Good morning. My name is Michelle and I will be your conference operator. At this time, I would like to welcome everyone to ADP's First Quarter Fiscal 2022 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 will be a question-and-answer session. I'll now turn the conference over to Mr. Daniel Hussain, Vice President Investor Relations. Please go ahead.

Thank you Michelle. Good morning, everyone. And welcome to ADP's first quarter Fiscal 2022 Earnings calls. Participating today are Carlos Rodriguez, our President and CEO and Don Maguire, our CFO. Earlier this morning, we released our results for the quarter. Our earnings materials are available on the SEC website and our Investor Relations website at investors.adp.com, where you will also find the investor presentation that accompanies today's call. During our call, we will reference non-GAAP financial measures, which we believe is useful to investors. And that includes the impact of certain items. A description of these items along with a reconciliation of non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. Today's call will also contain forward-looking statements, that refer to future events and involve some risks. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results, to differ materially from our current expectations. And with that, let me turn it over to Carlos. Thank you, Danny. And thank you, everyone for joining our call. I'd like to start by welcoming Don Mcguire, our new CFO. Don has been with ADP since 1998, when he joined the ADP Canada Team as a VP of Finance. He's held a series of roles with increasing responsibility, most recently serving as President of our international business, where he's done a phenomenal job of driving growth and profitability in a very complex environment. I know he's looking forward to meeting all of you.

Now, moving on to the quarter. We're pleased to have delivered a very strong start to the year with 10% revenue growth and 140 basis points of margin expansion, resulting in 17% increase in adjusted diluted EPS. While we did expect our Q1 revenue growth to be above our prior full-year guidance range, this result was still above our initial forecast and underscores the strong position, we are in as we emerge from the pandemic. I'll let Don go through the details after I cover some highlights. Our ES new business bookings results for very strong, representing another record Q1 bookings amount. And we're ahead of our expectations, but our performance driven by continued strength in our HR portfolio, in our international business. With this impressive bookings performance across the enterprise, we're pleased to raise our ES bookings guidance for the year after just one quarter, as we're now feeling even more confident about our sales momentum. Even stronger was our CEO bookings performance, which was also well ahead of our expectations. And a key reason that we are raising our guidance for average worksite employee growth for the year, as Don will outline for you. As you will recall, we have been sharing our sales productivity trends over the course of the pandemic and I'm pleased to report that in Q1 we were well above pre -pandemic levels. We reached this result several months sooner than we expected, and we expect us to continue as we look ahead. Our ES retention remained incredibly strong as well. As we shared last quarter, we believed it was reasonable to assume a slight step back and retention from the record 92.2% level we experienced last year. But in Q1, we did not see meaningful deterioration. Instead, we actually saw further improvement in…

Thank you, Carlos and everyone on the call good morning. And nice to meet you. Our first quarter represented a strong start to the year with 10% revenue growth on both a reported and organic constant currency basis. Our adjusted EBITDA margin was up a 140 basis points much better than expected, and was supported by higher revenue and overall cost containment. Our tax rate was up slightly in the quarter versus last year. But we also benefited from the elevated pace of share repurchases following our debt issuance in May, combined, those factors contributed to a 17% increase in our adjusted diluted earnings per share. Moving onto the segments, our Employer Services revenue increased 8% on a reported and organic constant currency basis. Our strong Q1, ES bookings guidance performance, and record retention contributed to this performance. Though, as a reminder, we did continue to lap some of the lower revenues we had last year in some of our volume-related businesses, including recruiting and background screening. Our clients finding interest represented only a slight headwind in the quarter, as our 40 point, basis point decline in average yield was offset by fantastic balanced growth of 22%, driven by client growth and planner growth, higher wages and the lapping of the payroll tax deferral last year. ES margin increased 150 basis points on strong revenue performance and overall cost containment. As Carlos mentioned, our PEO had another terrific quarter. Average worksite employees increased 15% year-over-year to $629,000 in revenues, excluding zero margin pass - throughs from 20%, supported once again, by favorable mix trends within the PEO employee base, as well as improving SUI rates. Total PEO revenue grew 15%, which included a modest drag from lower zero margin pass-through growth and worksite employee growth as expected. PEO margin was…

We'll take our first question from the line of Samad Samana with Jefferies. Your line is open.

