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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
 
FORM 10-Q
______________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2024

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to    
 
Commission File Number 1-5397
__________________________
AUTOMATIC DATA PROCESSING, INC.
(Exact name of registrant as specified in its charter)
__________________________
Delaware22-1467904
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
One ADP Boulevard
Roseland,NJ07068
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (973) 974-5000
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 Par Value
(voting)
ADPNASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý   No o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ý   No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).        Yes     No ý
The number of shares outstanding of the registrant’s common stock as of April 29, 2024 was 409,291,332.



Table of Contents
  Page
 
   
Item 1.
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
  
 
   
Item 1.
   
Item 1A.
   
Item 2.
Item 6.

2


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Earnings
(In millions, except per share amounts)
(Unaudited)
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
REVENUES:    
Revenues, other than interest on funds held
     for clients and PEO revenues
$3,270.3 $3,088.7 $9,011.7 $8,437.3 
Interest on funds held for clients320.8 249.4 747.9 577.7 
PEO revenues (A)1,662.7 1,589.7 4,674.5 4,519.4 
TOTAL REVENUES5,253.8 4,927.8 14,434.1 13,534.4 
EXPENSES:    
Costs of revenues:    
Operating expenses2,406.5 2,299.8 6,777.4 6,508.7 
Research and development242.7 208.6 707.8 622.6 
Depreciation and amortization119.0 115.4 359.9 336.8 
TOTAL COSTS OF REVENUES2,768.2 2,623.8 7,845.1 7,468.1 
Selling, general, and administrative expenses940.9 938.0 2,743.6 2,594.2 
Interest expense62.7 38.3 259.2 146.4 
TOTAL EXPENSES3,771.8 3,600.1 10,847.9 10,208.7 
Other (income)/expense, net(64.3)(36.3)(196.8)(106.3)
EARNINGS BEFORE INCOME TAXES1,546.3 1,364.0 3,783.0 3,432.0 
Provision for income taxes361.4 320.9 860.3 796.7 
NET EARNINGS$1,184.9 $1,043.1 $2,922.7 $2,635.3 
BASIC EARNINGS PER SHARE$2.89 $2.52 $7.11 $6.36 
DILUTED EARNINGS PER SHARE$2.88 $2.51 $7.07 $6.33 
Basic weighted average shares outstanding410.5 413.7 411.1 414.2 
Diluted weighted average shares outstanding412.1 415.5 413.6 416.2 

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $18,339.6 million and $17,301.8 million for the three months ended March 31, 2024 and 2023, respectively, and $52,713.4 million and $50,688.4 million for the nine months ended March 31, 2024 and 2023, respectively.











See notes to the Consolidated Financial Statements.
3


Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Comprehensive Income
(In millions)
(Unaudited)
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
Net earnings$1,184.9 $1,043.1 $2,922.7 $2,635.3 
Other comprehensive income/(losses):
Currency translation adjustments(37.4)15.6 (28.1)2.0 
Unrealized net (losses)/gains on available-for-sale securities(91.0)392.0 618.8 (200.9)
Tax effect19.1 (86.6)(145.7)47.9 
Reclassification of realized net losses on available-for-sale securities to net earnings1.2 0.9 5.2 13.9 
Tax effect(0.2)(0.2)(1.1)(3.1)
Amortization of unrealized losses on cash flow hedging activities1.1 1.1 3.3 3.3 
Tax effect(0.3)(0.3)(0.8)(0.8)
Reclassification of pension liability adjustment to net earnings1.0 0.6 2.9 4.2 
Tax effect(0.2) (0.6)(0.6)
Other comprehensive (loss)/income, net of tax(106.7)323.1 453.9 (134.1)
Comprehensive income$1,078.2 $1,366.2 $3,376.6 $2,501.2 






















