On July 31, 2024, Automatic Data Processing Inc (ADP, Financial) released its 8-K filing detailing the financial results for the fourth quarter and fiscal year 2024. ADP, a leading provider of payroll and human capital management solutions, reported significant growth in both revenue and net earnings, surpassing analyst estimates.
Company Overview
ADP is a provider of payroll and human capital management solutions servicing the full scope of businesses from micro to global enterprises. Established in 1949, ADP serves over 1 million clients primarily in the United States. The company's employer services segment offers payroll, human capital management solutions, human resources outsourcing, insurance, and retirement services. The smaller but faster-growing professional employer organization segment provides HR outsourcing solutions to small and midsize businesses through a co-employment model.
Performance and Challenges
For the fourth quarter, ADP reported a 6% increase in revenues to $4.8 billion and a 7% increase on an organic constant currency basis. Net earnings rose by 7% to $829 million, with adjusted net earnings increasing by 10% to $858 million. The company's adjusted EBIT grew by 10% to $1.1 billion, reflecting an adjusted EBIT margin increase of 80 basis points to 23.3%. Diluted earnings per share (EPS) increased by 8% to $2.02, while adjusted diluted EPS rose by 11% to $2.09.
Financial Achievements
For the full fiscal year, ADP's revenues increased by 7% to $19.2 billion, with a 6% increase on an organic constant currency basis. Net earnings grew by 10% to $3.8 billion, and adjusted net earnings increased by 11% to $3.8 billion. The company's adjusted EBIT rose by 9% to $4.9 billion, resulting in an adjusted EBIT margin expansion of 70 basis points to 25.5%. Diluted EPS increased by 11% to $9.10, and adjusted diluted EPS grew by 12% to $9.18.
Income Statement Highlights
| Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 |
|---|---|---|---|---|
| Total Revenues | $4.8B | $4.5B | $19.2B | $18.0B |
| Net Earnings | $829M | $777M | $3.8B | $3.4B |
| Diluted EPS | $2.02 | $1.87 | $9.10 | $8.21 |
Balance Sheet and Cash Flow
ADP's balance sheet remains robust with total assets of $54.4 billion as of June 30, 2024, compared to $51.0 billion in the previous year. The company reported cash and cash equivalents of $2.9 billion, up from $2.1 billion. Total liabilities stood at $49.8 billion, with stockholders' equity increasing to $4.5 billion from $3.5 billion.
Net cash flows provided by operating activities were $4.2 billion for the fiscal year, while net cash flows used in investing activities amounted to $1.4 billion. The company also reported net cash flows used in financing activities of $1.4 billion.
Segment Performance
In the Employer Services segment, revenues increased by 7% for the fourth quarter and 8% for the fiscal year. New business bookings grew by 7% to $2.0 billion for the year. However, client revenue retention slightly decreased to 92.0% from 92.2%. The segment's margin increased by 220 basis points for the fourth quarter and 210 basis points for the fiscal year.
The PEO Services segment saw a 6% increase in revenues for the fourth quarter and a 4% increase for the fiscal year. The segment's margin, however, decreased by 240 basis points for the fourth quarter and 150 basis points for the fiscal year.
Outlook for Fiscal 2025
ADP's fiscal 2025 outlook includes revenue growth of 5% to 6%, adjusted EBIT margin expansion of 60 to 80 basis points, and adjusted diluted EPS growth of 8% to 10%. The Employer Services segment is expected to see revenue growth of 5% to 6%, with new business bookings growth of 4% to 7%. The PEO Services segment is projected to achieve revenue growth of 4% to 6%.
"Our strong fourth quarter results concluded another very successful year for ADP," said Maria Black, President and Chief Executive Officer, ADP. "Employer Services new business bookings growth came in at the high-end of our expectations, and client satisfaction reached a new all-time high for the year. These results reflect the power of our innovative HCM solutions and the collective efforts of our talented associates who deliver unmatched service for our clients each day."
"Consistent execution on our proven business model produced strong revenue and earnings growth in fiscal 2024," said Don McGuire, Chief Financial Officer, ADP. "Our fiscal 2025 guidance anticipates ongoing solid revenue growth, Employer Services new business bookings growth, and margin expansion as we continue to reinvest in our business to drive long-term profitable growth for our shareholders."
For more detailed information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Automatic Data Processing Inc for further details.
