Pershing Square Responds to ADP’s Fiscal Year 2018 Q1 Results
02 Novembro 2017 - 7:17PM
Business Wire
ADP Fails to Correct its Inaccurate Claim that
its Plan Will Increase “Operational Margins” by “500 basis points”
in Three Years
ADP’s Underwhelming Results Highlight the Need
for Change
Pershing Square Capital Management, L.P. (“Pershing Square”)
today issued the following statement in response to ADP’s
(NASDAQ:ADP) fiscal year 2018 Q1 results:
On October 30, Pershing Square issued a press release
highlighting that ADP has been making an unsupported and inaccurate
claim that its current plan will result in increased “operational
margins” of “500 basis points” in three years. We believe ADP has
focused almost exclusively on this inflated claim in recent weeks
in an attempt to persuade investors that its plan is delivering on
the opportunity that Pershing Square has identified and
shareholders have embraced. We urged ADP to provide a detailed
calculation to explain this misleading claim during its earnings
presentation today or retract its claim. ADP did neither – the
claim is false.
ADP’s operational performance in the first quarter is
particularly unacceptable in context: (1) ADP has huge structural
advantages, (2) the HCM industry continues to grow at 6% – 7%, and
(3) ADP has an enormous opportunity to expand net operational
margins in Employer Services (“ES”) to 35% or greater. Notably:
- ADP’s ES is significantly
underachieving its potential with reported organic revenue growth
of just 3% and a net operational profit decline of ~7%, driven by a
decline in margins of ~170bps (from ~18.9% to ~17.2%) due to higher
operating expenses.
- ADP’s PEO is significantly
underachieving its potential with ADP PEO worksite employees
declining on a sequential basis as compared to last quarter.
Year-over-year growth of 10% represents a reduction of growth and
is unremarkable in the context of the enormous penetration
opportunity at ADP to cross-sell the PEO to ES clients.
- Bookings declined 3% year-over-year
despite ADP substantially increasing the size of its
salesforce.
- Adjusted EBIT declined 3% as margins
declined ~150bps due to weakness in ES.
- Adjusted Net Earnings declined ~2%
while Adjusted EPS was flat due to a reduced share count, when
adjusted to exclude the beneficial impact of changes in ADP’s tax
rate.
- ADP’s upward revisions to revenue and
EPS guidance were driven almost entirely by non-operational
considerations, including an acquisition, foreign exchange
translation and changes in ADP’s tax rate.
- ADP’s fiscal year guidance remains
back-end weighted.
ADP refuses to acknowledge that its performance is unacceptable
and ignores the significant opportunity for margin expansion and
accelerated growth. ADP’s mediocre results strongly make the case
for electing The Nominees for ADP’s Transformation to the
board.
The Nominees for ADP’s Transformation would represent a minority
of ADP’s board but would bring fresh perspectives and relevant
expertise in business transformation and operating efficiency to
the Company. With change, ADP can embark on a transformation to
improve its operational efficiency and technology and fulfill its
potential.
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, Veronica Hagen and Paul Unruh are
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 THE
GOLD PROXY CARD OR VOTING INSTRUCTION FORM.
You can vote by Internet or telephone by following the
directions on your GOLD Proxy Card or Voting Instruction Form. You
should no longer vote by mail as mailed Proxy Cards and Voting
Instruction Forms will not arrive in time to be counted in the
November 7 election. 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20171102006839/en/
Pershing SquareFran McGill, 212-909-2455McGill@persq.com
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