Releases Eighth Question for ADP
Reminds Investors the Only Way to Vote
FOR Bill Ackman and The Nominees For
ADP’s Transformation is to Vote on the GOLD Proxy Card or Voting Instruction Form
Pershing Square Capital Management, L.P. (“Pershing Square”)
today published a letter to ADP (NASDAQ:ADP) shareholders that
articulates ADP’s underperformance compared to its competitors and
highlights how Pershing Square’s Nominees for ADP’s Transformation
will help ADP achieve its potential.
This press release features multimedia. View
the full release here:
http://www.businesswire.com/news/home/20171027005379/en/
Question 8 (Graphic: Business Wire)
To execute on a transformation plan and help ADP fulfill its
potential, ADP’s board needs expertise in both (i) business
transformation and operating efficiency, and (ii) technology and
the Human Capital Management (“HCM”) industry. ADP’s board already
has relevant technology and HCM experience, and Pershing Square
is not seeking to replace any directors with technology or HCM
industry experience. Instead we are seeking to replace ADP’s
longest-tenured directors who have presided over ADP for years as
it has underachieved its potential.
The full letter can be viewed here:
https://adpascending.com/shareholder-materials/
ADP has yet to answer any of the first seven questions we have
asked. Today, Pershing Square released the following question:
Question:
Despite a significant boost to growth from the implementation of
the Affordable Care Act (“ACA”), ADP Employer Services’ growth
remained constant at a ~6% organic growth rate in FY 2015 and 2016,
suggesting an underlying deterioration (largely in Enterprise)
which was masked by ACA tailwinds. As growth tailwinds from ACA
have faded, growth has decelerated to low-single digits. ADP’s
three-year plan released on September 12th implies Employer
Services accelerating and achieving growth of 7-9% in FY ‘19 and FY
‘20. How will ADP achieve this significant acceleration in
growth?
Pershing Square’s previous questions are:
Question 1 – September 20,
2017:
What are ADP’s margins in Employer Services by sub-segment
(Small-Business (“SMB”), Mid-market, Enterprise, and
International), excluding float and allocating corporate
expenses?
- Is ADP earning comparable margins to
Paychex (~41%) in its SMB business? If so, that would imply 12%
margins for the rest of Employer Services.
Question 2 – September 28,
2017:
When ADP owned Dealer Services, it aimed to produce just ~50bps
of annual margin improvement. When Dealer Services was spun-off as
CDK Global (NASDAQ:CDK) (“CDK”), it promptly identified an
opportunity to double margins without negative consequence to CDK’s
customers, shareholders or other stakeholders. Why was ADP not able
to realize this opportunity when it owned CDK?
- CDK achieved this improvement by
engaging constructively with shareholders, hiring an outside
consultant to evaluate its potential, and announcing a
transformation plan – why won’t ADP do the same?
Question 3 – October 5,
2017:
Why is ADP’s labor productivity ~28% below its competitors’,
particularly in light of its enormous scale advantage?
Question 4 – October 10,
2017:
Competitors like Workday, Ultimate Software and Ceridian’s
Dayforce have taken substantial market share at the expense of ADP,
despite ADP spending significantly more on R&D. Why doesn’t ADP
have a best-in-class product for the Enterprise market?
Questions 5 and 6 – October 19,
2017:
Why does ADP continue to claim a 203% Total Shareholder Return
(“TSR”) during Mr. Rodriguez’s tenure when this number includes an
inaccurate start date, the increase in the stock price due to
Pershing Square’s involvement, and the performance of CDK when it
was no longer managed by Mr. Rodriguez?
In recent shareholder communications, ADP is now claiming that
it is implementing a plan to deliver 500bps of operational margin
improvement. ADP’s recently released guidance shows only 100bps to
200bps of actual operating margin expansion by 2020 which compares
with our estimated potential margin opportunity of 1,200bps by
2022. Investors cannot reconcile this 500bps calculation. Please
provide support for this calculation and explain why these supposed
savings do not translate into better operating margins.
Question 7 – October 23, 2017:
We understand that ADP has commissioned various consulting
studies over recent years which have outlined substantial
efficiency opportunities. Please outline for shareholders the
conclusions of these studies. What corporate inefficiencies did
these studies address – including management spans and layers, real
estate consolidation, and ADP’s siloed and outdated business unit
structure - and what was the timing and the magnitude of the
potential savings identified? Were these consulting studies shared
with the Board?
We ask that ADP respond to all of these questions so
shareholders can better understand ADP’s potential.
Review all of Pershing Square’s weekly questions to shareholders
here: https://adpascending.com/questions/
For additional information, visit our website:
www.ADPascending.com. Follow ADPascending on Facebook, Twitter and
YouTube.
To vote for Pershing Square’s Nominees for ADP’s Transformation
and ensure that Bill Ackman is elected to the board, shareholders
should vote the GOLD Proxy Card or GOLD Voting Instruction
Form.
THE ONLY WAY TO VOTE FOR BILL
ACKMAN AND THE NOMINEES FOR ADP’S TRANSFORMATION IS TO VOTE ON THE
GOLD PROXY CARD OR VOTING INSTRUCTION FORM.
You can vote by Internet, telephone or by signing and dating the
GOLD Proxy Card or Voting Instruction Form and mailing it in the
postage paid envelope provided. We urge you NOT to vote using any
white proxy card or voting instruction form you receive from ADP.
Please discard the white proxy card.
If you have any questions about how to vote your shares, please
contact our proxy solicitor, D.F. King & Co., Inc., at (866)
342-1635.
About Pershing Square Capital Management, L.P.
Pershing Square Capital Management, L.P., based in New York
City, is a SEC-registered investment advisor to investment
funds.
This press release relates to Pershing Square’s solicitation of
proxies in connection with the 2017 annual meeting of stockholders
of ADP.
The information contained in this press release (the
“Information”) is based on publicly available information about
Automatic Data Processing, Inc. (“ADP” or the “Company”), which has
not been independently verified by Pershing Square Capital
Management, L.P. (“Pershing Square”). Pershing Square recognizes
that there may be confidential or otherwise non-public information
in the possession of ADP or others that could lead ADP or others to
disagree with Pershing Square’s conclusions. This press release and
the Information is not a recommendation or solicitation to buy or
sell any securities.
The analyses provided may include certain forward-looking
statements, estimates and projections prepared with respect to,
among other things, general economic and market conditions, changes
in management, changes in board composition, actions of ADP and its
subsidiaries or competitors, the ability to implement business
strategies and plans and pursue business opportunities in the human
capital management industry. Such forward-looking statements,
estimates, and projections reflect various assumptions by Pershing
Square concerning anticipated results that are inherently subject
to significant uncertainties and contingencies and have been
included solely for illustrative purposes, including those risks
and uncertainties detailed in the continuous disclosure and other
filings of ADP with the Securities and Exchange Commission at
www.sec.gov. No representations, express or implied, are made as to
the accuracy or completeness of such forward-looking statements,
estimates or projections or with respect to any other materials
herein. Actual results may vary materially from the estimates and
projected results contained herein.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171027005379/en/
Media:Pershing SquareFran McGill,
212-909-2455McGill@persq.com
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