Summary
Automatic Data Processing, Inc. (ADP) reported a strong third quarter for fiscal year 2023, demonstrating robust financial performance and strategic execution. Total revenues grew by 9% year-over-year, reaching $4.93 billion, driven by solid client retention, new business bookings, and a significant increase in interest earned on client funds due to higher interest rates and balances. Earnings Before Income Taxes (EBIT) saw a healthy 15% increase, reflecting improved operational efficiency and margin expansion. The company continued to execute its modernization strategy, with ongoing roll-out of its new user experience across key platforms and strong sales performance. ADP's Employer Services segment showed robust revenue growth and margin improvement, while the PEO Services segment also delivered solid revenue increases and margin expansion. The company's financial position remains solid, supported by strong cash flows and a commitment to shareholder returns through dividends and share repurchases.
Financial Highlights
54 data points| Revenue | $4.93B |
| Cost of Revenue | $2.62B |
| Gross Profit | $2.30B |
| R&D Expenses | $208.60M |
| SG&A Expenses | $938.00M |
| Operating Expenses | $3.60B |
| Interest Expense | $38.30M |
| Net Income | $1.04B |
| EPS (Basic) | $2.52 |
| EPS (Diluted) | $2.51 |
| Shares Outstanding (Basic) | 413.70M |
| Shares Outstanding (Diluted) | 415.50M |
Key Highlights
- 1Total revenues increased by 9% to $4.93 billion for the third quarter of fiscal year 2023, compared to $4.51 billion in the prior year period.
- 2Interest on funds held for clients more than doubled to $249.4 million, driven by higher average client fund balances and a significant increase in the average interest rate earned.
- 3Earnings Before Income Taxes (EBIT) grew by 15% to $1.36 billion, with EBIT margin expanding by 130 basis points to 27.7%.
- 4Diluted Earnings Per Share (EPS) increased by 14% to $2.51, driven by net earnings growth and a reduction in outstanding shares due to repurchases.
- 5Employer Services segment revenues grew 11% and its EBIT margin expanded by 80 basis points, indicating strong performance in this core business.
- 6PEO Services segment revenues increased by 5% and its EBIT margin expanded by 140 basis points, demonstrating continued growth and profitability in this segment.
- 7The company returned $2.2 billion to shareholders via dividends and share repurchases in the first nine months of fiscal year 2023, underscoring its commitment to shareholder value.