What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-05-01 · 169 added, 197 removed, 467 unchanged (44% of the section changed)

4 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Revenues, other than interest on funds held

5 unchanged sentences

Operating expenses 2,157.6 2,074.4

Systems development and programming costs 208.6 197.3 622.6 585.8

Research and development 236.5 209.8

Depreciation and amortization 121.3 109.4

11 unchanged sentences

Diluted weighted average shares outstanding 413.6 416.9

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $ 17,301.8 million and $ 16,826.6 million for the three months ended March 31, 2023 and 2022, respectively, and $ 50,688.4 million and $ 46,863.8 million for the nine months ended March 31, 2023 and 2022, respectively.

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $ 15,994.6 million and $ 15,534.2 million for the three months ended September 30, 2023 and 2022, respectively.

See notes to the Consolidated Financial Statements.

3 unchanged sentences

(In millions)

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Net earnings $ 859.4 $ 779.0

16 unchanged sentences

(In millions, except per share amounts)

March 31, June 30,

September 30, June 30,

Current assets:

39 unchanged sentences

authorized, 1,000.0 shares;

issued, 638.7 shares at March 31, 2023 and June 30, 2022;

outstanding, 413.5 and 416.1 shares at March 31, 2023 and June 30, 2022, respectively

issued, 638.7 shares at September 30, 2023 and June 30, 2023;

outstanding, 411.7 and 412.1 shares at September 30, 2023 and June 30, 2023, respectively

Capital in excess of par value 2,188.7 2,102.3

1 unchanged sentence

Treasury stock - at cost:

225.2 and 222.7 shares at March 31, 2023 and June 30, 2022, respectively

227.0 and 226.6 shares at September 30, 2023 and June 30, 2023, respectively

( 18,767.4 ) ( 18,469.3 )

2 unchanged sentences

Total liabilities and stockholders’ equity $ 49,323.6 $ 50,971.0

(A ) As of June 30, 2022, $ 14.3 million of short-term marketable securities and $ 122.1 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements (see Note 9) .

(A ) As of September 30, 2023, $ 131.9 million of short-term marketable securities, $ 211.2 million of long-term marketable securities and $ 0.7 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements.

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.

3 unchanged sentences

(In millions)

Nine Months Ended

Three Months Ended

September 30,

Cash Flows from Operating Activities:

6 unchanged sentences

Net pension income ( 5.8 ) ( 9.3 )

Net amortization of premiums and accretion of discounts on available-for-sale securities 25.5 76.1

Net accretion of discounts and amortization of premiums on available-for-sale securities ( 5.5 ) 16.0

Other 2.7 10.6

Changes in operating assets and liabilities:

Decrease/(Increase) in accounts receivable 80.1 ( 533.6 )

(Increase)/Decrease in accounts receivable ( 107.9 ) 201.5

Increase in deferred contract costs ( 261.9 ) ( 239.6 )

Increase in other assets ( 304.9 ) ( 264.4 )

Decrease in accounts payable ( 30.4 ) ( 30.7 )

(Decrease)/Increase in accrued expenses and other liabilities ( 25.6 ) 103.7

Decrease in accrued expenses and other liabilities ( 308.6 ) ( 194.7 )

Net cash flows provided by operating activities 326.5 718.1

8 unchanged sentences

Cash Flows from Financing Activities:

Net (decrease)/increase in client funds obligations ( 3,412.3 ) 25,028.7

Net decrease in client funds obligations ( 1,374.9 ) ( 15,592.0 )

Payments of debt ( 0.2 ) ( 0.2 )

Proceeds from the issuance of debt — 7.3

Repurchases of common stock ( 250.0 ) ( 333.3 )

1 unchanged sentence

Dividends paid ( 515.8 ) ( 432.9 )

Net payments related to reverse repurchase agreements ( 142.3 ) ( 23.5 )

Net cash flows (used in)/provided by financing activities ( 5,686.2 ) 22,378.7

Net proceeds related to reverse repurchase agreements 273.8 54.8

Net cash flows used in financing activities ( 1,903.7 ) ( 16,302.6 )

Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents ( 16.3 ) ( 44.9 )

29 unchanged sentences

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.

