Good day, ladies and gentlemen, and welcome to the Automatic Data Processing Third Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I will now like to introduce your host for today's conference, Elena Charles, Vice President, Investor Relations. Please, begin.

Thank you. Good morning. I'm here today with Carlos Rodriguez, ADP's President and Chief Executive Officer, and Jan Siegmund, ADP's Chief Financial Officer. Thank you for joining us for our Third Quarter Fiscal 2014 Earnings Call and Webcast. Before discussing our financial results, Carlos and Jan will talk about the planned spinoff of Dealer Services announced on April 10 and our latest Human Capital Management technology innovations. Finally, after Jan discusses the quarterly results and the full year forecast, he will provide his thoughts about the expected impact of our client funds investment strategy for fiscal 2015. I'd like to remind everyone that 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 in our earnings release and in our periodic filings with the SEC. With that, I'll now turn the call over to Carlos.

Thank you, Elena. Good morning, and thank you for joining us. As Elena mentioned, we have several exciting topics to cover on our call. I'll begin with our strategic decision to spin off the Dealer Services business, a decision which we believe will benefit ADP shareholders by allowing each management team to focus on its respective industry. For ADP, this deepens our commitment to being a global leader in Human Capital Management and positions us well for future growth. For Dealer Services, it allows them to focus on expanding their leadership position in the global automotive retail industry. You might ask, why spin off Dealer Services now? The global retail automotive market is evolving at a fast pace, fueled by digital marketing and other innovations where Dealer Services currently enjoys a market-leading position. In addition, this industry is the strongest it has been since 2007 with U.S. vehicle sales continuing to recover to pre-crisis levels. In separating the 2 companies, we expect Dealer Services to be a strong, independent company with solid growth prospects, a strong competitive market position, an experienced management team, and an aligned capital structure. We fully believe that this is the right decision at the right time for both companies and for the shareholders. And now I'll turn the call over to Jan for his comments regarding the transaction.

Good morning, everyone. As Carlos mentioned, we believe this transaction will better enable both ADP and Dealer Services to pursue their respective growth strategies and drive long-term shareholder value. The structure of the transaction will be a 100% spinoff of the Dealer Services business into a separate, independent publicly traded company. This will be a tax-free transaction for our shareholders, and we anticipate its completion in early October, subject, of course, to applicable regulatory requirements. We expect to file the initial Form 10 in early June, and plan to have an investor roadshow with the management team of the new Dealer Services company as we get closer to the spin date. Additionally, we will be looking carefully at costs as we create the appropriate public company infrastructure for Dealer Services. Although we will offset some of these costs within ADP's existing infrastructure, we expect there will be a moderate increase in expenses when looking across both companies. As previously disclosed, we anticipate that ADP will receive at least $700 million from the Dealer Services business at the completion of this transaction. And our intent is to use this cash to repurchase shares of ADP stock, subject to market conditions. Regarding ADP's dividend, our intent following the spinoff is to increase the dividend annually subject to board approval, keeping intact our 39-year track record of dividend increases. However, we expect to grow the dividend at a slower rate than earnings to allow us to return to our pre-separation target dividend payout ratio of 55% to 60% in about 2 years. Any dividend to be paid by the new Dealer Services public company will be determined by the Dealer Services Board of Directors and will be incremental to the ADP dividend. Another area I would like to discuss with you is ADP's credit ratings, which were updated as a result of the announcement to spin off Dealer Services. We anticipated this change in ADP's credit ratings and fully contemplated it as part of our analysis. We are proud of our exceptionally strong AA credit ratings with a stable outlook from both Moody's and Standard & Poor's. In fact, you should note our ratings are still the best in our industry. The changed ratings are not expected to have any direct financial impact on our business. In addition, neither the spinoff of Dealer Services nor our updated credit ratings will change our disciplined approach to how we move more than $1 trillion in client funds each year. And I now will turn back the call over to Carlos.

Thank you, Jan. We'll provide updates on future calls about the progress we're making towards separating the Dealer Services business from ADP. But once again, I believe that this is the right decision at the right time for both companies and for our shareholders. I'm excited for the future of both companies and especially pleased about the investments we are making in Employer Services to further establish ourselves as a leading global provider of Human Capital Management solutions. So with that, let me share some highlights of how these investments are translating into our latest technology innovation. Earlier this month, we held our annual ADP Meeting of the Minds conference for our upmarket clients. I'm pleased to say that we hosted more than 1,000 participants, where we previewed exciting works coming out of our ADP Innovation Labs. Our next-generation user experience will transform the way our clients' employees manage their work life through a host of new features that fully leverage tablet and smartphone capabilities. Today's employees expect easy-to-use technology that is similar to how they bank, use social media, book travel, and so much more. As a result, ADP's new user experience will set the industry standard, enabling employees and their managers to collaborate, perform key business functions more effectively, and in short, fully utilize the power of our HCM solutions in an intuitive yet powerful way. What we previewed at our Annual Meeting of the Minds provided a glimpse into innovations that increase the ability for employees to manage their work life, ranging from creating powerful pre- and onboarding solutions that welcome new employees and leverage social media to get them productive more quickly; to finding the healthcare plan that best fits themselves and their families; easily viewing and managing their schedules, including social shift swapping; and transforming…

