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What changed in Automatic Data Processing's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Automatic Data Processing's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+265 added−255 removedSource: 10-K (2024-08-07) vs 10-K (2023-08-03)

Top changes in Automatic Data Processing's 2024 10-K

265 paragraphs added · 255 removed · 216 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

74 edited+34 added−33 removed80 unchanged
Biggest changeOur long-term business success is closely linked to our commitment to creating an environment in which our associates thrive, and that means we have to listen to and engage our associates. We conduct an annual culture survey, myVoice, where our associates can share their opinions on important topics, including client service, diversity, social responsibility, ethics, innovation and leadership.
Biggest changeWe conduct an annual culture survey, myVoice, where our associates can share their perspectives on important topics, including client service, inclusion, diversity, equity and belonging, social responsibility, ethics, innovation and leadership. Along with many of our world-class clients, we leverage our innovative StandOut® powered by ADP platform, to help managers drive talent engagement throughout the year.
HCM Solutions : In the United States, we provide cloud-based HCM software with supporting service and expertise that assists employers of all types and sizes in managing the entire worker spectrum and employment cycle – from full-time to freelancer and from hire to retire. U.S.
HCM Solutions : In the United States, we provide cloud-based HCM software with supporting service and expertise that assists employers of all types and sizes in managing the entire worker spectrum and employment cycle – from freelancer to full-time and from hire to retire. U.S.
This led to our establishment of an interdisciplinary working group across ADP to determine governance for use cases and adoption of a set of principles and processes to govern the use of these newer technologies, including operational monitoring of recommendations made by AI/ML technologies.
This led to our establishment of an interdisciplinary working group across ADP to determine governance for use cases and adoption of a set of principles and processes to govern the use of these newer technologies, including operational monitoring of recommendations made by AI and ML technologies.
PEO population with its global workforce’s HR system of record. • Protection and Compliance: ADP TotalSource HR experts help clients manage the risks of being an employer by advising how to handle properly a range of issues – from HR and safety compliance to employee-relations.
PEO population with its global workforce’s HR system of record. • Protection and Compliance: ADP TotalSource HR experts help clients manage the risks of being an employer by advising how to properly handle a range of issues – from HR and safety compliance to employee-relations.
This has allowed us to be consistently recognized by esteemed organizations as an employer of choice year after year. We invest in our team members so that they have the skills necessary to succeed and grow their careers. The ADP talent journey begins with an innovative, engaging and comprehensive onboarding process followed by extensive training and mentorship.
This has allowed us to be recognized by esteemed organizations as an employer of choice year after year. We invest in our team members so that they have the skills necessary to succeed and grow their careers. The ADP talent journey begins with an innovative, engaging and comprehensive onboarding process followed by extensive training and mentorship.
As part of our full-service employment tax services in the United States, we prepare and file employment tax returns on our clients’ behalf and, in connection with these stand-alone services, collect employment taxes from clients and remit these taxes to more than 8,000 federal, state and local tax agencies. 9 • ADP SmartCompliance Wage Payments.
As part of our full-service employment tax services in the United States, we prepare and file employment tax returns on our clients’ behalf and, in connection with these stand-alone services, collect employment taxes from clients and remit these taxes to more than 8,000 federal, state and local tax agencies. • ADP SmartCompliance Wage Payments.
In the United States, we offer compliant pay solutions for today's workforce, including electronic payroll disbursement options such as payroll cards, digital accounts and direct deposit, as well as traditional payroll checks, which can be integrated with clients’ ERP and payroll systems. Human Resources Management.
In the United States, we offer compliant pay solutions for today’s 9 workforce, including electronic payroll disbursement options such as payroll cards, digital accounts and direct deposit, as well as traditional payroll checks, which can be integrated with clients’ ERP and payroll systems. Human Resources Management.
Our configurable, automated time and attendance tools help global clients understand the work being performed and the resources being used, and help ensure the right people are in the right place at the right time. MARKETS AND SALES Our HCM solutions are offered in 140 countries and territories across North America, Latin America, Europe, Asia and Africa.
Our configurable, automated time and attendance tools help global clients understand the work being performed and the resources being used, and help ensure the right people are in the right place at the right time. MARKETS AND SALES Our HCM solutions are offered in over 140 countries and territories across North America, Latin America, Europe, Asia and Africa.
For example, our payroll services are designed to facilitate compliance with state laws and regulations applicable to the payment of wages. In addition, our HCM solutions help clients manage their compliance with certain requirements of the Affordable Care Act in the United States.
For example, our payroll services are designed to facilitate compliance with state laws and regulations applicable to the payment of wages. 13 In addition, our HCM solutions help clients manage their compliance with certain requirements of the Affordable Care Act in the United States.
In harnessing the power of data through ML, ADP recognizes the importance of accountability, transparency, privacy, explainability and governance, and in furtherance of those goals has established an active AI & Data Ethics Committee, comprised of both industry leaders and ADP experts, which advises on emerging industry trends and concerns and provides guidance with respect to compliance with the principles that ADP should follow while developing products, systems and applications that involve AI, ML and data.
Culture of responsible AI In harnessing the power of data through AI and ML, ADP recognizes the importance of accountability, transparency, privacy, explainability and governance, and in furtherance of those goals has established an active AI & Data Ethics Committee, comprised of both industry leaders and ADP experts, which advises on emerging industry trends and concerns and provides guidance with respect to compliance with the principles that ADP should follow while developing products, systems and applications that involve AI, ML and data.
As part of our payroll and payroll tax management services, we move client funds to taxing authorities, our clients’ employees and other payees via electronic transfer, direct deposit, prepaid access and ADPCheck.
As part of our payroll and payroll tax management services, we move client funds to our clients’ employees, tax authorities and other payees via electronic transfer, direct deposit, prepaid access and ADPCheck.
And we will grow our sales organization and continue to invest in best-in-class sales technology to not only make the purchase experience seamless but to also empower our sellers to provide the deep expertise and insights our clients, partners and influencers require to ensure they have the right HCM solutions to help them achieve their objectives and make a meaningful impact for their employees.
And we intend to grow our sales organization and continue to invest in best-in-class sales technology to not only make the purchase experience seamless but to also empower our sellers to provide the deep expertise and insights our clients, partners and influencers require to ensure they have the right HCM solutions to help them achieve their objectives and make a meaningful impact for their employees.
As one of the world’s largest providers of HCM solutions, our systems contain a significant amount of sensitive data 12 related to clients, employees of our clients, vendors and our employees.
As one of the world’s largest providers of HCM solutions, our systems contain a significant amount of data related to clients, employees of our clients, vendors and our 12 employees.
It offers a comprehensive set of HCM capabilities within a single solution that unifies the five major areas of HCM: HR management, benefits administration, payroll services, time and attendance management, and talent management. Payroll Services . We pay over 25 million (approximately 1 out of every 6) workers in the United States.
It offers a comprehensive set of HCM capabilities within a single solution that unifies the five major areas of HCM: HR management, benefits administration, payroll services, time and attendance management, and talent management. Payroll Services . We pay over 26 million (approximately 1 out of every 6) workers in the United States.
Workforce Management. ADP’s Workforce Management offers a range of solutions to over 120,000 employers of all sizes, including time and attendance, absence management and scheduling tools. Time and attendance solutions include time capture via online timesheets, timeclocks with badge readers, biometrics and touch-screens, telephone/interactive voice response, and mobile smartphones and tablets.
Workforce Management. ADP’s Workforce Management offers a range of solutions to over 130,000 employers of all sizes, including time and attendance, absence management and scheduling tools. Time and attendance solutions include time capture via online timesheets, timeclocks with badge readers, biometrics and touch-screens, telephone/interactive voice response, and mobile smartphones and tablets.
Our services are provided under written price quotations or service agreements having varying terms and conditions. No one price quotation or service agreement is material to us. Based on our retention levels in fiscal 2023, our client retention is estimated at approximately 13 years in Employer Services, and approximately 6 years in PEO.
Our services are provided under written price quotations or service agreements having varying terms and conditions. No one price quotation or service agreement is material to us. Based on our retention levels in fiscal 2024, our client retention is estimated at approximately 13 years in Employer Services, and approximately 6 years in PEO.
CLIENTS AND CLIENT CONTRACTS We provide services to more than 1 million clients. In fiscal 2023, no single client or group of affiliated clients accounted for revenues in excess of 2% of our annual consolidated revenues. We are continuously in the process of performing implementation services for new clients.
CLIENTS AND CLIENT CONTRACTS We provide services to more than 1.1 million clients. In fiscal 2024, no single client or group of affiliated clients accounted for revenues in excess of 2% of our annual consolidated revenues. We are continuously in the process of performing implementation services for new clients.
Tailored to meet the needs of businesses of all sizes, we help them work smarter today so they can have more success tomorrow. We serve over 1 million clients and pay over 41 million workers in 140 countries and territories.
Tailored to meet the needs of businesses of all sizes, we help them work smarter today so they can have more success tomorrow. We serve over 1.1 million clients and pay over 42 million workers in over 140 countries and territories.
Our Talent Strategy Our talent strategy is simple – we aim to attract, develop and retain ambitious, passionate and overall top talent by offering a place where our people can grow their careers, challenge themselves, share generously, take risks, and create positive change.
Our Talent Strategy Our talent strategy is simple – we aim to attract, develop and retain ambitious, passionate and overall top talent by offering a place where our associates can grow their careers, challenge themselves, share generously, take risks, and create positive change.
Our automated Pay-by-Pay® premium payment program calculates and collects workers’ compensation premium payments each pay period, simplifying this task for employers. Retirement Services. ADP Retirement Services helps employers in the United States administer various types of retirement plans, such as traditional and Roth 401(k)s, profit sharing (including new comparability), SIMPLE and SEP IRAs, and executive deferred compensation plans.
Our automated Pay-by-Pay® premium payment program calculates and collects workers’ compensation premium payments each pay period, simplifying this task for employers. Retirement Services. ADP Retirement Services helps over 170,000 employers in the United States administer various types of retirement plans, such as traditional and Roth 401(k)s, profit sharing (including new comparability), SIMPLE and SEP IRAs, and executive deferred compensation plans.
Our voluntary business resource groups (BRGs), which cover a broad array of diverse associates that share common interests and experiences, make us stronger by promoting diversity and cultural awareness, accelerating associate engagement, retention and career development, helping build relationships with diverse markets in our communities, and promoting the conservation and restoration of natural resources.
Our voluntary business resource groups (BRGs), which cover a broad array of diverse associates that share common interests and experiences, make us stronger by promoting inclusion, diversity, equity and belonging and cultural awareness, accelerating associate engagement, retention and career development, helping build relationships with diverse markets in our communities, and promoting the conservation and restoration of natural resources.
The most material markets for HCM Solutions, Global Solutions and HRO Solutions (other than PEO) are the United States, Canada and Europe. In each market, we have both country-specific solutions and multi-country solutions, for employers of all sizes and complexities. The major components of our offerings throughout these geographies are payroll, HR outsourcing and time and attendance management.
The most material markets for HCM Solutions, Global Solutions and HRO Solutions (other than PEO) are the United States, Canada and Europe. In each market, we have both country-specific solutions and multi-country solutions, for employers of all sizes and complexities. The major components of our offerings throughout these geographies are payroll, HR outsourcing and workforce management.
These investments include expenses for activities such as the development of new products, maintenance expenses associated with our existing technologies, purchases of new software and software licenses, and additions to software resulting from business combinations. LICENSES We are the licensee under a number of agreements for computer programs and databases.
These investments include expenses for activities such as the development of new products, maintenance expenses associated with our existing technologies, investments in generative AI, purchases of new software and software licenses, and additions to software resulting from business combinations. LICENSES We are the licensee under a number of agreements for computer programs and databases.
We are always designing better ways to work through cutting-edge products, premium services and exceptional experiences that enable people to reach their full potential. ADP's Business Pillars Our business is organized around three pillars which represent our core growth areas. U.S.
We are always designing better ways to work through cutting-edge products, premium services and exceptional experiences that enable people to reach their full potential. ADP ’ s Business Pillars Our business is organized around three pillars which represent our core growth areas. U.S.
Our next-gen payroll platform is a global solution that supports workers of all types and enables real-time, transparent, continuous payroll calculations. This next-gen payroll platform also unlocks flexible pay choices for our clients so they can provide the best pay experience for their workers.
Our next-gen payroll platform is designed to be a global solution that supports workers of all types and enables real-time, transparent, continuous payroll calculations. This next-gen payroll platform also unlocks flexible pay choices for our clients so they can provide the best pay experience for their workers.