New Accounting Pronouncements

5 unchanged sentences

The following tables provide details of revenue by our strategic pillars, and include a reconciliation to the Company’s reportable segments:

Three Months Ended Nine Months Ended

March 31, March 31,

Three Months Ended

September 30,

Types of Revenues 2023 2022

5 unchanged sentences

Total Revenues $ 4,512.4 $ 4,215.6

Reconciliation of disaggregated revenue to our reportable segments for the three months ended March 31, 2023:

Types of Revenues Employer Services PEO Other Total

HCM $ 2,165.8 $ — $ ( 2.0 ) $ 2,163.8

HRO, excluding PEO zero-margin benefits pass-throughs 323.0 633.4 ( 1.3 ) 955.1

PEO zero-margin benefits pass-throughs — 956.3 — 956.3

Global 603.2 — — 603.2

Interest on funds held for clients 247.1 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 three months ended March 31, 2022:

Types of Revenues Employer Services PEO Other Total

HCM $ 2,015.2 $ — $ ( 1.2 ) $ 2,014.0

HRO, excluding PEO zero-margin benefits pass-throughs 292.5 615.5 ( 1.6 ) 906.4

PEO zero-margin benefits pass-throughs — 897.2 — 897.2

Global 577.4 — — 577.4

Interest on funds held for clients 116.9 1.1 — 118.0

Total Segment Revenues $ 3,002.0 $ 1,513.8 $ ( 2.8 ) $ 4,513.0

Reconciliation of disaggregated revenue to our reportable segments for the nine months ended March 31, 2023:

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2023:

Types of Revenues Employer Services PEO Other Total

5 unchanged sentences

Total Segment Revenues $ 3,046.4 $ 1,469.6 $ ( 3.6 ) $ 4,512.4

Reconciliation of disaggregated revenue to our reportable segments for the nine months ended March 31, 2022:

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2022:

Types of Revenues Employer Services PEO Other Total

8 unchanged sentences

Therefore, the Company does not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in short-term deferred revenues related to set up fees for the nine months ended March 31, 2023 were as follows:

Changes in deferred revenues related to set up fees for the three months ended September 30, 2023 were as follows:

Contract Liability

3 unchanged sentences

Currency translation adjustments 12.0

Contract liability, March 31, 2023 $ 463.1

Contract liability, September 30, 2023 $ 472.2

Earnings per Share (“EPS”)

1 unchanged sentence

Shares Diluted

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

Three Months Ended March 31, 2022

Net earnings $ 928.5 $ 928.5

Weighted average shares (in millions) 418.1 1.0 1.1 420.2

EPS $ 2.22 $ 2.21

Nine Months Ended March 31, 2023

Three Months Ended September 30, 2023

Net earnings $ 859.4 $ 859.4

1 unchanged sentence

EPS $ 2.09 $ 2.08

Nine Months Ended March 31, 2022

Three Months Ended September 30, 2022

Net earnings $ 779.0 $ 779.0

1 unchanged sentence

EPS $ 1.88 $ 1.87

Stock options to purchase 0.2 million and 0.7 million shares of common stock for the three months ended March 31, 2023 and 2022, respectively, an d 0.2 million and 0.5 million shares of common stock for the nine months ended March 31, 2023 and

2022, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

For the three months ended September 30, 2023 there were no stock options excluded from the calculation of diluted earnings per share due to anti-dilution.

Stock Options to purchase 0.3 million shares of common stock for the three months ended September 30, 2022 were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Other (Income)/Expense, Net

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Interest income on corporate funds $ ( 46.5 ) $ ( 29.7 )

5 unchanged sentences

Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at March 31, 2023 and June 30, 2022 were as follows:

March 31, 2023

Corporate investments and funds held for clients at September 30, 2023 and June 30, 2023 were as follows:

September 30, 2023

Losses Fair Market Value (A)

4 unchanged sentences

Treasury securities 8,213.5 — ( 283.8 ) 7,929.7

Asset-backed securities 1,352.5 0.4 ( 63.9 ) 1,289.0

Canadian government obligations and Canadian government agency obligations

1 unchanged sentence

government agency securities 1,669.6 — ( 197.9 ) 1,471.7

Asset-backed securities 1,136.6 — ( 68.1 ) 1,068.5

Canadian provincial bonds 1,013.1 — ( 88.0 ) 925.1

12 unchanged sentences

Treasury securities 8,054.7 0.7 ( 290.4 ) 7,765.0

Asset-backed securities 1,995.7 0.5 ( 58.8 ) 1,937.4

Canadian government obligations and Canadian government agency obligations

1 unchanged sentence

government agency securities 1,670.0 0.2 ( 179.8 ) 1,490.4

Asset-backed securities 1,234.7 — ( 69.7 ) 1,165.0

Canadian provincial bonds 1,000.5 0.2 ( 78.1 ) 922.6

5 unchanged sentences

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 2022.