Thank you, Carlos. ADP reported 7% revenue growth for the quarter, which was nearly all organic. Focusing on continuing operations, we achieved 6% growth in both pretax and net earnings and 7% earnings per share growth on fewer shares outstanding compared with 1 year ago. The quarter's results were as anticipated, and each of our business segments performing well. Employer Services grew total revenue 6%, PEO grew 15%, and Dealer grew 7%. In Employer Services, overall growth was good across-the-board. I do want to remind you that we anticipate a slower revenue growth in Employer Services as we entered into the second half of fiscal year, of this fiscal year, as a result of lower revenues from our tax credit services business that helps our clients receive certain employment-related tax credits. These revenues were lower than 1 year ago because a program that began in last year's third fiscal quarter has expired and has not been reviewed yet. As many of you know, our third fiscal quarter is an important retention period in our business, and I'm pleased that Employer Services' worldwide client revenue retention increased 80 basis points, bringing us to a 10 basis points improvement on a year-to-date basis on top of historically high retention rates. We are pleased to see continued strength in our same-store pays per control with Employer Services in the U.S., with an increase of 2.8%. However, in Europe, same-store pays per control declined 0.6% as anticipated. Although the decline has lessened throughout the fiscal year, the economy across Europe is still mixed. Average client fund balances were stronger than anticipated during the quarter, increasing 9%. Lower state unemployment tax rates were offset by increases from wage growth, including bonus payments by our clients; standalone tax filing; new business growth, especially in the small…

[Operator Instructions] And the first question is from David Togut of Evercore.

It looks like ADP had its best quarter in quite some time. If I look at all of the leading metrics combined between client retention, new sales in ES and PEO and pays per control growth in the U.S., and you also seemed to be on track for this transition to run for small business and Workforce Now for mid-market by year end '15. So my question is, putting all these factors together, are you setting the stage for meaningful acceleration in revenue growth in ES once we get beyond FY '14?

So I think that -- I think, first of all, the first part of your comments, I think, are correct. We -- when you look at all the key metrics of our business, we're pretty pleased with the performance in the quarter. We obviously had some noise around this tax credit business and a couple of other items. But when you really look at the key metrics around retention, sales and all the kind of leading indicators, they really are very positive. Having said that, in terms of acceleration of revenue growth, I will just remind -- and I think you know this well that in a recurring revenue model, our ability to accelerate is really driven by the size of our sales number, and when we're able to start from that sales number, we're then subtracting what we lost for the year. So this improvement in retention and the acceleration in sales certainly accelerates our revenue growth. But, person's definition of meaningful acceleration in one business model versus in ours might be different. So just put in perspective, if you look at all the components that drive our revenue growth over multiple years -- I think we've given you these charts before -- we have things like price increase, which is a small item around 1%; we have pays per control growth, which is between 0.5% and 1%; we'll have some other noise factors. But the real key metric is what we call net new business, which is the difference between sales/starts and our losses. And we disclosed both of those numbers, so you can back into what our lost number is, and you can back into what our sales/starts number is. And I think if you roll that sales number forward and apply a reasonable growth rate of,…

That was very helpful. Just a quick follow-up on that point. Given your comment about rising client retention around the transition to RUN and Workforce Now and the message you had today on more innovation on the way, would you expect client retention to continue to increase over the next couple years and sort of bolster this gradual acceleration, if you will, in ES organic revenue growth?

I happen to take a look at a chart of our retention last night over the last 10 years. And you always have to have the caveat of the economy because, in our small business division in particular, it is -- the retention rate there is somewhat sensitive to economic changes. So I believe that during the last downturn, our retention rates decreased by about 1%, mostly driven by economic factors, by the economic cycle. And then those retention rates came back by roughly 1% -- 1%, 1.2%, but close enough. And then the last 2 or 3 years, we bounced around a little bit and now have had what appears to be 2 years of 10 to 20 basis point improvements. When you look at our historical retention rates and how high they are across all the individual businesses and collectively, I would not factor in more than those types of modest improvements in retention. Because, even though, as the clients have been migrated, we've shown very good improvements in retention rates on those clients, again, just the way the math works, in of itself isn't alone to generate a, call it, 50 basis points improvement in retention year-over-year. And some of that is just related to the fact that some of our businesses are more sensitive to economic conditions, as an example, and we can't change economic conditions. So we expect the retention improvements to continue to help in this growth rate and in our net new business. But I think prudence will dictate that we're very, very careful because these retention rates that we're at now are at record levels through multiple economic cycles, although, obviously, we're doing things through innovation, through migrations and other things to hopefully continue to strengthen that retention. So that is clearly our hope and our expectation, but I would not be modeling more than what I would consider to be modest improvements in retention rates.

The next question is from Smitti of Morgan Stanley.

Your SG&A looked very good this quarter, and looked like it actually declined sequentially and on an absolute basis. Does that have to do with this discontinued business that you sold off, or is there something else there?

Well, if you break down -- because we typically look at it in categories, so if you look at our sales expense, it was quite strong this quarter because of our good sales. But our sales results vary from quarter-to-quarter, where there's some seasonality in sales and sales results, and hence our sales expense will vary with that seasonality. If you look at our investments in R&D, as Jan mentioned, they were up about 10%. So that category was strong. So really, in our core, call it, overhead expenses, is I think where we have fairly good cost controls. But I think some of what you're seeing is really seasonality around sales expense and other factors. Because if you look at our expenses as a percent of revenue, they're pretty in line with what we've been trending at and we're happy with. So we're, to be clear, trying to get operating leverage on our business through a variety of ways, including the migrations of our clients, which hopefully eventually, will add operating leverage. We're adopting some continuous improvement initiatives to try to drive operating leverage as well. But our goal, I think, long term has been to grow our pretax operating earnings at a slightly faster rate, call it, 2 to 3 percentage points faster than our revenue growth, which I think reflects slower growth in an operating expense than in revenue. And that's, of course, holding all other things constant because the pressure that we've had from interest rate has made that difficult when you look at it at ADP's bottom line. But excluding the pressure from interest rates and other noise, that's really our objective. And I think the quarter is reflective of that.

Great. And maybe just a quick follow-up regarding the 14% growth in new business bookings. Can you help us parse it out, the growth in upmarket versus down market?

