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What changed in Automatic Data Processing's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Automatic Data Processing's 2022 and 2023 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 2023 report.

+256 added−231 removedSource: 10-K (2023-08-03) vs 10-K (2022-08-03)

Top changes in Automatic Data Processing's 2023 10-K

256 paragraphs added · 231 removed · 195 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

70 edited+31 added−17 removed86 unchanged
Biggest changeOur 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 (16 consecutive years); Best Place to Work for LGBTQ+ Equality (13th perfect score on the Human Rights Campaign Foundation’s Corporate Equality Index); DiversityInc Top 50 Companies for Diversity; Barron’s 100 Most Sustainable Companies; Newsweek’s America’s Most Responsible Companies; and Newsweek’s America’s Most Trustworthy Companies. 15 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.
Biggest changeOur 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.
We have a number of initiatives to strengthen and further cultivate our diverse and inclusive culture, starting with our Talent Task Force for all of our people leaders, which includes diversity goals for our senior leaders that are tied to their compensation as an incentive to diversify our leadership ranks.
We have a number of initiatives to strengthen and further cultivate our inclusive and diverse culture, starting with our Talent Task Force for all of our people leaders, which includes diversity goals for our senior leaders that are tied to their compensation as an incentive to diversify our leadership ranks.
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 business owners can download and self-purchase Roll and run payroll anywhere, anytime, quickly and compliantly, with no experience or training needed.
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.
Our solutions provide performance, learning, succession and compensation management tools that help employers align goals to outcomes, and enable managers to identify and mitigate potential retention risks. Our talent activation solutions include StandOut® powered by ADP, which provides team leaders with data and insights to drive employee engagement and leadership development, which in turn help drive employee performance. Workforce Management.
Our solutions provide performance, learning, succession and compensation management tools that help employers align goals to outcomes, and enable managers to identify and mitigate potential retention risks. Our talent activation solutions include StandOut ® powered by ADP, which provides team leaders with data and insights to drive employee engagement and leadership development, which in turn help drive employee performance.
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.
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.
See the discussion contained in the “Risk Factors” section in Part I, Item 1A of this Annual Report on Form 10-K for information regarding changes in laws 13 and regulations that could have a materially adverse effect on our reputation, results of operations or financial condition or have other adverse consequences.
See the discussion contained in the “Risk Factors” section in Part I, Item 1A of this Annual Report on Form 10-K for information regarding changes in laws and regulations that could have a materially adverse effect on our reputation, results of operations or financial condition or have other adverse consequences.
Similarly, the ADP Client Trust and ADP Trust Bank provide client funds with a level of protection that most competitors cannot offer. We continue to expand our approach to compliance and are adopting “Compliance by design” as a tenet that prioritizes compliance in designing and developing new solutions to support our clients.
Similarly, the ADP Client Trust and ADP Trust Bank provide client funds with a level of protection that most competitors cannot offer. We continue to expand our 13 approach to compliance and are adopting “Compliance by design” as a tenet that prioritizes compliance in designing and developing new solutions to support our clients.
We believe that we are competitive in each of these areas and that our leading-edge technology, together with our commitment to service excellence, distinguishes us from our competitors. INDUSTRY REGULATION Our business is subject to a wide range of complex U.S. and foreign laws and regulations.
We believe that we are competitive in each of these areas and that our leading-edge technology (together with our data) and commitment to service excellence, distinguishes us from our competitors. INDUSTRY REGULATION Our business is subject to a wide range of complex U.S. and foreign laws and regulations.
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 screening and selection services business offers background checking services that are subject to the Fair Credit Reporting Act.
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.
Built for dynamic teams, our next-gen HCM platform provides our clients with visibility into where work actually happens rather than into rigid organizational hierarchies and worker types. And, by deploying low-code applications, clients can easily tailor the solution to their needs.
Built for dynamic teams, our next-gen HCM platform provides our clients with visibility into where work happens rather than into rigid organizational hierarchies and worker types. And, by deploying low-code applications, clients can easily tailor the solution to their needs.
Our next-gen payroll solution is a global solution that supports workers of all types and enables real-time, transparent, continuous payroll calculations. This next-gen payroll solution 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 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.
ADP’s Pay Equity Storyboard combines analytics and benchmarking 5 to help employers better understand potential pay gaps and provide them with real, up-to-date, aggregated and anonymized market data to understand how their compensation for a particular job compares to other similar employers.
ADP’s Pay Equity Storyboard combines analytics and benchmarking to help employers better understand potential pay gaps and provide them with real, up-to-date, aggregated and anonymized market data to understand how their compensation for a particular job compares to other similar employers.
With a modern look and feel based on our brand new design system, our new UX is powered by data and ML and provides intuitive workflows that are available when and where our clients and their workers need it.
With a modern look and feel based on our new design system, our new UX is powered by data and ML and provides intuitive workflows that are available when and where our clients and their workers need it.
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 artificial intelligence, ML and data.
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.
ADP SmartCompliance includes HCM-related compliance solutions such as Employment Tax and Wage Payments, as well as Tax Credits, Health Compliance, Wage Garnishments, Employment Verifications, Unemployment Claims and W-2 Management. 9 • ADP SmartCompliance Employment Tax.
ADP SmartCompliance includes HCM-related compliance solutions such as Employment Tax and Wage Payments, as well as Tax Credits, Health Compliance, Wage Garnishments, Employment Verifications, Unemployment Claims and W-2 Management. • ADP SmartCompliance Employment Tax.
We pay over 14 million workers outside the United States with our in-country solutions and with ADP GlobalView, ADP Celergo/Streamline and ADP iHCM – our simplified and intuitive multi-country solutions. As part of our global payroll services, we supply year-end regulatory and legislative tax statements and other forms to our clients’ employees.
We pay over 15 million workers outside the United States with our in-country solutions and with ADP GlobalView, ADP Celergo/Streamline and ADP iHCM – our simplified and intuitive multi-country solutions. As part of our global payroll services, we supply year-end regulatory and legislative tax statements and other forms to our clients’ employees.
Insights powered by DataCloud are particularly important with respect to diversity, equity and inclusion (DEI) and, as part of our commitment to DEI, we introduced the first-of-its-kind DEI benchmark to help companies assess DEI gaps, track their progress and achieve their goals, bolstering ADP’s suite of DEI offerings.
Insights powered by DataCloud are particularly important with respect to diversity, equity and inclusion (DEI) and, as part of our commitment to DEI, we introduced the first-of-its-kind, award-winning DEI benchmark to help companies assess DEI gaps, track their progress and achieve their goals, bolstering ADP’s suite of DEI offerings.
ADP’s Workforce Management offers a range of solutions to over 110,000 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 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.
We address these broad market needs with our cloud-based strategic platforms: RUN Powered by ADP®, serving over 800,000 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 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.
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 to ensure 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 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.
In addition, our ADP Mobile app simplifies how work gets done by enabling clients to process their payroll anywhere, and giving millions of their employees worldwide convenient access to their payroll and HR information in 29 languages.
In addition, our ADP Mobile app simplifies how work gets done by enabling clients to process their payroll anywhere, and giving millions of their employees worldwide convenient access to their payroll and HR information in 32 languages.
While exact benefits vary by associate and region, they typically include health care coverage, a 401(k) plan with company matching contributions, 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.
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.
We are, therefore, subject to compliance obligations under federal, state and foreign privacy, data protection and cybersecurity-related laws, including federal, state and foreign security breach notification laws with respect to both client employee data and our own employee data.
We are, therefore, subject to compliance obligations under federal, state and foreign privacy, data protection, artificial intelligence (AI) and cybersecurity-related laws, including federal, state and foreign security breach notification laws with respect to both client employee data and our own employee data.
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, and diversity and inclusion.
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 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 2022, our client retention is estimated at approximately 13 years in Employer Services, and approximately 7 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 2023, our client retention is estimated at approximately 13 years in Employer Services, and approximately 6 years in PEO.
