What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2025-01-30 · 116 added, 106 removed, 286 unchanged (44% of the section changed)

36 unchanged sentences

Executing on our Strategic Priorities will be critical to enabling our growth in the years ahead.

During the second quarter, we continued to make meaningful progress on our Strategic Priorities.

We announced a partnership that brings together Fiserv’s preeminent small business solutions, specifically Clover® and CashFlow Central℠, with RUN, our industry-leading small business payroll and HR solution.

Additionally, we started to integrate the WorkForce Software acquisition, which closed in October, into our global HCM ecosystem.

Lastly, since the first quarter introduction of ADP Lyric HCM, our flexible, intelligent, and human-centric Global HCM platform, we have experienced a meaningful increase in ADP Lyric's new business activity.

During the second quarter, we also achieved a major milestone by increasing our dividend for the 50 th consecutive year.

Highlights from the six months ended December 31, 2024 include:

During the third quarter, we continued to make meaningful progress on our Strategic Priorities.

We continued to integrate WorkForce Software, which we acquired in October, into our global HCM ecosystem to better serve mid-sized and large, global enterprises.

We augmented our global payroll capabilities by acquiring PEI (Procesamiento Externo de Informacion, S.C.) in Mexico in January, enhancing the experience provided to our local and global clients and we continued to make broad-based improvements to our products and overall client experience resulting in continued improvement in client satisfaction scores.

Highlights from the nine months ended March 31, 2025 include:

• Revenue growth of 7% to $15,434.1 million;

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• Earnings before income taxes margin expansion of 50 bps, and adjusted EBIT margin expansion of 60 bps

• Diluted and adjusted diluted earnings per share ("EPS") growth of 12%, to $4.69, respectively

• Cash returned via shareholder friendly actions of $1,790M, including $1,145M of dividends and $645M of share repurchases

• Closed the WorkForce Software acquisition in October and started the integration efforts

For the six months ended December 31, 2024, we delivered solid revenue growth of 8%, 7% organic constant currency.

Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, grew 2% for the six months ended December 31, 2024 as compared to the six months ended December 31, 2023.

PEO average worksite employees increased 3% for the six months ended December 31, 2024, as compared to the six months ended December 31, 2023.

• Diluted and adjusted diluted earnings per share ("EPS") growth of 10% and 9%, respectively, to $7.75

• Cash returned via shareholder friendly actions of $2.8B, including $1.8B of dividends and $1.0B of share repurchases;

including increasing our dividend for the 50th consecutive year

• Closed the PEI (Procesamiento Externo de Informacion, S.C.) acquisition in January

• Closed the WorkForce Software acquisition in October and progressed on integration efforts

For the nine months ended March 31, 2025, we delivered solid revenue growth of 7%, 7% organic constant currency.

Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, grew 1% for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024.

PEO average worksite employees increased 3% for the nine months ended March 31, 2025, as compared to the nine months ended March 31, 2024.

We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions.

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We are committed to building upon our past successes by investing in our business through enhancements in research and development and by driving meaningful transformation in the way we operate.

Our financial condition remains solid at December 31, 2024 and we remain well positioned to support our clients and our associates.

Our financial condition remained solid at March 31, 2025, leaving us well positioned to support our clients and our associates.

RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

For the three and six months ended December 31, respectively:

Three Months Ended Six Months Ended

December 31, December 31,

For the three and nine months ended March 31, respectively:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

2 unchanged sentences

YoY Growth, Organic Constant Currency 6 % 6 % 7 % 6 %

Total revenues for the three months ended December 31, 2024 increased due to new business started from New Business Bookings, strong client retention, an increase in pricing, an increase in zero-margin benefits pass-throughs, an increase in our pays per control and the impact from the WorkForce Software acquisition.

Total revenues for the six months ended December 31, 2024 increased due to new business started from New Business Bookings, strong client retention, an increase in pricing, an increase in zero-margin benefits pass-throughs, and an increase in our pays per control.

