What changed in this filing

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Item 1. Financial Statements

2024-02-01 compared with 2023-11-02 · 196 added, 153 removed, 483 unchanged (42% of the section changed)

4 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Revenues, other than interest on funds held

19 unchanged sentences

Diluted weighted average shares outstanding 412.5 416.2 414.0 416.6

(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.

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $ 18,379.2 million and $ 17,852.4 million for the three months ended December 31, 2023 and 2022, respectively, and $ 34,373.8 million and $ 33,386.6 million for the six months ended December 31, 2023 and 2022, respectively.

See notes to the Consolidated Financial Statements.

3 unchanged sentences

(In millions)

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Net earnings $ 878.4 $ 813.1 $ 1,737.8 $ 1,592.2

Other comprehensive (loss)/income:

Other comprehensive income/(losses):

Currency translation adjustments 53.9 71.1 9.3 ( 13.6 )

Unrealized net (losses)/gains on available-for-sale securities ( 150.6 ) ( 835.1 )

Unrealized net gains/(losses) on available-for-sale securities 860.5 242.2 709.9 ( 592.9 )

Tax effect ( 194.9 ) ( 51.2 ) ( 164.8 ) 134.5

5 unchanged sentences

Tax effect ( 0.2 ) ( 0.1 ) ( 0.4 ) ( 0.6 )

Other comprehensive (loss)/income, net of tax ( 162.0 ) ( 730.4 )

Other comprehensive income/(loss), net of tax 722.6 273.2 560.6 ( 457.2 )

Comprehensive income $ 1,601.0 $ 1,086.3 $ 2,298.4 $ 1,135.0

4 unchanged sentences

(In millions, except per share amounts)

September 30, June 30,

December 31, June 30,

Current assets:

37 unchanged sentences

issued, no ne

Common sto ck, $ 0.10 par value:

Common stock, $ 0.10 par value:

authorized, 1,000.0 shares;

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

issued, 638.7 shares at December 31, 2023 and June 30, 2023;

outstanding, 410.7 and 412.1 shares at December 31, 2023 and June 30, 2023, respectively

Capital in excess of par value 2,262.9 2,102.3

1 unchanged sentence

Treasury stock - at cost:

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

228.0 and 226.6 shares at December 31, 2023 and June 30, 2023, respectively

( 19,019.1 ) ( 18,469.3 )

2 unchanged sentences

Total liabilities and stockholders’ equity $ 57,069.4 $ 50,971.0

(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.

(A ) As of December 31, 2023, $ 21.5 million of short-term marketable securities and $ 0.1 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) .

4 unchanged sentences

(In millions)

Three Months Ended

September 30,

Six Months Ended

Cash Flows from Operating Activities:

9 unchanged sentences

Changes in operating assets and liabilities:

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

Increase in accounts receivable ( 382.3 ) ( 1.1 )

Increase in deferred contract costs ( 538.0 ) ( 503.3 )

10 unchanged sentences

Proceeds from sale of property, plant, and equipment and other assets 26.4 —

Other ( 8.5 ) —

Net cash flows used in investing activities ( 77.8 ) ( 1,469.4 )

Cash Flows from Financing Activities:

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

Net increase/(decrease) in client funds obligations 5,421.9 ( 8,096.8 )

Payments of debt ( 0.5 ) ( 0.5 )

2 unchanged sentences

Dividends paid ( 1,032.1 ) ( 865.5 )

Net proceeds related to reverse repurchase agreements 273.8 54.8

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

Net payments related to reverse repurchase agreements ( 51.0 ) ( 132.8 )

Net cash flows provided by/(used in) financing activities 3,816.1 ( 9,624.3 )

Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents 10.6 ( 24.6 )

34 unchanged sentences

Recently Issued Accounting Pronouncements

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated by its three strategic pillars:

Standard Description Effective Date Effect on Financial Statements or Other Significant Matters

ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures This 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 Disclosures This 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.

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 strategic pillars, and include a reconciliation to the Company’s reportable segments:

Three Months Ended

September 30,

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

Three Months Ended Six Months Ended

December 31, December 31,

Types of Revenues 2023 2022 2023 2022

5 unchanged sentences

Total Revenues $ 4,668.0 $ 4,391.0 $ 9,180.3 $ 8,606.6

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

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

Types of Revenues Employer Services PEO Other Total

5 unchanged sentences

Total Segment Revenues $ 3,125.2 $ 1,546.1 $ ( 3.3 ) $ 4,668.0

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

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

Types of Revenues Employer Services PEO Other Total

5 unchanged sentences

Total Segment Revenues $ 2,891.9 $ 1,503.3 $ ( 4.2 ) $ 4,391.0

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

Types of Revenues Employer Services PEO Other Total

HCM $ 3,894.0 $ — $ ( 4.6 ) $ 3,889.4

HRO, excluding PEO zero-margin benefits pass-throughs 638.5 1,064.3 ( 2.4 ) 1,700.4

