01—Abstract
Summary
Summary of the 10-K filed August 5, 2016. Cited figures are marked; the original filing is the authoritative source.
Automatic Data Processing, Inc. (ADP) reported robust performance in its fiscal year ending June 30, 2016.
The company, a leading provider of Human Capital Management (HCM) solutions, saw a notable 7% increase in total revenues, reaching $11.7 billiona, with an 8% growth on a constant dollar basis, indicating strong underlying business momentum. This growth was primarily driven by strong new business bookings, up 12% year-over-year, and the increasing demand for solutions that help businesses comply with regulations like the Affordable Care Act (ACA). ADP demonstrated solid profitability with an 8% increase in net earnings from continuing operations to $1.5 billion, and diluted earnings per share (EPS) grew by 12% to $3.25.
The company continued its commitment to shareholder returns by repurchasing $1.2 billionb in shares and returning over $900 million in dividends, marking the 41st consecutive year of dividend per share increase. Furthermore, ADP strengthened its capital structure by issuing $2 billion in senior notes, signaling a strategic move to enhance shareholder returns over the long term.
02—Key points
Key Highlights
- Total revenues grew by 7% to $11.7 billion in fiscal year 2016, driven by strong new business bookings and demand for HCM solutions.
- Net earnings from continuing operations increased by 8% to $1.5 billion, with diluted EPS rising 12% to $3.25.
- New business bookings saw a significant 12% increase, reflecting strong market demand for ADP's services.
- The company returned approximately $1.2 billion to shareholders through share repurchases and over $900 million through dividends.
- ADP enhanced its capital structure by issuing $2 billion in senior notes to support long-term shareholder value.
- Revenue retention remained strong at 90.5% for Employer Services, though slightly impacted by legacy platform client losses.
- PEO Services demonstrated robust growth with a 16% revenue increase, driven by a 13% rise in worksite employees.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed August 5, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $11.67B$10.94B | +6.7% |
| SG&A Expenses | $2.64B$2.50B | +5.6% |
| Operating Expenses | $9.53B$8.93B | +6.7% |
| Interest Expense | $56.20M$6.50M | +764.6% |
| Net Income | $1.49B$1.45B | +2.8% |
| EPS (Basic) | $3.27$3.07 | +6.5% |
| EPS (Diluted) | $3.25$3.05 | +6.6% |
| Shares Outstanding (Basic) | 457.00M472.60M | −3.3% |
| Shares Outstanding (Diluted) | 459.10M475.80M | −3.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of ADP's revenue growth in fiscal year 2016?
ADP's revenue growth in fiscal year 2016 was primarily driven by strong new business bookings, which increased by 12% compared to the prior year. The growing demand for Human Capital Management (HCM) solutions, particularly those assisting with regulatory compliance like the Affordable Care Act (ACA), also significantly contributed to the revenue increase.
How did ADP manage its capital and return value to shareholders?
ADP actively managed its capital by issuing $2 billion in senior notes to enhance its capital structure. The company also demonstrated a strong commitment to shareholder returns by repurchasing approximately $1.2 billion worth of its common stock and distributing over $900 million in dividends to shareholders.
What is the company's strategy for future growth and service alignment?
ADP's strategy centers on its global HCM vision, focusing on product innovation, enhancing distribution and service capabilities, and assisting clients with complex HCM needs. The company also announced a multi-year service alignment initiative to optimize client service operations in conjunction with its platform simplification strategy.
How did ADP's two main segments, Employer Services and PEO Services, perform?
Employer Services saw a 5% revenue increase, driven by new business, price increases, and higher U.S. payroll volumes, although client retention saw a slight decline due to legacy platforms. PEO Services experienced robust growth, with revenues increasing by 16% due to a 13% rise in worksite employees and increased client participation in benefits.
06—Continue