Automatic Data Processing (ADP) investor relations material

Executive summary

• Achieved 6% revenue growth and 11% adjusted diluted EPS growth year-over-year in Q2 fiscal 2026, with record client satisfaction and strong new business bookings across segments.

• Strategic initiatives advanced, including launches of new workforce management solutions, enhancements to AI-driven services, and the acquisition of WorkForce Software.

• PEO revenue increased 6%, with 2% growth in average worksite employees, though PEO bookings were slightly below expectations.

• Cash returned to shareholders totaled $2.1B in the first half, including $1.3B in dividends and $0.9B in share repurchases; board authorized a new $6B share repurchase and increased dividend by 10%.

• Strategic priorities advanced in technology leadership, outsourcing solutions, and global scale.

Financial highlights

• Q2 revenues were $5.4B, up 6% year-over-year; six-month revenues reached $10.53B, up 7%.

• Adjusted EBIT margin expanded by 80 basis points to 26.0%; ES margins up 50 basis points, PEO margins down 70 basis points due to pass-throughs and higher selling expenses.

• Adjusted EPS grew 11% to $2.62 in Q2; six-month diluted EPS rose 9% to $5.12.

• Client funds interest revenue increased, with full-year forecast raised to $1.31–$1.33B.

• Operating expenses rose 6% year-over-year, mainly due to higher PEO pass-through costs and service investments.

Outlook and guidance

• Fiscal 2026 consolidated revenue growth outlook raised to about 6%, with adjusted EBIT margin expansion of 50–70 basis points.

• Adjusted EPS growth guidance increased to 9–10% for fiscal 2026; adjusted effective tax rate projected at approximately 23%.

• ES revenue growth outlook at about 6%; PEO revenue growth expected at 5–7%, excluding pass-throughs at 3–5%.

• Client funds interest revenue expected at $1.31–$1.33B, with average yield of ~3.4%.

• ES new business bookings growth guidance maintained at 4–7%.