So I think, as we mentioned in our opening comments, we had really good improvement sequentially in our -- in what we call our National Accounts biz, let's call it. Upmarket for us includes National Accounts but also include some of our multinational solutions that we consider in that bucket of MNC. But -- so the overall category has shown really good sequential improvement. But, unfortunately, as we've been very clear and transparent about, we had a very difficult first quarter on the heels of a blowout fourth quarter last fiscal year. And so we see improvement both in terms of units, in terms of dollars, against previous year and against plans. So on every metric, we see what we expected, which is a recovery as we rebuilt our pipelines and we resolved some of our execution issues in our upmarket business. Having said that, the reason we're being cautious is that -- I just mentioned that part of our problem in the first quarter was our blowout fourth quarter last year, particularly in National Accounts, that we're about -- we're now actually in the middle of the fourth quarter that now has to grow over that blowout fourth quarter. So we had a very, very difficult grow over, but on a normalized basis, we feel that we've recovered in our upmarket business and that the momentum is good. We mentioned in our comments that our Vantage sales were up over the previous year, and I think we're pleased with. We sold a number of Workforce Now deals in the low end of National Accounts, large increase over the previous year. That's a strong competitive offering against some competitors in the low end of our National Accounts business. So we think things are, I think, progressing as we expected and as we mentioned, which was a recovery that would take a couple of quarters as a result of rebuilding our pipelines and addressing our execution issues. But unfortunately, now we face this very difficult fourth quarter grow-over.

The next question is from Jim MacDonald of First Analysis.

You talked about how Dealer would be free to pursue their new strategies as a standalone company. How about core ADP? What new strategies might you be able to do now that -- once you're a separate company and just focused on employer-type services?

Well, I think that -- this was really not about changing ADP's strategy but about creating more focus on it. And so it really -- we don't really have any ulterior motives or any other secret weapons at our disposal, other than, obviously, we have now more financial flexibility post spinoff. But we -- our desire, I think, the board's view was that focusing my attention and my entire management team's attention on what we believe is a very large global opportunity in Human Capital Management was the appropriate thing to do. And by the way, they thought the same thing about Dealer because they have a very capable, very experienced team there that has the same views about the retail automotive market that we have about Human Capital Management. And so, I think, this is really about focus and about freeing up, I think, energy and attention of the 2 management teams. There really isn't any other -- we don't -- you shouldn't anticipate or expect a shift in direction here with the post-spin ADP. If anything, you're going to see a much more focused and, I think, determined competitor in the HCM world. Because this is -- ADP will be Employer Services, and we will be HCM.

And for my technical followup, PEO grew dramatically in the quarter, although it looks like you put on a lot of those employees late in the quarter. Could you talk a little bit about how that's panning out and if that had an impact on margins in the quarter, things like that?

It did have an impact on margins because the -- and I think the item you mentioned about the works [ph] employees coming on towards the end of the quarter, that happens every year, such a seasonal issue just because of what's called tax restarts and other factors in the PEO. So that a large number of the new starts, and sales of starts are actually equal to each other in the PEO business. That is very typical in that business. The margin impact on the business was as a result of the PEO having those strong sales results. Obviously, our commission expense and our sales expense increase when we have very strong sales results. And the sales results were, to say strong is an understatement in the quarter for the PEO. And, hence, our sales expense was quite strong as well or high, so that created a decrease in the PEO's margin versus the prior year, which obviously had some negative impacts on ADP's margins for the quarter as well overall. But we're happy with that. Just let me add, we love all of our businesses to have that much growth in sales because back to the very first question we got, it actually would accelerate this revenue growth.

And just a friendly reminder, of course, the accelerated growth of the PEO has also growing at a good clip. Our pass-through revenues in the PEO that are part of this PO revenues and those on low-margin revenues that as a mechanical consequence, also, put margin pressure onto our overall ADP results.

That's a great point. That's why, I think to Jan's point, we -- as you look at our 10-Q and you look at the comments we make to you, I think it's prudent to really look at the segment reporting as well as the overall ADP results for that very reason.

The next question is from Sara Gubins of Bank of America.

Could you talk about how you're thinking about potential client migration for existing clients onto the Vantage platform? I know this hasn't been an area of focus, but I'm wondering if it might become more so?

So it's a great question because we were with 1,000 clients just a few weeks ago at our Meeting of the Minds event, and we had the same question from a number of clients. So we're doing 2 things to address that. One is we're increasing our investment to increase our capacity to be able to do migrations, and we've done a few already. But, clearly, in theory, we have probably demand for hundreds of those types of migration. So we're doing 2 things. One is investing in that capacity to make sure that we can do migrations at a pace that's responsive to our clients' needs or our clients' desires. And also to block competitors from trying to take business from us, which has been a very effective part of our migration strategy in the low end and in mid market. The second thing that we're doing besides adding capacity for migrations is we are making some, what I would call modest investments from a technology innovation standpoint on our existing enterprise platform, which we gave a preview of at ADP -- at the Meeting of the Minds gathering. That was extremely well received because, frankly, in the upmarket space, there are many clients who aren't necessarily -- there are some that are lining up to migrate, and there's many that aren't because transitions can be disruptive, expensive, et cetera, to their own business, and it may just not be one of their business priorities. So them seeing that we're willing to invest in the short to medium term in our enterprise platform to give them a lot of the same capabilities from a look and feel and experience standpoint that we're providing on Vantage, which is very, very well received. So we're, we're frankly excited about that, and we think that it -- I guess, to put it bluntly, buys us time to be able to execute on these migrations to Vantage over the next several years.

And then just as a follow-up, are you seeing any change in the pricing environment? And I'm wondering, when you lose clients to competitors, has pricing ever been given as the reason?

