What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-31 compared with 2025-05-01 · 129 added, 170 removed, 232 unchanged (56% of the section changed)

19 unchanged sentences

the impact of new acquisitions and divestitures;

the adequacy, effectiveness and success of our business transformation initiatives and the impact of any uncertainties related to major natural disasters or catastrophic events;

the impact of any uncertainties related to major natural disasters or catastrophic events;

and supply-chain disruptions.

6 unchanged sentences

Adjusted EBIT, adjusted EBIT margin, adjusted net earnings, adjusted diluted earnings per share, adjusted effective tax rate and organic constant currency are all non-GAAP financial measures.

Please refer to the accompanying financial tables in the “Non-GAAP Financial Measures” section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their comparable GAAP financial measures.

EXECUTIVE OVERVIEW

We are a leading global provider of cloud-based Human Capital Management (“HCM”) technology solutions to employers around the world.

Our HCM solutions, which include both software and outsourcing services, are designed to help our clients manage their workforce through a dynamic business and regulatory landscape and the changing world of work.

We continuously seek to enhance our leading HCM solutions to further support our clients.

As a global leader in HR and payroll solutions, ADP continuously aims to solve complex business challenges for our clients and their workers.

Our Human Capital Management ("HCM") solutions, which include both software and outsourcing services, are designed to help our clients manage their workforce through a dynamic business and regulatory landscape and the changing world of work.

We see tremendous opportunity ahead as we focus on our three key Strategic Priorities:

Leading with Best-in-Class HCM technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients.

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

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:

During the first quarter, we made meaningful progress on our Strategic Priorities.

We continued to scale ADP Embedded Payroll to reach additional small business clients, accelerated the deployment of Workforce Now Next-Gen to a growing percentage of new mid-market clients, and experienced ongoing strong enterprise sales momentum for ADP Lyric HCM.

We continued to empower our associates to leverage their HR domain expertise by providing them with AI tools that further enhanced the client and associate experience.

Finally, we continued to build on our global scale by enhancing the services offered within our existing footprint of more than 140 countries and territories.

Highlights from the three months ended September 30, 2025 include:

• Revenue growth of 7% to $5,175.2 million;

7% organic constant currency

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

6% growth on an organic constant currency

• Diluted and adjusted diluted earnings per share ("EPS") growth of 6% and 7%, respectively, to $2.49

• Cash returned via shareholder friendly actions of $1.0B, including $0.6B of dividends and $0.4B 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.

For the three months ended September 30, 2025, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis.

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, remained stable for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

PEO average worksite employees increased 2% for the three months ended September 30, 2025, as compared to the three months ended September 30, 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.

We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our re-investments, longer term strategy, and commitments to shareholder friendly actions.

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

We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long-term strategy and commitments to shareholder friendly actions.

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

Our financial condition remains solid at September 30, 2025 and we remain well positioned to support our associates and our clients.

RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

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

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

Three Months Ended

September 30,

Total Revenues $ 5,175.2 $ 4,832.7

1 unchanged sentence

YoY Growth, Organic Constant Currency 6 % 7 %

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 revenues increased for the three months ended September 30, 2025 due to new business started from new business bookings, strong client retention, an increase in interest on funds held for clients, the impact from the WorkForce Software acquisition, and an increase in zero-margin benefits pass-throughs.

Total revenues for the three months ended September 30, 2025 include interest on funds held for clients of $286.8 million, as compared to $253.3 million for the three months ended September 30, 2024.

The increase in interest earned on funds held for

clients resulted from an increase in our average client funds balances of 6.5% to $34.9 billion for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, coupled with an increase in our average interest rate earned to 3.3% for the three months ended September 30, 2025, as compared to 3.1% for the three months ended September 30, 2024.

Total Expenses

Three Months Ended Nine Months Ended

March 31, March 31,

Change 2025 2024 %

Three Months Ended

September 30,

Costs of revenues:

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Total expenses $ 3,977.8 $ 3,698.2 8 %

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.

Operating expenses increased for the three months ended September 30, 2025 due to an increase of $81.8 million of PEO Services zero-margin benefits pass-through costs to $1,131.0 million from $1,049.2 million for the three months ended September 30, 2024.

Additionally, operating expenses increased by $67.1 million due to higher service and implementation costs in support of our growing revenue and by $10.6 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 months ended September 30, 2025 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.