With our cloud-based HCM software at the core, we serve more than 15,500 clients and 10 more than 700,000 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 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.
As the regulatory environment rapidly changes, making it harder for companies to navigate the complexities of payroll, our next-gen payroll solution’s built-in compliance capabilities enable our clients to focus on managing their business. Last year, 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. Additionally, we launched the “Roll™ by ADP” mobile-first solution – reimagining how small businesses do payroll.
Compliance with our BCRs permits us to process and transfer personal data across borders in accordance with the GDPR and other data protection laws in the EU. The CCPA and CPRA require companies to provide new data disclosure, access, deletion and opt-out rights to consumers in California.
Compliance with our BCRs permits us to process and transfer personal data across borders in accordance with the GDPR and other data protection laws in the EU. The CPRA requires companies to provide data disclosure, access, deletion and opt-out rights to consumers in California.
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, and helping build relationships with diverse markets in our communities.
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.
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 Employees and Demographics As of June 30, 2022, our global team of associates consisted of approximately 60,000 persons.
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.
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 990,000 clients and pay over 39 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 million clients and pay over 41 million workers in 140 countries and territories.
We are doing this by differentiating our HCM solutions with ADP’s unmatched dataset that provides clients with insights that can help drive better decisions, and by continuing to identify and pursue new and additional data-as-a-service opportunities.
We are doing this by differentiating our HCM solutions and providing our clients with insights that can help drive better decisions, and by continuing to identify and pursue new and additional data-as-a-service opportunities.
CLIENTS AND CLIENT CONTRACTS We provide services to more than 990,000 clients. In fiscal 2022, 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 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.
Our Chief Human Resources Officer (CHRO), together with our Chief Diversity and Talent Officer, manages our HCM strategy and related programs and initiatives, as well as our talent strategy.
Our Chief Human Resources Officer (CHRO), together with our Executive Leadership Team, manages our HCM strategy and related programs and initiatives, as well as our talent strategy.
SYSTEMS DEVELOPMENT AND PROGRAMMING During the fiscal years ended June 30, 2022, 2021 and 2020, we invested approximately $1.210 billion, $1.016 billion and $947 million, respectively, in systems development and programming.
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.
In our fiscal year ended June 30, 2022, in the United States, we processed and delivered more than 74 million employee year-end tax statements, and moved more than $2.7 trillion in client funds to taxing and other agencies and to our clients’ employees and other payees. • ADP SmartCompliance.
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.
The changing nature of these comprehensive laws in the United States, Europe and elsewhere, including the European Union’s (the “EU”) General Data Protection Regulation (the “GDPR”) and the California Consumer Privacy Act (the “CCPA”), which will be replaced by the voter-approved California Privacy Rights Act of 2020 (the “CPRA”), impact our processing of personal information of our employees and on behalf of our clients.
The changing nature of these comprehensive laws in the United States, Europe and elsewhere, including the European Union’s (the “EU”) General Data Protection Regulation (the “GDPR”) and the California Privacy Rights Act of 2020 (the “CPRA”), impact our processing of personal information of our employees and on behalf of our clients.
During our fiscal 2022, we undertook and implemented several initiatives that underpin our culture, values and talent practices, including: • Continuing to eliminate a college degree requirement to expand the applicant pool for non-specialized roles, such as those in our Sales organization; • Launching ADP’s Impact Council, activating top executives to align their business unit practices and outcomes with our diversity, equity and inclusion strategy; and • Establishing partnerships with the National Black MBA Association, the United Negro College Fund and Prospanica to further diversify our talent pipeline and educate and develop their members.
We have undertaken and implemented several initiatives that underpin our culture, values and talent practices, including: • Continuing to eliminate a college degree requirement to expand the applicant pool for non-specialized roles, such as those in our sales, service and implementation and technology organizations; • Launching ADP’s Impact Council, activating top executives to align their business unit practices and 15 outcomes with our diversity, equity and inclusion strategy; and • Establishing partnerships with the National Black MBA Association, the United Negro College Fund, Prospanica, the Anita Borg Institute for Women and Technology and Disability:IN to further diversify our talent pipeline and educate and develop their members.
Our next-gen platforms are designed for the ever-changing world of work. Built from the ground up to be cloud-native, global, scalable and secure, our next-gen platforms provide our clients with the flexibility they need to address today’s and tomorrow’s workplace challenges. Our award winning next-gen HCM platform enables our clients to personalize their experience based on their needs.
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.
Our common stock is listed on the NASDAQ Global Select Market® under the symbol “ADP.” When we refer to “we,” “us,” “our,” “ADP,” or the “Company” in this Annual Report on Form 10-K, we mean Automatic Data Processing, Inc. and its consolidated subsidiaries. 3 BUSINESS OVERVIEW ADP’s Mission As data, digital technology, globalization, new business models and other significant events and disruptions reshape the way people work, our mission is to power organizations with insightful solutions that meet the changing needs of our clients and their workers.
Our common stock is listed on the NASDAQ Global Select Market® under the symbol “ADP.” When we refer to “we,” “us,” “our,” “ADP,” or the “Company” in this Annual Report on Form 10-K, we mean Automatic Data Processing, Inc. and its consolidated subsidiaries. 3 BUSINESS OVERVIEW ADP’s Mission Our mission is to power organizations with insightful Human Capital Management (HCM) solutions that meet the changing needs of our clients and their workers.
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.
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.
Our registered investment adviser provides certain investment management and advisory services to retirement plan administrators under a heightened “fiduciary” standard and is regulated by the SEC and the U.S. Department of Labor. 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).
ADP Strategic Plan Services, LLC, our registered investment adviser, provides certain investment management and advisory services to retirement plan administrators under a heightened “fiduciary” standard and is regulated by the SEC and the U.S. Department of Labor.
Our HCM technology, industry and compliance expertise and data insights deliver measurable results and peace-of-mind, and contribute to an engaged, productive workforce. Our leading technology and commitment to service excellence are at the core of our relationship with each one of our clients, whether it's a small, mid-sized or large organization operating in one or multiple countries around the world.
Our leading technology and commitment to service excellence are at the core of our relationship with each one of our clients, whether it's a small, mid-sized or large organization operating in one or multiple countries around the world.
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 shown.
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.
We issue quarterly global StandOut® Engagement Pulse® and Performance Pulse® surveys to ensure that all associates can share how they feel about their work and their team, 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.
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 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 Strategy Our Strategic Pillars.
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 track certain gender and racial demographics of our workforce and share them in our annual Global Corporate Social Responsibility (“CSR”) Report, which is available on our website.
We track certain gender and racial demographics of our workforce and share them in our annual Global Corporate Social Responsibility (“CSR”) Report, which is available on our website. Nothing in our CSR Report shall be deemed incorporated by reference into this Annual Report on Form 10-K.
ADP DataCloud's Skills Graph, our proprietary data structure, is based on more than 30 million employee records, 65 million resumes and 7 million job postings across more than 20 industries and 500 geographic areas, and extracts, aligns and normalizes 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 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.
By operating a flexible service model, we help customers 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.
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.
In addition, in the United States, the Health Insurance Portability and Accountability Act of 1996 applies to our insurance services businesses and ADP TotalSource. 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 taxing authorities, our clients’ employees and other payees via electronic transfer, direct deposit, prepaid access and ADPCheck.
ADP TotalSource is subject to various state licensing requirements and maintains certifications with the Internal Revenue Service. Because ADP TotalSource is a co-employer with respect to its clients’ worksite employees, we may be subject to limited obligations and responsibilities of an employer under federal and state tax, insurance and employment laws.
Because ADP TotalSource is a co-employer with respect to its clients’ worksite employees, we may be subject to certain obligations and responsibilities of an employer under federal and state tax, insurance and employment laws, including worksite employee payroll obligations and with respect to claimed employee retention and other tax credits.
