10-KPeriod: FY2019

AUTOMATIC DATA PROCESSING INC Annual Report, Year Ended Jun 30, 2019

Filed August 9, 2019For Securities:ADP

Summary

Automatic Data Processing Inc. (ADP) reported solid performance for the fiscal year ended June 30, 2019. The company experienced a 6% increase in total revenues, reaching $14.18 billion, driven by strong retention and new business bookings in its Employer Services segment, alongside an 8% increase in worksite employees for its PEO Services segment. Net earnings grew by a notable 22% to $2.29 billion, with diluted earnings per share rising 23% to $5.24. This growth was supported by improved EBIT margins, benefiting from operating efficiencies derived from transformation initiatives, increased interest on client funds, and the sale of assets. ADP continues to strategically invest in its cloud-based Human Capital Management (HCM) solutions and next-generation platforms. The company is focused on innovation, client experience, and expanding its global reach. Shareholder returns remained a priority, with approximately $1.3 billion returned via dividends and $940 million through share repurchases during the fiscal year. The company's financial position remains strong, and it anticipates continued positive momentum into fiscal 2020.

Financial Highlights

55 data points
Beta

Revenue

$14.11B

43.2% Gross Margin

Net Income

$2.29B

16.2% Net Margin

EPS (Diluted)

$5.24

Total Assets

$41.89B

Cash & Equivalents

$1.95B

Free Cash Flow

$2.69B

Financial Statements
Beta
Revenue$14.11B
Cost of Revenue$8.02B
Gross Profit$6.09B
SG&A Expenses$3.06B
Operating Expenses$11.22B
Interest Expense$129.90M
Net Income$2.29B
EPS (Basic)$5.27
EPS (Diluted)$5.24
Shares Outstanding (Basic)435.00M
Shares Outstanding (Diluted)437.60M

Key Highlights

  • 1Total revenues increased by 6% to $14.18 billion.
  • 2Net earnings grew by 22% to $2.29 billion.
  • 3Diluted earnings per share (EPS) increased by 23% to $5.24.
  • 4Employer Services New Business Bookings increased by 8%.
  • 5Average number of Worksite Employees in PEO Services increased by 8% to 547,000.
  • 6EBIT Margin improved to 21.2%, and Adjusted EBIT Margin improved to 22.3%.
  • 7Returned approximately $2.24 billion to shareholders through dividends ($1.3 billion) and share repurchases ($940 million).

Frequently Asked Questions

ADP's revenue growth in fiscal year 2019 was primarily driven by an 8% increase in Employer Services New Business Bookings and continued strong client retention, leading to a 5% revenue increase in the Employer Services segment. Additionally, the PEO Services segment saw an 8% increase in its average number of Worksite Employees, contributing to a 9% revenue increase in that segment. Interest earned on funds held for clients also saw an increase due to higher average interest rates and client fund balances.

ADP's total expenses increased by 4% in fiscal 2019. The company benefited from operating efficiencies achieved through its ongoing transformation initiatives, including Voluntary Early Retirement Programs (VERP) and Workforce Optimization. These efficiencies, combined with increased interest income on client funds and a reduction in certain charges, led to an improvement in both EBIT Margin (to 21.2%) and Adjusted EBIT Margin (to 22.3%).

ADP's growth strategy is centered on three pillars: growing its comprehensive suite of cloud-based HCM solutions, scaling its HR Outsourcing (HRO) solutions, and leveraging its global presence. The company is investing heavily in its 'next-gen' platforms, data analytics (ADP DataCloud), and innovation to anticipate the evolving needs of the future of work. Strategic acquisitions like Global Cash Card, Work Market, and Celergo also support its expansion efforts.

ADP demonstrated a commitment to returning value to shareholders by distributing approximately $1.3 billion through dividends and repurchasing approximately $940 million worth of its common stock during fiscal year 2019. This reflects a continued focus on capital return alongside reinvestment in the business.