Depreciation and amortization expenses increased for the three months ended September 30, 2025 due to the amortization of intangible assets acquired in the WorkForce Software acquisition, amortization of investments in internally developed software primarily for our next-gen products, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased for the three months ended September 30, 2025 primarily due to increases in selling and marketing expenses of $57.2 million as a result of investments in our sales organization.

Interest expense decreased for the three months ended September 30, 2025 primarily due to a decrease of $15.5 million related to commercial paper and reverse repurchase borrowings as a result of a decrease in average interest rates on commercial paper issuances and reverse repurchases of 90 basis points, coupled with a decrease in average daily commercial paper borrowings of $0.3 billion, offset by an increase in average reverse repurchase outstanding balances of $0.7 billion, as compared to the three months ended September 30, 2024.

This decrease was partially offset by net increases in interest expense of $12.7 million related to the senior notes issued and redeemed during the year ended June 30, 2025.

Other (Income)/Expense, net

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 $ Change 2025 2024 $ Change

Three Months Ended

September 30,

2025 2024 $ Change

Interest income on corporate funds $ (101.5) $ (91.7) $ 9.8

Realized losses on available-for-sale securities, net 0.1 1.2 1.1 0.8 5.2 4.4

Realized (gains)/losses on available-for-sale securities, net (1.5) 0.2 1.7

Gain on sale of assets — (2.4) (2.4)

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Other income, net $ (110.1) $ (101.7) $ 8.4

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.

Interest income on corporate funds increased for the three months ended September 30, 2025 due to higher average investment balances of $11.4 billion as compared to $10.7 billion for the three months ended September 30, 2024, coupled with an increase in average interest rates of 20 basis points, as compared to the three months ended September 30, 2024.

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 nine months ended March 31:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

Three Months Ended

September 30,

2025 2024 YoY Growth

EBIT $ 1,307.5 $ 1,236.2 6 %

EBIT Margin 25.3 % 25.6 % (30) bps

26.7 % 26.2 % 50 bps

Adjusted EBIT $ 1,318.3 $ 1,232.5 7 %

Adjusted EBIT Margin 25.5 % 25.5 % 0 bps

26.8 % 26.2 % 60 bps

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.

Earnings before income taxes increased for the three months ended September 30, 2025, due to the increase in total revenues, partially offset by the increase in total expenses discussed above.

EBIT Margin decreased for the three months ended September 30, 2025, due to increased selling and marketing expenses and costs of servicing and implementing our clients on growing revenue, partially offset by contributions from client fund interest revenues discussed above and interest expense.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds

extended investment strategy, and net charges, including certain legal settlements, in the applicable periods.

Provision for Income Taxes

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.

The effective tax rate for the three months ended September 30, 2025 and 2024 was 22.5% and 22.6%, respectively.

The decrease in the effective tax rate is primarily due to lower reserves for uncertain tax positions primarily offset by the cost of an intercompany transfer of certain assets and a lower excess tax benefit on stock-based compensation in the three months ended September 30, 2025.

Adjusted Provision for Income Taxes

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 nine months ended March 31, 2025 and 2024 was 23.1% and 22.7%, respectively.

The adjusted effective tax rate for the three months ended September 30, 2025 and 2024 was 22.5% and 22.6%, 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 nine months ended March 31:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

Three Months Ended

September 30,

2025 2024 YoY Growth

Net earnings $ 1,013.0 $ 956.3 6 %

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Adjusted diluted EPS $ 2.49 $ 2.33 7 %

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.

In addition to the increase in net earnings, diluted EPS increased for the three months ended September 30, 2025 as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 1.2 million shares during the three months ended September 30, 2025, and 1.4 million shares during the three months ended September 30, 2024, partially offset by the issuances of shares under our employee benefit plans.

Adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above for the three months ended September 30, 2025.

