Automatic Data Processing Earnings Call Nuggets: Impact of Healthcare Reform and Vantage HCM

Automatic Data Processing (NASDAQ:ADP) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Impact of Healthcare Reform

Sara Gubins – Bank of America Merrill Lynch: First question regarding healthcare reform. Could you probably talk about the expected impact and specifically, I am wondering, if PEOs can continue to provide some more businesses with lower healthcare costs in an environment where there are the state run healthcare exchanges?

Carlos Rodriguez – President and CEO: I actually spent some time a few months ago with the folks from our PEO and exactly the question on healthcare reform and the impact on the PEO and we’re feeling pretty good about our ability to continue to deliver value to clients through our PEO even in the phase of healthcare reform. The profile of our clients tends to be slightly higher average wage and more white collar, which will probably have a less impact and the client average size in our PEO tends to be also slightly larger than the typical PEO. I believe the average clients lies somewhere in the 30 employee range or 40 employee range and that’s the average. So we tend to not have a lot of clients in our PEO that are under 10. Generally speaking where there would be the most of potential for migration is clients that are very small and clients that have lower average wage in terms of their client base. But as you can imagine we have – we don’t know for sure what the full impact will be of healthcare reform and the behavior of buyers and small clients or large clients, but I walked away from that meeting feeling pretty good that our value proposition was still quite strong and they we were going to be able to hold up and in fact be able to provide value to our clients during healthcare reform because there is going to be a lot of compliance requirements and a lot of changes as a result of healthcare reform that I think small businesses will also need help with. But I think it’s something that we are watching carefully. Our sales so far have been relatively stable in terms of — on the PEO side, our retention rates actually are quite strong on a year-to-date basis. So I think right now, I think we’re keeping an eye on it and we will continue to I think report back on a regular basis if we see anything di

Jan Siegmund – Corporate VP and CFO: Carlos if I add a follow on to it. In up market solutions you will know that ADP has a strong market position and benefit administration services for our mid and up market clients and we do see a healthy interest of those clients into our solutions leveraging ADP’s strength in the compliance and overall understanding of the healthcare reform. So we think there could be a positive impact on mid and upmarket business due to the healthcare reform and pending buying decisions.