Total revenues for the three months ended December 31, 2024 include interest on funds held for clients of $272.8 million, as compared to $225.3 million for the three months ended December 31, 2023.

The increase in the interest earned on funds held for clients resulted from an increase in our average interest rate earned to 3.1% for the three months ended December 31, 2024, as compared to 2.8% for the three months ended December 31, 2023, and an increase in our average client funds balances of 8.1% to $35.3 billion for the three months ended December 31, 2024.

Total revenues for the six months ended December 31, 2024 include interest on funds held for clients of $526.1 million, as compared to $427.1 million for the six months ended December 31, 2023.

The increase in the interest earned on funds held for clients resulted from an increase in our average interest rate earned to 3.1% for the six months ended December 31, 2024, as compared to 2.7% for the six months ended December 31, 2023, and an increase in our average client funds balances of 6.7% to $34.0 billion for the six months ended December 31, 2024.

Total revenues for the three months ended March 31, 2025 increased due to new business started from New Business Bookings, strong client retention, an increase in zero-margin benefits pass-throughs, an increase in pricing, an increase in interest on funds held for clients, and the impact from the WorkForce Software acquisition, partially offset by the impact of foreign currency.

Total revenues for the nine months ended March 31, 2025 increased due to new business started from New Business Bookings, strong client retention, an increase in zero-margin benefits pass-throughs, an increase in pricing, an increase in interest on funds held for clients, and the impact from the WorkForce Software acquisition.

Total revenues for the three months ended March 31, 2025 include interest on funds held for clients of $355.2 million, as compared to $320.8 million for the three months ended March 31, 2024.

The increase in the interest earned on funds held for clients resulted from an increase in our average client funds balances of 6.7% to $44.5 billion for the three months ended March 31, 2025, and an increase in our average interest rate earned to 3.2% for the three months ended March 31, 2025, as compared to 3.1% for the three months ended March 31, 2024.

Total revenues for the nine months ended March 31, 2025 include interest on funds held for clients of $881.3 million, as compared to $747.9 million for the nine months ended March 31, 2024.

The increase in the interest earned on funds held for clients resulted from an increase in our average interest rate earned to 3.1% for the nine months ended March 31, 2025, as compared to 2.8% for the nine months ended March 31, 2024, and an increase in our average client funds balances of 6.6% to $37.5 billion for the nine months ended March 31, 2025.

Total Expenses

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

Change 2025 2024 %

7 unchanged sentences

Total expenses $ 3,994.8 $ 3,771.8 6 % $ 11,571.2 $ 10,847.9 7 %

For the three months ended December 31, 2024, operating expenses increased due to an increase of $84.5 million of PEO Services zero-margin benefits pass-through costs from $970.7 million to $1,055.2 million.

Additionally, for the three months ended December 31, 2024 operating expenses increased by $36.1 million due to higher service and implementation costs in support of our growing revenue.

For the six months ended December 31, 2024, operating expenses increased due to an increase of $156.9 million of PEO Services zero-margin benefits pass-through costs from $1,947.5 million to $2,104.4 million.

Additionally, for the six months ended December 31, 2024 operating expenses increased by $60.7 million due to higher service and implementation costs in support of our growing revenue.

Research and development expenses increased for the three and six months ended December 31, 2024 due to increased investments and costs to develop, support, and maintain our new and existing products and the impact from the WorkForce Software acquisition, partially offset by efficiencies from workforce optimization efforts initiated in the prior year and an increase in the capitalizable spend related to the integration of GenAI into our products, as compared to the prior year.

Depreciation and amortization expenses increased for the three and six months ended December 31, 2024 due to the impact from the WorkForce Software acquisition and amortization of new investments in internally developed software primarily for our next-gen products and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased for the three and six months ended December 31, 2024 primarily due to increases in selling and marketing expenses of $39.0 million and $73.5 million, respectively, as a result of investments in our sales organization, and an increase from acquisition related costs.