Nothing in our CSR Report shall be deemed incorporated by reference into this Annual Report on Form 10-K. 14 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 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.
We offer comprehensive HRO solutions in which we provide complete management solutions for HR administration, payroll administration, talent management, employee benefits, benefits administration, employer liability management, and other HCM and employee benefits functions. • Leverage our global presence to offer clients HCM solutions wherever they do business (Global Solutions).
HR Outsourcing (HRO) Solutions : In the United States, we offer comprehensive HRO solutions in which we provide complete management solutions for HR administration, payroll administration, talent management, employee benefits, benefits administration, employer liability management, and other HCM and employee benefits functions.
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 size and breadth of our client base provides us an unrivaled HCM dataset, and we are focused on converting our data advantage into our client’s data advantage.
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.
Our digital card offerings are true banking alternatives that feature innovative optional services such as savings envelopes, spend-tracking, cash-back rewards and support for digital wallets. ‘Always Designing for People’ isn’t just a tag line – innovation is also about putting our clients first by giving them and their workers a faster, smarter and easier user experience (UX) that was designed with and for them.
Our digital card offerings are banking alternatives that afford financial wellness tools designed to help members realize a better financial path forward. ‘Always Designing for People’ isn’t just a tag line – innovation is also about putting our clients first by giving them and their workers a faster, smarter and easier user experience (UX) that was designed with and for them.
In addition, many of our solutions are designed to assist clients with their compliance with certain U.S. and foreign laws and regulations that apply to them.
In addition, many of our solutions are designed to assist clients with their compliance with certain U.S. and foreign laws and regulations that apply to them. We have, and continue to enhance, compliance programs and policies to monitor and address the legal and regulatory requirements applicable to our operations and client solutions, including dedicated compliance personnel and training programs.
We have, and continue to enhance, compliance programs and policies to monitor and address the legal and regulatory requirements applicable to our operations and client solutions, including dedicated compliance personnel and training programs. 12 As one of the world’s largest providers of HCM solutions, our systems contain a significant amount of sensitive data 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 sensitive data 12 related to clients, employees of our clients, vendors and our employees.
Wisely® Pay is a network-branded payroll card that comes with a digital account that enables employers to pay their employees, and enables employees to access their payroll funds immediately, including via a network member bank or an ATM, make purchases or pay bills, deposit checks, load additional funds onto the card, such as tax refunds, and transfer funds to a bank account in the United States.
Wisely® Pay is a network-branded paycard with a digital account, through which employees can access their pay, make purchases online and in store, deposit checks, load additional funds onto the card, and transfer funds to a bank account in the United States.
The results of our business within the HRO Solutions pillar related to our PEO products and solutions are contained within our PEO segment. 7 PRODUCTS AND SOLUTIONS In order to serve the unique needs of our clients and their diverse types of businesses and workforce models, we provide a range of solutions which businesses of all types and sizes and across geographies can use to recruit, pay, manage, and retain their workforce.
Our PEO business, called ADP TotalSource®, provides clients with comprehensive employment administration outsourcing solutions through a relationship in which employees who work for a client (referred to as “worksite employees”) are co-employed by us and the client. 7 PRODUCTS AND SOLUTIONS In order to serve the unique needs of our clients and their diverse types of businesses and workforce models, we provide a range of solutions which businesses of all types and sizes and across geographies can use to recruit, pay, manage, and retain their workforce.
We design cloud-based software and offer comprehensive solutions that assist 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. • Grow and scale our market-leading HR Outsourcing solutions (HRO Solutions).
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.
It was named a 2021 “Top HR Product” at the annual HR Technology Conference, marking the seventh consecutive year ADP has been honored for its innovative HCM technology. The solution also earned acclaim in Fast Company’s first-ever list of the “Next Big Things in Tech,” which highlights tech breakthroughs that promise to define the future of their industries.
It also earned acclaim in Fast Company’s first-ever list of the “Next Big Things in Tech,” which highlights tech breakthroughs that promise to define the future of their industries.
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. 11 ADP Global Payroll is a solution for multinational organizations of all sizes, empowering them to harmonize HCM strategies in 140 countries globally.
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.
Skills Graph powers ADP’s Candidate Profile Relevancy tool to help score, assess and predict candidates who are the best fit for a job opening, as well as 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.
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.
We are leading this innovation effort with ADP® DataCloud, our award-winning ML and workforce analytics platform which is the largest private repository of payroll information available. DataCloud analyzes aggregated, anonymized and timely HCM and compensation data from more than 930,000 organizations across the U.S., powering solutions that provide clients with in-depth workforce and business insights that enable critical HR decisions.
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.
As the business, data and digital technology landscape rapidly evolves, what “work” means, how and where it gets done, and how workers are paid is changing as well. We innovate by anticipating the future of work, the future of HCM and the future of pay in order to meet the evolving and unique needs of our clients and their workers.
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.
As we also seek to provide employee financial solutions, we offer Wisely® Direct, a network-branded general purpose reloadable card that comes with a digital account, which provides similar features and functionality as Wisely Pay but is offered directly to consumers.
Wisely also enables advanced capabilities and innovative features such as Earned Wage Access (EWA), automatic savings options, cash back rewards and bill pay that help employees take even more control of their finances. Wisely® Direct, a network-branded general purpose reloadable card that comes with a digital account, provides similar features and functionality but is offered directly to consumers.
We offer similar tools to clients outside the United States, including through our ADP GlobalView® and ADP iHCM solutions. ADP’s Model-Based Benchmarks, powered by Skills Graph, also extend benchmarks to include compensation for up to 150 million workers.
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 are expanding our international HCM and HRO businesses, comprised of our established local, in-country solutions and our market-leading, cloud-based multi-country solutions.
Global Solutions : We offer international HCM and HRO solutions, comprised of both local, in-country solutions and cloud-based multi-country solutions, to clients wherever they do business around the world.
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.
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.
For over 70 years, we have reimagined the world of work by designing cutting-edge products, robust services and exceptional experiences that touch millions of people’s lives daily. We pioneered HCM automation, HCM in the cloud, mobile HCM and a digital HCM marketplace.
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.
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Our business strategy is based on three strategic pillars, which are designed to position us as the global market leader in HCM technology and services: • G row a complete suite of cloud-based HCM solutions (HCM Solutions).
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Data, digital technology, artificial intelligence, globalization, new business models and other significant events and disruptions continuously reshape the way people work. Our HCM technology, industry and compliance expertise and data insights deliver measurable results and peace-of-mind, and contribute to an engaged, productive workforce.
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With a large and growing addressable market, we are executing on our strategic pillars by focusing on the following priorities: • Investing in our world-class and next-gen platforms that are built for the future of work, and providing market-leading product and technology solutions that solve the needs of our clients today, anticipate their needs of tomorrow and provide them with valuable data insights and guidance that help them understand their workforce and how they compare to their industry peers. • Continuing to offer the broadest suite of complete solutions, while identifying and pursuing new and additional opportunities to expand and build on our solutions to ensure that our clients and their workers can navigate the ever-changing and challenging world of work. • Enhancing our powerful distribution with impactful data, digital technology and marketing investments. • Accelerating our digital transformation and leveraging technology to simplify and personalize how we engage with our clients and how their workers engage with us – delivering solutions wherever they are, whether at work or on the go. • Providing our clients with comprehensive HR and payroll capabilities that drive productivity and enable compliance globally through our world-class platforms and multi-national solutions.
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ADP’s Strategy Our business strategy has three key priorities: With a large and growing addressable market, we are focused on our core growth areas and further enhancing our market position by executing on our Strategy: • Lead with Best-in-Class HCM Technology.
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Our footprint and scale in the HCM industry is unmatched. Together with leading technology and deep in-country compliance expertise, we are strongly positioned to continue to drive sustainable long-term growth and value by delivering solutions to clients of all sizes and their workers, wherever they do business. 4 Innovation at ADP Innovation is in our DNA.