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, 2023.

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, 2023, are as follows:

March 31, 2023

The Company had no available-for-sale securities included in Level 1 or Level 3 at September 30, 2023.

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 September 30, 2023, are as follows:

September 30, 2023

Securities in Unrealized Loss Position Less Than 12 Months Securities in Unrealized Loss Position Greater Than 12 Months Total

3 unchanged sentences

Treasury securities ( 33.8 ) 2,090.5 ( 250.0 ) 5,836.0 ( 283.8 ) 7,926.5

Asset-backed securities ( 4.8 ) 375.4 ( 59.1 ) 848.1 ( 63.9 ) 1,223.5

Canadian government obligations and Canadian government agency obligations

1 unchanged sentence

government agency securities ( 1.9 ) 36.0 ( 196.0 ) 1,435.6 ( 197.9 ) 1,471.6

Asset-backed securities ( 3.2 ) 251.0 ( 64.9 ) 801.5 ( 68.1 ) 1,052.5

Canadian provincial bonds ( 6.9 ) 143.3 ( 81.1 ) 781.8 ( 88.0 ) 925.1

9 unchanged sentences

Treasury securities ( 85.5 ) 4,629.4 ( 204.9 ) 2,876.3 ( 290.4 ) 7,505.7

Asset-backed securities ( 52.6 ) 1,444.9 ( 6.2 ) 59.9 ( 58.8 ) 1,504.8

Canadian government obligations and Canadian government agency obligations

1 unchanged sentence

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

2 unchanged sentences

$ ( 179.8 ) $ 8,235.0 $ ( 2,034.6 ) $ 20,814.5 $ ( 2,214.4 ) $ 29,049.5

At March 31, 2023, Corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carry credit ratings of A and above, and have maturities ran g ing from April 2023 through March 2033.

At March 31, 2023, asset-backed securities include AAA-rated senior tranches of securities with predomi nantly prime collateral of fixed-rate auto loan, credit card, and equipment lease receivables with fair values of $ 654.7 million, $ 440.3 million, and $ 161.8 million respectively.

At September 30, 2023, 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 ran g ing from October 2023 through May 2033.

At September 30, 2023, asset-backed securities include AAA-rated senior tranches of securities with predomi nantly prime collateral of fixed-rate auto loan, credit card, and equipment lease receivables with fair values of $ 522.3 million, $ 352.1 million, and $ 168.3 million, respectively.

These securities are collateralized by the cas h 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, 2023.

At March 31, 2023, U.S.

All collateral on such asset-backed securities has performed as expected through September 30, 2023.

At September 30, 2023, U.S.

government a gency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $ 952.3 million and $ 442.1 million, respectively.

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 June 2023 through March 2033.

At March 31, 2023, U.S government agency commercial mortgage-backed securities of $ 673.0 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At March 31, 2023, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair val ues of $ 538.9 million, AA-rated United Kingdom Gilt securities of $ 313.8 million, and AAA-rated supranational bonds of $ 211.3 million.

At September 30, 2023, U.S.

government agency commercial mortgage-backed securities of $ 609.8 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At September 30, 2023, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair val ues of $ 521.2 million, AA-rated United Kingdom Gilt securities of $ 375.5 million, and AAA-rated supranational bonds of $ 203.2 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:

March 31, June 30,

September 30, June 30,

Corporate investments:

7 unchanged sentences

Funds held for clients have been invested in the following categories:

March 31, June 30,

September 30, June 30,

Funds held for clients:

5 unchanged sentences

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 $ 47,756.8 million and $ 51,285.5 million at March 31, 2023 and June 30, 2022, respectively.

The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $ 37,098.8 million and $ 38,538.6 million at September 30, 2023 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, 2023 and June 30, 2022 , $ 41,371.2 million and $ 46,201.2 million, respectively, are held in the grantor trust.

