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ADP (ADP) Tops Q2 EPS by 8c, Offers FY Guidance

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January 29, 2020 6:58 AM EST

ADP (NASDAQ: ADP) reported Q2 EPS of $1.52, $0.08 better than the analyst estimate of $1.44. Revenue for the quarter came in at $3.7 billion versus the consensus estimate of $3.69 billion.

Fiscal 2020 Outlook
Certain components of ADP’s fiscal 2020 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 2019 pre-tax charges of about $138 million related to transformation initiatives
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Fiscal 2019 pre-tax gain of about $16 million related to sale of assets
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Fiscal 2020 pre-tax charges of about $30 million related to transformation initiatives
Consolidated Fiscal 2020 Outlook
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Revenue growth of about 6%
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Adjusted EBIT margin up 100 to 125 basis points
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Adjusted effective tax rate of 23.2%
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Diluted EPS growth of 14% to 16%
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Adjusted diluted EPS growth of 12% to 14%
Employer Services Segment Fiscal 2020 Outlook
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Employer Services revenue growth of about 4%
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Employer Services margin up 100 to 125 basis points
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Employer Services New Business Bookings growth of 6% to 7%
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Employer Services client revenue retention up 10 to 20 basis points
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Increase in pays per control of 2.5%
PEO Services Segment Fiscal 2020 Outlook
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PEO Services revenue growth of 9% to 10%
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PEO Services revenue growth excluding zero-margin benefits pass-throughs of 7% to 8%
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PEO Services margins flat to down 25 basis points; this outlook reflects approximately 50 basis points of anticipated grow-over pressure related to workers' compensation reserve reductions at ADP Indemnity in fiscal 2019
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PEO Services Average Worksite Employee growth of 7% to 8%
Client Funds Extended Investment Strategy Fiscal 2020 Outlook
The interest assumptions in our outlook are based on Fed Funds futures contracts and forward yield curves as of January 28, 2020. The Fed Funds futures contracts are used in the client short and corporate cash interest income outlook. The three-and-a-half and five-year U.S. government agency rates based on the forward yield curves as of January 28, 2020 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 of $570 to $580 million; this is based on anticipated growth in average client funds balances of ~4% from $25.5 billion in fiscal 2019, and an average yield which is anticipated to be about flat as compared to 2.2% in fiscal 2019
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Total contribution from the client funds extended investment strategy of $575 to $585 million

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


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