10-QPeriod: Q2 FY2025

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q2 Ended Dec 31, 2024

Filed January 30, 2025For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial results for the six months ended December 31, 2024. Total revenues increased by 8% to $9.88 billion, driven by new business, strong client retention, increased pricing, and growth in PEO and Employer Services segments. The acquisition of WorkForce Software in October 2024 is being integrated and is expected to contribute to future growth. The company also highlighted its continued commitment to shareholder returns, with $1.79 billion returned through dividends and share repurchases. The company demonstrated robust operational performance with Earnings Before Income Taxes (EBIT) increasing by 12% to $2.49 billion and EBIT margin expanding by 90 basis points. Diluted Earnings Per Share (EPS) saw a 12% increase to $4.69. ADP's financial condition remains strong, supported by significant cash flow generation and a solid liquidity position, enabling continued investment in business enhancements and strategic priorities.

Financial Highlights

54 data points
Beta

Revenue

$5.05B

45.7% Gross Margin

Net Income

$963.20M

19.1% Net Margin

EPS (Diluted)

$2.35

Total Assets

$64.10B

Cash & Equivalents

$2.22B

Free Cash Flow

$1.15B

Financial Statements
Beta
Revenue$5.05B
Cost of Revenue$2.74B
Gross Profit$2.31B
R&D Expenses$239.50M
SG&A Expenses$1.01B
Operating Expenses$3.88B
Interest Expense$129.60M
Net Income$963.20M
EPS (Basic)$2.36
EPS (Diluted)$2.35
Shares Outstanding (Basic)407.60M
Shares Outstanding (Diluted)409.00M

Key Highlights

  • 1Total revenues grew 8% to $9.88 billion for the six months ended December 31, 2024.
  • 2Earnings Before Income Taxes (EBIT) increased by 12% to $2.50 billion, with an improved EBIT margin of 25.3%.
  • 3Diluted Earnings Per Share (EPS) rose 12% to $4.69.
  • 4The company successfully closed the acquisition of WorkForce Software in October 2024, integrating it into its global HCM ecosystem.
  • 5$1.79 billion was returned to shareholders through dividends ($1.15 billion) and share repurchases ($0.65 billion) for the six-month period.
  • 6Interest income on corporate funds increased due to higher average investment balances and interest rates.
  • 7The Employer Services segment showed strong revenue growth of 8% and improved margins, while PEO Services experienced moderate revenue growth with slightly compressed margins.

Frequently Asked Questions

Revenue growth was primarily driven by new business bookings, strong client retention, an increase in pricing, growth in PEO and Employer Services segments, and the impact of the WorkForce Software acquisition. Additionally, increased interest earned on client funds, resulting from higher average balances and interest rates, contributed to overall revenue growth.

The WorkForce Software acquisition, which closed in October 2024, has been integrated into ADP's global HCM ecosystem. Its impact is reflected in increased revenues and operating expenses, including depreciation and amortization, and research and development costs, as the company invests in its integration and future growth.

ADP remains committed to shareholder returns, demonstrated by a 12% increase in diluted EPS and significant cash returned through dividends ($1.15 billion) and share repurchases ($0.65 billion) for the six-month period. The company also highlighted its 50th consecutive year of dividend increases.

ADP maintains a solid financial condition with strong cash flow generation and sufficient liquidity. The company expects its existing cash, cash equivalents, marketable securities, operating cash flow, and access to committed credit facilities to adequately meet its operating, investing, and financing needs, including dividends, share repurchases, and acquisitions.