ADP Reports 7% Revenue Growth, 11% Net Earnings Increase in Q3 2024

Automatic Data Processing, Inc. (ADP) reported strong financial performance for the three months ended September 30, 2024, with total revenues reaching $4,832.7 million, a 7% increase from $4,512.4 million in the same period of 2023. This growth was driven by new business bookings, strong client retention, increased pricing, and higher interest earned on client funds. The Human Capital Management (HCM) segment contributed $2,025.4 million in revenue, up from $1,914.4 million, while Professional Employer Organization (PEO) services generated $1,574.5 million, compared to $1,469.6 million in the prior year.

Net earnings for the quarter were $956.3 million, an 11% increase from $859.4 million in the previous year. Basic and diluted earnings per share rose to $2.34, reflecting a 13% year-over-year growth. Earnings before income taxes also improved, totaling $1,236.2 million, up from $1,092.8 million, marking a 13% increase.

Total expenses for the quarter increased to $3,698.2 million from $3,487.3 million, primarily due to higher operating costs and increased zero-margin benefits pass-through costs in the PEO segment. Operating expenses rose to $2,285.8 million, reflecting a 6% increase, while selling, general, and administrative expenses increased to $926.7 million.

ADP's cash flows from operating activities significantly improved, totaling $824.4 million, compared to $326.5 million in the same period last year. However, investing cash flows showed a net outflow of $(1,644.4) million, largely due to increased purchases of marketable securities. Financing cash flows also reflected a net outflow of $(6,491.5) million, compared to $(1,903.7) million in 2023.

In terms of strategic developments, ADP announced the acquisition of WorkForce Software for approximately $1.2 billion in cash, which will enhance its Employer Services segment. The company also repurchased approximately 1.4 million shares during the quarter, compared to 1.0 million shares in the same period last year.

As of September 30, 2024, ADP reported total assets of $49,511.4 million, down from $54,362.7 million as of June 30, 2024. Total stockholders’ equity increased to $5,348.6 million from $4,547.6 million. The effective tax rate for the quarter was 22.6%, up from 21.4% in the previous year, attributed to lower reserves for uncertain tax positions.

Overall, ADP's financial results reflect a robust business model with significant cash flows, enabling the company to meet its dividend and debt obligations while pursuing growth opportunities through strategic acquisitions.