Hi, good morning and thanks for taking my questions, congrats on the really strong start to the new fiscal year. So Carlos, maybe I want unpack the drivers to the strength on the new bookings side, I know productivity is clearly one, but how should we think about -- how should we think about the product side and within the product portfolio where that strength was in terms of driving new bookings?

So we -- even though what we really talked about is ES bookings, just want to start by saying that the PEO Bookings were incredibly strong. I don't know how else to put it. So I call it orders of magnitude in terms of growth rate higher than even the ES bookings growth for the quarter. That was really good to see. So that's kind of a sign to your question about products that I think the market is really searching for solutions coming out of this pandemic, that helped them with obviously people issues and sort of, but there's also a talent for -- so people are looking to obviously attract and retain people in this environment where every Company, including ADP, is going through some of these challenged in terms of retracting our own internal talent. And then you have another dynamic which is, if there are shortages of labor in various categories there we're hearing that there's also shortages of talent in kind of HCM category in general that should create a little bit of an advantage for the clinical outsourcers, right? So as you know, our model is, we provide great technology and software, but we also do the back-office work and we take accountability for outcomes. And I think when people are struggling to hire people to do the work in their HR department, or their payroll department, or their benefits department, we're here to help. And so I think those outsourcing solutions are getting a lot of tailwind. We also saw because of the easy comps and I think you've heard it in Dan 's comments. Some of the things like our recruitment process outsourcing business and our screening and selection business, which we're really at very low booking levels last year at the same time, have rebounded off for obvious reasons, incredibly well. But having said that, it was really across the board. We had very strong growth in workforce. Now, we had very strong growth in the up-market. We had strong growth even in a down-market. Although last at the same time, I think we mentioned that we had when we call client-base acquisition which is not technically M&A deal, but we were able to buy and large book of business that we converted, that really some of that flowed through our bookings. So I'd made that comparison a little harder on the SBS side, but if you back that out, it was equally strong on the SBS side as well. I would say that could give you a little bit of color, but it really was across the board. It just shows how connected we are to the economy and GDP when it comes to bookings, which is something that we've had the theory here for some -- for some years now, and we just have a very strong recovery in a very strong economy. And it's a great environment for our sales force.

That's very helpful. And then, Don Maguire, maybe one for you on the retention side. So obviously it's -- it's really impactful into to raise the outlook one quarter and I think signals the strength that you're seeing. But just help unpack the slight uptick in the SMB side moving a little bit more towards normal in terms of business failure. Should we think that the offset there is even better-than-expected retention in the mid-market, or on the enterprise side? Can you maybe help us think about it across the customer size spectrum? How to balance those different moving parts?

Yes. Sure. I think it's fair to say and we commented on it that the retention is at an all-time record for our Q1. So that's fantastic and better than we had expected. The expectation as we went into the year was to see particularly in the smaller business statement, to see that slipped back a little. And indeed it has, but it hasn't slipped back nearly to the extent that we had anticipated. So we're even better there against what we had previously thought. Of course, then that means that we did have and continue to have good retention levels in the mid-market and the upmarket. So we expect that to -- we expect that to continue. However, as you know the cyclicality of our business and the seasonality of our business. We will need to get through the calendar year end, which is when we see most of the switching activity because of the drivers in new starts the year etc. So we are positive and we did take our retention estimate up for the year and we'll see if it holds and perhaps it's better than we expected.

Great, thanks. And I look forward to seeing at the stand person and a few weeks.

Thank you.

Our next question comes from Jason Kupferberg with Bank of America. Please proceed.

Good morning and thank you for taking my questions. This is actually may hear about on for Jason. Don, firstly, congratulations on the role. Maybe you can talk a little bit about your priorities in the CFO role and how they could maybe look a little different than on the . And just relatedly, should we expect an update, the multiyear targets at next year's Analyst Day. And then I have a follow-up. Thank you.

Yes. So I guess what I would say is I've been with ADP for a long time now. And I guess what I observed in the roughly 23 years I've been with this Company is that ADP has always had a very strong financial organization with a strong finance leader. And I want to make sure that we continue that. I am sure we will. I think that the priorities that we have are well set out in our Strat plan previous Investor Days, etc. So we'll probably provide along with an update on those things that when we get together on November the 15th. But let's wait until then and I don't think you're going to see any dramatic changes. We pretty much have a well-discussed, and well-disclosed trajectory, and plan, and we will update you on that on November the 15th.