See notes to the Consolidated Financial Statements.
4


Automatic Data Processing, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
March 31,June 30,
20242023
Assets
Current assets:  
Cash and cash equivalents$3,291.7 $2,083.5 
    Accounts receivable, net of allowance for doubtful accounts of $51.5 and $53.0, respectively
3,460.7 3,009.6 
Other current assets 957.7 743.9 
Total current assets before funds held for clients7,710.1 5,837.0 
Funds held for clients47,929.5 36,333.6 
Total current assets55,639.6 42,170.6 
Long-term receivables, net of allowance for doubtful accounts of $0.2 and $0.1, respectively
7.0 8.5 
Property, plant and equipment, net676.5 681.4 
Operating lease right-of-use asset354.8 402.4 
Deferred contract costs2,838.3 2,769.7 
Other assets1,014.7 1,255.4 
Goodwill2,355.4 2,339.4 
Intangible assets, net1,295.3 1,343.6 
Total assets$64,181.6 $50,971.0 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$84.6 $96.8 
Accrued expenses and other current liabilities3,714.5 2,342.6 
Accrued payroll and payroll-related expenses722.1 941.4 
Dividends payable568.9 510.0 
Short-term deferred revenues189.1 188.6 
Obligations under reverse repurchase agreements (A) 105.4 
Income taxes payable110.4 44.2 
Total current liabilities before client funds obligations5,389.6 4,229.0 
Client funds obligations49,512.3 38,538.6 
Total current liabilities54,901.9 42,767.6 
Long-term debt2,990.7 2,989.0 
Operating lease liabilities309.1 349.9 
Other liabilities935.5 933.7 
Deferred income taxes64.4 73.6 
Long-term deferred revenues353.3 348.1 
Total liabilities59,554.9 47,461.9 
Commitments and contingencies (Note 13)
Stockholders' equity:  
Preferred stock, $1.00 par value: authorized, 0.3 shares; issued, none
  
Common stock, $0.10 par value: authorized, 1,000.0 shares; issued, 638.7 shares at March 31, 2024 and June 30, 2023;
 outstanding, 409.8 and 412.1 shares at March 31, 2024 and June 30, 2023, respectively
63.9 63.9 
Capital in excess of par value2,354.0 2,102.3 
Retained earnings23,366.1 22,118.0 
Treasury stock - at cost: 228.9 and 226.6 shares at March 31, 2024 and June 30, 2023, respectively
(19,305.4)(18,469.3)
Accumulated other comprehensive (loss)/ income(1,851.9)(2,305.8)
Total stockholders’ equity4,626.7 3,509.1 
Total liabilities and stockholders’ equity$64,181.6 $50,971.0 

(A) As of June 30, 2023, $104.6 million of long-term marketable securities and $0.8 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements (see Note 9).




See notes to the Consolidated Financial Statements.
5

Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Cash Flows
(In millions)
(Unaudited)

Nine Months Ended
March 31,
20242023
Cash Flows from Operating Activities:
Net earnings$2,922.7 $2,635.3 
Adjustments to reconcile net earnings to cash flows provided by operating activities:  
Depreciation and amortization426.2 408.9 
Amortization of deferred contract costs795.0 738.1 
Deferred income taxes(4.4)(17.6)
Stock-based compensation expense188.7 176.6 
Bad Debt Expense38.5 27.0 
Net pension income(17.4)(30.7)
Net accretion of discounts and amortization of premiums on available-for-sale securities(29.2)25.5 
Other(5.4)21.6 
Changes in operating assets and liabilities:  
(Increase)/Decrease in accounts receivable(496.2)80.1 
Increase in deferred contract costs(865.9)(814.2)
Increase in other assets(225.7)(171.5)
Decrease in accounts payable(9.1)(31.6)
Increase/(Decrease) in accrued expenses and other liabilities139.2 (25.6)
Net cash flows provided by operating activities2,857.0 3,021.9 
Cash Flows from Investing Activities:  
Purchases of corporate and client funds marketable securities(4,365.7)(5,471.1)
Proceeds from the sales and maturities of corporate and client funds marketable securities3,624.6 3,881.4 
Capital expenditures(153.7)(145.4)
Additions to intangibles(263.2)(285.3)
Acquisitions of businesses, net of cash acquired(33.6)(32.4)
Proceeds from sale of property, plant, and equipment and other assets28.3  
Other(8.5) 
Net cash flows used in investing activities(1,171.8)(2,052.8)
Cash Flows from Financing Activities:  
Net increase/(decrease) in client funds obligations10,999.6 (3,412.3)
Net cash received from the Internal Revenue Service1,132.0  
Payments of debt(0.7)(0.7)
Repurchases of common stock(796.2)(817.5)
Net proceeds from stock purchase plan and stock-based compensation plans24.6 72.7 
Dividends paid(1,608.0)(1,386.1)
Net payments related to reverse repurchase agreements(67.5)(142.3)
Net cash flows provided by/(used in) financing activities9,683.8 (5,686.2)
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents(15.7)(25.3)
Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents11,353.3 (4,742.4)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period8,771.5 22,783.0 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period$20,124.8 $18,040.6 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents$3,291.7 $1,828.4 
Restricted cash and restricted cash equivalents included in funds held for clients (A)16,833.1 16,212.2 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$20,124.8 $18,040.6 
Supplemental disclosures of cash flow information:
Cash paid for interest$260.9 $148.5 
Cash paid for income taxes, net of income tax refunds$806.1 $778.8 

(A) See Note 6 for a reconciliation of restricted cash and restricted cash equivalents in funds held for clients on the Consolidated Balance Sheets.


