What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-08-05 compared with 2025-08-06 · 111 added, 94 removed, 328 unchanged (38% of the section changed)

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The following section discusses our year ended June 30, 2026 (“fiscal 2026”), as compared to year ended June 30, 2025 (“fiscal 2025”).

A detailed review of our fiscal 2024 performance compared to our fiscal 2023 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2024.

A detailed review of our fiscal 2025 performance compared to our fiscal 2024 performance is set forth in Part II, Item 7 of our Form 10-K for the year ended June 30, 2025.

FORWARD-LOOKING STATEMENTS

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These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed.

Forward-looking statements are subject to inherent risks and uncertainties.

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include:

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our ability to respond successfully to changes in technology, including artificial intelligence;

compliance with existing or new legislation or regulations;

compliance with existing or new legislation or

changes in, or interpretations of, existing legislation or regulations;

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our ability to maintain our current credit ratings and the impact on our funding costs and profitability;

security or cyber breaches, fraudulent acts, and system interruptions and failures;

security or cyber breaches, including as a result of artificial intelligence, fraudulent acts, and system interruptions and failures;

employment and wage levels;

availability of

skilled associates;

availability of skilled associates;

the impact of new acquisitions and divestitures;

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and supply-chain disruptions.

The factors identified above are not exhaustive.

ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

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

During fiscal 2025, we continued to make meaningful progress on our Strategic Priorities.

We launched ADP Lyric HCM, an all-in-one solution designed to address workplace challenges with personalized experiences that meet client needs.

We acquired WorkForce Software, a premier workforce management solutions provider, and began to integrate it into our global HCM ecosystem to better serve large, global enterprises.

We enhanced our distribution network by launching an integrated payroll solution for small businesses.

We augmented our global payroll capabilities by continuing to expand our offerings in markets with exciting growth opportunities like Japan and Saudi Arabia, and by acquiring payroll businesses like PEI (Procesamiento Externo de Informacion, S.C.) in Mexico.

Lastly, we continued deploying AI tools in our products and across our sales, service, and research and development functions to improve the client experience and drive internal productivity gains.

During fiscal 2026, we made meaningful progress on our Strategic Priorities.

We continued to leverage our data advantages, domain expertise, and trusted brand to lead the HCM industry's AI transformation.

ADP Assist became increasingly embedded in our clients' workflows, delivering meaningful time savings and improved accuracy.

Since launching ADP Assist agents in January, we steadily expanded their availability across our payroll, benefits, HR, and compliance solutions, making AI-powered HCM agents accessible to nearly all of our more than 1.1 million clients.

We also launched a dedicated space within ADP Marketplace for our partners' AI agents, further expanding our AI ecosystem.

Additionally, we continued deploying AI tools across our sales, service, and research and development functions to improve the client experience and drive internal productivity gains.

During the year, we experienced strong enterprise sales momentum for ADP Lyric HCM and the ADP WorkForce Suite, as our unified global payroll, global HR, and global time solutions continued to resonate with clients.

Finally, we remained focused on delivering value through our global scale by providing compliant HCM solutions, local expertise, and trusted relationships wherever our clients operate.

Highlights from the year ended June 30, 2026 include:

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• Cash returned via shareholder friendly actions of $4.7B, including $2.6B of dividends and $2.1B of share repurchases

For fiscal 2025, we delivered strong revenue growth of 7% both on a reported and 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, grew 1% for the year ended June 30, 2025 as compared to the year ended June 30, 2024.

For fiscal 2026, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis.

Our United States pays per control metric, which represents the approximate growth in the number of employees on ADP clients' processed payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the year ended June 30, 2026 as compared to the year ended June 30, 2025.

PEO average worksite employees increased 2% for the year ended June 30, 2026, as compared to the year ended June 30, 2025.

Additionally, our ES new business bookings grew 3% in fiscal 2025, and ES client revenue retention was 92.1%.

Our strong retention stems in part from our company-wide client satisfaction scores reaching new record highs for the year.

These impressive client satisfaction results were broad-based and are a testament to the product investments we are making to improve the client experience.