Yes. It definitely -- we track, obviously, our -- very carefully, where our clients go in terms of losses and then the reason codes, whether they're related to service or product issues in terms of feature functionality or price, et cetera. And again, we look at those numbers literally every month very, very carefully. And we really haven't seen other than right after the economic downturn -- so going into the economic downturn, was a very large increase in price reasons for clients terminating. And then once we came out of the economic downturn, that went down as a reason. And now it's been stable. We really don't see any major -- and part of this is probably just because of our size because it's a large sample. But there's really nothing exciting to report. We really don't -- and I don't know if Jan has anything to add, but it just doesn't seem like there's anything there in terms of changes.

No. Carlos is exactly right. The mix of factors that clients indicate when they leave ADP has been stable, and also our discounting in new sales has been stable. So the pricing environment has been, overall, kind of stable for a number of quarters and a couple of years, I would even say. The net impact is that we are realizing about 1% of revenue growth for price increases on prices overall and new businesses coming in at bigger rates and really very stable pricing environment.

And part of our -- let me just add, a part of our approach around HCM is not necessarily to try to drive price at the individual payroll level, but it's really to add additional solutions that we think help our clients solve business problems and help them manage their people better, but also, frankly, create more revenue for us. So we gave you examples of, for example, as we migrate clients, and even as we sell new clients, the typical attach rates in terms of the number of modules that we sell is definitely higher than in our legacy client base. I think that helps us a lot from a "pricing standpoint" if you consider pricing to be unit based. But it's not really pricing, per se, and it's not a competitive issue in terms of making us uncompetitive because what we're doing is we're selling more things and more solutions and just getting higher dollars per client or per unit. So that's our preference from a pricing standpoint rather than trying to drive price increase, if you will.

And the next question is from Gary Bisbee of Royal Bank of Canada.

And I should say, congratulations on the decision to spin those -- the Dealer business. I guess, on that topic, can you give us an update within the Dealer business, what's the mix of the core DMS software offering versus digital marketing? And how should we think about what's been going on in terms of growth rates in those 2 parts of the business and how the profitability differs from one to the other?

Yes. Gary, at this point in time, we're really not updating more and publicizing more detail about the revenue mix and growth rates. We leave that to the filing and then the roadshow as we prepare at Dealer Services. You're aware that Dealer Services has 3 components, or 2 components, really, of major businesses, that's the traditional dealer management systems business, that's the core Dealer Services. And we added, through the acquisition of Cobalt, a meaningful business to the Digital Marketing capabilities. Those are the 2 major businesses that one should think about Dealer Services. And you will see probably end of May, beginning of June, when we file, you will see the segment reporting.

And I think just to help a little bit, we -- I think there were some public comments or filings about the revenues of Cobalt at the time of the acquisition. I think if you apply a reasonable growth rate to those, you'll get close to what you're looking for in terms of the mix. But I think, as Jan said, we're obviously going to be providing a lot more detail.

How about just sort of a higher-level commentary. When we try to think about the cash flow generation of the HR businesses relative to dealer capital spending levels or tax rate, but it's probably too early on that one. But can you give us just a high-level thought the business is similar, is one much better, one worse on capital efficiency, cash flow generation? Any other commentary, that would be great.

I think that those businesses are exceptional in terms of their profile around capital usage on a normal ongoing basis, if you will. So the only factor that would change that equation is really what I would call voluntary decisions about acquisitions. But if you look at the businesses in terms of their need for capital, they're very, very similar even though the Dealer Services business has some nuances in a couple of areas in terms of our international business having a little bit more licensing fees versus recurring revenues. But when you would put it all together, the businesses are very, very similar, which is why we held this business for so long and why it's been so good to us. It's -- we share a lot of DNA. This was not -- even though they're different industries and one is very focused on automotive retail and the other one is HCM, which is part of why we're making the separation, the separation is not because of the underlying dynamics or performance of either business because the Dealer business has been performing quite well. So to put it, I guess, in plain English, I think the cash flow generation capability of Dealer on a relative basis is almost the same as Employer Services: very low capital expenditure requirement; very good margin, which by the way is very similar to the ADP -- overall ADP margins. So if you start off with "net income" and you add back depreciation and amortization and you go through all the normal working capital changes, I know you're going to see, on a smaller scale obviously adjusted for size, a very, very similar picture in terms of cash flow generation capability. Then the decision comes down to, do you do other things like capital expenditures that can utilize, I think, capital, more or less. And again, over the years, we've had times where Dealer has been -- has made a number of acquisitions. There's other times where Employer Services have made a number of acquisitions. So that part is a little bit harder to pin down. But that's going to be up to the Dealer Services management team and their Board of Directors.

Great. And then the follow-up question, you talked an awful lot about the new platforms across RUN and Workforce Now and Vantage. You haven't talked a lot about changes in technology and platform within the PEO business. Obviously, that continues to be a terrific grower. But can you give us just sort of a high-level sense of how that's evolved over time, and if the offerings within the bundled solution there have changed a lot in recent years? And ultimately, I'm just trying to think through the continued competitiveness of that business?

Very good question that Jan asked me about a year ago about -- as we talked about modernizing and migrating and so forth, the PEO has really been using the same underlying platform for a while now. The difference with the PEO or perhaps why it may not be -- it's important, but why we are in a slightly different place is the co-employment model creates a much different level of touch point with the client in the sense that we're highly engaged in the clients' HR decisions. We're highly engaged in their benefits decisions, not just the technology, but in the decisions themselves. We actually provide them the insurance products around workers' compensation and healthcare. So it's just a much broader, bigger relationship. Having said all that, the employees of the clients in the PEO, which are now, obviously, over 300,000, have the same desire to have the same experience they had with their online banking. We mentioned that in our opening comments that the consumer experience at the employee level is still important and even at the practitioner level. So in response to that, even though we haven't change the fundamental underlying platform itself, we have made some fairly significant improvements and investments in the user experience, both at the employee level -- worksite employee level and at the practitioner level. And we saw a demo of that in one of my staff meetings just a few months ago, and it was quite impressive. And particularly around items related to healthcare reform and ACA, they're probably on a leading edge of providing tools to both the clients and to the employees to deal with kind of the new regulations and to actually comply with those regulations.