Of the Company’s funds held for clients at September 30, 2023 and June 30, 2023 , $ 31,932.5 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.

2 unchanged sentences

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, 2023.

Expected maturities of available-for-sale securities at March 31, 2023 are as follows:

All available-for-sale securities were rated as investment grade at September 30, 2023.

Expected maturities of available-for-sale securities at September 30, 2023 are as follows:

One year or less $ 6,208.3

5 unchanged sentences

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 pre-payments of our obligations and the recognition of various lease incentives.

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.

1 unchanged sentence

The components of operating lease expense were as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Operating lease cost $ 34.0 $ 35.6

3 unchanged sentences

The following table provides supplemental cash flow information related to the Company's leases:

Nine Months Ended

Three Months Ended

September 30,

Cash paid for operating lease liabilities $ 30.5 $ 33.5

1 unchanged sentence

Other information related to our operating lease liabilities is as follows:

March 31, June 30,

September 30, June 30,

Weighted-average remaining lease term (in years) 5 6

1 unchanged sentence

Current operating lease liability $ 97.4 $ 95.5

As of March 31, 2023, maturities of operating lease liabilities are as follows:

Three months ending June 30, 2023 $ 30.6

As of September 30, 2023, maturities of operating lease liabilities are as follows:

Nine months ending June 30, 2024 $ 83.7

Twelve months ending June 30, 2025 97.9

7 unchanged sentences

Goodwill and Intangible Assets, net

Changes in goodwill for the nine months ended March 31, 2023 are as follows:

Changes in goodwill for the three months ended September 30, 2023 are as follows:

Services Total

2 unchanged sentences

Currency translation adjustments ( 14.4 ) — ( 14.4 )

Balance at March 31, 2023 $ 2,330.9 $ 4.8 $ 2,335.7

Balance at September 30, 2023 $ 2,347.7 $ 4.8 $ 2,352.5

Components of intangible assets, net, are as follows:

March 31, June 30,

September 30, June 30,

Intangible assets:

12 unchanged sentences

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 $ 92.4 million and $ 86.1 million for the three months ended March 31, 2023 and 2022, respectively, and $ 278.5 million and $ 256.7 million for the nine months ended March 31, 2023 and 2022, respectively.

Amortization of intangible assets was $ 95.7 million and $ 92.3 million for the three months ended September 30, 2023 and 2022, respectively.

Estimated future amortization expenses of the Company's existing intangible assets are as follows:

Three months ending June 30, 2023 $ 112.0

Nine months ending June 30, 2024 $ 315.8

Twelve months ending June 30, 2025 $ 282.9

5 unchanged sentences

The Company has a $ 4.25 billion, 364 -day credit agreement that matures in June 2024 with a one year term-out option.

The interest rate applicable to committed borrowings under the agreement is tied to SOFR, the effective funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing.

The Company also has a $ 2.75 billion, five year credit facility that matures in June 2024 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 has a five year, $ 3.2 billion credit facility maturing in June 2026 that also 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 LIBOR, 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 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, 2023 under the credit agreements.

The Company had no borrowings through September 30, 2023 under the credit agreements.

The Company's U.S.

4 unchanged sentences

Maturities of commercial paper can range from overnight to up to 364 days.

At March 31, 2023 and June 30, 2022, the Company had no commercial paper borrowing outstanding.

At September 30, 2023 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 Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Average daily borrowings (in billions) $ 4.1 $ 4.6

Weighted average interest rates 5.3 % 2.3 %

Weighted average maturity (approximately in days) 1 day 1 day 2 days 1 day

Weighted average maturity (approximately in days) 2 days 2 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, 2023, there were no outstanding obligations related to repurchase agreements.

At June 30, 2022, the Company had $ 136.4 million of outstanding obligations related to reverse repurchase agreements.

At September 30, 2023 and June 30, 2023, the Company had $ 343.8 million and $ 105.4 million, respectively, of outstanding obligations related to reverse repurchase agreements.

Details of the reverse repurchase agreements are as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Average outstanding balances $ 1,379.0 $ 1,119.4

2 unchanged sentences

The Notes are senior unsecured obligations, and interest is payable in arrears, semi-annually.