Skills Graph also powers our new Organizational Benchmarking Dashboard, which enables companies to decide how best to deploy their workers by comparing organizational metrics like headcount, labor costs and turnover against other similar businesses, as well as Talent Market Insights where organizations can explore jobs and locations to understand talent availability, skills, wages, turnover and time to fill.
Skills Graph also powers our Organizational Benchmarking Dashboard, which enables companies to decide how best to deploy their workers by comparing organizational metrics like headcount, labor costs and turnover against other similar businesses, as well as Talent Market Insights where organizations can explore jobs and locations to understand talent availability, skills, wages, turnover and time to fill an open position.
ADP’s Insurance Services business, in conjunction with our licensed insurance agency, Automatic Data Processing Insurance Agency, Inc., facilitates access in the United States to workers’ compensation and group health insurance for small and mid-sized clients through a variety of insurance carriers.
ADP’s Insurance Services business, in conjunction with our licensed insurance agency, Automatic Data Processing Insurance Agency, Inc., facilitates access in the United States to workers’ compensation and group health insurance for over 240,000 small and mid-sized clients through a variety of insurance carriers.
With our cloud-based HCM software at the core, we serve more than 16,000 clients and 10 more than 725,000 worksite employees in all 50 U.S. states. ADP TotalSource is the largest PEO certified by the Internal Revenue Service as meeting the requirements to operate as a Certified Professional Employer Organization under the Internal Revenue Code.
With our cloud-based HCM software at the core, we serve more than 17,000 clients and 10 more than 750,000 worksite employees in all 50 U.S. states. ADP TotalSource is the largest PEO certified by the Internal Revenue Service as meeting the requirements to operate as a Certified Professional Employer Organization under the Internal Revenue Code.
As we continue to explore the potential that new technologies like generative AI can provide as we design and develop innovative solutions, we understand the great responsibility we have to approach these innovations in a way that is ethical, secure, and compliant for our business and the clients and workers we serve around the world.
As we continue to explore the potential that new technologies like generative AI can provide, we understand the great responsibility we have to approach these innovations in a way that is ethical, secure, and compliant for our business and the clients and workers we serve around the world.
We address these broad market needs with our cloud-based strategic platforms: RUN Powered by ADP®, serving over 850,000 small businesses; ADP Workforce Now®, serving over 80,000 mid-sized and large businesses across our strategic pillars; and ADP Vantage HCM® and our next-gen HCM platform, serving large enterprise businesses.
We address these broad market needs with our cloud-based strategic platforms: RUN Powered by ADP®, serving over 890,000 small businesses; ADP Workforce Now®, serving over 85,000 mid-sized and large businesses across our strategic pillars; and ADP Vantage HCM® and our next-gen HCM platform, serving large enterprise businesses.
In the U.S., ADP DataCloud's Skills Graph, our proprietary data structure, is based on more than 43 million employee records, 95 million resumes and 9 million job postings across more than 20 industries and 500 geographic areas, and uses large language models to extract, align and normalize key information such as skills, job titles and levels, education and qualifications from non-structured data and infers missing skills and qualifications from context.
In the U.S., ADP DataCloud’s Skills Graph, our proprietary data structure, is based on more than 44 million employee records, 140 million resumes and 11 million job postings across more than 20 industries and 500 geographic areas, and uses large language models to extract, align and normalize key information such as skills, job titles and levels, education and qualifications from non-structured data and infers missing skills and qualifications from context.
Diversity, equity and inclusion are a cornerstone of our one-of-a-kind culture. We value diverse perspectives and believe that our associates and their best ideas thrive in a diverse and inclusive environment.
Inclusion, diversity, equity and belonging are cornerstones of our one-of-a-kind culture. We value diverse perspectives and believe that our associates and their best ideas thrive in a diverse and inclusive environment.
Our CHRO, along with our CEO, as 14 appropriate, regularly updates and supports our Compensation and Management Development Committee of the Board (“CMDC”) as well as the Board of Directors on HCM matters, including culture, engagement, and diversity, equity, inclusion and belonging.
Our CHRO, along with our CEO, as appropriate, regularly updates and supports our Compensation and Management Development Committee of the Board (“CMDC”) as well as the Board of Directors on HCM matters, including culture, engagement, hiring, rewards, and inclusion, diversity, equity and belonging efforts.
The CMDC is responsible for these matters, as well as our executive compensation program, management succession planning and talent development, and company-wide equity-based plans. Our Associates and Demographics As of June 30, 2023 , our global team of associates consisted of approximately 63,000 persons.
The CMDC is responsible for these matters, as well as our executive compensation program, company-wide equity-based plans, and our management succession planning and development program. Our Associates and Demographics As of June 30, 2024 , our global team of associates consisted of approximately 64,000 persons.
Clients can also access data-driven benchmarks in areas such as turnover and overtime, staffing and understanding profit leaks, and have their ADP HR expert help tailor recommendations to continue to drive their business forward. A payroll specialist is also available to clients to help them ensure their workers are paid correctly, on time and in compliance. ADP Comprehensive Services.
Clients can also access data-driven benchmarks in areas such as turnover and overtime, staffing and benefit costs, and have their ADP HR expert help tailor recommendations to continue to drive their business forward. A payroll specialist is also available to clients to help them ensure their workers are paid correctly, on time and compliantly. ADP Comprehensive Services.
In our fiscal year ended June 30, 2023, in the United States, we processed and delivered more than 79 million employee year-end tax statements and moved more than $3.1 trillion in client funds to taxing and other agencies, our clients’ employees and other payees. • ADP SmartCompliance.
In our fiscal year ended June 30, 2024, in the United States, we processed and delivered more than 78 million employee year-end tax statements and moved more than $3.1 trillion in client funds to our clients’ employees, tax authorities and other payees. • ADP SmartCompliance.
We will continue to build on these strengths to further improve our client experience, and to add to our global footprint to further meet our clients where they choose to do business and address their needs for a distributed and flexible workforce.
Our clients benefit from our unmatched global footprint and scale in the HCM industry. We will continue to build on these strengths to further improve our client experience, and to add to our global footprint to further meet our clients where they choose to do business and address their needs for a distributed and flexible workforce.
ADP TotalSource is enabled by ADP Workforce Now and offers small and mid-sized businesses a comprehensive HR outsourcing solution through a co-employment model. With a PEO, both ADP and the client have a co-employment relationship with the client’s employees.
ADP’s HR Outsourcing solutions serve over three million employees. Professional Employer Organization. ADP TotalSource is enabled by ADP Workforce Now and offers small and mid-sized businesses a comprehensive HR outsourcing solution through a co-employment model. With a PEO, both ADP and the client have a co-employment relationship with the client’s employees.
In addition, ADP Retirement Services offers investment management services to retirement plans through ADP Strategic Plan Services, LLC, an SEC registered investment adviser under the Investment Advisers Act of 1940. ADP Retirement Services also offers trustee services through a third party.
In addition, ADP Retirement Services offers investment management services to retirement plans through ADP Strategic Plan Services, LLC, an SEC registered investment adviser under the Investment Advisers Act of 1940. ADP Retirement Services also offers trustee services through a third party as well as through ADP Retirement Trust Services, LLC, a New Hampshire state-chartered affiliated trust company.
Our business is not dependent upon a single license or group of licenses. Third-party licenses, patents, trademarks, and franchises are not material to our business as a whole. OUR HCM STRATEGY Our Human Capital Management (HCM) strategy is simple, our people are one of our most valuable assets and we are committed to valuing, developing and engaging them.
Our business is not dependent upon a single license or group of licenses. Third-party licenses, patents, trademarks, and franchises are not material to our business as a whole. 14 OUR HCM STRATEGY Our Human Capital Management (HCM) strategy is simple, our people have differentiated us for 75 years and we remain committed to valuing, developing and engaging them.
We strive to reflect the diversity of the communities and clients we serve and are firmly focused on ensuring that all our associates are welcomed and enjoy a deep sense of belonging.
We strive to reflect the diversity of the communities and clients we serve and are firmly focused on ensuring that all our associates are welcomed and enjoy a deep sense of belonging. We have a number of initiatives to strengthen and further cultivate our inclusive and diverse culture.
SYSTEMS DEVELOPMENT AND PROGRAMMING During the fiscal years ended June 30, 2023, 2022 and 2021, we invested approximately $1.195 billion, $1.210 billion and $1.016 billion, respectively, in systems development and programming.
RESEARCH AND DEVELOPMENT During the fiscal years ended June 30, 2024, 2023 and 2022, we invested approximately $1.276 billion, $1.195 billion, and $1.210 billion, respectively, in research and development.
We will continue to leverage our decades of experience, our significant data insights, and investments in AI and other enabling 4 technologies to help our clients and their workers navigate the ever-changing world of work. • Benefit our Clients with Our Global Scale. Our clients benefit from our unmatched global footprint and scale in the HCM industry.
We will continue to leverage our significant data insights and investments in AI and other enabling technologies to further enable our decades of knowledge and experience and more effectively 4 apply those to help our clients and their workers navigate the ever-changing world of work. • Benefit our Clients with Our Global Scale.
For over 70 years, we have proven that actively listening and responding to what clients and their employees need and want keeps the world of work progressing forward. We pioneered HCM automation, HCM in the cloud, mobile HCM and a digital HCM marketplace.
Innovation at ADP Innovation is in our DNA. For 75 years, we have proven that actively listening and responding to what clients and their employees need and want keeps the world of work progressing forward. As a founder in the industry, we pioneered HCM automation, HCM in the cloud, mobile HCM and a digital HCM marketplace.
We issue quarterly global StandOut® Engagement Pulse® and Performance Pulse® surveys to ensure that all associates can share with their leaders how they feel about their work and their colleagues, and for us to get a snapshot of engagement across the globe.
We issue quarterly global StandOut® Engagement Pulse® surveys to ensure that all associates can share with their leaders how they feel about their work and their colleagues, and for us to get a snapshot of engagement across the globe. The strength of our ADP team comes from what each one of us offers each other, our clients and our community.
The strength of our ADP team comes from what each one of us offers each other, our clients and our community. Through our myMoment Recognition Program, we give our associates the opportunity to recognize and celebrate each other when they demonstrate our values, drive our goals and go above and beyond in contributing to our collective success.
Through our myMoment Recognition Program, we give our associates the opportunity to recognize and celebrate each other when they demonstrate our values, drive our goals and go above and beyond in contributing to our collective success.
As the regulatory environment rapidly changes, making it harder for companies to navigate the complexities of payroll, our next-gen payroll platform’s built-in compliance capabilities enable our clients to focus on managing their business. Additionally, we launched the “Roll™ by ADP” mobile-first solution – reimagining how small businesses do payroll.
As the regulatory environment rapidly changes, making it harder for companies to navigate the complexities of payroll, our next-gen payroll platform’s built-in compliance capabilities enable our clients to focus on managing their business.
We also offer comprehensive, country-specific HCM solutions that combine innovative technology with deep local expertise. By operating a flexible service model, we help clients manage various combinations of payroll services, HR management, time and attendance management, talent management and benefits management, depending on the country in which the solution is provided.
By operating a flexible service model, we help clients manage various combinations of payroll services, HR management, time and attendance management, talent management and benefits management, depending on the country in which the solution is provided.
DataCloud analyzes aggregated, anonymized and timely HCM and compensation data from more than 1 million organizations across the U.S., powering solutions that provide clients with in-depth workforce and business insights that enable critical HR decisions. Artificial intelligence (AI) drives many of the key features of ADP’s data products.
ADP DataCloud analyzes aggregated, anonymized and timely HCM and compensation data from more than one million organizations across the U.S., powering solutions that provide clients with in-depth workforce and business insights that support critical HR decisions.
In the area of artificial intelligence, some states and localities in the U.S. have proposed or already enacted legislation and proposals are pending in the European Union and elsewhere that would impose obligations on how we develop and market AI-based products and solutions.
In the area of artificial intelligence, some states and localities in the U.S., the EU and elsewhere have proposed or already enacted legislation that imposes obligations on how we develop and market AI-based products and solutions. Specifically, the EU Artificial Intelligence Act imposes requirements on providers of certain types of AI services.
A key area of focus is using data and feedback from front-line practitioners to build products that improve the employee experience and make HR technology more intentional and in the moment. By innovating with a client-centric mindset, we continue to transform work. In today’s world of work, people-data has never been more important.
A key area of focus is using data and feedback from front-line practitioners to build products that improve the employee experience and make HR technology more intentional and in the moment.
The conversational experience runs off simple chat prompts such as “Run my payroll,” offering a frictionless experience that also allows clients to confidently handle compliance matters like tax filing and deposits.
