AUTOMATIC DATA PROCESSING, INC. ADP Earnings Call & Webcast Q3 Fiscal 2024
May 1, 2024
Copyright © 2024 ADP, Inc.
Forward Looking Statements
This document and other written or oral statements made from time to time by ADP may contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like "outlook," "expects," "assumes," "projects," "anticipates," "estimates," "we believe," "could," "is designed to" and other words of similar meaning, are forward-looking statements. These statements are based on management's expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the adequacy, effectiveness and success of our business transformation initiatives; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under "Item 1A. Risk Factors" of our most recent Annual Report on Form 10-K, and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.
Non-GAAP Measures
Adjusted EBIT, adjusted EBIT margin, adjusted diluted earnings per share, adjusted effective tax rate, and organic constant currency are all non-GAAP financial measures. Please refer to the Q3 fiscal 2024 earnings release available at investors.adp.com for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their closest comparable GAAP financial measures.
This presentation is a supplement to our Q3 fiscal 2024 earnings release; it is intended to be read in conjunction with, not as a substitute for, or in isolation from, the earnings release.
Copyright © 2024 ADP, Inc.
Highlights and Perspectives
Strong Q3 financial and operating performance:
- 7% revenue growth and 14% adjusted diluted EPS1 growth
- Solid ES new business bookings growth
- Record ES retention and client satisfaction for a Q3
Progress on strategic priorities:
- HCM Technology - Continued the rollout of ADP Assist
- Expertise & Outsourcing - Piloted new GenAI initiative designed to further automate implementation processes
- Global Scale - Aligned ADP Marketplace partners with
ADP's responsible AI principles; cont'd progress in APAC
Growing client partnerships:
- New clients demonstrate broad-based value proposition
1. For a reconciliation of this non-GAAP financial metric to its closest comparable GAAP metric see our Q3 fiscal 2024 earnings release available at investors.adp.com.
Copyright © 2024 ADP, Inc.
Q3 Fiscal 2024 Financial Highlights
(unaudited)
Total Revenues
- 7%
- 6% Organic Constant Currency1
$4,928M | $5,254M |
Q3 FY23 | Q3 FY24 |
Adjusted EBIT1
- 12%
Adjusted EBIT1 Margin h 140 bps
$1,372M | $1,539M |
Q3 FY23 | Q3 FY24 |
Adjusted Diluted EPS1
- 14%
$2.52 | $2.88 |
Q3 FY23 | Q3 FY24 |
1. For a reconciliation of these non-GAAP financial metrics to their closest comparable GAAP metrics see our Q3 fiscal 2024 earnings release available at investors.adp.com.
Copyright © 2024 ADP, Inc.
Q3 Fiscal 2024 Employer Services Segment Results
(unaudited)
ES Revenues
- 8%
- 7% Organic Constant Currency1
$3,339M | $3,591M |
Q3 FY23 | Q3 FY24 |
- U.S. pays per control h 2%
- Average client funds balances h 6%
- Average client funds yield of 3.1%, up from 2.5% in prior year
ES Margin
- 230 bps
37.3% | 39.6% |
Q3 FY23 | Q3 FY24 |
- Margin expansion driven by operating leverage and growth in client funds interest revenue
Q3 ES Highlights
- Strong revenue growth supported by solid new business bookings, better-than- expected retention, consistent pays per control growth, and an increase in client funds interest revenue
FY24 ES Outlook
January 31, | May 1, | |
2024 | 2024 | |
Revenues | 7 to 8% | 7 to 8% |
Margin | 150 to 160 bps | 180 to 190 bps |
ES New Business Bookings | 4 to 7% | 4 to 7% |
Client Revenue Retention | (60) to (40) bps | (30) to (20) bps |
U.S. Pays Per Control | 1 to 2% | ~2% |
1. For a reconciliation of this non-GAAP financial metric to its closest comparable GAAP metric see our Q3 fiscal 2024 earnings release available at investors.adp.com.
Copyright © 2024 ADP, Inc.
Q3 Fiscal 2024 PEO Services Segment Results
(unaudited)
PEO Revenues | PEO Margin | Q3 PEO Highlights | ||
h | 5% | i | 220 bps | • Growth in revenue and WSEs accelerated |
in line with expectations |
$1,592M | $1,666M |
Q3 FY23 | Q3 FY24 |
- Revenues excluding zero-margin benefits pass-throughsh 2%
- Average worksite employees (WSEs) h 3% to 732,000
16.4% | 14.2% |
Q3 FY23 | Q3 FY24 |
- Margin decline reflected a lower workers' compensation reserve release and a greater percentage of zero-margin benefits pass- through revenue versus prior year
- PEO pays per control growth decelerated slightly from the prior quarter
FY24 PEO Outlook
January 31, | May 1, | |
2024 | 2024 | |
Revenues | 3 to 4% | 3 to 4% |
Revenues Ex ZMPT | 2 to 4% | 2 to 4% |
Margin | (100) to (80) bps (140) to (120) bps | |
Average WSEs | 2 to 3% | 2 to 3% |
Copyright © 2024 ADP, Inc.
