Analysis of Reportable Segments
Automatic Data Processing Inc. operates in 2 segments: Employer Services and Professional Employer Organization (PEO) Services.
Segment Profit Margin
Automatic Data Processing Inc., profit margin by reportable segment
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 29.94% | 30.37% | 29.74% | 30.70% | 30.64% | 31.13% |
| Professional Employer Organization (PEO) Services | 14.92% | 13.42% | 14.62% | 12.94% | 12.88% | 12.10% |
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).
- Employer Services Profit Margin
-
The profit margin for the Employer Services segment exhibits a generally stable trend over the observed period from mid-2016 to mid-2021.
Initially, the margin starts at 31.13% in June 2016, followed by a slight decline to 30.64% in June 2017. The margin remains relatively unchanged in June 2018 at 30.7%, before experiencing a more noticeable decrease to 29.74% in June 2019. However, in the subsequent years, the margin shows minor recovery and stabilization, registering 30.37% in June 2020 and slightly declining again to 29.94% in June 2021.
Overall, the Employer Services segment maintains profit margins close to the 30% mark, with small fluctuations indicating modest variation in profitability but no significant upward or downward trend.
- Professional Employer Organization (PEO) Services Profit Margin
-
The profit margin for the Professional Employer Organization (PEO) Services segment demonstrates a moderate upward trend throughout the evaluation period.
Starting at 12.1% in June 2016, the margin increases steadily in the next years, reaching 12.88% in June 2017 and 12.94% in June 2018. A more substantial increase occurs in June 2019, where the margin climbs to 14.62%. Despite a slight decline to 13.42% in June 2020, the margin again rises to its highest point in the period at 14.92% by June 2021.
This pattern suggests that the PEO Services segment has been progressively improving its profitability over time, with some minor volatility but a clear overall growth in profit margin.
- Comparative Analysis
-
When comparing the two segments, Employer Services consistently shows a substantially higher profit margin than PEO Services. However, the Employer Services margin remains mostly stable with slight declines, whereas the PEO Services margin, although lower in absolute terms, reflects a more pronounced positive trajectory.
The relative improvement in the PEO Services profit margin may indicate effective cost management or revenue enhancements specific to that segment, suggesting potential growth opportunities. Meanwhile, the stability of Employer Services margins suggests mature profitability with less volatility.
Segment Profit Margin: Employer Services
Automatic Data Processing Inc.; Employer Services; segment profit margin calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Earnings before income taxes | 3,052,100) | 3,063,000) | 2,957,000) | 3,087,400) | 2,921,300) | 2,867,900) |
| Revenues | 10,195,200) | 10,086,600) | 9,942,800) | 10,057,800) | 9,535,200) | 9,211,900) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 29.94% | 30.37% | 29.74% | 30.70% | 30.64% | 31.13% |
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).
1 2021 Calculation
Segment profit margin = 100 × Earnings before income taxes ÷ Revenues
= 100 × 3,052,100 ÷ 10,195,200 = 29.94%
- Earnings before income taxes
- Over the examined period from mid-2016 to mid-2021, earnings before income taxes showed a generally stable but modest upward trend with some fluctuations. The earnings increased from 2,867,900 thousand US dollars in June 2016 to peak at 3,087,400 thousand in June 2018. Subsequently, there was a decline in June 2019 to 2,957,000 thousand, followed by a slight recovery in 2020 and 2021, concluding at 3,052,100 thousand US dollars. This pattern indicates periods of moderate growth interspersed with brief contractions, though overall earnings remained within a narrow range around the 3 million mark.
- Revenues
- Revenues exhibited a consistent upward trend throughout the period. Starting at 9,211,900 thousand US dollars in June 2016, revenues increased steadily each year, reaching 10,195,200 thousand by June 2021. The growth rate, while positive, was relatively moderate, reflecting steady demand and possibly incremental expansion in services or client base within the segment.
- Segment profit margin
- The segment profit margin showed a downward trend over the five years, decreasing from 31.13% in June 2016 to 29.94% in June 2021. Although the margin remained close to 30%, there was a gradual erosion in profitability percentage terms. The margin peaked slightly above 30% in 2018 but then declined steadily, reaching the lowest recorded margin in the series by mid-2021. This decline suggests rising costs or pricing pressures impacting profitability despite growing revenues.
- Summary Insights
- The Employer Services segment revealed a pattern of stable earnings alongside steadily increasing revenues, suggesting expanding business volume. However, the profitability margin declined, indicating increased cost challenges or competitive pricing pressures. The overall data points to a business segment managing to maintain earnings in the face of evolving market conditions but experiencing pressure on profit relative to sales growth. This may warrant further investigation into cost structure, pricing strategies, or operational efficiencies to sustain or enhance profitability going forward.
