average corporate extended balances will be flat to up $100 million, and the average yield on the corporate extended will be down 50 to 60 basis points. We're anticipating average borrowings will also be flat to up $100 million and the average interest rate paid on those borrowings will be up slightly in fiscal 2011, about 10 basis points, to a blended average borrowing rate of 0.3% to 0.4%. Looking now at the lower right of the chart, you see that the continued anticipation of low interest rate is expected to outweigh the benefit of growing average balances resulting in a decline in pretax earnings of $25 million to $30 million for fiscal 2011. For fiscal 2011, we anticipate a decline of about 40 basis points from fiscal 2010's overall yield of 4.1% from the net impact of this strategy. Now, I'll turn it back to Gary to take you through the remainder of the forecast for fiscal 2011.

Thank you, Chris. For those of you who are following along, we're now on Slide 10. In our fiscal 2011 outlook, we are assuming no change in the current economic landscape. We have updated our forecast to include the impact of the acquisitions that closed during the second quarter of fiscal '11, as well as the impact of the key metrics that were ahead of our expectations during the second quarter. Overall, we anticipate no dilution to earnings per share from the acquisitions closed to-date during fiscal '11. But as a reminder the acquisition-related cost will be dilutive to segment pretax margins for both Employer Services and Dealer. As disclosed in our public filings and on our website schedules, the reportable segment results include a cost of capital charge related to the funding of the acquisition. This charge is then eliminated at the total ADP level. We continue to anticipate that the year-over-year earnings pressures experienced in the first half of fiscal '11 will ease during the second half of the year as we anniversary the increased sales force and client service hiring. Now, let me take you through the forecast you see here on the slide. For total ADP revenues, we anticipate growth of about 9%. Excluding revenues from the acquisitions closed to-date during fiscal '11, we anticipate about 5% revenue growth. We also anticipate about 5% growth in diluted EPS from continuing operations compared to last year's 237, excluding favorable tax items in fiscal '10. As is our normal practice, no further share buybacks are contemplated in the forecast, though it is clearly our intent to continue to return excess cash to our shareholders, obviously depending upon market conditions. Let's now go to Slide 11 for the segment update. For our Employer Services business, excluding revenues from the acquisitions closed to date during fiscal '11, we anticipate revenue growth of about 5%. Including acquisitions, we anticipate about 6% to 7% revenue growth. Excluding acquisitions closed to date during fiscal '11, we continue to expect up to 50 basis points of pretax margin improvement for the full year. When you include the acquisitions, we anticipate up to 20 basis points of pretax margin improvement for the year. We do now anticipate an increase in our pays per control metric in the U.S. of about 2%. We anticipate client revenue retention will improve over 50 basis points for the year. We anticipate about 15% revenue growth for PEO services with a decline in pretax margin due to higher benefits pass-through revenues and the grow-over impact of last year's first quarter favorable $9 million state unemployment tax settlement. We continue to anticipate high single-digit growth in the annual dollar of the ES and PEO worldwide new business sales from the roughly $1 billion sold in fiscal '10. And for Dealer Services excluding fiscal '11 acquisitions, we anticipate 2% to 3% revenue growth and at least 50 basis points of pretax margin improvement. When you include acquisition activity, we continue to anticipate over 20% revenue growth. We anticipate a decline in total pretax margin at Dealer of 150 to 200 basis points. As we turn to Slide 12, I'd like to leave you with some closing remarks before we open it up for your questions. I'm sure you can tell by the tone of my voice, I am quite pleased with ADP's results for the second quarter of fiscal '11. The positive trends in all of our key business metrics continued, and it is clear from the results achieved for the second quarter that our business model is solidly intact. The resiliency of ADP's business model coupled with continued investments in the business during the downturn and execution against our five-point strategic growth program have clearly resulted in organic revenue growth in the mid-single-digit range less than a year out of the deepest U.S. recession in decades. As the economy strengthens and we continue to execute against our strategic growth program, I believe ADP is extremely well poised for higher growth longer term. I don't have to remind you, but I will anyway, ADP's revenues are highly recurring, our cash flow generation is strong and consistent, and we are clearly committed to returning excess cash to our shareholders through consistent share repurchase and increasing dividends. We recently announced a 6% increase in the quarterly dividend, marking the 36th consecutive year of dividend increases. Our 6% dividend increase and 15%-plus payout ratio should clearly signal ADP's confidence in our ability to deliver long-term top line and bottom line growth. Summing it all up, I remain optimistic about ADP's future growth opportunities. Now I will turn it over to the operator to take your questions.

[Operator Instructions] Your first question is from Julio Quinteros with Goldman Sachs.

Maybe just jumping ahead a little bit here in thinking about your set up for fiscal 2012. Help us sort of frame the key drivers? We understand what the key metrics are going to be, but what would you guys be looking for more as you look to fiscal 2012 outside of sort of the normal macro recovery as key drivers for any further acceleration in your revenue growth profile?