PEO zero-margin benefits pass-throughs — 1,947.5 — 1,947.5

Global 1,215.9 — — 1,215.9

Interest on funds held for clients 423.2 3.9 — 427.1

Total Segment Revenues $ 6,171.6 $ 3,015.7 $ ( 7.0 ) $ 9,180.3

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

Types of Revenues Employer Services PEO Other Total

HCM $ 3,677.4 $ — $ ( 4.6 ) $ 3,672.8

HRO, excluding PEO zero-margin benefits pass-throughs 595.2 1,039.7 ( 3.7 ) 1,631.2

PEO zero-margin benefits pass-throughs — 1,890.0 — 1,890.0

Global 1,084.3 — — 1,084.3

Interest on funds held for clients 325.3 3.0 — 328.3

Total Segment Revenues $ 5,682.2 $ 2,932.7 $ ( 8.3 ) $ 8,606.6

Contract Balances

1 unchanged sentence

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 three months ended September 30, 2023 were as follows:

Changes in deferred revenues related to set up fees for the six months ended December 31, 2023 were as follows:

Contract Liability

3 unchanged sentences

Currency translation adjustments 5.0

Contract liability, September 30, 2023 $ 472.2

Contract liability, December 31, 2023 $ 471.5

Earnings per Share (“EPS”)

1 unchanged sentence

Shares Diluted

Three Months Ended September 30, 2023

Three Months Ended December 31, 2023

Net earnings $ 878.4 $ 878.4

1 unchanged sentence

EPS $ 2.14 $ 2.13

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

Net earnings $ 813.1 $ 813.1

1 unchanged sentence

EPS $ 1.96 $ 1.95

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.

Six Months Ended December 31, 2023

Net earnings $ 1,737.8 $ 1,737.8

Weighted average shares (in millions) 411.4 0.9 1.7 414.0

EPS $ 4.22 $ 4.20

Six Months Ended December 31, 2022

Net earnings $ 1,592.2 $ 1,592.2

Weighted average shares (in millions) 414.4 1.1 1.1 416.6

EPS $ 3.84 $ 3.82

For the three months ended December 31, 2023, there were 0.1 million stock options excluded from the calculation of diluted earnings per share due to anti-dilution.

For the six months ended December 31, 2023, there were no stock options excluded

from the calculation of diluted earnings per share due to anti-dilution.

For the three and six months ended December 31, 2022, there were no stock options excluded from the calculation of diluted earnings per share due to anti-dilution.

Other (Income)/Expense, Net

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Interest income on corporate funds $ ( 56.9 ) $ ( 28.9 ) $ ( 103.4 ) $ ( 58.6 )

5 unchanged sentences

Corporate Investments and Funds Held for Clients

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

September 30, 2023

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

December 31, 2023

Losses Fair Market Value (A)

14 unchanged sentences

(A) Included within available-for-sale securities are corporate investments with fair values of $ 24.4 million and funds held for clients with fair values of $ 30,271.1 million.

All available-for-sale securities were included in Level 2 of the fair value hierarchy.

All available-for-sale securities were included in Level 2 of the fair value

June 30, 2023

16 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 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 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

The Company had no available-for-sale securities included in Level 1 or Level 3 at December 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 December 31, 2023, are as follows:

December 31, 2023

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

26 unchanged sentences

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

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.

At December 31, 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 January 2024 through November 2033.

At December 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 $ 552.4 million, $ 377.7 million, and $ 157.3 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 September 30, 2023.

At September 30, 2023, U.S.

All collateral on such asset-backed securities has performed as expected through December 31, 2023.

At December 31, 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 $ 990.5 million and $ 447.1 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 December 2023 through March 2033.

At September 30, 2023, U.S.

At December 31, 2023, U.S.

government agency commercial mortgage-backed securities of $ 568.8 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.

At December 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 $ 534.3 million, AA-rated United Kingdom Gilt securities of $ 399.5 million, and AAA-rated supranational bonds of $ 211.9 million.

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

September 30, June 30,

December 31, June 30,

Corporate investments:

7 unchanged sentences

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

September 30, June 30,

December 31, 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 $ 37,098.8 million and $ 38,538.6 million at September 30, 2023 and June 30, 2023, respectively.