Segment Profit Margin: Professional Employer Organization (PEO) Services
Automatic Data Processing Inc.; Professional Employer Organization (PEO) Services; segment profit margin calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Earnings before income taxes | 718,800) | 605,500) | 620,100) | 504,200) | 448,600) | 371,700) |
| Revenues | 4,818,300) | 4,511,500) | 4,242,700) | 3,896,600) | 3,483,600) | 3,073,100) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 14.92% | 13.42% | 14.62% | 12.94% | 12.88% | 12.10% |
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).
1 2021 Calculation
Segment profit margin = 100 × Earnings before income taxes ÷ Revenues
= 100 × 718,800 ÷ 4,818,300 = 14.92%
- Earnings before income taxes
- The earnings before income taxes exhibited a consistent upward trajectory from 2016 through 2021, increasing from $371.7 million in 2016 to $718.8 million in 2021. Notable growth periods include 2017 to 2019, with a significant rise each year, peaking at $620.1 million in 2019 before a slight decline in 2020 to $605.5 million, followed by a strong recovery in 2021.
- Revenues
- Revenues showed a steady increase across all years, growing from $3.07 billion in 2016 to $4.82 billion in 2021. Each year marks a positive increment, indicating consistent expansion in the segment’s top line. The revenue growth appears stable without any interruptions or declines within the period analyzed.
- Segment profit margin
- The segment profit margin experienced an overall positive trend with some fluctuations. Starting at 12.1% in 2016, the margin increased gradually to 14.62% in 2019, reflecting improved profitability. However, there was a dip to 13.42% in 2020, likely influenced by market or operational challenges, before rebounding to a segment-high 14.92% in 2021, suggesting enhanced efficiency or favorable market conditions during that year.
- Overall Summary
- The data demonstrates consistent growth in both earnings before income taxes and revenues over the six-year period, signifying effective business expansion within the Professional Employer Organization Services segment. Profit margins generally trended upward, with the exception of a temporary decline in 2020. The strong rebound in profitability in 2021 reflects a resilient segment capable of maintaining and improving its financial performance despite potential external pressures in the preceding year.
Segment Return on Assets (Segment ROA)
Automatic Data Processing Inc., ROA by reportable segment
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 6.07% | 8.26% | 8.54% | 10.21% | 9.70% | 7.83% |
| Professional Employer Organization (PEO) Services | 46.57% | 41.96% | 39.15% | 66.33% | 76.45% | 69.53% |
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).
The analysis of the annual reportable segment return on assets (ROA) data reveals distinct trends for both Employer Services and Professional Employer Organization (PEO) Services segments over the six-year period from June 30, 2016, to June 30, 2021.
- Employer Services Segment ROA:
- The Employer Services segment exhibited an initial rising trend in ROA from 7.83% in 2016 to a peak of 10.21% in 2018. This increase suggests improving asset efficiency and profitability within this segment during these years.
- Following 2018, a gradual decline is evident, with the ROA decreasing to 8.54% in 2019, then slightly down to 8.26% in 2020, and further falling to 6.07% by 2021. This sustained decrease over three years indicates challenges in maintaining asset productivity or possibly declining profitability pressures in this segment.
- Professional Employer Organization (PEO) Services Segment ROA:
- The PEO Services segment demonstrates a different pattern, starting at a very high ROA of 69.53% in 2016, followed by an increase to 76.45% in 2017, highlighting exceptional asset efficiency and strong profitability in these years.
- However, from 2017 onwards, the PEO segment ROA shows a marked decline, dropping sharply to 66.33% in 2018 and then plummeting further to 39.15% in 2019. This significant reduction may indicate structural challenges, increased costs, or greater asset base not matched by proportional earnings growth.
- After the steep decline, a modest recovery appears in 2020 and 2021, with ROAs of 41.96% and 46.57% respectively. This partial rebound suggests some stabilization or operational improvements, though the ROA remains substantially lower than the 2016-2017 peak levels.
In summary, both segments initially exhibited strong ROA performance, with the Employer Services peaking mid-period before declining steadily, and the PEO Services showing very high ROA initially but experiencing a significant contraction followed by slight recovery. These trends should prompt further investigation into underlying operational changes, market conditions, and asset utilization strategies impacting profitability within these segments.
