ADP® (Nasdaq:ADP), a leading global provider of Human Capital
Management (HCM) solutions, today announced its first quarter
fiscal 2018 financial results, and provided an update to its fiscal
2018 outlook.
First Quarter Fiscal 2018 Consolidated
Results
Compared to last year’s first quarter, revenues grew 6% to $3.1
billion, 6% organic. Net earnings increased 9% to $402
million. Earnings before income tax increased to $548
million, or 4%. Adjusted EBIT margin declined about 150 basis
points in the quarter to 18.3% due to pressure from higher
pass-through revenues and our continued investments in product,
distribution, and service. Diluted earnings per share
increased 11% to $0.90. Adjusted diluted earnings per share
increased 6% to $0.91, and included a $0.05 per share tax benefit
related to stock-based compensation.
“We are off to a good start in fiscal 2018 and I am especially
pleased with the 160 basis point improvement in retention this
quarter, reflecting our differentiated client-centric solutions and
our continued progress in improving the client experience,” said
Carlos Rodriguez, President and Chief Executive Officer, ADP. “We
anticipate that our continued focus on innovation and service
transformation will have a positive impact this year as we return
to expected new business bookings growth of 5% to 7% for fiscal
2018.”
Rodriguez continued, “We are incredibly excited about the
solutions we are delivering to the market today, and even more
excited about the future. Having upgraded more than 83% of ADP
clients to strategic cloud platforms, we continue to anticipate our
clients’ future needs through investments in next-generation
solutions that will enable us to deliver agile country, industry
and client-specific applications that will serve to further
differentiate ADP in the market.”
“ADP performed well in the quarter, posting good revenue growth
despite the headwinds from our fiscal 2017 bookings performance and
the disposition of our CHSA and COBRA businesses,” said Jan
Siegmund, Chief Financial Officer, ADP. “We continue to anticipate
pressure on our revenue growth and margins to be concentrated in
the first half of the fiscal year as we accelerate our revenue and
bookings growth toward the latter half of fiscal 2018.”
Adjusted EBIT margin, adjusted diluted earnings per share,
adjusted effective tax rate, organic revenue and constant dollar
are all non-GAAP financial measures. Please refer to the
accompanying financial tables at the end of this release 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.
First Quarter Fiscal 2018 Segment Results
Employer Services – Employer Services offers a comprehensive
range of HCM and human resources outsourcing solutions.
- Employer Services revenues increased 2% on a reported basis, 3%
organic compared to last year’s first quarter.
- The number of employees on ADP clients' payrolls in the United
States increased 2.4% for the first quarter when measured on a
same-store-sales basis for a subset of clients ranging from small
to large businesses.
- Employer Services client revenue retention increased 160 basis
points compared to last year’s first quarter, and was ahead
of the company’s expectations.
- Employer Services segment margin decreased approximately 110
basis points compared to last year’s first quarter. This
decrease was smaller than expected and resulted primarily from
continuing investments in product, distribution, and service, in
the context of slower, but better than expected, revenue
growth.
PEO Services – PEO Services provides comprehensive employment
administration outsourcing solutions through a co-employment
relationship.
- PEO Services revenues increased 14% compared to last year’s
first quarter.
- PEO Services segment margin declined approximately 60 basis
points compared to last year’s first quarter, primarily driven by
pressure from higher pass-through revenues.
- Average worksite employees paid by PEO Services increased 10%
for the quarter to about 484,000.
Interest on Funds Held for Clients – The safety, liquidity and
diversification of ADP clients’ funds are the foremost objectives
of the company’s investment strategy. Client funds are
invested in accordance with ADP’s prudent and conservative
investment guidelines and the credit quality of the investment
portfolio is predominantly AAA/AA.
- For the first quarter, interest on funds held for clients
increased 11% to $99 million from $89 million a year ago.
- Average client funds balances increased 6% in the first quarter
to $21.2 billion compared to $20.0 billion a year ago, 5% on a
constant dollar basis.
- For the first quarter, the average interest yield on client
funds was 1.9% which was up 10 basis points compared to a year
ago.
Notable Subsequent Events
In October 2017, ADP acquired Global Cash Card, Inc., a leader
in digital payments, including paycards and other electronic
accounts, for approximately $490 million. With this acquisition,
ADP gains an industry-leading proprietary digital payment
processing platform that enables HCM innovation and added value
services for clients and their workforces, as well as a large,
diversified client base that has demonstrated consistent
growth.
Fiscal 2018 Outlook
Certain components of ADP’s fiscal 2018 outlook and related
growth comparisons exclude the impact of the following items and
are discussed on an adjusted basis where applicable. Please
refer to the accompanying financial tables for a reconciliation of
these adjusted amounts to their closest comparable GAAP
measure.
- Fiscal 2017 pre-tax restructuring charges of $90 million
related to our Service Alignment Initiative.
