10-QPeriod: Q3 FY2015

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2015

Filed May 6, 2015For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial results for the nine months ended March 31, 2015, with total revenues increasing by 8% to $8.3 billion. This growth was driven by increases in both its Employer Services (up 5%) and PEO Services (up 17%) segments. Net earnings from continuing operations rose by 11% to $1.12 billion, with diluted earnings per share from continuing operations increasing to $2.35. The company successfully executed a strategic focus on its global Human Capital Management (HCM) strategy, which included the spin-off of its Dealer Services business into CDK Global, Inc. in September 2014. Despite pressures from foreign currency translation and a slower growth rate in client funds interest revenue relative to overall revenue, ADP demonstrated strong operational performance. The company continued to return value to shareholders through dividends and share repurchases, including utilizing $825 million received from CDK as a dividend to fund share buybacks. The balance sheet remains solid, with $1.9 billion in cash and cash equivalents and marketable securities as of March 31, 2015.

Financial Highlights

50 data points
Beta

Revenue

$3.02B

44.3% Gross Margin

Net Income

$489.60M

16.2% Net Margin

EPS (Diluted)

$1.03

Total Assets

$37.11B

Cash & Equivalents

$1.81B

Free Cash Flow

$857.10M

Financial Statements
Beta
Revenue$3.02B
Gross Profit$1.34B
SG&A Expenses$607.20M
Interest Expense$800K
Net Income$489.60M
EPS (Basic)$1.04
EPS (Diluted)$1.03
Shares Outstanding (Basic)470.30M
Shares Outstanding (Diluted)474.00M

Key Highlights

  • 1Total revenues grew 8% year-over-year to $8.3 billion for the nine months ended March 31, 2015.
  • 2Net earnings from continuing operations increased 11% to $1.12 billion for the nine months ended March 31, 2015.
  • 3Diluted EPS from continuing operations grew 12% to $2.35 for the nine months ended March 31, 2015.
  • 4PEO Services segment demonstrated strong growth with revenues up 17% year-over-year for the nine months.
  • 5The company completed the spin-off of its Dealer Services business (CDK Global) in September 2014, focusing on its HCM strategy.
  • 6Shareholder returns remained a priority, with significant share repurchases funded in part by a dividend from CDK.
  • 7The company maintained a strong financial position with $1.9 billion in cash and cash equivalents and marketable securities as of March 31, 2015.

Frequently Asked Questions

Revenue growth was primarily driven by increases in both the Employer Services segment (up 5%) and the PEO Services segment (up 17%) for the nine months ended March 31, 2015. This growth was attributed to new business bookings, price increases, and an increase in the number of employees on clients' payrolls.

The spin-off of CDK Global in September 2014 allowed ADP to sharpen its focus on its global HCM strategy. The spin-off itself resulted in the classification of CDK's operating results as discontinued operations for all periods presented. ADP also received an $825 million dividend from CDK, which was subsequently used to fund share repurchases.

ADP faced challenges from unfavorable foreign currency translation, which negatively impacted revenue and earnings growth. Additionally, there was margin pressure from the client funds interest revenue, which grew at a slower rate than overall revenue.

ADP is returning capital to shareholders through dividends and share repurchases. Notably, during the nine months ended March 31, 2015, the company repurchased approximately 13.3 million shares, a significant portion of which was funded by the dividend received from CDK.