AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 19/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · ERP integration, outsourced execution and tax filing establish embedded operational responsibilities. Reported 92.1% Employer Services retention alongside price increases provides strong operating support for switching costs; migration friction is inferred from those responsibilities rather than directly measured.
durability · 2/4 · Outsourced payroll responsibilities persist across the supplied periods, and current retention is strong. Limited retention history and ongoing competition prevent a strong demonstrated long-term durability assessment; corporate longevity alone is insufficient.
customer dependency · 3/4 · Customers entrust ADP with integrated payroll and tax filing, and 92.1% Employer Services retention demonstrates repeat demand. Dependency is strongest for integrated and outsourced relationships; the passages do not quantify its distribution across customers.
erosion resilience · 2/4 · Retention, new bookings and price increases demonstrate current resilience in a highly competitive market. PEO margin compression is a realized limitation, while AI disruption and processing failures remain prospective risks rather than demonstrated customer losses.
Pricing power69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 3/4 · The nine-month and full-year fiscal 2026 disclosures identify price increases as realized Employer Services revenue drivers, alongside strong retention. This supports current pricing power, although the increase is unquantified and the observations overlap.
retention · 3/4 · Reported Employer Services client retention of 92.1% directly demonstrates repeat demand. Revenue commentary also identifies strong retention, but no comparable multiyear retention series or PEO retention rate is supplied.
margin resilience · 2/4 · Employer Services margin increased 60 basis points, supported partly by servicing efficiencies, but also by client-funds interest and lower amortization. PEO margin fell 110 basis points, with disclosed cost pressures. The whole-business evidence is mixed and does not isolate pricing's contribution.
contractual freedom · 3/4 · RUN terms demonstrate strong contractual repricing freedom: ADP may increase service prices for clients previously using another ADP payroll platform with at least 30 days’ notice, and reserves rights to increase additional per-use feature and service fees, with continued use constituting acceptance. The notice requirement is a disclosed constraint. Evidence covers RUN and the specified client circumstances, not every ADP product; exceptional company-wide freedom is not established.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 1.04
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.20
Financial strength79
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 97.24
- interestCoverageGrade
- 96.20
- currentRatioGrade
- 24.06
- Debt / FCF (x)
- 0.95
- Net debt / operating income (x)
- 0.14
- Interest coverage (x)
- 11.58
- Current ratio (x)
- 1.05
Capital allocation100
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 88.79
- 3-year average dilution (%)
- -0.93
- 3-year average SBC / revenue (%)
- 1.22
- cashConversionGrade
- 100.00
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating cash generation increased, repurchases reduced outstanding shares despite compensation issuance, and capital returns were executed. However, long-term debt and purchase commitments increased, and the substantial goodwill in WorkForce Software lacks demonstrated acquisition-return evidence. Cash-flow growth also benefited from collection and payment timing. These support a mixed assessment without assuming buybacks created value.
incentive alignment · 3/4 · Actual incentives combine financial performance, multiyear equity and a relative TSR modifier that affected the disclosed three-year payout. The hedging prohibition reinforces exposure to share performance. Continued vesting under severance provisions and missing beneficial ownership amounts limit the assessment; no proposed award is counted as vested.
execution · 3/4 · Fiscal 2026 retention, record Employer Services bookings, 5% organic constant-currency Employer Services growth and earnings growth demonstrate execution through operating outcomes. PEO earnings and margin declined, so performance is strong but uneven. Unquantified AI benefit assertions are not needed for this grade.
governance · 3/4 · An independent compensation committee, independent-director executive sessions and board oversight of annual third-party cybersecurity assessments establish concrete oversight practices. The $48 million ERISA settlement, subject to court approval, is a material contrary outcome without establishing adjudicated wrongdoing. The passages support strong practices rather than exceptional governance effectiveness.
Evidence
We provide employers with a wide range of payroll options, including using mobile technology, connecting their major enterprise resource planning (“ERP”) applications with ADP’s payroll services or outsourcing their entire payroll process to us.
Business: payroll ERP connections and outsourcing · Filed 05/08/2026
On behalf of our clients in the United States, we prepare and file federal, state and local payroll tax returns, and quarterly and annual Social Security, Medicare, and federal, state and local income tax withholding reports.