- Fiscal 2017 second quarter pre-tax gain on the sale of the CHSA
and COBRA businesses of $205 million.
- Anticipated fiscal 2018 pre-tax restructuring charges of about
$30 million related to our Service Alignment Initiative.
- Anticipated fiscal 2018 pre-tax proxy contest charges of about
$27 million.
ADP now anticipates full-year fiscal 2018 revenue growth of 6%
to 8% compared to the prior forecast of 5% to 6%. The Global
Cash Card acquisition and the impacts from foreign currency
translation are anticipated to add approximately one percentage
point of growth to revenue. This revenue forecast assumes
growth in worldwide new business bookings of 5% to 7% compared to
the $1.65 billion sold in fiscal 2017.
ADP expects full year diluted earnings per share to be down 1%
to up 1%, compared to our prior forecast of down 3% to down 1% and
adjusted diluted earnings per share growth to be 5% to 7% compared
to our prior forecast of 2% to 4% growth. This earnings
growth forecast assumes an adjusted effective tax rate increase of
80 basis points to 31.7% and an adjusted EBIT margin decline of 25
to 50 basis points for the full year. ADP continues to
anticipate adjusted diluted earnings per share growth and adjusted
EBIT margin to be below the guidance ranges in the first half of
fiscal 2018, and above the guidance ranges in the second half of
fiscal 2018.
Reportable Segments Fiscal 2018 Forecast
- For the Employer Services segment, ADP anticipates revenue
growth of approximately 4% to 5% compared to our prior forecast of
2% to 3%, and continues to anticipate a margin decline of 50 to 75
basis points for the year.
- ADP reaffirms expectations for an increase in pays per control
of 2.5% for the year.
- For the PEO Services segment, ADP continues to anticipate 11%
to 13% revenue growth and margin expansion of 25 to 50 basis points
for the year.
Client Funds Extended Investment Strategy Fiscal 2018
Forecast
The interest assumptions in our forecasts are based on Fed Funds
futures contracts and forward yield curves as of October 31,
2017. The Fed Funds futures contracts used in the client
short and corporate cash interest income forecasts assume an
increase in the Fed Funds rate in December 2017. The
three-and-a-half and five-year U.S. government agency rates based
on the forward yield curves as of October 31, 2017 were used to
forecast new purchase rates for the client and corporate extended,
and client long portfolios, respectively.
- Interest on funds held for clients is expected to increase $45
to $55 million, or about 13%, compared to the prior forecast of up
$40 to $50 million, or about 11%. This is based on
anticipated growth in average client funds balances of
approximately 3% from $23.0 billion in fiscal 2017, compared to the
prior forecast of 2% to 3% growth and an average yield which is
anticipated to increase about 20 basis points to 1.9% compared to
the fiscal 2017 average yield of 1.7%.
- The total contribution from the client funds extended
investment strategy is now expected to be up $35 to $45 million
compared to the prior forecast of up $30 to $40 million.
Investor Webcast TodayADP will host a
conference call for financial analysts today, Thursday, November 2,
2017 at 8:30 a.m. EDT. The conference call will be webcast
live on ADP’s website at investors.adp.com and will be available
for replay following the call. A slide presentation will be
available shortly before the webcast.
Supplemental financial information including schedules of
quarterly and full year reportable segment revenues and earnings
for fiscal years 2016 and 2017, as well as quarterly details of the
fiscal 2018 results from the client funds extended investment
strategy, are posted to ADP’s website at investors.adp.com.
ADP news releases, current financial information, SEC filings and
Investor Relations presentations are accessible at the same
website.
About ADP (Nasdaq:ADP)Powerful technology plus
a human touch. Companies of all types and sizes around the
world rely on ADP’s cloud software and expert insights to help
unlock the potential of their people. HR. Talent. Benefits.
Payroll. Compliance. Working together to build a better
workforce. For more information, visit ADP.com.