The principal amounts and associated effective interest rates of the Notes and other debt as of March 31, 2023 and June 30, 2022, are as follows:

Debt instrument Effective Interest Rate March 31, 2023 June 30, 2022

Fixed-rate 3.375 % notes due September 15, 2025

3.47 % $ 1,000.0 $ 1,000.0

The principal amounts and associated effective interest rates of the Notes and other debt as of September 30, 2023 and June 30, 2023, are as follows:

Debt instrument Effective Interest Rate September 30, 2023 June 30, 2023

Fixed-rate 3.375 % notes due September 15, 2025

2 unchanged sentences

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

Other 4.7 4.9

3 unchanged sentences

Total long-term debt $ 2,989.8 $ 2,989.0

(a) - Current portion of long-term debt as of March 31, 2023 is included within accrued expenses and other current liabilities on the Consolidated Balance Sheets.

(a) - Current portion of long-term debt as of September 30, 2023 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, 2023, the fair value of the Notes, based on Level 2 inputs, was $ 2,689.1 million.

As of September 30, 2023, the fair value of the Notes, based on Level 2 inputs, was $ 2,600.1 million.

5 unchanged sentences

Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock.

Other than the change described above, the methods and assumptions used in the determination of the fair value of stock-based awards are generally consistent with those described in the Company's Form 10-Q for the first quarter of fiscal 2023.

See the Company's Quarterly Report on Form 10-Q for the first quarter of fiscal 2023 for a detailed description of the Company's stock-based compensation awards and employee stock purchase plan.

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.

• Restricted Stock.

• Time-Based Restricted Stock Units.

Time-based restricted stock units generally vest ratably over 3 years.

Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Time-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period.

Time-based restricted stock unit awards granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period.

Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period.

Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently remeasured at each reporting date during the vesting period based on the change in the ADP stock price.

Dividend cash equivalents are paid on share-settled units, and dividend cash equivalents are not paid on cash-settled units.

• Performance-Based Restricted Stock Units.

Performance-based restricted stock units generally vest over a one to three year performance period and a subsequent service period of up to 38 months.

Under these programs, the Company communicates “target awards” at the beginning of the performance period with

possible payouts at the end of the performance period ranging from 0 % to 200 % of the “target awards.” Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Performance-based restricted stock units cannot be transferred and are settled in either cash or stock, depending on the employee's home country.

Compensation expense relating to the issuance of performance-based restricted stock units settled in cash is recognized over the vesting period initially based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded during the performance period based on probable and actual performance against targets.

In addition, compensation expense is remeasured at each reporting period during the vesting period based on the change in the ADP stock price.

Compensation expense relating to the issuance of performance-based restricted stock units settled in stock is recorded over the vesting period based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded based on the probable and actual performance against targets.

Dividend equivalents are paid on awards under the performance-based restricted stock unit program.

• Employee Stock Purchase Plan.

The Company offers an employee stock purchase plan that allows eligible employees to purchase shares of common stock at a price equal to 95 % of the market value for the Company's common stock on the last day of the offering period.

This plan has been deemed non-compensatory and, therefore, no compensation expense has been recorded.

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 repurchase d 1.2 million and 2.3 million shares in the three months ended March 31, 2023 and 2022, respectively, and repurchased 3.5 million and 7.0 million shares in the nine months ended March 31, 2023 and 2022, respectively.

The Company repurchase d 1.0 million and 1.4 million shares in the three months ended September 30, 2023 and 2022, 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, 2023 and 2022, respectively:

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

The following table represents pre-tax stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively:

Three Months Ended

September 30,

Operating expenses $ 7.4 $ 6.0

Selling, general and administrative expenses 42.8 37.1

System development and programming costs 8.2 6.2 23.2 20.1

Research and development 8.6 7.5

Total stock-based compensation expense $ 58.8 $ 50.6

During the three months ended September 30, 2023, the following activity occurred under the Company’s existing plans.

