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Driven by Improving Business Outlook, Automatic Data Processing Raises Dividend by 2%

Shauvik Haldar Nov 19, 2020

Automatic Data Processing (ADP) is one of the world’s leading providers of human capital management (HCM) systems to employers via a cloud-based platform. It has more than 850,000 clients across 140 countries.

The company aims to grow its complete suite of HCM solutions, scale its HR outsourcing (HRO) solutions and leverage its global presence to provide a seamless experience of its HCM solutions for its clients.

At present, ADP operates via two segments – Employer Services offers a comprehensive range of HCM and HRO solutions, while the professional employer organization (PEO) segment offers a holistic range of employment administration outsourcing solutions to its clients. While the first segment contributes nearly two-thirds of ADP’s revenue, the latter contributes the remaining.

Shareholders Benefit From Relatively Better Bookings and Customer Retention

Although several of ADP’s clients continued to witness single-digit declines in their employment levels during Q1 2021, ADP was able to book new business and retain clients via its unique product differentiation initiatives.

With the economy starting to show signs of improvement as the company moved from Q4 2020 to Q1 2021, there was greater willingness among clients to engage ADP’s services. As a result, the company continued to utilize its sales expertise to improve its client acquisition funnel.

Interestingly, ADP’s performance was supported by better-than-expected levels of customer satisfaction and customer retention, partly driven by the delayed decision to switch over HCM vendors due to COVID-19-induced business uncertainty.

In short, higher bookings, better-than-expected customer retention numbers, and cost controls driven by digital transformation initiatives helped ADP report a 5% improvement in its adjusted diluted earnings per share in Q1 2021.

This led ADP to increase its quarterly dividend for the 46th consecutive year, from 91 cents to 93 cents payable to shareholders of record as of December 11, 2020.

Going forward, ADP intends to continue leveraging innovative ways to deliver value to its customers. For instance, more customers are expected to adopt its Next-Gen Payroll Platform engine in the coming quarters as it ensures easy understanding of regulatory frameworks and improves transparency. The company also expects to leverage its Return-to Workplace solution as employers start bringing employees back into the office space with the expected easing of COVID-19 restrictions.

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