|
Automatic Data Processing, Inc. and
Subsidiaries |
Statements of Consolidated Earnings |
(In
millions, except per share amounts) |
(Unaudited) |
|
|
Three Months Ended |
|
|
September 30, |
|
|
2017 |
|
2016 |
Revenues: |
|
|
|
|
Revenues, other than interest on funds |
|
|
|
|
held for clients and PEO revenues |
|
$ |
2,080.9 |
|
|
$ |
2,037.4 |
|
Interest on funds held for clients |
|
|
99.4 |
|
|
|
89.2 |
|
PEO revenues (A) (B) |
|
|
898.5 |
|
|
|
790.3 |
|
Total revenues |
|
|
3,078.8 |
|
|
|
2,916.9 |
|
|
|
|
|
|
Expenses: |
|
|
|
|
Costs of revenues: |
|
|
|
|
Operating expenses (B) |
|
|
1,646.9 |
|
|
|
1,531.5 |
|
Systems development & programming costs |
|
|
156.9 |
|
|
|
154.9 |
|
Depreciation & amortization |
|
|
62.6 |
|
|
|
57.2 |
|
Total
costs of revenues |
|
|
1,866.4 |
|
|
|
1,743.6 |
|
|
|
|
|
|
Selling, general & administrative expenses |
|
|
662.4 |
|
|
|
647.7 |
|
Interest expense |
|
|
28.0 |
|
|
|
19.9 |
|
Total expenses |
|
|
2,556.8 |
|
|
|
2,411.2 |
|
|
|
|
|
|
Other income, net |
|
|
(26.2 |
) |
|
|
(23.0 |
) |
|
|
|
|
|
Earnings before income taxes |
|
|
548.2 |
|
|
|
528.7 |
|
|
|
|
|
|
Provision for income taxes |
|
|
146.7 |
|
|
|
160.0 |
|
|
|
|
|
|
Net
earnings |
|
$ |
401.5 |
|
|
$ |
368.7 |
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.91 |
|
|
$ |
0.82 |
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.90 |
|
|
$ |
0.81 |
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.570 |
|
|
$ |
0.530 |
|
|
|
|
|
|
Components of Other income, net: |
|
|
|
|
Interest income on corporate funds |
|
$ |
(25.8 |
) |
|
$ |
(22.9 |
) |
Realized gains on available-for-sale securities |
|
|
(0.3 |
) |
|
|
(0.4 |
) |
Realized losses on available-for-sale securities |
|
|
0.3 |
|
|
|
0.3 |
|
Gain on sale of assets |
|
|
(0.4 |
) |
|
|
— |
|
Total other income, net |
|
$ |
(26.2 |
) |
|
$ |
(23.0 |
) |
|
|
|
|
|
(A)
Professional Employer Organization (“PEO”) revenues are net of
direct pass-through costs, primarily consisting of payroll wages
and payroll taxes of $8,738.5 million and $7,687.6 million for the
three months ended September 30, 2017 and 2016, respectively. |
|
(B) PEO
revenues and operating expenses include pass-through costs
associated with benefits coverage, workers' compensation coverage,
and state unemployment taxes for worksite employees of $686.5
million and $597.9 million for the three months ended September 30,
2017 and 2016, respectively. |
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
|
Condensed
Consolidated Balance Sheets |
|
|
|
|
(In
millions) |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
September 30, |
|
June 30, |
|
|
2017 |
|
2017 |
Assets |
|
|
|
|
Cash and
cash equivalents |
|
$ |
2,363.6 |
|
$ |
2,780.4 |
Other
current assets |
|
|
2,952.8 |
|
|
2,586.8 |
Total
current assets before funds held for clients |
|
|
5,316.4 |
|
|
5,367.2 |
Funds
held for clients |
|
|
25,686.2 |
|
|
27,291.5 |
Total
current assets |
|
|
31,002.6 |
|
|
32,658.7 |
|
|
|
|
|
Property, plant and equipment, net |
|
|
800.4 |
|
|
779.9 |
Other
non-current assets |
|
|
3,858.1 |
|
|
3,741.4 |
Total
assets |
|
$ |
35,661.1 |
|
$ |
37,180.0 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Other
current liabilities (C) |
|
$ |
2,690.0 |
|
$ |
2,626.5 |
Client
funds obligations |
|
|
25,596.6 |
|
|
27,189.4 |
Total
current liabilities |
|
|
28,286.6 |
|
|
29,815.9 |
|
|
|
|
|
Long-term debt |
|
|
2,002.1 |
|
|
2,002.4 |
Other
non-current liabilities |
|
|
1,419.0 |
|
|
1,384.7 |
Total
liabilities |
|
|
31,707.7 |
|
|
33,203.0 |
|
|
|
|
|
Total
stockholders' equity |
|
|
3,953.4 |
|
|
3,977.0 |
Total
liabilities and stockholders' equity |
|
$ |
35,661.1 |
|
$ |
37,180.0 |
|
|
|
|
|
(C) As of September 30, 2017, other current liabilities include
obligations under reverse repurchase agreements of $129.4
million. Under the Company’s reverse repurchase agreements,
$110.0 million of short-term marketable securities, $19.3 million
of long-term marketable securities and $0.1 million of cash and
cash equivalents have been pledged as collateral. |
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
|
Condensed
Statements of Consolidated Cash Flows |
|
|
|
|
(In
millions) |
|
|
|
|
(Unaudited) |
|
Three Months Ended |
|
|
September 30, |
|
|