See notes to the Consolidated Financial Statements.
6


Automatic Data Processing, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Tabular dollars in millions, except per share amounts or where otherwise stated)
(Unaudited)
Note 1.  Basis of Presentation

The accompanying Consolidated Financial Statements and footnotes thereto of Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Consolidated Financial Statements and footnotes thereto are unaudited. In the opinion of the Company’s management, the Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, that are necessary for a fair presentation of the Company’s interim financial results.

The Company has a grantor trust, which holds the majority of the funds provided by its clients pending remittance to employees of those clients, tax authorities, and other payees. The Company is the sole beneficial owner of the trust. The trust meets the criteria in Accounting Standards Codification (“ASC”) 810, “Consolidation” to be characterized as a variable interest entity (“VIE”). The Company has determined that it has a controlling financial interest in the trust because it has both (1) the power to direct the activities that most significantly impact the economic performance of the trust (including the power to make all investment decisions for the trust) and (2) the right to receive benefits that could potentially be significant to the trust (in the form of investment returns) and, therefore, consolidates the trust. Further information on these funds and the Company’s obligations to remit to its clients’ employees, tax authorities, and other payees is provided in Note 6, “Corporate Investments and Funds Held for Clients.” 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the assets, liabilities, revenue, expenses, and accumulated other comprehensive income that are reported in the Consolidated Financial Statements and footnotes thereto. Actual results may differ from those estimates. Interim financial results are not necessarily indicative of financial results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“fiscal 2023”).

Certain amounts from the prior year's financial statements have been reclassified in order to conform to the current year's presentation. We also updated the description of "Systems development and programming costs" to "Research and development" within the Statement of Consolidated Earnings, this change did not result in changes to current or previously reported amounts.

Note 2.  New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

None.
Recently Issued Accounting Pronouncements

StandardDescriptionEffective DateEffect on Financial Statements or Other Significant Matters
ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax DisclosuresThis update enhances the transparency and decision usefulness of income tax disclosures to better assess how an entity’s operations and related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows. June 30, 2026
(Fiscal 2026)
The Company is assessing this guidance. The adoption will modify disclosures but will not have an impact on the Company's consolidated results of operations, financial condition, and cash flows.
ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment DisclosuresThis update improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and certain quantitative disclosures.June 30, 2025
(Fiscal 2025)
The Company is assessing this guidance. The adoption will modify disclosures but will not have an impact on the Company's consolidated results of operations, financial condition, and cash flows.

7


Note 3.  Revenue

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated by its three business pillars: Human Capital Management (“HCM”), HR Outsourcing (“HRO”), and Global Solutions (“Global”), with separate disaggregation for PEO zero-margin benefits pass-through revenues and client funds interest revenues. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

The following tables provide details of revenue by our business pillars, and include a reconciliation to the Company’s reportable segments:
Three Months EndedNine Months Ended
March 31,March 31,
Types of Revenues2024202320242023
HCM$2,278.8 $2,163.8 $6,168.3 $5,836.6 
HRO, excluding PEO zero-margin benefits pass-throughs988.1 955.1 2,688.5 2,586.3 
PEO zero-margin benefits pass-throughs1,016.3 956.3 2,963.7 2,846.3 
Global649.8 603.2 1,865.7 1,687.5 
Interest on funds held for clients320.8 249.4 747.9 577.7 
Total Revenues$5,253.8 $4,927.8 $14,434.1 $13,534.4 

Reconciliation of disaggregated revenue to our reportable segments for the three months ended March 31, 2024:
Types of RevenuesEmployer ServicesPEOOtherTotal
HCM$2,280.8 $ $(2.0)$2,278.8 
HRO, excluding PEO zero-margin benefits pass-throughs342.2 646.4 (0.5)988.1 
PEO zero-margin benefits pass-throughs 1,016.3  1,016.3 
Global649.8   649.8 
Interest on funds held for clients317.9 2.9  320.8 
Total Segment Revenues$3,590.7 $1,665.6 $(2.5)$5,253.8 

Reconciliation of disaggregated revenue to our reportable segments for the three months ended March 31, 2023:
Types of RevenuesEmployer ServicesPEOOtherTotal
HCM$2,165.8 $ $(2.0)$2,163.8 
HRO, excluding PEO zero-margin benefits pass-throughs323.0 633.4 (1.3)955.1 
PEO zero-margin benefits pass-throughs 956.3  956.3 
Global603.2   603.2 
Interest on funds held for clients247.1 2.3  249.4 
Total Segment Revenues$3,339.1 $1,592.0 $(3.3)$4,927.8 

