Automatic Data Processing Inc. (NASDAQ:ADP)

The analysis of the annual financial data reveals the following trends and observations over the six-year period ending June 30, 2021.

Current Assets

The current assets initially declined from US$39,500,400 thousand in 2016 to US$32,658,700 thousand in 2017 and further to US$32,050,000 thousand in 2018, indicating a decreasing trend in liquidity during this period. A mild recovery occurred in 2019 with an increase to US$34,342,300 thousand. However, in 2020, current assets again decreased to US$31,564,100 thousand, reaching the lowest point in this timeline. The year 2021 showed a significant improvement with current assets rising sharply to US$40,741,800 thousand, surpassing the initial 2016 level. Overall, the current assets exhibit volatility, with a downward trend for the first four years followed by a bounce back in the last period.

Adjusted Current Assets

The adjusted current assets closely mirror the pattern observed in current assets. From US$39,538,500 thousand in 2016, adjusted current assets dipped to US$32,708,300 thousand in 2017 and slightly up to US$32,101,300 thousand in 2018. A slight increase occurred in 2019 with US$34,397,200 thousand, before a decrease to US$31,656,600 thousand in 2020. In 2021, there was a marked increase to US$40,821,400 thousand. The adjusted figures consistently track the unadjusted current assets with minimal differences, indicating stability in adjustments applied and confirming the overall cash and liquidity position trends.

Total Assets

The total assets exhibited a fluctuating trend over the six-year period. From June 2016 to June 2017, a significant decrease was observed, with total assets declining from approximately 43.67 billion US dollars to around 37.18 billion US dollars. This decline plateaued in the following year, as the value remained almost constant between June 2017 and June 2018. Subsequently, total assets increased noticeably in June 2019, reaching approximately 41.89 billion US dollars. However, this value decreased again in June 2020 to roughly 39.17 billion US dollars before showing a marked increase in June 2021, reaching a peak of approximately 48.77 billion US dollars, the highest point in the observed period.

Adjusted Total Assets

Adjusted total assets followed a similar pattern to total assets throughout the years. Starting from 44.05 billion US dollars in June 2016, there was a consistent decline until June 2017, after which the figures stabilized slightly through June 2018. In June 2019, adjusted total assets increased just above 42.42 billion US dollars, followed by a decrease to approximately 39.22 billion US dollars in June 2020. The final recorded value in June 2021 showed a substantial rise to around 48.80 billion US dollars. Overall, the adjusted total assets moved closely alongside total assets with only minor differences in magnitude.

Insights

Both total assets and adjusted total assets demonstrate variability over time, reflecting changes in the asset base due to potential operational adjustments, acquisitions, divestitures, or other financial activities. The sharp decline between 2016 and 2017 suggests a significant reduction in asset holdings or revaluation. The recovery and subsequent growth after 2019 indicate positive asset accumulation, with the peak in 2021 suggesting a strong asset base. The close correlation between total and adjusted assets indicates consistency in asset valuation approaches over the period.

Current Liabilities

Current liabilities exhibited fluctuations over the analyzed periods. Starting at approximately 35.85 billion US dollars in mid-2016, there was a significant decline to roughly 29.82 billion in mid-2017. This was followed by a modest increase through 2018 and 2019, reaching above 32.6 billion. Mid-2020 saw a decrease again to about 30.13 billion, but a notable jump occurred by mid-2021, with current liabilities increasing sharply to 38.09 billion US dollars.

Adjusted Current Liabilities

Adjusted current liabilities mirrored the general trend of current liabilities closely but were consistently slightly lower in value. Beginning near 35.61 billion in mid-2016, these liabilities decreased to around 29.58 billion in mid-2017. The values then edged upward through 2018 and peaked again in mid-2019 at approximately 32.41 billion. Following a decline to about 29.91 billion in mid-2020, there was a sharp increase by mid-2021 to around 37.89 billion.