Segment ROA: Employer Services
Automatic Data Processing Inc.; Employer Services; segment ROA calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Earnings before income taxes | 3,052,100) | 3,063,000) | 2,957,000) | 3,087,400) | 2,921,300) | 2,867,900) |
| Assets | 50,279,300) | 37,071,700) | 34,606,300) | 30,250,800) | 30,107,700) | 36,637,500) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | 6.07% | 8.26% | 8.54% | 10.21% | 9.70% | 7.83% |
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).
1 2021 Calculation
Segment ROA = 100 × Earnings before income taxes ÷ Assets
= 100 × 3,052,100 ÷ 50,279,300 = 6.07%
- Earnings before income taxes
- The earnings before income taxes show a generally stable pattern over the period from June 30, 2016, to June 30, 2021. There is an increase from 2,867,900 thousand US dollars in 2016 to a peak of 3,087,400 thousand in 2018, followed by a slight decline and stabilization around 3,053,100 thousand by 2021. Overall, earnings remained relatively consistent, demonstrating a steady operational performance in the segment.
- Assets
- The asset base experienced considerable fluctuation during the period. Initially, assets decreased from 36,637,500 thousand US dollars in 2016 to 30,107,700 thousand in 2017. Subsequently, assets showed recovery and growth, increasing steadily from 30,107,700 thousand in 2017 to 50,279,300 thousand by 2021. The significant rise in assets in the latter years indicates substantial investment or acquisition activity within the segment.
- Segment Return on Assets (ROA)
- The segment's return on assets (%) demonstrated a peak at 10.21% in 2018, indicating efficient use of assets to generate earnings. After this, ROA declined progressively each year, reaching 6.07% in 2021. This downward trend suggests that despite the growth in assets, the segment's ability to generate earnings from its asset base has weakened over time.
Segment ROA: Professional Employer Organization (PEO) Services
Automatic Data Processing Inc.; Professional Employer Organization (PEO) Services; segment ROA calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Earnings before income taxes | 718,800) | 605,500) | 620,100) | 504,200) | 448,600) | 371,700) |
| Assets | 1,543,400) | 1,443,200) | 1,584,100) | 760,100) | 586,800) | 534,600) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | 46.57% | 41.96% | 39.15% | 66.33% | 76.45% | 69.53% |
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).
1 2021 Calculation
Segment ROA = 100 × Earnings before income taxes ÷ Assets
= 100 × 718,800 ÷ 1,543,400 = 46.57%
The data for the Professional Employer Organization (PEO) Services segment reveals several noteworthy trends over the six-year period ending June 30, 2021.
- Earnings before income taxes
- This metric shows a generally upward trajectory, increasing from $371.7 million in 2016 to $718.8 million in 2021. Notable growth appears between 2018 and 2019, with earnings rising from $504.2 million to $620.1 million. There was a slight decline in 2020 to $605.5 million, which may indicate an external impact during that period, followed by a strong recovery in 2021 to the highest reported value.
- Assets
- The asset base also expanded significantly, more than doubling from $534.6 million in 2016 to $1.54 billion in 2021. The largest asset increase occurred between 2018 and 2019, where assets jumped from $760.1 million to $1.58 billion, suggesting substantial investment or acquisition activity. A small decrease is observed in 2020 before rising again in 2021.
- Segment Return on Assets (ROA)
- The segment ROA demonstrated variability and an overall downward trend from its peak of 76.45% in 2017 to a low of 39.15% in 2019. It improved modestly in the subsequent years to 46.57% by 2021. This indicates that while earnings and assets increased, the efficiency in generating earnings from assets declined notably after 2017 and only partially recovered by 2021.
Overall, the segment shows solid growth in both earnings and asset size, reflecting expansion efforts. However, the decline in ROA suggests that asset utilization efficiency weakened during the period of rapid asset growth, signaling potential challenges in maintaining profitability relative to the asset base. The recovery in ROA from 2019 onwards indicates some improvement in operational efficiency or profitability management.
Segment Asset Turnover
Automatic Data Processing Inc., asset turnover by reportable segment
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 0.20 | 0.27 | 0.29 | 0.33 | 0.32 | 0.25 |
| Professional Employer Organization (PEO) Services | 3.12 | 3.13 | 2.68 | 5.13 | 5.94 | 5.75 |
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).
- Employer Services Asset Turnover
- The asset turnover ratio for the Employer Services segment showed an initial increase from 0.25 in mid-2016 to a peak of 0.33 in mid-2018. Following this peak, the ratio exhibited a gradual decline, dropping to 0.29 by mid-2019, then further decreasing to 0.27 in mid-2020, and reaching a low of 0.20 by mid-2021. This trend suggests that the efficiency in generating revenue from assets in this segment improved until 2018 but subsequently deteriorated over the following three years.
