In This Article:
-
Revenue Growth: 8% increase in the second quarter.
-
Adjusted EBIT Margin Expansion: 60 basis points increase.
-
Adjusted EPS Growth: 10% increase.
-
Employer Services Revenue Growth: 8% increase on a reported basis, 7% on an organic constant currency basis.
-
PEO Revenue Growth: 8% increase.
-
Average Worksite Employee Growth: 3% increase.
-
Employer Services Margin: Increased by 90 basis points.
-
PEO Margin: Decreased by 140 basis points.
-
Client Funds Interest Revenue: Increased more than anticipated, full-year forecast increased by $25 million.
-
Fiscal 2025 Revenue Growth Outlook: 6% to 7% growth.
-
Fiscal 2025 Adjusted EBIT Margin Expansion Outlook: 30 basis points to 50 basis points.
-
Fiscal 2025 Adjusted EPS Growth Outlook: 7% to 9% growth.
-
Effective Tax Rate: Expected to be around 23% for fiscal 2025.
Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
-
Automatic Data Processing Inc (NASDAQ:ADP) achieved a significant milestone by increasing its quarterly dividend for the 50th consecutive year, joining the elite group of 'Dividend Kings'.
-
The company reported strong second quarter results with 8% revenue growth, 60 basis points of Adjusted EBIT margin expansion, and 10% Adjusted EPS growth.
-
ADP's client satisfaction levels reached a new all-time high in the second quarter, reflecting strong overall business environment and high client satisfaction.
-
The strategic partnership with Fiserv is expected to enhance ADP's small business offerings by integrating Fiserv's Clover platform with ADP's RUN solution.
-
ADP's acquisition of WorkForce Software is progressing well, with new business opportunities emerging from the integration of their solutions with ADP's platforms.
Negative Points
-
Employer services retention declined slightly compared to the prior year, although it modestly exceeded expectations.
-
Employer services pays per control growth decelerated to 1% in Q2 from 2% in Q1, indicating a slower hiring pace among clients.
-
PEO margin decreased by 140 basis points in the quarter, impacted by higher zero-margin benefits pass-through revenue growth and increased costs.
-
The company anticipates a deceleration in revenue growth in Q3 due to factors such as FX headwinds and lower short-term interest rates.
-
ADP's fiscal 2025 outlook includes a forecasted modest decline in employer services retention and a decrease in PEO margin for the full year.
Q & A Highlights
Q: Can you provide more details on the Fiserv partnership? Is it a referral relationship, and is there any revenue share involved? A: Yes, we are currently in a referral relationship with Fiserv, exchanging leads between our distribution arms. We plan to integrate our products, with RUN being embedded in Clover and vice versa. There is a revenue share component, making it a mutually beneficial partnership. We believe in partnerships and the ecosystem, and this could be the beginning of more such relationships.