Fiscal 2024 Outlook
Fiscal 2023 | July 26, 2023 | October 25, 2023 | January 31, 2024 | May 1, 2024 | ||
Fiscal 2024 | Fiscal 2024 | Fiscal 2024 | Fiscal 2024 | |||
(unaudited) | ||||||
1 | 1 | 1 | 1 | |||
Outlook | Outlook | Outlook | Outlook | |||
Revenues | $18,012M | 6 to 7% | 6 to 7% | 6 to 7% | 6 to 7% | |
Total ADP | Adj. EBIT Margin2 | 24.8% | 60 to 80 bps | 60 to 80 bps | 60 to 70 bps | 60 to 70 bps |
Adj. Effective Tax Rate2 | 23.1% | ~23% | ~23% | ~23% | ~23% | |
Adj. Diluted EPS2 | $8.23 | 10 to 12% | 10 to 12% | 10 to 12% | 10 to 12% | |
Revenues | $12,043M | 7 to 8% | 7 to 8% | 7 to 8% | 7 to 8% | |
Employer | Margin | 33.0% | 130 to 150 bps | 150 to 170 bps | 150 to 160 bps | 180 to 190 bps |
ES New Business Bookings | $1.9B | 4 to 7% | 4 to 7% | 4 to 7% | 4 to 7% | |
Services | ||||||
Client Revenue Retention | 92.2% | (70) to (50) bps | (70) to (50) bps | (60) to (40) bps | (30) to (20) bps | |
U.S. Pays Per Control | 5% | 1 to 2% | 1 to 2% | 1 to 2% | ~2% | |
Revenues | $5,984M | 3 to 5% | 3 to 4% | 3 to 4% | 3 to 4% | |
PEO | Revenues Ex Zero-MarginPass-throughs | $2,183M | 3 to 5% | 2 to 4% | 2 to 4% | 2 to 4% |
Services | Margin | 16.3% | (40) to (20) bps | (100) to (50) bps | (100) to (80) bps | (140) to (120) bps |
Average WSEs | 712,000 | 3 to 4% | 2 to 3% | 2 to 3% | 2 to 3% | |
Client | Average Client Funds Balances | $34.1B | 2 to 3% | 2 to 3% | 2 to 3% | ~3% |
Yield on Client Funds Portfolio | 2.4% | ~2.8% | ~2.9% | ~2.8% | ~2.9% | |
Funds | ||||||
Client Funds Interest Revenue | $813M | $955 to $975M | $990 to $1,010M | $985 to $995M | $1,000 to $1,010M | |
Interest | ||||||
Net Impact from Client Funds Extended Strategy | $730M | $815 to $835M | $850 to $870M | $835 to $845M | $850 to $860M | |
- Outlook contemplates the anticipated impact of foreign currency in revenue and operating results.
- For a reconciliation of these non-GAAP financial metrics to their closest comparable GAAP metrics see our Q3 fiscal 2024 earnings release available at investors.adp.com.
Copyright © 2024 ADP, Inc.
Appendix: Client Funds Investment Strategy Detail
Average Balances ($) | ||
Fiscal 2023 | May 1, 2024 | |
Fiscal 2024 | ||
(unaudited) | ||
Outlook | ||
Client Short | 6.9B | ~7.2B |
Client Extended | 15.4B | ~15.5B |
Client Long | 11.8B | ~12.4B |
Funds Held for Clients1 | 34.1B | ~35.1B |
Corporate Extended Interest Income2 | 4.7B | ~5.4B |
Short-term Financing to Support Client Funds Extended | 4.7B | ~5.4B |
Strategy | ||
Net Impact from Client Funds Extended Strategy | ||
Average Rates
Fiscal 2023 | May 1, 2024 |
Fiscal 2024 | |
(unaudited) | |
Outlook | |
4.0% | ~5.0% |
1.8% | ~2.1% |
2.4% | ~2.7% |
2.4% | ~2.9% |
2.1% | ~2.7% |
3.9% | ~5.4% |
Interest Income / (Expense) ($)
Fiscal 2023 | May 1, 2024 |
Fiscal 2024 | |
(unaudited) | |
Outlook | |
258M | 350 - 355M |
273M | ~320M |
283M | 330 - 335M |
813M | 1,000 - 1,010M |
99M | ~145M |
(182)M | ~(295)M |
730M | 850 - 860M |
Interest on the Extended Portfolio flows into two separate sections of the Statements of Consolidated Earnings.
- Reported as Interest on Funds Held for Clients in the revenue section of the Statements of Consolidated Earnings.
- A component of Interest Income on Corporate Funds, reported within Other Income, net, on the Statements of Consolidated Earnings.
Copyright © 2024 ADP, Inc.
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ADP - Automatic Data Processing Inc. published this content on 01 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 May 2024 13:00:10 UTC.