- Professional Employer Organization (PEO) Services Asset Turnover
- The PEO Services segment maintained a relatively high asset turnover ratio compared to Employer Services throughout the period. Starting at 5.75 in mid-2016, it saw a slight increase to 5.94 in mid-2017. However, from mid-2017 onwards, the ratio experienced a significant decline, dropping sharply to 5.13 in mid-2018 and more drastically to 2.68 in mid-2019. This decline was somewhat moderated in the subsequent years, with the ratio increasing slightly to 3.13 in mid-2020 and remaining relatively stable at 3.12 in mid-2021. Despite the reduction from its earlier levels, the segment sustained a considerably higher turnover ratio than Employer Services, indicating a generally higher asset utilization efficiency, albeit with volatility.
- Overall Observations
- Both segments demonstrated decreasing asset turnover ratios in the later years, with Employer Services showing a steady decline after its peak in 2018 and PEO Services reflecting a more pronounced drop beginning in 2018. The data suggests potential challenges or changes in asset management strategies or revenue generation capabilities for both segments during the latter part of the period under review. The sharper decline and subsequent stabilization in PEO Services may point to specific operational adjustments or market conditions affecting this segment more significantly.
Segment Asset Turnover: Employer Services
Automatic Data Processing Inc.; Employer Services; segment asset turnover calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenues | 10,195,200) | 10,086,600) | 9,942,800) | 10,057,800) | 9,535,200) | 9,211,900) |
| Assets | 50,279,300) | 37,071,700) | 34,606,300) | 30,250,800) | 30,107,700) | 36,637,500) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 0.20 | 0.27 | 0.29 | 0.33 | 0.32 | 0.25 |
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).
1 2021 Calculation
Segment asset turnover = Revenues ÷ Assets
= 10,195,200 ÷ 50,279,300 = 0.20
- Revenues
- The revenue figures for the Employer Services segment show a generally steady increase from 2016 through 2021. Starting at approximately $9.21 billion in mid-2016, revenues rose each year with minor fluctuations, reaching around $10.20 billion by mid-2021. The growth between consecutive years is modest but consistent overall, except for a slight dip in 2019. This indicates relatively stable demand and performance in the segment during the analyzed period.
- Assets
- The asset base experienced notable fluctuations during the period. Initially, assets decreased from about $36.64 billion in 2016 to roughly $30.11 billion in 2017, remaining relatively stable in 2018. From 2018 onwards, assets increased substantially, reaching approximately $50.28 billion by mid-2021. This sharp rise in assets in the later years suggests significant capital investment or acquisitions affecting the segment’s asset structure.
- Segment Asset Turnover
- The segment asset turnover ratio, which measures the efficiency of asset use to generate revenues, declined consistently from 0.25 in 2016 to 0.20 in 2021. After peaking at 0.33 in 2018, the ratio showed a downward trend. This indicates that despite rising revenues, the segment's asset base grew at a faster pace, resulting in lower efficiency in utilizing assets to produce sales over time.
Segment Asset Turnover: Professional Employer Organization (PEO) Services
Automatic Data Processing Inc.; Professional Employer Organization (PEO) Services; segment asset turnover calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenues | 4,818,300) | 4,511,500) | 4,242,700) | 3,896,600) | 3,483,600) | 3,073,100) |
| Assets | 1,543,400) | 1,443,200) | 1,584,100) | 760,100) | 586,800) | 534,600) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 3.12 | 3.13 | 2.68 | 5.13 | 5.94 | 5.75 |
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).
1 2021 Calculation
Segment asset turnover = Revenues ÷ Assets
= 4,818,300 ÷ 1,543,400 = 3.12
- Revenues
- Revenues demonstrated a consistent upward trend over the analyzed period. Starting at approximately $3.07 billion in mid-2016, revenues increased each year, reaching $4.82 billion by mid-2021. This represents a growth of about 57% over five years, indicating a steady expansion in the segment's sales or service volume.
- Assets
- Assets showed notable growth with some fluctuations. From $534.6 million in 2016, assets rose moderately through 2017 and 2018, then surged significantly in 2019 to approximately $1.58 billion. This peak was followed by a slight decline in 2020 to $1.44 billion, then a modest rebound to $1.54 billion in 2021. The sharp increase in 2019 suggests a considerable investment or acquisition during that year, while subsequent years indicate some consolidation or asset adjustments.