The conversational experience runs off simple chat prompts such as “Run my payroll,” offering a simple and powerful experience that also allows clients to confidently handle compliance matters like tax filing and deposits. Along with transforming our solutions, we firmly believe AI and generative AI enhance our operations and enable us to elevate the end-to-end client experience.
ADP’s Model-Based Benchmarks, powered by Skills Graph, also extend benchmarks to include compensation for up to 160 million workers. Model-Based Benchmarks are driven by a set of deep learning models that extract 5 patterns and knowledge from millions of payroll records and job profiles to provide accurate information that reflects the reality of the position being researched.
Model-Based Benchmarks are driven by a set of deep learning models that extract patterns and knowledge from millions of payroll records and job profiles to provide accurate information that reflects the reality of the position being researched, including salary benchmarking tools in the U.S. and Canada.
Built to be as dynamic as the world of work today, our next-gen platforms are designed for adaptability. Built from the ground up to be cloud-native, global, scalable and secure, our next-gen platforms are designed to provide our clients with the flexibility they need to address today’s and tomorrow’s workplace challenges, and to personalize the experience based on their needs.
These cloud-native, global, scalable and secure platforms provide our clients with the flexibility they need to address today’s and tomorrow’s workplace challenges, and to personalize the experience based on their needs.
ADP TotalSource is subject to various state licensing requirements and, as a Certified PEO, maintains certifications with the Internal Revenue Service.
Our employee background screening services business offers background checking services that are subject to the Fair Credit Reporting Act. ADP TotalSource is subject to various state licensing requirements and, as a Certified PEO, maintains certifications with the Internal Revenue Service.
Our commitment to building a better world of work and creating a workplace where everyone can thrive has led to recognition across the globe, including Fortune’s World’s Most Admired Companies (17 consecutive years); Best Place to Work for LGBTQ+ Equality (13 consecutive perfect scores on the Human Rights Campaign Foundation’s Corporate Equality Index); DiversityInc Top 50 Companies for Diversity; Seramount’s Best Companies. for Multicultural Women; Barron’s 100 Most Sustainable Companies; and Newsweek’s America’s Most Responsible Companies.
Our commitment to building a better world of work and creating a workplace where everyone can thrive has led to recognition across the globe, including Fortune’s World’s Most Admired Companies (18 consecutive years); Disability:IN Best Place to Work for Disability Inclusion; Fair360 Top 50 Companies for Diversity; Seramount’s Best Companies for Multicultural Women; Fast Company’s Best Workplaces for Innovators; Newsweek’s America’s Most Responsible Companies; and Newsweek’s Most Trustworthy Companies in America.
HRO Solutions As a leader in the growing HR Outsourcing market, we partner with our clients to offer a full range of seamless technology and service solutions for HR administration, workforce management, payroll services, benefits administration and talent management. From small businesses to enterprises with thousands of employees, our clients gain proven technology and processes and robust service and support.
HRO Solutions As a leader in the growing HR Outsourcing market, we partner with clients from small, midsized and large enterprise organizations, offering a full range of premium services and seamless technology for HR, benefits, payroll, and talent management.
In addition, many of our businesses offer solutions that assist our clients in complying with certain U.S. and foreign laws and regulations that apply to them. Although these laws and regulations apply to our clients and not to ADP, changes in such laws or regulations may affect our operations, products and services.
Although these laws and regulations apply to our clients and not to ADP, changes in such laws or regulations may affect our operations, products and services.
We offer physical and mental wellness programs that help our team pursue a healthy lifestyle and reduce absenteeism and lost time due to injuries. Our efforts include a company-wide health and safety manual and website, safety education and training, and a wellness program that rewards associates for completing wellness activities.
Our efforts include a company-wide health and safety manual and website, safety education and training, and a wellness program that rewards associates for completing wellness activities.
This groundbreaking payroll solution utilizes an AI-powered chat interface to turn traditional payroll management into an intuitive conversation that can complete payroll in under a minute. Leveraging ADP’s long-standing payroll expertise and data security, small 6 business owners can download and self-purchase Roll and run payroll anywhere, anytime, quickly and compliantly, with no experience or training needed.
Leveraging ADP’s long-standing payroll expertise and data security, small business owners can download and self-purchase Roll and run payroll anywhere, anytime, quickly, and compliantly, with no experience or training needed.
The combination of technology, deep expertise and data-driven insights that ADP COS offers is powerful, allowing clients to focus on strategy and results. ADP Recruitment Process Outsourcing Services (ADP RPO ® ). ADP RPO provides deep talent insights to help drive targeted recruitment strategies for attracting top talent.
With ADP COS, the day-to-day payroll process becomes our responsibility, freeing up clients to address critical issues like employee engagement and retention. The combination of technology, deep expertise and data-driven insights that ADP COS offers is powerful, allowing clients to focus on strategy and results. ADP Recruitment Process Outsourcing Services (ADP RPO ® ).
The foregoing description does not include an exhaustive list of the laws and regulations governing or impacting our business.
Similarly, the ADP Client Trust and ADP Trust Bank provide client funds with a level of protection that most competitors cannot offer. The foregoing description does not include an exhaustive list of the laws and regulations governing or impacting our business.
We offer similar tools to clients outside the United States, including through our ADP GlobalView® and ADP iHCM solutions. We are also using AI to respond to the needs of HR practitioners.
We offer similar tools to clients outside the United States, including through our ADP GlobalView® and ADP iHCM solutions. We also continue to advance our next-gen platforms. Built to be as dynamic as the world of work, our next-gen platforms are designed for adaptability.
With global, customizable recruitment services, ADP RPO enables organizations to find and hire the best candidates for hourly, professional or executive positions. In addition, we also deliver market analytics, sourcing strategies, candidate screening, selection and on-boarding solutions to help organizations connect their talent strategy to their business's priorities.
In addition, we also deliver market analytics, sourcing strategies, candidate screening, selection and on-boarding solutions to help organizations connect their talent strategy to their business’s priorities. Global Solutions Our premier global solutions consist of multi-country and local in-country solutions for employers of any type or size.
Global Solutions Our premier global solutions consist of multi-country and local in-country solutions for employers of any type or size. We partner with clients to help them navigate the most complex HR and payroll scenarios using tailored and scalable technology supported by our deep compliance expertise.
We partner with clients to help them navigate the most complex HR and payroll scenarios using tailored and scalable technology supported by our deep compliance expertise. ADP Global Payroll is a solution for multinational organizations of all sizes, empowering them to harmonize 11 HCM strategies in over 140 countries globally.
While exact benefits vary by associate and region, they typically include health care coverage, a 401(k) plan with company matching contributions for U.S. associates, life insurance, paid time off and tuition reimbursement. We particularly emphasize benefits that support individual and family needs (parental leave, adoption/fertility benefits and caregiver support), and constantly update our programs according to our associates’ needs.
Our associates receive a competitive benefits package, intended to help them enjoy physical, emotional and financial well-being and be productive members of their teams. While exact benefits vary by associate and region, they typically include health care coverage, a 401(k) plan with company matching contributions for U.S. associates, life insurance, paid time off and tuition reimbursement.
Elements of our money movement activities outside of the United States are subject to licensing and similar anti-money laundering and reporting laws and requirements in certain countries in which we provide such services. Our employee background screening services business offers background checking services that are subject to the Fair Credit Reporting Act.
Consumer protections for prepaid accounts under Regulation E include requirements related to pre-acquisition fee and other disclosures, error resolution and investigation, and account access. Elements of our money movement activities outside of the United States are subject to licensing and similar anti-money laundering and reporting laws and requirements in certain countries in which we provide such services.
Our Culture and Values More than 70 years ago, our founders established the values that guide us today. These values have helped shape our one-of-a-kind culture, which embraces diversity, equity, inclusiveness and belonging.
Our Culture and Values Seventy-five years ago, our founders established values that guide us today. These values have helped shape our one-of-a-kind culture, which embraces inclusion, diversity, equity and belonging. Our long-term business success is closely linked to our commitment to creating an environment in which our associates thrive, and to do so we listen to and engage our associates.
Leveraging our market-leading ADP Workforce Now platform, ADP Comprehensive Services partners with clients of all types and sizes to tackle their HR, talent, benefits administration and pay challenges with help from our proven expertise, deep experience and best practices.
ADP Comprehensive Services combines personalized, high-touch support with our market-leading ADP Workforce Now platform to offer a managed services solution tailored to the specific needs of businesses of all sizes. Our committed team of professionals provides expertise, guidance, and tools across HR, talent, payroll, and benefits administration leveraging proven expertise, deep experience, and best practices.
ADP Broker-Dealer, Inc., which supports our Retirement Services business, is a registered broker-dealer regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). Our current and future offerings in the payments and/or consumer space may also subject us to additional laws and regulations, which could also require corresponding compliance programs and policies and dedicated resources.
Our current and future offerings in the payments and/or consumer space may also subject us to additional laws and regulations, which could also require corresponding compliance programs and policies and dedicated resources. In addition, many of our businesses offer solutions that assist our clients in complying with certain U.S. and foreign laws and regulations that apply to them.
ADP Global Payroll is a solution for multinational organizations of all sizes, empowering them to harmonize 11 HCM strategies in 140 countries globally. This improves visibility, control and operational efficiency, giving organizations the insight and confidence to adapt to changing local needs, while helping to drive overall organizational agility and engagement.
This improves visibility, control and operational efficiency, giving organizations the insight and confidence to adapt to changing local needs, while helping to drive overall organizational agility and engagement. We also offer comprehensive, country-specific HCM solutions that combine innovative technology with deep local expertise.
Whether a client chooses our PEO or other HR Outsourcing solutions, we offer solutions tailored to a client’s specific needs and preferences – designed to meet the client’s needs today, and as its business and needs evolve. Professional Employer Organization.
We help organizations streamline processes, reduce the daily workload and reduce compliance risk while also gaining a partner to navigate HR challenges. Whether a client chooses our Professional Employer Organization (PEO) or Human Resources Outsourcing (HRO)/Managed Services, we offer solutions tailored to a client’s specific needs and provide day-to-day expertise, guidance and tools, all personalized to meet their unique needs.
Our Benefits and Health and Wellness Programs The wide range of benefits and health and wellness programs we offer contribute to an environment where all our associates add to our success. Our associates receive a competitive benefits package, intended to help them enjoy physical, emotional and financial well-being and be productive members of their teams.
Additionally, our succession planning process deploys leaders to new career experiences that help ensure we are developing executives that will deliver results now and in the future. Our Benefits and Health and Wellness Programs The wide range of benefits and health and wellness programs we offer contribute to an environment where all our associates add to our success.
We expanded employee self-service via our app by incorporating ML-based recommendations for employees to better find information, correct missing information, and complete tasks more efficiently. Reportable Segments Our two reportable business segments are Employer Services and Professional Employer Organization (“PEO”), and are based on the way that management reviews the performance of, and makes decisions about, our business.
As part of its strategy, ADP Ventures invests in and partners with early-stage and scaling tech startups that advance ADP’s innovation strategy. Reportable Segments Our two reportable business segments are Employer Services and Professional Employer Organization (“PEO”), and are based on the way that management reviews the performance of, and makes decisions about, our business.
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As we continue to invest in and execute on our Strategy, we intend to continue to exceed the expectations of our clients and enable them and their people to reach their full potential. Innovation at ADP Innovation is in our DNA.
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This spirit of innovation remains a steady guide as we continue to listen and respond to emerging needs. The transformative potential of innovation continues to grow, in tandem with the power of technologies like artificial intelligence (AI), machine learning (ML) and generative AI.
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This spirit of innovation remains a steady guide as we continue to listen and respond to emerging needs. As the business, data and digital technology landscape continues to rapidly evolve, what “work” means, how and where it gets done, and how workers are paid is changing as well.
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As these tools change how work happens, we remain focused on providing our clients and associates with HCM technology that is easy to use, powered with smart insights and personalized to support a human-centric experience. To bring these solutions to market, we pursue multiple paths to innovation.
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Leveraging the power of data, we innovate by anticipating the future of work, the future of HCM and the future of pay to help our clients transform their businesses, simplify work and empower their workers.
