01—Abstract
Summary
Summary of the 10-K filed August 3, 2018. Cited figures are marked; the original filing is the authoritative source.
Automatic Data Processing, Inc. (ADP) in its fiscal year ended June 29, 2018, reported total revenues of $13.3 billiona, an 8% increase year-over-year.
This growth was driven by an 8% increase in new business bookings and a 5% revenue increase in the Employer Services segment, alongside a strong 12% increase in the PEO Services segment. Diluted earnings per share (EPS) decreased by 5% to $3.66b, primarily due to significant transformation initiatives and voluntary early retirement program charges totaling over $400 million.
However, adjusted diluted EPS saw a substantial 18% increase to $4.35c, reflecting underlying operational improvements and the benefits of the Tax Cuts and Jobs Act. The company continued its shareholder-friendly capital allocation, increasing its dividend by 21% and repurchasing approximately $2.1 billion in shares.
02—Key points
Key Highlights
- Total revenues increased by 8% to $13.3 billion, driven by strong new business bookings.
- Diluted EPS decreased by 5% to $3.66 due to significant transformation charges, but adjusted diluted EPS increased by 18% to $4.35.
- The company returned $2.1 billion to shareholders through dividends and share repurchases, demonstrating a commitment to shareholder returns.
- Employer Services revenue grew 5%, with client retention improving to 90.4%, benefiting from a focus on client experience and platform enhancements.
- PEO Services revenue saw robust growth of 12%, driven by an increase in worksite employees and higher benefit pass-through revenues.
- Investments in technology, including acquisitions like Global Cash Card and WorkMarket, strengthened ADP's position in the Human Capital Management (HCM) sector, expanding its ability to serve a diverse workforce.
- The company benefited from the Tax Cuts and Jobs Act, leading to a lower effective tax rate and contributing to improved adjusted earnings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed August 3, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $13.27B$12.37B | +7.3% |
| Cost of Revenue | $7.76B$7.24B | +7.1% |
| Gross Profit | $5.52B$5.13B | +7.6% |
| SG&A Expenses | $2.96B$2.77B | +6.7% |
| Operating Expenses | $10.82B$10.10B | +7.1% |
| Interest Expense | $102.70M$80.00M | +28.4% |
| Net Income | $1.88B$1.79B | +5.4% |
| EPS (Basic) | $4.28$3.99 | +7.3% |
| EPS (Diluted) | $4.25$3.97 | +7.1% |
| Shares Outstanding (Basic) | 440.60M447.80M | −1.6% |
| Shares Outstanding (Diluted) | 443.30M450.30M | −1.6% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of ADP in fiscal year 2018?
In fiscal year 2018, ADP reported an 8% increase in total revenues to $13.3 billion, driven by strong sales performance and growth in both its Employer Services and PEO Services segments. While reported diluted EPS decreased by 5% to $3.66 due to significant one-time charges related to transformation initiatives, adjusted diluted EPS showed a strong increase of 18% to $4.35, indicating improved operational performance.
How did ADP's PEO Services segment perform?
The PEO Services segment demonstrated robust growth, with revenues increasing by 12% compared to the prior year. This growth was primarily attributed to a 9% increase in the average number of worksite employees, supported by an increase in new PEO clients and higher benefit pass-through revenues.
What impact did transformation initiatives have on ADP's financial results?
ADP incurred significant charges related to its transformation initiatives, including a Voluntary Early Retirement Program (VERP) and a Service Alignment Initiative, totaling over $400 million in fiscal year 2018. These charges negatively impacted reported net earnings and diluted EPS, but the company highlighted that adjusted earnings metrics provided a clearer view of the underlying business performance, showing substantial growth.
How did ADP manage its capital and return value to shareholders?
ADP continued its focus on returning value to shareholders. In fiscal year 2018, the company increased its quarterly cash dividend by 21% and returned approximately $2.1 billion to shareholders through dividends and share repurchases. The company also maintained a solid financial position with approximately $2.2 billion in cash and marketable securities.
06—Continue