Understood. Thank you. And then just if I could ask about just sales for spend, just clearly seeing some very strong momentum in the market. So I was wondering if you have any plans for sales force growth in Fiscal 2022? And which part of the market those ads would be concentrated in. Also anything notable to call out in terms of just the mix of new logos versus cross-sells in your bookings for the quarter or in the forecast. Thank you.

I think in this kind of environment, given the very first comments we made about the economy, and you have both the economy of the tailwind and you have now in the U.S. I think an administration that is kind of more inclined to regulation into, particularly employer regulation. And so you have, I think a very strong backdrop for what I would say is the foreseeable future. In that environment, historically, what ADP would do is we would add as much sales capacity as possible. That doesn't mean that we indiscriminately hire because we have people to hire and onboard and train and so forth. And we have to make those people effective. But I would say that we have a strong appetite for growing our sales force, but also for growing our investment in marketing. Whether it's digital marketing or more traditional advertising. And that's exactly what we plan to do. Having said that, I would tell you that we've had challenges like everyone else, in terms of hiring, it's a very difficult labor market. So I hope that we can fulfill those expectations, those dreams, if you will, of growing our sales force as fast as possible. But that's the only thing that I could see getting in the way. We obviously have the capital, we have the I think the desire and we have, I think the experience to be able to execute once we hire those people to get the sales, get the clients implemented, and then hopefully derive the benefits of that revenue for, in many cases 15-20 years, depending on which business unit you're in. And so I guess I would say strong appetite for both headcount growth, but also other investments in sales. Whether it's marketing, digital marketing, sales tools, all across-the-board.

Thank you.

Our next question comes from Tien-jian Huang with JP Morgan. Your line is open.

Thanks so much. Good results here. Just on the PEO side, I'm curious how much of the general improvement there is secular versus cyclical? And I know Carlos, you talked about putting more sales energy there as well. Just curious, what's changed?

So the risk of -- because we had a strong feeling that the PEO business was going to be strong coming out of the pandemic. Because it's been strong coming out of prior economical recession. and those are the different recession. So I have to be careful about any specific predictions. But we had some challenges, I think coming out of the pandemic with the price that we're selling in the PEO were slightly smaller and just ballpark it around 10% smaller. So let's say that the average, I'm just going to make up the numbers. Let's say the average new clients over in the PEO with 3 worksite employees and all of a sudden, prior to the pandemic and that's been can quote, growing slightly over the years. All of a sudden it came down to like 27, so 10% decline. So even if you sell 10% more units, if the units are at 10% smaller, you basically end up in the same place. So that's a little bit of what we were expecting. We believe that a 100% related to the economy, and to what was happening with the pandemic. Now what we've seen in the recovery is both the unit growth is still strong as it was prior year, and now our unit size has recovered. And so the combination of those 2 things has created really, really strong growth in the first quarter in the PEO. The only caveat that I would add also is that we did have a transition into a new year, as you know, our fiscal year ended on June 30th. And in some cases, our businesses tend to perform really extremely well in the first quarter when they come out of a year where -- I wouldn't call it under-performance because it was still a good year last year, given the circumstances. But clearly the PEO, we were very, I think, clear that the PEO had been trailing, in terms of recovery when it comes to bookings, what we were seeing in EF. Now, as we expected, the horse race now -- the horse in the lead has changed. So now the PEO is the one leading the race.

Thank you, Carlos.

Our next question comes from Kevin McVeigh with Credit Suisse. Your line is open.

Great. Thank you and congrats on the results and Don Welcome. Hey, I wondered -- could you give us a sense, Carlos, from a sales perspective, despite the tight environment you're still delivering, is there any way to think about the go-to-market strategy this cycle as opposed to last that and how maybe technology and maybe more of a mix down-market helps drive that process. I guess what I'm saying is there more leverage in the sales force today than you've ever had, is there any way to maybe put some parameters around that?