The next question is from David Grossman of Stifel Financial. David M. Grossman - Stifel, Nicolaus & Company, Incorporated, Research Division: Carlos, if you look back over time, that AAA rating has been an important element, maybe important is an overstatement, but an element of ADP's branding. And I assume there were both advantages and constraints imposed on your business as a result of that. Can you help us better understand what the tradeoff, if any, as you move forward, as you think about the change in rating in terms of both positive and negative that may be an outcome of that?

I'll give you a couple of thoughts there, and I'll let Jan take a crack at it because he's done a very effective job in communicating with our external constituents about that topic, so he's given a lot of thought and talked to a lot of people about it as well. But to be clear, and I think Jan has made this clear as well, we were obviously -- we were aware that we were going to have a potential change in our rating as a result of what we consider to be a strategic decision. Over the years, we have come across other strategic opportunities, for example, whether they be acquisitions that -- and we've never looked at large multi-year dilutive acquisitions. But when you look at a larger acquisition, even if it's in the HCM space, if it requires taking on a modest amount of debt, that would've also led to a change in rating. So we've had those discussions over the course of several years and always came to the conclusion, and the board, I think, recommended that we not discard our credit rating for the sake of discarding it because we were proud of it, and we enjoyed the publicity, if you will, of being 1 of 4 AAA-rated companies. Having said that, the board and my predecessor and his predecessor were always very clear with you and with everyone that for the right strategic transaction, we didn't believe that it was worth not doing a strategic transaction in order to preserve AAA rating because it was largely a source of pride and not a source of financial advantage. So those there's no change in our -- we obviously don't have any debt, so it doesn't change our borrowing costs. And even if we do borrow at some point in the future, at least today, the debt cost of between AAA and AA is nonexistent. And so when you look at the full picture together, it was not a decision that we took lightly. It was a decision that we obviously thought about a lot, spoke with the board about, Jan and I spent a lot of time discussing, but this was the right thing to do because we think it's the right thing to do long term for ADP and for Dealer Services. And at least so far, our expectation has been proven out, which is that we're managing really a public relations issue rather than a financial or real issue because it has no impact on our business when you really get down to it other than potentially a positive impact of creating more financial flexibility for us down the road. So Jan, I don't know if you have any...

I think you covered really the vast majority of it. After the spin, we did survey, of course, our sales force and inquired about the potential client reaction, the impact, and there was none. So really, even the public relations impact from being "downgraded" was nonexistent from what our sales force experienced. So I think, overall, the outcome for ADP is a better place, more financial flexibility for us strategically in the future and our business model being intact. But for all the things that we need to do relative to the client fund and Money Movement operations where credit rating does play a role and the AA is perfectly wonderful rating for that is we monetized our opportunities here I think in a good way.

And I think you also -- well, you should hear that -- as you have seen that our commitment to our fortress balance sheet has not changed. And so even though we have more financial flexibility going forward, part of what we represent in terms of our industry is really we're still highly differentiated in terms of our ability to move more than $1.4 trillion through our Money Movement systems. The importance of credibility, the importance of the relationships we have with tax agencies and with the IRS, these are all very, very important things to us that we're never going to compromise on. So the credit rating is one thing, but I think our commitment to our financial principles and how we run our company in order to be able to make good on all these commitments to both our clients and also to all the agencies that we work with has obviously not changed. And again, competitively, if I were one of our competitors, this would not be one of the items I would focus on in the sales call because, obviously, we would -- we welcome those discussions either in a AAA or a AA any day. David M. Grossman - Stifel, Nicolaus & Company, Incorporated, Research Division: Understood. And I know that this has come up in a couple of other questions, but the PEO obviously saw significant growth in both revenue and worksite employees. And you've talked about the Affordable Care Act in the past and that potential impact on the business and weren't quite sure how that would exactly play out. But do you have any better insight into what are some of the specific drivers right now that are creating some acceleration in growth in that business?

The PEO really acts as a -- and always has, so this is nothing different, acts as a large employer for the purposes of healthcare and workers' compensation, and that's part of the value proposition is that you create scale in purchasing, in distribution, in administration of a lot of services. So not just HR services and benefits administration payroll but also on the products themselves, the healthcare and the workers' compensation. So that has been the formula since ADP has been in the PEO business. So that has not changed. Acting as a large employer of providing healthcare benefits to what are really client employees, if you will, at a sub-level, we have thousands of clients, obviously, that are part of our PEO business, creates an advantage, if you will, from a purchasing standpoint because our cost of healthcare we're purchasing on a large scale. And as a large employer, these are the small businesses we're having to purchase individual small business policies. So there has always been some theoretical advantage because there's also other drivers that drive cost of healthcare like your experience. Like do you have high losses, do you have low losses, the demographics of the age and makeup of the workforce. So there are lots of other factors that drive the cost of healthcare as well. But this issue around buying either as a large employer or a small employer has always been a factor, but it's been magnified by healthcare reform as new regulations and new rules have been imposed and new price controls have been imposed on small business policies and small business pricing. So that's really where some of the competitive differentiation for the PEO, I think, has come from, where it has improved. But again, we're very proud and we're very happy with the acceleration. And there's no question it's an acceleration. But I just want to point out that this business has been performing well for a decade and has had double-digit worksite employee growth in the past as a result of the same factors that we're talking about today. But clearly, they've been amplified as a result of healthcare reform. David M. Grossman - Stifel, Nicolaus & Company, Incorporated, Research Division: I see. And perhaps if I could just get one more in. You brought up this -- the idea that you were working on expanding capacity for conversions. Could you just, perhaps, elaborate on how that impacts the competitive dynamic in retention? I think you mentioned that. I was just hoping to clarify that quickly.

