Name: Automatic Data Processing Inc. (NASDAQ:ADP) | Income Statement
Creator: Stock Analysis on Net

Income Statement

The income statement presents information on the financial results of a company business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what cost it incurred in connection with generating that revenue.

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Automatic Data Processing Inc., consolidated income statement

US$ in thousands

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	9,768,600)	9,538,100)	9,375,800)	8,985,200)	8,518,100)	8,234,000)
Interest on funds held for clients	422,400)	545,200)	561,900)	466,500)	397,400)	377,300)
Professional Employer Organization (PEO) revenues	4,814,400)	4,506,500)	4,237,500)	3,874,100)	3,464,300)	3,056,500)
Revenues	15,005,400)	14,589,800)	14,175,200)	13,325,800)	12,379,800)	11,667,800)
Operating expenses	(7,520,700)	(7,404,100)	(7,145,900)	(6,937,900)	(6,416,100)	(6,025,000)
Systems development and programming costs	(716,600)	(674,100)	(636,300)	(630,200)	(627,500)	(603,700)
Depreciation and amortization	(403,000)	(366,900)	(304,400)	(274,500)	(226,200)	(211,600)
Costs of revenues	(8,640,300)	(8,445,100)	(8,086,600)	(7,842,600)	(7,269,800)	(6,840,300)
Gross profit	6,365,100)	6,144,700)	6,088,600)	5,483,200)	5,110,000)	4,827,500)
Selling, general, and administrative expenses	(3,040,500)	(3,003,000)	(3,064,200)	(2,971,500)	(2,783,200)	(2,637,000)
Operating income	3,324,600)	3,141,700)	3,024,400)	2,511,700)	2,326,800)	2,190,500)
Interest expense	(59,700)	(107,100)	(129,900)	(102,700)	(80,000)	(56,200)
Interest income on corporate funds	36,500)	84,500)	97,600)	83,500)	76,700)	62,400)
Realized gains (losses) on available-for-sale securities, net	11,300)	12,900)	(900)	(2,500)	2,200)	(5,000)
Impairment of assets	(19,900)	(29,900)	(12,100)	—)	—)	—)
Gain on sale of assets	8,100)	5,800)	4,100)	700)	—)	13,900)
Gain on sale of investment	1,700)	200)	15,700)	—)	—)	—)
Gain on sale of business	—)	—)	—)	—)	205,400)	29,100)
Non-service components of pension income (expense), net	58,600)	74,500)	6,700)	(319,600)	—)	—)
Other income (expense), net	96,300)	148,000)	111,100)	(237,900)	284,300)	100,400)
Earnings from continuing operations before income taxes	3,361,200)	3,182,600)	3,005,600)	2,171,100)	2,531,100)	2,234,700)
Provision for income taxes	(762,700)	(716,100)	(712,800)	(550,300)	(797,700)	(741,300)
Net earnings from continuing operations	2,598,500)	2,466,500)	2,292,800)	1,620,800)	1,733,400)	1,493,400)
Net loss from discontinued operations	—)	—)	—)	—)	—)	(900)
Net earnings	2,598,500)	2,466,500)	2,292,800)	1,620,800)	1,733,400)	1,492,500)

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).

Total revenues exhibited a consistent upward trajectory over the six-year period, increasing from 11.67 billion USD in 2016 to 15.01 billion USD in 2021. This growth was driven primarily by strong performance in Professional Employer Organization (PEO) revenues and core service revenues, while interest on funds held for clients showed more volatility.

Revenue Stream Analysis: PEO revenues demonstrated the most aggressive growth, rising from 3.06 billion USD in 2016 to 4.81 billion USD in 2021, indicating a significant expansion of this business segment. Revenues from other sources, excluding interest and PEO, grew steadily from 8.23 billion USD to 9.77 billion USD. In contrast, interest on funds held for clients peaked in 2019 at 561.9 million USD before declining to 422.4 million USD by 2021, suggesting sensitivity to fluctuating interest rate environments.
Operational Efficiency and Cost Management: Gross profit grew from 4.83 billion USD in 2016 to 6.37 billion USD in 2021. While costs of revenues increased in absolute terms, operating income grew more rapidly, rising from 2.19 billion USD to 3.32 billion USD. This suggests a scalable business model where revenue growth is outpacing the growth of operating expenses. Selling, general, and administrative expenses remained relatively controlled, growing from 2.64 billion USD to 3.04 billion USD over the period.
Net Earnings and Non-Operating Volatility: Net earnings increased from 1.49 billion USD in 2016 to 2.60 billion USD in 2021. A notable dip occurred in 2018, where net earnings fell to 1.62 billion USD, largely attributable to a significant non-service component of pension expense totaling 319.6 million USD. Subsequent years showed a recovery and steady growth. Recent years also saw the introduction of asset impairments, starting in 2019, which created a recurring drag on pre-tax earnings.
Profitability Ratios and Margins: The trend in operating income indicates improving operating margins. The progression from 2.19 billion USD in 2016 to 3.32 billion USD in 2021 reflects an increase in the conversion of revenue to operating profit. Net earnings followed a similar positive trend, though the bottom line was periodically influenced by non-recurring items such as gains on the sale of businesses in 2016 and 2017, and pension adjustments in 2018.

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