2017 |
|
2016 *As Adjusted |
Cash Flows from
Operating Activities: |
|
|
|
|
Net
earnings |
|
$ |
401.5 |
|
|
$ |
368.7 |
|
Adjustments to reconcile net earnings to cash flows provided by
operating activities |
|
|
204.3 |
|
|
|
178.1 |
|
Changes
in operating assets and liabilities, net of effects from
acquisitions and divestitures of businesses |
|
|
(361.1 |
) |
|
|
(217.0 |
) |
Net cash flows
provided by operating activities |
|
|
244.7 |
|
|
|
329.8 |
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
Purchases and proceeds from corporate and client funds marketable
securities |
|
|
(149.6 |
) |
|
|
(271.0 |
) |
Capital
expenditures |
|
|
(73.3 |
) |
|
|
(48.7 |
) |
Additions to intangibles |
|
|
(69.7 |
) |
|
|
(57.2 |
) |
Other
investing activities |
|
|
— |
|
|
|
(20.0 |
) |
Net cash flows
used in investing activities |
|
|
(292.6 |
) |
|
|
(396.9 |
) |
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
Net
decrease in client funds obligations |
|
|
(1,674.3 |
) |
|
|
(8,928.3 |
) |
Repurchases of common stock |
|
|
(250.1 |
) |
|
|
(328.6 |
) |
Dividends paid |
|
|
(253.7 |
) |
|
|
(241.8 |
) |
Other
financing activities |
|
|
113.4 |
|
|
|
(14.9 |
) |
Net cash flows
used in financing activities |
|
|
(2,064.7 |
) |
|
|
(9,513.6 |
) |
|
|
|
|
|
Effect
of exchange rate changes on cash, cash equivalents, restricted
cash, and restricted cash equivalents |
|
|
14.2 |
|
|
|
(16.3 |
) |
|
|
|
|
|
Net
change in cash, cash equivalents, restricted cash, and restricted
cash equivalents |
|
|
(2,098.4 |
) |
|
|
(9,597.0 |
) |
|
|
|
|
|
Cash,
cash equivalents, restricted cash, and restricted cash equivalents,
beginning of period |
|
|
8,181.6 |
|
|
|
15,458.6 |
|
Cash,
cash equivalents, restricted cash, and restricted cash equivalents,
end of period |
|
$ |
6,083.2 |
|
|
$ |
5,861.6 |
|
|
|
|
|
|
Reconciliation
of cash, cash equivalents, restricted cash, and restricted cash
equivalents to the Consolidated Balance Sheets |
|
|
|
|
Cash and
cash equivalents |
|
|
2,363.6 |
|
|
|
2,776.6 |
|
Restricted cash and restricted cash equivalents included in funds
held for clients |
|
|
3,719.6 |
|
|
|
3,085.0 |
|
Total
cash, cash equivalents, restricted cash, and restricted cash
equivalents |
|
$ |
6,083.2 |
|
|
$ |
5,861.6 |
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
Cash
paid for interest |
|
$ |
41.4 |
|
|
$ |
33.4 |
|
Cash
paid for income taxes, net of income tax refunds |
|
$ |
41.9 |
|
|
$ |
36.3 |
|
|
|
|
|
|
*Prior-period information has been restated for the adoption of ASU
No. 2016-18, Statement of Cash Flows, Restricted Cash (Topic
230). |
|
|
|
|
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
|
|
|
Other Selected
Financial Data |
|
|
|
|
|
|
(Dollars in
millions, except per share amounts) |
|
|
|
|
|
|
(Unaudited) |
|
Three Months Ended |
|
|
|
|
September 30, |
|
|
|
|
2017 |
|
2016 |
|
% Change |
Revenues |
|
|
|
|
|
|
Employer
Services |
|
$ |
2,316.3 |
|
|
$ |
2,261.2 |
|
|
2 |
% |
PEO
Services |
|
|
903.6 |
|
|
|
794.7 |
|
|
14 |
% |
Other |
|
|
(141.1 |
) |
|
|
(139.0 |
) |
|
n/m |
|
Total
revenues |
|
$ |
3,078.8 |
|
|
$ |
2,916.9 |
|
|
6 |
% |
|
|
|
|
|
|
|
Segment earnings |
|
|
|
|
|
|
Employer
Services |
|
$ |
646.6 |
|
|
$ |
656.0 |
|
|
(1 |
)% |
PEO
Services |
|
|
116.8 |
|
|
|
107.1 |
|
|
9 |
% |
Other |
|
|
(215.2 |
) |
|
|
(234.4 |
) |
|
n/m |
|
Total
pretax earnings |
|
$ |
548.2 |
|
|
$ |
528.7 |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
September 30, |
|
|
Segment margin |
|
2017 |
|
2016 |
|
Change |
Employer
Services |
|
|
27.9 |
% |
|
|
29.0 |
% |
|
(1.1 |
)% |
PEO
Services |
|
|
12.9 |
% |
|
|
13.5 |
% |
|
(0.6 |
)% |
Other |
|
|
n/m |
|
|
|
n/m |
|
|
n/m |
|
Total
pretax margin |
|
|
17.8 |
% |
|
|
18.1 |
% |
|
(0.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
September 30, |
|
|
Earnings per share
information: |
|
2017 |
|
2016 |
|
% Change |
Net
earnings |
|
$ |
401.5 |
|
|
$ |
368.7 |
|
|
9 |
% |
|
|
|
|
|
|
|
Basic
weighted average shares outstanding |
|
|
442.2 |
|
|
|
452.3 |
|
|
(2 |
)% |
Basic
earnings per share |
|
$ |
0.91 |
|
|
$ |
0.82 |
|
|
11 |
% |
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding |
|
|
445.0 |
|
|
|
455.3 |
|
|
(2 |
)% |
Diluted
earnings per share |
|
$ |
0.90 |
|
|
$ |
0.81 |
|
|