I think I was speaking really about the upmarket space, and I think it was in reaction to a question about we're making progress on low end, on the mid market, and I think someone was asking about what about the upmarket since we were not talking about that a lot. And so as a reaction really to the question about the upmarket, we have very large investments in our upmarket migrations already as we've been for several years moving clients from one version of enterprise to our latest version of enterprise. And I was really only alluding to the fact that we, as a result of demand, that we've heard from clients, both at Meeting of Minds but otherwise, that we feel we need to expand that capacity to be able to migrate clients not just to new versions of enterprise but also to Vantage. So wish I had more detail to report on that, but there's really -- I don't think you should expect any -- this was not intended as a major announcement competitively. This was about just kind of moderate, modest increases that are already significant capacity to National Accounts to migrate clients, and we can also migrate some Vantage clients as well.

And the next question is from George Mihalos of Crédit Suisse. Georgios Mihalos - Crédit Suisse AG, Research Division: Carlos, you mentioned an opportunity to upsell or cross-sell clients as you convert them to the newer platforms and sort of increase the revenue per client. Is there a way we can sort of think about that across the different segments? Is it x number of modules that you generally have on the legacy platform and now with the transition it's increased by 2 or 3 modules or maybe a 3% or 4% or 5% increase in revenue per client. Any sort of color you can provide there?

Yes, I'll answer this. The newest example we can give is for our mid-market migrations that clients migrating onto Workforce Now platform. And I think I talked about in prior calls about it. We have seen really 2 sources of improvements. Number one is clients buying in the process of converting and clients staying longer is the second source of improvement of lifetime value of the client, if you like. And the numbers have been now fairly stable over the last few quarters. So I think I can be pretty, pretty precise with you. Where about 30% of clients that convert buy additional modules, about 1/3 of the clients, so to speak. And it happens within the timeframe of the migration plus/minus a couple of months or so. And when they do so, the overall revenue base of our migrated clients is about 15% higher than it was before. And clients have several percentage points of retention improvement compared to the old platform that they were on, which is lower than the average of our clients. So you see really driving about 15% more revenue, 30% of the clients choose and -- retention improving. Georgios Mihalos - Crédit Suisse AG, Research Division: Okay, that's helpful. Is it safe to assume that the impact from RUN is somewhat lower than that?

Yes, it is because the most important loss driver for RUN is still downmarket, out of business and economic, general economic reasons. So you'll see, in retention, we have not seen -- we have seen retention improving in SBS gradually, and certainly RUN is contributing to that, but it's not as pronounced as we have seen it in the mid market. And we have a fairly stable mix of HR components that we cross-sell into the businesses. And I would more describe it that we had that for a while. You could buy EasyPay off a legacy platform in -- with richer HR bundles before, and you can do that on RUN, too. And I believe we have a mix of clients that is already optimally penetrated, so to speak, because not all clients need really more comprehensive HR solutions. If you're a 1- or 2-person company, you may not want to choose for that. So the mix and the downmarket, we feel, is already very good. So we didn't see missed upsell opportunities, so to speak. So we think of the RUN conversion is more revenue neutral. Georgios Mihalos - Crédit Suisse AG, Research Division: Okay, that's helpful. And then just last question. You guys spoke about some more flexibility on the financial side post the Dealer spin. Does that change your attitude towards employing debt on the balance sheet? And does that change at all your thoughts around the pace of M&A or the size of potential M&A transactions?

I don't -- I think, again, given the discussions we've had with our board over the last several years, I think the answer to that has to be no because we've never felt constrained. But it is -- it's also not fair to say that it's a nonissue or nonevent because it was a distraction. So we had the AAA, if you will, monkey on our back, although we were very happy to have it, but it was a monkey on our back. And it was something that came up as a result of discussions around strategic transactions, be they slightly larger acquisitions that required employing [ph] a little bit of debt or just employing debt as a way of optimizing the capital structure of the company. So it's just not -- again, I'm obviously in those discussions, and it's just not -- it's never been a constraint. If we felt that there was something like we just did with Dealer Services that would add value long term to ADP, the board was always willing to do it. Having said all that, I think it's -- the reason I say more financial flexibility is, I don't know if it's a 5% or 10% increase in flexibility, but there's some improvement in flexibility because there's really going to not be that obstacle, if you will, of that monkey being on our back anymore.

And the next question is from Jason Kupferberg of Jefferies.

This is Ryan Cary calling in for Jason. Hate to beat a dead horse on the PEO growth but, obviously, it's accelerated the past 4 quarters. Just want to be clear, are you actually taking share, or is something really happening to the market that's just increasing the overall size of the pie?

That industry is very difficult to get good, reliable data on because there are only -- I think now, there are a couple of public companies. There used to be only one. But it is difficult. There is an association that provides some data. I think based on what we see from the industry association and based on other information that we have, we believe we're gaining market share.

Okay, great. And just quickly, I know we're running over here a little bit. I don't believe you have any exposure to Russia and Ukraine. I just wanted to doublecheck on that. And I'd also love just a little more commentary on Europe and the climate. I know it's been a drag the last couple of quarters. I believe it improved modestly this quarter, but just kind of your thoughts on the outlook.