The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $ 44,002.1 million and $ 38,538.6 million at December 31, 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 September 30, 2023 and June 30, 2023 , $ 31,932.5 million and $ 32,758.1 million, respectively, are held in the grantor trust.

Of the Company’s funds held for clients at December 31, 2023 and June 30, 2023 , $ 39,005.9 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 September 30, 2023.

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

All available-for-sale securities were rated as investment grade at December 31, 2023.

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

One year or less $ 6,504.0

9 unchanged sentences

The components of operating lease expense were as follows:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Operating lease cost $ 32.2 $ 32.1 $ 66.2 $ 67.8

3 unchanged sentences

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

Three Months Ended

September 30,

Six Months Ended

Cash paid for operating lease liabilities $ 63.6 $ 65.3

1 unchanged sentence

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

September 30, June 30,

December 31, June 30,

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

1 unchanged sentence

Current operating lease liability $ 96.5 $ 95.5

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

Nine months ending June 30, 2024 $ 83.7

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

Six months ending June 30, 2024 $ 56.9

Twelve months ending June 30, 2025 100.4

7 unchanged sentences

Goodwill and Intangible Assets, net

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

Changes in goodwill for the six months ended December 31, 2023 are as follows:

Services Total

2 unchanged sentences

Currency translation adjustments 2.9 — 2.9

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

Balance at December 31, 2023 $ 2,365.0 $ 4.8 $ 2,369.8

Components of intangible assets, net, are as follows:

September 30, June 30,

December 31, 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 $ 95.7 million and $ 92.3 million for the three months ended September 30, 2023 and 2022, respectively.

Amortization of intangible assets was $ 94.5 million and $ 93.7 million for the three months ended December 31, 2023 and 2022, respectively, and $ 190.2 million and $ 186.1 million for the six months ended December 31, 2023 and 2022, respectively.

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

Nine months ending June 30, 2024 $ 315.8

Six months ending June 30, 2024 $ 210.2

Twelve months ending June 30, 2025 $ 313.9

10 unchanged sentences

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 September 30, 2023 under the credit agreements.

The Company had no borrowings through December 31, 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 September 30, 2023 and June 30, 2023, the Company had no commercial paper borrowing outstanding.

At December 31, 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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Average daily borrowings (in billions) $ 3.9 $ 3.4 $ 4.0 $ 4.0

Weighted average interest rates 5.4 % 3.5 % 5.3 % 2.8 %

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

Weighted average maturity (approximately in days) 2 days 2 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 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.

At December 31, 2023 and June 30, 2023, the Company had $ 21.6 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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Average outstanding balances $ 2,423.3 $ 960.8 $ 1,901.1 $ 1,040.1

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 September 30, 2023 and June 30, 2023, are as follows:

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

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

Debt instrument Effective Interest Rate December 31, 2023 June 30, 2023

Fixed-rate 3.375 % notes due September 15, 2025

9 unchanged sentences

Total long-term debt $ 2,990.2 $ 2,989.0

(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.

(a) - Current portion of long-term debt as of December 31, 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 September 30, 2023, the fair value of the Notes, based on Level 2 inputs, was $ 2,600.1 million.

As of December 31, 2023, the fair value of the Notes, based on Level 2 inputs, was $ 2,716.4 million.

7 unchanged sentences

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 1.0 million and 1.4 million shares in the three months ended September 30, 2023 and 2022, respectively .

The Company repurchase d 1.1 million and 0.9 million shares in the three months ended December 31, 2023 and 2022, respectively, and repurchased 2.1 million and 2.3 million shares in the six months ended December 31, 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 months ended September 30, 2023 and 2022, respectively:

Three Months Ended

September 30,

The following table represents pre-tax stock-based compensation expense for the three and six months ended December 31, 2023 and 2022, respectively:

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Operating expenses $ 7.4 $ 6.5 $ 14.8 $ 12.5

2 unchanged sentences

Total stock-based compensation expense $ 73.6 $ 58.4 $ 132.4 $ 109.0

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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Service cost – benefits earned during the period $ 1.3 $ 1.2 $ 2.6 $ 2.3

4 unchanged sentences

Net pension (income)/expense $ ( 5.8 ) $ ( 10.7 ) $ ( 11.6 ) $ ( 20.0 )

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.

The effective tax rate for the three months ended December 31, 2023 and 2022 was 23.2 %.

The rate remained flat due to a lower state income tax rate and a lower benefit for adjustments to prior year tax liabilities in the three months ended December 31, 2023.

The effective tax rate for the six months ended December 31, 2023 and 2022 was 22.3 % and 23.0 %, respectively.

Commitments and Contingencies

3 unchanged sentences

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 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.