Interest expense increased for the three months ended December 31, 2024 primarily due to a higher volume of average commercial paper borrowings of $4.5 billion and reverse repurchase borrowings of $3.7 billion, as compared to $3.9 billion and $2.4 billion, respectively, for the three months ended December 31, 2023, partially offset by a decrease in average interest rates of 60 basis points for commercial paper and reverse repurchase borrowings.

Interest expense increased for the six months ended December 31, 2024 primarily due to a higher volume of average commercial paper borrowings of $4.7 billion and reverse repurchase borrowings of $3.7 billion, as compared to $4.0 billion and $1.9 billion, respectively, for the six months ended December 31, 2023, partially offset by a decrease in average interest rates of 30 basis points for commercial paper and reverse repurchase borrowings.

For the three months ended March 31, 2025, operating expenses increased primarily due to an increase of $73.7 million of PEO Services zero-margin benefits pass-through costs from $1,016.3 million to $1,090.0 million.

Additionally, for the three months ended March 31, 2025 operating expenses increased by $28.8 million due to higher service and implementation costs in support

of our growing revenue and by $23.9 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

For the nine months ended March 31, 2025, operating expenses increased primarily due to an increase of $230.7 million of PEO Services zero-margin benefits pass-through costs from $2,963.7 million to $3,194.4 million.

Additionally, for the nine months ended March 31, 2025 operating expenses increased by $89.5 million due to higher service and implementation costs in support of our growing revenue and by $54.2 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased for the three and nine months ended March 31, 2025 due to the WorkForce Software acquisition, and increased costs to develop, support, and maintain our new and existing products, partially offset by efficiencies from workforce optimization efforts initiated in the prior year and an increase in the capitalizable spend related to the integration of GenAI into our products, as compared to the prior year.

Depreciation and amortization expenses increased for the three and nine months ended March 31, 2025 due to the WorkForce Software acquisition and amortization of new investments in internally developed software primarily for our next-gen products and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased for the three and nine months ended March 31, 2025 primarily due to increases in selling and marketing expenses of $41.5 million and $115.3 million, respectively, as a result of investments in our sales organization, and an increase from acquisition related costs.

Interest expense increased for the three months ended March 31, 2025 primarily due to the issuance of $1.0 billion of senior notes during the first quarter ended September 30, 2024.

Interest expense increased for the nine months ended March 31, 2025 primarily due to a higher volume of average commercial paper borrowings of $4.2 billion and reverse repurchase borrowings of $2.8 billion, as compared to $3.6 billion and $1.5 billion, respectively, for the nine months ended March 31, 2024, and the issuance of $1.0 billion of senior notes during the first quarter ended September 30, 2024, partially offset by a decrease in average interest rates of 40 basis points for commercial paper and reverse repurchase borrowings.

Other (Income)/Expense, net

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 $ Change 2025 2024 $ Change

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Non-service components of pension income, net (7.9) (8.4) (0.5) (23.4) (25.6) (2.2)

Other (income)/expense, net $ (91.1) $ (64.8) $ 26.3 $ (192.8) $ (132.5) $ 60.3

Interest income on corporate funds increased due to higher average investment balances of $10.0 billion and $10.3 billion for the three and six months ended December 31, 2024, respectively, as compared to $7.8 billion and $7.5 billion for the three and six months ended December 31, 2023, respectively, coupled with higher average interest rates of 3.4% for each period, as compared to 2.9% and 2.8% for the three and six months ended December 31, 2023, respectively.

Other income, net $ (63.7) $ (64.3) $ (0.6) $ (256.5) $ (196.8) $ 59.7

Interest income on corporate funds remained flat for the three months ended March 31, 2025 due to higher average investment balances of $6.3 billion as compared to $5.5 billion for the three months ended March 31, 2024, offset by a decrease in average interest rates of 40 basis points.

Interest income on corporate funds increased for the nine months ended March 31, 2025 due to higher average investment balances of $9.0 billion as compared to $6.8 billion for the nine months ended March 31, 2024, coupled with an increase in average interest rates of 30 basis points.