Business: payroll tax preparation and filing · Filed 05/08/2026
We remain focused on our core growth areas and further enhancing our market position by executing against our three strategic priorities: Our Strategic Priorities Lead with best-in-class Provide unmatched Benefit our clients with our HCM Technology Expertise and Outsourcing Global Scale iv ADP 2026 Proxy Statement Table of Contents 2026 Proxy Statement Summary Fiscal year 2026 reflected continued strength, growth, and momentum at ADP: Highlights $21.9 billion in revenue Over 1.1 million clients globally Over 42 million workers paid across 140+ countries and territories Employer Services new business bookings increased 6% to a new record of $2.2 billion and worldwide new business bookings increased 5.6% 10% earnings per share growth to $10.94 for the year Strong Employer Services client retention of 92.1% Reached new, all-time high company- wide client satisfaction levels Stockholder Friendly Actions $4.7 billion 51 $2.6 billion $2.1 billion in cash returned to stockholders consecutive years of dividend increases dividends share repurchases Strategic Execution Continued to lead with best-in-class HCM technology by embedding AI into the very core of how we orchestrate, govern and execute HR and pay processes.
Proxy statement summary: fiscal 2026 retention, bookings and capital returns · Filed 24/09/2026
n/m - not meaningful Employer Services Revenues 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%.
MD&A: fiscal 2026 Employer Services revenue drivers · Filed 05/08/2026
With ADP COS, the day-to-day payroll process becomes our responsibility, freeing up clients to address critical issues like employee engagement and retention.
Business: responsibility for day-to-day outsourced payroll · Filed 07/08/2024
COMPETITION The industries in which we operate are highly competitive and we are one of the largest providers of HCM solutions in the world.
Competition: highly competitive HCM industry · Filed 05/08/2026
We also face ongoing competition from companies’ in-house functions, whereby companies install and operate their own HCM system.
Competition: customers' in-house HCM functions · Filed 05/08/2026
The inability to properly perform our money movement services, operational errors in the performance of these services (including as a result of human or system errors, timing mismatches, settlement failures, unauthorized transactions or failures or delays attributable to financial institutions or other third parties), or our failure to recover any funds from clients could result in significant financial losses, regulatory intervention, fines and penalties, litigation and reputational harm, which could have a material adverse effect on our business, financial condition and results of operations.
Risk factors: potential money movement failures and consequences · Filed 05/08/2026
ANALYSIS OF REPORTABLE SEGMENTS Revenues Years Ended June 30, % Change 2026 2025 As Reported Organic Constant Currency Employer Services $ 14,831.4 $ 13,883.1 7 % 5 % PEO Services 7,128.1 6,690.4 7 % 7 % Intercompany eliminations (12.1) (12.6) n/m n/m $ 21,947.4 $ 20,560.9 7 % 6 % Earnings before Income Taxes Years Ended June 30, % Change 2026 2025 As Reported Employer Services $ 5,436.8 $ 5,008.5 9 % PEO Services 936.1 950.5 (2) % Other (a) (642.6) (648.9) n/m $ 5,730.3 $ 5,310.1 8 % Margin Years Ended June 30, 2026 2025 YoY Growth Employer Services 36.7 % 36.1 % 60 bps PEO Services 13.1 % 14.2 % (110) bps 31 (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.
MD&A: fiscal 2026 segment growth, earnings and margins · Filed 05/08/2026
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: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or 26 regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; 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; the impact of new acquisitions and divestitures; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions.
Forward-looking risk discussion: technology, competition and operational risks · Filed 05/08/2026
Employer Services' revenues increased for the nine months ended March 31, 2026 due to new business started from new business bookings, strong client retention, an increase in pricing, the impact of foreign currency, an increase in interest earned on funds held for clients, and an increase in our pays per control when measured on a same-store-sales basis of 1%.
MD&A: nine-month Employer Services pricing and retention · Filed 30/04/2026
Margin 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.
MD&A: Employer Services margin drivers · Filed 05/08/2026
PEO Services' margin decreased for the nine months ended March 31, 2026, due to increased selling and marketing expenses, increases in zero-margin benefit pass through costs, increased operating costs related to state unemployment insurance, and a decrease in the pre-tax benefit from ADP Indemnity, partially offset by increased revenues discussed above.
MD&A: PEO margin compression drivers · Filed 30/04/2026
Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.
Risk factors: potential customer spending reductions and renegotiation · Filed 05/08/2026
37 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, 2026 and 2025, respectively, are summarized as follows: Nine Months Ended March 31, 2026 2025 $ Change Cash provided by (used in): Operating activities $ 4,013.2 $ 3,500.5 $ 512.7 Investing activities (3,755.8) (3,458.2) (297.6) Financing activities 7,299.6 (1,916.4) 9,216.0 Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents (13.7) (12.7) (1.0) Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 7,543.3 $ (1,886.8) $ 9,430.1 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 the nine months ended March 31, 2025.
