AUTOMATIC DATA PROCESSING, INC. ADP Earnings Call & Webcast
Q1 Fiscal 2021
October 28, 2020
Copyright © 2020 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 "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; 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; 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; changes in technology; availability of skilled technical associates; the impact of new acquisitions and divestitures; the adequacy, effectiveness and success of our business transformation initiatives; and the impact of and uncertainties related to major natural disasters or catastrophic events, including the COVID-19 pandemic. 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 Q1 fiscal 2021 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 comparable GAAP financial measures.
This presentation is a supplement to our Q1 fiscal 2021 earnings release; it is intended to be read in conjunction with, not as a substitute for, or in isolation from, the earnings release.
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Copyright © 2020 ADP, Inc
CEO's Perspective
- Strong Q1 FY21 results driven by revenue and margin outperformance versus expectations
- Revenue decline of 1%, adjusted EBIT (a) margin increase of 120 basis points, and adjusted diluted EPS (a) growth of 5%
- Employment gradually improved with US pays per control decline of (9)% in Q1 FY21, compared to decline of (11)% in Q4 FY20
- Record Q1 Employer Services New Business Bookings
- Continued recovery in client purchase activity and sales productivity driving broad-based outperformance
- Record Q1 Employer Services client retention
- Client service and product innovation remain differentiators, with client satisfaction levels at or near record levels across portfolio
- For a reconciliation of these non-GAAP financial metrics to their closest comparable GAAP metrics see our Q1 fiscal
2021 earnings release available at investors.adp.com. | 3 |
Q1 Fiscal 2021 Financial Highlights
(unaudited)
Total Revenues | Adjusted EBIT (a) | Adjusted Diluted EPS (a) |
i 1% | h 5% | h 5% | |||
i 1% Organic Constant Currency (a) | Adjusted EBIT (a) Margin h 120 bps | ||||
$3,496M | $3,471M | $745M | $781M | $1.34 | $1.41 |
Q1 FY20 | Q1 FY21 | Q1 FY20 | Q1 FY21 | Q1 FY20 | Q1 FY21 |
(a) For a reconciliation of these non-GAAP financial metrics to their closest comparable GAAP metrics see our Q1 fiscal 2021 earnings release available at investors.adp.com. | 4 | ||||
Copyright © 2020 ADP, Inc.
Q1 Fiscal 2021 Employer Services Segment Results
(unaudited)
ES RevenuesES MarginQ1 Highlights
i 3% | h 120 bps | • | Record Q1 ES bookings and |
i 3% Organic Constant Currency (a) | retention driving significant revenue |
upside to expectations | |
$2,441M | $2,377M | 27.8% | 29.0% | PPC in line with expectations |
• | ||||
• Client funds balances stronger than | ||||
Q1 FY20 | Q1 FY21 | Q1 FY20 | Q1 FY21 | expectations but interest income |
remains significant drag |
• ES New Business Bookings h 2% | • | Resilient revenue performance | |
• U.S. Pays Per Control i 9% | • | Continued cost containment | |
• | Average client funds balances i 7% | • | Execution of transformation |
• | Average client funds yield i 30 bps | initiatives | |
- Intense focus on operational execution
- Continued cost containment and headcount control
(a) For a reconciliation of this non-GAAP financial metric to its closest comparable GAAP metric see our Q1 fiscal 2021 earnings release available at investors.adp.com. | 5 |
Copyright © 2020 ADP, Inc
Q1 Fiscal 2021 PEO Services Segment Results
(unaudited)
PEO Revenues | PEO Margin | Q1 Highlights |
- 4%
$1,057M $1,096M
Q1 FY20 | Q1 FY21 |