Julio, I'll take you to the waterfall chart that we've charted out in the past, and it really comes down to sales growth retention is the key, and that's why we're particularly pleased that the sales growth is -- where we anticipated it, it's strong, it's well on its way to high single digits this year. We've still got half a year to go, but we're happy with the progress thus far and particularly pleased with the retention. And with the guidance that we gave on retention now coming off of the base at the end of last year, we'll be near all-time high levels of retention by the end of this year, which is great coming out of the downturn this quickly. So those two metrics firing on all cylinders. And then obviously, pays per control is an indication of what's happening in the number of employees, but again, people put too much emphasis on that. It certainly will be wind in our back. But it's not quite as important as those other two, sales and retention. So we're happy with all the direction of the metrics that we normally go through.

Your next question is from James Kissane with Bank of America.

Chris, just following up on the retention, can you give us a sense of the retention by client size? And is most of the improvement coming from the Small end?

No. We saw retention improvements across the board in each of our businesses SBS, Majors, National Accounts, big increases in the mid-market Majors, but nice improvement in each of the others as well. As Gary said, we've had a look at the early indications of January and they look positive as well, which is an important month, obviously, with the calendar year end and that's looking nice, so strong throughout.

Jim, a way to think about it is clearly, with the regional firms and the price pressures in the low and middle side of the market, those two areas have clearly improved the most. National accounts was already pretty darn good at 93%, 94% kind of numbers before we had the recession. And we've actually seen that number go up just because -- just for the same reason, we've been slow in signing up new business. Our existing clients are not anxious to run out and spend money doing other things. So we've actually seen retention for the first part of the year in National Accounts, be over 95%, which is pretty darn good. International has been pretty stable throughout the process. When you add it all up, we're not quite to record levels, but we're clearly approaching it plus we've spent a lot of incremental dollars in upping our service levels across the board. So we're clearly looking forward as we get into the next year or two to go past those record highs in terms of retention. But I would expect it to become a little bit more asymptotic as time goes on because we have made big strides as we go through that.

So Gary, I got to ask on margins as you look at a couple of years, not to get a target on margins, but do you think the business is as scalable and as leverageable as in the past so that margins can continue to move up with revenues?

Let me speak about that a little bit individually, Jim. Clearly, in the PEO, the wild card is the increasing cost of healthcare and what's going to happen there and how big it increases, et cetera, in terms of what's the final outcome with the Healthcare Act et cetera. So we'll still have pressure on margins in the PEO because of the large component of healthcare pass-through. In terms of Dealer and ES at the core, then there is certainly no reason to not think about ADP traditionally. The more organic revenue growth you give me, the easier it is for me to bring margin improvement to the bottom line.

Your next question is from Adam Frisch with Morgan Stanley.

I just want to talk about Employer Services for a second the divergence and trends. Revenue for traditional payroll and tax were flat after being up last two quarters. Beyond Payroll business accelerated quite nicely. How much of the increase in Beyond was due to acquisitions and can you describe a little bit, can you give a little more detail on the puts and takes that are causing the different growth rates here in the two segments?

Yes, Adam, the 16% included about 5% from acquisitions. So taking out those acquisitions, it is 11%. And the payroll Growth was more of an anomaly from the calendar year end. All the metrics were driving payroll growth as you would expect them to. But there's a lot of activities at year end including things like W2 delivery that can be different from year-to-year. So that's why we pointed out that in January, we saw that coming back. So that flat would be if you look back, it would be more equivalent to what you saw in the first quarter. And just as a reminder, when you see it a little bit higher in the third quarter, that's benefiting from the movement into January. So nothing to worry about. We want to point that out because we saw it as a little bit of anomaly from what you would have expected, but all related to the timing of calendar year-end activities.

And just looking at those two areas again, obviously, great to see at least the start, hopefully it continues more of a macro rebound in employment and so forth. How do you see employers approaching the next 12 months? Do you view them as, we're going to start hiring selectively, slowly just to make sure that we're not overextending ourselves? Do you see the beyond stuff growing slower or faster than it normally has when employers need to give some extra benefit to retain employees? Obviously, that's not the case today. How do you see the next 12, 18 months or so shaping out in terms of your clients' approach to hiring and ultimately beyond?

Clearly, the tone if -- you know, I'm a member of the Business Roundtable in Washington. They put out a quarterly survey. And between the third quarter and the fourth quarter survey, which came out in December, the number of multinational companies expected to increase in employment rose significantly to like 65%, 70% from like 50% or whatever the number was in the third quarter. So clearly, the trends for the larger companies, which had been the ones that have been in the bunker the most during this period of time is clearly coming back the other way. Unemployment is down almost a point. Every prognostication I read from the economists is projecting another point improvement in the calendar year ahead. We're still seeing great activity in our screening and selection services. It's still up strong double-digits over the same period last year. So I think in general, we are going to continue to get some lift there and obviously, that's very high margin at our back as we get it. But you got to remember that 8.5 million people lost their jobs during the middle of this and we've only added back a couple of million of those. So there's still 6 million new jobs to get back, to get back to a normalized 5.5% kind of unemployment number.