Reconciliation of disaggregated revenue to our reportable segments for the nine months ended March 31, 2024:
Types of RevenuesEmployer ServicesPEOOtherTotal
HCM$6,174.8 $ $(6.5)$6,168.3 
HRO, excluding PEO zero-margin benefits pass-throughs980.7 1,710.7 (2.9)2,688.5 
PEO zero-margin benefits pass-throughs 2,963.7  2,963.7 
Global1,865.7   1,865.7 
Interest on funds held for clients741.1 6.8  747.9 
Total Segment Revenues$9,762.3 $4,681.2 $(9.4)$14,434.1 

8


Reconciliation of disaggregated revenue to our reportable segments for the nine months ended March 31, 2023:
Types of RevenuesEmployer ServicesPEOOtherTotal
HCM$5,843.2 $ $(6.6)$5,836.6 
HRO, excluding PEO zero-margin benefits pass-throughs918.2 1,673.1 (5.0)2,586.3 
PEO zero-margin benefits pass-throughs 2,846.3  2,846.3 
Global1,687.5   1,687.5 
Interest on funds held for clients572.4 5.3  577.7 
Total Segment Revenues$9,021.3 $4,524.7 $(11.6)$13,534.4 

Contract Balances

The timing of revenue recognition for HCM, HRO and Global Solutions is consistent with the invoicing of clients, as invoicing occurs in the period the services are provided. Therefore, the Company does not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in deferred revenues related to set up fees for the nine months ended March 31, 2024 were as follows:
Contract Liability
Contract liability, July 1, 2023$464.8 
Recognition of revenue included in beginning of year contract liability(32.3)
Contract liability, net of revenue recognized on contracts during the period45.0 
Currency translation adjustments6.4 
Contract liability, March 31, 2024$483.9 

Note 4.  Earnings per Share (“EPS”)
BasicEffect of Employee Stock Option SharesEffect of
Employee
Restricted
Stock
Shares
Diluted
Three Months Ended March 31, 2024    
Net earnings$1,184.9   $1,184.9 
Weighted average shares (in millions)410.5 0.7 0.9 412.1 
EPS$2.89   $2.88 
Three Months Ended March 31, 2023    
Net earnings$1,043.1   $1,043.1 
Weighted average shares (in millions)413.7 0.8 1.0 415.5 
EPS$2.52   $2.51 
Nine Months Ended March 31, 2024
Net earnings$2,922.7   $2,922.7 
Weighted average shares (in millions)411.1 0.8 1.7 413.6 
EPS$7.11   $7.07 
Nine Months Ended March 31, 2023    
Net earnings$2,635.3   $2,635.3 
Weighted average shares (in millions)414.2 1.0 1.0 416.2 
EPS$6.36   $6.33 

For the three and nine months ended March 31, 2024, there were no stock options excluded from the calculation of diluted earnings per share due to anti-dilution. For the three and nine months ended March 31, 2023, there were 0.2 million stock options excluded from the calculation of diluted earnings per share due to anti-dilution in each period.
9



Note 5. Other (Income)/Expense, Net
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
Interest income on corporate funds$(55.9)$(24.1)$(159.3)$(82.8)
Realized losses on available-for-sale securities, net1.2 0.9 5.2 13.9 
Gain on sale of assets(1.2) (17.1) 
Impairment of assets   0.3 
Non-service components of pension income, net (see Note 11)(8.4)(13.1)(25.6)(37.7)
Other (income)/expense, net$(64.3)$(36.3)$(196.8)$(106.3)

Note 6. Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at March 31, 2024 and June 30, 2023 were as follows:
 March 31, 2024
Amortized
Cost
Gross
Unrealized
 Gains
Gross
Unrealized
Losses
 Fair Market Value (A)
Type of issue:   
Money market securities, cash and other cash equivalents$20,124.8 $— $— $20,124.8 
Available-for-sale securities:
Corporate bonds16,425.9 12.7 (975.2)15,463.4 
U.S. Treasury securities8,214.9 7.6 (178.4)8,044.1 
Canadian government obligations and Canadian government agency obligations
2,108.2 0.5 (99.1)2,009.6 
U.S. government agency securities1,637.5 0.1 (145.4)1,492.2 
Asset-backed securities1,278.1 4.1 (45.8)1,236.4 
Canadian provincial bonds1,076.8 2.1 (59.4)1,019.5 
Commercial mortgage-backed securities574.0  (36.0)538.0 
Other securities1,363.9 4.2 (74.9)1,293.2 
Total available-for-sale securities32,679.3 31.3 (1,614.2)31,096.4 
Total corporate investments and funds held for clients$52,804.1 $31.3 $(1,614.2)$51,221.2 
(A) Included within available-for-sale securities are funds held for clients with fair values of $31,096.4 million. There are no corporate investments included within available-for-sale securities at March 31, 2024. All available-for-sale securities were
10