I think there is definitely more leverage in the sales force than we've ever had because -- I mean, I think maybe what you're alluding to our sales force like a lot of other of our competitors had to go to a 100% virtual for a number of months, and I'm sure every competitor handled differently in terms of how long they were virtual, versus when they went back in the field. But that process which we had been learning about for 20-25 years, like we have almost a third of our sales force already selling what we call insights sales. And so they were able to sell virtually. They had been in a building, but it didn't really matter whether they want the building or in their homes. They were still able to sell very effectively. That was an easy transition for that portion of our sales force, and then we really with the appropriate tools and some training and some learning from our inside sales force we really moved our entire sales force to sell virtually. So I think now we're really in a period where we're going to sell based on, however the client wants to be sold. And so if the client wants a combination of an initial video call on Zoom or WebEx, we'll do that. If the client once an in-person visits we'll do that if they want to close the deal with an in-person, but start with a video, we can do that. So I think there's no question that if Salesforce leverage has increased for us, but admittedly, probably for our competitors as well. Our reach has definitely been extended. There's no question about that in terms of tools, but also philosophically. I think we are now, I think able to sell…

That's helpful. And then just one real quick one on retention. What was the boost kind of all the Q1 over-performance because I know the Q2 December's big quarter in terms of retention, things like that or is it just more optimism over the balance of the year or a little of both? Is there any way to frame how much of that boost was maybe Q1 over-performance as opposed to how you're feeling over the balance of the year?

Maybe I will take that. I think our retention, certainly we're very happy with the Q1 record we have, but I think it's also heavily linked to the success we've had over the last few years with our improvements in NPS. And as our NPS continues to go on the right direction and improved, we're seeing general increases in retention to go along with that, I think that's what we would expect and that's what we want to see happen. So I think there is some relationship there. The -- with no doubt that the retention is very good and we're benefiting still I think from a little bit of some of the concerns coming out of the pandemic that clients may have about switching it during a time of still virtual for many. So we're benefiting from that as well and we acknowledge that. But as I said, we're very happy with the retention and the progress we're making with our products and our service that go along to driving those retention numbers. We will see a little bit of a step back perhaps in the down-market. But as we said so far, it's soft living up better than we expected.

And just to clarify, because we did share in our prepared remarks that the raise which primarily a function of the Q1 results, obviously we have the stability in October as well.

That makes sense. Thank you.

Next question comes from Ramsey El-Assal with Barclays. Your line is open.

Hi, Gentlemen. Thanks for taking my call this morning. I wanted to ask about margins and forgive me if you addressed this in some detail, I missed a bit of the call earlier, but it came in really strongest quarter well above our model, can you speak to the drivers of the beat and also to their sustainability as we move forward.

Sure, let me start by saying that the margin in the first quarter was a record for us. And it was above last year as we just reported But if you go back to last year -- last year was above the prior year. It's quite impressive that we had margin improvement last year, given that we were one quarter into a pandemic. But it's even more impressive is that impressive that we had margin improvement again, having said that, up the victory lap. Then the other part of the comment is we had way higher revenue than we had anticipated, which is incredibly gratifying We're very happy about that, and it was really in both ES and PEO. And it was an a bunch of different places. Slightly better pace per control, retention was better. You heard all the comments. We have just a lot of things working in our favor here. The expenses have not caught up to the revenues and so right now, we are trying to add capacity, both for implementation and service, particularly ahead of our year-end period. And so like other companies, the most important thing for us is to be able to execute on our commitments to our clients, and to be able to start a business that we've sold. And so I would say that that's a dynamic that factored into the margin performance, but I don't want to take anything away from the organization or anything away from the operating leverage because it's pretty impressive what the organization was able to accomplish. But had we known where we were going to be in terms of top line and volumes, we would have more headcount today than we have. And there is some catching up to do. Now to put a fine point on that, don't think of, we have to add hundreds of millions dollars with expense, we're just a little bit behind, and that's why you see in case someone's asked it yet may as well address it head on for the rest of the year. When you look at the EPS and the guidance, we really not raising by much more than what we had in terms of our performance in Q1. And that's because we are going to continue to invest in both sales and distribution, but also in service and implementation. And that delay in hiring or deferred hiring helped us in terms of the margin in the first quarter, I strongly believe we still would've had a very strong margin performance in the first quarter, even had we hit our headcount numbers for service implementation and volume-related businesses. And I thought I should kind of put that out there because it seems like an obvious question as well.