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From leveraging our unique data to provide differentiated insights to collaborating with, or investing in, organizations with complementary products or purchasing solutions that add to our strong foundation, each of these avenues helps ADP sustain a culture focused on continuous innovation. Transforming our solutions and service through AI Data is the foundation of the advantage we bring to our clients.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese initiatives, or our failure to successfully manage them, could result in unintended consequences or unforeseen costs, including distraction of our management and employees, attrition, inability to attract or retain key personnel, and reduced employee productivity, which could adversely affect our business, financial condition, and results of operations. 21 A major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences Our business, operations, financial condition, results of operations, access to capital markets and borrowing costs may be adversely affected by a major natural disaster or catastrophic event, including civil unrest, geopolitical instability, war, terrorist attack, pandemics or other (actual or threatened) public health emergencies, extreme weather, such as droughts, hurricanes, flooding and wildfires (including as a result of climate change), or other events beyond our control, and measures taken in response thereto.
Biggest changeA major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences Our business, operations, financial condition, results of operations, access to capital markets and borrowing costs may be adversely affected by a major natural disaster or catastrophic event, including civil unrest, geopolitical instability, war, terrorist attack, pandemics or other (actual or threatened) public health emergencies, extreme weather, such as droughts, hurricanes, flooding and wildfires (including as a result of climate change), or other events beyond our control, and measures taken in response thereto.
In addition , self-regulatory frameworks like the National 18 Institute of Standards and Technology AI Risk Management Framework are being promulgated and adherence to these may become an industry standard or a client expectation.
In addition , self-regulatory frameworks like the National Institute of Standards and Technology AI Risk 18 Management Framework are being promulgated and adherence to these may become an industry standard or a client expectation.
We may not realize or sustain the expected benefits from our business transformation initiatives, and these efforts could have a materially adverse effect on our business, operations, financial condition, results of operations and competitive position We have been and will be undertaking certain transformation initiatives, which are designed to streamline our organization, extend our world-class distribution and strengthen our talent and culture, while supporting our revenue growth, margin improvement and productivity.
We may not realize or sustain the expected benefits from our business transformation initiatives, and these efforts could have a materially adverse effect on our business, 21 operations, financial condition, results of operations and competitive position We have been and will be undertaking certain transformation initiatives, which are designed to streamline our organization, extend our world-class distribution and strengthen our talent and culture, while supporting our revenue growth, margin improvement and productivity.
While ADP maintains insurance coverage that, subject to policy terms and conditions and a significant self-insured retention, is designed to address losses or claims that may arise in connection with certain aspects of data and cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in the continually evolving area of data and cyber risk.
While ADP maintains insurance coverage that, subject to policy terms and conditions and a significant self-insured 20 retention, is designed to address losses or claims that may arise in connection with certain aspects of data and cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in the continually evolving area of data and cyber risk.
While we have contingency plans in place for bank failures, a 22 systemic shutdown of the banking industry would impede our ability to process funds on behalf of our payroll, tax and other money movement services clients and could have an adverse impact on our financial results and liquidity.
While we have contingency plans in place for bank failures, a systemic shutdown of the banking industry would impede our ability to process funds on behalf of our payroll, tax and other money movement services clients and could have an adverse impact on our financial results and liquidity.
SECURITY AND TECHNOLOGY RISKS Our businesses collect, host, store, transfer, process, disclose, use, secure and retain and dispose of personal and business information, and collect, hold and transmit client funds, and a security or privacy breach may damage or disrupt our businesses, result in the disclosure of confidential information, damage our reputation, increase our costs, cause losses and materially adversely affect our results of operations In connection with our business, we collect, host, store, transfer, process, disclose, use, secure and retain and dispose of large amounts of personal and business information about our clients, employees of our clients, our vendors and our employees, contractors and temporary staff, including payroll information, health care information, personal and business financial data, social security numbers and their foreign equivalents, bank account numbers, tax information and other sensitive personal and business information.
SECURITY AND TECHNOLOGY RISKS Our businesses collect, host, store, transfer, process, disclose, use, secure, retain and dispose of personal and business information, and collect, hold and transmit client funds, and a security or privacy breach may damage or disrupt our businesses or operations, result in the disclosure of confidential information, damage our reputation, increase our costs, cause losses and materially adversely affect our results of operations In connection with our business, we collect, host, store, transfer, process, disclose, use, secure, retain and dispose of large amounts of personal and business information about our clients, employees of our clients, our vendors and our employees, contractors and temporary staff, including payroll information, health care information, personal and business financial data, social security 19 numbers and their foreign equivalents, bank account numbers, tax information and other personal and business information.
In addition, the severity of the failure or disablement may require us to replace or rebuild the affected system(s), application(s) or solution(s) and we may be unable to do so before it materially adversely affects our business.
In addition, the severity of the failure or disablement may require us to replace or rebuild the affected system(s), application(s) or solution(s) and we may be unable to do so before it materially adversely affects our business or operations.
Any violations of applicable anti-corruption, economic and trade sanctions or anti-money laundering laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operation or financial condition.
Any violations of applicable anti-corruption, economic and trade sanctions or anti-money laundering laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations or financial condition.
For example, a change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities would adversely impact average client balances and, thereby, adversely impact interest income from investing client funds before such funds are remitted to the applicable taxing authorities.
For example, a change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities would adversely impact average client balances and, thereby, adversely impact interest income from investing client funds before such funds are remitted to the applicable tax authorities.
In order to satisfy these short-term funding requirements, we maintain access to various sources of liquidity, including borrowings under our commercial paper program and our committed credit facilities, our ability to execute reverse repurchase transactions and corporate cash balances.
In order to satisfy these short-term funding requirements, we maintain access to various sources of liquidity, including borrowings under our commercial paper program and our committed credit facilities, our ability to execute regular reverse repurchase transactions, our committed reverse repurchase agreements, and corporate cash balances.
As a result, the ability to provide data-driven insights and otherwise leverage AI and ML may be constrained by current or future laws, regulatory or self-regulatory requirements or ethical considerations, including our own published, guiding ethical principles regarding AI and ML, that could restrict or impose burdensome and costly requirements on our ability to leverage data and/or these technologies in innovative ways.
As a result, the ability to provide data-driven insights and otherwise leverage AI and ML may be constrained by current or future laws (including product liability regimes), regulatory or self-regulatory requirements or ethical considerations, including our own published, guiding ethical principles regarding AI and ML, that could restrict or impose burdensome and costly requirements on our ability to leverage data and/or these technologies in innovative ways.
As these threats continue to evolve and increase (including due to the use of AI), we continue to invest significant resources, and may be required to invest significant additional resources, to modify and enhance our information security and controls and to investigate and remediate any security vulnerabilities.
As these threats continue to evolve and increase (including due to the use of AI), we continue to invest significant resources, and may be required to invest significant additional resources, to modify and enhance our cybersecurity controls and to investigate and remediate any security vulnerabilities.
We have programs and processes in place to prevent, detect and respond to data or cybersecurity incidents.
We have programs and processes in place designed to prevent, detect and respond to data or cybersecurity incidents.
Any such failure or disablement, even for a brief period of time, whether due to malevolent acts, errors, defects or any other factor(s), could result in financial loss, a disruption of our businesses, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a materially adverse effect on our results of operation or financial condition.
Any such failure or disablement, even for a brief period of time, whether due to malevolent acts, errors, defects or any other factor(s), could result in financial loss, a disruption of our businesses or operations, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a materially adverse effect on our business, results of operations or financial condition.
In addition, our ability to achieve certain ESG initiatives and targets may depend on the actions or continuing requirements of governmental entities (e.g., our paperless initiatives may depend on whether certain states continue to require employers to offer employees to be paid via paper check or to obtain employee consent to be paid electronically instead of via paper check).
In addition, our ability to achieve certain ESG initiatives and targets may depend on the actions or continuing requirements of governmental entities (e.g., our paperless initiatives may depend on whether certain states continue to require employers to offer employees the option to be paid by paper check or to obtain employee consent to be paid electronically instead of by paper check).
In addition, the steps we take to protect our intellectual property rights may be inadequate or ineffective, or may not provide us with a significant competitive advantage. Our intellectual property could be wrongfully acquired as a result of a cyber-attack or other wrongful conduct by third parties or our personnel.
In addition, the steps we take to protect our intellectual property rights may be inadequate or ineffective, or may not provide us with a significant competitive advantage. Our intellectual property (including source code) could be wrongfully acquired as a result of a cyber-attack or other wrongful conduct by third parties or our personnel.
Any failure, disablement or disruption, even for a limited period of time, could disrupt our businesses and we could suffer financial loss, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a material adverse effect on our results of operation or financial condition.
Any failure, disablement or disruption, even for a limited period of time, could disrupt our businesses or operations and we could suffer financial loss, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a material adverse effect on our business, results of operations or financial condition.
Nonetheless, the global environment continues to grow increasingly hostile as attacks on information technology systems continue to grow in frequency, complexity and sophistication, and we are regularly targeted by unauthorized parties using malicious tactics, code and viruses. Certain of these malicious parties may be state-sponsored and/or supported by significant financial and technological resources.
Nonetheless, the global environment continues to grow increasingly hostile as attacks on information technology systems continue to grow in frequency, complexity and sophistication (including due to the use of AI), and we are regularly targeted by unauthorized parties using malicious tactics, code and viruses. Certain of these malicious parties may be state-sponsored and/or supported by significant financial and technological resources.
In connection with our client funds assets investment strategy, we attempt to minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by generally impounding the client’s funds at the time of payment of such client’s obligation.
In connection with our client funds assets investment strategy, we attempt to minimize the risk of not having funds collected from a client available at the time such 22 client’s obligation becomes due by generally impounding the client’s funds at or before the time of payment of such client’s obligation.
Although this is a global problem, it may affect our businesses more than other businesses because malevolent parties (including our personnel) may focus on the amount and type of personal and business information that our businesses collect, host, store, transfer, process, disclose, use, secure and retain and dispose of, and the client funds that we collect and transmit.
Although this is a global problem, it may affect our businesses more than other businesses because malevolent parties (which could include our personnel) may focus on the amount and type of personal and business information that our businesses collect, host, store, transfer, process, disclose, use, secure, retain and dispose of, and the client funds that we collect and transmit.
These data centers or cloud-computing and other technology services and systems have (and, in the future, may) failed, become disabled or been disrupted.
These data centers or cloud-computing and other technology services and systems have failed, become disabled or been disrupted, and may do so in the future.
A cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, theft of non-public or other sensitive information, or similar act by a malevolent party (including our personnel), or inadvertent acts or inactions by our vendors, partners or personnel, could result in the loss, disclosure or misuse of confidential personal or business information or the theft of client or ADP funds, which could have a materially adverse effect on our business or results of operations or that of our clients, result in liability, litigation, regulatory investigations and sanctions or a loss of confidence in our ability to serve clients, or cause current or potential clients to choose another service provider.
In the future, a cybersecurity attack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, theft of non-public or other sensitive information, or similar act by a malevolent party (which could include our personnel), or inadvertent acts or inactions by our vendors, partners or personnel, could result in the loss, disclosure or misuse of confidential personal or business information or our intellectual property or the theft of client or ADP funds, which could have a materially adverse effect on our business or results of operations or that of our clients, result in liability, litigation, regulatory investigations and sanctions or a loss of confidence in our ability to serve clients, or cause current or potential clients to choose another service provider.
A disruption of the data centers or cloud-computing or other technology services or systems that we utilize could have a materially adverse effect on our business We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing and other technology services and systems that are provided, by third-party vendors.
A disruption of the data centers or cloud-computing or other technology services or systems that we utilize could have a materially adverse effect on our business, operations, financial condition or results of operations We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing and other technology services and systems that are provided, by third-party vendors.
As a result, the breach or perceived breach of our security systems could result in a loss of confidence by our clients or potential clients and cause them to choose another service provider, which could have a materially adverse effect on our business.
As a result, the breach or perceived breach of our security systems could result in a loss of confidence by our clients or potential clients and cause them to choose another service provider, which could have a materially adverse effect on our business, financial condition or results of operations.
The risk of failing to receive such payments from PEO clients could be magnified during significant financial or other disruptions or catastrophic events, such as the failure of a bank, like that of Signature Bank or Silicon Valley Bank, with whom a significant number of PEO clients may bank at the time, or more widespread stress or failure within the U.S. banking system.
The risk of failing to receive such payments from PEO clients could be magnified during significant financial or other disruptions or catastrophic events, such as the failure of a bank with whom a significant number of PEO clients may bank at the time, or more widespread stress or failure within the U.S. banking system.
In addition, our third-party vendors may cease providing data center facilities or cloud-computing or other technology services or systems, elect to not renew their agreements with us on commercially reasonable terms or at all, breach their agreements with us or fail to satisfy our expectations, which could disrupt our operations and require us to incur costs which could materially adversely affect our results of operation or financial condition.
