ADP Fiscal Q1 2025 Earnings: Revenues Climb to $4.8 Billion, Marking a Strong Start
ADP announced robust first quarter fiscal 2025 results with a 7% increase in revenue reaching $4.8 billion and a 13% increase in diluted EPS at $2.34. Significant highlights include the
acquisition of WorkForce Software and the launch of
ADP Lyric HCM, a global human capital management platform. Adjusted EBIT rose 13% to $1.2 billion, reflecting strong new business growth and efficient operational management. The financial outlook for the full year was revised to account for the WorkForce acquisition, projecting a 6-7% revenue growth and a 7-9% increase in adjusted diluted EPS.
ADP Reports First Quarter Fiscal 2025 Results
•Revenues increased 7% compared to last year's first quarter to $4.8 billion; 7% organic constant currency
•Net earnings increased 11% to $956 million, and adjusted net earnings increased 11% to $956 million
•Adjusted EBIT increased 13% to $1.2 billion, and adjusted EBIT margin increased 130 basis points to 25.5%
•Diluted earnings per share ("EPS") increased 13% to $2.34; adjusted diluted EPS increased 12% to $2.33
•Acquired WorkForce Software, a leading workforce management solutions provider that specializes in supporting large, global enterprises, on October 15, 2024 for approximately $1.2 billion in cash
•To incorporate expected impact from the WorkForce Software acquisition, we are updating full year consolidated revenue growth guidance to 6% to 7% and adjusted diluted EPS growth guidance to 7% to 9%
ROSELAND, N.J. – October 30, 2024 – ADP (Nasdaq: ADP), a leading global technology company providing human capital management (HCM) solutions, today announced its first quarter fiscal 2025 financial results and updated its fiscal 2025 outlook.
First Quarter Fiscal 2025 Consolidated Results
Compared to last year’s first quarter, revenues increased 7% to $4.8 billion and 7% on an organic constant currency basis. Net earnings increased 11% to $956 million, and adjusted net earnings increased 11% to $956 million. Adjusted EBIT increased 13% to $1.2 billion, representing an adjusted EBIT margin increase of 130 basis points in the quarter to 25.5%. ADP’s effective tax rate for the quarter was 22.6% on both a reported basis and an adjusted basis. Diluted EPS increased 13% to $2.34, and adjusted diluted EPS increased 12% to $2.33.
“We are off to a strong start in fiscal 2025 and are pleased with our financial results and meaningful strategic progress," said Maria Black, President and Chief Executive Officer, ADP. “Our recent acquisition of WorkForce Software, a leading workforce management solutions provider, and the introduction of ADP Lyric HCM, our flexible, intelligent, and human-centric global HCM platform, position us to provide our enterprise clients with a unique global HR, payroll, time, and service solution. We look forward to continuing to lead the way in workforce innovation through our market-leading products, premium services, unmatched data, and exceptional experiences that empower our clients and their employees to reach their full potential."
"Our first quarter revenue and margin performance exceeded our expectations, as we benefited from solid new business bookings growth, strong client revenue retention, and higher client funds interest revenue," said Don McGuire, Chief Financial Officer, ADP. "We are focused on continuing to deliver strong financial performance as we make strategic investments to support our long-term growth."
Adjusted EBIT, adjusted EBIT margin, adjusted net earnings, adjusted diluted earnings per share, adjusted effective tax rate and organic constant currency 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 closest comparable GAAP financial measures.
First Quarter Segment Results
Employer Services – Employer Services offers a comprehensive range of global HCM and Human Resources Outsourcing solutions. Compared to last year's first quarter:
•Employer Services revenues increased 7% on a reported basis and 7% on an organic constant currency basis
•U.S. pays per control increased 2%
•Employer Services segment margin increased 260 basis points
PEO Services – PEO Services provides comprehensive employment administration outsourcing solutions. Compared to last year's first quarter:
•PEO Services revenues increased 7%
•PEO Services revenues excluding zero-margin benefits pass-throughs increased 7%
•Average worksite employees paid by PEO Services increased 3% to about 737,000
•PEO Services segment margin decreased 80 basis points
Included within the results of our segments above:
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 most of the investment portfolio is rated AAA/AA. Compared to last year's first quarter:
•Interest on funds held for clients increased 26% to $253 million
•Average client funds balances increased 5% to $32.8 billion
•The average interest yield on client funds increased 50 basis points to 3.1%
Notable Subsequent Events
On October 15, 2024, ADP acquired WorkForce Software, a leading workforce management solutions provider that specializes in supporting large, global enterprises, for approximately $1.2 billion in cash. This acquisition expands ADP's global offering of workforce management solutions and enables future innovation in the space.
Fiscal 2025 Outlook
Certain components of ADP’s fiscal 2025 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 2024 pre-tax charges of about $5 million related to transformation initiatives
•Fiscal 2024 pre-tax reversal of about $4 million related to a legal matter
•Fiscal 2024 pre-tax charges of about $42 million related to workforce optimization
•Fiscal 2025 expected pre-tax charges of about $5 million related to transformation initiatives
Consolidated Fiscal 2025 Outlook
•Revenue growth of 6% to 7%
•Adjusted EBIT margin expansion of 30 to 50 basis points
•Adjusted effective tax rate of about 23%
•Diluted EPS growth of 8% to 10%
•Adjusted diluted EPS growth of 7% to 9%
Employer Services Segment Fiscal 2025 Outlook
•Employer Services revenue growth of 6% to 7%
•Employer Services margin up 40 to 60 basis points
•Employer Services new business bookings growth of 4% to 7%
•Employer Services client revenue retention decrease of 10 to 30 basis points
•Increase in U.S. pays per control of 1% to 2%
PEO Services Segment Fiscal 2025 Outlook
•PEO Services revenue growth of 5% to 6%
•PEO Services revenue, excluding zero-margin benefits pass-throughs, growth of 4% to 5%
•PEO Services margin down 70 to 90 basis points
•PEO Services average worksite employee count growth of 2% to 3%
Client Funds Extended Investment Strategy Fiscal 2025 Outlook
The interest assumptions in our outlook are based on Fed Funds futures contracts and various forward yield curves as of October 29, 2024. The Fed Funds futures contracts are used in the client short and corporate cash interest income outlook. A combination of various forward yield curves that reflect our investment mix, resulting in a blended rate of 3.8%, was used to forecast new purchase rates across the client and corporate extended and client long portfolios over the remainder of the fiscal year.
•Interest on funds held for clients of $1.115 to $1.135 billion; this is based on anticipated growth in client funds balances of 3% to 4% and an average yield that is anticipated to increase to 3.1%
•Total contribution from the client funds extended investment strategy of $1.0 to $1.02 billion
Fiscal 2025 Outlook
(a) Outlook contemplates the anticipated impact of foreign currency in revenue and operating results.
Investor Webcast Today
As previously announced, ADP will host a conference call for financial analysts today, Wednesday, October 30, 2024 at 8:30 a.m. ET. 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 accompanying the webcast is also available at investors.adp.com/events-and-presentations. ADP news releases, current financial information, SEC filings, and Investor Relations presentations are posted to ADP’s website at investors.adp.com.
About ADP (Nasdaq: ADP)
Designing better ways to work through cutting-edge products, premium services, and exceptional experiences that enable people to reach their full potential. HR, Talent, Time Management, Benefits, and Payroll. Informed by data and designed for people. Learn more at ADP.com. 
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