Employer Services

PEO Services

Dealer Services

Other

Human Capital Management

HR Outsourcing

PEO Zero-Margin Benefits Pass-Throughs

Global Solutions

Interest on Funds Held for Clients

Revenues Other Than Interest and PEO

Total Revenue

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United States

Europe

Canada

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The surge in ADP’s cash and cash equivalents in Q3 2024 was driven by several factors. **Net cash flows from financing activities** played a pivotal role, largely due to a **net increase in client funds obligations of $10,999.6 million** and **net cash received from the Internal Revenue Service amounting to $1,132.0 million**, which together contributed to a dramatic turnaround compared to the prior period. Additionally, robust **operating cash flows** and a notably lower use of cash in **investing activities** (yielding an improvement of **$881.0 million**) further supported the increase, while the effect of exchange rate changes was minimal.  **[0000008670-24-000014_adp-20240331.htm:31]** **[0000008670-24-000009_q3fy24exhibit99.htm:5]** 

What drove the surge in cash and cash equivalents in Q3 2024?

ADP’s total assets dropped sharply in Q1 2024 mainly due to a significant reduction in funds held for clients. Specifically, the assets decreased by **$1,647.4 million** from **$50,971.0 million** as of June 30, 2023, to **$49,323.6 million** as of September 30, 2023, with funds held for clients declining from **$36,333.6 million** to **$34,762.9 million** during that period.  **[0000008670-23-000033_q1fy24exhibit99.htm:4]** **[0000008670-23-000040_adp-20230930.htm:2]** 

Why did total assets drop so sharply in Q1 2024?

The appearance of **short-term debt** in Q3 2024 is primarily due to ADP implementing **short-term financing to support its Client Funds Strategy**. This approach was used to meet short-term funding requirements for client funds obligations, rather than liquidating longer-term investments. In doing so, the company increased its reliance on short-term financing, which is reflected in the noticeable change in its short-term debt profile in Q3 2024.  **[0000008670-24-000009_q3fy24exhibit99.htm:7]** 

What accounts for the appearance of short-term debt in Q3 2024?

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The strong rebound in operating cash flows in Q1 2025 was driven by **favorable changes in working capital components** and **increased business growth**. In particular, there was a **notable increase in net earnings**—rising from **$859.4 million** in Q1 2024 to **$956.3 million** in Q1 2025—and marked improvements in accounts receivable, which shifted from an increase of **$107.9 million** in Q1 2024 to a decrease of **$115.4 million** in Q1 2025, along with a smaller rise in deferred contract costs compared to the previous year.  **[0000008670-24-000030_adp-20240930.htm:3]** **[0000008670-24-000026_q1fy25exhibit99.htm:5]** 

What drove the strong rebound in Operating Cash Flows in Q1 2025?

There is no evidence in the documents that ADP experienced a significant drop in capital expenditures in Q2 2025. In fact, one document notes that the figures for Q2 2025 do not represent a "big change" and instead points out only a small increase over the comparable period along with revised outlooks for fiscal 2025.  **[0000008670-25-000007_adp-20241231.htm:35]**  This suggests that the phrasing "dropped significantly" may not accurately reflect the reported capital expenditures figures.  **[0000008670-25-000007_adp-20241231.htm:3]** **[0000008670-25-000007_adp-20241231.htm:35]** 

Why did Capital Expenditures drop significantly in Q2 2025?

The documents indicate that the **Increase in Other Assets** turned from **(8.70)** in Q2 2024 to **87.90** in Q3 2024, yet they do not provide specific details or explanations outlining the drivers behind this shift. In fact, while one document notes a **$54.2 million year-over-year increase** over a nine‐month period, it explicitly states that no further reasons are given for the change.  **[0000008670-24-000009_q3fy24exhibit99.htm:5]** **[0000008670-24-000014_adp-20240331.htm:3]** 

What caused the shift to a positive increase in Other Assets in Q3 2024?

The sharp swing in Financing Activities in Q2 2025 was driven by several factors. **ADP experienced a substantial net increase in client funds obligations of **$3,668.5 million** due to timing differences in impounds and client payments.  **[0000008670-25-000007_adp-20241231.htm:33]**  Additionally, **proceeds from the issuance of debt contributed **$988.9 million**, and the company repurchased its common stock more aggressively—buying **2.4 million shares** at a higher average price of **$274.42** compared to the previous period.  **[0000008670-25-000007_adp-20241231.htm:33]**  Moreover, **dividends paid increased to **$1,145.1 million** from **$1,032.1 million**  **[0000008670-25-000003_q2fy25exhibit99.htm:5]** , and there was a decrease in net proceeds associated with reverse repurchase agreements, which fell to **$(344.7) million** compared to **$(51.0) million**.  **[0000008670-25-000003_q2fy25exhibit99.htm:5]**  These factors collectively led to the significant change in ADP's financing activities in Q2 2025.

What factors led to the sharp swing in Financing Activities in Q2 2025?

