Stock Analysis on Net
AI Tokens
Stock Analysis on Net

Automatic Data Processing Inc. (NASDAQ:ADP)

This company has been moved to the archive! The financial data has not been updated since April 29, 2022.

Common-Size Income Statement

Automatic Data Processing Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Revenues, other than interest on funds held for clients and PEO revenues 65.10 65.38 66.14 67.43 68.81 70.57
Interest on funds held for clients 2.81 3.74 3.96 3.50 3.21 3.23
Professional Employer Organization (PEO) revenues 32.08 30.89 29.89 29.07 27.98 26.20
Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Operating expenses -50.12 -50.75 -50.41 -52.06 -51.83 -51.64
Systems development and programming costs -4.78 -4.62 -4.49 -4.73 -5.07 -5.17
Depreciation and amortization -2.69 -2.51 -2.15 -2.06 -1.83 -1.81
Costs of revenues -57.58% -57.88% -57.05% -58.85% -58.72% -58.63%
Gross profit 42.42% 42.12% 42.95% 41.15% 41.28% 41.37%
Selling, general, and administrative expenses -20.26 -20.58 -21.62 -22.30 -22.48 -22.60
Operating income 22.16% 21.53% 21.34% 18.85% 18.80% 18.77%
Interest expense -0.40 -0.73 -0.92 -0.77 -0.65 -0.48
Interest income on corporate funds 0.24 0.58 0.69 0.63 0.62 0.53
Realized gains (losses) on available-for-sale securities, net 0.08 0.09 -0.01 -0.02 0.02 -0.04
Impairment of assets -0.13 -0.20 -0.09 0.00 0.00 0.00
Gain on sale of assets 0.05 0.04 0.03 0.01 0.00 0.12
Gain on sale of investment 0.01 0.00 0.11 0.00 0.00 0.00
Gain on sale of business 0.00 0.00 0.00 0.00 1.66 0.25
Non-service components of pension income (expense), net 0.39 0.51 0.05 -2.40 0.00 0.00
Other income (expense), net 0.64% 1.01% 0.78% -1.79% 2.30% 0.86%
Earnings from continuing operations before income taxes 22.40% 21.81% 21.20% 16.29% 20.45% 19.15%
Provision for income taxes -5.08 -4.91 -5.03 -4.13 -6.44 -6.35
Net earnings from continuing operations 17.32% 16.91% 16.17% 12.16% 14.00% 12.80%
Net loss from discontinued operations 0.00 0.00 0.00 0.00 0.00 -0.01
Net earnings 17.32% 16.91% 16.17% 12.16% 14.00% 12.79%

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

A longitudinal analysis of the common-size income statement reveals a consistent improvement in overall profitability and a strategic shift in the composition of revenue streams. Net earnings as a percentage of revenue increased from 12.79% in 2016 to 17.32% by 2021, driven primarily by expanding operating margins and disciplined expense management.

Revenue Mix Evolution
A clear transition in revenue sources is evident. Professional Employer Organization (PEO) revenues grew steadily from 26.20% of total revenues in 2016 to 32.08% in 2021. This growth was offset by a corresponding decline in revenues from other sources, which fell from 70.57% to 65.10% over the same period. Interest on funds held for clients remained relatively stable, though it experienced a peak of 3.96% in 2019 before declining to 2.81% in 2021.
Cost Structure and Gross Margin
Gross profit margins demonstrated a positive trend, rising from 41.37% in 2016 to 42.42% in 2021. This expansion is attributed to a gradual reduction in the cost of revenues, which decreased from 58.63% to 57.58%. While depreciation and amortization costs saw a slight increase as a percentage of revenue, reaching 2.69% in 2021, these were outweighed by broader efficiencies in the cost of services.
Operating Efficiency
Operating income grew significantly from 18.77% in 2016 to 22.16% in 2021. This improvement was heavily supported by a reduction in selling, general, and administrative (SG&A) expenses, which contracted from 22.60% to 20.26% of revenues. The data indicates a strong application of operating leverage, where revenue growth outpaced the growth of fixed and semi-variable operating costs.
Non-Operating Items and Net Profitability
Earnings before income taxes showed volatility due to non-service components of pension income/expense, which fluctuated from a cost of 2.40% in 2018 to an income of 0.39% in 2021. Interest expenses peaked in 2019 at 0.92% before dropping to 0.40% in 2021. The provision for income taxes remained relatively stable, averaging around 5% of revenues in the final three years of the period, ultimately allowing the net earnings margin to expand from 12.79% to 17.32%.

AI Ask an analyst for more

My previous chats

Add tokens

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?