Total liabilities

Total liabilities experienced notable fluctuations over the six-year period. Starting at approximately 39.2 billion US dollars in mid-2016, there was a significant decline to about 33.2 billion by mid-2017. This downward trend largely stabilized in 2018 and 2020, with liabilities remaining around the 33 to 36 billion range, although a slight increase occurred in 2019. A marked increase was observed in 2021, when total liabilities rose sharply to approximately 43.1 billion, representing the highest point in the period analyzed.

Adjusted total liabilities

The adjusted total liabilities closely mirrored the pattern of the total liabilities throughout the period. Beginning slightly lower than total liabilities at roughly 38.8 billion in 2016, adjusted liabilities declined steadily to the lowest point of about 32.1 billion by mid-2020. A pronounced increase followed in 2021, rising to approximately 42.1 billion, again the peak in the series. Overall, the adjusted figures track total liabilities with slight differences, generally maintaining a consistent spread lower than the unadjusted totals.

Stockholders’ equity

The stockholders' equity showed a decreasing trend from June 30, 2016, to June 30, 2018, declining from $4,481,600 thousand to $3,459,600 thousand. However, a notable reversal occurred starting in 2019, with equity increasing sharply to $5,399,900 thousand, and continuing to rise to $5,752,200 thousand in 2020. In 2021, there was a slight decline to $5,670,100 thousand. This pattern indicates initial contraction followed by a strong recovery and stabilization at a higher level than the starting period.

Adjusted stockholders’ equity

The adjusted stockholders' equity followed a similar trajectory but with consistently higher values compared to the unadjusted stockholders’ equity. It decreased from $5,284,800 thousand in 2016 to $4,132,400 thousand in 2018, then experienced a significant increase peaking at $7,121,000 thousand in 2020. In 2021, it decreased moderately to $6,750,700 thousand. This suggests adjustments made to accounting items or revaluations consistently increased the equity base, with trends closely mirroring the overall equity pattern of reduction followed by substantial growth and slight moderation.

Overall analysis

The data indicates that the company experienced a contraction in equity during the first three years covered, potentially reflecting losses, dividend distributions, or other equity-reducing events. Beginning in 2019, there was a pronounced rebound in equity levels, both adjusted and unadjusted, indicating improved profitability, capital inflows, or adjustments favoring equity growth. The slight decline observed in 2021 after peak equity levels in 2020 might reflect partial retractions or distributions. The adjusted equity remaining consistently above the reported equity suggests the presence of upward adjustments or reclassifications that affect the reported equity but provide a higher valuation basis.

The financial data reveals several notable trends in the company’s capital structure over the period from mid-2016 to mid-2021. Both reported and adjusted figures are provided for debt, equity, and total capital, offering insights into changes based on different accounting treatments or adjustments.

Total Reported Debt

Reported debt remained relatively stable from 2016 to 2018, fluctuating slightly around approximately 2 billion US dollars. A significant increase occurred in 2019 to over 2.26 billion, followed by a reduction in 2020, and a sharp rise again in 2021 reaching approximately 3 billion dollars.

Stockholders’ Equity (Reported)

Stockholders’ equity displayed a downward trend from 2016 through 2018, declining from roughly 4.48 billion to around 3.46 billion. However, there was a strong rebound in 2019, surging to nearly 5.4 billion, and this upward momentum continued into 2020, peaking at approximately 5.75 billion before a marginal decrease in 2021.

Total Reported Capital

Reported total capital, representing the sum of reported debt and equity, decreased from 6.49 billion in 2016 to 5.46 billion in 2018, reflecting the combined impact of decreasing equity and stable debt. It then rose markedly in 2019 and 2020, reaching about 7.77 billion, and further increased to nearly 8.68 billion in 2021, driven largely by increases in debt and equity components.

Adjusted Total Debt

The adjusted debt figures closely mirror the reported debt trends but consistently show higher values. The amount rose modestly from 2.45 billion in 2016 to 2.49 billion in 2018, increased to around 2.81 billion in 2019, then decreased to 2.46 billion in 2020, followed by a significant rise to 3.45 billion in 2021. These fluctuations indicate adjustments that amplify the debt reporting, especially in the latter years.