If I could just throw in one last one, and then I'll turn it over. Outside of the rising tide, which again, we all hope continues, is there anything else you'd like to highlight that ADP is doing to grow in excess of the macro environment assuming recovery?

Well, sale was up 16% for the quarter, it feels pretty good.

Just anything outside the normal core business of ADP, I know you've had some tuck-ins and some features and functionality kind of expansion stuff, but is there anything that would go outside of ADP's core business that may be tangential to ADP, but not necessarily something you do today?

Well, there's a couple of things. One is, seeing upon how healthcare turns out. We're selling a lot of healthcare and workers comp into our base, which will continue to grow a lot as we go forward. And the other thing is I think we did the smart thing and continued to invest heavily in product during the downturn, which is pretty evident by how quickly we're popping back from a sales and revenue growth standpoint. So I think our product leadership in the market is pretty apparent today, and we intend to keep the pedal to the metal to make sure we stay there.

[Operator Instructions] Your next question is from Jason Kupferberg with UBS.

So your biggest competitor in the Small Business market has recently gone through some management change and has talked about some changes in product, pricing, sales strategy, I guess, to some extent. Are you guys observing that out in the field, out in the marketplace, you're hearing feedback from your sales force about this competitor doing things in a meaningfully different way? Is it having any impact on win rates or competitive dynamics you guys have been able to ascertain so far?

We're seeing no noticeable impact. Basically, what they did was just unbundle some services and try to put more of a handle and more of a clamp on discounting. But our sales guys have the ability to dodge and divert where they need to counter whatever the situation would be. So we're really not seeing any difference in win loss or a competitive activity than what we've seen before. So it's kind of business as usual.

And then just on the mobile front, I know you guys have talked about the RUN product in the mobile environment in the past. Any update you can give us on customer adoption in terms of using the mobile version of the product and your latest thinking on possibly extending some of the applications aside from RUN into the mobile environment? And any sense from your vantage point to what extent using this mobile channel is truly a differentiator for ADP right now in the marketplace? Are you seeing some of your competitors do something similar?

Well, there is a couple of things that I think are pertinent. We have well over a 1,000 people signed up for the mobile app on RUN. You have to remember though that you may do your payrolls still on your PC when you're in the office, but if you're in the golf course or traveling, you may do it on your iPhone, whatever the case may be. So it's not like every one of those 1,000-plus are doing it every payroll, but they've got the app and are using it. The other thing, which I think you should consider is that our RUN application, the real time payroll engine that we have is the best thing in the marketplace today. And so when you put the mobile app on top of that, it makes it really a killer application. So the sales guys are excited about it, their enthusiasm shows, the CPAs and the bankers are excited about it. So I think it's happening across the board. Here in the next month or so, we'll be making that same app available in terms of the BlackBerry and all of the Android devices. And also in the next several months, we're going into the first rollout of making all of our mobile applications available to the entire client base. So you'll be able to go to the ADP portal, whether you're running on AutoPay in Major Accounts or enterprise in the high end of the market or RUN in the low end and get a full functionality out of your mobile device. So we're really excited about it, and we're in the process of the plan to roll it out to our clients as well as to our sales and implementation people.

Your next question is from David Togut with Evercore Partners.

Gary and Chris, could you give us some more granular description of some of the strongest selling and weakest selling services within the three areas of ES?

I'm not sure of what question -- are you talking about like beyond payroll products?

Well, not only beyond payroll, but within the core payroll. Is that just vanilla payroll coming back? Is there anything else along with that, that's driving the double-digit sales growth?

I think on the core payroll, it's the new platforms RUN. We've said it in the past, it's got a buzz in the sales force, it's got a lot of excitement, clients love it. So that's helpful. I think that's helping drive -- as well as the work force now in the mid-market and that's got the same effect in the mid-market. So I think that's driving it. And the beyond payroll, with the 11% excluding acquisitions, it was pretty much across the board in terms of growth. The HR and benefits area, our ASO product or the BPO at the low end of the market was very, very strong, as was our Tax Credit Services, everything was up nicely and so it's strong across the board.

Yes, I think there one really notable exception for you, David, would be the ASO products in our major accounts and in the small end of the market. A lot of traction and the new platforms help it even more.

Just as a quick follow up, have you noticed any significant change in win rates versus your primary national competitor with the RUN product and also with Workforce Now?

I would say that most of our losses -- I think where people sometimes get a little confused is that most of our losses come out of the days. They don't come so much in new sales and even though we may see our competitor, our national competitor, frequently, we don't see him on every deal. And clearly, we're doing great with the RUN platform and the new mobile app. So I think they are a little better, but clearly, it's large function of who's the referring CPA or the banker or who got there first or who's a little more flexible on price. So, yes, I'd say it's better, but I certainly wouldn't want to run around trouncing our largest competitor.

Your next question is from David Grossman of Stifel, Nicolaus. David Grossman - Stifel, Nicolaus & Co., Inc.: Gary, can you talk a little bit more about the international markets, perhaps ex-GlobalView and how the growth has been trending and what impact, if any, your ability to transfer funds within Europe is impacting both growth and profitability?