Stock Options:

(in thousands) Weighted

Average Price

Options outstanding at July 1, 2023 2,654 $ 155

Options exercised ( 305 ) $ 148

Options forfeited/cancelled ( 5 ) $ 176

Options outstanding at September 30, 2023 2,344 $ 156

Time-Based Restricted Stock and Time-Based Restricted Stock Units:

Number of Shares

(in thousands) Number of Units

(in thousands)

Restricted shares/units outstanding at July 1, 2023 450 730

Restricted shares/units granted — 605

Restricted shares/units vested ( 289 ) ( 256 )

Restricted shares/units forfeited ( 4 ) ( 8 )

Restricted shares/units outstanding at September 30, 2023 157 1,071

Performance-Based Restricted Stock and Performance-Based Restricted Stock Units:

Number of Shares

(in thousands) Number of Units

(in thousands)

Restricted shares/units outstanding at July 1, 2023 197 821

Restricted shares/units granted 113 224

Restricted shares/units vested ( 103 ) ( 363 )

Restricted shares/units forfeited ( 3 ) ( 3 )

Restricted shares/units outstanding at September 30, 2023 204 679

Pension Plans

The components of net pension income were as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Service cost – benefits earned during the period $ 1.3 $ 1.2

4 unchanged sentences

Net pension (income)/expense $ ( 5.8 ) $ ( 9.3 )

The effective tax rate for the three months ended March 31, 2023 and 2022 was 23.5 % and 22.0 %, respectively.

The increase is primarily due to an intercompany transfer of certain assets in the three months ended March 31, 2022.

and higher reserves for uncertain tax positions in the three months ended March 31, 2023.

The effective tax rate for the nine months ended March 31, 2023 and 2022 was 23.2 % and 22.6 %, respectively.

The increase is primarily due to an intercompany transfer of certain assets in the nine months ended March 31, 2022 and higher reserves for uncertain tax positions, partially offset by favorable adjustments to prior year tax liabilities in the nine months ended March 31, 2023.

The effective tax rate for the three months ended September 30, 2023 and 2022 was 21.4 % and 22.9 %, respectively.

The decrease is primarily due to lower reserves for uncertain tax positions and a valuation allowance release offset by a lower excess tax benefit on stock-based compensation in the three months ended September 30, 2023.

Commitments and Contingencies

In May 2020, two potential class action complaints were filed against ADP, TotalSource and related defendants in the U.S.

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 complaints assert 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 complaints seek statutory and other unspecified monetary damages, injunctive relief and attorney’s fees.

These claims are still in their early stages and the Company is unable to estimate any reasonably possible loss, or range of loss, with respect to these matters.

The Company intends to vigorously defend against these lawsuits.

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.

These claims are still in their early stages and the Company is unable to estimate any reasonably possible loss, or range of loss, with respect to this matter.

The Company intends to vigorously defend 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.

financial condition or cash flows.

These matters are subject to inherent uncertainties and management's view of these matters may change in the future.

5 unchanged sentences

Three Months Ended

March 31, 2023

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

Balance at December 31, 2022 $ 63.9 $ 1,954.2 $ 21,333.0 $ ( 17,913.5 ) $ ( 2,450.9 ) $ 2,986.7

Net earnings — 1,043.1 — 1,043.1

Other comprehensive income — — 323.1 323.1

Stock-based compensation expense — 61.7 — — 61.7

Issuances relating to stock compensation plans — 46.0 — 17.6 — 63.6

Treasury stock acquired ( 1.2 million shares repurchased)

— — ( 266.1 ) — ( 266.1 )

Dividends declared ($ 1.25 per share)

— — ( 518.3 ) — — ( 518.3 )

Balance at March 31, 2023 $ 63.9 $ 2,061.9 $ 21,857.8 $ ( 18,162.0 ) $ ( 2,127.8 ) $ 3,693.8

Three Months Ended

March 31, 2022

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

Balance at December 31, 2021 $ 63.9 $ 1,664.7 $ 20,011.8 $ ( 16,362.4 ) $ ( 328.4 ) $ 5,049.6

Net earnings — — 928.5 — — 928.5

Other comprehensive income — — — — ( 933.9 ) ( 933.9 )

Stock-based compensation expense — 42.7 — — — 42.7

Issuances relating to stock compensation plans — 29.4 — 10.3 — 39.7

Treasury stock acquired ( 2.3 million shares repurchased)

— — — ( 497.9 ) — ( 497.9 )

Dividends declared ($ 1.04 per share)

— — ( 435.8 ) — — ( 435.8 )

Balance at March 31, 2022 $ 63.9 $ 1,736.8 $ 20,504.5 $ ( 16,850.0 ) $ ( 1,262.3 ) $ 4,192.9