11 |
% |
|
|
|
|
|
|
|
Key Statistics: |
|
|
|
|
|
|
Employer
Services: |
|
|
|
|
|
|
Change in
pays per control - U.S. |
|
|
2.4 |
% |
|
|
2.7 |
% |
|
|
Change in
client revenue retention percentage - worldwide |
|
|
1.6 |
pts |
|
|
(1.0 |
)
pts |
|
|
Employer
Services/PEO new business bookings growth - worldwide |
|
|
(3 |
)% |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
PEO
Services: |
|
|
|
|
|
|
Paid PEO
worksite employees at end of period |
|
|
486,000 |
|
|
|
443,000 |
|
|
|
Average
paid PEO worksite employees during the period |
|
|
484,000 |
|
|
|
439,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Selected
Financial Data, Continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, except per share amounts or where otherwise
stated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
Change |
|
|
% Change |
|
Average
investment balances at cost (in billions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate, other than corporate extended |
|
|
$ |
2.3 |
|
|
|
$ |
2.9 |
|
|
|
$ |
(0.6 |
) |
|
|
(22 |
)% |
|
Corporate
extended |
|
|
|
4.3 |
|
|
|
|
4.4 |
|
|
|
|
(0.1 |
) |
|
|
(2 |
)% |
|
Total
corporate |
|
|
|
6.6 |
|
|
|
|
7.3 |
|
|
|
|
(0.7 |
) |
|
|
(10 |
)% |
|
Funds
held for clients |
|
|
|
21.2 |
|
|
|
|
20.0 |
|
|
|
|
1.2 |
|
|
|
6 |
% |
|
Total |
|
|
$ |
27.8 |
|
|
|
$ |
27.4 |
|
|
|
$ |
0.4 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
interest rates earned exclusive of realized losses (gains) on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate, other than corporate extended |
|
|
|
1.1 |
% |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
Corporate
extended |
|
|
|
1.8 |
% |
|
|
|
1.6 |
% |
|
|
|
|
|
|
|
Total
corporate |
|
|
|
1.6 |
% |
|
|
|
1.3 |
% |
|
|
|
|
|
|
|
Funds
held for clients |
|
|
|
1.9 |
% |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
Total |
|
|
|
1.8 |
% |
|
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain position at end of period |
|
|
$ |
89.6 |
|
|
|
$ |
438.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
short-term financing (in billions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial paper borrowings |
|
|
$ |
3.8 |
|
|
|
$ |
4.1 |
|
|
|
|
|
|
|
|
U.S.
& Canadian reverse repurchase agreement borrowings |
|
|
|
0.5 |
|
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
$ |
4.3 |
|
|
|
$ |
4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
interest rates paid on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial paper borrowings |
|
|
|
1.2 |
% |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
U.S.
& Canadian reverse repurchase agreement borrowings |
|
|
|
1.1 |
% |
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on funds held for clients |
|
|
$ |
99.4 |
|
|
|
$ |
89.2 |
|
|
|
$ |
10.2 |
|
|
|
11 |
% |
|
Corporate extended interest income (D) |
|
|
|
19.6 |
|
|
|
|
18.1 |
|
|
|
|
1.4 |
|
|
|
8 |
% |
|
Corporate interest expense-short-term financing (D) |
|
|
|
(13.0 |
) |
|
|
|
(4.9 |
) |
|
|
|
(8.1 |
) |
|
|
(163 |
)% |
|
|
|
|
$ |
105.9 |
|
|
|
$ |
102.4 |
|
|
|
$ |
3.5 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(D) Please refer to the accompanying financial table at the
end of this release for a reconciliation of these non-GAAP measures
to their comparable GAAP financial measures. |
|
Automatic Data Processing, Inc. and
Subsidiaries |
|
|
|
|
Consolidated Statement of Adjusted / Non-GAAP Financial
Information |
|
|
|
|
(in
millions, except per share amounts) |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition
to our GAAP results, we use the adjusted results and other non-GAAP
metrics set forth in the table below to evaluate our operating
performance in the absence of certain items and for planning and
forecasting of future periods: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Financial Measure |
U.S. GAAP Measures |
Adjustments/Explanation |
|
Adjusted EBIT |
Net earnings |
- Provision for income taxes - All other interest
expense and income - Certain restructuring charges -
Non-operational costs related to proxy contest matters See
footnotes (a), (b), and (e) |
|
Adjusted net earnings |
Net earnings |
Pre-tax and tax impacts of: - Certain restructuring
charges - Non-operational costs related to proxy contest matters