Let me talk to the funds piece first. We are having a lot of success. The initial two countries that we rolled it out were the U.K. and the Netherlands, and it's doing terrific, obviously, off of a very small base. We have rolled it out to our French clients over the last number of months, and they have been surprised with the acceptance that we've gotten so far. So that's certainly helping the overall number. But again, it's nascent in terms of its size and scale, but we're very pleased with the results that we've seen so far, clearly ahead of our expectations. In general, we've seen double-digit sales growth out of our international markets now for a couple of years. A lot of that -- it's really based on three things, more feet on the street because we had a big opportunity. I think our management team is executing better, and we're clearly -- have clearly convinced them that there is a lot of opportunity in beyond payroll. So we're selling a lot of HR and time and labor kind of services that we really weren't selling historically internationally. So that would be the way I would divide it up. David Grossman - Stifel, Nicolaus & Co., Inc.: And should we think about that -- it's 20% of revenue as I recall right now, the international piece. I mean, should that just stair step its way up or climb its way up? Or do you see any catalyst for that to accelerate other than GlobalView, of course?

Well, if they can get to the point like we are in the United States of selling beyond payroll, where its 40% or 50% of new sale, it would clearly accelerate. And I think that some of the embedded growth that we're getting today, we're very fortunate in the international scene too to also have very low turnover in the sales force. And so I expect it to continue to do well and potentially even do better over time. David Grossman - Stifel, Nicolaus & Co., Inc.: And just one last thing, getting back to Adam's question, ADP is obviously a different company than it was coming out of the last cycle. So if you think about those investments that have been made over the last couple of years or the last several years, if you will, where do you want us to focus in terms of where you expect to see the most incremental growth in the new cycle?

Well, we're clearly going to regain employment levels. I think if you take economic forecast as reliable, which I'm not sure you can, but if you take that as reliable to go from 9% unemployment down to about 5% over the next three or four years, certainly going to be a big advantage for us. Secondly, at some point in the future, interest rates will no longer be a drag, so we'd all be worth a lot of money if we could call that date exactly. But over a planning horizon of five years, I would certainly not expect this drag that we've had to continue. But again, I think that it's going to be great wind at our back as the laddering strategy starts to increment the other way other than just prevent bigger losses from going down. The rubber meets the road in terms of our new sales growth. Our retention rates are terrific. Obviously, as the economic environment gets a little bit more positive, we should be able to get back to a little bit more of a positive slant on price increases. I think ASO, particularly in the mid and the low end of the market, is going to continue to explode. And I think we're going to do a bang up job selling healthcare insurance and workers' comp into our base. We're very pleased with what's happened in our Workscape acquisition. So the realities of us being able to focus on higher growth and benefits, I think, is going to be very important for the future as well.

I will also take you back to the five points of strategic growth because we've been talking about that for a long period of time. And we do see the growth coming out of every one of the -- particularly on the revenue side, the top four. We believe that the core business can grow. If we didn't believe that, we wouldn't have been investing in products like RUN and Workforce Now. We believe that international will continue to grow and continue to invest in GlobalView and the excitement here in Barcelona is a good indication of the potential of that. And then in the BPO space, as Gary said, the ASO, COS offering and the growth on the PEO, so we're seeing the growth in each of the areas as well as you can see in the beyond payroll, that's coming back nicely, and we continue to invest on that. So it's not any more than the other, it's from all of those areas we expect to see nice growth.

Your next question is from Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang - JP Morgan Chase & Co: Retention, the level of retention, where are you now versus your historical average retention rate? And then maybe if you can compare it to peak retention levels, I'd be curious to hear that as well.

We ended up last year slightly below the 90% that we've talked and with 50 basis points above that, you can do the math. And so that's starting to approach the highest levels that we had seen back in -- this was fiscal year '08 result, our last peak. Tien-Tsin Huang - JP Morgan Chase & Co: Okay, so we're near the highest there?

Yes. Tien-Tsin Huang - JP Morgan Chase & Co: And then on the Employer Services, just a clarification, I guess you noted, Chris, pressure from higher selling expenses. But it looks like you kept your margin outlook the same if we exclude the acquisition. So are the selling expenses tracking higher than you expected and there are some offsets? Or was is it pretty much what you had forecasted?

Pretty much what we had forecasted, and we had said that there'll be pressure in the quarter. It was nothing unexpected. We had the grow-over of the expenses. We knew the sales expenses would be higher than last year because of the growth in selling expenses. So we didn't mean to indicate anything other than that.

Your next question is from Ashwin Shirvaikar with Citi.

My question is on the obviously, very good new sales growth, but what's the timeframe to ramp those new sales into revenues? Do you think they layer into revenues in one to two quarters?

You have to remember that in the PEO and in Small Business, sales and starts are the same number.

I meant more of the larger front side.