That's great and I appreciate your candor there. Quick follow-up from me. I was wondering about the human resources and human capital management products. Can you talk about how the cross-selling process into your basic kit of kind of payroll customers is organized? I'm just trying to figure out sort of how you go about that cross-sell process. And I guess how much of a runway do you see for attach rates to those products?

There really isn't a simple answer to that, to the first part. We'll come back to the -- I think the second question about the attach rates. Let me answer that one first. The attach rates are -- there's a couple of products where we have what I would call good attach rates, acceptable, which is saying as CEO speak for, they could always be higher. Like our benefit admin tools, our time and attendance systems. But most of our products and our worker's compensation tool in a down-market also has a high attach rate. But almost everything else that is quote, unquote, beyond payroll. So HCM in addition to kind of our core payroll solutions, we're way under penetrated in terms of attach rates. So there is a lot of potential, I think for that to improve as well. So on the first part of your question in terms of how we cross-sell, as I started saying, there isn't a simple answer because there isn't a simple answer. In some of our businesses, we have very distinct organizations like in the down-market, we have a large down-market sales force that works with accountants and other kind of third-party channels and also sell directly. And then we have a sales force that sells our retirement solutions are 401K products. And our insurance services solution, those are distinct sales forces that basically share leaves with each other, and they have incentives to do so. That down-market business also feeds business to our PEO through also incentives. But there is a separate and distinct sales force in the PEO as well. When you get into the up-market and into the mid-market, you start to get some portion of our sales force which is able to sell multiple products or whatever call bundles.…

Very helpful. Appreciate it. Thank you.

Our next question comes from Kartik Mehta with Northcoast Research. Your line is open.

Carlos, I just wanted to get your thoughts. I know you talk to obviously a lot about new sales and I'm wondering, outside of this wage inflation that you're seeing. Is the cost to acquire clients going down, especially on the SMB side now that there is a new way to sell to them? Or do you think the cost to acquire clients as we move through this pandemic will go back to what it was?

I wish I had a crystal ball in terms of answering where it's going to go. But I think just from a mathematical or technical standpoint, the cost of sale is definitely pulling down because of this productivity increase. So this is the same leverage that you're seeing in so many industries and so many businesses, including ours, on the revenue happens on the bookings as well. When you get higher volumes it basically indicates higher -- unless you add a lot of expense, by definition you get higher productivity. So you see us being reported in the press all the time about, how worker productivity is up. Well, hardly reason why worker productivity is up is because revenues of recovered, volumes have recovered, and it sustained people. Or you're adding a few more people now. Maybe people aren't focusing on, is that worker productivity went down, right as the pandemic kind of set in and people's revenues went down. So I hate to make it so simplistic, mathematically. But some of that is what's happening now. So you do have to be careful about jumping to any medium to long-term conclusions because right now our cost of sale compared to last year and the year before is definitely coming down as a result of a very large increase in bookings with how a similar increase in expenses. We still though are not back to where our cost of sale was pre -pandemic. And we hope to get there. But that will require even a little bit more productivity during this year. But that would be our expectation is that whether it's the GDP or interest rates or employment, that, there's regression to the mean here as they very large economy. ADP's large Company, but the economy is massive, and it tends to regress to the mean on a lot of things, and we also tend to regress to the mean s. So I think some of these things will work themselves out. And you have to just get past the base effects, and the comparisons, and so forth to really understand where you are, and we won't know that until we're on the other side unfortunately, I hate to say it.

Thank you very much. Appreciate it.

Our next question comes from James Faucette with Morgan Stanley. Your line is open.

Thank you very much and thanks for all the this morning. I guess maybe I just want to ask the obvious headline question and just wondering how the reported current tightness in the labor market, as factored into your guidance? And how are you anticipating on that changes through the coming fiscal year? And I guess maybe a product and service-related question tied to that. Are you seeing incremental sales opportunities with some of the tech that you can provide to your clients for hiring, etc. and is that having any impact on how you're thinking about your outlook and forecasts? Thanks.