See footnotes (b), (c), and (e) |
|
Adjusted provision for income taxes |
Provision for income taxes |
Tax impacts of: - Certain restructuring charges -
Non-operational costs related to proxy contest matters See
footnotes (c), (d), and (e) |
|
Adjusted diluted earnings per share |
Diluted earnings per share |
EPS impacts of: - Certain restructuring charges -
Non-operational costs related to proxy contest matters See footnote
(b) and (e) |
|
Adjusted effective tax rate |
Effective tax rate |
See footnote (d) |
|
Constant Dollar Basis |
U.S. GAAP P&L line items |
See footnote (f) |
|
Organic revenue growth |
Revenues |
Impact of acquisitions Impact of dispositions Impact of
foreign currency translation See footnote (g) |
|
Corporate extended interest income |
Interest income |
All other interest income See footnote (h) |
|
Corporate interest expense-short-term financing |
Interest expense |
All other interest expense See footnote (h) |
|
|
|
|
|
|
|
|
|
|
|
|
We believe
that the exclusion of the identified items helps us reflect the
fundamentals of our underlying business model and analyze results
against our expectations, against prior period, and to plan for
future periods by focusing on our underlying operations. We
believe that the adjusted results provide relevant and useful
information for investors because it allows investors to view
performance in a manner similar to the method used by management
and improves their ability to understand and assess our operating
performance. The nature of these exclusions are for specific
items that are not fundamental to our underlying business
operations. Since these adjusted financial measures and other
non-GAAP metrics are not measures of performance calculated in
accordance with U.S. GAAP, they should not be considered in
isolation from, as a substitute for, or superior to their U.S. GAAP
measures, and they may not be comparable to similarly titled
measures at other companies. |
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
% Change |
|
|
2017 |
|
2016 |
|
As Reported |
|
Constant DollarBasis (f) |
Net earnings |
|
$ |
401.5 |
|
|
$ |
368.7 |
|
|
|
9 |
% |
|
8 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
|
146.7 |
|
|
|
160.0 |
|
|
|
|
|
All other
interest expense (a) |
|
|
15.0 |
|
|
|
15.0 |
|
|
|
|
|
All other
interest income (a) |
|
|
(6.3 |
) |
|
|
(4.8 |
) |
|
|
|
|
Service
Alignment Initiative (b) |
|
|
(3.3 |
) |
|
|
39.9 |
|
|
|
|
|
Proxy contest matters (e) |
|
|
10.5 |
|
|
|
— |
|
|
|
|
|
Adjusted EBIT |
|
$ |
564.1 |
|
|
$ |
578.8 |
|
|
|
(3 |
)% |
|
(3 |
)% |
Adjusted
EBIT Margin |
|
|
18.3 |
% |
|
|
19.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
$ |
146.7 |
|
|
$ |
160.0 |
|
|
|
(8 |
)% |
|
(9 |
)% |
Adjustments: |
|
|
|
|
|
|
|
|
Service
Alignment Initiative (c) |
|
|
(1.3 |
) |
|
|
15.1 |
|
|
|
|
|
Proxy contest matters (e) |
|
|
4.1 |
|
|
|
— |
|
|
|
|
|
Adjusted provision for
income taxes |
|
$ |
149.5 |
|
|
$ |
175.1 |
|
|
|
(15 |
)% |
|
(15 |
)% |
Adjusted
effective tax rate (d) |
|
|
26.9 |
% |
|
|
30.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
401.5 |
|
|
$ |
368.7 |
|
|
|
9 |
% |
|
8 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
Service
Alignment Initiative (b) |
|
|
(3.3 |
) |
|
|
39.9 |
|
|
|
|
|
Income
tax provision/(benefit) for Service Alignment Initiative (c) |
|
|
1.3 |
|
|
|
(15.1 |
) |
|
|
|
|
Proxy
contest matters (e) |
|
|
10.5 |
|
|
|
— |
|
|
|
|
|
Income tax benefit for proxy contest matters (e) |
|
|
(4.1 |
) |
|
|
— |
|
|
|
|
|
Adjusted
net earnings |
|
$ |
405.9 |
|
|
$ |
393.5 |
|
|
|
3 |
% |
|
3 |
% |
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
0.90 |
|
|
$ |
0.81 |
|
|
|
11 |
% |
|
11 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
Service
Alignment Initiative (b) |
|
|
— |
|
|
|
0.05 |
|
|
|
|
|
Proxy contest matters (e) |
|
|
0.01 |
|
|
|
— |
|
|
|
|
|
Adjusted
diluted EPS |
|
$ |
0.91 |
|
|
$ |
0.86 |
|
|
|
6 |
% |
|
6 |
% |
|
|
|
|
|
|
|
|
|
(a) We
continue to include the interest income earned on investments
associated with our client funds extended investment strategy and
interest expense on borrowings related to our client funds extended
investment strategy as we believe these amounts to be fundamental
to the underlying operations of our business model. The adjustments