Yes, so we have no exposure to Russia and the Ukraine. And the European business environment has been more difficult for us compared to the U.S. Just a reminder, there is still revenue growth in Europe, it's just below the average of ADP's growth. So we have seen an ever-so-slight improvement in the pays per control metric quarter-over-quarter. And a couple of countries, and those are the countries that you hear in the press, are improving. We see that the same way. The Germany and U.K., and we're having a good year in -- better year in France. So we see slight improvements, but the pays per control are still declining. So it is a relative easing of the pressure that we see. We had -- we continue to enjoy good retention rates in this market. And so it is just that slow-growth environment. I would -- we anticipated the question around the international economic environment, and it's really just a gradual, ever-so-slight improvement that we wanted to communicate. I don't think it's a great change [indiscernible] change that we are seeing at this point in time.

The next question is from Matthew O'Neill of CLSA. Matthew O'Neill - Credit Agricole Securities (USA) Inc., Research Division: I had a quick question, following up, I know we've talked a lot about retention this morning. I was curious, do you guys just look at retention or think about retention as having a theoretical maximum that's actually below 100%, which you sort of discussed this morning being attributable to the economy here, to the business consolidations or things like that, as far as a target that you work for or just getting your clients at 100% satisfaction and then what is unfortunately lost that's completely out of your control? Just wondering if you could discuss that.

Sure. The -- and we'll prepare for the next time to have more detail around actual numbers. But clearly, given everything we've said, the theoretical maximum is not 100%. So I'll use an example of this. In the downmarket, I think Jan alluded to it, in the low end, approximately half of our losses are really related to companies just going out of business. So you've seen all the stories and the publications about how the amount of turnover in small businesses is quite high, which is just part of the way America works. People start businesses and many of them fail and many of them are successful. And so there's a good close to 10 percentage points of losses in that low end -- between 8 and 10 percentage points of losses that are, what we call, uncontrollable, where either bankruptcy or they just stopped processing because they go out of business, they just close down. Some of these are not even formal bankruptcies because they're just sole proprietorships and they just stop doing whatever services they are doing. So that alone, the SBS theoretical maximum being somewhere in the low-90s at best, obviously, factors into ADP's overall ability to achieve 100%, and that, obviously, brings it down to somewhere lower than 100%. I don't know if it's 97% or 98%, but we'll do the math and get that for you. And then in the mid market, you have the same phenomenon, but in a much smaller scale, obviously. There are some number of companies in mid market that are uncontrollable losses, bankruptcy, out of business. But it's a smaller number because their business clients are between 50 and 1,000 employees. And the level of failure rate in that segment of the market is much, much lower than in…

The next question is from Tien-tsin Huang of JPMorgan. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Just I guess I wanted to ask on the -- maybe I'll start with the SaaS payroll question. A couple of new companies have come public. I know there's a lot of PEO questions, but just on SaaS, given how those stocks are trading, I'm curious if that changes your appetite to acquire similar players or similar technologies.

We're pretty happy with our own technologies, as you probably could tell, on our new -- certainly, on our new platforms. So no, it doesn't. I mean, we're -- again, we're always open to using our capital for the best interest of our shareholders, including acquisitions. But we don't feel -- we don't have a compelling need right now to buy technology or to buy platforms. We have a compelling need to accelerate our migrations and to sell more of what we already have. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Okay. I figured that was the case, just wanted to make sure, Carlos. And then just beyond -- I just want to clarify on the guidance, you muted the high end of the revenue range but to the midpoint of EPS. Is the difference just the discontinued operations, or is it also the slower buyback and the rate outlook change?

No, the guidance does not contemplate the buybacks, the incremental buybacks above revenue dilution. And the guidance also excludes the disc ops as well as the onetime cost that we anticipate in the fourth quarter for the Dealer spin. So this is really the true continued operations number that we guide towards. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Right. So it's just -- you're just a little bit firmer, I guess, just on earnings...

That's the rest of the year, and we have really only 1 quarter left. We felt it was -- versus the true disclosure, I narrowed our guidance to what we see, and that will be appropriate to help you guys a little bit.

The next question is from Mark Marcon of Robert W. Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I was wondering if you could discuss a little bit more about what was truly exciting at the Meeting of the Minds conference in terms of future functionality with regards to the improvements in Vantage, and how quickly will those be available broadly?

We just recently had a recent release of Vantage that I think adds some great enhancement done [ph] up from a feature functionality standpoint. But the really exciting part at Meeting of the Minds was sharing the new user experience, which the ADP Innovation Labs folks that we now have working out of New York City, obviously, have made -- and also here in Roseland, New Jersey, have obviously contributed to that. And we did -- which is again different for us. We did an on-stage demo that Mike Capone and Mark Benjamin did for all of the clients and some prospects of what that new user experience was going to be. And as we mentioned in our comments, it's going to be available in the early fall. And that really was probably the most exciting part of the meeting because it showed not only our commitment to usability and user experience both at the practitioner level but also at the employee level because now we have more employees of our clients touching our products than we have clients and practitioners just because of the nature of how our business has changed. And so I think the clients and prospects see that as a huge positive because if we leave them the administrative work, people can easily and intuitively handle all of their HR administrative needs and, by the way, do some things that help them in terms of managing their own work life. For example, in the demo, it showed how someone can go through an open enrollment to choose their benefits and how, because we have payroll information and time information because we have the entire HCM platform, how on a single screen on one dashboard, the employee can see how a change in the healthcare choices affects their take-home pay, affects their taxes, affects all other aspects of their work life, if you will. And so I personally thought that, that was the most exciting moment and where I think we got the most buzz is when people saw that we're really committed to this technology innovation from a user experience standpoint because I believe that from a feature functionality standpoint that we already are pretty robust in terms of being able to deliver solutions around tax compliance and all the regulatory challenges that our clients experience. And we've been doing that for a very, very long time.

