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ADP (ADP) Tops Q2 EPS by 16c, Offers Guidance

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January 30, 2019 7:05 AM EST

ADP (NASDAQ: ADP) reported Q2 EPS of $1.34, $0.16 better than the analyst estimate of $1.18. Revenue for the quarter came in at $3.51 billion versus the consensus estimate of $3.44 billion.

Fiscal 2019 Outlook
Certain components of ADP’s fiscal 2019 outlook and related growth comparisons exclude the impact of the following items and are discussed on an adjusted basis where applicable. Please refer to the accompanying financial tables for a reconciliation of these adjusted amounts to their closest comparable GAAP measure.
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Fiscal 2018 pre-tax proxy contest charges of about $33 million.
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Fiscal 2018 one-time net tax benefit of about $184 million from the Tax Cuts and Jobs Act.
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Fiscal 2018 pre-tax charges of about $405 million related to the Voluntary Early Retirement Program, the Service Alignment Initiative, and other transformation initiatives.
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Fiscal 2019 pre-tax charges of about $112 million related to the Voluntary Early Retirement Program, the Service Alignment Initiative and other transformation initiatives.
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Fiscal 2019 one-time transition benefit of about $1 million from the Tax Cuts and Jobs Act.
Comparisons to prior outlook are provided in the table below.
Consolidated Fiscal 2019 Outlook
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Revenue growth of 6% to 7%.
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Adjusted EBIT margin up 125 to 150 basis points from 20.7% in fiscal 2018.
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Diluted EPS growth of 20% to 22% from $4.25 in fiscal 2018.
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Adjusted diluted EPS growth of 17% to 19% from $4.53 in fiscal 2018.
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Adjusted effective tax rate of 24.4%.
Reportable Segments Fiscal 2019 Outlook
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Employer Services revenue growth of 5% to 6%.
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Employer Services margins up 175 to 200 basis points.
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Employer Services New Business Bookings growth of 6% to 8%.
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Employer Services client revenue retention up 25 to 50 basis points.
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Increase in pays per control of 2.5%.
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PEO average Worksite Employee growth of 8% to 9%.
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PEO revenue growth of 9% to 10%.
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PEO revenue growth excluding zero-margin benefits pass-throughs of 8% to 9%.
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PEO margins at least flat. This outlook continues to reflect approximately 50 basis points of anticipated grow-over pressure related to workers' compensation reserve reductions at ADP Indemnity.
Client Funds Extended Investment Strategy Fiscal 2019 Outlook
The interest assumptions in our outlook are based on Fed Funds futures contracts and forward yield curves as of January 29, 2019. The Fed Funds futures contracts used in the client short and corporate cash interest income outlook assume no further increases during the fiscal year. The three-and-a-half and five-year U.S. government agency rates based on the forward yield curves as of January 29, 2019 were used to forecast new purchase rates for the client and corporate extended, and client long portfolios, respectively.
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Interest on funds held for clients up $90 to $100 million. This is based on anticipated growth in average client funds balances of about 4% from $24.3 billion in fiscal 2018, and an average yield which is anticipated to increase about 30 basis points to 2.2% compared to the fiscal 2018 average yield of 1.9%.
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Total contribution from the client funds extended investment strategy up $70 to $80 million.

For earnings history and earnings-related data on ADP (ADP) click here.


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