Common-Size Income Statement
Quarterly Data
Automatic Data Processing Inc., common-size consolidated income statement (quarterly data)
Based on: 10-Q (reporting date: 2022-03-31), 10-Q (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-K (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-Q (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-K (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-K (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-K (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-K (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-K (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30).
- Revenue Composition and Trend
- The proportion of revenues derived from sources other than interest on funds held for clients and PEO revenues shows a gradual decrease from approximately 71.06% in the third quarter of 2015 to about 63.87% by the first quarter of 2022. Concurrently, Professional Employer Organization (PEO) revenues as a percentage of total revenues exhibit a steady increase, rising from 25.7% to 33.52% over the same period. The interest on funds held for clients fluctuates slightly, peaking at 4.35% in the first quarter of 2019 before declining to around 2.61% in early 2022.
- Operating Expenses
- Operating expenses as a percentage of revenues have remained relatively consistent, with minor fluctuations around the mid-50% range, showing a slight improvement in cost efficiency in some periods, such as the first quarters of 2018 and 2020 when the ratio approaches 48-49%. Systems development and programming costs fluctuate modestly, generally ranging between 4.16% and 5.75%, with a mild downward trend in later periods. Depreciation and amortization costs remain stable between 1.65% and 2.98%, with a tendency to increase slightly over time. Overall, costs of revenues demonstrate a slight improvement, decreasing from nearly 61% in the second quarter of 2020 to around 55.67% by the first quarter of 2022, suggesting effective cost control measures.
- Profitability Measures
- Gross profit percentages show variability but maintain an upward trend overall, reaching over 44% in multiple quarters including the first quarter of 2019, the first quarter of 2021, and again in the first quarter of 2022. Selling, general, and administrative expenses fluctuate between approximately 18% and 27%, with the highest spikes occurring sporadically but generally trending downward toward the end of the observed period. This containment of SG&A expenses has positively influenced operating income, which also exhibits significant volatility but generally improves over time—peaking above 26% in the first quarter of 2022. Interest expense shows a decline from a peak near 1.14% to a low around 0.33%, indicating reduced financing costs relative to revenue.
- Other Income and Earnings
- Other income (expense), net, displays substantial volatility, with notable outliers such as a 7.63% spike in the fourth quarter of 2016 and a sharp negative 8.93% in the second quarter of 2018. Excluding these anomalies, it remains positive but modest. Earnings from continuing operations before income taxes mirror operating income trends but are influenced by these fluctuations in other income. The effective income tax provision varies widely but tends to average around 4-6% of revenues, with some quarters showing reduced tax rates significantly improving net earnings. Net earnings from continuing operations generally follow the trajectory of pre-tax earnings and net of tax effects, increasing from approximately 12.4% in late 2015 to above 20% in the first quarter of 2022, indicating a strong profitability improvement over the period.
- Overall Financial Performance
- The data reveal a company experiencing controlled revenue composition shifts, with growing reliance on PEO revenues and declining emphasis on other revenue sources. Cost management appears effective as key cost ratios stabilize or improve slightly, contributing to enhanced gross and operating margins. Despite some volatility in other income and tax provisions, net earnings demonstrate an overall upward trend in profitability relative to revenues. The company shows resilience and improvement in operating and net income generation capacity, particularly evident in the later quarters of the period analyzed.