10-QPeriod: Q1 FY2025

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q1 Ended Sep 30, 2024

Filed November 1, 2024For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported a strong first fiscal quarter ended September 30, 2024, with total revenues increasing by 7% to $4.83 billion, driven by new business, client retention, and pricing increases. Profitability also saw a notable improvement, with Net Earnings rising 11% to $956.3 million, and Diluted EPS growing 13% to $2.34. The company highlighted strategic investments in technology, including generative AI, and a significant acquisition of WorkForce Software in October 2024 for $1.2 billion, which is expected to bolster its Employer Services segment. ADP's financial position remains robust, supported by consistent operating cash flows and a strong balance sheet. The company returned $940 million to shareholders through dividends ($570 million) and share repurchases ($370 million). Management's focus on strategic priorities, coupled with operational efficiencies and favorable interest income on client funds, positions ADP for continued growth and value creation for shareholders.

Financial Highlights

54 data points
Beta

Revenue

$4.83B

45.5% Gross Margin

Net Income

$956.30M

19.8% Net Margin

EPS (Diluted)

$2.34

Total Assets

$49.51B

Cash & Equivalents

$2.10B

Free Cash Flow

$824.40M

Financial Statements
Beta
Revenue$4.83B
Cost of Revenue$2.63B
Gross Profit$2.20B
R&D Expenses$232.60M
SG&A Expenses$926.70M
Operating Expenses$3.70B
Interest Expense$137.80M
Net Income$956.30M
EPS (Basic)$2.34
EPS (Diluted)$2.34
Shares Outstanding (Basic)407.90M
Shares Outstanding (Diluted)409.50M

Key Highlights

  • 1Total Revenues grew 7% to $4.83 billion, driven by new business, client retention, and pricing strategies.
  • 2Net Earnings increased 11% to $956.3 million, and Diluted EPS rose 13% to $2.34.
  • 3Acquisition of WorkForce Software for approximately $1.2 billion in October 2024, aimed at strengthening the Employer Services segment.
  • 4Introduced ADP Lyric HCM, a new global platform combining HR, payroll, and services with a human-centric approach.
  • 5Investments in generative AI capabilities to enhance client experience and associate empowerment.
  • 6Returned $940 million to shareholders via dividends ($570 million) and share repurchases ($370 million).
  • 7Interest income on funds held for clients increased due to higher interest rates and average client fund balances.

Frequently Asked Questions

Revenue growth was primarily driven by new business secured from bookings, strong client retention rates, increased pricing for services, higher pass-through costs for PEO benefits, and an increase in the 'pays per control' metric, which represents the number of employees on ADP clients' payrolls.

Profitability improved significantly. Net earnings increased by 11% to $956.3 million, and diluted earnings per share (EPS) grew by 13% to $2.34. This was supported by revenue growth, operating efficiencies, and increased interest income on client funds.

The acquisition of WorkForce Software for approximately $1.2 billion in cash is a strategic move to enhance ADP's capabilities in workforce management, particularly for large, global enterprises. This acquisition is expected to be reported within the Employer Services segment and should bolster ADP's offerings in the Human Capital Management (HCM) space.

ADP demonstrated a solid financial position with strong operating cash flows. The company returned $940 million to shareholders during the quarter, comprising $570 million in dividends and $370 million through share repurchases. Their committed credit facilities and access to debt markets provide ample liquidity for ongoing operations, dividends, share repurchases, and acquisitions.