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We design and develop world-class HCM platforms that simplify work and utilize enabling technologies like artificial intelligence and modern cloud architecture.
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Our innovative Wisely® payment offerings support an employer’s need for flexible payment solutions in order to meet the individual needs of its workers.
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We aim to solve the needs of our clients and their workers today by making HCM transactions effortless and compliant, while anticipating their needs of tomorrow by incorporating valuable data insights and guidance into our solutions to help them better understand their workforce and how they compare to industry peers, and position them to make better decisions. • Provide Unmatched Expertise and Outsourcing Solutions.
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We have also given third-party developers and system integrators access to some of our platforms’ API 6 (application programming interface) libraries through ADP Marketplace in order to enable secure data sharing between ADP and other solutions across the HR and business ecosystem.
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Our clients look to us as a source of expertise to understand key HR trends and best practices, employment and related legislation, and to offer thoughtful strategies to utilize HCM technology to achieve their business objectives and support their workforce.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA major natural disaster or catastrophic event could have a materially adverse effect on our business, financial condition and results of operations, or have other adverse consequences Our business, 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 such as the COVID-19 outbreak, or other events beyond our control, and measures taken in response thereto.
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.
LEGAL AND COMPLIANCE RISKS Failure to comply with, or changes in, laws and regulations applicable to our businesses could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences Our business is subject to a wide range of complex U.S. and foreign laws and regulations, including, but not limited to, the laws and regulations described in the “Industry Regulation” section in Part I, Item 1 of this Annual Report on Form 10-K.
LEGAL AND COMPLIANCE RISKS Failure to comply with, compliance with or changes in, laws and regulations applicable to our businesses could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences Our business is subject to a wide range of complex U.S. and foreign laws and regulations, including, but not limited to, the laws and regulations described in the “Industry Regulation” section in Part I, Item 1 of this Annual Report on Form 10-K.
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 19 computer viruses and malware into our systems or otherwise compromise the confidentiality, integrity or availability of data or our systems.
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.
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, 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 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.
Among other things, the BSA requires certain financial institutions, 17 including banks and money services businesses (such as national trust banks and providers of prepaid access like us), to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity, and maintain transaction records.
Among other things, the BSA requires certain financial institutions, including banks and money services businesses (such as national trust banks and providers of prepaid access like us), to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity, and maintain transaction records.
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. 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, 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.
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.
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.
We operate our business around the world, including in numerous developing economies where companies and government officials are more likely to engage in business practices that are prohibited by domestic and foreign laws and regulations, including the United States Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
We operate our business around the world, including in numerous developing economies where companies and government officials are more likely to engage in business practices that are 17 prohibited by domestic and foreign laws and regulations, including the United States Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
Any 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, and 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 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.
Failure to comply with privacy, data protection and cyber security laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences The collection, storage, hosting, transfer, processing, disclosure, use, security and retention and destruction of personal information required to provide our services is subject to federal, state and foreign privacy, data protection and cyber security laws.
Failure to comply with privacy, data protection, artificial intelligence and cyber security laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences The collection, storage, hosting, transfer, processing, disclosure, use, security and retention and destruction of personal information required to provide our services is subject to federal, state and foreign privacy, data protection and cyber security laws.
In addition, our business could be adversely affected in periods surrounding our new product introductions if customers delay purchasing decisions to evaluate the new product offerings. Furthermore, we may not execute successfully on our product development strategy, including because of challenges with regard to product planning and timing and technical hurdles that we fail to overcome in a timely fashion.
In addition, our business could be adversely affected in periods surrounding our new product introductions if clients delay purchasing decisions to evaluate the new product offerings. Furthermore, we may not execute successfully on our product development strategy, including because of challenges with regard to product planning and timing and technical hurdles that we fail to overcome in a timely fashion.
Activist stockholders may create perceived uncertainties as to the future direction of our business or strategy, including with respect to our ESG efforts, which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel, potential customers and business partners and may affect our relationships with current customers, vendors, investors and other third parties.
Activist stockholders may create perceived uncertainties as to the future direction of our business or strategy, including with respect to our ESG efforts, which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel, potential clients and business partners and may affect our relationships with current clients, vendors, investors and other third parties.
Complying with privacy, data protection and cyber security laws and requirements, including the enhanced obligations imposed by the GDPR, our BCRs and the CCPA and 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 and the CPRA, may result in significant costs to our business and require us to amend certain of our business practices.
We rely on patent, copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees, customers, vendors, partners and others to protect our intellectual property rights. We may need to devote significant resources, including cybersecurity resources, to monitoring our intellectual property rights.
We rely on patent, copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees, clients, vendors, partners and others to protect our intellectual property rights. We may need to devote significant resources, including cybersecurity resources, to monitoring our intellectual property rights.
We have made and expect to continue to make significant investments in product development. We must continue to dedicate a significant amount of resources to our development efforts before knowing to what extent our investments will result in products the market will accept.
We have made and expect to continue to make significant investments in product development and new technologies. We must continue to dedicate a significant amount of resources to our development efforts before knowing to what extent our investments will result in products the market will accept.
We may also be obligated to indemnify our customers, vendors or partners in connection with any such claim or litigation. Even if we were to prevail in such a dispute, any litigation could be costly and time-consuming.
We may also be obligated to indemnify our clients, vendors or partners in connection with any such claim or litigation. Even if we were to prevail in such a dispute, any litigation could be costly and time-consuming.
Competition for skilled employees in the outsourcing and other markets in which we operate is increasingly intense, making it more difficult and expensive to attract and retain highly skilled, motivated and diverse personnel. If we are unable to attract and retain highly skilled, motivated and diverse personnel, results of our operations and culture may suffer. 22 Item 1B.
Competition for skilled employees in the outsourcing and other markets in which we operate is increasingly intense, making it more difficult and expensive to attract and retain highly skilled, motivated and diverse personnel. If we are unable to attract and retain highly skilled, motivated and diverse personnel, results of our operations and culture may suffer.
We believe that providing insights from data, including artificial intelligence (AI) and machine learning (ML), will become increasingly important to the value that our solutions and services deliver to our customers.
We believe that providing insights and content from data, including via artificial intelligence (AI) and machine learning (ML), will become increasingly important to the value that our solutions and services deliver to our clients.
As a result, even the perception of noncompliance, whether or not valid, may damage our reputation. 18 If we fail to protect our intellectual property rights, it could materially adversely affect our business and our brand Our ability to compete and our success depend, in part, upon our intellectual property.
As a result, noncompliance, the failure to meet such expectations or the perception of noncompliance or such failure, whether or not valid, may damage our reputation. If we fail to protect our intellectual property rights, it could materially adversely affect our business and our brand Our ability to compete and our success depend, in part, upon our intellectual property.
The European Union (the “EU”) General Data Protection Regulation (the “GDPR”), and state consumer privacy laws like the California Consumer Protection Act (the “CCPA”), which will be replaced by the voter-approved California Privacy Rights Act of 2020 (the “CPRA”), are among the most comprehensive of these laws, and more and more jurisdictions are adopting similarly comprehensive laws that impose new data privacy protection requirements and restrictions.
The European Union (the “EU”) General Data Protection Regulation (the “GDPR”), and state consumer privacy laws like the California Privacy Rights Act of 2020 (the “CPRA”), are among the most comprehensive of these laws, and more and more jurisdictions are adopting similarly comprehensive laws that impose new data privacy protection requirements and restrictions.
However, the ability to provide data-driven insights may be constrained by current or future 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 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, 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, 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 information security and controls and to investigate and remediate any security vulnerabilities.