- Segment Asset Turnover
- The segment asset turnover ratio, reflecting efficiency in generating revenues from assets, initially increased slightly from 5.75 in 2016 to 5.94 in 2017. However, it declined gradually thereafter, falling to 5.13 in 2018 and dropping sharply to 2.68 in 2019. From 2019 onwards, the ratio experienced a modest recovery, reaching about 3.12 by 2021. The significant decline in 2019 correlates with the substantial asset increase that year, indicating that the asset base grew faster than revenues, reducing turnover efficiency. The partial rebound suggests some improvement in assets utilization following that period.
Segment Capital Expenditures to Depreciation
Automatic Data Processing Inc., capital expenditures to depreciation by reportable segment
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 0.28 | 0.30 | 0.31 | 0.39 | 0.34 | 0.31 |
| Professional Employer Organization (PEO) Services | 0.00 | 0.00 | 0.00 | 0.00 | 0.15 | 0.67 |
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).
The analysis of the annual reportable segment capital expenditures to depreciation ratios reveals distinct trends over the examined periods.
- Employer Services Ratio
- The ratio for Employer Services exhibits a fluctuating yet overall declining trend from 2016 through 2021. Starting at 0.31 in mid-2016, it increased slightly to reach a peak of 0.39 by mid-2018. Following this peak, a consistent downward movement is observed, with the ratio declining to 0.31 in 2019, then further diminishing to 0.30 in 2020, and eventually to 0.28 in 2021. This suggests a gradual reduction in capital expenditure relative to depreciation within this segment over the more recent years.
- Professional Employer Organization (PEO) Services Ratio
- The data for the Professional Employer Organization (PEO) Services ratio is sparse and only available for the first two periods, showing a significant decrease from 0.67 in mid-2016 to 0.15 in mid-2017. No data is reported thereafter, indicating either discontinuation of reporting, reclassification, or absence of capital expenditure relative to depreciation data for this segment during subsequent years.
Overall, the Employer Services segment demonstrates a moderation in capital investment relative to asset depreciation, possibly reflecting changes in asset acquisition strategies or efficiency improvements. The PEO Services ratio cannot be reliably assessed beyond the initial periods due to missing data, which limits the ability to draw conclusions for this segment.
Segment Capital Expenditures to Depreciation: Employer Services
Automatic Data Processing Inc.; Employer Services; segment capital expenditures to depreciation calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Capital expenditures | 116,700) | 115,700) | 98,200) | 113,900) | 83,000) | 71,100) |
| Depreciation and amortization | 421,700) | 388,000) | 321,000) | 291,900) | 247,300) | 230,700) |
| Segment Financial Ratio | ||||||
| Segment capital expenditures to depreciation1 | 0.28 | 0.30 | 0.31 | 0.39 | 0.34 | 0.31 |
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).
1 2021 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 116,700 ÷ 421,700 = 0.28
- Capital Expenditures
- Capital expenditures demonstrated an overall upward trend from 2016 to 2021. The values increased from 71,100 thousand US dollars in 2016 to 116,700 thousand US dollars in 2021. Despite some fluctuations, such as a peak in 2018 at 113,900 thousand US dollars followed by a dip in 2019 to 98,200 thousand US dollars, capital expenditures generally grew, indicating ongoing investment in assets within the segment.
- Depreciation and Amortization
- Depreciation and amortization expenses showed a consistent and marked increase over the six-year period. Starting at 230,700 thousand US dollars in 2016, these expenses rose steadily each year, reaching 421,700 thousand US dollars by 2021. This steady rise suggests an increasing asset base or accelerated asset usage in the segment.
- Segment Capital Expenditures to Depreciation Ratio
- The ratio of capital expenditures to depreciation fluctuated within a relatively narrow band, ranging from 0.28 to 0.39. The highest ratio occurred in 2018 at 0.39, while the ratio generally declined afterward, reaching 0.28 in 2021. This downward trend in the ratio may indicate that while capital expenditures increased, depreciation expense grew at a faster rate, potentially reflecting greater capital asset aging or intensity of asset utilization.
Segment Capital Expenditures to Depreciation: Professional Employer Organization (PEO) Services
Automatic Data Processing Inc.; Professional Employer Organization (PEO) Services; segment capital expenditures to depreciation calculation
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Capital expenditures | —) | —) | —) | —) | 200) | 1,000) |
| Depreciation and amortization | 7,400) | 3,400) | 3,500) | 3,000) | 1,300) | 1,500) |
| Segment Financial Ratio | ||||||
| Segment capital expenditures to depreciation1 | 0.00 | 0.00 | 0.00 | 0.00 | 0.15 | 0.67 |
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).