See Note 12 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

Earnings Before Income Taxes ("EBIT") and Adjusted EBIT

For the three and six months ended December 31:

Three Months Ended Six Months Ended

December 31, December 31,

For the three and nine months ended March 31:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

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26.8 % 26.2 % 60 bps

Earnings before income taxes increased for the three and six months ended December 31, 2024, due to the components discussed above.

EBIT Margin increased for the three and six months ended December 31, 2024, due to contributions from client funds interest revenues discussed above, increased interest income on corporate funds, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased interest expense and acquisition related expenses.

Numbers may not foot due to rounding.

Earnings before income taxes increased for the three and nine months ended March 31, 2025, due to the components discussed above.

EBIT Margin decreased for the three months ended March 31, 2025, due to unfavorable impacts from interest expense, acquisition related expenses, and selling and marketing expenses, partially offset by contributions from client funds interest revenues discussed above and operating efficiencies for costs of servicing and implementing our clients on growing revenue.

EBIT Margin increased for the nine months ended March 31, 2025, due to contributions from client funds interest revenues discussed above, increased interest income on corporate funds, and operating efficiencies for costs of servicing and implementing our clients on growing revenue, partially offset by increased interest expense and acquisition related expenses.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds extended investment strate gy, legal settlements, and net charges related to our broad-based transformation initiatives, in the applicable periods.

Provision for Income Taxes

The effective tax rate for the three months ended December 31, 2024 and 2023 was 23.6% and 23.2%, respectively.

The increase in the effective tax rate is primarily due to a benefit for adjustments to prior year tax liabilities in the three months ended December 31, 2023, partially offset by a higher excess tax benefit on stock-based compensation in the three months ended December 31, 2024.

The effective tax rate for the six months ended December 31, 2024 and 2023 was 23.1% and 22.3%, respectively.

The increase in the effective tax rate is primarily due to a benefit for adjustments to prior year tax liabilities, lower reserves for uncertain tax positions and a valuation allowance release in the six months ended December 31, 2023.

The effective tax rate for the three months ended March 31, 2025 and 2024 was 23.0% and 23.4%, respectively.

The decrease in the effective tax rate is primarily due to a benefit for a decrease in uncertain tax position activity and a higher excess tax benefit on stock-based compensation in the three months ended March 31, 2025, partially offset by the benefits of an intercompany transfer of certain assets in the three months ended March 31, 2024.

The effective tax rate for the nine months ended March 31, 2025 and 2024 was 23.1% and 22.7%, respectively.

The increase in the effective tax rate is primarily due to a benefit for adjustments to prior year tax liabilities and a valuation allowance release in the nine months ended March 31, 2024.

Adjusted Provision for Income Taxes

The adjusted effective tax rate for the three months ended December 31, 2024 and 2023 was 23.6% and 23.2%, respectively.

The adjusted effective tax rate for the three months ended March 31, 2025 and 2024 was 23.0% and 23.4%, respectively.

The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

The adjusted effective tax rate for the six months ended December 31, 2024 and 2023 was 23.1% and 22.3%, respectively.

The adjusted effective tax rate for the nine months ended March 31, 2025 and 2024 was 23.1% and 22.7%, respectively.

The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

Net Earnings and Diluted EPS, Unadjusted and Adjusted

For the three and six months ended December 31:

Three Months Ended Six Months Ended

December 31, December 31,

For the three and nine months ended March 31:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

3 unchanged sentences

Adjusted diluted EPS $ 3.06 $ 2.88 6 % $ 7.75 $ 7.08 9 %

For the three and six months ended December 31, 2024, net earnings reflect the changes described above in our earnings before income taxes and our effective tax rate.

For the three months ended December 31, 2024, in addition to the increase in net earnings, diluted EPS increased as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 0.9 million shares during the three months ended December 31, 2024, and 1.1 million shares during the three months ended December 31, 2023, partially offset by the issuances of shares under our employee benefit plans.

