10-QPeriod: Q2 FY2016

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q2 Ended Dec 31, 2015

Filed February 3, 2016For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial performance for the six months ended December 31, 2015, with total revenues increasing by 6% to $5.52 billion, driven by growth in both its Employer Services and PEO Services segments. Net earnings from continuing operations rose 8% to $678.9 million. The company continues to invest in product innovation and sales force expansion, particularly focusing on solutions for Affordable Care Act (ACA) compliance, which is contributing to strong new business bookings. While facing headwinds from foreign currency translation and lower interest income on client funds, ADP maintained a strong balance sheet with significant cash reserves and implemented a new debt structure through the issuance of $2 billion in senior notes, signaling a commitment to enhancing shareholder returns. The company's strategic shift towards cloud-based Human Capital Management (HCM) solutions remains a core focus. Despite a slight decline in revenue retention on legacy platforms, overall revenue growth was robust, reflecting the effectiveness of its sales efforts and market demand for its services. ADP's financial health is characterized by recurring revenues, healthy margins, and consistent cash flow generation, positioning it for continued growth.

Financial Highlights

51 data points
Beta

Revenue

$2.81B

40.1% Gross Margin

Net Income

$341.40M

12.2% Net Margin

EPS (Diluted)

$0.74

Total Assets

$39.90B

Cash & Equivalents

$2.79B

Free Cash Flow

$406.30M

Financial Statements
Beta
Revenue$2.81B
Gross Profit$1.12B
SG&A Expenses$627.20M
Operating Expenses$2.33B
Interest Expense$16.80M
Net Income$341.40M
EPS (Basic)$0.75
EPS (Diluted)$0.74
Shares Outstanding (Basic)457.60M
Shares Outstanding (Diluted)460.30M

Key Highlights

  • 1Total revenues increased by 6% to $5.52 billion for the six months ended December 31, 2015, compared to the prior year period.
  • 2Net earnings from continuing operations grew by 8% to $678.9 million for the six months ended December 31, 2015.
  • 3Diluted earnings per share from continuing operations increased by 12% to $1.47 for the six months ended December 31, 2015.
  • 4The PEO Services segment showed particularly strong revenue growth of 18% for the three months and 18% for the six months ended December 31, 2015.
  • 5ADP issued $2 billion in senior notes during the six months ended December 31, 2015, to enhance its capital structure and return capital to shareholders.
  • 6The company reported a slight decrease in its worldwide client revenue retention rate due to elevated losses on legacy platforms, but maintains focus on upgrading clients to cloud-based solutions.
  • 7Cash and cash equivalents and marketable securities stood at $2.84 billion as of December 31, 2015, indicating a strong liquidity position.

Frequently Asked Questions

For the six months ended December 31, 2015, ADP reported total revenues of $5.52 billion, a 6% increase compared to the same period in the prior year. This growth was primarily driven by new business bookings and strong performance in both the Employer Services and PEO Services segments, despite pressures from foreign currency translation.

Net earnings from continuing operations increased by 8% to $678.9 million for the six months ended December 31, 2015. Diluted earnings per share from continuing operations also saw a healthy increase of 12% to $1.47 over the same period, reflecting improved operational efficiency and revenue growth.

ADP maintained a strong financial position, with cash and cash equivalents and marketable securities totaling $2.84 billion as of December 31, 2015. The company also issued $2 billion in senior notes, strengthening its capital structure, and indicated intentions to return capital to shareholders via share repurchases.

The report mentions pressure from foreign currency translation impacting revenues and earnings. Additionally, the company experienced a slight decline in revenue retention on legacy platforms, although it is actively working to transition clients to its newer cloud-based solutions.