ADP(ADP) - 2025 Q1 - Quarterly Report

Revenue and Earnings Growth - Revenue growth of 7% to $4,832.7 million for the three months ended September 30, 2024, with 7$2.34 and 12% to $2.33, respectively[95] - Net earnings increased by 11$956.3 million for the three months ended September 30, 2024, compared to $859.4 million in the same period last year[125] - Adjusted EBIT increased by 13$1,232.5 million for the three months ended September 30, 2024, with an adjusted EBIT margin of 25.5%[125] Cash Flow and Liquidity - Cash returned via shareholder-friendly actions of $940M, including$570M of dividends and $370M of share repurchases[95] - Cash and cash equivalents stood at$2.1 billion as of September 30, 2024, primarily invested in time deposits and money market funds[129] - The company has $10.3 billion of committed credit facilities and expects sufficient liquidity to meet operating, investing, and financing activities for the foreseeable future[130] - Operating cash flow increased to$824.4 million in September 2024, up from $326.5 million in September 2023, driven by favorable working capital changes and business growth[133] - Net cash flows provided by operating activities increased to$824.4 million in 2024, up from $326.5 million in 2023, driven by favorable changes in working capital and business growth[133] - Net cash flows used in investing activities changed significantly to$(1,644.4) million in 2024, primarily due to timing of purchases and proceeds of corporate and client funds marketable securities of $1,426.7 million[134] - Net cash flows used in financing activities increased to$(6,491.5) million in 2024, largely due to a net decrease in cash flow from client funds obligations of $9,495.6 million[135] - The company repurchased 1.4 million shares at an average price of$259.47 per share in September 2024, compared to 1.0 million shares at $242.26 per share in September 2023[136] - The company repurchased 1.4 million shares of common stock at an average price of$259.47 per share in Q3 2024, compared to 1.0 million shares at $242.26 per share in Q3 2023[136] - The company maintains$10.3 billion in committed credit facilities, with no borrowings through September 30, 2024[140] Employer Services Performance - Employer Services revenue increased by 7% to $3,261.0 million for the three months ended September 30, 2024, driven by new business bookings, strong client retention, and a 2$1,164.3 million for the three months ended September 30, 2024, driven by client funds interest revenues and operating efficiencies[114][116] - Employer Services' margin increased by 260 basis points to 35.7% for the three months ended September 30, 2024, due to client funds interest revenues and reduced research and development costs[115][116] PEO Services Performance - PEO Services revenue increased by 7% to $1,574.5 million for the three months ended September 30, 2024, due to a 3$225.6 million for the three months ended September 30, 2024, partially offset by higher selling expenses and zero-margin benefits pass-through costs[114][118] - PEO Services' margin decreased by 80 basis points to 14.3% for the three months ended September 30, 2024, due to higher zero-margin benefits pass-through costs and workers' compensation expenses[115][119] Interest and Investment Performance - Interest on funds held for clients increased to $253.3 million, up from$201.7 million in the same period last year, driven by a higher average interest rate of 3.1% and a 5.3% increase in average client funds balances to $32.8 billion[99] - Interest expense increased by 50$137.8 million due to higher average commercial paper borrowings of $4.8 billion and reverse repurchase borrowings of$3.8 billion[104] - Average daily commercial paper borrowings were $4.8 billion in September 2024, with a weighted average interest rate of 5.3$7.3 billion available under U.S. reverse repurchase agreements, with $679.1 million outstanding as of September 2024[139] - Total average investment balances increased to$43,456.8 million in September 2024, up from $38,258.4 million in September 2023[150] - The annualized interest rate earned on the investment portfolio increased to 3.2$7 million over the next 12 months[150] - Corporate investments increased to $10,669.8 million in September 2024 from$7,129.0 million in September 2023, a 49.6% increase[150] - Funds held for clients grew to $32,787.0 million in September 2024 from$31,129.4 million in September 2023, a 5.3% increase[150] - Total average investment balances rose to $43,456.8 million in September 2024 from$38,258.4 million in September 2023, a 13.6% increase[150] - Average interest rates earned on corporate investments increased to 3.4% in September 2024 from 2.6% in September 2023[150] - Average interest rates earned on funds held for clients increased to 3.1% in September 2024 from 2.6% in September 2023[150] - Total average interest rates earned increased to 3.2% in September 2024 from 2.6% in September 2023[150] - Net unrealized pre-tax losses on available-for-sale securities decreased to $651.2 million in September 2024 from$1,515.8 million in June 2024[150] - Total available-for-sale securities at fair value increased to $33,673.1 million in September 2024 from$31,207.5 million in June 2024[150] - A hypothetical 25 basis points change in short-term and intermediate-term interest rates could result in a $15 million impact to earnings before income taxes over the next twelve months[150] - The company limits credit risk by investing primarily in AAA-rated and AA-rated securities[151] Capital Expenditures and Share Repurchases - Capital expenditures for September 2024 were$55.6 million, with fiscal 2025 expectations between $200 million and$225 million[142] - Capital expenditures for Q3 2024 were $55.6 million, with fiscal 2025 expectations between$200 million and $225 million[142] Debt and Borrowings - The company has$4.0 billion of senior unsecured notes with maturity dates in 2025, 2028, 2030, and 2034[137] - The company's U.S. commercial paper program allows for issuance of up to $10.3 billion, with$4.4 billion outstanding as of September 30, 2024[138] - Average daily borrowings under the commercial paper program were $4.8 billion in Q3 2024, with a weighted average interest rate of 5.3$7.3 billion available on a committed basis under U.S. reverse repurchase agreements, with $679.1 million outstanding as of September 30, 2024[139] Acquisitions and Investments - Acquired WorkForce Software for approximately$1.2 billion in cash[95] - Research and development expenses decreased by 2% to $232.6 million due to workforce optimization and increased capitalizable spend related to GenAI integration[101]