For the six months ended December 31, 2024, in addition to the increase in net earnings, diluted EPS increased as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 2.4 million shares during the six months ended December 31, 2024, and 2.1 million shares during the six months ended December 31, 2023, partially offset by the issuances of shares under our employee benefit plans.

For the three and nine months ended March 31, 2025, net earnings reflect the changes described above in our earnings before income taxes and our effective tax rate.

For the three months ended March 31, 2025, in addition to the increase in net earnings, diluted EPS increased as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 1.0 million shares during the three months ended March 31, 2025, and 1.2 million shares during the three months ended March 31, 2024, partially offset by the issuances of shares under our employee benefit plans.

For the nine months ended March 31, 2025, in addition to the increase in net earnings, diluted EPS increased as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 3.4 million shares during the nine months ended March 31, 2025, and 3.3 million shares during the nine months ended March 31, 2024, partially offset by the issuances of shares under our employee benefit plans.

ANALYSIS OF REPORTABLE SEGMENTS

Three Months Ended % Change Six Months Ended % Change

December 31, December 31,

Three Months Ended % Change Nine Months Ended % Change

March 31, March 31,

Reported Organic constant currency 2025 2024 As

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Three Months Ended %

Change Six Months Ended %

December 31, December 31,

Change Nine Months Ended %

March 31, March 31,

2025 2024 As Reported 2025 2024 As

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$ 1,621.9 $ 1,546.3 5 % $ 4,119.4 $ 3,783.0 9 %

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

4 unchanged sentences

n/m - not meaningful

Numbers may not foot due to rounding.

Employer Services

Revenues increased for the three and six months ended December 31, 2024 due to new business started from New Business Bookings, strong client retention, an increase in pricing, an increase in interest earned on funds held for clients, an increase in our pays per control of 1% and 2%, respectively, and the impact from the WorkForce Software acquisition.

Revenues increased for the three months ended March 31, 2025 due to new business started from New Business Bookings, strong client retention, an increase in pricing, an increase in interest earned on funds held for clients, an increase in our pays per control of 1% for each period, and the impact from the WorkForce Software acquisition, partially offset by impact of foreign currency.

Revenues increased for the nine months ended March 31, 2025 due to new business started from New Business Bookings, strong client retention, an increase in pricing, an increase in interest earned on funds held for clients, an increase in our pays per control of 1% for each period, and the impact from the WorkForce Software acquisition.

Earnings before Income Taxes

Employer Services' earnings before income taxes increased 11% and 13% for the three and six months ended December 31, 2024, respectively, due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased selling expenses.

Employer Services' margin increase for the three and six months ended December 31, 2024, respectively, due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by acquisition related expenses.

Three Months Ended Change Six Months Ended Change

December 31, December 31,

Employer Services' earnings before income taxes increased 6% and 10% for the three and nine months ended March 31, 2025, respectively, due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing and implementing our clients on growing revenue, partially offset by increased selling and marketing expenses.

Employer Services' margin increased for the three months ended March 31, 2025, due to contributions from client funds interest revenues discussed above and operating efficiencies for costs of servicing and implementing our clients on growing revenue, partially offset by increased selling and marketing expenses and acquisition related expenses.

Employer Services' margin increased for the nine months ended March 31, 2025, due to contributions from operating efficiencies for costs of servicing and implementing our clients on growing revenue, and client funds interest revenues discussed above, partially offset by acquisition related expenses.

Three Months Ended Change Nine Months Ended Change

March 31, March 31,

2025 2024 $ % 2025 2024 $ %

2 unchanged sentences

PEO Services' revenues excluding zero-margin benefits pass-throughs $ 698.5 $ 649.3 $ 49.2 8 % $ 1,831.9 $ 1,717.5 $ 114.4 7 %

PEO Services' revenue increased for the three and six months ended December 31, 2024, due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 3% for each period, as compared to the three and six months ended December 31, 2023.