in the table above represent the interest income and interest
expense that is not related to our client funds extended investment
strategy and are labeled as "All other interest expense" and "All
other interest income." |
|
|
|
|
|
|
|
|
|
(b) The
majority of charges relating to our Service Alignment Initiative
represent severance charges. Severance charges/(reversals)
have been taken in the past and not included as an adjustment to
get to adjusted results. Unlike severance charges in prior
periods, these specific charges relate to our broad-based,
company-wide Service Alignment Initiative. |
|
|
|
|
|
|
|
|
|
(c) The
tax benefit/provision on the Service Alignment Initiative was
calculated based on the annualized marginal rate in effect during
the quarter of the adjustment. |
|
|
|
|
|
|
|
|
|
(d) The
Adjusted effective tax rate is calculated as our Adjusted provision
for income taxes divided by our Adjusted net earnings from
continuing operations plus our Adjusted provision for income
taxes. |
|
|
|
|
|
|
|
|
|
(e)
Represents non-operational costs associated with proxy contest
matters. The tax benefit on the non-operational charges related to
proxy contest matters was calculated based on the annualized
marginal rate in effect during the quarter of the adjustment. |
|
|
|
|
|
|
|
|
|
(f)
"Constant dollar basis" provides information that isolates the
actual growth of our operations. "Constant dollar basis" is
determined by calculating the current year result using foreign
exchange rates consistent with the prior year. |
|
|
|
|
|
|
|
|
|
(g) The
following table reconciles our reported growth rates to the
non-GAAP measure of organic revenue which excludes the impact of
acquisitions, the impact of dispositions, and the impact of foreign
currency translation. The impact of acquisitions and dispositions
is calculated by excluding the current year revenues of
acquisitions until the one year anniversary of the transaction and
by excluding the prior year revenues of divestitures for the one
year period preceding the transaction. The impact of foreign
currency translation is determined by calculating the current year
result using foreign exchange rates consistent with the prior
year. The PEO segment is not impacted by acquisitions,
dispositions or foreign currency. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
|
Revenue growth
consolidated: |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Employer
Services |
|
|
|
|
2 |
% |
|
|
6 |
% |
|
|
PEO
Services |
|
|
|
|
14 |
% |
|
|
13 |
% |
|
|
Consolidated revenue growth as reported |
|
|
|
|
6 |
% |
|
|
7 |
% |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Impact of
acquisitions |
|
|
|
|
— |
% |
|
|
— |
% |
|
|
Impact of
dispositions |
|
|
|
|
1 |
% |
|
|
1 |
% |
|
|
Impact of
foreign currency translation |
|
|
|
|
— |
% |
|
|
— |
% |
|
|
Consolidated organic revenue growth |
|
|
|
|
6 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer Services
revenue growth as reported |
|
|
|
|
2 |
% |
|
|
6 |
% |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Impact of
acquisitions |
|
|
|
|
— |
% |
|
|
— |
% |
|
|
Impact of
dispositions |
|
|
|
|
1 |
% |
|
|
— |
% |
|
|
Impact of
foreign currency translation |
|
|
|
|
(1 |
)% |
|
|
— |
% |
|
|
Employer Services organic revenue growth |
|
|
|
|
3 |
% |
|
|
6 |
% |
|
|
|
|
|
|
(h) The
following tables reconcile our "Total interest income" and "Total
interest expense" to “Corporate extended interest income” and
“Corporate interest expense-short-term financing,” related to our
client funds investment strategy which are non-GAAP measures. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Corporate extended
interest income |
|
|
|
$ |
19.6 |
|
|
$ |
18.1 |
|
|
|
All other interest
income |
|
|
|
|
6.3 |
|
|
|
4.8 |
|
|
|
Total interest income
on corporate funds |
|
|
|
$ |
25.8 |
|
|
$ |
22.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate interest
expense-short-term financing |
|
|
|
$ |
13.0 |
|
|
$ |
4.9 |
|
|
|
All other interest
expense |
|
|
|
|
15.0 |
|
|
|
15.0 |
|
|
|
Total interest
expense |
|
|
|
$ |
28.0 |
|
|
$ |
19.9 |
|
|
|
|
Automatic Data Processing, Inc. and
Subsidiaries |
Fiscal 2018 GAAP to Non-GAAP Guidance
