10-KPeriod: FY2018

AUTOMATIC DATA PROCESSING INC Annual Report, Year Ended Jun 30, 2018

Filed August 3, 2018For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) in its fiscal year ended June 29, 2018, reported total revenues of $13.3 billion, 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 $3.66, 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 $4.35, 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.

Financial Highlights

53 data points
Beta

Revenue

$13.27B

41.6% Gross Margin

Net Income

$1.88B

14.2% Net Margin

EPS (Diluted)

$4.25

Total Assets

$38.85B

Cash & Equivalents

$2.17B

Free Cash Flow

$2.52B

Financial Statements
Beta
Revenue$13.27B
Cost of Revenue$7.76B
Gross Profit$5.52B
SG&A Expenses$2.96B
Operating Expenses$10.82B
Interest Expense$102.70M
Net Income$1.88B
EPS (Basic)$4.28
EPS (Diluted)$4.25
Shares Outstanding (Basic)440.60M
Shares Outstanding (Diluted)443.30M

Key Highlights

  • 1Total revenues increased by 8% to $13.3 billion, driven by strong new business bookings.
  • 2Diluted EPS decreased by 5% to $3.66 due to significant transformation charges, but adjusted diluted EPS increased by 18% to $4.35.
  • 3The company returned $2.1 billion to shareholders through dividends and share repurchases, demonstrating a commitment to shareholder returns.
  • 4Employer Services revenue grew 5%, with client retention improving to 90.4%, benefiting from a focus on client experience and platform enhancements.
  • 5PEO Services revenue saw robust growth of 12%, driven by an increase in worksite employees and higher benefit pass-through revenues.
  • 6Investments 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.
  • 7The company benefited from the Tax Cuts and Jobs Act, leading to a lower effective tax rate and contributing to improved adjusted earnings.

Frequently Asked Questions

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.

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.

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.

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.