Liquidity: nine-month operating cash flow and timing effects · Filed 30/04/2026
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.
Capital resources: executed fiscal 2026 and 2025 repurchases · Filed 05/08/2026
46 Automatic Data Processing, Inc. and Subsidiaries Consolidated Balance Sheets (In millions, except per share amounts) June 30, 2026 2025 Assets Current assets: Cash and cash equivalents $ 4,230.1 $ 3,347.8 Short-term marketable securities — 4,498.8 Accounts receivable, net of allowance for doubtful accounts of $44.5 and $47.1, respectively 3,521.1 3,579.1 Other current assets 852.1 840.8 Total current assets before funds held for clients 8,603.3 12,266.5 Funds held for clients 43,957.8 30,985.7 Total current assets 52,561.1 43,252.2 Property, plant and equipment, net 641.3 655.4 Operating lease right-of-use assets 388.6 374.1 Deferred contract costs 3,244.1 3,154.1 Other assets 1,420.5 1,057.0 Goodwill 3,284.4 3,273.5 Intangible assets, net 1,653.3 1,603.0 Total assets $ 63,193.3 $ 53,369.3 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 162.5 $ 169.1 Accrued expenses and other current liabilities 3,218.5 3,092.4 Accrued payroll and payroll-related expenses 1,039.4 973.1 Dividends payable 671.9 620.6 Short-term deferred revenues 267.5 262.8 Obligations under reverse repurchase agreements (A) 139.3 38.4 Obligations under commercial paper borrowings — 4,769.5 Income taxes payable 110.3 9.1 Total current liabilities before client funds obligations 5,609.4 9,935.0 Client funds obligations 44,415.5 31,343.3 Total current liabilities 50,024.9 41,278.3 Long-term debt 4,964.1 3,974.7 Operating lease liabilities 306.7 321.2 Other liabilities 1,141.4 1,058.3 Deferred income taxes 339.1 163.6 Long-term deferred revenues 385.9 385.2 Total liabilities 57,162.1 47,181.3 Commitments and Contingencies (Note 13) Stockholders' equity: Preferred stock, $1.00 par value: Authorized, 0.3 shares; issued, none — — Common stock, $0.10 par value: authorized,1,000.0 shares; issued, 638.7 shares at June 30, 2026 and June 30, 2025; outstanding, 397.8 and 405.3 shares at June 30, 2026 and June 30, 2025, respectively 63.9 63.9 Capital in excess of par value 3,067.9 2,788.3 Retained earnings 26,967.4 25,240.6 Treasury stock - at cost: 240.9 and 233.4 shares at June 30, 2026 and June 30, 2025, respectively (23,165.9) (21,021.4) Accumulated other comprehensive (loss)/income (902.1) (883.4) Total stockholders’ equity 6,031.2 6,188.0 Total liabilities and stockholders’ equity $ 63,193.3 $ 53,369.3 (A) As of June 30, 2026, $138.6 million of long-term marketable securities, and $0.7 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements.
Consolidated balance sheets: cash, debt, client obligations and outstanding shares · Filed 05/08/2026
The purchase price allocation for WorkForce Software is as follows: Cash $ 12.5 Accounts receivable, net of allowance for doubtful accounts 20.0 Identifiable intangible assets (1) 292.0 Goodwill 885.8 Deferred income taxes, net of valuation allowance 45.9 All other assets 14.8 Total assets acquired $ 1,271.0 Deferred revenue $ 39.6 All other liabilities 60.6 Total liabilities assumed $ 100.2 Total net assets acquired $ 1,170.8 (1) Intangible assets are recorded at estimated fair value, as determined by management based on available information which includes an estimated valuation by an independent third party.
Acquisition note: WorkForce Software purchase allocation · Filed 30/04/2026
As of June 30, 2026, the Company has purchase commitments of approximately $2,850.5 million, including a reinsurance premium with Chubb for the fiscal 2026 policy year, as well as obligations related to software license agreements, third-party software services and purchase and maintenance agreements on our software, equipment, and other assets, of which $604.6 million relates to the year ending June 30, 2027, $1,095.9 million relates to the years ending June 30, 2028 through 2029, $694.1 million relates to the years ending June 30, 2030 through 2031, and the remaining relates to fiscal years thereafter.
