Automatic Data Processing (ADP)
Q4 2010 Earnings Call
July 29, 2010 8:30 am ET
Gary Butler - Chief Executive Officer, President and Director
Christopher Reidy - Chief Financial Officer and Corporate Vice President
Debbie Morris -
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Good morning. My name is Amanda, and I will be your conference operator. At this time, I would like to welcome everyone to ADP's Fiscal 2010 Earnings Webcast. [Operator Instructions] I will now turn the conference over to Ms. Debbie Morris, Senior Director of Investor Relations. Please go ahead.
Good morning. I'm here today with Gary Butler, ADP's President and CEO; and Chris Reidy, ADP's Chief Financial Officer. Thank you for joining us this morning for our fiscal 2010 earnings call and webcast. Our slide presentation for today's call and webcast is available for you to print from the Investor Relations home page of our Web site at adp.com. As a reminder, the quarterly history of revenue and pretax earnings for our reportable segments has been posted to the IR section of our Web site. These schedules have been updated to include the fourth quarter of fiscal 2010. During today's conference call, we will make some forward-looking statements that refer to future events and as such, involve some risks. And these are discussed on Page 2 of the slide presentation and in our periodic filings with the SEC.
With that, I'll now turn the call over to Gary for his opening remarks.
Thanks, Debbie, and good morning to everybody. Appreciate you joining us this morning. I'll begin today's call with some opening remarks about the fourth quarter and our fiscal year results. At the conclusion of my opening remarks, I'll turn the call back over to Chris Reidy to take you through the detailed results. When Chris is through, I'll return to provide you with our forecast for fiscal 2011. And before we take your questions, I'll provide some concluding remarks.
As I look back over fiscal 2010, I am pleased that ADP's financial results were better than we initially anticipated as we entered the fiscal year. The economy did show some signs of stabilization early on in the fiscal year. Demand for ADP's solutions has clearly increased, and key business metrics began to improve during the second half of the fiscal year and, importantly, reached inflection point during this fourth quarter. Particularly noteworthy was the 25% growth in Employer Services and PEO Services new business sales for the fourth quarter, and I'm very pleased that all major business segments posted double-digit sales growth in the quarter.
This obviously is compared with a very weak quarter four of last year, but it is significant nonetheless, as we all know that positive growth in new bookings is important to longer-term revenue growth. Later in the presentation, we will review with you our revenue waterfall chart, and you will see the impact of these new bookings on revenue growth.
For the year, new business sales grew 4%, and we had strong momentum heading into fiscal 2011. Having said that, we are still somewhat cautious about the over 1,000 pays National Accounts market. While we believe we are beyond the bottom, we are still cautious, as this market is typically where sales cycles take longer to rebound coming out of an economic downturn.
Turning to another important metric, I'm especially pleased that client revenue retention and Employer Services improved 160 basis points during the fourth quarter and 40 basis points for the full fiscal year, which was ahead of our expectations. Employment levels in the U.S. continue to stabilize, and our pays per control same-store sales U.S. employment metric turned slightly positive in the fourth quarter. And as a result, the full year decline of 3.4% was also slightly ahead of our expectations.
We also made some positive steps with important acquisitions that support our growth strategy to enter adjacent markets that leverage our core franchise. As you know, we did announce a few weeks ago that we signed a definitive agreement to acquire Workscape, a leading provider of integrated benefit and compensation solutions and services. The addition of Workscape will clearly be complementary to our National Account Services benefits offering and will enable us to expand our market presence to compete more successfully for large and more complex benefit deals. Workscape’s average client has over 20,000 employees and, as you know, our current benefit solution is a better fit for companies with under 20,000 employees.
Workscape also offers compensation and performance management solutions. While we remain strongly committed to our partnership with Cornerstone OnDemand to deliver a full suite of integrated performance and learning management solutions, we do believe that the Workscape solution set will be a great complement to our existing talent management offerings and will give us an additional solution in our one-stop shop portfolio.
Let me move on to Dealer Services, where we have good positive momentum here as well. First, let me provide some highlights regarding our North American business. In June, we announced that Asbury, one of the large public dealer groups, has signed a letter of intent for ADP to become their sole dealer management systems solutions provider. Asbury has 80 dealer locations, representing 107 franchises, and plans to begin the transition to ADP's Dealer Management System towards the end of calendar 2010. We are currently in the final steps of negotiating the definitive agreement for that deal. Our position with large dealer groups continues to solidify. In fact, upon the signing of the Asbury contract, we will be the exclusive DMS [Dealer Management System] solutions provider for seven out of the top 10 largest dealer groups in the United States.