I add one component to it that the user experience now includes also the leverage of our data. So not only the scope of the products that we are able to integrate into the user experience but also the size and number of companies that we can include and offer now a benchmark and advice to either employees or managers on how to make their decisions. So we're really leveraging our data analytics in a very practical and intuitive way to the benefit of the employees. So kind of trying to build really what we have been talking for the last couple of years, sources of data, our social capabilities, the source that we have so many employees on our platforms and translating it into very tangible values that you experience when you are on our platform.

It's a brighter visual since Jan only gets more excited about it. As I remember the moment, not only do -- does the employee see the impact on the change on their paycheck right away and can do what ifs, if you will, on the screen. But to Jan's point, as they're choosing the different healthcare plans, our data actually will recommend to them or will tell them, in fact, using social and using Amazon-like ratings, if you will, they will say, the majority of the employees in your situation at your pay level, with your number of dependents, pick this health plan. There are these other 2 or 3 choices, but this is the one that is most often chosen and, by the way, here are the ratings from other employees of multiple companies of these different healthcare plans. So it's very, very powerful, I think, use of data and analytics. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: That sounds like a very material improvement. As we think about just the fourth quarter new sales and you have this big grow over target, is there a possibility that some clients will hold off on making any decisions and just wait until this is broadly available?

We -- that's really not our intention. And it's not what our -- what has been our historical experience. So our salespeople, we've obviously been through this before where we have new products roll out, and we have enhancements to our products, so in our large account business, these cycles are very long sales cycles. And so people typically don't stop making decisions or don't start making decisions because of specific product feature functionality or technology available. And it's not been, I think, our prior experience. So we're not -- we didn't see that in this quarter. Obviously, our sales were very strong. And we don't expect that to be the case because we have, I think, obviously, incentives in place, both for our sales folks but also for our clients because we want to get, obviously, them contracted as soon as possible. And when we implement them or when we start them, I mean, we, today, for example, would be happy to sell a National Account client for a fall implementation or even a January 1 implementation because that sale cycle takes that long. So frankly, given the timing of the announcement, I don't think it has any impact on our sales in terms of slowing our sales. That wasn't the intention. It was intended to actually accelerate our sales. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then with regards to the -- to Wati [ph], how much was that impact?

Well, the Wati [ph] impact is, I think it's a little, I would say, maybe half a basis -- 50 basis points or so, roughly. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: 50 bps. Okay. Great. And then with regards to just the gaining share in the PEO side, what's the primary driver do you think that's driving the share gains?

Well, I mean, frankly, based on the data that I see, excluding acquisitions, we've been gaining market share for 10 years. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I know. I'm one of the few people who follow that other competitor. But what do you think is driving it in an accelerating rate right now?

All right, just to be clear, I'm not picking on one competitor because I wasn't referring to any one competitor. I'm talking about the entire -- because I look at the entire industry. There are plenty of other competitors, and there's a lot of acquisition activity and a lot of available data, even though most of them are private. And my comment was, I think, was across-the-board, not any specific competitor. But I wish I could tell you more other than, clearly, they're getting some help from the concern people have around ACA and healthcare reform. But also, again, my personal view is that the business is executing really well. I mean, they've done some really great and innovative things even on the sales side over the last 2 or 3 years. So again, unrelated necessarily to ACA and to healthcare reform, but just around the value proposition and how we sell and also how we get and generate leads from our partners in major accounts and in SBS. So I think we've had great sales leadership there for several years and I think great general management leadership, where these investments that they've made in the user experience and in technology without, again, changing the underlying platform, but I think the presentation of the experience to the employees and the clients has been enhanced significantly. And then there's been some good old-fashioned improvement, if you will, from a continuous improvement standpoint in just processes in terms how open enrollment is conducted, how new businesses -- how new clients are implemented. So I think they've just had great execution, and I think they have some help now from the market in terms of healthcare reform.

And the next question is from Jeff Silber of BMO Capital Markets.

This is actually Henry Chien calling on behalf of Jeff. Just a quick one from me. About margin guidance for ES, just want to doublecheck that nothing has changed. Does it continue to be driven by sales productivity in the migration clients?

I'm sorry, can you repeat that again? The margin question on ES was...

In terms of your guidance for margin expansion to ES?

No, I think if you see our -- I believe we included in the press release that our guidance is consistent with our prior guidance, if I'm not mistaken. So I'm just reading through...

Yes, I think you were thinking that it was due to the migrations and sales efficiencies. There's also a lot of operating efficiencies going on. I wouldn't attribute it to migrations at this point.

So again, to be clear, our guidance, I think, what we stated in the press release, which was consistent from our guidance -- consistent with our guidance for the entire year is a pretax margin expansion of about 100 basis points. And so that would include both the negative impact of migration and sales costs but also positives of what Elena was referring to, as we're obviously doing a lot of things to try to get more efficient and better at what we do.

At this time, I'd like to turn the call back over to Carlos Rodriguez for closing remarks.

Well, thanks very much for joining us today. As you can tell, we're very pleased with our results for the quarter. You can also tell that we're obviously still very committed to our shareholder-friendly actions around dividends and share buybacks, notwithstanding the delay in buybacks as a result of the waiting for the announcement for Dealer Services. Over the next couple months, we're obviously going to be working very diligently, and there's a lot of people putting a lot of effort, a lot of hard work to getting the spinoff of Dealer Services completed, and we're going to update you along the way about our progress. I hope you share my enthusiasm for Dealer's feature, as well as ADP's future, given that the transaction is going to free Dealer to focus on their own industry while, obviously, highlighting our commitment to being the global leader in human capital management. I think that the transaction is going to position both companies for great future and strong growth. And again, we thank you for joining us this quarter. We look forward to seeing you -- talking to you next quarter. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.