Well, in Majors, our average new client starts in, call it, four months is a good way to think about it. And in National Accounts, it's more like nine months on average. GlobalView, it's usually phased in over a couple of years.

But for modeling purposes, I think we have always kind of steered everyone towards the 50% in here and 50% out. There's nothing that we see that would move you away from that.

Also one other I guess housekeeping kind of question, the share count, why did that jump? Was that more of a timing situation because of the recent acquisitions and the dividend increase or is that anything...

Yes, that was more of anomaly of the quarter. We don't expect that to hold for the year, but it's option exercises with the stock price at $49 and older options particularly starting to expire in the money, and so we look at that, and we make sure that it balances out over the year as we say that we don't expect there to be any dilution for the year. We would buy back shares to make sure we counter that at the very least. So that should not be an issue for the year.

Your next question is from Rod Bourgeois with Bernstein.

Nice to see the growth coming back. On that note, what was your year-over-year growth in core payroll clients? And can you also give us a read on what your year-over-year growth in average pricing was?

Okay, in clients, let's see. Current year, we're up across in total U.S., it's up and it's up about a little shy of 4% in SBS year-over-year.

So does that mean average pricing was down since you had flat growth in core payroll, positive pays per control, positive client retention trend and if you had positive growth in the actual client base, what's the remaining factor that caused payroll to be flat year-over-year?

It really was the anomaly of the year end and the recognition of revenues either in the second quarter or the third quarter. And so we have a lot of year-end activities, you got W2 revenue as a good example of that and that can fall either into December or it can fall into January. So when you normalize for that, the payroll growth in the second quarter looked a lot like it did in the first quarter, and in the third quarter, it will look a bit higher because it's got the benefit in January. So it really had nothing to do with the pricing.

So in other words you had positive growth in employees, positive growth in clients, but the average yield in terms of revenues on those employees and clients was down because of less sort of year-end revenue recognition, which may benefit you in January?

Yes, and that's just a timing issue, and we've already seen that come back to us in the beginning of January. So that will flatten that out or make it more ratable through the year than the little bump that you saw.

With the current sort of bookings trend being in place, assuming that run rate at least continues, what sort of base client growth can you achieve over the next year if you're able to sustain that level of sales activity? I mean, it looks like you're actually in a position to have better base client growth or at least akin to what it was before the downturn if you can sustain this level of sales activity, but I'd love your latest read on that.

Yes, I think the best we can say is that to give you the actuals that we're up, we don't forecast at that level, to the client level. Certainly, I'm happy to see that it's positive and headed in the right direction. One does correlate to the other, but we don't forecast at that level.

And then Chris, just one quick one, on the selling expenses in the quarter. I mean, clearly, your margin was affected by higher selling expenses, which I assume largely stems from sales commissions being up due to the strong bookings. Can you quantify to what extent your margins were affected?

I'm sorry, I missed the end of what you said because I was adding that it's not only just the commissions, but it's -- we had salespeople, probably 15% growth in the sales headcount as well as in service. But in the selling expense particularly, you're going to see that increase year-over-year as well. So it's both.

So you've got commissions and you've got headcount, but if you exclude the sales headcount and you just look at the sales commission load, which was probably higher in the quarter, can you give us an idea to what extent the margins in the quarter were affected just by the lumpiness of having sales commissions up?

I don't have that off the top of my head. I don't think it was -- I think the only thing we would probably point it to was the guidance that were given for the full year that it turns around. It wasn't that the sales growth was way more than we expected. It's still on target to be high single digits, and if you remember last quarter, we had the anomaly in sales of being flat in sales growth, and we were telling everybody that's okay because of the year-over-year, but it's still in line. So I don't think that it was anything abnormal. We expected it to be down in margins in second quarter, and so as a result, we expect that to turn around for the year.

[Operator Instructions] Your next question comes from Joseph Foresi with Janney Montgomery Scott.

I wonder if you could just provide maybe a little bit more color around the new sales growth this quarter. I know it's hard to say, but is it a sustainable level and whether should we think of it in terms of any kind of seasonality or any onetime that might be working its way into that number?

In the grand scheme of things, for model building et cetera, it may change from year-to-year. But the skewing is pretty much first half of the year is about 50%. The second half of the year is about 50%. That varies by business because like in the PEO and SBS, they are very skewed towards the third quarter because their sales and starts are the same number. So you get a big bounce there. In terms of absolute dollars, the first quarters tend to be the smallest, and the fourth quarter would generally be a little bit larger as everybody is running for the roses of making the trip or leveraging their commission rate.

I would say what would be helpful for you to look at too is the growth rates in sales last year by quarter, and you'll see that the first half was down in fiscal year '10 in both the first and second quarter, 2%. It was relatively flat in Q3 and then up 24% in the fourth quarter. So, as you're thinking about year-to-date 8% and we're talking high-single digits for the year, that's in contemplation of a fourth quarter all for a strong fourth quarter last year. So bear that in mind as you're looking at it as well.