5 unchanged sentences

Three Months Ended

September 30, 2023

December 31, 2023

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

Balance at June 30, 2023 $ 63.9 $ 2,102.3 $ 22,118.0 $ ( 18,469.3 ) $ ( 2,305.8 ) $ 3,509.1

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

Net earnings — — 878.4 — — 878.4

6 unchanged sentences

— — ( 576.7 ) — — ( 576.7 )

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

Balance at December 31, 2023 $ 63.9 $ 2,262.9 $ 22,757.1 $ ( 19,019.1 ) $ ( 1,745.2 ) $ 4,319.6

Three Months Ended

September 30, 2022

December 31, 2022

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

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

Net earnings — — 813.1 — — 813.1

Other comprehensive income — — — — 273.2 273.2

Stock-based compensation expense — 51.0 — — — 51.0

Issuances relating to stock compensation plans — 10.1 — 6.2 — 16.3

Treasury stock acquired ( 0.9 million shares repurchased)

— — — ( 224.3 ) — ( 224.3 )

Dividends declared ($ 1.25 per share)

— — ( 519.1 ) — — ( 519.1 )

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

Six Months Ended

December 31, 2023

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

Balance at June 30, 2023 $ 63.9 $ 2,102.3 $ 22,118.0 $ ( 18,469.3 ) $ ( 2,305.8 ) $ 3,509.1

7 unchanged sentences

— — ( 1,098.7 ) — — ( 1,098.7 )

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

Balance at December 31, 2023 $ 63.9 $ 2,262.9 $ 22,757.1 $ ( 19,019.1 ) $ ( 1,745.2 ) $ 4,319.6

Six Months Ended

December 31, 2022

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

Balance at June 30, 2022 $ 63.9 $ 1,794.2 $ 20,696.3 $ ( 17,335.4 ) $ ( 1,993.7 ) $ 3,225.3

Net earnings — 1,592.2 — — 1,592.2

Other comprehensive income — — — ( 457.2 ) ( 457.2 )

Stock-based compensation expense — 97.0 — — — 97.0

Issuances relating to stock compensation plans — 63.0 — 46.5 — 109.5

Treasury stock acquired ( 2.3 million shares repurchased)

— — — ( 624.6 ) — ( 624.6 )

Dividends declared ($ 2.29 per share)

— — ( 955.5 ) — — ( 955.5 )

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

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

1 unchanged sentence

Three Months Ended

September 30, 2023

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

Other comprehensive income/(loss) before reclassification adjustments 53.9 860.5 — — 914.4

Tax effect — ( 194.9 ) — — ( 194.9 )

Reclassification adjustments to net earnings — 2.0 (A) 1.1 (C) 0.9 (B) 4.0

Tax effect — ( 0.5 ) ( 0.2 ) ( 0.2 ) ( 0.9 )

Balance at December 31, 2023 $ ( 331.5 ) $ ( 1,157.5 ) $ ( 21.6 ) $ ( 234.6 ) $ ( 1,745.2 )

Three Months Ended

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

Other comprehensive (loss)/income before reclassification adjustments 71.1 242.2 — — 313.3

Tax effect — ( 51.2 ) — — ( 51.2 )

Reclassification adjustments to net earnings — 11.5 (A) 1.1 (C) 1.5 (B) 14.1

Tax effect — ( 2.7 ) ( 0.2 ) ( 0.1 ) ( 3.0 )

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

Six Months Ended

December 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 June 30, 2023 $ ( 340.8 ) $ ( 1,705.6 ) $ ( 23.3 ) $ ( 236.1 ) $ ( 2,305.8 )

3 unchanged sentences

Tax effect — ( 1.0 ) ( 0.5 ) ( 0.4 ) ( 1.9 )

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

Three Months Ended

September 30, 2022

Balance at December 31, 2023 $ ( 331.5 ) $ ( 1,157.5 ) $ ( 21.6 ) $ ( 234.6 ) $ ( 1,745.2 )

Six Months Ended

December 31, 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 — ( 2.9 ) ( 0.5 ) ( 0.6 ) ( 4.0 )

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

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

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

4 unchanged sentences

Employer Services and PEO Services.

The primary components of the “Other” segment are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to our transformation office, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and interest expense.

The primary components of the “Other” segment are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to transformation, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and interest expense.

Certain revenues and expenses are charged to the reportable segments at a standard rate for management reasons.

1 unchanged sentence

Segment Results:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Employer Services $ 3,125.2 $ 2,891.9 $ 6,171.6 $ 5,682.2

3 unchanged sentences

Earnings before Income Taxes

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2023 2022 2023 2022

Employer Services $ 1,061.9 $ 934.6 $ 2,070.4 $ 1,798.1

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