We derive a significant portion of our revenues and operating income outside of the United States and, as a result, we are exposed to market risk from changes in foreign currency exchange rates that could impact our results of operations, financial position and cash flows. We publicly share certain information about our environmental, social and governance (“ESG”) initiatives.
We derive a significant portion of our revenues and operating income outside of the United States and, as a result, we are exposed to market risk from changes in foreign currency exchange rates that could impact our results of operations, financial position and cash flows.
Third parties, including our competitors, may own or claim to own intellectual property relating to our products or services and may claim that we are infringing their intellectual property rights. We may be found to be infringing upon such rights, even if we are unaware of their intellectual property rights.
Third parties, including our competitors, may own or claim to own intellectual property relating to our products or services and may claim that we are infringing their intellectual property rights.
Further, bank regulators, including the OCC which regulates the ADP Trust Bank, continue to impose additional and stricter requirements on banks to ensure they are meeting their BSA obligations, and banks are increasingly viewing money services businesses, as a class, to be higher risk customers for money laundering.
Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their BSA obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering.
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. 20 BUSINESS AND INDUSTRY RISKS If we fail to upgrade, enhance and expand our technology and services to meet client needs and preferences, the demand for our solutions and services may materially diminish Our businesses operate in industries that are subject to rapid technological advances and changing client needs and preferences.
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.
Nevertheless, such investments are subject to general market, interest rate, credit and liquidity risks. These risks may be exacerbated, individually or together, during periods of unusual financial market volatility.
We invest our funds held for clients in liquid, investment-grade marketable securities, money market securities, and other cash equivalents. Nevertheless, such investments are subject to general market, interest rate, credit and liquidity risks. These risks may be exacerbated, individually or together, during periods of unusual financial market volatility.
In addition, as our operating costs increase due to inflationary pressure or otherwise, we may not be able to offset these increases by corresponding price increases for our products and solutions.
In addition, as our operating costs increase due to inflationary pressure or otherwise, we may not be able to offset these increases by corresponding price increases for our products and solutions. Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.
In addition, data security events and concerns about privacy abuses by other companies are changing consumer and social expectations for enhanced privacy and data protection.
In addition, data security events, concerns about privacy abuses by other companies and increased awareness of the potential (positive and negative) of AI are changing consumer and social expectations for enhanced protections (including with respect to bias and potential discrimination).
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 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 are dependent upon various large banks to execute electronic payments and wire transfers as part of our client payroll, tax and other money movement services.
Any such event could prevent or materially delay the recovery of any funds from clients and could have an adverse impact on our financial results and liquidity. We are dependent upon various large banks to execute electronic payments and wire transfers as part of our client payroll, tax and other money movement services.
However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, are increasingly more complex and sophisticated and may be difficult to detect for long periods of time, we may be unable or fail to anticipate these techniques or implement adequate or timely preventive or responsive measures.
We may fail to anticipate or detect these techniques and/or incidents for long periods of time and, even when we do so, we may be unable or fail to implement adequate or timely preventive or responsive measures.
In order to remain competitive and responsive to client demands, we continually upgrade, enhance, and expand our technology, solutions and services. If we fail to respond successfully to technology challenges and client needs and preferences, the demand for our solutions and services may diminish. In addition, investment in product development often involves a long return on investment cycle.
In order to remain competitive and responsive to client demands, we continually upgrade, enhance, and expand our technology, solutions and services, including by leveraging AI in our solutions.
The COVID-19 outbreak may have long-term effects on the nature of the office environment and remote working, which may present operational and workplace culture challenges that may adversely affect our business.
In addition, the nature of the office environment and remote or hybrid working is changing, which may make it more difficult to attract and retain personnel. It may also present operational and workplace culture challenges that may adversely affect our business. 23 Item 1B. Unresolved Staff Comments None.
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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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Because our PEO is a co-employer with our PEO clients and a Certified PEO by the Internal Revenue Service, we may be subject to certain obligations, responsibilities and liabilities of an employer with respect to Worksite Employees (WSE), including with respect to their wages and the payment thereof, the payment of certain taxes with respect to WSE wages and employee benefits provided to the WSEs.
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Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results. 21 We invest our funds held for clients in liquid, investment-grade marketable securities, money market securities, and other cash equivalents.
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Even though PEO clients are contractually responsible for the timely remittance of such costs, it is possible that our clients will not remit such payments despite their contractual obligations.
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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.
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Any such event could prevent or materially delay the recovery of any payments not timely remitted and could have an adverse impact on our financial results and liquidity.
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We are increasingly leveraging AI and ML in our solutions and service delivery and are exploring how best to integrate generative AI technologies and develop and deploy capabilities that are beneficial to our clients and their employees.
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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.
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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.
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In addition, use of AI tools may result in the release of confidential or proprietary information which could limit our ability to protect, or prevent us from protecting, our intellectual property rights.
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Additionally, as we expand our use of AI, there is uncertainty regarding intellectual property ownership and license rights of AI algorithms and content generated by AI and we may become subject to similar claims of infringement. We may be found to be infringing upon third party intellectual property rights, even if we are unaware of their intellectual property rights.
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However, as a result of the complexity of our operating environment, the period over which hardware and software has been acquired or other reasons, our programs and processes may not be sufficient or adequate or may fail to prevent, detect or respond to a cybersecurity incident or identify and/or remediate a security vulnerability in our operating environment.
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The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, are increasingly more complex and sophisticated (including due to the use of AI).
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BUSINESS AND INDUSTRY RISKS Our industry is subject to rapid technological change, including as a result of AI, and if we fail to upgrade, enhance and expand our technology and services to meet client needs and preferences, the demand for our solutions and services may materially diminish Our businesses operate in industries that are subject to rapid technological advances (such as AI) and changing client needs and preferences.
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If we fail to respond successfully to technology challenges and client needs and preferences or our competitors or other third parties respond to such challenges more quickly or successfully than us, the demand for our solutions and services may diminish. As new technologies (such as AI) continue to emerge, they may be disruptive to the HCM industry.
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These technologies could result in new and innovative HCM products and solutions that could increase competition, place us at a competitive disadvantage or even render obsolete our technology, products and solutions. In addition, investment in product development and new technologies often involves a long return on investment cycle.
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We may fail to realize all the economic benefit of our investment in the development of a product which could cause an impairment of goodwill or intangibles and result in a significant charge to earnings.
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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.
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When we don’t impound client funds by the time we pay such client obligations (including for PEO clients with respect to which we are legally obligated for payroll and tax obligations in respect of WSEs as a Certified PEO), we are at risk of not recovering such funds or a material delay in such recovery.
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Such risk 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 clients may bank at the time or more widespread stress or failure within the U.S. banking system.

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 11 other operational offices, sales offices, and its corporate headquarters in Roseland, New Jersey, which aggregate approximately 2,960,506 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 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.
All of these leases, which aggregate approximately 5,668,295 square feet worldwide, expire at various times up to the year 2032. ADP believes its facilities are currently adequate for their intended purposes and are adequately maintained.
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.

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. 23 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. Item 4. Mine Safety Disclosures Not applicable. 24 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, 1,275,687 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) April 1, 2022 to April 30, 2022 640,656 $230.87 638,944 $1,445,716,749 May 1, 2022 to May 31, 2022 786,840 $213.87 785,635 $1,277,703,317 June 1, 2022 to June 30, 2022 812,694 $212.38 809,908 $1,105,689,504 Total 2,240,190 2,234,487 (1) During the three months ended June 30, 2022, pursuant to the terms of the Company’s restricted stock program, the Company purchased 5,703 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, 1,442,988 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.
For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report on Form 10-K. 24 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, 2017, 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. 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.
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, 2022, there were 33,473 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, 2023, there were 32,322 holders of record of the Company’s common stock.
(2) The Company received the Board of Directors' approval to repurchase shares of the Company's common stock as follows: Date of Approval November 2019 $5 billion There is no expiration date for the common stock repurchase authorization.
