10-QPeriod: Q1 FY2022

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q1 Ended Sep 30, 2021

Filed October 29, 2021For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported a solid first quarter for fiscal year 2022, demonstrating robust financial performance. Total revenues grew by 10% year-over-year to $3.83 billion, driven by strong retention, new business acquisition, and a 15% increase in PEO services. Earnings Before Income Taxes (EBIT) saw an impressive 18% increase, alongside a 150 basis point expansion in EBIT margin, indicating effective cost management and operational efficiencies. Diluted Earnings Per Share (EPS) also rose by 18% to $1.65, reflecting strong profitability. The company highlighted consistent client service, ongoing innovation in its Human Capital Management (HCM) solutions, and a strong balance sheet, reinforcing its position as a market leader.

Financial Highlights

52 data points
Beta

Revenue

$3.83B

42.0% Gross Margin

Net Income

$700.50M

18.3% Net Margin

EPS (Diluted)

$1.65

Total Assets

$59.99B

Cash & Equivalents

$1.60B

Free Cash Flow

$121.90M

Financial Statements
Beta
Revenue$3.83B
Cost of Revenue$2.22B
Gross Profit$1.61B
SG&A Expenses$719.20M
Operating Expenses$2.96B
Interest Expense$18.50M
Net Income$700.50M
EPS (Basic)$1.66
EPS (Diluted)$1.65
Shares Outstanding (Basic)421.40M
Shares Outstanding (Diluted)423.80M

Key Highlights

  • 1Total revenues increased by 10% to $3.83 billion, driven by growth across Employer Services and PEO Services segments.
  • 2Earnings Before Income Taxes (EBIT) grew by 18% to $900.8 million, with an expansion in EBIT margin by 150 basis points to 23.5%.
  • 3Diluted Earnings Per Share (EPS) rose by 18% to $1.65, indicating strong bottom-line performance.
  • 4PEO Services revenue saw a significant 15% increase, supported by a 15% rise in average worksite employees.
  • 5The company returned $0.9 billion to shareholders through dividends ($0.4 billion) and share repurchases ($0.5 billion).
  • 6Cash and cash equivalents stood at $1.6 billion, with a strong overall liquidity position to support operations and shareholder returns.
  • 7ADP continued to invest in innovation, including the rollout of a new user experience for RUN Powered by ADP® and an award-winning Diversity, Equity, and Inclusion solution.

Frequently Asked Questions

ADP reported a 10% year-over-year increase in total revenues for the three months ended September 30, 2021, reaching $3.83 billion. This growth was primarily fueled by strong client retention, new business, an increase in PEO revenues, and a rise in 'pays per control'.

PEO Services revenue grew by 15%, largely due to an increase in zero-margin benefits pass-throughs and a significant 15% increase in the average number of worksite employees. This indicates strong demand for their Professional Employer Organization solutions.

Despite a 9% increase in total costs of revenues and a 6% increase in selling, general, and administrative expenses, ADP managed its overall expenses effectively. This, combined with revenue growth, led to an 18% increase in Earnings Before Income Taxes (EBIT) and a 150 basis point expansion in EBIT margin, demonstrating improved operational efficiency.

ADP maintains a solid financial condition with $1.6 billion in cash and cash equivalents. The company expects its existing cash flow, credit facilities, and access to debt financing to be sufficient for its operating, investing, and financing activities for the foreseeable future. The report highlights continued investment in innovation and a commitment to shareholder returns through dividends and share repurchases.