In addition, our third-party vendors may cease providing data center facilities or cloud-computing or other technology services or systems (including those on which our products or services are based), elect to not renew their agreements or licenses with us on commercially reasonable terms or at all, breach their agreements or licenses with us or fail to satisfy our expectations, which could disrupt our operations and require us to incur costs which could materially adversely affect our results of operations or financial condition.
Failure to maintain high credit ratings on long-term and short-term debt could increase our cost of borrowing, reduce our ability to obtain intra-day borrowing required by our Employer Services business, and adversely impact our results of operations.
Failure to maintain high credit ratings on long-term and short-term debt could increase our cost of borrowing, reduce our ability to obtain short-term borrowing required by our business, and adversely impact our results of operations.
We have disaster recovery, business continuity, and crisis management plans and procedures designed to protect our businesses against a multitude of events, including natural disasters, military or terrorist actions, power or communication failures, or similar events.
We have a global business resiliency program that includes disaster recovery, business continuity, and crisis management plans and procedures designed to protect our businesses against a multitude of events, including natural disasters, military or terrorist actions, power or communication failures, or similar events.
Unauthorized parties also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other methods of deceiving these third parties or our personnel, including phishing and other social engineering techniques whereby attackers use end-user behaviors to distribute computer viruses and malware into our systems or otherwise compromise the confidentiality, integrity or availability of data or our systems.
Unauthorized parties have also attempted to gain (and in certain cases have gained), and will continue to attempt to gain, access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other methods of deceiving these third parties or our personnel, including phishing and other social engineering techniques whereby attackers use end-user behaviors to distribute computer viruses and malware into our systems or otherwise compromise the confidentiality, integrity or availability of data or our systems.
Our business could be negatively impacted as a result of actions by activist stockholders or others We may be subject to actions or proposals from activist stockholders or others that may not align with our business strategies or the interests of our other stockholders.
Our business could be negatively impacted as a result of actions by activist stockholders or others We have been in the past, and may be in the future, subject to actions or proposals from activist stockholders or others that may not align with our business strategies or the interests of our other stockholders.
Complying with privacy, data protection, AI and cyber security laws and requirements, including the enhanced obligations imposed by the GDPR, our BCRs and the CPRA, may result in significant costs to our business and require us to amend certain of our business practices.
Complying with privacy, data protection, AI and cyber security laws and requirements, including the enhanced obligations imposed by the GDPR, our BCRs, U.S. state privacy laws, including the CPRA, and the EU Artificial Intelligence Act, may result in significant costs to our business and require us to amend certain of our business practices.
Information obtained by malevolent parties (including our personnel) resulting from successful attacks against our clients, vendors, partners or other third parties may, in turn, be used to attack our information technology systems.
Information or system access obtained by malevolent parties (which could include our personnel) resulting from successful attacks against our clients, vendors, partners or other third parties may, in turn, be used to attack our information technology systems.
However, legislation that would govern the development and/or use of AI is under consideration in the U.S. at the state and local level, as well as abroad.
However, legislation that governs the development and/or use of AI has been adopted or is under consideration in the U.S. at the state and local level, as well as abroad.
We publicly share certain information about our environmental, social and governance (“ESG”) initiatives, including our net zero greenhouse gas emissions pledge. We may face increased scrutiny related to our ESG initiatives and any related targets, including from the investment community.
We publicly share certain information about our environmental, social and governance (“ESG”) initiatives, including our efforts related to greenhouse gas emissions reductions and Inclusion, Diversity, Equity and Belonging efforts. We may face increased scrutiny related to our ESG initiatives and any related targets, including from the investment community.
We also collect significant amounts of funds from the accounts of our clients and transmit them to their employees, taxing authorities and other third parties. 19 We are focused on ensuring that we safeguard and protect personal and business information and client funds, and we devote significant resources to maintain and regularly update our systems and processes.
We also collect significant amounts of funds from the accounts of our clients and transmit them to their employees, tax authorities and other payees. We are focused on safeguarding and protecting personal and business information and client funds, and we devote significant resources to maintain and regularly update our systems and processes.
Our systems, applications, solutions and services may be subject to disruptions that could have a materially adverse effect on our business and reputation Many of our businesses are highly dependent on our ability to process, on a daily basis, a large number of complicated transactions. We rely heavily on our payroll, financial, 20 accounting, and other data processing systems.
Our systems, applications, solutions and services may be subject to disruptions that could have a materially adverse effect on our business, operations, financial condition, results of operations or reputation Many of our businesses are highly dependent on our ability to process, on a daily basis, a large number of complicated transactions.
We have registered our payroll card business as a provider of prepaid access, and registered our ADP Trust Bank with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
We have registered our payroll card business as a provider of prepaid access, and registered ADP Trust Bank and ADP Retirement Trust Services with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). ADP Canada Co. is a registered entity with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as a Money Service Business (MSB).
Our failure to achieve progress in these and other ESG areas on a timely basis, or at all, could impact our reputation, business, including employee retention, and growth.
Our failure to achieve progress in these and other ESG areas on a timely basis, or at all, our failure to fully comply with these new ESG requirements, or our failure to do so in a timely manner, or a negative perception of our ESG initiatives could adversely impact our reputation, business, including employee recruitment and retention, financial results, and growth.
We need to properly manage our systems, applications and solutions, and any upgrades, enhancements and expansions we may undertake from time to time, in order to ensure they properly support our businesses. From time to time, these systems, applications or solutions fail to operate properly or become disabled.
We rely heavily on our payroll, financial, accounting, and other data processing systems. We need to properly manage our systems, applications and solutions, and any upgrades, enhancements and expansions we may undertake from time to time, in order to ensure they properly support our businesses.
Although we believe that we maintain a robust program of information security and controls and none of the data or cybersecurity incidents that we have encountered to date have materially impacted us, a data or cyber security incident could have a materially adverse effect on our business, results of operations, financial condition and reputation.
Although none of the cybersecurity incidents that we have identified to date have materially affected us, including our business strategy, operations, results of operations, or financial condition, we continue to face significant known and unknown cybersecurity threats.
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Our use of generative AI in our products and operations also introduces additional risks, including risks related to accuracy, bias, security, and privacy. For example, if the data used to train a model or the model’s output is inaccurate or biased, or alleged to be inaccurate or biased, we could be subject to reputational damage or litigation.
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Further, while we perform due diligence prior to acquisitions and take actions to safeguard the businesses that we acquire, these businesses may not have invested as significantly as we do in security and technology and may be more susceptible to cybersecurity incidents, which may make us more vulnerable to cybersecurity incidents as well.
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We have been, and expect we will continue to be, the subject of cybersecurity attacks, including unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, and theft of sensitive information (including our intellectual property).
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From time to time, these systems, applications or solutions fail to operate properly or become disabled.
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These initiatives, or our failure to successfully manage them, could result in unintended consequences or unforeseen costs, including distraction of our management and employees, attrition, inability to attract or retain key personnel, and reduced employee productivity, which could adversely affect our business, financial condition, and results of operations.
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There has also been an increase in current and proposed ESG regulations, standards and reporting requirements, which may result in legal and regulatory uncertainty as well as increased compliance costs for our business. Further, developments in the law relative to diversity may influence our talent strategies.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties ADP owns 7 of its processing/print ce nters, and 13 other operational offices, sales offices, and its corporate headquarters in Roseland, New Jersey, which aggregate approximately 2,975,188 square feet. None of ADP's owned facilities is subject to any material encumbrances. ADP leases space for some of its processing centers, other operational offices, and sales offices.
Biggest changeItem 2. Properties ADP owns 6 of its processing/print ce nters, and 12 other operational offices, sales offices, and its corporate headquarters in Roseland, New Jersey, which aggregate approximately 2,690,198 square feet. None of ADP’s owned facilities is subject to any material encumbrances. ADP leases space for some of its processing centers, other operational offices, and sales offices.
All of these leases, which aggregate approximately 5,595,720 square feet worldwide, expire at various times up to the year 2033. ADP believes its facilities are currently adequate for their intended purposes and are adequately maintained.
All of these leases, which aggregate approximately 5,649,576 square feet worldwide, expire at various times up to the year 2035. ADP believes its facilities are currently adequate for their intended purposes and are adequately maintained.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the outcome of any litigation is inherently unpredictable, ADP believes that it has valid defenses with respect to the legal matters pending against it and that the ultimate resolution of these matters will not have a materially adverse impact on its financial condition, results of operations, or cash flows. Item 4. Mine Safety Disclosures Not applicable. 24 Part II
Biggest changeWhile the outcome of any litigation is inherently unpredictable, ADP believes that it has valid defenses with respect to the legal matters pending against it and that the ultimate resolution of these matters will not have a materially adverse impact on its financial condition, results of operations, or cash flows. 25 Item 4.
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Mine Safety Disclosures Not applicable. 26 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of such date, 1,442,988 additional holders held their common stock in “street name.” Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of the Publicly Announced Common Stock Repurchase Plan (2) Maximum Approximate Dollar Value of Shares that may yet be Purchased under the Common Stock Repurchase Plan (2) (3) April 1, 2023 to April 30, 2023 446,225 $215.30 441,377 $4,528,050,996 May 1, 2023 to May 31, 2023 511,026 $213.80 509,837 $4,419,043,544 June 1, 2023 to June 30, 2023 484,679 $222.16 464,818 $4,315,733,014 Total 1,441,930 1,416,032 (1) During the three months ended June 30, 2023, pursuant to the terms of the Company’s restricted stock program, the Company purchased 25,898 shares at the then-market value of the shares to satisfy certain tax withholding requirements for employees upon the vesting of their restricted shares.
Biggest changeAs of such date, 1,620,873 additional holders held their common stock in “street name.” Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share (3) Total Number of Shares Purchased as Part of the Publicly Announced Common Stock Repurchase Plan (2) Maximum Approximate Dollar Value of Shares that may yet be Purchased under the Common Stock Repurchase Plan (2) (3) April 1, 2024 to April 30, 2024 583,609 $245.10 583,460 $3,368,435,067 May 1, 2024 to May 31, 2024 623,282 $246.45 622,878 $3,214,926,248 June 1, 2024 to June 30, 2024 544,622 $244.84 543,211 $3,077,743,017 Total 1,751,513 1,749,549 (1) During the three months ended June 30, 2024, pursuant to the terms of the Company’s restricted stock program, the Company purchased 1,964 shares at the then-market value of the shares to satisfy certain tax withholding requirements for employees upon the vesting of their restricted shares.
The stock price performance shown on this graph may not be indicative of future performance. (a) We use the Nasdaq Dividend Achievers Select Index as our Peer Group Index. The Nasdaq Dividend Achievers Select Index is a select group of companies, that includes the Company, with at least ten consecutive years of increasing annual regular dividend payments. Item 6.
The stock price performance shown on this graph may not be indicative of future performance. (a) We use the Nasdaq Dividend Achievers Select Index as our Peer Group Index. The Nasdaq Dividend Achievers Select Index is a select group of companies, that includes ADP, with at least ten consecutive years of increasing annual regular dividend payments. Item 6.
For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report on Form 10-K. 25 Performance Graph The following graph compares the cumulative return on the Company’s common stock for the most recent five years with the cumulative return on the S&P 500 Index and the Peer Group Index, (a) assuming an initial investment of $100 on June 30, 2018, with all dividends reinvested.
For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report on Form 10-K. 27 Performance Graph The following graph compares the cumulative return on ADP's common stock for the most recent five years with the cumulative return on the S&P 500 Index and the Peer Group Index, (a) assuming an initial investment of $100 on June 30, 2019, with all dividends reinvested.
(2) The Company received the Board of Directors' approval to repurchase shares of the Company's common stock as follows: Date of Approval November 2022 $5 billion (3) Inclusive of the impact of the one-percent excise tax under the Inflation Reduction Act of 2022. There is no expiration date for the common stock repurchase authorization.
