10-QPeriod: Q3 FY2024

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2024

Filed May 2, 2024For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported strong financial results for the third quarter and the first nine months of fiscal year 2024. Total revenues increased by 7% year-over-year for both periods, driven by new business, client retention, pricing increases, and growth in interest on client funds. Net earnings saw a significant increase of 14% for the quarter and 11% for the nine months. Diluted Earnings Per Share (EPS) also grew, rising 15% quarterly and 12% year-to-date. The company's strategic priorities, including enhancing its Human Capital Management (HCM) technology with AI and leveraging global scale, are progressing well. ADP continues to demonstrate a strong financial position and robust cash flow generation, enabling consistent returns to shareholders through dividends and share repurchases.

Financial Highlights

54 data points
Beta

Revenue

$5.25B

47.3% Gross Margin

Net Income

$1.18B

22.6% Net Margin

EPS (Diluted)

$2.88

Total Assets

$64.18B

Cash & Equivalents

$3.29B

Free Cash Flow

$1.50B

Financial Statements
Beta
Revenue$5.25B
Cost of Revenue$2.77B
Gross Profit$2.49B
R&D Expenses$242.70M
SG&A Expenses$940.90M
Operating Expenses$3.77B
Interest Expense$62.70M
Net Income$1.18B
EPS (Basic)$2.89
EPS (Diluted)$2.88
Shares Outstanding (Basic)410.50M
Shares Outstanding (Diluted)412.10M

Key Highlights

  • 1Total revenues grew 7% year-over-year for both the three and nine months ended March 31, 2024.
  • 2Net earnings increased by 14% for the three months and 11% for the nine months ended March 31, 2024.
  • 3Diluted EPS rose by 15% for the quarter and 12% for the nine months.
  • 4Interest income on funds held for clients significantly increased due to higher average interest rates and client fund balances.
  • 5Investments in Research and Development and Selling, General, and Administrative expenses increased, reflecting strategic investments in technology (including AI) and sales organization.
  • 6The company returned $2.4 billion to shareholders through dividends ($1.6B) and share repurchases ($0.8B) in the first nine months.
  • 7Employer Services segment revenues grew 8% year-over-year, with a notable increase in Earnings Before Income Taxes (EBIT) of 14% for the quarter.

Frequently Asked Questions

ADP's total revenues increased due to several factors including new business secured, strong client retention, an increase in pricing for services, growth in interest earned on client funds, and an increase in pays per control metric. For the three and nine months ended March 31, 2024, interest on funds held for clients specifically benefited from higher average interest rates and increased average client fund balances.

Profitability improved significantly. Net earnings grew 14% year-over-year for the three months and 11% for the nine months ended March 31, 2024. Diluted Earnings Per Share (EPS) also showed strong growth, up 15% for the quarter and 12% for the nine-month period, reflecting both increased earnings and a slight reduction in outstanding shares due to repurchases.

ADP is focused on three strategic priorities: leading with best-in-class Human Capital Management (HCM) technology, providing unmatched expertise and outsourcing solutions, and leveraging its global scale. This includes continued rollout of ADP Assist, an AI-powered tool to enhance HR productivity, and extending AI capabilities to service associates. They are also ensuring partners on ADP Marketplace adhere to responsible AI principles.

ADP demonstrates a commitment to shareholder returns through a combination of regular quarterly dividends and share repurchases. In the first nine months of fiscal year 2024, the company returned $2.4 billion to shareholders, consisting of $1.6 billion in dividends and $0.8 billion in share repurchases.