1 2021 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 0 ÷ 7,400 = 0.00
- Capital Expenditures
- Capital expenditures were recorded at $1,000 thousand in 2016, increasing to $2,000 thousand in 2017. Following this, no capital expenditures were reported from 2018 through 2021, indicating a cessation or significant reduction of investment in fixed assets within the segment during this period.
- Depreciation and Amortization
- Depreciation and amortization expenses exhibited a fluctuating trend over the analyzed period. Beginning at $1,500 thousand in 2016, the figure slightly declined to $1,300 thousand in 2017 before substantially increasing to $3,000 thousand in 2018. This upward trajectory continued in 2019 and 2020, with values at $3,500 thousand and $3,400 thousand respectively, and then saw a marked surge to $7,400 thousand in 2021. The notable increase in 2021 suggests significant amortization or depreciation of assets, which may relate to prior investments or asset revaluations.
- Segment Capital Expenditures to Depreciation Ratio
- The ratio of capital expenditures to depreciation was reported at 0.67 in 2016, decreasing sharply to 0.15 in 2017. No ratio data is available for subsequent years, likely due to the absence of reported capital expenditures. The declining ratio in the first two years indicates that capital expenditures fell substantially in relation to the level of depreciation, which could imply reduced reinvestment in assets relative to their consumption or write-off.
- Overall Insights
- The data reveal an initial phase of moderate capital investment followed by a complete halt starting in 2018, while depreciation and amortization charges rose considerably over the same time frame, culminating in a significant increase in 2021. This pattern suggests a period of asset write-down or accelerated amortization, possibly linked to changes in asset utilization, impairment, or shifts in accounting policies. The discontinuation of capital expenditures combined with increasing depreciation may affect the segment's capacity for asset renewal and future operational capabilities.
Revenues
Automatic Data Processing Inc., revenues by reportable segment
US$ in thousands
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 10,195,200) | 10,086,600) | 9,942,800) | 10,057,800) | 9,535,200) | 9,211,900) |
| Professional Employer Organization (PEO) Services | 4,818,300) | 4,511,500) | 4,242,700) | 3,896,600) | 3,483,600) | 3,073,100) |
| Other | (8,100) | (8,300) | (10,300) | (628,600) | (639,000) | (617,200) |
| Total | 15,005,400) | 14,589,800) | 14,175,200) | 13,325,800) | 12,379,800) | 11,667,800) |
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).
The analysis of the annual reportable segment revenues reveals several notable trends over the period from June 30, 2016, to June 30, 2021.
- Employer Services
- This segment shows a generally upward trend in revenue over the six-year period. Starting at approximately 9.21 billion USD in mid-2016, revenues increased steadily to around 10.20 billion USD by mid-2021. Although there was a slight dip observed in mid-2019, the overall trajectory indicates consistent growth in this segment.
- Professional Employer Organization (PEO) Services
- The PEO Services segment exhibits a strong and continuous growth pattern throughout the same timeframe. Revenues grew from approximately 3.07 billion USD in mid-2016 to about 4.82 billion USD in mid-2021. The growth rate in this segment appears robust and outpaces the growth observed in Employer Services, indicating an expanding contribution to overall revenue.
- Other
- The Other category is characterized by negative values each year, representing what may be adjustments, eliminations, or other non-revenue figures. Initially, the negative values were substantial, around -617 million USD in mid-2016, with a significant decrease in magnitude over time to around -8 million USD by mid-2021, demonstrating a trend toward reduced negative impact or improved reconciliation processes.
- Total
- Total revenues display a consistent increase throughout the period, rising from approximately 11.67 billion USD in mid-2016 to 15.01 billion USD in mid-2021. The steady upward movement is supported by growth in both Employer Services and PEO Services, despite the offsetting negative figures within the Other category. This overall increase signifies expanding business operations and enhanced revenue generation capabilities.
Earnings before income taxes
Automatic Data Processing Inc., earnings before income taxes by reportable segment
US$ in thousands
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 3,052,100) | 3,063,000) | 2,957,000) | 3,087,400) | 2,921,300) | 2,867,900) |
| Professional Employer Organization (PEO) Services | 718,800) | 605,500) | 620,100) | 504,200) | 448,600) | 371,700) |
| Other | (409,700) | (485,900) | (571,500) | (1,420,500) | (838,800) | (1,004,900) |
| Total | 3,361,200) | 3,182,600) | 3,005,600) | 2,171,100) | 2,531,100) | 2,234,700) |
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).
The earnings before income taxes data for the reportable segments reveal several distinct trends over the observed periods.