(2) The Company received the Board of Directors' approval in November 2022 to repurchase $5 billion of its common stock. (3) Inclusive of the impact of the one-percent excise tax under the Inflation Reduction Act of 2022. There is no expiration date for the common stock repurchase authorization.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Registrant's Common Equity The principal market for the Company’s common stock is the NASDAQ Global Select Market under the symbol ADP. As of June 30, 2023, there were 32,322 holders of record of the Company’s common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Registrant's Common Equity The principal market for the Company’s common stock is the NASDAQ Global Select Market under the symbol ADP. As of June 30, 2024, there were 31,271 holders of record of the Company’s common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGAAP measures, and they may not be comparable to similarly titled measures at other companies. 33 Years Ended June 30, % Change 2023 2022 As Reported Net earnings $ 3,412.0 $ 2,948.9 16 % Adjustments: Provision for income taxes 1,025.6 855.2 All other interest expense (a) 70.9 71.3 All other interest income (a) (50.5) (7.1) Transformation initiatives (b) 8.7 3.5 Legal settlements (c) 1.2 — Adjusted EBIT $ 4,467.9 $ 3,871.8 15 % Adjusted EBIT Margin 24.8 % 23.5 % Provision for income taxes $ 1,025.6 $ 855.2 20 % Adjustments: Transformation initiatives (d) 2.2 0.8 Legal settlements 0.2 — Adjusted provision for income taxes $ 1,028.0 $ 856.0 20 % Adjusted effective tax rate (e) 23.1 % 22.5 % Net earnings $ 3,412.0 $ 2,948.9 16 % Adjustments: Transformation initiatives (b) 8.7 3.5 Income tax (benefit)/provision for transformation initiatives (d) (2.2) (0.8) Legal settlements (c) 1.2 — Income tax (benefit)/provision for legal settlements (d) (0.2) — Adjusted net earnings $ 3,419.5 $ 2,951.6 16 % Diluted EPS $ 8.21 $ 7.00 17 % Adjustments: Transformation initiatives (b) (d) 0.02 0.01 Legal settlements (c) (d) — — Adjusted diluted EPS $ 8.23 $ 7.01 17 % (a) In adjusted EBIT, we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model.
Biggest changeGAAP measures, and they may not be comparable to similarly titled measures at other companies. 34 Years Ended June 30, % Change 2024 2023 As Reported Net earnings $ 3,752.0 $ 3,412.0 10 % Adjustments: Provision for income taxes 1,120.3 1,025.6 All other interest expense (a) 71.4 70.9 All other interest income (a) (97.0) (50.5) Transformation initiatives (b) 5.4 8.7 Legal settlements (c) (4.0) 1.2 Workforce optimization (d) 42.0 — Adjusted EBIT $ 4,890.1 $ 4,467.9 9 % Adjusted EBIT Margin 25.5 % 24.8 % Provision for income taxes $ 1,120.3 $ 1,025.6 9 % Adjustments: Transformation initiatives (e) 1.3 2.2 Legal settlements (e) (0.9) 0.2 Workforce optimization (e) 10.5 — Adjusted provision for income taxes $ 1,131.2 $ 1,028.0 10 % Adjusted effective tax rate (f) 23.0 % 23.1 % Net earnings $ 3,752.0 $ 3,412.0 10 % Adjustments: Transformation initiatives (b) 5.4 8.7 Income tax (benefit)/provision for transformation initiatives (e) (1.3) (2.2) Legal settlements (c) (4.0) 1.2 Income tax (benefit)/provision for legal settlements (e) 0.9 (0.2) Workforce optimization (d) 42.0 — Income tax (benefit)/provision for workforce optimization (e) (10.5) — Adjusted net earnings $ 3,784.5 $ 3,419.5 11 % Diluted EPS $ 9.10 $ 8.21 11 % Adjustments: Transformation initiatives (b) (e) 0.01 0.02 Legal settlements (c) (e) (0.01) — Workforce optimization (d) (e) 0.08 — Adjusted diluted EPS $ 9.18 $ 8.23 12 % (a) In adjusted EBIT, we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model.
Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio).
Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio).
Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or 26 regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the adequacy, effectiveness and success of our business transformation initiatives; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions.
Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or 28 regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the adequacy, effectiveness and success of our business transformation initiatives; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions.
When we don’t impound client funds in advance of paying such client obligations, we are at risk of not recovering such funds or a material delay in such recovery. Through our clients funds investment strategy and client impounding processes, we have consistently maintained the required level of liquidity to satisfy all of our obligations.
When we don’t impound client funds in advance of paying such client obligations, we are at risk of not recovering such funds or experiencing a material delay in such recovery. Through our clients funds investment strategy and client impounding processes, we have consistently maintained the required level of liquidity to satisfy all of our obligations.
Client funds 37 assets are invested in highly liquid, investment-grade marketable securities, with a maximum maturity of 10 years at the time of purchase, and money market securities and other cash equivalents.
Client funds assets are invested in highly liquid, investment-grade marketable securities, with a maximum maturity of 10 years at the time of purchase, and money market securities and other cash equivalents.
The impact of foreign currency is determined by calculating the current year results using foreign exchange rates consistent with the 34 prior year. The PEO segment is not impacted by acquisitions, dispositions or foreign currency.
The impact of foreign currency is determined by calculating the current year results using foreign exchange rates consistent with the prior year. The PEO segment is not impacted by acquisitions, dispositions or foreign currency.
We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, and equipment lease receivables, secured predominantly by prime collateral. All collateral on asset-backed securities is performing as expected through June 30, 2023. In addition, we own U.S. government securities which primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks.
We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, and equipment lease receivables, secured predominantly by prime collateral. All collateral on asset-backed securities is performing as expected through June 30, 2024. In addition, we own U.S. government securities which primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks.
However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all. See Note 9 of our Consolidated Financial Statements for a description of our notes.
However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all. See Note 9 of our Consolidated Financial Statements for a description of our senior unsecured notes.
Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to the $1 million per occurrence related to the workers' compensation and employer's liability deductible reimbursement insurance protection for PEO Services' worksite employees.
Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to the $1 million per occurrence related to the workers ’ compensation and employer's liability deductible reimbursement insurance protection for PEO Services' worksite employees.
The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary. We had no borrowings through June 30, 2023 under the credit facilities.
The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary. We had no borrowings through June 30, 2024 under the credit facilities.
Quantitative and Qualitative Disclosures about Market Risk Our overall investment portfolio is comprised of corporate investments (cash and cash equivalents, short-term and long-term marketable securities) and client funds assets (funds that have been collected from clients but have not yet been remitted to the applicable tax authorities, client employees or other payees).
Quantitative and Qualitative Disclosures about Market Risk Our overall investment portfolio is comprised of corporate investments (cash and cash equivalents, marketable securities) and client funds assets (funds that have been collected from clients but have not yet been remitted to the applicable tax authorities, client employees or other payees).
A detailed review of our fiscal 2022 performance compared to our fiscal 2021 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2022.
A detailed review of our fiscal 2023 performance compared to our fiscal 2022 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2023.
We see tremendous growth opportunity ahead as we focus on our three key Strategic Priorities: leading with best-in-class HCM technology, providing unparalleled expertise and outsourcing, and leveraging our global scale for the benefit of our clients. Executing on our Strategic Priorities will be critical to enabling our growth in the years ahead.
We see tremendous opportunity ahead as we focus on our three key Strategic Priorities: Leading with Best-in-Class HCM Technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients. Executing on our Strategic Priorities will be critical to enabling our growth in the years ahead.
A hy pothetical chan ge in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately an $14 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2024.
A hy pothetical chan ge in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately an $17 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2025.
Details of the borrowings under the commercial paper program are as follows: Years ended June 30, 2023 2022 Average daily borrowings (in billions) $ 3.4 $ 2.0 Weighted average interest rates 3.7 % 0.4 % Weighted average maturity (approximately in days) 2 days 1 day Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.
Details of the borrowings under the commercial paper program are as follows: Years ended June 30, 2024 2023 Average daily borrowings (in billions) $ 3.5 $ 3.4 Weighted average interest rates 5.3 % 3.7 % Weighted average maturity (approximately in days) 2 days 2 days Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.
For corporate liquidity, we expect existing cash, cash equivalents, short-term and long-term marketable securities, cash flow from operations together with our $9.7 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future.
For corporate liquidity, we expect existing cash, cash equivalents, marketable securities, cash flow from operations together with our $10.3 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future.
For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S. short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements, together with our $9.7 billion of comm itted credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations.
For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S. short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements, together with our $10.3 billion of comm itted credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations.
Statements that are not historical in nature and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could” “is designed to” and other words of similar meaning, are forward-looking statements.
Statements that are not historical in nature and which may be identified by the use of words like “outlook,” “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could,” “is designed to” and other words of similar meaning, are forward-looking statements.
A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $5 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2024.
A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $7 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2025.
Interest expense increased due to the increase i n average interest rates on commercial paper issuances and reverse repurchases to 3.7% and 4.3% for the year ended June 30, 2023, as compared to 0.4% and 0.7% for the year ended June 30, 2022, respectively, also coupled with a higher volume of average commercial paper and reverse repurchase borrowings, as compared to the year ended June 30, 2022 .
Interest expense increased due to the increase i n average interest rates on commercial paper issuances and reverse repurchases to 5.3% and 5.5%, respectively, for the year ended June 30, 2024, as compared to 3.7% and 4.3%, respectively, for the year ended June 30, 2023, also coupled with a higher volume of average commercial paper and reverse repurchase borrowings, as compared to the year ended June 30, 2023 .
Earnings before Income Taxes Employer Services' earnings before income taxes increased in fiscal 2023 due to increased revenues discussed above, partially offset by increases in expenses.
Earnings before Income Taxes Employer Services' earnings before income taxes increased in fiscal 2024 due to increased revenues discussed above, partially offset by increases in expenses.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Tabular dollars are presented in millions, except per share amounts The following section discusses our year ended June 30, 2023 (“fiscal 2023”), as compared to year ended June 30, 2022 (“fiscal 2022”).
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Tabular dollars are presented in millions, except per share amounts The following section discusses our year ended June 30, 2024 (“fiscal 2024”), as compared to year ended June 30, 2023 (“fiscal 2023”).
We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $9.7 billion a vailable to us under the revolving credit agreements.
We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $10.3 billion a vailable to us under the revolving credit agreements.
We completed our annual assessment of goodwill as of June 30, 2023 and determined that there was no impairment of goodwill.
We completed our annual assessment of goodwill as of June 30, 2024 and determined that there was no impairment of goodwill.
Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, grew 4.7% for the year ended June 30, 2023 as compared to the year ended June 30, 2022.
Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, grew 2% for the year ended June 30, 2024 as compared to the year ended June 30, 2023.
In addition, we have a five-year $3.2 billion credit facility and a five-year $2.25 billion credit facility maturing in June 2026 and June 2028, respectively, each with an accordion feature under which the aggregate com mitment can be increased by $ 500 million , subject to the availability 36 of additional commitments.
In addition, we have a five-year $2.25 billion credit facility and a five-year $3.5 billion credit facility maturing in June 2028 and June 2029, respectively, each 37 with an accordion feature under which the aggregate com mitment can be increased by $ 500 million , subject to the availability of additional commitments.
We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our re-investments, longer term strategy, and commitments to shareholder friendly actions.
We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long term strategy and commitments to shareholder friendly actions.
ADP Indemnity paid a premium of $269 million in July 2023, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2024 policy year on terms substantially similar to the fiscal 2023 reinsurance policy.
ADP Indemnity paid a premium of $276 million in July 2024, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2025 policy year on terms substantially similar to the fiscal 2024 reinsurance policy.
Contractual Obligations Our contractual obligations at June 30, 2023 relate primarily to operating leases (Note 6) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 10), liabilities for uncertain tax positions (Note 11), purchase obligations (Note 12), debt obligations (Note 9) and $263.5 million of interest payments of our debt, of which $64.3 million is expected to be paid within one year.
Contractual Obligations Our contractual obligations at June 30, 2024 relate primarily to operating leases (Note 6) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 10), liabilities for uncertain tax positions (Note 11), purchase obligations (Note 12), debt obligations (Note 9) and $200.1 million of interest payments on our debt, of which $64.3 million is expected to be paid within one year.
For fiscal 2023, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.
For fiscal 2024, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.
During fiscal 2023, ADP Indemnity paid a premium of $284 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2023 policy year up to $1 million per occurrence.
During fiscal 2024, ADP Indemnity paid a premium of $269 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2024 policy year up to $1 million per occurrence.
This investment strategy is supported by our short-term financing arrangements necessary to satisfy short-term funding requirements relating to client funds obligations. See Note 4 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients. Capital expenditures for fiscal 2023 were $206.0 million, as compared to $177.1 million for fiscal 2022.
This investment strategy is supported by our short-term financing arrangements necessary to satisfy short-term funding requirements relating to client funds obligations. See Note 4 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients. Capital expenditures for fiscal 2024 were $211.7 million, as compared to $206.0 million for fiscal 2023.
Separately, ADP Indemnity paid a p remium of $269 million in July 2023 to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2024 policy year.
Separately, ADP Indemnity paid a p remium of $276 million in July 2024 to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2025 policy year.
Diluted EPS increased as a result of the increase in net earnings and the impact of fewer shares outstanding resulting from the repurchase of approximately 4.9 million shares during fiscal 2023 and 9.2 million shares during fiscal 2022, partially offset by the issuances of shares under our employee benefit plans.
