10-QPeriod: Q2 FY2020

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q2 Ended Dec 31, 2019

Filed January 31, 2020For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial results for the six months ended December 31, 2019, demonstrating robust revenue growth and improved profitability. Total revenues increased by 5% to $7.2 billion, driven by strong performance in both Employer Services and PEO Services segments, with organic constant currency revenue growth at 6%. Net earnings saw a significant increase of 16% to $1.23 billion, translating to diluted earnings per share of $2.84, up 17% compared to the prior year period. The company also highlighted improved operating efficiencies and margin expansion, with Adjusted EBIT Margin increasing by 70 basis points to 22.3%. Shareholder returns remained a priority, with substantial amounts returned through dividends and share repurchases, underscoring a commitment to delivering long-term shareholder value.

Financial Highlights

53 data points
Beta

Revenue

$3.67B

42.9% Gross Margin

Net Income

$651.60M

17.8% Net Margin

EPS (Diluted)

$1.50

Total Assets

$49.06B

Cash & Equivalents

$1.50B

Free Cash Flow

$698.10M

Financial Statements
Beta
Revenue$3.67B
Cost of Revenue$2.09B
Gross Profit$1.58B
SG&A Expenses$754.30M
Operating Expenses$2.88B
Interest Expense$31.60M
Net Income$651.60M
EPS (Basic)$1.51
EPS (Diluted)$1.50
Shares Outstanding (Basic)431.50M
Shares Outstanding (Diluted)433.30M

Key Highlights

  • 1Total revenues grew 5% to $7.2 billion for the six months ended December 31, 2019, with organic constant currency growth at 6%, indicating strong underlying business performance.
  • 2Net earnings increased by a robust 16% to $1.23 billion, and diluted EPS rose 17% to $2.84, reflecting improved profitability and operational efficiency.
  • 3Both Employer Services and PEO Services segments showed strong revenue growth, up 4% and 9% respectively, demonstrating the company's diversified revenue streams.
  • 4Adjusted EBIT Margin improved by 70 basis points to 22.3%, showcasing the positive impact of cost management and operational efficiencies.
  • 5The company returned approximately $690 million via dividends and $620 million via share repurchases during the six-month period, demonstrating a commitment to shareholder returns.
  • 6The balance sheet remains solid, with total assets growing to $49.1 billion and total liabilities at $43.7 billion, leading to total stockholders' equity of $5.4 billion.
  • 7Operating cash flow increased by approximately $200 million to $1.13 billion for the six months ended December 31, 2019, highlighting the company's strong cash generation capabilities.

Frequently Asked Questions

ADP demonstrated strong financial performance, with total revenues increasing by 5% to $7.2 billion and net earnings rising by 16% to $1.23 billion for the six months ended December 31, 2019. Diluted EPS grew 17% to $2.84. The company also achieved margin expansion, with an Adjusted EBIT Margin of 22.3%, up 70 basis points.

Both the Employer Services and PEO Services segments contributed positively to revenue growth. Employer Services revenues increased by 4%, while PEO Services revenues saw a stronger increase of 9% for the six months ended December 31, 2019, driven by an increase in the average number of Worksite Employees.

ADP continues to prioritize shareholder returns. For the six months ended December 31, 2019, the company returned approximately $690 million through dividends and $620 million through share repurchases, reflecting its financial strength and commitment to shareholder value.

ADP is focusing on operational efficiencies and cost management as part of its transformation initiatives. This has led to margin expansion, with the Adjusted EBIT Margin increasing by 70 basis points. Expenses such as operating expenses and selling, general, and administrative expenses saw controlled growth relative to revenue, contributing to improved profitability.