And then just my second question here, just maybe you could provide just a little bit of color, how much would you attribute to new sales growth reinvestments and where are we on that plan? Have we kind of finished the first round of reinvestment and we're going to put some more into the business or maybe you can just update us on that as well?

We'll get back to our -- as we come out of this year, we'll be back to our more standard approach to sales growth, which would mean we'd add call it 5% to 7% headcount growth as we attempt to grow sales double digits. So headcount is kind of a certain way to do it, and then you always drive for increases in productivity due to tenure, better pricing, bigger bundles, whatever the case may be. So as you think about that and we generally start hiring those folks again in the March-April timeframe. This year, the headcount growth was larger than that. It was more like 8% or 9%. And we added a good bit to the low end of the market because that's where we did have the luxury to cut during the downturn in '08, so we wanted to put it back up. But I think our traditional way of thinking about it will be the correct way of thinking about fiscal '12 and beyond.

Your next question is from Tim McHugh with William Blair & Co. Timothy McHugh - William Blair & Company L.L.C.: You kind of touched on my question a little bit right there, but I was going ask mainly on both the sales force and then what you just talked about but more also on the client service side. Where do you feel you're at productivity wise relative to history and how much of a room is there to improve? I realize you just mentioned sales force, so maybe more so on the client service side?

Well, we did ramp up service, particularly as our loss rates went the wrong way during the downturn. We chose to continue to invest and actually increase the headcount levels even though we were under a lot of revenue pressure. I think our service levels today are pretty good. If you're sitting in my chair, you never say they're great, but they're certainly better than they've been for a number of years, and turnover in service is very low. We will continue to increase headcount, kind of add a little bit of a discount to internal revenue growth and work on productivity to kind of offset the difference. But we're certainly not going to try to freeze it at this level and then milk the margin as opposed to doing a better job or creating products that cause people to call less et cetera. Timothy McHugh - William Blair & Company L.L.C.: And then can you also give us an update on the GlobalView profitability expectations?

Sure. I think what we're anticipating is the breakeven of GlobalView would be in fiscal year '13.

Your next question is from Jim Macdonald with First Analysis.

Could we talk about Internet payroll for a second? Your competitors are getting active there. You have products, but can you give your thoughts in that area?

Say the question again?

Using the Internet to generate business, for example, Intuit's purchase of PayCycle and Paychex on SurePayroll, what are you going to do about that?

Well, we chose not to bid on it because we already had it.

So will you get more aggressive on acquiring business through the Internet?

We have been for all of our current product set in Major Accounts and Small Business are all delivered via the net.

I am talking more about sales acquisition?

I'm not following you?

You mean with Internet marketing?

Try to buy more SurePayrolls, is that your question?

No, buying customers on -- getting customers through the web?

You mean just without a sales force?

Yes, with modest sales activity.

Well, we do that with our telesales today. So if we generate lead activity to the ADP website, that's followed up with a telesales call, which we are continuing to do that and have been for a while, which is not a whole lot different than what some of the other people do. I think Intuit -- actually you can sign up if you're a small company directly on the web. But SurePayroll and others like that, you generally end up talking to somebody before you get started.

And moving on, could you give an idea on your acquisitions, what the magnitude of the acquisitions were that you have closed this quarter?

Well, we gave what they were, MasterTax, Byte Software. Byte was the largest payroll provider in Italy, and we were number two, so now we're the largest significantly, and…

Byte was in the $60 million kind of range. MasterTax is like a $10 million-plus or minus. PACC would've been somewhere around the same size.

That was $10 million?

Yes, give or take. I mean, we don't give digital accuracy at that level.

Your next question is from Tim Willi with Wells Fargo.

I just have one question around PEO, could you discuss sort of what the margin trends have looked like if you exclude pass-throughs, and I know you talked about part of the margin pressure was not only pass-through, but some investments you made, and just sort of maybe help us understand -- maybe split the margin pressure, if you will, at least conceptually between your investments and the accounting treatment of revenues, and then just sort of thinking about that going forward?

I would say in the net or excluding the pass-throughs, there was still a little bit of pressure on that number this time because we did increase sales force and headcount. And so we made some investments just like we did in the rest of the businesses this quarter. So that did put a little bit of pressure on. But typically, that's been rising while the bottom line falls. Now in the Q, you'll see the pass-through numbers and so you can kind of do the math based on the pass-through and back it out from the total, and you'll see that as you do that, the margins are 30%-plus kind of margins. I'm just taking the total -- the NOI doesn't change, and you back out the pass-throughs from the total revenues, and you'll be able to do that math. So it's good healthy margin business, and then the accounting as you referred to is just bringing it down to the net.

If I could follow up just on that business with my follow-up question here, I think, historically, that's been a pretty fragmented market. As you think about that business, is it a business where M&A makes sense going forward? Or obviously, sort of the organic growth is obviously pretty healthy as it stands. Did you sort of decide to just continue to do what you're doing organically? Or are there attractive properties out there that may come on the market, I think private equity was putting some money in may be a handful of years ago and they're trying to do some rollups in particular parts of country. Any thoughts there?

