Automatic Data Processing (ADP) investor relations material

Demand environment and bookings

• Demand remains stable and consistent across all business segments, with no significant tailwinds or headwinds observed throughout the fiscal year.

• Employer Services bookings are guided to 4%-7% growth for the year, with Q4 being the largest and most critical quarter for bookings.

• Bookings growth is expected to be stronger than last year’s 3%, but a small variance in bookings does not significantly impact full-year revenue.

• Broad-based contribution across the portfolio has been a highlight, with no overreliance on specific segments.

PEO segment and retention

• The PEO operates a fully insured health insurance model, focusing on white- and gray-collar markets, which helps manage risk and pricing.

• Medical inflation is high, but retention has remained stable, with no degradation observed despite a high renewal environment.

• Investments in sales and marketing are ongoing to drive bookings and WSE growth, especially as pays per control moderates.

• Margin pressure exists due to investment in new business, but the long-term outlook for the PEO remains positive.

AI strategy and impact

• AI initiatives include ADP Assist, persona-based agents, and third-party AI agents via the Marketplace, all governed for data security.

• AI deployment is in early stages but already delivering efficiency gains, especially in service and implementation teams.

• AI is not expected to cannibalize outsourced services but rather augment and enhance them.

• Continued investment in AI is anticipated, with margin benefits already emerging and expected to support future margin expansion.