ANALYSIS OF REPORTABLE SEGMENTS

Three Months Ended % Change Nine Months Ended % Change

March 31, March 31,

Reported Organic constant currency 2025 2024 As

Three Months Ended % Change

September 30,

Reported Organic constant currency

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PEO Services 1,687.5 1,574.5 7 % 7 %

Other (3.4) (2.5) n/m n/m (9.6) (9.4) n/m n/m

Other (3.5) (2.8) n/m n/m

$ 5,175.2 $ 4,832.7 7 % 6 %

1 unchanged sentence

Three Months Ended %

Change Nine Months Ended %

March 31, March 31,

2025 2024 As Reported 2025 2024 As

September 30,

2025 2024 As Reported

Employer Services $ 1,228.8 $ 1,164.3 6 %

PEO Services 218.8 225.6 (3) %

Other (131.5) (111.3) n/m (458.5) (422.9) n/m

Other (140.1) (153.7) n/m

$ 1,307.5 $ 1,236.2 6 %

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

Three Months Ended

September 30,

2025 2024 YoY Growth

Employer Services 35.2 % 35.7 % (50) bps

36.9 % 35.8 % 120 bps

PEO Services 13.0 % 14.3 % (140) bps

14.5 % 15.2 % (70) bps

n/m - not meaningful

1 unchanged sentence

Employer Services

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.

Employer Services' revenues increased for the three months ended September 30, 2025 due to new business started from new business bookings, strong client retention, an increase in pricing, the impact from the WorkForce Software acquisition, and an increase in interest earned on funds held for clients.

Earnings before Income Taxes

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,

Employer Services' earnings before income taxes increased for the three months ended September 30, 2025, due to increased revenues, including contributions from client funds interest, discussed above, partially offset by increased costs of servicing and implementing our clients on growing revenue, selling and marketing expenses, and costs to develop, support, and maintain our new and existing products.

Employer Services' margin decreased for the three months ended September 30, 2025, due to increased selling and marketing expenses, costs of servicing and implementing our clients on growing revenue, and costs to develop, support, and maintain our new and existing products, partially offset by contributions from client fund interest revenues discussed above.

Three Months Ended Change

September 30,

2025 2024 $ %

2 unchanged sentences

PEO Services' revenues excluding zero-margin benefits pass-throughs $ 556.5 $ 525.3 $ 31.2 6 %

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.

PEO Services' revenues increased for the three months ended September 30, 2025 due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 2%, as compared to the three months ended September 30, 2024.

Earnings before Income Taxes

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.

PEO Services' earnings before income taxes decreased for the three months ended September 30, 2025 due to increased operating costs related to state unemployment insurance and selling and marketing expenses, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the three months ended September 30, 2025, due to increased operating costs related to state unemployment insurance, selling and marketing expenses and zero-margin benefits pass-through costs, partially offset by increased revenues discussed above.

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 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.

The primary components of “Other” 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 other interest income and expense.

ADP Indemnity recorded a pre-tax benefit of approximately $4.7 million for the three months ended September 30, 2025, as compared to approximately $4.8 million for the three months ended September 30, 2024, which were primarily the results of more favorable actuarial loss development in workers’ compensation reserves.

ADP Indemnity paid a premium of $278 million in July 2025, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2026 policy year on terms substantially similar to the fiscal 2025 reinsurance policy.

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

Non-GAAP Financial Measures

In addition to our U.S.

GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods:

In addition to our GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods:

Adjusted Financial Measure U.S.

6 unchanged sentences

Organic constant currency Revenues

We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior period, and to plan for future periods by focusing on our underlying operations.

We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior periods, and to plan for future periods by focusing on our underlying operations.

We believe that the adjusted results provide relevant and useful information for investors because it allows investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance.

3 unchanged sentences

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

Three Months Ended % Change Nine Months Ended % Change

March 31, March 31,

2025 2024 As Reported 2025 2024 As Reported

Three Months Ended % Change

September 30,

2025 2024 As Reported

Net earnings $ 1,013.0 $ 956.3 6 %

2 unchanged sentences

All other interest income (a) (22.8) (23.9)

Transformation initiatives 0.1 1.5 0.1 4.9

Legal settlements (b) — (0.3)

2 unchanged sentences

Provision for income taxes $ 294.5 $ 279.9 5 %

Transformation initiatives (c) — 0.4 — 1.2

Legal settlements (c) — (0.1)

2 unchanged sentences

Net earnings $ 1,013.0 $ 956.3 6 %

Transformation initiatives 0.1 1.5 0.1 4.9

Income tax (benefit)/provision for transformation initiatives (c) — (0.4) — (1.2)

Legal settlements (b) — (0.3)

Income tax (benefit)/provision for legal settlements (c) — — 0.1 —

Income tax provision for legal settlements (c) — 0.1

Adjusted net earnings $ 1,013.0 $ 956.1 6 %

Diluted EPS $ 2.49 $ 2.34 6 %

Transformation initiatives (c) — — — 0.01

Legal settlements (b) (c) — —

Adjusted diluted EPS $ 2.49 $ 2.33 7 %

Numbers may not foot due to rounding.