Diluted EPS increased as a result of the increase in net earnings and the impact of fewer shares outstanding resulting from the repurchase of approximately 5.1 million shares during fiscal 2024 and 4.9 million shares during fiscal 2023, partially offset by the issuances of shares under our employee benefit plans.
Our financial condition remains solid at June 30, 2023 and we have sufficient liquidity.
Our financial condition remains solid at June 30, 2024 and we have sufficient liquidity.
We expect capital expenditures in fiscal 2024 to be between $200 million and $225 million.
We expect capital expenditures in fiscal 2025 to be between $200 million and $225 million.
The increases in expenses were due to increased costs to service our client base in support of our growing revenue, increases in selling expenses, and investments and costs to develop, support, and maintain our new and existing products.
The increases in expenses were due to an increase in investments and costs to develop, support, and maintain our new and existing products, increases in selling and marketing expenses, and costs to service our client base in support of our growing revenue.
We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under o ur $9.7 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), our ability to engage in reverse repurchase agreement transactions and available borrowings under our $9.7 billion committe d credit facilities.
We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under o ur $10.3 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), our ability to engage in reverse repurchase agreement transaction s ($7.3 billion of which is available on a committed basis), and available borrowings under our $10.3 billion committe d credit facilities.
Details of the reverse repurchase agreements are as follows: Years ended June 30, 2023 2022 Average outstanding balances $ 1,279.9 $ 299.6 Weighted average interest rates 4.3 % 0.7 % We vary the maturities of our committed credit facilities to limit the refinancing risk of any one facility.
Details of the reverse repurchase agreements are as follows: Years ended June 30, 2024 2023 Average outstanding balances $ 1,828.6 $ 1,279.9 Weighted average interest rates 5.5 % 4.3 % We vary the maturities of our committed credit facilities to limit the refinancing risk of any one facility.
Refer to “Analysis of Reportable Segments” for additional discussion of the changes in revenue for each of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services. Total revenues in fiscal 2023 include interest on funds held for clients of $813.4 million, as compared to $451.8 million in fiscal 2022.
Refer to “Analysis of Reportable Segments” for additional discussion of the changes in revenue for each of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services. Total revenues in fiscal 2024 include interest on funds held for clients of $1,024.7 million, as compared to $813.4 million in fiscal 2023.
In addition to the obligations described above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing services. As of June 30, 2023, the obligations relating to these matters, which are expected to be paid in fiscal 2024, total $38,538.6 million and were recorded in client funds obligations on our Consolidated Balance Sheets.
In addition to the obligations described above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing services. As of June 30, 2024, the obligations relating to these matters, which are expected to be paid in fiscal 2025, total $39,503.9 million, and were recorded in client funds obligations on our Consolidated Balance Sheets.
At June 30, 2023 and 2022, there were $105.4 million and $136.4 million, respectively, of outstanding obligations related to the reverse repurchase agreements.
At June 30, 2024 and 2023, there were $385.4 million and $105.4 million, respectively, of outstanding obligations related to the reverse repurchase agreements.
The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.” (b) In fiscal 2023, the charges include consulting costs relating to our company-wide transformation initiatives, partially offset by net reversals relating to severance.
The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.” (b) In fiscal 2024, the charges include consulting costs relating to our company-wide transformation initiatives.
We have a $4.25 billion, 364-day credit agreement that matures in June 2024 with a one year term-out option.
We have a $4.55 billion, 364-day credit agreement that matures in June 2025 with a one-year term-out option.
These agreements generally have terms ranging from overnight to up to five business days. We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations.
These agreements generally have terms ranging from overnight to up to five business days. We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations. We have $7.3 billion available to us on a committed basis under these reverse repurchase agreements.
The annualized interest rate earned on our entire portfolio increased from 1.3% for fiscal 2022 to 2.4% for fiscal 2023.
The annualized interest rate earned on our entire portfolio increased from 2.4% for fiscal 2023 to 3.0% for fiscal 2024.
We purchased approximately 4.9 million shares of our common stock at an average price per share of $227.30 during fiscal 2023, as compared to purchases of 9.2 million shares at an average price per share of $214.40 during fiscal 2022. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program.
We purchased approximately 5.1 million shares of our common stock at an average price per share of $244.04 during fiscal 2024, as compared to purchases of 4.9 million shares at an average price per share of $227.30 during fiscal 2023. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program.
Our U.S. short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securiti es. This commercial paper program provides for the issuance of up to $9.7 billion in aggregate maturity value .
Our U.S. short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securiti es.
At June 30, 2023, ADP Indemnity had total assets of $660.8 million to satisfy the actuarially estimated unpaid losses of $552.3 million for the policy years since July 1, 2003. ADP Indemnity paid claims of $0.8 million and $1.8 million, net of insurance recoveries, in fiscal 2023 and 2022, respectively.
At June 30, 2024, ADP Indemnity had total assets of $684.4 million to satisfy the actuarially estimated unpaid losses of $611.5 million for the policy years since July 1, 2003. ADP Indemnity paid claims of $1.1 million and $0.8 million, net of insurance recoveries, in fiscal 2024 and 2023, respectively.
Details regarding our overall investment portfolio are as follows: Years ended June 30, 2023 2022 Average investment balances at cost: Corporate investments $ 6,293.9 $ 4,241.3 Funds held for clients 34,142.8 32,480.3 Total $ 40,436.7 $ 36,721.6 Average interest rates earned exclusive of realized losses/(gains) on: Corporate investments 2.4 % 1.0 % Funds held for clients 2.4 % 1.4 % Total 2.4 % 1.3 % Net realized losses/(gains) on available-for-sale securities 14.7 4.4 38 As of June 30: Net unrealized pre-tax (losses)/gains on available-for-sale securities $ (2,206.9) $ (1,721.4) Total available-for-sale securities at fair value $ 29,764.9 $ 28,391.6 We are exposed to interest rate risk in relation to securities that mature, as the proceeds from maturing securities are reinvested.
Details regarding our overall investment portfolio are as follows: Years ended June 30, 2024 2023 Average investment balances at cost: Corporate investments $ 7,397.1 $ 6,293.9 Funds held for clients 35,369.5 34,142.8 Total $ 42,766.6 $ 40,436.7 Average interest rates earned exclusive of realized losses/(gains) on: Corporate investments 3.3 % 2.4 % Funds held for clients 2.9 % 2.4 % Total 3.0 % 2.4 % Net realized losses on available-for-sale securities 5.9 14.7 39 As of June 30: Net unrealized pre-tax losses on available-for-sale securities $ (1,515.8) $ (2,206.9) Total available-for-sale securities at fair value $ 31,207.5 $ 29,764.9 We are exposed to interest rate risk in relation to securities that mature, as the proceeds from maturing securities are reinvested.
Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade marketable securities. These assets are available for our regular quarterly dividends, share repurchases, capital expenditures and/or acquisitions, as well as other corporate operating purposes. All of our short-term and long-term fixed-income securities are classified as available-for-sale securities.
Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade marketable securities. These assets are available for our regular quarterly dividends, share repurchases, capital expenditures and/or acquisitions, as well as other corporate operating purposes.
Our client funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives. Consistent with those objectives, we also seek to maximize interest income and to minimize the volatility of interest income.
All of our fixed-income securities are classified as available-for-sale securities. 38 Our client funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives. Consistent with those objectives, we also seek to maximize interest income and to minimize the volatility of interest income.
PEO Services Revenues PEO Revenues Years Ended Change June 30, 2023 2022 $ % PEO Services' revenues $ 5,984.2 $ 5,545.7 $ 438.5 8 % Less: PEO zero-margin benefits pass-throughs 3,800.9 3,514.4 286.5 8 % PEO Services' revenues excluding zero-margin benefits pass-throughs $ 2,183.3 $ 2,031.3 $ 152.0 7 % PEO Services' revenues increased 8% for fiscal 2023 due to increases in average worksite employees of 6% for fiscal 2023, as compared to fiscal 2022, and due to an increase in zero-margin benefits pass-throughs.
PEO Services Revenues PEO Revenues Years Ended Change June 30, 2024 2023 $ % PEO Services' revenues $ 6,233.6 $ 5,984.2 $ 249.4 4 % Less: PEO zero-margin benefits pass-throughs 3,975.9 3,800.9 175.0 5 % PEO Services' revenues excluding zero-margin benefits pass-throughs $ 2,257.7 $ 2,183.3 $ 74.4 3 % PEO Services' revenues increased 4% for fiscal 2024 due to increases in average worksite employees of 2% for fiscal 2024, as compared to fiscal 2023, and due to an increase in zero-margin benefits pass-throughs.
Earnings Before Income Taxes ("EBIT") and Adjusted EBIT For the year ended June 30, respectively: Years Ended June 30, 2023 2022 YoY Growth EBIT $ 4,437.6 $ 3,804.1 17 % EBIT Margin 24.6 % 23.1 % 160 bps Adjusted EBIT $ 4,467.9 $ 3,871.8 15 % Adjusted EBIT Margin 24.8 % 23.5 % 130 bps Earnings before income taxes increased due to the increases in revenues partially offset by the increases in expenses discussed above.
Earnings Before Income Taxes ("EBIT") and Adjusted EBIT For the year ended June 30, respectively: Years Ended June 30, 2024 2023 YoY Growth EBIT $ 4,872.3 $ 4,437.6 10 % EBIT Margin 25.4 % 24.6 % 70 bps Adjusted EBIT $ 4,890.1 $ 4,467.9 9 % Adjusted EBIT Margin 25.5 % 24.8 % 70 bps Earnings before income taxes increased due to the increases in total revenues partially offset by the increases in total expenses discussed above.
Judgments and Uncertainties The Company has estimated the amortization periods for deferred costs by using its historical retention rates by business unit to estimate the pattern during which the service transfers.
Judgments and Uncertainties 40 The Company has estimated the amortization periods for deferred costs by using its historical client retention rates by business unit to estimate the pattern during which the service transfers. The expected client relationship period ranges from three to eight years.
Risk Factors,” and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein. NON-GAAP FINANCIAL MEASURES In addition to our U.S.
These risks and uncertainties, along with the risk factors discussed under “Item 1A. - Risk Factors”, and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein. NON-GAAP FINANCIAL MEASURES In addition to our U.S.
Other (Income)/Expense, net Years ended June 30, 2023 2022 $ Change Interest income on corporate funds $ (149.5) $ (41.0) $ 108.5 Realized losses/(gains) on available-for-sale securities, net 14.7 4.4 (10.3) Impairment of assets 2.1 23.0 20.9 Gain on sale of assets — (7.5) (7.5) Non-service components of pension income, net (50.8) (61.7) (10.9) Other (income)/expense, net $ (183.5) $ (82.8) $ 100.7 Interest income on corporate funds increased in fiscal 2023, as compared to fiscal 2022, due to higher average interest rates of 2.4% for the year ended June 30, 2023, as compared to 1.0% for the year ended June 30, 2022, coupled with higher average investment balances for the year ended June 30, 2023 as compared to the year ended June 30, 2022.
Other (Income)/Expense, net Years ended June 30, 2024 2023 $ Change Interest income on corporate funds $ (241.3) $ (149.5) $ 91.8 Realized losses on available-for-sale securities, net 5.9 14.7 8.8 Impairment of assets — 2.1 2.1 Gain on sale of assets (17.1) — 17.1 Non-service components of pension income, net (34.2) (50.8) (16.6) Other (income)/expense, net $ (286.7) $ (183.5) $ 103.2 Interest income on corporate funds increased in fiscal 2024, as compared to fiscal 2023, due to higher average interest rates of 3.3% for the year ended June 30, 2024, as compared to 2.4% for the year ended June 30, 2023, coupled with higher average investment balances of $7.4 billion in fiscal 2024 as compared to $6.3 billion in fiscal 2023.
ANALYSIS OF REPORTABLE SEGMENTS Revenues Years Ended June 30, % Change 2023 2022 As Reported Organic Constant Currency Employer Services $ 12,042.6 $ 10,967.7 10 % 11 % PEO Services 5,984.2 5,545.7 8 % 8 % Other (14.6) (15.1) n/m n/m $ 18,012.2 $ 16,498.3 9 % 10 % Earnings before Income Taxes Years Ended June 30, % Change 2023 2022 As Reported Employer Services $ 3,974.2 $ 3,406.3 17 % PEO Services 977.3 871.2 12 % Other (513.9) (473.4) n/m $ 4,437.6 $ 3,804.1 17 % Margin Years Ended June 30, 2023 2022 YoY Growth Employer Services 33.0 % 31.1 % 190 bps PEO Services 16.3 % 15.7 % 60 bps n/m - not meaningful 31 Employer Services Revenues Revenues increased due to new business started from New Business Bookings, an increase in our pays per control of 5%, continued strong client retention, an increase in interest earned on funds held for clients, and an increase in pricing, partially offset by an unfavorable impact of one percentage point from foreign currency.