Thanks for the question. The second part of your question, I think kind of answers the first part. The answer is yes. Like, I think part -- again, hard to separate how much is just pure GDP growth, new business formation etc. But the last part of your question, there's no question that part of our growth is driven by what you are alluding to, which is everyone now is looking for help in terms of hiring, attracting people, and frankly, also trying to hold onto them. This is a great environment for us. The combination of strong GDP, an administration that is more inclined towards regulation, and then a tight labor market for people who do the things that we do. By that I mean, payroll staff and HR staff at prospects and our clients. That's all a very good backdrop for us. I'm assuming that -- this is not going to resolve itself overnight in terms of the tightness in the labor market. We should anticipate some tailwinds here and some help for some period of time, until that changes. And I hate to use the R word, but some day, at some point in the future, doesn't see m anywhere near future given what's going on with government stimulus and government policy. But someday that might change. But we don't see that on the horizon right now. On the very first part of your question though in terms of the tight labor markets, I would say the overwhelming impact of tight labor markets is positive on AEP. I mentioned one of the challenges we have, which is tight labor market affects our own internal associates in terms of we have to hire service people and implementation people, so it's harder for us like it is harder for…

That's great color. Thank you.

Our next question comes from Bryan Bergin with Cowen. Your line is open.

Hi, good morning. Thank you. I had to follow-up first on retention. Curious, within the record, 1Q retention performance, can you dig in a little bit more as far as the drivers there between the still lower out of business closures versus essentially better competitive win rates, And anything broadly, you can comment on around -- around clients switching behavior or client re engagement to assess HCM solutions?

On the first -- on the first part, I'm not sure how much more color we can give you. We have a fair amount of detail in terms of losses and retention around, we call non-controlled the losses which are broadly speaking out of business, bankruptcies, etc. And those have started to trend back up again. They're not back to normal levels, but they started to trend back. I think that's not surprising because there's still a lot of liquidity, and a lot of stimulus if you will, even if it's not new stimulus. So when you have consumer spending doing what it's doing, and you have activity doing what it's doing. It tends to be supportive of small business rather than the normal turnover that you have that's natural in the small business sector. I guess with hindsight, like if 3 or 6 months ago, when we were putting together our plan, we'd had a crystal ball, we would've probably -- and we had experienced with the pandemic, we probably would have planned the downturn in retention to be slower. So we've been positively surprised by how long it's taking for those losses to regress back to normal. Having said that, we don't know that they're going to regress 100 % backs because there's other parts of our retention that are controllable. We call controllable. In our controllable losses, we see those going down as well. And I think Don made a common thing that should not be lost on you, which is that our client satisfaction scores as measured by NPS, are the highest they've ever been. And I give credit to the organization for during the pandemic, being able to get through what was an incredibly difficult time for them personally, in terms of they were trying to help our clients. But we also had a huge increase in volume because of all the government stimulus programs in the PPP loans, etc. And this happened all over the world, it wasn't just in the U.S.. And fortunately, we maintained relative stability in our headcount. We didn't do mass layoffs and let a bunch of people go. So the combination of maintaining investment and also being able to, to have people -- I don't know how to described it. Make a efforts to help our clients, we were able to maintain those NPS where that actually haven't go up. And there's staying at very strong levels, and we believe that there is a correlation between strong NPS and retention. So we may be able to see new record highs for retention on a permanent basis, but it's way too early to make that prediction.

Okay. And then just follow-up on, on next-gen HCM platform. Can you provide an update on new sales there? Maybe the pipeline and sold clients versus lifelines, any metrics or updates you're willing to share?

Sure. I think we talked about over the last couple of quarters as we kind of entered in the pandemic, we obviously had a couple of particularly large clients that we're in industries that were particularly hard hit. So we've got put on a little bit off course, if you will, in terms of our implementations and our starts. We also, I think, started to focus on implementation tools. I think we had -- I don't know how many set -- how many we said we had sold. And as we started implementing in starting these clients. We recognize that we still have some work to do in terms of implementation tools and making sure that if and when we want to use third-party integrators to help us with that, that we need to build out those tools. There has been quite a lot of focus on that effort. And we feel good about it. We actually -- I think we also talked about investments in the last quarter that we made to bring in some third-parties to help us with the evaluation. And in some cases, the build of that to make sure that as we now enter a hopefully a period of time where we can really accelerate the implementations and the growth and the starts of those clients. But it's fair to say, and I think we said in the last couple of quarters that our focused turn ed more to, making sure that we have a strong foundation and that we had the right implementation tools to be able to get the business started that we intend to have in the next year or 2, which is hopefully quite -- quite a lot of business. And you'll hear more details about this when we get to our Investor Day on November 15th.

