01—Abstract
Summary
Summary of the 10-Q filed May 1, 2025. Cited figures are marked; the original filing is the authoritative source.
Automatic Data Processing, Inc. (ADP) reported solid financial results for the third quarter and the first nine months of fiscal year 2025.
Total revenues increased by 6% year-over-year to $5.55 billiona for the quarter and 7% to $15.43 billion for the nine-month period, driven by new business, client retention, pricing increases, and interest income on client funds. The company also benefited from its recent acquisitions, WorkForce Software and PEI. Net earnings grew 5% to $1.25 billion ($3.06 per diluted share) for the quarter, and 8% to $3.17 billion ($7.75 per diluted share) for the nine months.
The company continued its commitment to shareholder returns, repurchasing shares and increasing its dividend for the 50th consecutive year. ADP's financial condition remains strong, supported by consistent cash flow generation and ample liquidity, positioning the company well for future growth and investments in its HCM technology solutions.
02—Key points
Key Highlights
- Total revenues increased by 6% to $5.55 billion in Q3 FY25 and by 7% to $15.43 billion in the first nine months of FY25.
- Net earnings grew 5% to $1.25 billion ($3.06 diluted EPS) for the quarter and 8% to $3.17 billion ($7.75 diluted EPS) for the nine-month period.
- The company successfully integrated the WorkForce Software acquisition and completed the PEI acquisition in Mexico, enhancing its global HCM capabilities.
- Interest on funds held for clients increased due to higher average client fund balances and a rise in average interest rates earned.
- Employer Services segment revenue grew 5% year-over-year for the quarter and 10% for the nine-month period, driven by new bookings, retention, and the WorkForce Software acquisition.
- PEO Services revenue increased 7% for both the quarter and nine-month period, supported by growth in average worksite employees.
- ADP returned $2.8 billion to shareholders through dividends ($1.8 billion) and share repurchases ($1.0 billion) in the first nine months of FY25, marking its 50th consecutive annual dividend increase.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2025filed May 1, 2025Financial Statements
Q3 FY2025 against Q3 FY2024
| Line item | Q3 FY2025Q3 FY2024 | Change |
|---|---|---|
| Revenue | $5.55B$5.25B | +5.7% |
| Cost of Revenue | $2.90B$2.77B | +4.9% |
| Gross Profit | $2.65B$2.49B | +6.6% |
| R&D Expenses | $247.10M$242.70M | +1.8% |
| SG&A Expenses | $1.02B$940.90M | +8.0% |
| Operating Expenses | $3.99B$3.77B | +5.9% |
| Interest Expense | $74.80M$62.70M | +19.3% |
| Net Income | $1.25B$1.18B | +5.5% |
| EPS (Basic) | $3.07$2.89 | +6.2% |
| EPS (Diluted) | $3.06$2.88 | +6.3% |
| Shares Outstanding (Basic) | 406.90M410.50M | −0.9% |
| Shares Outstanding (Diluted) | 408.50M412.10M | −0.9% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the third quarter?
Revenue growth in the third quarter was primarily driven by new business bookings, strong client retention, an increase in pricing, higher interest income on funds held for clients, and the contribution from the WorkForce Software acquisition.
How did the acquisitions of WorkForce Software and PEI impact ADP's performance?
The acquisition of WorkForce Software, completed in October 2024, contributed to revenue growth and is being integrated into ADP's global HCM ecosystem. The acquisition of PEI in Mexico, completed in January 2025, enhanced ADP's global payroll capabilities.
What is ADP's outlook on its financial health and liquidity?
ADP maintains a solid financial condition with sufficient liquidity. The company expects its existing cash, cash equivalents, marketable securities, operational cash flow, and access to committed credit facilities and debt markets to adequately fund its operations, dividends, share repurchases, acquisitions, and capital expenditures for the foreseeable future.
How did interest income on funds held for clients perform?
Interest income on funds held for clients saw a notable increase. For the three months ended March 31, 2025, it rose to $355.2 million from $320.8 million in the prior year, driven by a 6.7% increase in average client funds balances and a rise in the average interest rate earned to 3.2%.
06—Continue