included in Level 2 of the fair value hierarchy.
 June 30, 2023
Amortized 
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market Value (B)
Type of issue:    
Money market securities, cash and other cash equivalents$8,771.5 $— $— $8,771.5 
Available-for-sale securities: 
Corporate bonds15,870.7 4.7 (1,308.3)14,567.1 
U.S. Treasury securities8,054.7 0.7 (290.4)7,765.0 
Canadian government obligations and Canadian government agency obligations
2,070.4  (145.0)1,925.4 
U.S. government agency securities1,670.0 0.2 (179.8)1,490.4 
Asset-backed securities1,234.7  (69.7)1,165.0 
Canadian provincial bonds1,000.5 0.2 (78.1)922.6 
Commercial mortgage-backed securities679.2  (46.7)632.5 
Other securities1,391.6 1.7 (96.4)1,296.9 
Total available-for-sale securities31,971.8 7.5 (2,214.4)29,764.9 
Total corporate investments and funds held for clients$40,743.3 $7.5 $(2,214.4)$38,536.4 
(B) Included within available-for-sale securities are corporate investments with fair values of $119.3 million and funds held for clients with fair values of $29,645.6 million. All available-for-sale securities were included in Level 2 of the fair value hierarchy.

For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2023. The Company concurred with and did not adjust the prices obtained from the independent pricing service. The Company had no available-for-sale securities included in Level 1 or Level 3 at March 31, 2024.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of March 31, 2024, are as follows: 
March 31, 2024
Securities in Unrealized Loss Position Less Than 12 MonthsSecurities in Unrealized Loss Position Greater Than 12 MonthsTotal
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair
Market Value
Corporate bonds$(17.4)$1,543.5 $(957.8)$12,649.1 $(975.2)$14,192.6 
U.S. Treasury securities(25.0)2,341.0 (153.4)4,651.5 (178.4)6,992.5 
Canadian government obligations and Canadian government agency obligations
(1.2)209.3 (97.9)1,746.1 (99.1)1,955.4 
U.S. government agency securities(0.2)38.5 (145.2)1,432.3 (145.4)1,470.8 
Asset-backed securities(1.6)220.5 (44.2)706.6 (45.8)927.1 
Canadian provincial bonds(1.0)122.4 (58.4)750.0 (59.4)872.4 
Commercial mortgage-backed securities(0.5)11.2 (35.5)526.8 (36.0)538.0 
Other securities(10.1)305.7 (64.8)781.4 (74.9)1,087.1 
 $(57.0)$4,792.1 $(1,557.2)$23,243.8 $(1,614.2)$28,035.9 

11


The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of June 30, 2023, are as follows:
June 30, 2023
Securities in Unrealized Loss Position Less Than 12 MonthsSecurities in Unrealized Loss Position Greater Than 12 MonthsTotal
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair
Market Value
Corporate bonds$(62.0)$2,255.9 $(1,246.3)$12,050.5 $(1,308.3)$14,306.4 
U.S. Treasury securities(85.5)4,629.4 (204.9)2,876.3 (290.4)7,505.7 
Canadian government obligations and Canadian government agency obligations
(5.8)333.9 (139.2)1,588.0 (145.0)1,921.9 
U.S. government agency securities(0.6)28.2 (179.2)1,432.2 (179.8)1,460.4 
Asset-backed securities(2.0)159.7 (67.7)975.6 (69.7)1,135.3 
Canadian provincial bonds(2.7)127.0 (75.4)757.3 (78.1)884.3 
Commercial mortgage-backed securities(6.7)126.9 (40.0)505.6 (46.7)632.5 
Other securities(14.5)574.0 (81.9)629.0 (96.4)1,203.0 
 $(179.8)$8,235.0 $(2,034.6)$20,814.5 $(2,214.4)$29,049.5 

At March 31, 2024, corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carrying credit ratings of A and above, and have maturities ranging from April 2024 through March 2034.

