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

Revenue growth was primarily driven by strong client retention, new business bookings from prior quarters, an increase in PEO zero-margin benefits pass-throughs, and growth in pays per control. Additionally, higher interest rates and increased client fund balances contributed to a significant increase in interest on funds held for clients.

How did expenses change compared to the prior year?

Total expenses increased by 10%. Key drivers included a 7% rise in operating expenses (largely due to increased PEO pass-through costs and servicing costs), an 11% increase in selling, general, and administrative expenses (reflecting investments in sales, travel, and marketing), and a significant 177% increase in interest expense due to higher commercial paper borrowings and interest rates.

What is the company's outlook on liquidity and financial condition?

ADP maintains a solid financial condition and sufficient liquidity. The company expects existing cash, cash equivalents, operating cash flow, and its significant committed credit facilities to be adequate for its operating, investing, and financing activities, including dividends and share repurchases.

How is ADP managing market risks, particularly regarding its investment portfolio?

ADP manages market risks by investing its corporate and client funds in highly liquid, investment-grade marketable securities with diversification and safety of principal as primary objectives. They use a strategy of laddering investment maturities and employing short-term financing to manage interest rate and credit risks. The company limits its exposure by setting credit quality and maturity limits for investments and avoids certain complex or sub-prime securities.

ADP 10-Q Quarterly Report Q1 FY2023 — Revenue, Net Income, EPS

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial results for the first quarter of fiscal year 2023, ending September 30, 2022. Total revenues grew by 10% year-over-year to $4.22 billion, driven by strong performance across both its Employer Services and PEO Services segments. Net earnings increased by 11% to $779.0 million, and diluted earnings per share (EPS) rose by 13% to $1.87, demonstrating effective operational execution and growth in its core business. The company's strategic initiatives, including the rollout of a new unified user experience and enhancements to its mobile app, are progressing well and contributing to its competitive positioning. ADP continues to focus on innovation within its Human Capital Management (HCM) solutions, evidenced by recent awards and product launches. The company maintains a strong financial position with robust cash flows, enabling continued investment in the business and returning capital to shareholders through dividends and share repurchases.

Financial Highlights

53 data points

Beta

Revenue

$4.22B

0.4% Gross Margin

Net Income

$779.00M

0.2% Net Margin

EPS (Diluted)

$1.87

Total Assets

$46.36B

Cash & Equivalents

$1.21B

Free Cash Flow

$718.10M

Financial Statements

Beta

Revenue	$4.22B
Cost of Revenue	$2.39B
Gross Profit	$1.82B
R&D Expenses	$209.80M
SG&A Expenses	$800.30M
Operating Expenses	$3.25B
Interest Expense	$51.20M
Net Income	$779.00M
EPS (Basic)	$1.88
EPS (Diluted)	$1.87
Shares Outstanding (Basic)	414.60M
Shares Outstanding (Diluted)	416.90M

Key Highlights

1Total revenues increased 10% to $4.22 billion, with organic constant currency revenue growth at 11%.
2Net earnings grew 11% to $779.0 million, and diluted EPS increased 13% to $1.87.
3Employer Services revenue grew 9% (11% organically) and PEO Services revenue grew 13%.
4Interest on funds held for clients increased significantly to $141.0 million from $101.1 million due to higher balances and interest rates.
5Operating expenses and Selling, general, and administrative expenses increased by 7% and 11% respectively, reflecting investments in service, sales, and product development.
6The company returned $0.8 billion to shareholders through dividends and share repurchases during the quarter.
7ADP continues to invest in product innovation, including a new unified user experience rollout and re-launch of its mobile app.

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q1 Ended Sep 30, 2022

Summary

Financial Highlights

Key Highlights

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