We would love to do acquisitions in that area. There's a couple of subtleties though that you need to be aware of. Typically, ADP likes to be in the PEO business where the workers comp number is relatively low. So we tend to be more white collar or gray collar and certainly, not blue collar. So we don't write high-end workers' comp kind of business which gives us less exposure when you have capacity issues in the insurance industry and you see workers comp rates go through the roof. So we have very stringent underwriting both in terms of the quality of the book of business, as well as the type of the business that we buy. As contrasted to that, the general market where you were referring to it as being fragmented, having high workers' comp claims or insurance premiums for a lot of those companies is a good thing because it's more revenue until the arbitrage goes the other way and then they get in trouble. So we've looked at, let me say, dozens of properties over the years, and we have tried to do some deals where we pay you on what gets converted into our model, but seldom the entrepreneurs want to sell that away. So I don't expect a lot of increase in acquisition activity in that arena, but if they come and meet the criteria that we're looking for in the quality of our book of business, we would certainly do the deals. You also have to remember that 15% of the new bookings in the PEO are referrals from the ADP payroll base and not many other PEO companies have 4,000 feet on the street in the Employer Services business nor have 500,000 clients as readymade prospects that you can target based on the underwriting criteria that we would like to have.

At a much higher multiple revenue.

Yes.

Your next question is from Gary Bisbee with Barclays Capital.

Just one question, as we look back at the employer acquisitions over the last 12 months, what would be a reasonable expectation to have around the growth potential of those over the first say two to three years? And I remember the employees example a couple of years ago where you just shut the lights out in terms of sales people grabbing that and upselling it, but how should we think about how quickly you integrate them, how quickly the sales people are trying to up-sell these or sell them to new customers?

Generally, if we buy 1% of revenue in a year, I'm disappointed. We buy 2% to 3%, I'm pretty pleased, and occasionally, we get lucky and get one that's a pretty good size, not huge, but pretty good size where you may get up to 3% to 5% of revenue. In almost every case, the acquisitions we make are for new products or new geographies or the kind of things that we can then leverage and hand to our sales force and then take it back out. A current example of that is Workscape, which really is a superior product for the medium size and large size major National Accounts, and it's really hot right now in terms of the sales guys being excited about it. We bought a little company in the U.K., which is an Internet HR and Benefits engine last year, and we're taking it across the continent and into Australia, and it's going to be a good growth driver for us. When we buy just the payroll acquisition, we typically just integrate it and convert it to our platforms because we really don't need strategic platforms in the payroll area.

So I guess it's reasonable to assume then that outside of it you're just buying payroll customers, a lot of these acquisitions have much more rapid growth potential for a couple of years than what the core business assumes?

Yes, absolutely. I think that's an accurate statement.

And I guess just a quick follow up. Is there any change in your thought around the profit margin potential beyond payroll, in general? I know PEO is lower, but outside of that, you still think that they can be comparable to the core business overall?

I absolutely do. And if you give me organic revenue growth, whether it's the Payroll business, the HR business, the Benefits business, 401(k) business, the margin improvement's going to come right along with it.

Your next question is from Giri Krishnan with Credit Suisse.

A quick question for Gary, I guess it was good to see that growth in the large company market seems to have picked up, but I guess in speaking with clients, does it feel like this growth is sustainable for the rest of the year? And I guess if so, do we have any room for the new business sales forecast to then be revised up or is it still too early to tell that, that might, in fact, happen?

Well you know I can't really comment on that, beyond the forecast that we made. But I think you can clearly tell from the tone of voice that we're very pleased with where our product is. The sales guys are doing well. The momentum is clearly going in the right direction. We had a lot of prospects here for GlobalView. We've actually signed a couple of large multi-million dollar contracts in the month of January that didn't get into the December numbers, and we even got permission this morning to say to you that we actually signed up over 80,000 employees with the new General Motors for their U.S. payroll on GlobalView. So we got some real new product enhancements, product platforms that are coming out in National Accounts this spring. It will be in place for '12. So in general, I'm pretty optimistic about the sales scene. And if I was pessimistic at that, we would have reaffirmed our high single-digit forecast.

A quick follow up. I know in the last quarter, you had spoken to a pricing pressure from the regionals. Is that changed at all or can you give us an update on that?

I mean it's still there, and that's really where we see it the most, at the regionals, not from the national competitors, but it's certainly abated. Our mission there is to deliver higher value at the same or slightly higher pricing, and we're constantly working on the product and the product configuration to try to make sure that happens.

[Operator Instructions]Your next question is from Mark Marcon with Robert W. Baird & Co. Mark Marcon - Robert W. Baird & Co. Incorporated: I want to go back to a question that was asked earlier, just rephrasing it a little bit. I think the nature of the question was to what extent do you think, on the Small Business side, there is a change in behavior in terms of a preference for almost do-it-yourself or kind of the Intuit versus a fully outsourced model, just for core payroll. Any sense in terms of your market research, your feet on the street, what are you hearing from that perspective?