Commitments and contingencies: purchase commitments · Filed 05/08/2026
Compensation Element Objectives Key Characteristics Base Salary To provide a fixed amount for performing the duties and responsibilities of the position Determined based on overall performance, level of responsibility, competitive compensation data and comparison to other company executives Annual Cash Bonus To motivate executive officers to achieve key financial and non-financial performance goals Payment based on achievement of company-wide and business unit financial measures and strategic performance goals Performance-Based Stock Unit (“PSU”) Awards To motivate executive officers to achieve certain longer-term goals and create long-term alignment with stockholders Awards based on target growth in adjusted net income and revenue ex-ZMPT, with earned shares issued following applicable performance period, subject to a relative TSR modifier Time-Based Restricted Stock Unit (“RSU”) Awards To attract and retain executive officers Granted annually and vesting ratably over three years.
Executive compensation: actual fiscal 2026 incentive program structure · Filed 24/09/2026
In the case of PSUs, the table reflects a payout of 122.8% based on the average of the financial metric annual achievement percentages of 111%, 132%, and 125.5% (as a result of adjusted net income growth and revenue ex-ZMPT growth) for the three-year performance period comprised of fiscal years 2024, 2025 and 2026, respectively, and application of the three-year rTSR modifier achievement of 89.1%.
Executive compensation: three-year PSU payout and relative TSR modifier · Filed 24/09/2026
No-hedging policy: We prohibit all of our directors and employees, including our executive officers, from engaging in any hedging or similar transactions involving ADP securities.
Executive compensation policies: prohibition on hedging · Filed 24/09/2026
The severance plan provides that a participant who is involuntarily terminated by the company without cause (other than during the two-year period following the occurrence of a change in control) will receive: ■ 18 (or in the case of the CEO, 24) months of continued base salary; ■ A prorated annual bonus for the year of termination, based on actual performance for the full fiscal year, but assuming that any non-financial and other subjective and qualitative performance criteria are achieved at a level equal to the weighted-average percentage achievement of all applicable financial and other objective and non-qualitative performance criteria; ■ Continued vesting of his or her stock options and time-vested restricted stock and restricted stock unit awards during the period of continued base salary payments (the “Severance Period”); and ■ The number of shares of stock (or cash, in the case of cash-settled awards) that the participant would have been entitled to receive based on the actual achievement of the applicable performance goals in each of the then-ongoing performance-based restricted stock and PSU programs, prorated to reflect the portion of the applicable performance period elapsed through the last day of the Severance Period.
Corporate Officer Severance Plan: compensation and continued vesting · Filed 24/09/2026
Independence of our compensation and management development committee and advisor: The compensation and management development committee of our board of directors, which is comprised solely of independent directors, utilizes the services of FW Cook as an independent compensation consultant.
Governance: independent compensation committee and consultant · Filed 24/09/2026
Executive Sessions Independent directors also hold regularly scheduled executive sessions without company management present, at which strategy is discussed.
Strategy oversight: independent director executive sessions · Filed 24/09/2026
Our global cybersecurity program is subject to an annual third-party assessment overseen by our board of directors and this assessment reviews all aspects of our cyber program.
Cybersecurity governance: annual third-party assessment overseen by board · Filed 05/08/2026
The Company reached a settlement of all outstanding claims for $48 million, subject to the court's approval.
Contingencies: ERISA settlement subject to court approval · Filed 05/08/2026
Competition for business outsourcing solutions is primarily based on product and service quality, reputation, ease of use and accessibility of technology, breadth of offerings, and price.
Competition: service, technology, reputation and price factors · Filed 05/08/2026
ADP DataCloud analyzes aggregated, anonymized and timely HCM and compensation data from more than one million organizations across the U.S., powering solutions that provide clients with in-depth workforce and business insights that enable critical HR decisions.
Business: DataCloud use of aggregated HCM and compensation data · Filed 06/08/2025
n/m - not meaningful Employer Services Revenues 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%.
Employer Services—Revenues, fiscal 2026 · Filed 05/08/2026
Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.
Risk factors—potential client contract renegotiation · Filed 05/08/2026
n/m - not meaningful Employer Services Revenues 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%.
Employer Services — Revenues · Filed 05/08/2026
Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.
Risk factors — client spending and contract renegotiation · Filed 05/08/2026
If You previously processed payroll with ADP on another payroll platform, ADP may increase prices for the Services at any time upon at least 30 days prior notice to You but otherwise reserves the right to increase pricing from time to time for any additional per use features and services, including but not limited to those listed on Your sales order, available through the RUN platform, or sent to You by email or otherwise, and Your continued use of RUN or the Services constitutes Your acceptance of such fees.
RUN Powered by ADP customer terms: fee increases and acceptance through continued use; retrieved October 19, 2026 · Retrieved 19/10/2026