PEO Services' revenue increased for the three and nine months ended March 31, 2025, due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 2% and 3%, respectively, as compared to the three and nine months ended March 31, 2024.

Earnings before Income Taxes

PEO Services' earnings before income taxes decreased 1% and remained flat for the three and six months ended December 31, 2024, respectively, due to increased revenues discussed above, partially offset by increases in zero-margin benefits pass-through costs, operating costs related to workers' compensation and state unemployment insurance, and selling expenses, as compared to the three and six months ended December 31, 2023.

PEO Services' margin decreased for the three and six months ended December 31, 2024 due to increases in zero-margin benefits pass-through costs, operating costs related to workers' compensation and state unemployment insurance, and selling expenses.

PEO Services' earnings before income taxes increased 7% and 2% for the three and nine months ended March 31, 2025, respectively, due to increased revenues discussed above, partially offset by increases in zero-margin benefits pass-through costs, operating costs related to workers' compensation and state unemployment insurance, and selling and marketing expenses, as compared to the three and nine months ended March 31, 2024.

PEO Services' margin remained flat for the three months ended March 31, 2025, due to an increase in the pre-tax benefit from ADP Indemnity and operating efficiencies for costs of servicing and implementing our clients on growing revenue, offset by an increase in zero-margin benefits pass-through costs, operating costs related to workers' compensation and state unemployment insurance, and selling and marketing expenses.

PEO Services' margin decreased for the nine months ended March 31, 2025, due to increases in zero-margin benefits pass-through costs, operating costs related to workers' compensation and state unemployment insurance, and selling and marketing expenses.

ADP Indemnity provides workers’ compensation and employer’s liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence.

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The Company believes the likelihood of ultimate losses exceeding this limit is remote.

ADP Indemnity recorded a pre-tax (loss)/benefit of approximately $(0.8) million and $4.1 million for the three and six months ended December 31, 2024, respectively, as compared to approximately $(1.7) million and $4.5 million for the three and six months ended December 31, 2023, respectively.

The pre-tax loss for the three months ended December 31, 2024 was primarily a result of more favorable actuarial loss development in workers’ compensation reserves as compared to December 31, 2023.

The pre-tax benefit for the six months ended December 31, 2024 was primarily a result of less favorable actuarial loss development in workers’ compensation reserves as compared to December 31, 2023.

ADP Indemnity recorded a pre-tax benefit of approximately $5.6 million and $9.7 million for the three and nine months ended March 31, 2025, respectively, as compared to approximately $1.6 million and $6.1 million for the three and nine months ended March 31, 2024, respectively.

The pre-tax benefit for the three months and nine months ended March 31, 2025 was primarily a result of more favorable actuarial loss development in workers’ compensation reserves as compared to the three and nine months ended March 31, 2024.

In July 2024, ADP Indemnity paid a premium of $276 million t o enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2025 policy year on terms substantially similar to the fiscal 2024 reinsurance policy.

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GAAP measures, and they may not be comparable to similarly titled measures at other companies.

Three Months Ended % Change Six Months Ended % Change

December 31, December 31,

Three Months Ended % Change Nine Months Ended % Change

March 31, March 31,

2025 2024 As Reported 2025 2024 As Reported

29 unchanged sentences

The impact of acquisitions and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction.

The impact of foreign currency is determined by calculating the current year result using foreign exchange rates consistent with the prior year.

impact of foreign currency is determined by calculating the current year result using foreign exchange rates consistent with the prior year.

The PEO segment is not impacted by acquisitions, dispositions or foreign currency.

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

Consolidated revenue growth as reported 6 % 7 %

6 unchanged sentences

Employer Services revenue growth, organic constant currency 5 % 6 %

Numbers may not foot due to rounding.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE S

At December 31, 2024, cash and cash equivalents were $2.2 billion, which were primarily invested in time deposits and money market funds.