Nine Months Ended

March 31, 2023

September 30, 2023

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

8 unchanged sentences

— — ( 522.0 ) — — ( 522.0 )

Balance at March 31, 2023 $ 63.9 $ 2,061.9 $ 21,857.8 $ ( 18,162.0 ) $ ( 2,127.8 ) $ 3,693.8

Nine Months Ended

March 31, 2022

Balance at September 30, 2023 $ 63.9 $ 2,188.7 $ 22,455.4 $ ( 18,767.4 ) $ ( 2,467.8 ) $ 3,472.8

Three Months Ended

September 30, 2022

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

8 unchanged sentences

— — ( 436.3 ) — — ( 436.3 )

Balance at March 31, 2022 $ 63.9 $ 1,736.8 $ 20,504.5 $ ( 16,850.0 ) $ ( 1,262.3 ) $ 4,192.9

Balance at September 30, 2022 $ 63.9 $ 1,893.1 $ 21,039.0 $ ( 17,695.4 ) $ ( 2,724.1 ) $ 2,576.5

Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”)

1 unchanged sentence

Three Months Ended

March 31, 2023

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

Balance at December 31, 2022 $ ( 367.8 ) $ ( 1,778.3 ) $ ( 24.9 ) $ ( 279.9 ) $ ( 2,450.9 )

Other comprehensive income/(loss) before reclassification adjustments 15.6 392.0 — — 407.6

Tax effect — ( 86.6 ) — — ( 86.6 )

Reclassification adjustments to net earnings — 0.9 (A) 1.1 (C) 0.6 (B) 2.6

Tax effect — ( 0.2 ) ( 0.3 ) — ( 0.5 )

Balance at March 31, 2023 $ ( 352.2 ) $ ( 1,472.2 ) $ ( 24.1 ) $ ( 279.3 ) $ ( 2,127.8 )

Three Months Ended

March 31, 2022

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

Balance at December 31, 2021 $ ( 278.3 ) $ 98.3 $ ( 28.3 ) $ ( 120.1 ) $ ( 328.4 )

Other comprehensive (loss)/income before reclassification adjustments ( 14.2 ) ( 1,192.5 ) — — ( 1,206.7 )

Tax effect — 270.3 — — 270.3

Reclassification adjustments to net earnings — 0.3 (A) 1.1 (C) 1.9 (B) 3.3

Tax effect — ( 0.1 ) ( 0.3 ) ( 0.4 ) ( 0.8 )

Balance at March 31, 2022 $ ( 292.5 ) $ ( 823.7 ) $ ( 27.5 ) $ ( 118.6 ) $ ( 1,262.3 )

Nine Months Ended

March 31, 2023

September 30, 2023

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

4 unchanged sentences

Tax effect — ( 0.4 ) ( 0.3 ) ( 0.2 ) ( 0.9 )

Balance at March 31, 2023 $ ( 352.2 ) $ ( 1,472.2 ) $ ( 24.1 ) $ ( 279.3 ) $ ( 2,127.8 )

Nine Months Ended

March 31, 2022

Balance at September 30, 2023 $ ( 385.4 ) $ ( 1,824.6 ) $ ( 22.5 ) $ ( 235.3 ) $ ( 2,467.8 )

Three Months Ended

September 30, 2022

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

4 unchanged sentences

Tax effect — ( 0.3 ) ( 0.3 ) ( 0.5 ) ( 1.1 )

Balance at March 31, 2022 $ ( 292.5 ) $ ( 823.7 ) $ ( 27.5 ) $ ( 118.6 ) $ ( 1,262.3 )

Balance at September 30, 2022 $ ( 438.9 ) $ ( 1,978.1 ) $ ( 25.8 ) $ ( 281.3 ) $ ( 2,724.1 )

(A) Reclassification adjustments out of AOCI are included within Other (income)/expense, net, on the Statements of Consolidated Earnings.

8 unchanged sentences

Segment Results:

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Employer Services $ 3,046.4 $ 2,790.2

3 unchanged sentences

Earnings before Income Taxes

Three Months Ended Nine Months Ended

March 31, March 31,

2023 2022 2023 2022

Three Months Ended

September 30,

Employer Services $ 1,008.5 $ 863.5

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements