Good morning. My name is Kevin, I'll be your conference operator. At this time, I'd like to welcome, everyone, to ADP's Fourth Quarter Fiscal 2017 Earnings Call. I would like to inform you that this conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question-and-answer session. Thank you. I would now turn the conference over to Mr. Christian Greyenbuhl, Vice President, Investor Relations. Please go ahead.

Thank you, Kevin, and good morning, everyone. This is Christian Greyenbuhl, ADP's Vice President, Investor Relations, and 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 fourth quarter fiscal 2017 earnings call and webcast. Before we begin, you may have noticed in the slide presentation, posted on our website, that we included the detail of our client funds available for sale portfolios as of June 30, 2017, which shows the embedded book yields of the portfolio by year of maturity. This chart is in the appendix of the presentation, and is provided for your information. During our call today, we will reference certain non-GAAP financial measures, which we believe to be useful to investors. A reconciliation of these non-GAAP financial measures to their comparable GAAP measures is included in the earnings release and in the supplemental slides on our Investor Relations website. This quarter you may have also noticed that we've included more expansive disclosure regarding our definition of organic revenue, so as to exclude the impacts of foreign currency translation and M&A activity. We believe this best reflects the underlying operating performance of our business, and I encourage you to review our earnings release for additional details. I'd also like to remind everyone that today's call will contain forward-looking statements that refer to future events and, as such, involve some risk. We encourage you to review our filings with the SEC for additional information on risk factors that could cause actual results to differ materially from our current excitations. Now, let me turn the call over to Carlos.

Thank you, Christian, and thank you all for joining our call this morning. We appreciate your interest in ADP. This morning, we reported our fourth quarter and full-year fiscal 2017 results, with revenue growth up 6%, both for the quarter and the year. Revenue for the year was up 7% on an organic basis, benefiting from a solid 6% client growth and from the continued strong performance of our downmarket, PEO, and multinational solutions. In line with expectations, our new business bookings declined 7% this quarter and 5% for the year. While we are disappointed with this year's overall bookings performance, it's important to look at the underlying dynamics. The clients were concentrated in our mid- and upmarkets and the challenges were due in large part to growing over the strong fiscal 2016 sales of solutions that assist our clients in complying with the Affordable Care Act. Despite these challenges, the sales opportunities within the mid and upmarkets continue to demonstrates a solid environment with positive growth prospects. We continue to be very pleased with the momentum and performance of our downmarket and the PEO, both of which continue to demonstrate the value of a broad-based portfolio of solutions. During fiscal 2017, we increased our head count investments in our sales organization to better position us for growth during fiscal 2018 and beyond. As the tightening labor market creates additional demand for human capital management solutions, we expect these investments to help us further grow due to the effects of the regulatory uncertainty that prevail within the mid and upmarket since the November U.S. Election. Accordingly, as we return to a more normalized growth trend, we expect fiscal 2018 new business bookings to grow 5% to 7%, gradually expanding back to pre-ACA growth levels as we progress through the year.…

Thank you very much, Carlos, and good morning, everyone. During the quarter, we took a restructuring charge of about $49 million related to our Service Alignment Initiative, which brings our total related charges for fiscal year 2017 to $90 million, which were in line with our estimates for the year. Certain non-GAAP measures in my commentary to follow, excludes the impact of these charges, as well as certain other one-time items recognized earlier in the fiscal year and in fiscal year 2016. As Carlos mentioned, fiscal year 2017 was a challenging year for ADP, as we worked to further stabilize retention and build upon the strong new business bookings from fiscal year 2016. As a result, for fiscal year 2017 ADP revenues grew 6% on a reported basis to $12.4 billion, 7% organic. Pre-tax earnings from continuing operations before income taxes grew at 13% on a reported and constant dollar basis. Net earnings grew 16% to $1.7 billion on a reported and constant dollar basis. Adjusted earnings before interest and taxes, or adjusted EBIT, grew 8%, or 7% on a constant dollar basis to $2.4 billion, despite about one percentage points of combined pressure from our second quarter business disposition and our fiscal year 2017 acquisitions. Adjusted EBIT margin increased about 30 basis points compared to the 19.5% in fiscal year 2016. And included about 20 basis points of pressure from dual operations cost related to our Service Alignment Initiative. We will always focus on making the right investments for ADP's long-term success. And our results this year reflect the impact of our investments to continuously innovate to transform service and to further expand our sales force. With these investments, I'm pleased with the margin expansion that we have achieved this fiscal year, despite the impact to revenue growth from…

We will take our first question from the line of David Togut with Evercore ISI.

Good morning.

Good morning.

Good morning.

Could you talk a bit about customer buying intentions? What is the sales force seeing downmarket, midmarket, and up-market in terms of sales cycles and demand patterns as you look out to FY 2018?

Well, I think as we've said in our comments, the midmarket, the PEO, multinational have all been quite strong. And really, especially, in a downmarket, as we mentioned, has been really no impact from this grow-over issue with ACA. So, we've, I think, had what I would consider to be the best results in several years in that space in the downmarket. In the midmarket, obviously, we had a very significant grow-over, given the strong sales for ACA products in 2016. But as we've kind of checked in with the sales force throughout the year, and frankly, continue to make investments to keep their heads in the game, we've maintained our turnover at almost exactly the same rate it was in the prior year, which is a very encouraging sign because, obviously, it was a very tight labor market. So, my worry was given our performance, we might lose some of our sales force. But I think it's a sign of, I think, optimism on the part of the sales force that there is really no issue with the economy or with our products or competitively or with pricing that it's really just unfortunately a mathematical issue that got aggravated by some of this uncertainty that came out of Washington, which really stop people from buying not only – or slowed the sales of ACA to a much lower level than we had planned, but I think just created some kind of short-term uncertainty after November. I think in the upmarket, we did, I think, feel after November that there was some elongation in terms of decision-making, which is a little more logical because you have relatively sophisticated buyers there. And I think some were probably waiting to see what would happen with the regulatory environment, given that there was talk of repealing ACA and repealing a number of other regulations within weeks, as we all know that hasn't happened. And so, I think gradually things feel like they've gotten a little bit better and things have loosened up a bit. But as we know from what's going on in Washington yesterday and today, I think in that space in particular, I think there's still, I think some probably wait and see on the part of buyers. At least in our experience with our products.

Understood. And then just a quick follow-up on the Service Alignment Initiative. What is the incremental spending on that in FY 2018? Basically, the delta between the adjusted and the diluted EPS guidance?

So, our non-GAAP charges for the year, I think, is expected to be $30 million to $35 million. And it's really a very small margin impact incremental to the 20 basis points that we had in 2017. So, I think a few basis points more, but more or less between $20 million and $25 million if I give you a range, I think I would expect pressure so the incremental is very little.

Yes. And I think if I you stick to like looking at 'our adjusted results,' then you shouldn't even worry about it for next year because the dual ops incremental expenses is minimal. So, there's really nothing to worry about. By the way, those – that will be two years of – so we had a step up of – and it was a 20 basis point impact of dual ops this year. Next year, it's about the same level of expense and then it should fall off, obviously, in the following year. But the restructuring costs themselves for the Strategic Alignment Initiative are non-GAAP. And so you shouldn't have to, I think, worry too much about trying to figure out the analysis there. Because should not be – should not enter into the picture. Other than, obviously, we're incredibly excited about what is going to be the outcome of the Strategic Alignment Initiative down the road.

Have you seen an impact from it yet?

Well, I think that it's obviously very early. We're about halfway through in terms of the hiring plans. So I would say that, I think, we joke around that I think this is the easy part. So putting buildings up and hiring people, we definitely accomplished it. And we're right on track in terms of – and on schedule in terms of our objectives. We feel like we've gotten some great people. We've got great engagements. Obviously, they're in the process of being trained. So, I think all systems, so far, we haven't seen anything to indicate that our expectations that we had of the project are going to be anything other than what we expected. So we're very excited that we've been able to kind of stay on track. But I think it's a little early to really declare victory. But we're very optimistic as this, obviously, is going to create a much enhanced experience for our clients, given that we're putting teams in large locations that are, what we call intact, and are able to deliver services across multiple modules rather than just in silos. Not to mention, obviously, the consolidation effect of having large groups of associates, which we've seen already in two locations that we've had for several years, El Paso and Augusta, creates very, very high engagement, better NPS scores, better client experience, and better associate experience as well. So, we're very excited. It's obviously a big investment. And fortunately, it's on track as of now.

Thank you. I appreciate all the helpful detail.

Thank you.

The next question comes from Tien-Tsin Huang with JPMorgan.

Hi, good morning. Thank you. Just looking at the slides here. I was hoping, maybe on – just to help unpack the margin investments you're making in the ES again? Is there a way to maybe break it up to think how much of the margin investment is in, say, sales investments and product whatnot versus investments in retention, or if there's any investments in pricing? For example, is there a way to simplify it that way?

Yes. It's – let me start at the enterprise level to give you a little insight about the margin dynamics that we are experiencing compared to – between 2018 and 2017. And then, I can give you some pointers on the segment level. So, the pass-throughs are the most important factor that are very transparent, really. And if you decompose the margins for 2017, you will identify that our overall EBIT margin expansion was about 30 basis points. But we faced about 120 basis points of pressure on our overall margins just from the fast growth of our pass-throughs. And so, that's a starting point of our business dynamic between the two segments. And so to offset that, we had basically about operational scale and contributions to margins of approximately 100 basis points to 120 basis points, if you like. So – and that's kind of the dynamic. Sales was flat to margins this year and so operational scale is basically contributing about net 30 basis points to all margin expansion, offset by the pressure from the pass-throughs. And next year, we kind of anticipate a similar momentum relative to the pass-through development. So, we're starting already with more than 100 basis points of pressure. And what you now will see is, well, slightly down and, largely what will happen is slowing of the revenue growth will make the operational scale a little bit harder to achieve because we kind of set our cost base to grow, so to speak, in to a growing revenue base and right-sized for our service levels throughout the fiscal year. So, we have a little bit of a higher cost base in the first half of the year where you basically see operations, basically, being flat to margin contribution, and then in the second half, the kind of return to a more normalized level. So net-net, the margin pressure from the pass-throughs is only partially offset by the operational scale to the operations and sales throughout, for all intents and purposes, is kind of more or less flattish contribution to margins this year. I hope that's helpful.

And I think the last thing you mentioned, which should also, I think, address is, is it related to pricing, and the answer is not. For the last several years, we've been trying to gradually bring down our, 'price increase'. And we've done that again this year. But it's $5 million to $10 million. It's not a big deal on the 'overall gross and net price increase that we passed through to our clients. So – but there's no change in pricing in terms of new business or the competitive environment or anything to that effect. I think it's really related to the factors that we're seeing that Jan was talking about in terms of some of the revenue growth issues. The good news for us is that the scale really starts to pick up again for us in the second half. So if you look at the way this issue has worked with the grow over, part of the confusion might be related to the fact that our fiscal year is in the middle of – obviously, ends in the middle of the year, and the impacts are really calendar-year impacts. And so, if you go back and you look at quarterly numbers, you will see that we had two strong quarters the first half of this fiscal year, and then now we just had two relatively weak quarters because of the grow over issues. So we will have another two-week quarters because of the grow over issue at the beginning of fiscal 2018, and then our plans are that our sales return to near pre-ACA levels in the second half, as well as our revenue growth begins to once again gradually accelerate. Now, of course, that means that we have to hit our plans in retention and new business bookings, but that's the way math does work. Everything we've been telling you, I think, is accurate about the impacts of the grow over of this ACA issue, which were significant. We've mentioned that the business itself is about $175 million in revenue, which means that we sold about $175 million. And so that affected our new business bookings, which is what's causing the grow over from new business bookings. And likewise, the $175 million in revenue, even though it didn't come all in one year, a lot of it did come in January of 2016, which means that from a revenue standpoint, you also have, call it, a point or so of incremental growth that you've picked up from ACA. And then, obviously, now, from a comparison standpoint, you lose a point. And that's right about how the math works because on an organic basis, we're at about 7% growth this year, and we were at about 8% last year. And so our hope is that once we get past the next couple of quarters, that we get back here to business as usual.

Yeah. So that's all great. That's really helpful. So just a quick follow-on, given everything you guys just said there, so as we can move into the second half, and I appreciate you guys are spending through this cycle for the long term, is it fair to say, then, you'll be through the transition and you should get closer maybe going into fiscal 2019 to your longer-term targets on top-line and margin expansions or anything else that could derail you from doing that?

That's exactly the plan, and obviously recessions or...

Sure.

...conflicts with Korea, but that's exactly what the plan is. And I think that the second half of this fiscal year starts to pave a path for us to be there, based on our – obviously we don't guide and we don't give you quarterly guidance, but we have that in front of us here, and we're looking at it. That is exactly the picture we're seeing.

Thank you for the update.

Our next question comes from Rich Eskelsen with Wells Fargo.

Hey, good morning. Thank you for taking my question. I just wanted to follow-up on Tien-Tsin's question and hone in on the sales impact. I believe you said that was sort of flattish on the margins. But can you talk about what impact the declining new business bookings had on any incentive compensation? Was that offset by new sales hiring, and how are you building that into the plan for next year as you assume it goes back to growth?

Yeah, delighted to give you a little bit more background. As Carlos mentioned in his comments throughout this more difficult year on new business bookings in 2017, we continue to make, in particular, new sales hires. So our quota carrier count increased actually this fiscal year by 8%, which is about twice the rate of what we would typically 9% – Christian tells me it's 9%. So, it's higher than our typical rate. As you know, we try to grow our sales – new business bookings by approximately half through quota carrier growth and from half through productivity and new product additions. And so this year we overinvested, if you like, in head count. And so part of the lack of spend on commissions for product sales were offset by a) incremental incentives to our sales force to retain our existing sales force and investments into new salespeople that are now hired and gaining productivity and part of the lift that we're seeing on sales productivity next year is driven by these new fourth quarter carriers becoming more productive and making a contribution. So when you think about sales costs as part of our overall margin development throughout the year, it looks like that we have – that is about flat. It's about flat to margins, for all intents and purposes, for precision that we know. And in comparison, we had a little bit more margin pressure for sales in 2017 in the second half versus the first half because the first half in 2017 started kind of good. So you'll see this balancing out, basically, in 2018 where it is for all intents and purposes throughout the year, more or less flat, slightly improving towards the back end of the year.

Thank you. That's very helpful. Just following up also, earlier you talked several times about the strength in international and multinational. Maybe if you can go into a little more of the dynamics on what you're seeing there? Thanks.

I think our strength in particular – and we think we've talked about this for several years, is really our multinational solutions really do appear to be highly differentiated. And again, multinationals is both very, very large companies with very large populations of employees, but we also have multinational solutions for a company that may be headquartered somewhere in Europe and has 20 employees in four countries in Europe. So we really go all the way from very, very large Fortune 100 – or world Fortune 100 companies all the way to what I would call local multinationals, if you will, or regional multinationals. And so it's a highly differentiated product. We've had good sales growth over multiple years, double-digit revenue growth, generating great margins because now we've got scale, and the business is – I would just call it humming along. Our international business, I think, has gotten better on, what I would call, a relative basis, because it's been a difficult backdrop in Europe, which is our largest international business. We also have a business in APAC and Latin America, but our largest concentration other than Canada in North America is in Europe. And so that European business on a relative basis, slight improvement in the underlying pays per control. It looks like GDP is starting to pick up a little bit there. Sales, a little bit better this year than we have for the last several years, but I wouldn't say that that business is at the same performance level as the multinational business. We hope it will be at some point in the near future, but the international business, good, solid performance and really good margin performance as well where that business – 10, 15 years ago, my predecessor, we struggled for years to really get that business to perform as well as the rest of ADP from a margin and "retention standpoint," and I think we're kind of there now. So we've got good leadership and I think the business is performing very well. We're very happy with our international and multinational business.

And international is about 20% of the total? How big is the multinational piece? Thanks.

Multinational – sorry. I think in total is about $500 million, Jan? Is that...

It's a little bit more than $500 million, approaching $600 million, actually. And Carlos's description is correct. That's very good and strong, solid double-digit growth for many years. In Europe, a little bit lower, more mature business, but both components really showing nice margin expansion and good business characteristics.

And then what we call international. So the multinational is $500 million. For rounding purposes, call international $1 billion. And then Canada, another $400 million. So that's how you get to approximately 20%.

Thank you very much.

Our next question comes from Lisa Ellis with Bernstein. Lisa Dejong Ellis - Sanford C. Bernstein & Co. LLC: Hi, good morning, guys. Can you give an update on the migrations? Are you still on track to finish the midmarket migrations to Workforce Now by the end of the year? And where are you sort of seeing client interest or demand in shifting to Vantage in the upmarket?

We are on track on the migrations. I think we did about a couple thousand this quarter, probably 2,500 to 3,000 the previous quarter to that. So we're kind of in the same general ballpark, which just as a reminder is much lower than it was at its peak when we were in the middle of ACA, because we had a lot of accelerated migrations in order to get clients on the right platforms to be able to do ACA compliance for them. And then with the benefit of hindsight, that was an issue for us that caused some of our retention challenges. But fortunately that's all behind us now. And now we're back to what we were doing all along for several years, which is migrating clients at the right pace, with the right attention and the right what we call now white-glove service. We have I think it's 5,000 to 6,000 clients left in the midmarket? I'm checking for...

Approximately.

About 5,000 to 6,000 clients left. And so you can see that at the pace that we're on now, we have a shot at getting it done by yearend. We might have, whatever, 500 clients, 1,000 clients left at yearend, that doesn't obviously concern me because we would have done, I think, 60,000 clients. So if we have to – and again, the way our business works is everything has to stop in the middle of November because of yearend. And everything starts again in February. In other words, the company just becomes focused on getting through the yearend process. So it could be that we have 500 to 1,000. But it's obviously helping us on a number of fronts because our retention on our strategic platform is much higher than our legacy platform. So as the number of clients gets smaller and smaller, we get a mathematical lift, if you will, just because of the mix issue. So I think it's – I would say that it's probably not something that will be an enormous amount of focus for all of you going forward, but it is an incredible accomplishment. Because I was talking to the person who runs R&D for that organization about a week ago, and he named all the platforms that we had 10 years ago when he first went to that business. And we're down to one platform here, and we're close – almost across the finish line. So the power that that business is going to have now, the focus – and to focus on the competition and to focus on execution and NPS scores and retention is going to be, I think, equal to what we've done in the downmarket on RUN, and that gets me excited. Lisa Dejong Ellis - Sanford C. Bernstein & Co. LLC: Terrific. And then just as a quick follow-up, can you articulate what macroeconomic outlook is embedded in FY 2018 guidance and kind of what the latest temperature check on the U.S. macro environment?

As you can see and kind of read from our pays per control metrics and deduct from our money – from our client fund interest rate forecast, which are the most explicit components in our forecast, we anticipate that the economy is going to continue on a steady path that we have seen in the last 12 months, which, I think, is probably the best bet that we have today. The labor market is in full employment, and we have seen – and we are shifting our focus on delivering HCM solutions to our clients that help our clients to attract and retain their employees in a better way. So there's a slight shift in focus as you have full employment, the fight for talent and recruiting becomes more important, and we're prepared to offer great solutions for this. And on the interest rate environment, obviously the forward curves predict rate increases, another rate increase towards the end of the year by the Fed, and the rates are creeping up over time for a modest contribution on the client fund balances. So I think it's a steady state in a slight rate increasing environment going forward that we have baked into our plan. Lisa Dejong Ellis - Sanford C. Bernstein & Co. LLC: Terrific. Thank you.

Our next question comes from David Grossman with Stifel Financial. David Michael Grossman - Stifel, Nicolaus & Co., Inc.: Hi, thank you. I just wanted to ask a quick question about the competitive environment and just some rough math, if we assume that basically two-thirds of our ES business is mid- and upmarket in those segments, and the aggregate churn is about 5% annually, is it correct to assume that business as usual, if you will, for ADP creates about $300 million of opportunity, if you will, for your competitors each year? And then second, are there any other internal statistics that you can share with us that would give us some insight into how you've been faring competitively, let's say, over the last 12 to 18 months?

Sure. I think your math is probably pretty close, directionally close. And that's been obviously why we keep focusing so hard on our service experience and our retention rates because obviously every $10 million that we keep is $10 million less for the competition. So that's why you hear us being so keenly focused on retention over the last several quarters. In terms of competitive information, we've said before that we really don't have any one competitor who takes more than 10% of our business, if you will. So there's really not – and that's been consistent for a long, long time. So there is a lot of competition. So we have a lot of competitors, who operate in multiple segment s. The competitors in the downmarket are different from the midmarket. The midmarket is different from the upmarket. Some of them bleed across some of those segments. But in general, we have competitors that tend to be more focused on a particular part of the market than us, which are broadly focused. I think that gives us some advantages, which we leverage in terms of products and service capabilities, et cetera. But at the end of the day, we are very large, and we obviously are the target for a lot of competition. In terms of specifics, we do look very deeply on a quarterly basis at win/losses both head-to-head and sales and also in the book. In other words, clients that we lose to a particular competitor and clients we take away from a particular competitor. In addition to looking at the head-to-head competition from a sales standpoint. And again, this quarter, unfortunately, it's the same story as other quarters, which is there's no discernible pattern other than there were a couple of competitors in particular that we…

Yeah. We would like to try to help there. And I'll be careful and I'll let Jan do the closing here. Because of the way our business works, it's a recurring revenue business, and events tend to take place at calendar year ends like they did with ACA. So the first two quarters of this fiscal year should not look that different from the first two quarters of this fiscal year from a revenue growth standpoint. If our sales forecasts and our retention forecasts hold true, by the second half of this fiscal year, there will be gradual improvement on the revenue growth. Likewise, when you look at margins – now, clearly, as Jan said, we've been 'adjusting' our expense base to a lower revenue. We just didn't want to do it too quickly because we're trying to focus on retention as well, and we mentioned that we're making investments in sales. But there should be some gradual relief of pressure on the margin in the first half of this fiscal year compared to the second half of last fiscal year. But even more, 'relief' and improvement in the second half. And I would call it significant improvement and relief in the second half. And again, that's all mathematical, and it all works that way, and I think that's probably – I said probably more than I should say, and I'll let Jan...

No, I think a few more pointers. I think the risky part in building the quarterly model is to go and compare to the quarters one to one, first quarter versus first quarter because of this grow over issue that we had in the first half of fiscal year 2017. So we grew our earnings in fiscal year – first half of the fiscal year between 20% and 26% because of this revenue boost that we received. I think the sequential analysis is more meaningful because the cost base that we have in our business in the fourth quarter is likely to be smoothly continuing on. And so you make your revenue assumption, and then it's going to be very steadily improving with kind of acceleration towards the end of the year. That will be kind of my guidance. And I'll look at this, it really develops very smoothly. And then maybe one point is important, I tried to isolate it in my remarks, but part of the earnings pressure, of course, is that the tax rate is jumping up back to 33%. And I kind of want to remind everybody that the $0.07 benefit that we had for the accounting of the equity-based employer compensation is not contemplated in the 33%, but likely we're going to have option exercises. It's very hard to forecast those benefits. So we had $0.07 last year. And that's about 2% of earnings growth, roughly. So you can make your own assumptions on the tax rate also. So the 33% is the number that is our forecast excluding that. And we anticipate some benefit, but it's very hard because share price and employee behavior will dictate it. But you may be more bold in the forecast. David Michael Grossman - Stifel, Nicolaus & Co., Inc.: Great. Very helpful, thank you.

Our next question comes from James Berkley with Barclays.

Thanks for the time, guys. It's nice to see bookings turning around in fiscal 2018. Can you just touch on the percentage of new bookings coming from the PEO side versus the Employer Services side historically? And how that compares to what you're seeing now, or providing the bookings growth rates for each as well, if possible?

Well, it's like the mechanics of revenue growth indicate to you obviously that sales growth is driving those revenue growth numbers. So we have strong growth, strong double-digit revenue growth in the PEO. We have strong double-digit revenue growth in multinationals. Those businesses we had great performance in the SBS space. Those businesses obviously have disproportionate growth in our new business bookings. And so reverse engineering tells you if we're anticipate kind of about the same type of revenue growth in the PEO that the growth of our new business bookings goes in parallel. So we have a slight – those are the faster growing business, also on the business bookings side that we see.

And I think in terms of the relative size of the PEO bookings, I don't know that we don't really give that guidance, but I don't think there's anything wrong with giving you a range of the sales dollars for TotalSource are somewhere around – call it 20% to 25% – 20-ish%, if you will, of the total bookings, somewhere in that range, maybe a little bit higher than that. And again, with good growth, obviously that's driving the top line revenue growth.

I'd just like to remind everybody, the new business bookings for our PEO business at the 20% to 25%, 22%, whatever, does exclude the pass-throughs.

That's right.

So you have to make them comparable. So that's why we really don't like to give out these details because it's going to be more confusing than not.

Yeah. I shouldn't have done that because Jan is right. If you look the sales at the gross level including the pass-throughs, they would be probably, almost as much as our total bookings, because other PEOs probably may report their sales or the new business bookings that way. But obviously we, for the sake of comparability and to make sure that it looks like other ADP business as we do exclude the pass-throughs in the way we count it.

Okay, great. That's helpful. And then just a quick follow-up. If you could just discuss what you think is driving the record-high retention you're seeing in the downmarket and provide any additional comments on how the midmarket is tracking, and where you think that could go after the work you've done in the downmarket, and given what you're doing in midmarket now?

So I'll add that we had record retention in a couple of other places as well. So the PEO had record retention. The SBS business in down-market had record retention. We had a couple of other places that had record retention as well. And I think that in most of those cases, the only thing I can put my finger on is execution because they are good businesses, and there's a good backdrop. But for the benefit of hindsight, that's kind of always been true. And I think the one variable seems to be execution. So if we really deliver great products and great service, the clients stay in all of the segments. And so the retention in SBS, for example, now in the downmarket is 3 to 4 percentage points, not basis points, higher than it was five or six years ago and higher than – and that much higher than we thought we would ever be able to achieve. And again, I think it's getting all the clients on one platform so that you make all your investments and you put all your focus and all your R&D on one platform. You heard what we were doing with things like Accountant Connect. It's very hard to do those things when you have three or four platforms. So having everyone on one platform, going after kind of the friction and the things that create bad service experience and just good execution, all those things, I think you put them together, and it's really created a really great story for us that obviously is translating not only into great retention but great retention in these businesses leads to really great margin performance and really good revenue growth.

And maybe I'll add the midmarket experience, we have seen improvement in retention in fiscal year 2017 in the midmarket, and it was paralleled by a very significant improvement in our service levels and a meaningful improvement in our client satisfaction scores. So we feel encouraged about the development in the midmarket.

Thanks very much.

Our next question comes from Jim Schneider with Goldman Sachs. Jim, if your line is muted, could you please unmute the phone line? James Schneider - Goldman Sachs & Co. LLC: Good morning. Thanks for taking my question. Apologies. Maybe if you can talk a little bit about the bookings outlook and your visibility as you see it throughout the year. I mean, I guess it kind of implies in the back half, you could probably be back to solid maybe even double-digit bookings growth in the March and June quarters. Can you maybe talk about the visibility you have on that, and was that a correct assumption about the numbers there?

So the visibility that we have is related to the number of salespeople we have and their productivity, what we call annual sales productivity. So we have a lot of data and many years of data around that. And we know that our productivity jumped dramatically when we had ACA sales and obviously came back down when we didn't have that tailwind. But we have ways of getting at the numbers. Having said that, we've said multiple times where it's retention or new business bookings, the amount of visibility we have to that is less than things like revenue next quarter because it's a completely different issue in terms of the recurring revenue, nature of the business makes the revenues, and the margins are somewhat predictable. So new business bookings and retention have less visibility. But we have ways of getting at what we think are the right targets, which I think as you mentioned are much better obviously in the second half. So again, all things being equal, if the economy cooperates and we continue to execute well and the math holds up historically for ADP, we should be able to get to those numbers. And obviously, it doesn't happen in a vacuum. You've got to have great products. You've got to keep sales force turnover down. Those are kind of the controllables that we focus on that, I think we're doing frankly an exceptional job on right now.