ANALYSIS OF REPORTABLE SEGMENTS Revenues Years Ended June 30, % Change 2024 2023 As Reported Organic Constant Currency Employer Services $ 12,980.8 $ 12,042.6 8 % 7 % PEO Services 6,233.6 5,984.2 4 % 4 % Other (11.8) (14.6) n/m n/m $ 19,202.6 $ 18,012.2 7 % 6 % Earnings before Income Taxes Years Ended June 30, % Change 2024 2023 As Reported Employer Services $ 4,555.5 $ 3,974.2 15 % PEO Services 921.5 977.3 (6) % Other (604.7) (513.9) n/m $ 4,872.3 $ 4,437.6 10 % 32 Margin Years Ended June 30, 2024 2023 YoY Growth Employer Services 35.1 % 33.0 % 210 bps PEO Services 14.8 % 16.3 % (150) bps n/m - not meaningful Employer Services Revenues Revenues increased due to new business started from New Business Bookings, an increase in our pays per control of 2%, continued strong client retention, an increase in interest earned on funds held for clients, and an increase in pricing.
We had $36,333.6 million of cas h and cash e quivalents and marketable securities that were impounded from our clients to satisfy such obligations recorded in funds held for clients on our Consolidated Balance Sheets as of June 30, 2023.
We had $37,996.1 million of cas h and cash e quivalents and marketable securities to satisfy such obligations recorded in funds held for clients on our Consolidated Balance Sheets as of June 30, 2024.
FORWARD-LOOKING STATEMENTS This document and other written or oral statements made from time to time by ADP may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
FORWARD-LOOKING STATEMENTS This document and other written or oral statements made from time to time by Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions.
We believe these results are largely attributable to improvements made to our platforms and service over multiple years. We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions.
Net cash flows used in financing activities changed due to a net decrease in the cash flow from client funds obligations of $29,759.5 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, an increase in dividends paid, and a net decrease in reverse repurchase agreements borrowing, offset by a decrease in repurchases of common stock in fiscal 2023.
Net cash flows used in financing activities changed due to a net increase in the cash flow from client funds obligations of $13,715.7 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, a net increase in cash received from the Internal Revenue Service as of June 30, 2024 to be refunded to our clients, a net increase in proceeds related to reverse repurchase agreements, offset by an increase in dividends paid, and an increase in repurchases of common stock in fiscal 2024.
Net Earnings and Diluted EPS, Unadjusted and Adjusted For the year ended June 30, respectively: Years Ended June 30, 2023 2022 YoY Growth Net earnings $ 3,412.0 $ 2,948.9 16 % Diluted EPS $ 8.21 $ 7.00 17 % Adjusted net earnings $ 3,419.5 $ 2,951.6 16 % Adjusted diluted EPS $ 8.23 $ 7.01 17 % 30 Adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.
Net Earnings and Diluted EPS, Unadjusted and Adjusted For the year ended June 30, respectively: Years Ended June 30, 2024 2023 YoY Growth Net earnings $ 3,752.0 $ 3,412.0 10 % Diluted EPS $ 9.10 $ 8.21 11 % Adjusted net earnings $ 3,784.5 $ 3,419.5 11 % Adjusted diluted EPS $ 9.18 $ 8.23 12 % Adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.
RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS Total Revenues For the year ended June 30, respectively: Years Ended June 30, 2023 2022 Total Revenues 18,012.2 16,498.3 YoY Growth 9 % 10 % YoY Growth, Organic Constant Currency 10 % 10 % Revenues in fiscal 2023 increased due to new business started from New Business Bookings, an increase in zero-margin benefits pass-throughs, an increase in our pays per control, continued strong client retention, an increase in interest on funds held for clients, and an increase in pricing, partially offset by an unfavorable impact of one percentage point from foreign currency.
Our financial condition remains solid at June 30, 2024 and we remain well positioned to support our associates and our clients. 29 RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS Total Revenues For the year ended June 30, respectively: Years Ended June 30, 2024 2023 Total Revenues $ 19,202.6 $ 18,012.2 YoY Growth 7 % 9 % YoY Growth, Organic Constant Currency 6 % 10 % Revenues in fiscal 2024 increased due to new business started from New Business Bookings, an increase in zero-margin benefits pass-throughs, an increase in our pays per control, continued strong client retention, an increase in interest on funds held for clients, and an increase in pricing.
Operating, Investing and Financing Cash Flow s Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows are summarized as follows: Years ended June 30, 2023 2022 $ Change Cash provided by (used in): Operating activities $ 4,207.6 $ 3,099.5 $ 1,108.1 Investing activities (2,517.3) (7,014.4) 4,497.1 Financing activities (15,680.7) 13,653.4 (29,334.1) Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents (21.1) (98.7) 77.6 Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ (14,011.5) $ 9,639.8 $ (23,651.3) 35 Net cash flows provided by operating activities increased due to growth in our underlying business (net income adjusted for non-cash adjustments), and a net favorable change in the components of operating assets and liabilities primarily due to timing on collections of accounts receivable, and a decrease in incentive compensation payments, as compared to the year ended June 30, 2022 .
Operating, Investing and Financing Cash Flow s Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows are summarized as follows: Years ended June 30, 2024 2023 $ Change Cash provided by (used in): Operating activities $ 4,157.6 $ 4,207.6 $ (50.0) Investing activities (1,389.0) (2,517.3) 1,128.3 Financing activities (1,431.7) (15,680.7) 14,249.0 Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents (22.4) (21.1) (1.3) Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 1,314.5 $ (14,011.5) $ 15,326.0 36 Net cash flows provided by operating activities decreased due to a net unfavorable change in the components of operating assets and liabilities primarily due to timing on collections of accounts receivable, offset by growth in our underlying business (net income adjusted for non-cash adjustments), as compared to the year ended June 30, 2023.
Judgments and Uncertainties The Company’s annual goodwill impairment assessment as of June 30, 2023 was performed for all reporting units using a quantitative approach by comparing the fair value of each reporting unit to its carrying value.
Goodwill is tested annually for impairment or more frequently when an event or circumstance indicates that goodwill might be impaired. Judgments and Uncertainties The Company’s annual goodwill impairment assessment as of June 30, 2024 was performed for all reporting units using a quantitative approach by comparing the fair value of each reporting unit to its carrying value.
ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A.
ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
We are committed to building upon our past successes by investing in our business through enhancements in research and development and by driving meaningful transformation in the way we operate. Our financial condition remains solid at June 30, 2023 and we remain well positioned to support our associates and our clients.
We are committed to building upon our past successes by investing in our business through enhancements in research and development and by driving meaningful transformation in the way we operate.
Please refer to the accompanying financial tables in the “Non-GAAP Financial Measures” section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their comparable GAAP financial measures.
Please refer to the accompanying financial tables in the “Non-GAAP Financial Measures” section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their comparable GAAP financial measures. EXECUTIVE OVERVIEW We are a leading global provider of cloud-based Human Capital Management (“HCM”) technology solutions to employers around the world.
The expected client relationship period ranges from three to eight years. 39 Sensitivity of Estimate to Change As the assumptions used to estimate the amortization period of the deferred costs could have a material impact on timing of recognition, we assess the amortization periods annually using historical retention rates.
Sensitivity of Estimate to Change As the assumptions used to estimate the amortization period of the deferred costs could have a material impact on timing of recognition, we assess the amortization periods annually using historical retention rates. Actual retention rates were not materially different than those used in our calculation to determine the amortization period.
Systems development and programming costs increased for fiscal 2023 due to increased investments and costs to develop, support, and maintain our new and existing products. Depreciation and amortization expenses increased due to the amortization of internally developed software products and new investments in purchased software.
Research and development expenses increased for fiscal 2024 due to increased investments and costs to develop, support, and maintain our new and existing products, and increased investments in GenAI, including the integration of GenAI in our existing products.
The increase in interest earned on funds held for clients resulted from an increase in our average interest rate earned to 2.4% in fiscal 2023, as compared to 1.4% in fiscal 2022, coupled with an increase in our average client funds balances of 5.1% to $34.1 billion in fiscal 2023 as compared to fiscal 2022. 28 Total Expenses Years Ended June 30, 2023 2022 % Change Costs of revenues: Operating expenses $ 8,657.4 $ 8,252.6 5 % Systems development and programming costs 844.8 798.6 6 % Depreciation and amortization 451.2 410.7 10 % Total costs of revenues 9,953.4 9,461.9 5 % Selling, general and administrative expenses 3,551.4 3,233.2 10 % Interest expense 253.3 81.9 209 % Total expenses $ 13,758.1 $ 12,777.0 8 % For the year ended June 30: Operating expenses increased due to an increase in our PEO Services zero-margin benefits pass-through costs to $3,800.9 million from $3,514.4 million for the years ended June 30, 2023 and 2022, respectively.
Total Expenses Years Ended June 30, 2024 2023 % Change Costs of revenues: Operating expenses $ 9,050.1 $ 8,657.4 5 % Research and development 955.7 844.8 13 % Depreciation and amortization 470.9 451.2 4 % Total costs of revenues 10,476.7 9,953.4 5 % Selling, general and administrative expenses 3,778.9 3,551.4 6 % Interest expense 361.4 253.3 43 % Total expenses $ 14,617.0 $ 13,758.1 6 % For the year ended June 30: Operating expenses increased due to an increase in our PEO Services zero-margin benefits pass-through costs to $3,975.9 million from $3,800.9 million for the years ended June 30, 2024 and 2023, respectively.
Margin Employer Services' margin increased due to increases in revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by an increase in selling expenses.
Margin Employer Services' margin increased due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by investments and costs to develop, support, and maintain our new and existing products.
Refer t o Note 11, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion. Adjusted Provision for Income Taxe s The adjusted effective tax rate in fiscal 2023 and 2022 was 23.1% and 22.5%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.
Adjusted Provision for Income Taxe s The adjusted effective tax rate in fiscal 2024 and 2023 was 23.0% and 23.1%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.
Year Ended June 30, 2023 Consolidated revenue growth as reported 9 % Adjustments: Impact of acquisitions — % Impact of foreign currency 1 % Consolidated revenue growth, organic constant currency 10 % Employer Services revenue growth as reported 10 % Adjustments: Impact of acquisitions — % Impact of foreign currency 1 % Employer Services revenue growth, organic constant currency 11 % FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2023, cash and cash equivalent s were $2.1 billion, which were primarily invested in time deposits and money market funds.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2024, cash and cash equivalent s were $2.9 billion, which were primarily invested in time deposits and money market funds.
The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency.
(f) The adjusted effective tax rate is calculated as our adjusted provision for income taxes divided by the sum of our adjusted net earnings plus our adjusted provision for income taxes. 35 The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency.
Sensitivity of Estimate to Change While the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount of taxes due. If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions.
Sensitivity of Estimate to Change While the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount of taxes due.
(d) The income tax (benefit)/provision was calculated based on the marginal rate in effect for the year ended June 30, 2023. (e) The Adjusted effective tax rate is calculated as our Adjusted provision for income taxes divided by the sum of our Adjusted net earnings plus our Adjusted provision for income taxes.
(e) The income tax (benefit)/provision was calculated based on the marginal rate in effect for the year ended June 30, 2024.
Net cash flows used in investing activities changed due to the timing of proceeds and purchases of corporate and client funds marketable securities of $4,570.2 million, offset by higher payments for capital expenditures in fiscal 2023, and the sale of property, plant, and equipment in fiscal 2022.
Net cash flows used in investing activities changed due to the timing of proceeds and purchases of corporate and client funds marketable securities of $1,117.5 million.
Overall margin increased due to increases in revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased selling expenses, increased interest expense, and increases in zero-margin pass through costs.
Overall margin increased due to the increases in total revenues discussed above, increased interest income on corporate funds, operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increases in selling and marketing expenses, increased interest expense, less favorable actuarial loss development in workers’ compensation reserves related to ADP Indemnity, and investments and costs to develop, support, and maintain our new and existing products.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk The information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures About Market Risk” under “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation.” 41
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk The information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures About Market Risk” under “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation.” 42

Other ADP 10-K year-over-year comparisons