85978bde07ee71844be3a01c3c9f74a90c6e9114f7cd80e2d78cb877b6c8d6ab

ADP’s interest expense spiked in **Q3 2024** primarily due to **higher average interest rates** and **increased borrowing volumes**. The average rates on commercial paper issuances and reverse repurchase agreements rose to **5.4%** in Q3 2024 compared to lower levels in Q3 2023, coupled with a higher volume of borrowings on these instruments. These factors together drove the expense up from **$38.3 million** in Q3 2023 to **$62.7 million** in Q3 2024, marking a **64% increase**.  **[0000008670-24-000009_q3fy24exhibit99.htm:3]** **[0000008670-24-000014_adp-20240331.htm:25]** 

Why did Interest Expense spike in Q3 2024?

**The boost in Total Revenues in Q3 2024 was driven by multiple factors. First, **strong new business bookings** and **record client retention** were key contributors. Additionally, **pricing increases** helped drive the higher revenue figures. There was also a **2% growth in pays per control** in Employer Services, an increase in **interest revenue** from funds held for clients, and a **5% rise in PEO Services revenues** alongside a **3% increase in average paid worksite employees**.  **[ADP_3381814_1]** **[0000008670-24-000014_adp-20240331.htm:24]** **

What factors boosted Total Revenues in Q3 2024?

The higher EPS in FY 2024 was driven by a combination of factors. **Revenue growth** played a significant role, with total revenues increasing by **7%** from **$18.0 billion in FY 2023** to **$19.2 billion in FY 2024**. Additionally, **improved margins** were a key contributor, as the Adjusted EBIT margin expanded by **70 basis points** to reach **25.5%**, indicating better operational efficiency and cost management. The growth in **net earnings** from **$3.41 billion to $3.75 billion** also supported the EPS increase. Lastly, a **reduction in the share count** from **413.7 million to 410.6 million** helped boost the EPS by distributing the earnings over fewer shares.  **[0000008670-24-000017_q4fy24exhibit99.htm:0]** **[0000008670-24-000024_adp-20240630.htm:67]** **[0000008670-24-000017_q4fy24exhibit99.htm:0]** **[0000008670-24-000017_q4fy24exhibit99.htm:12]** **[0000008670-24-000024_adp-20240630.htm:79]** **[0000008670-24-000024_adp-20240630.htm:67]** 

What drove the higher EPS in FY 2024?

The jump in **interest on client funds** in Q1 2025 was primarily explained by two factors. First, there was an **increase in the average interest rate** from **2.6%** in Q1 2024 to **3.1%** in Q1 2025. Second, there was a **5% increase** in **average client funds balances**, which reached **$32.8 billion** in Q1 2025. These factors combined resulted in a significant rise in interest income on the funds held for clients.  **[0000008670-24-000026_q1fy25exhibit99.htm:1]** **[0000008670-24-000026_q1fy25exhibit99.htm:7]** 

What explains the jump in interest on client funds in Q1 2025?

Pre-tax earnings improved in Q3 2024 due to **multiple factors**. **Revenue growth increased by 7%** to **$5.3 billion**, driven primarily by strong performance in the Employer Services segment, which saw a **14% increase** in pre-tax earnings to **$1,421.7 million**. This robust growth in the Employer Services segment more than offset a **10% decline** in the PEO Services segment. Additionally, **higher interest income** from increased average interest rates and higher investment balances, along with **operating efficiencies** that reduced servicing costs, contributed significantly to the overall improvement in earnings before income taxes.  **[0000008670-24-000014_adp-20240331.htm:27]** **[0000008670-24-000009_q3fy24exhibit99.htm:0]** **[0000008670-24-000014_adp-20240331.htm:25]** 

Why did pre-tax earnings improve in Q3 2024?

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Revenues, Other Than Interest and PEO Revenues (USD, millions)

Interest on Funds Held for Clients (USD, millions)

PEO Revenues (USD, millions)

Total Revenues (USD, millions)

Total Costs of Revenues (USD, millions)

Selling, General, and Administrative Expenses (USD, millions)

Interest Expense (USD, millions)

Total Expenses (USD, millions)

Other (Income)/Expense, Net (USD, millions)

Earnings Before Income Taxes (USD, millions)

Provision for Income Taxes (USD, millions)

Net Earnings (USD, millions)

Basic Earnings Per Share (USD)

Diluted Earnings Per Share (USD)

e84598f50fd89142cb950e3ac9b97fa19fe105853c591e22518cdbb1aa6a69e2

21a17eb355b3d041f62f7b08d052887582a5187f4218838a104f4143ff15b92b

Total Revenue [USD, Millions]

Cost of Goods Sold (COGS) [USD, Millions]

SG&A [USD, Millions]

R&D [USD, Millions]

D&A [USD, Millions]

Interest Expense [USD, Millions]

Operating Income (EBIT) [USD, Millions]

Net Income [USD, Millions]

EPS - Basic [USD, Per Share]

EPS - Diluted [USD, Per Share]

5320bc03f2344b981c00fac0394da96ae21425203c7520460fb5b0df89fea3e2

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

dcfb14cb509a8147a276aeb85795811b780c87795ebdd1edd861b809581e390c

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ca664cc156f9255023d9fa8a8cb0e1a0d20713e20da44ca562bd0a60f76663ed

AUTOMATIC DATA PROCESSING (ADP)

Financials