Additionally, our ES new business bookings grew 6% in fiscal 2026, and our ES client revenue retention was 92.1%.

These results are a testament to the meaningful investments we have made in our solutions and the efforts of our associates to deliver exceptional levels of client service.

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 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 and by driving meaningful transformation in the way we operate.

We are committed to building upon our past successes by investing in research and development to enhance our products and services and by driving continuous improvement in the way we operate.

Our financial condition remains solid at June 30, 2026 and we remain well positioned to support our associates and our clients.

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Total Revenues

For the year ended June 30, respectively:

For the year ended June 30:

Total Revenues $ 21,947.4 $ 20,560.9

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YoY Growth, Organic Constant Currency 6 % 7 %

Revenues increased in fiscal 2025 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.

Refer to “Analysis of Reportable Segments” for additional discussion of the changes in revenue for each of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services.

Total revenues increased in fiscal 2026 due to new business started from new business bookings, strong client revenue retention, an increase in zero-margin benefits pass-throughs of $318.3 million, an increase in pricing, a 1% year-over-year growth impact of foreign currency, and an increase in interest on funds held for clients of $165.7 million.

Total revenues for fiscal 2026 include interest on funds held for clients of $1,354.8 million, as compared to $1,189.1 million in fiscal 2025.

The increase in interest earned on funds held for clients resulted from an increase in our average interest rate earned to 3.2% in fiscal 2025, as compared to 2.9% in fiscal 2024, coupled with an increase in our average client funds balances of 6.4% to $37.6 billion in fiscal 2025 as compared to fiscal 2024.

The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 7.4% to $40.4 billion in fiscal 2026 as compared to fiscal 2025, coupled with an increase in our average interest rate earned to 3.4% in fiscal 2026, as compared to 3.2% in fiscal 2025.

Total Expenses

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For the year ended June 30:

Operating expenses increased in fiscal 2025 due to an increase of $313.1 million of PEO Services zero-margin benefits pass-through costs to $4,289.0 million in fiscal 2025 from $3,975.9 million in fiscal 2024.

Additionally, operating expenses increased by $137.3 million due to higher service and implementation costs in support of our growing revenue and by $67.8 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased in fiscal 2025 due to increased costs to develop, support, and maintain our new and existing products and the WorkForce Software acquisition.

Depreciation and amortization increased in fiscal 2025 due to the WorkForce Software acquisition, amortization of investments in internally developed software primarily for our next-gen products, and amortization of purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased in fiscal 2025 primarily due to increases in selling and marketing expenses of $184.4 million as a result of investments in our sales organization and an increase from acquisition related costs.

Interest expense increased in fiscal 2025 primarily due to an increase of $51.1 million related to commercial paper and reverse repurchase borrowings as a result of increases in average daily commercial paper borrowings of $0.6 billion, and average reverse repurchase outstanding balances of $1.1 billion, as compared to fiscal 2024 , offset by decreases in average interest rates on commercial paper issuances and reverse repurchases of 50 basis points and 70 basis points, respectively, as compared to fiscal 2024.

Additionally, interest expense increased by $37.9 million related to the issuance of $1.0 billion of senior notes during the first quarter ended September 30, 2024.

Operating expenses increased in fiscal 2026 due to an increase of $318.3 million in PEO Services zero-margin benefits pass-through costs to $4,607.3 million in fiscal 2026 from $4,289.0 million in fiscal 2025.

Additionally, operating expenses increased by $188.9 million due to higher service and implementation costs in support of our growing revenue, $74.4 million million primarily due to higher hosting, cloud-based service, and software license costs in support of our products and solutions, and by $37.1 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased in fiscal 2026 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 increased in fiscal 2026 due to the amortization of investments in internally developed software primarily for our products and solutions, intangible assets acquired in the WorkForce Software acquisition, and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general, and administrative expenses increased in fiscal 2026 primarily due to increases in selling and marketing expenses of $241.4 million as a result of investments in our sales organization, an increase in costs related to non-recurring, broad-based, company-wide initiatives of $67.2 million and a non-recurring net legal settlement of $18.0 million.

Interest expense increased in fiscal 2026 primarily due to net increases in interest expense of $25.3 million related to the senior notes issued in fiscal 2026 and 2025, offset by the redemption of a senior note in fiscal 2025.

These increases were partially offset by a decrease of $22.8 million related to commercial paper and reverse repurchase borrowings as a result of decreases in average interest rates on commercial paper issuances and reverse repurchases of 80 and 70 basis points, respectively, offset by an increase in average daily commercial paper borrowings and average reverse repurchase outstanding balances of $0.1 billion and $0.6 billion, respectively, as compared to fiscal 2025.

Other (Income)/Expense, net

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Interest income on corporate funds $ (371.0) $ (319.5) $ (51.5)

Realized losses on available-for-sale securities, net 1.7 5.9 4.2

Realized (gains)/losses on available-for-sale securities, net (2.9) 1.7 (4.6)

Gain on sale of assets — (5.0) 5.0

Non-service components of pension income, net (28.3) (31.3) 3.0

Net (gain)/loss on ADP Ventures' investments (8.4) — (8.4)

Other income, net $ (410.6) $ (354.1) $ (56.5)

Interest income on corporate funds increased in fiscal 2026 due to higher average investment balances of $10.4 billion as compared to $9.2 billion in fiscal 2025, coupled with an increase in average interest rates of 10 basis points, as compared to fiscal 2025.

In fiscal 2026, the Company recognized a net gain of $8.4 million related to investments made through its Corporate Venture Capital arm, ADP Ventures.

See Note 11 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

In fiscal 2025, the gain on sale of assets of $5.0 million related to sales of buildings.

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

For the year ended June 30, respectively:

For the year ended June 30:

2026 2025 YoY Growth

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Adjusted EBIT Margin 26.8 % 26.0 % 80 bps

Numbers may not foot due to rounding.

Earnings before income taxes increased in fiscal 2025 due to the increases in total revenues, partially offset by the increases in total expenses discussed above.

EBIT Margin increased in fiscal 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 interest expense and acquisition related expenses.

Earnings before income taxes increased in fiscal 2026 due to the increase in total revenues, partially offset by the increase in total expenses discussed above.

EBIT Margin increased in fiscal 2026 due to contributions from client funds interest revenues, increased interest income on corporate funds, lower amortization of client contracts and lists, and lower interest expense related to commercial paper and reverse repurchase borrowings, partially offset by increased selling and marketing expenses and costs related to non-recurring, broad-based, company-wide initiatives.

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 matters, gain on sale of assets, and broad-based optimization initiatives, in the applicable periods.

extended investment strategy, and net charges, including certain legal matters, non-recurring, broad-based, company-wide initiatives, gain on sale of assets, and (gains)/losses on ADP Ventures' investments, in the applicable periods.

Provision for Income Taxes

The effective tax rate in fiscal 2026 and 2025 was 23.0% and 23.2%, respectively.

The increase in the effective tax rate is primarily due to higher reserves for uncertain tax positions in fiscal 2025 and a valuation allowance release in fiscal 2024 offset by an increase in the excess tax benefit on stock-based compensation in fiscal 2025.

The decrease in the effective tax rate is primarily due to a decrease in uncertain tax positions and an increase in tax credits, partially offset by a lower benefit for adjustments to prior year tax liabilities and a lower excess tax benefit on stock-based compensation for fiscal 2026 as compared to fiscal 2025.

Refer to Note 12, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.

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Adjusted diluted EPS $ 11.12 $ 10.01 11 %

For fiscal 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 4.4 million shares during fiscal 2025 and 5.1 million shares during fiscal 2024, partially offset by the issuances of shares under our employee benefit plans.

For fiscal 2025, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.

In addition to the increase in net earnings, diluted EPS increased in fiscal 2026 as a result of the impact of fewer shares outstanding resulting from share repurchases under our authorized share repurchase program, partially offset by the issuances of shares under our employee benefit plans.

The Company repurchased 8.6 million and 4.4 million shares in fiscal 2026 and 2025, respectively.

For fiscal 2026, adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above.

ANALYSIS OF REPORTABLE SEGMENTS

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PEO Services 7,128.1 6,690.4 7 % 7 %

Other (12.6) (11.8) n/m n/m

Intercompany eliminations (12.1) (12.6) n/m n/m

$ 21,947.4 $ 20,560.9 7 % 6 %

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PEO Services 936.1 950.5 (2) %

Other (648.9) (604.7) n/m

Other (a) (642.6) (648.9) n/m

$ 5,730.3 $ 5,310.1 8 %

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PEO Services 13.1 % 14.2 % (110) bps

(a) Other represents certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, legal settlements, company-wide severance initiatives, non-recurring gains and losses, the elimination of intercompany transactions, and interest income and expense.

n/m - not meaningful

Employer Services

Employer Services' revenues increased in fiscal 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, the impact from the WorkForce Software acquisition, and an increase in the volume of our pays per control of 1%, as compared to fiscal 2024.

Employer Services' revenues increased in fiscal 2026 due to new business started from new business bookings, strong client revenue retention, an increase in pricing, a 1% year-over-year growth impact of foreign currency, an increase in interest earned on funds held for clients of $164.1 million, and an increase in our pays per control when measured on a same-store-sales basis of 1%.

Earnings before Income Taxes

Employer Services' earnings before income taxes increased in fiscal 2025 due to increased revenues, including contributions from client funds interest, 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 the impact from the WorkForce Software acquisition.

Employer Services' margin increased in fiscal 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.

Employer Services' earnings before income taxes increased in fiscal 2026 due to the increase in revenues, including contributions from client funds interest, discussed above, partially offset by increases in expenses, including $188.6 million in selling and marketing expenses and $159.7 million in costs of servicing and implementing our clients on growing revenue.

Employer Services' margin increased in fiscal 2026 due to contributions from client funds interest revenues, operating efficiencies for costs of servicing and implementing our clients on growing revenue, and lower amortization of client contracts and lists, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition in October 2024.

Years Ended Change

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PEO Services' revenues excluding zero-margin benefits pass-throughs $ 2,520.8 $ 2,401.4 $ 119.4 5 %

PEO Services' revenues increased in fiscal 2025 due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 3%, as compared to fiscal 2024.

PEO Services' revenues increased in fiscal 2026 due to an increase in zero-margin benefits pass-throughs of $318.3 million, and growth in average worksite employees of 2% coupled with increases in average wages and state unemployment taxes per worksite employee, as compared to fiscal 2025.

Earnings before Income Taxes

PEO Services’ earnings before income taxes increased in fiscal 2025 due to increased revenues discussed above, partially offset by increases in operating costs related to workers' compensation and state unemployment insurance, zero-margin benefits pass-through costs, and selling and marketing expenses.

PEO Services' margin decreased in fiscal 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, partially offset by an increase in the pre-tax benefit from ADP Indemnity.

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

PEO Services has secured a workers’ compensation and employer’s liability insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in fiscal years 2012 and prior from an admitted and licensed insurance company of AIG.

PEO Services’ earnings before income taxes decreased in fiscal 2026 due to increases in expenses, including $318.3 million in zero-margin benefits pass-through costs, $52.8 million in selling and marketing expenses, and $37.1 million in operating costs related to worker's compensation coverage and state unemployment insurance, partially offset by the increase in revenues discussed above.

PEO Services' margin decreased in fiscal 2026 due to increased selling and marketing expenses, zero-margin benefit pass through costs, an increase in the pre-tax loss from ADP Indemnity, and operating costs related to state unemployment insurance, partially offset by increased revenues discussed above.

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

PEO Services has secured a workers’ compensation insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in the year ended June 30, 2012 and prior from an admitted and licensed insurance company of AIG.

We utilize historical loss experience and actuarial judgment to determine the estimated claim liability, and changes in estimated ultimate incurred losses are included in the PEO segment.

Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to the $1 million per occurrence related to the workers ’ compensation and employer's liability deductible reimbursement insurance protection for PEO Services' worksite employees.

Additionally, starting in the year ended June 30, 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to $1 million per occurrence related to the workers ’ compensation deductible reimbursement insurance protection for PEO Services' worksite employees.

Each of these reinsurance arrangements limits our overall exposure incurred up to a certain limit.

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

During fiscal 2025, ADP Indemnity paid a premium of $276 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2025 policy year up to $1 million per occurrence.

ADP Indemnity recorded a pre-tax benefit of approximately $10 million in fiscal 2025 and a pre-tax benefit of approximately $3 million in fiscal 2024, which were primarily the results of more favorable actuarial loss development in workers’ compensation reserves.

ADP Indemnity recorded a pre-tax actuarial gain of $2.8 million in fiscal 2026, as compared to a pre-tax actuarial gain of $8.8 million in fiscal 2025, due to less favorable loss development in workers’ compensation reserves.

ADP Indemnity paid a premium of $327.8 million in July 2026, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2027 policy year on terms substantially similar to the fiscal 2026 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

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All other interest income (a) (92.9) (94.2)

Optimization initiatives (b) (4.5) 19.4

Business alignment program (c) 91.1 —

Gain on sale of assets — (2.6)

Transformation initiatives (b) 0.1 5.4

Legal settlements (c) (0.4) (4.0)

Optimization initiatives (d) 19.3 42.0

Net (gain)/loss on ADP Ventures' investments (d) (8.4) —

Legal settlements (e) 18.0 (0.4)

Adjusted EBIT $ 5,874.6 $ 5,347.1 10 %

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Provision for income taxes $ 1,316.8 $ 1,230.4 7 %

Gain on sale of assets (e) (0.6) —

Transformation initiatives (e) — 1.3

Legal settlements (e) (0.1) (0.9)

Optimization initiatives (e) 4.8 10.5

Optimization initiatives (f) (1.2) 4.8

Business alignment program (f) 23.2 —

Gain on sale of assets (f) — (0.6)

Net (gain)/loss on ADP Ventures' investments (f) (2.1) —

Legal settlements (f) 4.4 (0.1)

Adjusted provision for income taxes $ 1,341.1 $ 1,234.5 9 %

Adjusted effective tax rate (f) 23.2 % 23.0 %

Adjusted effective tax rate (g) 23.0 % 23.2 %

Net earnings $ 4,413.5 $ 4,079.7 8 %

Optimization initiatives (b) (4.5) 19.4

Income tax provision for/(benefit from) optimization initiatives (f) 1.2 (4.8)

Gain on sale of assets — (2.6)

Income tax provision on gain on sale of assets (e) 0.6 —

Transformation initiatives (b) 0.1 5.4

Income tax benefit for transformation initiatives (e) — (1.3)

Legal settlements (c) (0.4) (4.0)

Income tax provision for legal settlements (e) 0.1 0.9

Optimization initiatives (d) 19.3 42.0

Income tax benefit for optimization initiatives (e) (4.8) (10.5)

Income tax provision for gain on sale of assets (f) — 0.6

Business alignment program (c) 91.1 —

Income tax benefit from business alignment program (f) (23.2) —

Net (gain)/loss on ADP Ventures' investments (d) (8.4) —

Income tax provision for net (gain)/loss on ADP Ventures' investments (f) 2.1 —

Legal settlements (e) 18.0 (0.4)

Income tax (benefit from)/provision for legal settlements (f) (4.4) 0.1

Adjusted net earnings $ 4,485.4 $ 4,092.0 10 %

Diluted EPS $ 10.94 $ 9.98 10 %

Transformation initiatives (b) (e) — 0.01

Legal settlements (c) (e) — (0.01)

Optimization initiatives (d) (e) 0.03 0.08

Optimization initiatives (b) (f) (0.01) 0.03

Business alignment program (c) (f) 0.17 —

Net (gain)/loss on ADP Ventures' investments (d) (f) (0.02) —

Legal settlements (e) (f) 0.04 —

Adjusted diluted EPS $ 11.12 $ 10.01 11 %

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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) The charges in fiscal 2024 include consulting costs relating to our company-wide transformation initiatives.

(d) In fiscal 2025, there were $23.9 million of severance charges related to broad-based, company-wide initiatives, including efforts to align resources with respect to our new global HCM products, offset by a $4.6 million partial reversal of the workforce optimization initiative from fiscal 2024.

(b) Represents partial reversals of workforce optimization initiatives from fiscal 2025 and 2024.

Severance charges/(reversals) have been taken in the past and not included as an adjustment to get to adjusted results.

Unlike severance charges/(reversals) in prior periods, these specific reversals relate to broad-based, company-wide initiatives.

(c) In Q4 2026, we incurred a charge of $91.1 million as part of a corporate-led business alignment program, which is designed to better align our organization and resources with our Strategic Priorities and to streamline the organizational structure.

Costs associated with this program included severance costs of $89.1 million and strategic project costs of $2.0 million.

Strategic project costs consist primarily of external advisory costs.

This charge is excluded from adjusted net earnings to provide a clearer view of ongoing operations and enhance period-over-period comparability.

Severance charges have been taken in the past and not included as an adjustment to get to adjusted results.

Unlike severance charges in prior periods, these specific charges relate to broad-based, company-wide initiatives.

(e) The income tax (benefit)/provision was calculated based on the marginal rate in effect for the year ended June 30, 2025.

(f) 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.

Unlike charges in prior periods, these specific charges relate to a broad-based, company-wide initiative.

(d) Represents (gains)/losses on investments made through our Corporate Venture Capital arm, ADP Ventures.

(Gains)/losses on these investments may result from observable price changes, changes in ownership interest, accrued interest income, and impairment charges.

These adjustments may be highly variable, are predominantly non-cash, are outside our control, and are not fundamental to the underlying operations of our business model.

(e) In fiscal 2026, this represents a net charge (establishment of a legal reserve and insurance recovery) from a legal matter settled during the year ended June 30, 2026.

Refer to Note 13, Commitments and Contingencies, within the Notes to the Consolidated Financial Statements for further discussion.

In fiscal 2025, this represents a reversal of a legal reserve recorded during the year ended June 30, 2023.

(f) The income tax provision was calculated based on the marginal rate in effect during the period of the adjustment.

(g) 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.

The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency.

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Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 5,570.6 $ (5,031.4) $ 10,602.0

Net cash flows provided by operating activities increased due to growth in our business, and net favorable changes in the components of operating assets and liabilities, as compared to fiscal 2024.

Net cash flows used in investing activities changed due to the acquisition of WorkForce Software with a net cash disbursement of $1,158.3 million and timing of the net proceeds and purchases of corporate and client funds marketable securities of $523.0 million.

Net cash flows used in financing activities changed due to a net decrease in the cash flow from client funds obligations of $9,288.1 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, a net increase in cash distributed to our clients that was received from the Internal Revenue Service, and a net increase in payments related to reverse repurchase agreements, partially offset by net proceeds from the issuance and redemption of debt.

Net cash flows provided by operating activities increased due to growth in our business and a net favorable change in the components of operating assets and liabilities primarily due to timing of collections and payments, as compared to fiscal 2025.

Net cash flows used in investing activities changed primarily due to timing of net proceeds and purchases of corporate and client funds marketable securities of $2,696.2 million, offset by a net decrease in acquisitions of businesses, which totaled $1,165.1 million in fiscal 2025, primarily related to the Workforce Software acquisition.

Net cash flows provided by/(used in) financing activities changed primarily due to a net increase in the cash flow from client funds obligations of $21,516.6 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, a net decrease in cash distributed to our clients that was received from the Internal Revenue Service of $576.2 million, partially offset by the repayment of $4,769.5 million related to borrowings outstanding as of June 30, 2025 under the commercial paper program and an increase of $802.8 million in repurchases of common stock.

We purchased approximately 8.6 million shares of our common stock at an average price per share of $242.92 during fiscal 2026, as compared to purchases of 4.4 million shares at an average price per share of $289.11 during fiscal 2025.

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Capital Resources and Client Fund Obligations

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

We have $5.0 billion of senior unsecured n o tes with maturity dates in 2028, 2030, 2032, 2034, and 2036.

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.

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

As of June 30, 2025, the Company had $4.8 billion of commercial paper outstanding, which was

repaid in early July 2025.

A s of June 30, 2024, the Company had no co mmercial paper borrowing outstanding.

As of June 30, 2026, the Company had no commercial paper outstanding.

A s of June 30, 2025, the

Company had $4.8 billion of co mmercial paper outstanding, which was repaid in early July 2025.

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

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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.

These agreements generally have terms ranging from overnight to up to ten 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 obligations.

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

As of June 30, 2026 and 2025, the Company had $139.3 million and $38.4 million, respectively, of outstanding obligations related to reverse repurchase agreements.

The Company has $7.5 billion available on a committed basis under the U.S.

reverse repurchase agreements.

As of June 30, 2025 and 2024, there were $38.4 million and $385.4 million, respectively, of outstanding obligations related to the reverse repurchase agreements.

Details of the reverse repurchase agreements are as follows:

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Contractual Obligations

Our contractual obligations at June 30, 2025 relate primarily to operating leases (Note 7) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 11), liabilities for uncertain tax positions (Note 12), purchase obligations (Note 13), debt obligations (Note 10) and $875.0 million of interest payments on our debt, of which $121.5 million is expected to be paid within one year.

Our contractual obligations as of June 30, 2026 relate primarily to operating leases (Note 7 of our Consolidated Financial Statements) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 11 of our Consolidated Financial Statements), liabilities for uncertain tax positions (Note 12 of our Consolidated Financial Statements), purchase obligations (Note 13 of our Consolidated Financial Statements), debt obligations (Note 10 of our Consolidated Financial Statements) and $1,333.0 million of interest payments on our debt, of which $171.5 million is expected to be paid within one year.

In addition to the obligations described above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing services.

As of June 30, 2025, the obligations relating to these matters, which are expected to be paid in fiscal 2026,

total $31,343.3 million, and were recorded in client funds obligations on our Consolidated Balance Sheets.

As of June 30, 2026, the obligations relating to these matters, which are expected to be paid in fiscal 2027, total $44,415.5 million, and were recorded in client funds obligations on our Consolidated Balance Sheets.

We had $43,957.8 million of cas h and cash e quivalents and marketable securities to satisfy such obligations recorded in funds held for clients on our Consolidated Balance Sheets as of June 30, 2026.

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Such risks include liquidity risk, including the risk associated with our ability to liquidate, if necessary, our available-for-sale securities in a timely manner in order to satisfy our client funds obligations.

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.

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 o ur $11.7 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.

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Total 3.4 % 3.2 %

Net realized losses on available-for-sale securities 1.7 5.9

Net realized (gains)/losses on available-for-sale securities (2.9) 1.7

As of June 30:

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We regularly review our deferred costs for impairment.

There were no impairment losses incurred during the fiscal years ended June 30, 2025, June 30, 2024, or June 30, 2023.

There were no impairment losses incurred during the years ended June 30, 2026, June 30, 2025, or June 30, 2024.

Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired.

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Significant assumptions used in determining the fair value of our reporting units include projected revenue growth rates, profitability projections, working capital assumptions, the weighted average cost of capital, the determination of appropriate market comparison companies, and terminal growth rates.

Several of these assumptions including projected revenue growth rates and profitability projections are dependent on our ability to upgrade, enhance, and expand our technology and services to meet client needs and preferences.

Several of these

assumptions including projected revenue growth rates and profitability projections are dependent on our ability to upgrade, enhance, and expand our technology and services to meet client needs and preferences.

Sensitivity of Estimate to Change

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If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions.

As of June 30, 2025 and 2024, the Company's liabilities for unrecognized tax benefits, which include interest and penalti es, were $163.0 million and $126.9 million, respectively.

As of June 30, 2026 and 2025, the Company's liabilities for unrecognized tax benefits, which include inter est and penalties, were $152.5 million and $163.0 million, respectively.

Quantitative and Qualitative Disclosures About Market Risk

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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-K

Item 7. Management’s Discussion and Analysis