- Employer Services
- There is a generally positive trend in Employer Services earnings from June 2016 to June 2018, with values increasing from approximately $2,867,900 thousand to $3,087,400 thousand. However, this was followed by a slight decline in June 2019 before a modest recovery in subsequent years, stabilizing around $3,052,100 thousand by June 2021. This suggests relatively stable earnings in this segment with minor fluctuations.
- Professional Employer Organization (PEO) Services
- This segment shows a consistent upward trajectory throughout the period. Earnings grew significantly from $371,700 thousand in June 2016 to $718,800 thousand in June 2021, nearly doubling over five years. The growth was particularly strong between June 2017 and June 2019, indicating expanding profitability and possibly increased market penetration or operational efficiency in PEO Services.
- Other
- The 'Other' category consistently reports negative earnings before income taxes, reflecting losses. The magnitude of losses fluctuated meaningfully—initially decreasing in negativity from -$1,004,900 thousand in June 2016 to -$838,800 thousand in June 2017, then increasing sharply to -$1,420,500 thousand in June 2018. Post-2018, losses diminished considerably, improving towards -$409,700 thousand by June 2021. This pattern suggests volatility and potential restructuring or divestiture activities affecting this segment.
- Total
- Total earnings before income taxes demonstrate an overall increasing trend from $2,234,700 thousand in June 2016 to $3,361,200 thousand in June 2021. Although there is variability, particularly a decline in June 2018, the total figures progressively improve in subsequent years. This indicates solid aggregate performance, buoyed by gains in the PEO Services segment and recovery from reductions in the Other segment losses.
Assets
Automatic Data Processing Inc., assets by reportable segment
US$ in thousands
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 50,279,300) | 37,071,700) | 34,606,300) | 30,250,800) | 30,107,700) | 36,637,500) |
| Professional Employer Organization (PEO) Services | 1,543,400) | 1,443,200) | 1,584,100) | 760,100) | 586,800) | 534,600) |
| Other | (3,050,200) | 650,600) | 5,697,300) | 6,077,800) | 6,485,500) | 6,497,900) |
| Total | 48,772,500) | 39,165,500) | 41,887,700) | 37,088,700) | 37,180,000) | 43,670,000) |
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).
The segment assets data presents several notable trends over the examined periods from mid-2016 to mid-2021.
- Employer Services
- The Employer Services segment shows an overall increasing trend in assets. Beginning at approximately $36.6 billion in mid-2016, there was a decline in the following year to about $30.1 billion. This was followed by relative stabilization around $30.3 billion in 2018, then a steady rise to $34.6 billion in 2019. The upward trend continued more sharply into 2020 and 2021, reaching roughly $50.3 billion by mid-2021. This represents significant growth in this segment in the later years, particularly notable between 2020 and 2021.
- Professional Employer Organization (PEO) Services
- The PEO Services segment exhibited a generally upward trajectory, although the magnitude is considerably smaller compared to Employer Services. Starting near $535 million in 2016, assets increased modestly through 2017 and 2018. A substantial jump occurred in 2019, when asset value more than doubled from the previous year, reaching just over $1.58 billion. The values then slightly declined in 2020 to about $1.44 billion before rising modestly again in 2021 to approximately $1.54 billion. This indicates growing investment and asset allocation to the PEO services business, with some fluctuation around 2020.
- Other
- The Other segment showed a steady decline in assets from 2016 through 2019, decreasing from around $6.5 billion to below $6 billion by mid-2018, and further down to roughly $5.7 billion in 2019. In 2020, assets plummeted drastically to just $650 million, followed by a sharp negative value of about -$3.05 billion in 2021. The movement into negative territory suggests significant write-downs, disposals, or reclassifications that severely diminished the asset base in this category, representing an area of concern or transformation.
- Total
- Total assets experienced a dip between 2016 and 2017, decreasing from approximately $43.7 billion to $37.2 billion, then remained relatively stable through 2018. Growth resumed strongly in 2019, reaching nearly $41.9 billion, followed by a slight decline in 2020 to about $39.2 billion. A marked increase emerged in 2021, as total assets surged to approximately $48.8 billion. The 2021 increase was largely driven by the substantial growth in Employer Services assets, which offset the severe negative shift in the Other segment.
Overall, the data indicates a strong emphasis and asset growth in the Employer Services segment, moderate but consistent growth in PEO Services, and a significant decline with eventual negative asset values recorded in the Other category. Despite volatility in some segments, total assets ended on an upward trajectory by the latest period.