Reconciliation |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
Fiscal 2018 |
|
|
|
|
June 30, 2017 |
|
Forecast |
|
|
Earnings from
continuing operations before income taxes / margin (GAAP) |
|
$ |
2,531.1 |
|
|
20.4 |
% |
|
~(190) - (165) bps |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
All other
interest expense |
|
|
59.3 |
|
|
+50bps |
|
|
- |
|
a |
All other
interest income |
|
|
(22.4 |
) |
|
(20)bps |
|
|
- |
|
b |
Gain on
sale of CHSA and COBRA businesses - 2Q F17 |
|
|
(205.4 |
) |
|
(170)bps |
|
|
+170bps |
|
c |
Workforce
Optimization Effort - 4Q F17 |
|
|
(5.0 |
) |
|
(5)bps |
|
|
+5bps |
|
d |
Service
Alignment Initiative - F17 |
|
|
90.0 |
|
|
+75bps |
|
|
(75)bps |
|
e |
Service
Alignment Initiative - F18 |
|
|
- |
|
|
- |
|
|
+20bps |
|
f |
Proxy
contest matters - F18 |
|
|
- |
|
|
- |
|
|
+20bps |
|
g |
Adjusted EBIT margin (Non-GAAP) |
|
$ |
2,447.6 |
|
|
19.8 |
% |
|
~(50) - (25) bps |
|
|
|
|
|
|
|
|
|
|
Effective tax rate (GAAP) |
|
|
|
31.5 |
% |
|
31.5% |
|
|
Adjustments: |
|
|
|
|
|
|
|
Gain on
sale of CHSA and COBRA businesses - 2Q F17 |
|
|
|
(0.9 |
%) |
|
- |
|
|
Workforce
Optimization Effort - 4Q F17 |
|
|
|
(0.0 |
%) |
|
- |
|
|
Service
Alignment Initiative - F17 |
|
|
|
+0.4 |
% |
|
- |
|
|
Service
Alignment Initiative - F18 |
|
|
|
- |
|
|
+0.1% |
|
|
Proxy
contest matters - F18 |
|
|
|
- |
|
|
+0.1% |
|
|
Adjusted effective tax rate (Non-GAAP) |
|
|
|
30.9 |
% |
|
31.7% |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share from continuing operations (GAAP) |
|
$ |
3.85 |
|
|
18 |
% |
|
(1)% - 1% |
|
|
Adjustments: |
|
|
|
|
|
|
|
Gain on
sale of CHSA and COBRA businesses - 2Q F17 |
|
|
(0.27 |
) |
|
(7 |
%) |
|
+7% |
|
c |
Workforce
Optimization Effort - 4Q F17 |
|
|
(0.01 |
) |
|
(0 |
%) |
|
+0% |
|
d |
Service
Alignment Initiative - F17 |
|
|
0.12 |
|
|
+3 |
% |
|
(3%) |
|
e |
Service
Alignment Initiative - F18 |
|
|
- |
|
|
- |
|
|
+1% |
|
f |
Proxy
contest matters - F18 |
|
|
- |
|
|
- |
|
|
+1% |
|
g |
Adjusted diluted earnings per share from continuing
operations (Non-GAAP) |
|
$ |
3.70 |
|
|
13 |
% |
|
5% - 7% |
|
|
|
|
|
|
|
|
|
|
a) No material impact is expected from change in all other
interest expense in fiscal 2018 |
|
|
b) No material impact is expected from change in all other
interest income in fiscal 2018 |
|
|
c) Second quarter fiscal 2017 impact from gain on the sale of
CHSA and COBRA businesses |
|
|
d) Fourth quarter fiscal 2017 Workforce Optimization Effort
adjustment is a reversal of the fiscal 2016 estimate and is
not expected to recur in fiscal 2018. The majority of charges
relating to Workforce Optimization Effort represent
severance charges. Severance charges have been taken in the
past and not included as an adjustment to get to adjusted
results. Unlike severance charges in prior periods, these specific
charges relate to our broad-based, company-wide
Workforce Optimization Effort |
e) Fiscal 2017 charges in connection with the Service
Alignment Initiative |
f) Expected impact of Fiscal 2018 charges in connection with
the Service Alignment Initiative |
|
|
g) Expected impact of Fiscal 2018 charges in connection with
proxy contest matters |
|
|
|
|
|
|
|
|
|
|
Safe Harbor Statement
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; 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 privacy breaches, fraudulent acts, and system
interruptions and failures; employment and wage levels; changes in
technology; availability of skilled technical associates; and the
impact of new acquisitions and divestitures. 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” in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2017
should be considered in evaluating any forward-looking statements
contained herein.
ADP and the ADP logo are registered trademarks of ADP,
LLC. ADP A more human resource. is a service mark of ADP,
LLC. All other marks are the property of their respective
owners. Copyright © 2017 ADP, LLC. All rights reserved.
ADP-Investor Relations
Investor Relations Contacts:Christian
Greyenbuhl973.974.7835Christian.Greyenbuhl@ADP.com
Byron Stephen973.974.7896Byron.Stephen@ADP.com
Media Contact:Andy
Hilton973.974.4462Andy.Hilton@ADP.com
Source: Automatic Data Processing, Inc.
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