ADP Reports Third Quarter Fiscal 2008 Results; Confirms Fiscal 2008 Revenue and EPS from Continuing Operations Growth Forecasts

Business Wire,  May 1, 2008  

Tags: Automatic Data Processing Inc.

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ADP delivered 12% revenue growth and 18% diluted earnings per share from continuing operations growth in its fiscal third quarter. Segment operating results, including improved margins, and the benefit of fewer shares outstanding, resulted in strong EPS growth.

ROSELAND, N.J. -- Automatic Data Processing, Inc. (NYSE:ADP) announced 12% revenue growth to $2.4 billion for the third fiscal quarter ended March 31, 2008, Gary C. Butler, president and chief executive officer, announced today. Revenue growth benefited over 2% from favorable foreign exchange rates during the quarter. Pretax and net earnings from continuing operations grew 11% and 12%, respectively, compared with last year's third quarter. Diluted earnings per share from continuing operations of $0.77 increased 18% from $0.65 a year ago on fewer average shares outstanding.

Fiscal year to date, ADP acquired nearly 24 million shares of its stock for treasury at a cost of almost $1.1 billion. At March 31, 2008, cash and marketable securities balances were $1.7 billion.

"I am pleased with the solid results ADP achieved for the third quarter," Mr. Butler commented. "We are in the midst of a challenging economy, and as a result, growth in both new business sales and the number of employees on our clients' payrolls moderated in the quarter. We have seen a lengthening of the sales cycle in the high-end of the market in National Accounts Services and GlobalView. Therefore, we have revised our forecast for the year to high single-digit new business sales growth, which is within our original forecast of high single-digit to low double-digit growth."

Employer Services

"Employer Services' revenues increased 9% for the third quarter, 8% organically, compared with a year ago. In the United States, revenues from our traditional payroll and payroll tax filing business grew 8%, and our beyond payroll revenues, excluding PEO Services revenues, grew 13%. The number of employees on our clients' payrolls in the United States increased 1.1% as measured on a same store sales basis for our Major Accounts Auto Pay clients. Pay growth in Europe continued to be positive compared with last year. During this critical year-end retention period, worldwide client retention increased 90 basis points over the prior year's third quarter. Employer Services' pretax margin improved 90 basis points as a result of continued operating leverage."

"Combined new business sales for Employer Services and PEO Services grew over 4% worldwide. New business sales represent annualized recurring revenues anticipated from new orders. The quarter's new business sales were strong in Small Business Services, Major Accounts Services, and in our International in-country business. Sales at the high-end of the market in National Accounts Services and GlobalView have moderated, reflecting a lengthening of the sales cycle, as evidenced by sales that we anticipated closing in the third quarter that instead closed in April."

PEO Services

"PEO Services' revenues increased 20% for the third quarter, all organic, compared with a year ago. PEO Services' pretax margin improved 70 basis points. Average worksite employees paid by PEO Services increased 17% to approximately 181,000 compared with the third quarter of fiscal 2007."

Dealer Services

"Dealer Services' revenues increased 8% for the third quarter, over 5% organically, compared with a year ago. Overall new business sales growth slowed with strong sales in beyond the core Dealer Management Systems (DMS) solutions offsetting slower growth in the core DMS. Dealer Services' pretax margin expanded 40 basis points in the quarter compared with a year ago from increased operating leverage, partially offset by costs relating to the acquisitions of three Autoline distributors that were completed earlier in the year."

Client Funds

"Interest on funds held for clients was flat compared to last year's third quarter, at $198.5 million, due to a 6.2% increase in average client funds balances to $18.7 billion, offset by a lower average interest yield of nearly 30 basis points to 4.2% from an average interest yield of 4.5% last year, excluding gains and losses."

Fiscal 2008 Forecast

"Although ADP has been somewhat impacted by the slowing economy, we continue to anticipate strong revenue and earnings per share growth for fiscal 2008. We remain confident in attaining our revenue growth forecast of 12% to 13%, which includes approximately two percentage points from foreign exchange rates. We are equally confident in achieving the high end of our earnings per share growth forecast of 18% to 21% in diluted earnings per share from continuing operations, up from $1.80 in fiscal 2007, which excludes the net one-time gain recorded in the first quarter of fiscal 2007."

"For Employer Services, we anticipate revenue growth of nearly 10%. We are narrowing our forecasted pretax margin expansion for Employer Services to 80 to 100 basis points from our previous forecast of 70 to 110 basis points. For PEO Services, we continue to anticipate 19% to 20% revenue growth and pretax margin expansion of 50 to 90 basis points. We are forecasting high single-digit new business sales growth worldwide for Employer Services and PEO Services on a combined basis, which is slightly lower than our previous forecast of high single-digit to low double-digit growth. For Dealer Services, we anticipate nearly 9% revenue growth. We are lowering our forecasted pretax margin expansion for Dealer Services to about 70 basis points from our previous forecast of 70 to 90 basis points improvement."