Capital expenditures
Automatic Data Processing Inc., capital expenditures by reportable segment
US$ in thousands
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 116,700) | 115,700) | 98,200) | 113,900) | 83,000) | 71,100) |
| Professional Employer Organization (PEO) Services | —) | —) | —) | —) | 200) | 1,000) |
| Other | 61,600) | 52,600) | 64,500) | 78,000) | 165,800) | 93,600) |
| Total | 178,300) | 168,300) | 162,700) | 191,900) | 249,000) | 165,700) |
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).
- Employer Services Capital Expenditures
- The capital expenditures in the Employer Services segment show a general upward trend over the six-year period. Starting at $71,100 thousand in 2016, there was a consistent increase reaching $113,900 thousand by 2018. A slight decline occurred in 2019 with $98,200 thousand, followed by a rebound to $115,700 thousand in 2020 and a marginal increase to $116,700 thousand in 2021. This pattern indicates growth with occasional minor fluctuations.
- Professional Employer Organization (PEO) Services Capital Expenditures
- The PEO Services category only reports expenditure data in 2016 and 2017, with $1,000 thousand and $2,000 thousand respectively. The values for 2018 through 2021 are missing, making any trend analysis inconclusive for this segment beyond 2017.
- Other Segment Capital Expenditures
- The Other segment exhibits the most variability. Capital expenditures increased notably from $93,600 thousand in 2016 to a peak of $165,800 thousand in 2017. However, after 2017, the expenditures decreased sharply to $78,000 thousand in 2018, followed by further declines to $64,500 thousand in 2019 and $52,600 thousand in 2020. There is a moderate recovery in 2021 with an increase to $61,600 thousand. This pattern indicates a sharp peak followed by a significant reduction and a partial rebound at the end of the period.
- Total Capital Expenditures
- Total capital expenditures across all segments peaked in 2017 at $249,000 thousand, reflecting the high expenditure in the Other segment that year. After this peak, total expenditures gradually decreased to a low of $162,700 thousand in 2019. Subsequent years show a modest recovery to $178,300 thousand by 2021. The overall trend reveals volatility with a considerable peak mid-period and a trend toward stabilization at a lower expenditure level compared to the peak.
Depreciation and amortization
Automatic Data Processing Inc., depreciation and amortization by reportable segment
US$ in thousands
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | |
|---|---|---|---|---|---|---|
| Employer Services | 421,700) | 388,000) | 321,000) | 291,900) | 247,300) | 230,700) |
| Professional Employer Organization (PEO) Services | 7,400) | 3,400) | 3,500) | 3,000) | 1,300) | 1,500) |
| Other | 81,600) | 88,600) | 84,500) | 82,700) | 67,500) | 56,400) |
| Total | 510,700) | 480,000) | 409,000) | 377,600) | 316,100) | 288,600) |
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).
The depreciation and amortization data for the various segments reveals distinct trends over the six-year period ending in June 2021. The Employer Services segment exhibits a steady and consistent increase in depreciation and amortization expenses each year. Starting from $230,700 thousand in 2016, the value rises continuously to $421,700 thousand in 2021, nearly doubling over the period.
The Professional Employer Organization (PEO) Services segment, while much smaller in absolute terms, shows considerable volatility and growth. The values fluctuate initially, with a decrease from $1,500 thousand in 2016 to $1,300 thousand in 2017, followed by a significant increase to $7,400 thousand by 2021. This suggests an expansion or increased investment in this segment, particularly notable in the sharp rise between 2020 and 2021.
The Other category also shows growth overall but with less consistency. From $56,400 thousand in 2016, the expenses increase steadily up to $88,600 thousand in 2020 before decreasing slightly to $81,600 thousand in 2021. This dip may warrant further investigation to understand the underlying causes, such as asset disposals, reclassification, or reduced capital expenditure.
When looking at the total depreciation and amortization figures, an overall upward trend is evident. The total expense rises from $288,600 thousand in 2016 to $510,700 thousand in 2021. This increase aligns closely with the growth observed in the Employer Services segment, which constitutes the largest portion of the total expense. The Professional Employer Organization Services' significant increase in the latter years also contributes to this upward trend, while the Other category's slight decline in the final year marginally tempers the overall growth.
In summary, the depreciation and amortization expenses indicate ongoing investment and asset utilization growth within the Employer Services segment and increasing activity in the Professional Employer Organization Services. The Other category's expenses, while generally rising, show some variability that could reflect changes in the asset base or business focus. Overall, the total expenses have increased substantially, reflecting broader asset base expansion or higher capitalization and amortization levels across the segments.