(a) In adjusted EBIT, we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model.

The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”

(b) Represents a reserve reversal of a legal matter from fiscal 2023 previously recorded as an adjustment to EBIT.

(c) The income tax (benefit)/provision was calculated based on the annualized marginal rate in effect during the quarter of the adjustment.

(b) In the three months ended September 30, 2024, this represents a reserve reversal of a legal reserve recorded during the year ended June 30, 2023.

(c) The income tax provision was calculated based on the annualized marginal rate in effect during the quarter of the adjustment.

(d) The adjusted effective tax rate is calculated as our adjusted provision for income taxes divided by the sum of our adjusted net earnings plus our adjusted provision for income taxes.

1 unchanged sentence

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.

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

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

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

Three Months Ended Nine Months Ended

March 31, March 31,

Three Months Ended

September 30,

Consolidated revenue growth as reported 7 %

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Employer Services revenue growth, organic constant currency 5 %

Numbers may not foot due to rounding.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE S

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 March 31, 2025 and we have sufficient liquidity.

As of September 30, 2025, cash and cash equivalents were $2.5 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 $10.6 billion of committed 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, and capital expenditures for the foreseeable future.

Our financial condition remains solid at September 30, 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 ($7.5 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.

as of June 30, 2025), together with our $10.6 billion of comm itted 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 nine months ended March 31, 2025 and 2024, respectively, are summarized as follows:

Nine Months Ended

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the three months ended September 30, 2025 and 2024, respectively, are summarized as follows:

Three Months Ended

September 30,

2025 2024 $ Change

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Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ (1,062.9) $ (7,294.5) $ 6,231.6

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.

Net cash flows provided by operating activities decreased primarily due to a net unfavorable change in the components of operating assets and liabilities partially offset by growth in our business, as compared to the three months ended September 30, 2024.

Net cash flows used in investing activities changed due to timing of net proceeds and purchases of corporate and client funds marketable securities of $203.7 million.

Net cash flows provided by financing activities changed due to a net increase in the cash flow from client funds obligations of $11,443.6 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, partially offset by a decrease in the net proceeds from the issuance of commercial paper and debt.

We purchased approximately 1.2 million shares of our common stock at an average price per share of $302.10 during the three months ended September 30, 2025, as compared to purchases of 1.4 million shares at an average price per share of $259.47 during the three months ended September 30, 2024.

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 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

We have $4.0 billion of senior unsecured notes with maturity dates in 2025, 2028, 2030 and 2034.

We have $4.0 billion of senior unsecured no tes with maturity dates in 2028, 2030, 2032, and 2034.

We may from time to time revisit the long-term debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure.

However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all.

See Note 11 of our Consolidated Financial Statements for a description of our long-term financing.

short-term funding requirements primarily related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

See Note 11 of our Consolidated Financial Statements for a description of our senior unsecured notes.

short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

This commercial paper program provides for the issuance of up to $10.6 billion in aggregate maturity value.

Our commercial paper program is rated A-1+ by St andard & Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch.

Our commercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch.

These ratings denote the highest quality commercial paper securities.

Maturities of commercial paper can range

from overnight to up to 364 days.

At March 31, 2025 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.

As of September 30, 2025 and June 30, 2025 the Company had $5.2 billion and $4.8 billion of commercial paper outstanding, which were repaid in early October 2025 and July 2025, respectively.

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

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

Three Months Ended

September 30,

Average daily borrowings (in billions) $ 4.5 $ 4.8

Weighted average interest rates 4.4 % 5.3 %

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

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

Our 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.

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.

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

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 obligations.

As of September 30, 2025, we had $7.5 billion available to us on a committed basis under the U.S.

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.

As of September 30, 2025 and June 30, 2025, the Company had $247.4 million and $38.4 million of outstanding obligations related to reverse repurchase agreements, respectively.