At March 31, 2024, asset-backed securities include AAA-rated senior tranches of securities with predominantly prime collateral of fixed-rate auto loan, credit card, and equipment lease receivables with fair values of $611.3 million, $395.8 million, and $175.2 million, respectively. These securities are collateralized by the cash flows of the underlying pools of receivables. The primary risk associated with these securities is the collection risk of the underlying receivables. All collateral on such asset-backed securities has performed as expected through March 31, 2024.

At March 31, 2024, U.S. government agency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $967.7 million and $445.2 million, respectively. U.S. government agency securities represent senior, unsecured, non-callable debt that primarily carry ratings of Aaa by Moody's, and AA+ by Standard & Poor's, with maturities ranging from May 2024 through December 2033.

At March 31, 2024, U.S. government agency commercial mortgage-backed securities of $538.0 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At March 31, 2024, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair values of $533.2 million, AA-rated United Kingdom Gilt securities of $396.7 million, and AAA-rated supranational bonds of $209.3 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:
March 31,June 30,
20242023
Corporate investments:  
Cash and cash equivalents$3,291.7 $2,083.5 
Short-term marketable securities (a) 14.7 
Long-term marketable securities (b) 104.6 
Total corporate investments$3,291.7 $2,202.8 
 
(a) - Short-term marketable securities are included within Other current assets on the Consolidated Balance Sheets.
(b) - Long-term marketable securities are included within Other assets on the Consolidated Balance Sheets.

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Funds held for clients represent assets that, based upon the Company's intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories:
March 31,June 30,
20242023
Funds held for clients:  
Restricted cash and cash equivalents held to satisfy client funds obligations$16,833.1 $6,688.0 
Restricted short-term marketable securities held to satisfy client funds obligations5,652.6 5,601.9 
Restricted long-term marketable securities held to satisfy client funds obligations25,443.8 24,043.7 
Total funds held for clients$47,929.5 $36,333.6 

Client funds obligations represent the Company's contractual obligations to remit funds to satisfy clients' payroll, tax, and other payee payment obligations and are recorded on the Consolidated Balance Sheets at the time that the Company impounds funds from clients. The client funds obligations represent liabilities that will be repaid within one year of the balance sheet date. The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $49,512.3 million and $38,538.6 million at March 31, 2024 and June 30, 2023, respectively. The Company has classified funds held for clients as a current asset since these funds are held solely for the purpose of satisfying the client funds obligations. Of the Company’s funds held for clients at March 31, 2024 and June 30, 2023, $43,448.0 million and $32,758.1 million, respectively, are held in the grantor trust. The liabilities held within the trust are intercompany liabilities to other Company subsidiaries and are eliminated in consolidation.

The Company has reported the cash flows related to the purchases of corporate and client funds marketable securities and related to the proceeds from the sales and maturities of corporate and client funds marketable securities on a gross basis in the investing section of the Statements of Consolidated Cash Flows. The Company has reported the cash and cash equivalents related to client funds investments with original maturities of ninety days or less, within the beginning and ending balances of cash, cash equivalents, restricted cash, and restricted cash equivalents. The Company has reported the cash flows related to the cash received from and paid on behalf of clients on a net basis within net increase / (decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.

All available-for-sale securities were rated as investment grade at March 31, 2024.
 
Expected maturities of available-for-sale securities at March 31, 2024 are as follows:
One year or less$5,652.6 
One year to two years8,272.1 
Two years to three years5,832.8 
Three years to four years2,768.5 
After four years8,570.4 
Total available-for-sale securities$31,096.4 

Note 7.  Leases

The Company records leases on the Consolidated Balance Sheets as operating lease right-of-use (“ROU”) assets, records the current portion of operating lease liabilities within accrued expenses and other current liabilities and, separately, records long-term operating lease liabilities. The difference between total ROU assets and total lease liabilities is primarily attributable to prepayments of our obligations and the recognition of various lease incentives.

The Company has entered into operating lease agreements for facilities and equipment. The Company's leases have remaining lease terms of up to approximately eleven years.