At March 31, 2025, cash and cash equivalents were $2.7 billion, which were primarily invested in time deposits and money market funds.

For corporate liquidity, we expect existing cash, cash equivalents, marketable securities, cash flow from operations together with our $10.3 billion of co mmitted credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities such as regular quarterly dividends, share repurchases, acquisitions and capital expenditures for the foreseeable future.

Our financial condition remains solid at December 31, 2024 and we have sufficient liquidity.

Our financial condition remains solid at March 31, 2025 and we have sufficient liquidity.

For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S.

short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements ($7.3 billion of which is available on a committed basis in the U.S.), together with our $10.3 billion of committed credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations.

short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements ($7.3 billion of which is available on a committed basis in the U.S.

as of March 31, 2025), together with our $10.3 billion of committed credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations.

Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy.

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Operating, Investing and Financing Cash Flows

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the six months ended December 31, 2024 and 2023, respectively, are summarized as follows:

Six Months Ended

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the nine months ended March 31, 2025 and 2024, respectively, are summarized as follows:

Nine Months Ended

2025 2024 $ Change

5 unchanged sentences

Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ (1,886.8) $ 11,353.3 $ (13,240.1)

Net cash flows provided by operating activities increased due to favorable changes in the components of working capital and an increase in growth in our business, as compared to the six months ended December 31, 2023.

Net cash flows used in investing activities changed due to the acquisition of Workforce Software with a cash disbursement of $1,160.6 million and the timing of purchases and proceeds of corporate and client funds marketable securities of $1,664.3 million.

Net cash flows used in financing activities changed due to a net increase in the cash flow from client funds obligations of $3,668.5 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, along with proceeds from the issuance of debt, offset by a net decrease in cash distributed from the Internal Revenue Service as of December 31, 2024, which was refunded to our clients, repurchases of common stock, dividends paid, and proceeds related to reverse repurchase agreements.

Net cash flows provided by operating activities increased due to an increase in growth in our business and timing on collections of accounts receivables, partially offset by a reduction in operational accruals due to timing, as compared to the nine months ended March 31, 2024.

Net cash flows used in investing activities changed primarily due to the acquisition of Workforce Software with a net cash disbursement of $1,158.3 million and the timing of purchases and proceeds of corporate and client funds marketable securities of $1,132.4 million.

Net cash flows used in financing activities changed due to a net decrease in the cash flow from client funds obligations of $10,365.2 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, and a net decrease in cash distributed from the Internal Revenue Service as of March 31, 2025, which is processed to our clients, partially offset by proceeds from the issuance of debt.

From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program.

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.

We purchased approximately 2.4 million shares of our common stock at an average price per sha re o f $274.42 duri ng the six months ended December 31, 2024, as compared to purchases of 2.1 million shares at an average price per share of $238.29 during the six months ended December 31, 2023.

We purchased approximately 3.4 million shares of our common stock at an average price per share of $283.14 during the nine months ended March 31, 2025, as compared to purchases of 3.3 million shares at an average price per share of $242.02 during the nine months ended March 31, 2024.

Capital Resources and Client Funds Obligations

7 unchanged sentences

These ratings denote the highest quality commercial paper securities.

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

At December 31, 2024 and June 30, 2024, the Compa ny had no comm ercial paper borrowing outstanding.

Maturities of commercial paper can range

from overnight to up to 364 days.

At March 31, 2025 and June 30, 2024, the Compa ny had no comm ercial paper borrowing outstanding.

Details of the borrowings under the commercial paper program are as follows:

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

5 unchanged sentences

We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligatio ns.

We have $7.3 billion available to us on a committed basis under the U.S.

As of March 31, 2025, we have $7.3 billion available to us on a committed basis under the U.S.

reverse repurchase agreements.

At December 31, 2024, the Company had no outstanding obligations related to reverse repurchase agreements.

At March 31, 2025, the Company had no outstanding obligations related to reverse repurchase agreements.