Well, I think you would -- just a good example of that, Mark, just in RUN payroll, which is a much more intuitive product for Internet, real-time payroll, which would kind of go to the vein that you're talking about. Historically, we'll move a sum of what we call AutoPay Plus or -- our product hit the low end of the market. 70% of those people would call their payroll in. In RUN, 70% of the people do it themselves and only 30% of them call it in. So we're looking at some other options on the low end of the market that would even further encourage that or things that would use live chat or other kinds of methods to enable us to get at a lower price point and a more zero touch kind of environment. But at the end of the day, if you've got a payroll problem and your direct deposit doesn't work or the IRS is calling, we think it's pretty nice to be able to ask somebody to get on the phone. And so basically, we'd like to be able to offer a continuum of service. But at the end of the day, if you've got a problem as a small client, it's really my problem and I'm happy to be there to help you. Mark Marcon - Robert W. Baird & Co. Incorporated: It certainly sounds advantageous to have a spectrum of services. How is the profitability on a per client basis to the extent that preferences shift? Can you make as much money through the RUN product as you can through your fully outsourced payroll?

Absolutely. I mean the margins there are right on the money already with much smaller base.

The example that Gary gave of the Teledata business of the 70% calling it in means I have to have somebody on line answering that call, keying it in then you've got an error rate issue. So there's a lot of potential if we could drive that.

The other thing that has been great, Mark, about the real time engine on RUN is it's a real time engine, and you can run a complete payroll and look at it before you release it. And so you can make all the corrections live and still get rerun and rerun and rerun until you get it to look exactly like what you want to have on it. Mark Marcon - Robert W. Baird & Co. Incorporated: That's huge. And then I was wondering if we could just shift over to Dealer Services for the follow up. Out of the 20% revenue growth that you're anticipating, how much of that is due to the acquisitions versus organic? And to what extent are you starting to see some real benefits in terms of the auto market is really starting to come back both domestically and internationally? To what extent are you starting to see that? When is that going to really come through?

I'll just give you the first part of that, and then I'll turn it to Gary. Excluding the acquisitions, it would be 2% to 3% revenue growth excluding acquisitions as part of our guidance. Mark Marcon - Robert W. Baird & Co. Incorporated: Just to what extent are you starting to see the benefits of the global auto market coming back? I mean, Asia is on fire, China is probably going to end up selling more cars obviously at lower price points, but more cars than the U.S in the near future. To what extent are you starting to derive the benefits of that?

I think longer term, if you take out the huge economic swings you get in the auto sector, there is not a reason in the world that dealer can't grow at the same rate as Employer Services over time. And so our objective there is to get back to high single digit kind of organic growth rate and bring some margin improvement to the bottom-line to drive double-digit profitability. The issue you have in China is it's still very nascent from a system standpoint. So you have a lot of smaller dealers with not a lot of automation, and you don't have the large dealer groups like you have in parts of Europe and throughout the U.S. So on the surface, it appears to give you more faster growth, but the realities are there's a lot of slogging through the mud that has to take place to really get it to the same kind of levels we get in the U.S.

Your final question is from Chris Mammone with Deutsche Bank.

I guess just a quick follow up, you did a good job explaining the anomaly effect for the fourth quarter payroll growth, I guess, is that sort of 2% shift that occurred, is that -- I'm just trying to get sense, is that sort of more than is typical? Or is that sort of as expected?

You know, you really don't know until the very end of December, early January. So we've seen a little bit of that anomaly in the past as well, but it's hard to predict. So it's not something you can -- there are a couple of other things you have to remember. There were some pretty severe weather in large parts of the country during that period of time. A lot of it depends of when people run bonus payrolls. A lot of it is how fast they want to start for the following year. We also, in times, where you've got a lot of changes to tax rates or other compliance rules and regulations, we tend to move the volume further into January, so that we don't run out and print a bunch of 25 million W2s and find out they're wrong. So we tend to go a little bit slower in times when there is a lot of complexity. I think the long and the short of it, and Chris said it before, is you ought to assume that it's going to be business-as-usual in terms of the full year, in terms of that rate of growth and not get hung up in this timing around the quarter.

And I guess for my follow-up, just back to Dealer, any update on the ODE platform? I just haven't heard about it in a while. I was just wondering if it's still a strategic focus.

Yes, it's still a strategic focus. We're working -- the big challenge there is getting all the connections to all the banks that do the lending and off-the-loan apps, which we're doing. We're working on a couple of other big opportunities that we think may help us. But we still think long-term, it's the right thing to do for Dealer Services. I appreciate everybody calling in today. I think you can tell by the tone of the conversation today that we're much more encouraged. Again, I don't want to use the term buoyant as I talked about the last quarter, but we certainly are encouraged. We've raised our forecast literally almost across the board and all the trend lines are in the right direction. So I think we're going to have a great year, and I think we're going to be well positioned to continue that strength as we move into fiscal '12. Thanks for coming, and we'll talk to you next quarter.

Thanks everyone.

This concludes today's conference call. You may now disconnect your lines.