What was the primary driver of revenue growth in this quarter?

Revenue growth was primarily driven by broad-based increases across all major segments, particularly Employer Services and Dealer Services. Employer Services benefited from new business, strong client retention, and price increases, while Dealer Services saw growth boosted by the integration of Kerridge and increased sales in North America.

How did the planned spin-off of the Brokerage Services Group progress during this period?

ADP announced progress towards the spin-off of its Brokerage Services Group, which is intended to become Broadridge Financial Solutions, Inc. The company has filed a registration statement for Broadridge and is awaiting a favorable ruling from the IRS to proceed with the tax-free spin-off to ADP shareholders. Incremental separation costs of $8.0 million were incurred during the quarter related to this initiative.

What is the company's outlook on expenses and profitability?

While total revenues grew 14%, total expenses also increased by 15%, primarily due to higher operating expenses supporting revenue growth, increased personnel costs for sales and implementation, and higher pass-through costs in the PEO business. Despite the expense increase, net earnings from continuing operations grew 10%, and the company maintained its operating margin, indicating effective management of profitability amidst expansion.

How is the company managing its share count and returning capital to shareholders?

The company actively repurchased shares during the quarter, with 5.1 million shares bought back under its common stock repurchase plan. This reduction in shares outstanding contributed to the year-over-year increase in diluted earnings per share. Dividends paid also increased, reflecting a commitment to returning capital to shareholders.

ADP 10-Q Quarterly Report Q2 FY2007 — Revenue, Net Income, EPS

Summary

Automatic Data Processing, Inc. (ADP) reported strong financial performance for the second quarter of fiscal year 2007, ending December 31, 2006. Total revenues increased by 14% year-over-year, reaching $2.32 billion, driven by robust growth across all major segments, particularly Employer Services and Dealer Services. Net earnings from continuing operations saw a 10% increase to $283 million, translating to diluted earnings per share of $0.51, up from $0.44 in the prior year's comparable quarter. The company also highlighted strategic initiatives, including progress on the planned spin-off of its Brokerage Services Group into a new entity, Broadridge Financial Solutions, Inc. Management noted effective cost management, although operating expenses and selling, general, and administrative expenses increased in line with revenue growth and investments in new business opportunities. The company's financial position remains solid, with ample liquidity and a strong balance sheet, supporting continued investment and shareholder returns.

Key Highlights

1Total revenues grew 14% to $2.32 billion for the three months ended December 31, 2006, compared to $2.03 billion in the prior year.
2Net earnings from continuing operations increased by 10% to $283.0 million, up from $257.0 million in the prior year's quarter.
3Diluted earnings per share (EPS) from continuing operations rose to $0.51 from $0.44 year-over-year.
4Employer Services segment revenue increased by 12% to $1.54 billion, driven by new business, client retention, and price increases.
5Dealer Services segment revenue saw significant growth of 19% to $302.9 million, partly due to the inclusion of Kerridge, acquired in late 2005.
6The company announced progress on the planned spin-off of its Brokerage Services Group into an independent company, Broadridge Financial Solutions, Inc.
7Total expenses increased by 15% to $1.86 billion, reflecting investments in new business opportunities, increased personnel, and higher pass-through costs in the PEO business.

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q2 Ended Dec 31, 2006

Summary

Key Highlights

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