Okay. Thank you.

Our next question comes from Eugene Simuni with Moffett Nathanson. Your line is open.

Hi, thank you very much for taking my questions. I have badge the couple in the PEO, so I'm asking upfront. One is that, if you look broadly at your HRO offerings, so PEO and non-PEO, can you compare and contrast for us a little bit to the PEO Solutions and non-PEO hopefully outsourced solutions, how are you seeing them growing relative to each other the demand? And are you seeing any switch in between clients who might be using that HRO Solutions without benefits switching into the PEO? So that will be the first one and the second, I was just curious. How are you positioning the be-all franchise to really win market share in a post-pandemic environment, given the secular growth seems to be very favorable. But how do you actually make sure that ADP wins share?

So on the first -- on the first question, I think I said in my early comments that all of the HRO Solutions, the Corporal Outsourcing Solutions, are very, very strong across-the-board, right? Up-market because we have HRO Solutions in the up-market, we have in the mid-market, and we have them in the down-market. And in in the down market -- and in the mid-market, we have PEO, but we also have what you're alluding to, which is a non-core employment. What I would call -- we call it comprehensive services, as the name implies, it provides a kind of broader assortment of services in addition to our traditional software in our traditional tax and other services. There is to my knowledge a lot of switching from clients that are, what I would call typical clients of ADP that have payroll benefits and I'd then maybe TLM, etc., whether it's in a down-market in the mid-market into these HRO Solutions, there is not a lot to my knowledge of switching across because it typically. Again, if we're doing our job from a sales standpoint, you are really trying to find the right fit for the client. In some cases, the client wants you to do their benefits admin, and provide their benefits, provide the workers comp, and their 401-K. In other cases, the client wants you to only do the administrative back-office of the payroll department in the HR department which would be the non - PEO solutions. So I think if we do our job well, which I think we do in the sales process, and in the upgrade process, those clients tend to stay on those -- on whatever solution they have chosen. But to be clear, both of them are growing at this point at rates that are multiples of our growth in employer services. And so it's quite impressive in terms of the tailwind and the growth rates that we have in all of the HRO businesses. On the last part of your question, which I think was about positioning PEO in terms of market share and so forth. We have 600 and I think it's 630,000 roughly, we reported worksite employees, average worksite employees this last quarter. That's tripled, what it was 10 years ago in the first quarter of fiscal year 11. And so and that's a higher market share than it was 10 years ago. So I don't know how else to answer that question other than to say that we have a proven track record of execution to continue to drive growth in the PEO that's faster than the markets. So I don't think there's any question about our positioning or our ability to drive market share as evidenced by our ability to execute.

Got it. Thank you.

And our last question comes from Mark Marcon with Baird. Your line is open.

Good morning, Carlos and Don, look forward to working with you. On next-gen payroll can you give us an update in terms of the roll out there, please?

So next-gen PEO, equally excited as we are about next-gen HCM in terms of what this holds for the future for ADP. The challenge for us in terms of as we communicate and on November 15th, we'll try to figure out a way to address this issue. Like, we have 15 billion in revenue. So as well as next-gen HCM are going and next-gen payroll is going, it just doesn't -- this is a future impact for ADP., so it's not in the next quarter. And I know you're not asking a question that's really about next quarter mark, but I think it was a good opportunity to kind of throw that out there. That -- what's driving the performance of ADP this quarter, this year, and for the next 2 to 3 years is not going to be that from a financial standpoint. But in terms of positioning the Company for the future, in terms of growth and creating competitive differentiation and the ability to drive new bookings, they're absolutely critical. So I would say that on those measurements we're still happy and excited by the progress we're seeing with both next-gen HCM, as well as next-gen payroll, we have not gone to general availability, so we're selling a lot of next-gen payroll, but we're only selling in what we call the core of major accounts right now of the mid-market, which is kind of 50 to 150 and this is no different in terms of the playbook that we use with our transition from our old platform to run in a down-market. And some of our more legacy platform in mid-market to then our next-gen Workforce Now version which we're on now. So we're doing the same thing with next-gen payroll and the same thing with next-gen HCM, which is we're doing very carefully that we have a very large installed base. And we are not -- We're going to eventually move some of those clients, and begin to move some of those clients. But we're happy with the business and the cash flow that we have, and the clients satisfaction scores that are record levels on our existing platform. So we do not have any -- this is not panicking. There's no sense of crisis, and there's no -- we have urgency, but no crisis, because I want to make sure people hear that. Like, I don't want you to think that we all have a sense of urgency because the faster we get these two solutions to scale, the faster we beat the competition.

