ROSELAND, N.J. – July 26, 2023 – ADP (Nasdaq: ADP), a leading global technology company providing human capital management (HCM) solutions, announced its fourth quarter and fiscal 2023 financial results and provided its fiscal 2024 outlook.

Fourth Quarter and Fiscal 2023 Consolidated Results

Compared to last year’s fourth quarter, revenues increased 8% to $4.5 billion and 9% on an organic constant currency basis. Net earnings increased 24% to $777 million, and adjusted net earnings increased 25% to $781million. Adjusted EBIT increased 23% to $1.0 billion, representing an adjusted EBIT margin increase of 270 basis points in the quarter to 22.5%. ADP’s effective tax rate for the quarter was 22.8% on a reported basis and an adjusted basis. Diluted EPS increased 25% to $1.87, and adjusted diluted EPS increased 26% to $1.89.

For the full year, revenues increased 9% to $18.0 billion, 10% organic constant currency. Net earnings increased 16% to $3.4 billion, and adjusted net earnings increased 16% to $3.4 billion. Adjusted EBIT increased 15% to $4.5 billion, resulting in adjusted EBIT margin expansion of 130 basis points to 24.8%. ADP's full year tax rate was 23.1% on both an effective basis and an adjusted basis. Diluted EPS increased 17% to $8.21, and adjusted diluted EPS increased 17% to $8.23, including a net share count reduction.

“Our stellar fourth quarter results capped off another very successful year," said Maria Black, President and Chief Executive Officer, ADP. "New business bookings were incredibly strong and Employer Services retention returned to a record level, underscoring our strong market position. As we look ahead, we are focused on expanding on our leadership with a simple set of priorities across our business – leading with best-in-class HCM technology, providing unmatched expertise and outsourcing solutions, and leveraging our global scale and reach to benefit our clients."

Fourth Quarter and Fiscal 2023 Segment Results

Employer Services – Employer Services offers a comprehensive range of global HCM and Human Resources Outsourcing solutions. Compared to last year:

Employer Services revenues increased 11% on a reported basis and 11% on an organic constant currency basis for the fourth quarter, and increased 10% on a reported basis and 11% on an organic constant currency basis for the fiscal year.

Employer Services new business bookings increased 10% to $1.9 billion for the fiscal year.

Employer Services client revenue retention increased to 92.2% for the fiscal year, from 92.1%.

U.S. pays per control increased 3% for the fourth quarter and increased 5% for the fiscal year.

Employer Services segment margin increased 480 basis points for the fourth quarter and increased 190 basis points for the fiscal year.

PEO Services – PEO Services provides comprehensive employment administration outsourcing solutions. Compared to last year:

PEO Services revenues increased 4% for the fourth quarter and increased 8% for the fiscal year.

PEO Services revenues excluding zero-margin benefits pass-throughs increased 2% for the fourth quarter and increased 7% for the fiscal year.

Average worksite employees paid by PEO Services increased 3% to about 722,000 for the fourth quarter and increased 6% to about 712,000 for the fiscal year.

PEO Services segment margin decreased 110 basis points for the fourth quarter and increased 60 basis points for the fiscal year.

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:

Interest on funds held for clients increased 86% to $236 million for the fourth quarter and increased 80% to $813 million for the fiscal year.

Average client funds balances increased 6% to $34.7 billion for the fourth quarter and increased 5% to $34.1 billion for the fiscal year.

The average interest yield on client funds increased 120 basis points to 2.7% for the fourth quarter and increased 100 basis points to 2.4% for the fiscal year.

Fiscal 2024 Outlook

Certain components of ADP’s fiscal 2024 outlook and related growth comparisons exclude the impact of the following items and are discussed on an adjusted basis where applicable.

Fiscal 2023 pre-tax charges of about $9 million related to transformation initiatives.

Fiscal 2023 pre-tax charges of about $1 million related to legal settlements.

Fiscal 2024 expected pre-tax charges of about $5 million related to transformation initiatives.

Consolidated Fiscal 2024 Outlook – Revenue growth of 6% to 7%; Adjusted EBIT margin expansion of 60 to 80 basis points; Adjusted effective tax rate of about 23%; Diluted EPS growth of 10% to 12%; Adjusted diluted EPS growth of 10% to 12%.

Employer Services Segment Fiscal 2024 Outlook – Employer Services revenue growth of 7% to 8%; Employer Services margin up 130 to 150 basis points; Employer Services new business bookings growth of 4% to 7%; Employer Services client revenue retention decrease of 50 to 70 basis points; Increase in U.S. pays per control of 1% to 2%.

PEO Services Segment Fiscal 2024 Outlook – PEO Services revenue growth of 3% to 5%; PEO Services revenue, excluding zero-margin benefits pass-throughs, growth of 3% to 5%; PEO Services margin down 20 to 40 basis points; PEO Services average worksite employee count growth of 3% to 4%.

Client Funds Extended Investment Strategy Fiscal 2024 Outlook

The interest assumptions in ADP’s outlook are based on Fed Funds futures contracts and various forward yield curves as of July 25, 2023. 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 4.0%, 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 $955 to $975 million; this is based on anticipated growth in client funds balances of 2% to 3% and an average yield that is anticipated to increase to 2.8%. Total contribution from the client funds extended investment strategy of $815 to $835 million.

About ADP

ADP is a comprehensive global provider of cloud-based human capital management (HCM) solutions that unite HR, payroll, talent, time, tax and benefits administration, and a leader in business outsourcing services, analytics and compliance expertise. Its unmatched experience, deep insights and cutting-edge technology have transformed human resources from a back-office administrative function to a strategic business advantage.

SOURCE ADP