Automatic Data Processing reported before the market opened on January 27, 2021, it earned $1.51 per diluted share in the quarter that ended on December 31, 2020, up 1 percent from earnings of $1.50 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Adjusted net earnings (non-GAAP) were unchanged from one year earlier at $1.52 per share. The exclusions responsible for the $0.01 per share difference in the latest quarter between the GAAP and non-GAAP earnings were: Transformation initiatives [$0.01 per share]. Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.
This post compares the quarterly Income Statement published by ADP to the estimates I made in a previous “Look Ahead” post. My estimates were based on publicly available guidance provided by ADP's management to financial analysts, news reports, and trends in the company's historical results. Unless otherwise mentioned, all reported values mentioned below are GAAP figures.
First, a little background about the company: ADP provides "human capital management" and human resource outsourcing services, such as payroll, benefits, and personnel management, to numerous firms around the world. These services are increasingly cloud-based. In the company's most recent fiscal year, ADP "processed and delivered more than 69 million employee year-end tax statements, and moved more than $2.2 trillion in client funds."
The following table is a simplified version of ADP's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions. Figures from the year-earlier quarter are also provided for comparative purposes.
Revenue in the December 2020 quarter totaled $3.7 billion, 1 percent more than last year. The Employer Services business was responsible for 68 percent of overall revenue, and this unit's revenue percent fell by 1.1 percent compared to the year-earlier result. The PEO Services business contributed 32 percent of revenue, and this unit's revenue increased by 4.5 percent.
I was expecting ADP to report revenue of $3.7 billion for the December 2020 quarter. The actual amount fell short of my estimate by $4.3 million (0.1 percent).
The Cost of Revenue (also known as Cost of Goods Sold) was $1.8 billion in the latest quarter, which translates into a Gross Margin of 50.0 percent of revenue. I was expecting the Gross Margin to be 49.0 percent in the December 2020 quarter, and ADP exceeded that prediction by 1.0 percent.
ADP spent $175 million on Research and Development in the latest quarter, up from $169 million one year ago. I had estimated that R&D expenses would be $174 million. R&D was 4.7 percent of Revenue.
Sales, General, and Administrative expenses totaled $756 million in the December 2020 quarter, up from $754 million one year ago. SG&A expenses decreased from 20.6 percent to 20.5 percent of quarterly revenue, which shows ADP spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 21.0 percent of revenue, and the reported data show that the actual percentage was lower than that prediction.
ADP's Operating Income was $818 million in the quarter, down 0.4 percent from the year-earlier period. Operating Income exceeded my $762 million estimate by $56 million.
Interest and other non-operating items summed to a net income of $15 million. My estimate for non-operating items was $15 million.
The effective income tax rate rose by 0.2 percent to 22.2 percent, which had a negative effect on net income. I expected the tax rate to be 23.0 percent.
Net income in the quarter attributable to ADP was $648 million, $1.51 per share. The figures for the year-earlier quarter were $652 million, $1.50/share. My earnings estimate for ADP in this quarter was $598 million ($1.39/share).
In summary, Automatic Data Processing earned in the December 2020 quarter more than I had expected. The company had better than predicted Gross Margin, Operating Income growth, and Income tax rate.
This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed. Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company. These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).
#adp #gauges #gcfr #gcfr2 #QtrlyRpt #nac_financialanalysis
No comments:
Post a Comment