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The components of operating lease expense were as follows:
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
Operating lease cost$29.4 $33.5 $95.6 $101.3 
Short-term lease cost0.3 0.8 1.1 1.5 
Variable lease cost4.7 4.7 12.8 11.5 
Total operating lease cost$34.4 $39.0 $109.5 $114.3 
The following table provides supplemental cash flow information related to the Company's leases:
Nine Months Ended
March 31,
20242023
Cash paid for operating lease liabilities$95.6 $95.8 
Operating lease ROU assets obtained in exchange for new operating lease liabilities$54.2 $43.6 

Other information related to our operating lease liabilities is as follows:
March 31,June 30,
20242023
Weighted-average remaining lease term (in years)56
Weighted-average discount rate3.0 %2.7 %
Current operating lease liability$94.3 $95.5 


As of March 31, 2024, maturities of operating lease liabilities are as follows:
Three months ending June 30, 2024$29.3 
Twelve months ending June 30, 2025102.3 
Twelve months ending June 30, 202688.3 
Twelve months ending June 30, 202776.7 
Twelve months ending June 30, 202856.8 
Thereafter81.1 
Total undiscounted lease obligations434.5 
Less: Imputed interest(31.1)
Net lease obligations$403.4 

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Note 8. Goodwill and Intangible Assets, net

Changes in goodwill for the nine months ended March 31, 2024 are as follows:
Employer
Services
PEO
Services
Total
Balance at June 30, 2023$2,334.6 $4.8 $2,339.4 
Additions and other adjustments24.5  24.5 
Currency translation adjustments(8.5) (8.5)
Balance at March 31, 2024$2,350.6 $4.8 $2,355.4 

Components of intangible assets, net, are as follows:
March 31,June 30,
20242023
Intangible assets:  
Software and software licenses$3,712.0 $3,548.9 
Customer contracts and lists1,165.1 1,140.6 
Other intangibles242.0 241.9 
 5,119.1 4,931.4 
Less accumulated amortization:  
Software and software licenses(2,593.5)(2,442.6)
Customer contracts and lists(989.6)(907.5)
Other intangibles(240.7)(237.7)
 (3,823.8)(3,587.8)
Intangible assets, net$1,295.3 $1,343.6 

Other intangibles consist primarily of purchased rights, trademarks and trade names (acquired directly or through acquisitions). All intangible assets have finite lives and, as such, are subject to amortization. The weighted average remaining useful life of the intangible assets is 6 years (6 years for software and software licenses, 3 years for customer contracts and lists, and 1 year for other intangibles). Amortization of intangible assets was $94.9 million and $92.4 million for the three months ended March 31, 2024 and 2023, respectively, and $285.1 million and $278.5 million for the nine months ended March 31, 2024 and 2023, respectively.

Estimated future amortization expenses of the Company's existing intangible assets are as follows:
 Amount
Three months ending June 30, 2024$109.7 
Twelve months ending June 30, 2025$340.2 
Twelve months ending June 30, 2026$214.2 
Twelve months ending June 30, 2027$172.1 
Twelve months ending June 30, 2028$133.1 
Twelve months ending June 30, 2029$103.8 

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Note 9. Short-term Financing

The Company has a $4.25 billion, 364-day credit agreement that matures in June 2024 with a one year term-out option. The Company also has a five year, $3.2 billion credit facility maturing in June 2026 that contains an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. In addition, the Company also has a $2.25 billion, five year credit facility that matures in June 2028 that contains an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. The interest rate applicable to committed borrowings is tied to SOFR, the effective federal funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing. The Company is also required to pay facility fees on the credit agreements. The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary. The Company had no borrowings through March 31, 2024 under the credit agreements.

The Company's U.S. short-term funding requirements primarily related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. This commercial paper program provides for the issuance of up to $9.7 billion in aggregate maturity value. The Company’s commercial paper program is rated A-1+ by Standard & Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days. At March 31, 2024 and June 30, 2023, the Company had no commercial paper borrowing outstanding. Details of the borrowings under the commercial paper program are as follows:
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
Average daily borrowings (in billions)$2.7 $1.5 $3.6 $3.2 
Weighted average interest rates5.4 %4.5 %5.3 %3.1 %
Weighted average maturity (approximately in days)2 days1 day2 days2 days

The Company’s U.S., Canadian and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. These agreements generally have terms ranging from overnight to up to five business days. At March 31, 2024, the Company had no outstanding obligations related to reverse repurchase agreements. At June 30, 2023, the Company had $105.4 million of outstanding obligations related to reverse repurchase agreements. Details of the reverse repurchase agreements are as follows:
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
Average outstanding balances$634.4 $343.2 $1,482.0 $811.2 
Weighted average interest rates5.4 %4.4 %5.4 %3.1 %