(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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeAdjusted Net Earnings and Adjusted Diluted Earnings per Share For the year ended June 30, respectively: á 15% YoY Growth á 16% YoY Growth For fiscal 2022, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above. 32 ANALYSIS OF REPORTABLE SEGMENTS Revenues Years Ended June 30, % Change 2022 2021 As Reported Organic Constant Currency Employer Services $ 10,967.7 $ 10,195.2 8 % 8 % PEO Services 5,545.7 4,818.3 15 % 15 % Other (15.1) (8.1) n/m n/m $ 16,498.3 $ 15,005.4 10 % 10 % Earnings before Income Taxes Years Ended June 30, % Change 2022 2021 As Reported Employer Services $ 3,406.3 $ 3,052.1 12 % PEO Services 871.2 718.8 21 % Other (473.4) (409.7) n/m $ 3,804.1 $ 3,361.2 13 % 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 7%, continued strong retention, and an increase in interest earned on funds held for clients.
Biggest changeANALYSIS 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.
For corporate liquidity, we expect existing cash, cash equivalents, short-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, 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.
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).
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See Note 1, Recently Issued Accounting Pronouncements, of Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements. 42 CRITICAL ACCOUNTING ESTIMATES Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with U.S. GAAP.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See Note 1, Recently Issued Accounting Pronouncements, of Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements. CRITICAL ACCOUNTING ESTIMATES Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with U.S. GAAP.
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.
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.
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.
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.
Our c ommercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days. At June 30, 2022 and 2021, we had no commercial paper borrowing outstanding.
Our c ommercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days. At June 30, 2023 and 2022, we had no commercial paper borrowing outstanding.
The impact of acquisitions 37 and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction.
The impact of acquisitions and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction.
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 or client employees).
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).
Factors that influence the earnings impact of interest rate changes include, among others, the amount of invested funds and the overall portfolio mix between short-term and long-term investments. This mix varies during the fiscal year and is impacted by daily interest rat e changes.
Factors that influence the earnings impact of interest rate changes include, among others, the amount of invested funds and the overall portfolio mix between short-term and long-term investments. This mix varies during the fiscal year and is impacted by daily interest rate changes.
We generate sufficient free cash flow to satisfy our cash dividend and modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our re-investments, our long term strategy, and our 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 re-investments, longer term strategy, and commitments to shareholder friendly actions.
We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, equipment lease, and rate reduction receivables, secured predominantly by prime collateral. All collateral on asset-backed securities is performing as expected through June 30, 2022. 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, 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.
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, 2022 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, 2023 under the credit facilities.
A detailed review of our fiscal 2021 performance compared to our fiscal 2020 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2021.
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.
Details of the borrowings under the commercial paper program are as follows: Years ended June 30, 2022 2021 Average daily borrowings (in billions) $ 2.0 $ 1.6 Weighted average interest rates 0.4 % 0.1 % Weighted average maturity (approximately in days) 1 day 1 day 39 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, 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.
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 2022 include interest on funds held for clients of $451.8 million, as compared to $422.4 million in fiscal 2021.
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.
Earnings before Income Taxes Employer Services' earnings before income taxes increased in fiscal 2022 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 2023 due to increased revenues discussed above, partially offset by increases in expenses.
Se e Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net. 29 In fiscal 2022, the Company recorded impairment charges of $23.0 million which is comprised of a write down of $12.1 million related to software and customer lists which were determined to have no future use and impairment charges of $10.9 million related to operating right-of-use assets associated with exiting certain leases early.
See Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net. 29 In fiscal 2022, the Company recorded impairment charges of $23.0 million, which is comprised of $12.1 million related to software and customer lists which were determined to have no future use and impairment charges of $10.9 million related to operating right-of-use assets associated with exiting certain leases early.
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, 2022 (“fiscal 2022”), as compared to year ended June 30, 2021 (“fiscal 2021”).
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”).
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 9.2 million shares during fiscal 2022 and 8.2 million shares during fiscal 2021, 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 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.
Contractual Obligations Our contractual obligations at June 30, 2022 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 $309.5 million of interest payments of our debt, of which $63.3 million is expected to be paid within one year.
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.
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; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or 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; 25 employment and wage levels; changes in technology; 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, including the coronaviru s ( “ COVID-19 ” ) pandemic; 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 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.
In addition, we have a five-year $2.75 billion credit facility and a five-year $3.2 billion credit facility maturing in June 2024 and June 2026, respectively, each with an accordion feature under which the aggregate com mitment can be increased by $500 million, subject to the availability of additional commitments.
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.
ADP Indemnity paid a premium of $284 million in July 2022, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2023 policy year on terms substantially similar to the fiscal 2022 reinsurance policy.
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.
During fiscal 2022, ADP Indemnity paid a premium of $260 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2022 policy year up to $1 million per occurrence.
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.
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 2022 were $177.1 million, as compared to $178.3 million for fiscal 2021.
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.
The maximum maturity at time of purchase for BBB-rated securities is 5 years, and for single A rated, AA-rated and AAA-rated securities it is 10 years. Time deposits and commercial paper must be rated A-1 and/or P-1.
The maximum maturity at time of purchase for BBB-rated securities is 5 years, and for single A rated, AA-rated and AAA-rated securities it is 10 years. Time deposits and commercial paper must be rated A-1 and/or P-1. Money market funds must be rated AAA/Aaa-mf.
Our financial condition remains solid at June 30, 2022 and we have sufficient liquidity.
Our financial condition remains solid at June 30, 2023 and we have sufficient liquidity.
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 2022, the charges include consulting costs relating to our company wide transformation initiatives, partially offset by net reversals relating to severance, and gain on sale of assets.
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.
ADP Indemnity recorded a pre-tax benefit of approximately $61 million in fiscal 2022 and a pre-tax benefit of approximately $32 million in fiscal 2021, which were primarily a result of changes in our estimated actuarial losses.
ADP Indemnity recorded a pre-tax benefit of approximately $73 million in fiscal 2023 and a pre-tax benefit of approximately $61 million in fiscal 2022, which were primarily a result of changes in our estimated actuarial losses.
Year Ended June 30, 2022 Consolidated revenue growth as reported 10 % Adjustments: Impact of acquisitions — % Impact of foreign currency — % Consolidated revenue growth, organic constant currency 10 % Employer Services revenue growth as reported 8 % Adjustments: Impact of acquisitions — % Impact of foreign currency — % Employer Services revenue growth, organic constant currency 8 % FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2022, cash and cash equivalent s were $1.4 billion, which were primarily invested in time deposits and money market funds.
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.
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 $8 million im pact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2023.
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.
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, 2022, the obligations relating to these matters, which are expected to be paid in fiscal 2023, total $51,285.5 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, 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.
At June 30, 2022, ADP Indemnity had total assets of $612.0 million to satisfy the actuarially estimated unpaid losses of $533.9 million for the policy years since July 1, 2003. ADP Indemnity paid claims of $1.8 million and $3.3 million, net of insurance recoveries, in fiscal 2022 and 2021, 40 respectively.
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.
We had $49,569.2 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, 2022.
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.
Details of the reverse repurchase agreements are as follows: Years ended June 30, 2022 2021 Average outstanding balances $ 299.6 $ 136.7 Weighted average interest rates 0.7 % 0.2 % 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, 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.
Separately, ADP Indemnity paid a p remium of $284 million in Ju ly 2022 to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2023 policy year.
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.
At June 30, 2022 and 2021, there were $136.4 million and $23.5 million, respectively, of outstanding obligations related to the reverse repurchase agreements.
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.