I think one point of information is remember in the first quarter of 2017, we did sell – have some ACA sales, this is prior to Election. And we had a pretty good performance actually relative to our expectations in the first quarter. So we still have – we have no material sales assumptions for the Affordable Care Act this fiscal year, but we still have a little bit of grow over challenge in the first quarter, so that's going to be a little bit more difficult, but then – Carlos's words hold, of course, the truth. James Schneider - Goldman Sachs & Co. LLC: Thanks. And then maybe just a clarification. In terms of the capital allocation strategy, is there any buyback assumption embedded in your fiscal 2018 guidance? I know there was one explicitly called out in fiscal 2017 guidance. Wonder what it was (58:20) for 2018, if any?

As you are a very correct observer, Jim. So as an exception in fiscal year 2017, we guided for incremental share buybacks, because we wanted to make – be clear that our intent was to return the proceeds of our debt offering in 2016, which has been completed. So we're now returning to our normal practice, which is we are anticipating to offset equity based dilution for our employer compensation, which is about $400 million or so. And then we should expect – we're aiming to be back at our long-term model that we have shared. And I think the long-term model includes – not that we guide to it – but the long-term model anticipates the return of excess cash to our shareholders of approximately 1% – resulting into approximately 1% of share count reduction. That will be our long-term model and pending on market conditions, obviously. James Schneider - Goldman Sachs & Co. LLC: Thank you.

Our next question comes from Gary Bisbee with RBC Capital Markets.

Hey, guys. This is actually Jay Hanna on for Gary today. Just a quick question with regard to bookings guidance. You're guiding for 5% to 7% in fiscal 2018, and that's coming off a reduction of 5% last year. So that really only implies flatish to 2% over two years. And on a four-year CAGR, if I'm doing the math right, that implies about 6%, which should remove for most of the ACA-related noise. And this just falls a bit below the 8% to 10% long-term model you've given. So I just was wondering if you had any comments with regard to that? And if maybe we should think about it through a different lens now? Thanks.

I think it depends on how you calculate your averages and where you have your starting point. Clearly, our sales guidance for 2018 signals our optimism into our success of our sales force and the competitiveness of our products. And clearly we are anticipating to grow out of that grow-over challenge that we had. And the way I think our guidance words is that we are kind of returning over the year back to our long-term expectations. And as Carlos confirmed in his initial remarks and impressions, we are sticking to our long-term expectation model that we have set in our Investor Days a couple of years ago.

Okay. And then just another quick follow-up. Are you including in guidance any uptick in sales commissions related to the return to growth in bookings for the year?

Yes. Our operating model and operating plan fully contemplates the sales cost related to new business bookings. We had a dynamic twofold, as I tried to explain, in 2017, accelerated investments into head count staffing, which kind of elevated our sales costs and distribution costs a little bit and incremental sales incentives to get us through a difficult year. And next year we have distribution costs planned for a more normalized head count growth of approximately 4%. And obviously, we're matching commission expense to our expected sales results.

Okay. Thank you.

Our next question comes from Danyal Hussain with Morgan Stanley. Danyal Hussain - Morgan Stanley & Co. LLC: Hi. Thanks for taking the question. Just a quick follow-up on bookings. The fourth quarter came in a bit better than your expectation. Would you attribute more of that to client behavior inflecting more positively or just your investment in sales? And then likewise for fiscal 2018, could you talk maybe about the degree of conservatism in your outlook just in the context of what happened last year? Thanks.

I think it's really too early to read anything into the fourth quarter sales results. Because as Jan just said, we put in incentives to try to get people over the finish line. We frankly also implored the sales force to "not give up," because we don't want to send the wrong signal to the market or to our competitors. And so there's a lot of moving parts here that I think may have contributed. But it was better than the alternative, so we're happy that we had the finish that we had. But I don't think that there's really anything you can scientifically read into it, other than maybe underneath the surface there's some better environment in terms of the – because some of the uncertainty – I mean, at some point people have to get back to business as usual despite what's going on in Washington with regulation and with ACA and so forth. So maybe there's a little bit of that. But we – can't put my finger on it. I wish I could, but our optimism as to your point about why are we optimistic, it relates back to my previous comments around ADP's historical ability to execute in sales related to having the right head count, having the right products, the right sales support, the right incentives, and the right execution. I think with the right economic backdrop, I think should give me – and it does – a high level of confidence and optimism. Danyal Hussain - Morgan Stanley & Co. LLC: Got it. And then your biggest competitor called out elevated pricing, competition in the midmarket, did you see any of that, or was it just not material?

No, we haven't – good question. So we monitor two components of our pricing. Number one is our discounts versus book pricing in new sales. And we are monitoring our pricing levels and concessions in the base. And both are good indicators of the pricing competition. And we have not seen any material change in both indicators. So we view the pricing environment as unchanged. It is dynamic though. There are ups and downs each quarter in different regions, depending on the competitive action that we take and our competitors take. But if you take the aggregate and you look at the lines, we cannot devise a specific trend to increase pricing pressure or the opposite to that matter. So we feel good about the pricing environment. Danyal Hussain - Morgan Stanley & Co. LLC: Perfect. Thank you.