Details of the reverse repurchase agreements are as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

Three Months Ended

September 30,

Average outstanding balances (in billions) $ 4.5 $ 3.8

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We have a $4.6 billion, 364-day credit agreement that matures in June 2026 with a one-year term-out option.

In addition, we have a five-year $2.25 billion credit facility and a five-year $3.5 billion credit facility maturing in June 2028 and June 2029, respectively, each with an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments.

In addition, we have a five-year $3.5 billion credit facility and a five-year $2.5 billion credit facility maturing in June 2029 and June 2030, respectively, each with an

accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments.

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 March 31, 2025 under the credit facilities.

We had no borrowings through September 30, 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 $10.6 billion available to us under the revolving credit agreements.

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Our investment portfolio does not contain any asset-backed securities with underlying collateral of sub-prime mortgages, alternative-A mortgages, sub-prime auto loans or sub-prime home equity loans, collateralized debt obligations, collateralized loan obligations, credit default swaps, derivatives, auction rate securities, structured investment vehicles or non-investment grade fixed-income securities.

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 March 31, 2025.

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

All collateral on asset-backed securities is performing as expected through September 30, 2025.

In addition, we own U.S.

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

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.

Capital expenditures for the three months ended September 30, 2025 were $44.9 million, as compared to $55.6 million for the three months ended September 30, 2024.

We expect capital expenditures in fiscal 2026 to be between $225.0 million and $250.0 million, as compared to $176.8 million in fiscal 2025.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our overall investment portfolio is comprised of corporate investments (cash and cash equivalents, marketable securities) and client funds assets (funds that have been collected from clients but have not yet been remitted to the applicable tax authorities or client employees).

Our overall investment portfolio is comprised of corporate investments (cash and cash equivalents, and marketable securities) and client funds assets (funds that have been collected from clients but have not yet been remitted to the applicable tax authorities, client employees or other payees).

Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade marketable securities.

These assets are available for our regular quarterly dividends, share repurchases, capital expenditures and/or acquisitions, as well as other corporate operating purposes.

All of our short-term and long-term fixed-income securities are classified as available-for-sale securities.

All of our fixed-income securities are classified as available-for-sale securities.

Our client funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives.

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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.

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

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 o ur $10.6 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), our ability to engage in reverse repurchase agreement transaction s ($7.5 billion of which is available on a committed basis in the U.S.

as of September 30, 2025) and available borrowings under our $10.6 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.

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The minimum allowed credit rating at time of purchase for corporate, Canadian government agency and Canadian provincial bonds is BBB, for asset-backed securities is AAA, and for municipal bonds is A.

The maximum maturity at time of purchase for BBB-rated securities is 5 years, and for single A rated securities, AA-rated and AAA-rated securities is 10 years.

The maximum maturity at time of purchase for BBB-rated securities is 5 years, and for single A rated, AA-rated and AAA-rated securities it is 10 years.

Time deposits and commercial paper must be rated A-1 and/or P-1.

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Details regarding our overall investment portfolio are as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2025 2024 2025 2024

Three Months Ended

September 30,

Average investment balances at cost:

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Total 3.4 % 3.2 %

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

March 31, 2025 June 30, 2024

Realized (gains)/losses on available-for-sale securities, net $ (1.5) $ 0.2

September 30, 2025 June 30, 2025

Net unrealized pre-tax losses on available-for-sale securities $ (211.5) $ (425.7)

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

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.

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 March 31, 2026.

The annu alized interest rate earned on ou r entire portfolio increased from 3.2% for the three months ended September 30, 2024 to 3.4% for the three months ended September 30, 2025.

A hy pothetical chan ge 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 an $22 million impact to earnings before income taxes over the ensuing twelve-month period ending September 30, 2026.

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 an $7 million impact to earnings before income taxes over the ensuing twelve-month period ending September 30, 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.

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CRITICAL ACCOUNTING POLICIES

Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with U.S.

The preparation of these financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and other comprehensive income.

We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements.

The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances.

Actual amounts and results could differ from these estimates made by management.

Refer to Note 2 of our Consolidated Financial Statements for changes to our accounting policies effective for the fiscal 2025.

Refer to Note 2 of our Consolidated Financial Statements for changes to our accounting policies effective for fiscal 2026.

NEW ACCOUNTING PRONOUNCEMENTS

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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