ADP Earnings: HR Services Continue Growth Spree

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ADP: Automatic Data Processing logo
ADP
Automatic Data Processing

ADP (NASDAQ:ADP) announced its Q3 FY 2016 results, reporting 7% annual growth in revenue to $3.2 billion. [1] Correspondingly, its cash operating expenses were up by about 8% y-o-y to just under $2.4 billion for the quarter. As a result, the company’s adjusted EBITDA margin for the quarter was roughly flat over the prior year quarter at 26.1%. A resulting higher net income led diluted EPS to increase by 14% y-o-y to $1.14 for the quarter ended March.

Q316 Earnings1Similar to the previous 6-8 quarters, much of the growth was attributable to HR outsourcing and other services, which grew at 16% for the quarter. Core payroll processing revenues were up by a steady 5% to just under $2.3 billion for Q3’16.

Q316 Earnings2Below are a few key growth metrics for the company through the quarter. A flat interest yield on client assets meant that client funds interest revenue remained flat over the comparable prior year period.

Q316 Earnings3

In the table below you can see our revenue forecast for ADP’s fiscal year ended June. In the long run, ADP is likely to witness the most revenue growth from its HR outsourcing and services, as compared to client funds interest or payroll processing business. ADP’s primary strength lies in its ability to offer customized solutions to larger clients.

Q316 Earnings4

Have more questions about ADP (NASDAQ:ADP)? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ADP
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Notes:
  1. ADP Reports Third Quarter Fiscal 2016 Results, ADP Press Release, April 2016 []