I appreciate that, and thanks for the color there. On the PEO growth, can you talk a little bit about two different dimensions? 1 would be, the growth that you're seeing kind of in the established states relative to some of the less mature states and to what extent are you seeing less mature states really catch on? Particularly given the -- the legislative and regulatory backdrop. And then secondly, how should we think about just health insurance costs now that elective surgeries are starting to come back, elective procedures are starting to come back. What impact would that end up having just on the overall pricing? I know that you're not necessarily impacted directly from a margin perspective, but just thinking about the demand environment.

It's a great question. I think the second part of question, so hopefully you'll forget about first part because we don't have -- we try to prepare for everything and that one, we'll have to follow-up with you on in terms of what regions or what states, we're strongest in terms of our sales. I'm going to suspect that they were all strong because honestly, like the PEO results were off the charts, there can't be any state that wasn't in strong double-digit growth. But we'll follow up on that question. On the healthcare rate question, you're right that we're not directly impacted, but you're also right to imply that we're indirectly impacted because it does matter, right? It matters to our clients what they're paying for healthcare. And I hate to be so simplistic, but I think what the actual regression to the mean and large economies -- the healthcare world and insurance companies are also similar in terms of they regress, right? So losses have an uncanny way of regressing to the mean. That's why I always caution people when all of a sudden someone thinks that they have this big decline in either workers comp costs or healthcare costs. It usually doesn't work that way. There's usually something that explains it and it usually regresses back to the mean. I think, if I can try to answer -- what I think is the implication of your question, there was a temporary decline in things like elective surgery, and frankly, healthcare in general. People even start to stop going to their primary care physicians and so forth, that decreased healthcare costs temporarily. And I hate to use that word transitory, that is now the favorite word it seems talk about inflation, but it's very clear that that was…

Appreciate the comments. Look forward to seeing you on the 15th.

Same here.

This concludes our question-and-answer portion for today. I'm pleased to hand the program over to Carlos Rodriguez for closing remarks.

There's not much more I can say as we really had terrific results. I want to thank Don for joining and I think you're all going to be very happy to meet him and get the benefit of his experience in ADP more broadly, besides just in the finance organization. Because he has kind of real-world business experience within ADP as well. The -- I just want to end the way I usually end which is thanking our organization and particularly our front line associates because I'm not sure what's going on in other companies. but we would not be able to get our goals accomplished without people going above and beyond. I think we mentioned the tight labor market and that we're a little bit behind in terms of our hiring, that means our people are working extra hard. An economist said, that an increase in productivity, I'd say that's just people working hard. And we really appreciate it, our clients appreciate it. I think our shareholders appreciate it, and I don't think a lot listen to this call, but you should be aware of that, whether it's here in other companies, there's a lot of people out there that are pushing really hard to deliver. And many of us, whether we're as consumers or buyers of products and businesses and so we're frustrated by what's happening in terms of supply chain and some of these other things. But all I see is a bunch of people working really, really hard to try to fulfill the needs of our clients. And I think that's happening across the whole economy. And I think we'd show a little bit of patience with each other. Because this will all normalize as these variant now recedes, I mean, you're seeing already and some of the mobility data, things will slowly get back to normal. People will come back into the labor force. And this great economy that we have will function, the way it's supposed to function. But in the meantime, I want to thank our associates for what they've done so far, whether it's this last quarter and what they're going to have to do to get through this year-end, which is going to be very challenging given the volumes we have and the capacity we have. So for that, I thank them, but I also thank all of you for listening and for being supporters of ADP. Thank you.

And this concludes the program. You may now disconnect. Everyone, have a great day.