At June 30, 2024, the Company had $385.4 million of outstanding obligations related to reverse repurchase agreements which were fully paid in early July 2024.

Details of the reverse repurchase agreements are as follows:

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

5 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.

We had no borrowings through December 31, 2024 under the credit facilities.

We had no borrowings through March 31, 2025 under the credit facilities.

We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder and we are not aware of any conditions that would prevent us from borrowing part or all of the $10.3 billion available to us under the revolving credit agreements.

2 unchanged sentences

We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, and equipment lease receivables, secured predominantly by prime collateral.

All collateral on asset-backed securities has performed as expected through December 31, 2024.

All collateral on asset-backed securities has performed as expected through March 31, 2025.

In addition, we own U.S.

3 unchanged sentences

See Note 7 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients.

Capital expenditures for the six months ended December 31, 2024 were $98.2 million, as compared to $94.0 million for the six months ended December 31, 2023.

Capital expenditures for the nine months ended March 31, 2025 were $139.9 million, as compared to $151.6 million for the nine months ended March 31, 2024.

We expect capital expenditures in fiscal 2025 to be between $180.0 million and $200.0 million, as compared to $211.7 million in fiscal 2024.

11 unchanged sentences

In circumstances where we experience a reduction in employment levels due to a slowdown in the economy, we may make tactical decisions to sell certain securities or not reinvest maturing securities in order to reduce the size of the funds held for clients to correspond to client funds obligations.

We minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by impounding, in virtually all instances, the client’s funds in advance of the timing of payment of such client’s obligation.

As a result of this practice, we have consistently maintained the required level of client funds assets to satisfy all of our obligations.

We attempt to minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by generally impounding the client's funds by the time we pay such client’s obligation.

When we don't impound client funds in advance of paying such client obligations, we are at risk of not recovering such funds or material delay in such recovery.

Through our client funds investment strategy and client impounding processes, we have consistently maintained the required level of liquidity to satisfy all of our obligations.

There are inherent risks and uncertainties involving our investment strategy relating to our client funds assets.

1 unchanged sentence

However, our investments are made with the safety of principal, liquidity, and diversification as the primary goals to minimize the risk of not having sufficient funds to satisfy all of our client funds obligations.

We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under our $10.3 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), and our ability to engage in reverse repurchase agreement transactions ($7.3 billion of which is available on a committed basis in the U.S.) and available borrowings under our $10.3 billion committed credit facilities.

as of March 31, 2025) and available borrowings under our $10.3 billion committed credit facilities.

The reduced availability of financing during periods of economic turmoil, even to borrowers with the highest credit ratings, may limit our ability to access short-term debt markets to meet the liquidity needs of our business.

6 unchanged sentences

Details regarding our overall investment portfolio are as follows:

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

9 unchanged sentences

Net realized losses on available-for-sale securities $ 0.1 $ 1.2 $ 0.8 $ 5.2

December 31, 2024 June 30, 2024

March 31, 2025 June 30, 2024

Net unrealized pre-tax losses on available-for-sale securities $ (688.0) $ (1,515.8)

3 unchanged sentences

This mix varies during the fiscal year and is impacted by daily interest rate changes.

The annu alized interest rate earned on our entire p ortfolio increased from 2.7% for the six months ended December 31, 2023 to 3.2% for the six months ended December 31, 2024.

A hypothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately a $20 million impact to earnings before income taxes over the ensuing twelve-month period ending December 31, 2025.

A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately a $9 million impact to earnings before income taxes over the ensuing twelve-month period ending December 31, 2025.

The annu alized interest rate earned on ou r entire portfolio increased from 2.9% for the nine months ended March 31, 2024 to 3.2% for the nine months ended March 31, 2025.

A hypothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately a $24 million impact to earnings before income taxes over the ensuing twelve-month period ending March 31, 2026.

We are exposed to credit risk in connection with our available-for-sale securities through the possible inability of the borrowers to meet the terms of the securities.

17 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 2. Management’s Discussion and Analysis