(Adds details from interview with CFO, updates share price.)
Automatic Data Processing Inc.'s (ADP) fiscal third-quarter
earnings rose 0.3% as the number of workers on clients' payrolls
continued to fall and pricing pressures remained.
The global payroll-processing and human-resources outsourcing
company, with about 570,000 clients, late last year grew optimistic
on signs of a stabilizing economy and a slowing pace of job losses.
However, while the number of mass layoffs has declined from last
year, the U.S. unemployment rate has remained stubbornly high.
President and Chief Executive Gary C. Butler said the selling
environment was showing signs of improvement at ADP's employer
services and human-resources outsourcing segments.
Meanwhile, the decline in pays-per-control, an important measure
of profitability for payroll-processing companies, has slowed from
a year earlier. Chief Financial Officer Christopher Reidy said a 1%
change is the equivalent of about $20 million in annual revenue.
The company still expects the figure to drop 4% this fiscal
year.
The big driver will be generating new revenue growth, and ADP
began to expand sales force in the quarter, with plans to add 300
to 400 people to its sales force of roughly 4,000, Reidy told Dow
Jones Newswires. ADP has seen small and midmarket business start to
turn around, while challenges remain for very large national
accounts and multinationals, which tend to lag the economy a
bit.
In another sign of stabilization, client funds that are being
processed by the companies were up on increases in bonuses and
unemployment withholding year-to-year, which helps boost ADP's
interest revenue.
For the quarter ended March 31, ADP reported a profit of $403.6
million, up from $402.5 million. Earnings per share were flat at 80
cents. Revenue increased 3% to $2.44 billion, largely on currency
changes.
Analysts polled by Thomson Reuters forecast earnings of 78 cents
a share on revenue of $2.4 billion.
Gross margin fell to 45.5% from 48.7%, but that was offset by
lower overhead costs.
Revenue at ADP's employer-services segment, by far its largest
division, rose 1%. In the U.S., revenue declined 3% at ADP's
traditional payroll business but rose 8% at its "beyond payroll"
segment, which includes products such as employee applications
management and benefits. Employees on clients' payrolls were down
2.5%.
The company's smaller human resources outsourcing segment, which
is geared to small businesses that need bundled services, saw
revenue jump 15% as the number of employees on clients' payrolls
rose 5%.
Shares of ADP were down 1.9% at $44.48 in recent trading. The
stock is up 4.5% this year, less than the broader market.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com