h 40 bps | • | Better-than-expected revenue and |
WSE performance in the quarter
14.1% | 14.5% | • | WSE outperformance on stronger |
retention | |||
• Same-store pays performance down | |||
mid-single digits, in line with | |||
Q1 FY20 | Q1 FY21 | expectations |
• Revenues excluding zero-margin | • Includes 60 basis points of |
benefits pass-throughsi 1% | benefit from ADP Indemnity |
- Average Worksite Employees paid i 3% to 547,000
- NPS continues upward trend
- Margin performance against expectations driven by cost containment and further supported by actuarial benefit at ADP Indemnity
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Copyright © 2020 ADP, Inc
Updated Macroeconomic Assumptions for Fiscal 2021
Macro Driver | Prior | Current |
Pays Per Control | Negative through Q3, positive in Q4; | Unchanged |
(4) to (3)% average for full year | ||
Out-of-Business | Elevated losses Q1 through Q3 | Elevated losses in Q2 and Q3 |
Client Funds Balances | Balance decline of (8) to (6)% | Balance decline of (3) to (1)% |
and Interest | Average yield of 1.6% | Average yield of 1.6% |
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Copyright © 2020 ADP, Inc
Fiscal 2021 Outlook
Fiscal 2020 | July 29, 2020 | (a) | October 28, 2020 | (a) | ||
(unaudited) | Fiscal 2021 Outlook | Fiscal 2021 Outlook | ||||
Revenues | $14,590M | (4) to (1)% | (1) to 1% | |||
Total ADP | Adj. EBIT Margin(b) | 23.0% | ~(300) bps | (150) to (100) bps | ||
Adj. Effective Tax Rate(b) | 22.6% | 23.1% | 23.1% | |||
Adj. Diluted EPS(b) | $5.92 | (18) to (13)% | (7) to (3)% | |||
Revenues | $10,087M | (5) to (3)% | (2)% to flat | |||
Margin | 30.3% | ~(300) bps | (150) to (100) bps | |||
Employer Services | ES New Business Bookings | $1.2B | Flat to 10% | 10 to 20% | ||
Client Revenue Retention | 90.5% | (100) to (50) bps | (50) bps to flat | |||
Pays Per Control | (1.0)% | (4) to (3)% | (4) to (3)% | |||
Revenues | $4,511M | (2) to 2% | Flat to 3% | |||
PEO Services | Revenues Ex Zero-MarginPass-throughs | $1,604M | (4) to (1)% | (1) to 1% | ||
Margin | 13.5% | ~(100) bps | (50) bps to flat | |||
Average WSEs | 571,000 | (3)% to flat | (1) to 1% | |||
Average Client Funds Balances | $26.0B | (8) to (6)% | (3) to (1)% | |||
Client Funds | Yield on Client Funds Portfolio | 2.1% | (50) bps to 1.6% | (50) bps to 1.6% | ||
Interest | Client Funds Interest Revenue | $545M | $390 to $400M | $400 to $410M | ||
Extended Investment Strategy | $561M | $430 to $440M | $435 to $445M |
- Outlook contemplates the anticipated impact of foreign currency in revenue and operating results.
- For a reconciliation of these non-GAAP financial metrics to their closest comparable GAAP metrics see our Q1 fiscal 2021 earnings release available at investors.adp.com.
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Copyright © 2020 ADP, Inc
Appendix: Client Funds Investment Strategy Detail
Fiscal 2021 Outlook | ||||
Average Balance ($) | Average Yield | Interest ($) | ||
Client Short | 5.9 | - 6.0B | ~0.1% | ~10M |
Client Extended | 10.7 | - 10.9B | 1.7 - 1.8% | 185 - 190M |
Client Long | 8.8 | - 9.0B | 2.3 - 2.4% | 205 - 210M |
Total Client Funds (a) | 25.4 | - 25.9B | ~1.6% | 400 - 410M |
Corporate Extended Interest Income (b) | ~2.3B | ~1.7% | ~40M | |
Borrowing Days Interest Expense | ~2.3B | ~0.1% | ~(5)M | |
Net Impact From Client Funds | 435 - 445M | |||
Extended Investment Strategy | ||||
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.
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ADP - Automatic Data Processing Inc. published this content on 26 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 November 2020 14:18:00 UTC