Adjusted Stockholders’ Equity

Adjusted equity shares a similar trend to reported equity but at higher values, starting at 5.28 billion in 2016 and dropping to 4.13 billion in 2018. It then shows a strong increase, peaking at approximately 6.67 billion in 2019 and further climbing to about 7.12 billion in 2020, before a slight decline to 6.75 billion in 2021. The adjustment implies a more robust equity base than the reported figures suggest, particularly after 2018.

Adjusted Total Capital

Adjusted total capital, summing adjusted debt and equity, exhibits a noticeable growth trajectory: declining from 7.74 billion in 2016 to 6.62 billion in 2018, followed by a sharp increase to roughly 9.48 billion in 2019. This upward trend continues modestly into 2020 and 2021, with total adjusted capital reaching just over 10.2 billion in the last reported period. This trend underscores an expansion in overall financial resources when considering adjustments.

Overall, the data points to a period of contraction in equity and capital between 2016 and 2018, offset by relatively stable debt levels. From 2019 onwards, there is a clear turnaround characterized by substantial growth in both equity and capital, alongside variable debt levels with significant increases in the most recent year. Adjusted measures consistently present a larger financial base than reported figures, emphasizing the importance of accounting adjustments in assessing the company’s capital structure. The substantial rise in both reported and adjusted total capital in recent years may reflect strategic financing activities, investment growth, or other operational developments influencing the company’s financial positioning.

Revenue Trends

The company’s revenues exhibited steady growth over the six-year period analyzed. Starting from approximately 11.67 billion USD in mid-2016, revenues increased each year, reaching about 15.01 billion USD by mid-2021. This indicates a compound growth trend with no observed periods of decline, suggesting consistent market demand or successful business expansion.

Adjusted Revenue Analysis

Adjusted revenues closely follow the trend of reported revenues, with values marginally higher in most years. Beginning at roughly 11.69 billion USD in 2016 and escalating to nearly 14.99 billion USD in 2021, the adjusted figures reflect minor adjustments for specific items not detailed here but likely aim to provide a clearer picture of recurring operational income. The convergence of these figures supports the accuracy and reliability of revenue recognition practices.

Growth Rate Observations

The annual increments in revenue appear consistent, with no drastic fluctuations. The year-over-year increase ranges progressively, indicating steady expansion rather than volatile growth spikes. Adjusted revenues maintain this pattern, supporting the inference of sustainable operational improvements.

The financial data reveals trends in net earnings and adjusted net earnings over a six-year period ending June 30, 2021. The analysis highlights the overall growth trajectory and fluctuations within these two key profitability metrics.

Net Earnings

Net earnings increased steadily from 2016 to 2017, rising from approximately 1.49 billion USD to 1.73 billion USD. In 2018, a slight decrease occurred, bringing net earnings down to around 1.62 billion USD. This was followed by a substantial rise in 2019, reaching approximately 2.29 billion USD. The upward trend continued in 2020 and 2021, with net earnings growing to roughly 2.47 billion USD and 2.60 billion USD, respectively. Overall, net earnings show a positive growth trend with a notable spike in 2019.

Adjusted Net Earnings

Adjusted net earnings exhibit some volatility compared to net earnings. From 2016 to 2017, adjusted net earnings decreased slightly from about 1.57 billion USD to 1.60 billion USD, followed by a more pronounced decline in 2018 to approximately 1.34 billion USD. A significant rebound occurred in 2019, with adjusted net earnings climbing to around 2.67 billion USD, marking the highest point within the period analyzed. In 2020, the adjusted net earnings remained relatively stable at 2.74 billion USD before declining to approximately 2.34 billion USD in 2021. These changes suggest the presence of adjustments possibly related to one-time items or accounting changes impacting the adjusted figures.

Comparison and Insights

The trends indicate that both net earnings and adjusted net earnings generally increased over the six years, with adjustments causing more pronounced fluctuations in the latter metric. The notable increase in 2019 for both metrics signifies a period of substantial profitability improvement. However, the decline in adjusted net earnings in 2021 contrasts with the continued growth in net earnings, which may point to changes in non-recurring items, restructuring costs, or other adjustments affecting reported profitability.