Our next question comes from Jeff Silber with BMO Capital Markets.

Thanks. I know it's late. I'm just curious, shifting gears back down to what's going on in Washington, D.C. Have you heard anything on the discussion in terms of tax reform that either might help or hurt your business?

I think other than the realization that we have a high effective tax rate and that we view us of a net beneficiary of any corporate tax reform in all scenarios, we have no further comment, because I think you can better assess the likelihood of success in the tax reform to it.

So but besides that, I guess, I was more curious in terms of from a client impact or a product impact?

Again, we haven't heard anything in terms of that would change, for example, the way taxes are collected in this country or that would affect our fluid – I'm not sure exactly maybe where – if there's something you think or you know that we don't know. And we're happy to hear about it or address it. But we're not aware of anything other than they're trying to reduce the corporate tax rate. And obviously there are some, I guess, preferences and benefits that are going to be taken away in order to do that, but those generally apply to, like, the energy sector, manufacturing sector and other. That's why we have a higher effective tax rate. So in theory there are going to be winners and losers. The people with very low effective tax rate are going to probably get an increase in their effective tax rate. And the people who have a high effective tax rate are going to see a decrease because the statutory corporate tax rate is going to – not going to – they're saying they're going to take it down. So whether it's 25% or 20% or 30%, that can only help us. And we don't have any significant tax preferences that we take advantage of that would go the other way. From a client standpoint, we do have a tax credit business. It's relatively small. We haven't heard any talk about – those are targeted job credit-type taxes that are – tax breaks that are very popular. So we haven't heard any talk about that, those being repealed. I would say it's very likely that if there's any tax reform, that it would be very positive for ADP. It could be significantly positive. But obviously as Jan said, we have no sense of the likelihood of that.

It was more the credit-relating aspects that I was referring to. Okay. Thanks so much.

Our last question comes from Kartik Mehta with Northcoast Research.

Good morning. I know you've talked about pricing and not seeing pricing pressure, but I was wondering on the downmarket, your ability to achieve price increases. Have you seen any change in the marketplace that would – that changes this dynamic from, let's say, a year ago?

The downmarket has been and actually performing beautifully and competitive strength that the product has, has translated in a very good price realization.

And then just the last question, Carlos. I know you've talked about competition and you have not seen much difference in competition. But if you just look at the marketplace as a whole, have you seen anything different in the last 12 months, that being – you know the competition you anticipated that only stayed on the high end coming down to the midmarket or competition that was just at the midmarket coming down to the low end, or competitors leaving the marketplace? Anything that's changed, in your opinion, in the last 12 months?

Just to clarify, and I don't want to be misquoted as saying not seeing much change in the competition because we have a lot of competition. And it feels like we have more of it than we had three years or five years ago or 10 years. But that probably happens to every CEO. They always think that they have more competition than the previous person. So we have an enormous amount of respect for the market and for the competition because there's a lot of it. And we know that we have to earn our place every day in the marketplace by having competitive products and great service. And whenever we slip or trip, they take advantage. And whenever they slip or trip, we take advantage. And so it's very important for us to stay on top of it. But if you're asking about 12 months specifically, there are definitely competitors who have gone – who have kind of come down segments or gone up segments. But I think, based on my experience at ADP, nothing different from what's been happening for decades where a competitor decides if they're in the downmarket, that they can go up into the midmarket. And they try it and then maybe three years later, they go back, or sometimes they stay. Likewise, we've always had enterprise-size competitors that are in the upmarket who decide to come downmarket a little bit into the midmarket. Sometimes they stay. Sometimes they go away. So I don't think I've seen anything worth, I guess, reporting. But plenty of that type of stuff that you just mentioned. But I think it's normal competitive actions by competitors.

Thank you very much.

Thank you very much.

This concludes the Q&A portion for today. I'm pleased to hand the program over to Carlos Rodriguez for closing remarks.

We appreciate your time today. As you can see, I think these strategic initiatives that we've laid out over the last several years, I think are beginning to deliver on some of the objectives we have around not just shareholder value but also around delivering world-class solutions to our clients. I'm very proud – it's year-end, so I think I should say that I'm very proud of the hard work and dedication of our associates who obviously have been able to help us deliver these results, including the improvements in the service experience and improvements in retention this quarter. Obviously, we continue to be excited about the prospects ahead of us. We definitely have challenges in 2018 with a softer bookings performance. And as you can tell, we're incredibly bullish and confident still. Otherwise we wouldn't be making the kinds of investments that we're making. So we believe that these investments, along with our ability to execute, I think, really give us the right formula for sustained, continued success for many years to come. So thanks again for your interest in ADP, and thank you for joining us on the call today.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect. And have a wonderful day.