Note 10. Debt

The Company issued three series of fixed-rate notes with staggered maturities of 7 and 10-years totaling $3.0 billion (collectively the “Notes”). The Notes are senior unsecured obligations, and interest is payable in arrears, semi-annually.
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The principal amounts and associated effective interest rates of the Notes and other debt as of March 31, 2024 and June 30, 2023, are as follows:
Debt instrumentEffective Interest RateMarch 31, 2024June 30, 2023
Fixed-rate 3.375% notes due September 15, 2025
3.47%$1,000.0 $1,000.0 
Fixed-rate 1.700% notes due May 15, 2028
1.85%1,000.0 1,000.0 
Fixed-rate 1.250% notes due September 1, 2030
1.83%1,000.0 1,000.0 
Other4.2 4.9 
3,004.2 3,004.9 
Less: current portion (a)(1.0)(1.2)
Less: unamortized discount and debt issuance costs(12.5)(14.7)
Total long-term debt$2,990.7 $2,989.0 
(a) - Current portion of long-term debt as of March 31, 2024 is included within accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The effective interest rates for the Notes include the interest on the Notes and amortization of the discount and debt issuance costs.

As of March 31, 2024, the fair value of the Notes, based on Level 2 inputs, was $2,691.3 million. For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2023.

Note 11. Employee Benefit Plans

A.  Stock-based Compensation Plans. Stock-based compensation consists of the following:

The Company's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, and performance-based restricted stock units. The Company also offers an employee stock purchase plan for eligible employees. Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock. Any such future awards will be grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility. Time-based restricted stock unit awards and performance-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock, and for awards granted to employees with a home country outside the United States are generally settled in cash.

The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under the Company's employee stock purchase plan, and restricted stock awards. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company repurchased 1.2 million shares in each of the three months ended March 31, 2024 and 2023, and repurchased 3.3 million and 3.5 million shares in the nine months ended March 31, 2024 and 2023, respectively. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.

The following table represents pre-tax stock-based compensation expense for the three and nine months ended March 31, 2024 and 2023, respectively:
Three Months EndedNine Months Ended
March 31,March 31,
2024202320242023
Operating expenses$7.8 $6.1 $22.6 $18.5 
Selling, general and administrative expenses39.2 53.3 139.6 134.9 
Research and development9.3 8.2 26.5 23.2 
Total stock-based compensation expense$56.3 $67.6 $188.7 $176.6 

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B.  Pension Plans

The components of net pension income were as follows:
Three Months EndedNine Months Ended
March 31,March 31,
 2024202320242023
Service cost – benefits earned during the period$1.3 $1.2 $3.9 $3.5 
Interest cost on projected benefits21.2 19.5 63.4 58.6 
Expected return on plan assets(29.0)(31.9)(86.9)(95.6)
Net amortization and deferral0.7 0.5 2.2 1.4 
Settlement charges and special termination benefits   1.4 
Net pension (income)/expense$(5.8)$(10.7)$(17.4)$(30.7)

Note 12. Income Taxes

The effective tax rate for the three months ended March 31, 2024 and 2023 was 23.4% and 23.5%, respectively. The decrease in the effective tax rate is primarily due to an intercompany transfer of certain assets in the three months ended March 31, 2024 offset by an increased benefit for Research and Development Tax Credits in the three months ended March 31, 2023.

The effective tax rate for the nine months ended March 31, 2024 and 2023 was 22.7% and 23.2%, respectively. The decrease in the effective tax rate is primarily due to lower reserves for uncertain tax positions, a lower state income tax rate and a valuation allowance release offset by a lower benefit for adjustments to prior year tax liabilities in nine months ended March 31, 2024.

Note 13. Commitments and Contingencies

In May 2020, a putative class action complaint was filed against ADP, TotalSource and related defendants in the U.S. District Court, District of New Jersey. The complaint asserts violations of the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with the ADP TotalSource Retirement Savings Plan’s fiduciary administrative and investment decision-making. The complaint seeks statutory and other unspecified monetary damages, injunctive relief and attorney’s fees. The Company is unable to estimate any reasonably possible loss, or range of loss, with respect to this matter. The Company is vigorously defending against this lawsuit.

The Company is subject to various claims, litigation, and regulatory compliance matters in the normal course of business. When a loss is considered probable and reasonably estimable, the Company records a liability in the amount of its best estimate for the ultimate loss. Management currently believes that the resolution of these claims, litigation and regulatory compliance matters against us, individually or in the aggregate, will not have a material adverse impact on our consolidated results of operations, financial condition or cash flows. These matters are subject to inherent uncertainties and management's view of these matters may change in the future.

It is not the Company’s business practice to enter into off-balance sheet arrangements. In the normal course of business, the Company may enter into contracts in which it makes representations and warranties that relate to the performance of the Company’s services and products. The Company does not expect any material losses related to such representations and warranties.

Note 14. Stockholders' Equity

Changes in stockholders' equity by component are as follows:

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Three Months Ended
March 31, 2024
Common StockCapital in Excess of Par Value