GAAP measures, and they may not be comparable to similarly titled measures at other companies. 36 Years Ended June 30, % Change 2022 2021 As Reported Net earnings $ 2,948.9 $ 2,598.5 13 % Adjustments: Provision for income taxes 855.2 762.7 All other interest expense (a) 71.3 57.3 All other interest income (a) (7.1) (6.5) Transformation initiatives (b) 3.5 — Excess capacity severance charges — 2.9 Legal settlements — (30.7) Adjusted EBIT $ 3,871.8 $ 3,384.2 14 % Adjusted EBIT Margin 23.5 % 22.6 % Provision for income taxes $ 855.2 $ 762.7 12 % Adjustments: Transformation initiatives (c) 0.8 — Excess capacity severance charges — 0.5 Legal settlements — (7.5) Adjusted provision for income taxes $ 856.0 $ 755.7 13 % Adjusted effective tax rate (d) 22.5 % 22.7 % Net earnings $ 2,948.9 $ 2,598.5 13 % Adjustments: Transformation initiatives (b) 3.5 — Income tax benefit for transformation initiatives (c) (0.8) — Excess capacity severance charges — 2.9 Income tax benefit for excess capacity severance charges — (0.5) Legal settlements — (30.7) Income tax provision/ (benefit) for legal settlements — 7.5 Adjusted net earnings $ 2,951.6 $ 2,577.7 15 % Diluted EPS $ 7.00 $ 6.07 15 % Adjustments: Transformation initiatives (b) (c) 0.01 — Excess capacity severance charges — 0.01 Legal settlements — (0.05) Adjusted diluted EPS $ 7.01 $ 6.02 16 % (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.
GAAP 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.
Additionally, operating expenses increased due to increased costs to service our client base in support of our growing revenue, partially offset by a net reduction of $28.8 million in our estimated losses related to ADP Traditional Incorporated Cell, formerly known as ADP Indemnity, Inc. ("ADP Indemnity") and the impact of foreign currency.
Additionally, operating expenses increased due to increased costs to service our client base in support of our growing revenue, partially offset by the impact of foreign currency and a net reduction of $12.3 million in our estimated losses related to ADP Indemnity.
We expect capital expenditures in fiscal 2023 to be between $175 million and $200 million.
We expect capital expenditures in fiscal 2024 to be between $200 million and $225 million.
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. The expected client relationship period ranges from three to eight years.
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.
Such risks include liquidity risk, including the risk associated with our ability to liquidate, if necessary, our available-for-sale securities in a timely manner in order to satisfy our client funds obligations.
There are inherent risks and uncertainties involving our investment strategy relating to our client funds assets. Such risks include liquidity risk, including the risk associated with our ability to liquidate, if necessary, our available-for-sale securities in a timely manner in order to satisfy our client funds obligations.
A hy pothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rate s of 25 basis points appl ied to the estimated average investment balances and any related short-term borrowings would result in approx imately an $18 million i mpact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2023.
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.
As of June 30, 2022 and 2021, the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $98.1 million and $99.9 million, respectively.
As of June 30, 2023 and 2022, the Company's liabilities for unrecognized tax benefits, which include interest and penalti es, were $116.9 million and $98.1 million, respectively. 40
EXECUTIVE OVERVIEW Highlights from the year ended June 30, 2022 include: 10% 70 basis points 15% Revenue Growth Earnings Before Income Taxes Margin Expansion Diluted EPS Growth 10% 90 basis points 16% Organic Constant Currency Revenue Growth Adjusted EBIT Margin Expansion Adjusted Diluted EPS Growth 15% Employer Services New Business Bookings Growth 15% PEO Services Average Worksite Employee Growth $3.6B Cash Returned via Shareholder Friendly Actions $1.7B Dividends | $2.0B Share Repurchases We are the leading provider of cloud-based HCM technology solutions to employers around the world.
EXECUTIVE OVERVIEW Highlights from the year ended June 30, 2023 include: 9% 160 basis points 17% Revenue Growth Earnings Before Income Taxes Margin Expansion Diluted EPS Growth 10% 130 basis points 17% Organic Constant Currency Revenue Growth Adjusted EBIT Margin Expansion Adjusted Diluted EPS Growth 10% Employer Services New Business Bookings Growth 6% PEO Services Average Worksite Employee Growth $3.0B Cash Returned via Shareholder Friendly Actions $1.9B Dividends | $1.1B Share Repurchases We are a leading global provider of cloud-based Human Capital Management (“HCM”) technology solutions to employers around the world.
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 2022 and 2021 was 22.5% and 22.7%, respectively.
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.
The PEO average number of Worksite Employees increased 15% for fiscal 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 7% for fiscal 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 4.7% for the year ended June 30, 2023 as compared to the year ended June 30, 2022.
The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 18.7% to $32.5 billion in fiscal 2022 as compared to fiscal 2021, partially offset by the decrease in our average interest rate earned to 1.4% in fiscal 2022, as compared to 1.5% in fiscal 2021. 28 Total Expenses Years Ended June 30, 2022 2021 % Change Costs of revenues: Operating expenses $ 8,252.6 $ 7,520.7 10 % Systems development and programming costs 798.6 716.6 11 % Depreciation and amortization 410.7 403.0 2 % Total costs of revenues 9,461.9 8,640.3 10 % Selling, general and administrative expenses 3,233.2 3,040.5 6 % Interest expense 81.9 59.7 37 % Total expenses $ 12,777.0 $ 11,740.5 9 % For the year ended June 30: Operating expenses increased due to the increase in our PEO Services zero-margin benefits pass-through costs to $3,514.4 million from $3,092.0 million for the year ended June 30, 2022 and 2021, respectively.
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.
Money market funds must be rated AAA/Aaa-mf. 41 Details regarding our overall investment portfolio are as follows: Years ended June 30, 2022 2021 Average investment balances at cost: Corporate investments $ 4,241.3 $ 3,525.6 Funds held for clients 32,480.3 27,353.1 Total $ 36,721.6 $ 30,878.7 Average interest rates earned exclusive of realized losses/(gains) on: Corporate investments 1.0 % 1.0 % Funds held for clients 1.4 % 1.5 % Total 1.3 % 1.5 % Net realized losses/(gains) on available-for-sale securities 4.4 (11.3) As of June 30: Net unrealized pre-tax (losses)/gains on available-for-sale securities $ (1,721.4) $ 502.2 Total available-for-sale securities at fair value $ 28,391.6 $ 24,371.7 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, 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.
The annualized interest rate earned on our entire portfolio decreased from 1.5% for fiscal 2021 to 1.3% for fiscal 2022.
The annualized interest rate earned on our entire portfolio increased from 1.3% for fiscal 2022 to 2.4% for fiscal 2023.
PEO Services Revenues PEO Revenues Years Ended Change June 30, 2022 2021 $ % PEO Services' revenues $ 5,545.7 $ 4,818.3 $ 727.4 15 % Less: PEO zero-margin benefits pass-throughs 3,514.4 3,092.0 422.4 14 % PEO Services' revenues excluding zero-margin benefits pass-throughs $ 2,031.3 $ 1,726.3 $ 305.0 18 % PEO Services' revenues increased 15% for fiscal 2022 due to increases in average worksite employees of 15% for fiscal 2022, as compared to fiscal 2021, and due to an increase in zero-margin benefits pass-throughs.
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.
Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy.
Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy. See Note 8 of our Consolidated Financial Statements for a description of our short-term financing including commercial paper.
We minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by impounding, in virtually all instances, the client’s funds in advance of the timing of payment of such client’s obligation.
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 by the time we pay such client’s obligation.
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, 2022 was performed for all reporting units using a quantitative approach by comparing the fair value of each reporting unit to its carrying value.
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.
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.
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.
Selling, general and administrative expenses increased due to increased selling expenses as a result of investments in our sales organization, increased marketing expenses and increased travel expenses, partially offset by a decrease in our allowance for doubtful accounts of $26.0 million as a result of a decrease in estimated credit losses related to the impact of COVID-19 on our clients ("the decrease in our allowance for doubtful accounts").
Selling, general and administrative expenses increased due to increased selling expenses as a result of investments in our sales organization, increased marketing expenses, and a reversal of COVID-19 credit loss reserves of $26.0 million in 2022, partially offset by the impact of foreign currency.
Net cash flows used in investing activities changed due to the timing of proceeds and purchases of corporate and client funds marketable securities of $3,455.6 million, and higher payments related to acquisitions of intangibles and a business, offset by proceeds from the sale of property, plant, and equipment.
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.
(d) 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.
(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.
Net cash flows provided by financing activities changed due to a net increase in the cash flow from client funds obligations of $8,721.7 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, an increase in reverse repurchase agreements borrowing, and the settlement of cash flow hedges in the year ended June 30, 2021.
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.
Systems development and programming costs increased for fiscal 2022 due to increased investments and costs to develop, support, and maintain our new and existing products.
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.
See Note 8 of our Consolidated Financial Statements for a description of our short-term financing including commercial paper. 38 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, 2022 2021 $ Change Cash provided by (used in): Operating activities $ 3,099.5 $ 3,093.3 $ 6.2 Investing activities (7,014.4) (3,515.0) (3,499.4) Financing activities 13,653.4 6,437.5 7,215.9 Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents (98.7) 73.8 (172.5) Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 9,639.8 $ 6,089.6 $ 3,550.2 Net cash flows provided by operating activities was flat compared to prior year and includes a net unfavorable change in the components of operating assets and liabilities, due to timing on collections of accounts receivable and an increase in incentive compensation payments, offset by the growth in our underlying business (net income adjusted for non-cash adjustments), as compared to the year ended June 30, 2021 .
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 .
Other The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to our transformation office, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense. 35 Non-GAAP Financial Measures In addition to our GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods: Adjusted Financial Measures U.S.
Other The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to our transformation office, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense.
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.
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.
Our financial condition remains solid at June 30, 2022 and we remain well positioned to support our associates and our clients. 27 RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS Total Revenues For the year ended June 30, respectively: Total Revenues 10% YoY Growth 10% YoY Growth, Organic Constant Currency Revenues in fiscal 2022 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, and continued strong client retention.
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.
Earnings before Income Taxes PEO Services’ earnings before income taxes increased 21% in fiscal 2022, due to increased revenues discussed above and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by the increases in zero-margin benefits pass-throughs of $422.4 million for fiscal 2022. 34 For the year ended June 30, respectively: á 80 bps YoY Growth PEO Services' overall margin increased for fiscal 2022 due to an increase in revenues discussed above and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by by incremental pressure from growth in our zero-margin benefits pass-throughs.
Earnings before Income Taxes PEO Services’ earnings before income taxes increased 12% in fiscal 2023 due to increases in revenues discussed above and a net reduction of $12.3 million in our estimated losses related to ADP Indemnity, partially offset by the increases in zero-margin benefits pass-throughs of $286.5 million for fiscal 2023.
Capital Resources and Client Fund Obligations We have $3.0 billion of senior unsecured notes with maturity dates in 2025, 2028, and 2030. We may from time to time revisit the long-t erm debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure.
We may from time to time revisit the long-t erm debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure.
Other (Income)/Expense, net (In millions) Years ended June 30, 2022 2021 $ Change Interest income on corporate funds $ (41.0) $ (36.5) $ 4.5 Realized losses/(gains) on available-for-sale securities, net 4.4 (11.3) (15.7) Impairment of assets 23.0 19.9 (3.1) Gain on sale of assets (7.5) (9.8) (2.3) Non-service components of pension income, net (61.7) (58.6) 3.1 Other (income)/expense, net $ (82.8) $ (96.3) $ (13.5) Other (income)/expense, net, decreased $13.5 million in fiscal 2022 , as compared to fiscal 2021 primarily as a result of losses on available-for-sale securities, net, in the current year, compared to gains in the prior year, and the items described below, partially offset by the change in non-service components of pension income, net.
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.
We purchased approximately 9.2 million shares of our common stock at an average price per share o f $214.40 du ring fis cal 2022, as compared to purchases of 8.2 million shares at an average price per share of $170.04 during fiscal 2021.
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.
From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.
The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions. Capital Resources and Client Fund Obligations We have $3.0 billion of senior unsecured notes with maturity dates in 2025, 2028, and 2030.
Earnings Before Income Taxes For the year ended June 30, respectively: á 13% YoY Growth á 70 bps YoY Growth 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, 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.
The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with the Company’s operating strategy.
The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with the Company’s operating strategy. Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.
The decrease in t he effective tax rate is primarily due to a favorable earnings mix, lower reserves for uncertain tax positions, and an intercompany transfer of certain assets in fiscal 2022, partially offset by favorable adjustments to prior year tax liabilities and a foreign tax election in fiscal 2021.
Provision for Income Taxes The effective tax rate in fiscal 2023 and 2022 was 23.1% and 22.5%, respectively. The increase in t he effective tax rate is primarily due to an intercompany transfer of certain assets that resulted in a lower effective tax rate in fiscal 2022 and higher reserves for uncertain tax positions in fiscal 2023.
Unlike other severance charges which are not included as an adjustment to get to adjusted results, these specific charges relate to actions taken as part of our broad-based, company-wide transformation initiative. (c) The income tax provision/(benefit) was calculated based on the marginal rate in effect for the year ended June 30, 2022.
Unlike other severance charges which are not included as an adjustment to get to adjusted results, these specific charges relate to actions taken as part of our broad-based, company-wide transformation initiatives. (c) Represents net charges (reserves and insurance recovery) from legal matters during fiscal 2023.
ADP Indemnity provides workers’ compensation and employer’s liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence.
Margin PEO Services' overall margin increased for fiscal 2023 due to increases in revenues discussed above, lower state unemployment and workers compensation insurance costs, and changes in our estimated losses related to ADP Indemnity, partially offset by increases in selling expenses. 32 ADP Indemnity provides workers’ compensation and employer’s liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence.
Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses. 43 We completed our annual assessment of goodwill as of June 30, 2022 and determined that there was no impairment of goodwill.
We completed our annual assessment of goodwill as of June 30, 2023 and determined that there was no impairment of goodwill.
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, partially offset by the decrease of $26.0 million in our allowance for doubtful accounts. 33 For the year ended June 30, respectively: á 110 bps YoY Growth Employer Services' margin increased due to increases in revenues discussed above, operational efficiencies, and the decrease of $26.0 million in our allowance for doubtful accounts, partially offset by an increase in costs to service our client base in support of our growing revenue.
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.
Overall margin increased due to increases in revenues discussed above, operational efficiencies, the decrease of $26.0 million in our allowance for doubtful accounts, and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by incremental pressure from growth in our zero-margin benefits pass-throughs. 30 Adjusted Earnings before certain Interest and Taxes ("Adjusted EBIT") For the year ended June 30, respectively: á 14% YoY Growth á 90 bps YoY Growth Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds extended investment strategy, and net charges, including gain on sale of assets related to our broad-based transformation initiatives and the impact of net severance charges, as applicable, in the respective periods.
Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds extended investment strategy, and net charges, including gain on sale of assets related to our broad-based transformation initiatives and the impact of net severance charges relating to these initiatives, as applicable, in the respective periods.
We regularly review our deferred costs for impairment. There were no impairment losses incurred during the fiscal years ended June 30, 2022, June 30, 2021, or June 30, 2020. Goodwill. Description Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired.
Actual retention rates were not materially different than those used in our calculation to determine the amortization period. We regularly review our deferred costs for impairment. There were no impairment losses incurred during the fiscal years ended June 30, 2023, June 30, 2022, or June 30, 2021. Goodwill.
Additionally, there was an increase in average interest rates for commercial paper borrowings to 0.4% for the year ended June 30, 2022, as compared to 0.1% for the year ended June 30, 2021.
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 .

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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.” 44
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

Other ADP 10-K year-over-year comparisons