Automatic Data Processing, Inc. reports 9.3% EBITDA growth in 2018 and almost no change in EBITDA Margin of 21.7%
08/01/2018 • About Automatic Data Processing, Inc. (
$ADP) • By InTwits
Automatic Data Processing, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is relatively stable: 21.7% in FY2018 vs. 21.3% in FY2017 vs. 21.3% in FY2014
- Automatic Data Processing, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $635m in FY2018, $1,069m in FY2017, $723m in FY2016, $593m in FY2015, $409m in FY2014
- In the last 5 years the company invested considerably less than D&A: $933m vs. $1,621m. In FY2018 this situation was still the same: CAPEX was 206 while D&A was 378
- The company has highly profitable business model: ROIC is 37.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 7.6%. Revenue growth showed acceleration in FY18Q4 - it increased 8.3% YoY. During the last 5 years Revenue growth bottomed in FY2017 at 6.1%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.3 pp from 14.9% to 12.5% in FY2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2015 at 21.0% and was growing since that time.
Gross Margin showed almost no change in FY2018. During FY2014-FY2018 Gross Margin topped in FY2016 at 41.4% and was declining since that time. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue declined at -0.21 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.
Net Income margin decreased slightly on 1.8 pp from 14.0% to 12.2% in FY2018. The efficient tax rate was 25.3% in FY2018 while the average for the last five years was 30.4%.
Investments (CAPEX, working capital and M&A)
In FY2018 Automatic Data Processing, Inc. had CAPEX/Revenue of 1.5%. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average level of CAPEX/Revenue for the last three years was 1.6%.
Accounts receivable as a % of Revenue increased slightly on 1.1 pp from 13.8% to 14.9% in FY2018. Accounts payable as a % of Revenue showed almost no change in FY2018.
Automatic Data Processing, Inc. has spent
$612m on M&A in FY2018 which accounts for 4.6% of revenue.
Return on investment
The company operates at high and attractive ROIC (37.5%) and ROE (37.2%). ROIC increased slightly on 0.82 pp from 36.6% to 37.5% in FY2018. ROE decreased on 3.8 pp from 41.0% to 37.2% in FY2018. ROIC followed a growing trend at 3.5 pp per annum in FY2014-FY2018. ROE grew at 4.3 pp per annum in FY2014-FY2018.
Leverage (Debt)
Debt level is -0.1x Net Debt / EBITDA and 0.7x Debt / EBITDA. Debt didn't change in FY2018 while cash dropped on 22.0%.
Automatic Data Processing, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 24.5x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence paid by the company was 5.1% in FY2018.
Valuation and dividends
Automatic Data Processing, Inc.'s trades at EV/EBITDA 20.8x and P/E 37.2x.
The company paid 65.6% of Net Income as dividends in FY2018. Dividends grew on average at 3.8% per annum in the last 5 years).
Management team
The company's CEO Carlos A Rodriguez is a founder and has spent 7 years with the company. CEO total compensation was
$12,489,040 in FY2018 which included
$1,055,000 salary.
0.15% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 57,000 employees. The number of employees decreased slightly on 1.7%. Average revenue per employee in FY2018 was
$233,786 and it increased on 9.5%.
Financial and operational results
FY ended 06/30/2018
Automatic Data Processing, Inc. ($ADP) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 10,226 | 10,939 | 11,668 | 12,380 | 13,326 | 7.6% |
| Gross Profit | 4,185 | 4,511 | 4,828 | 5,110 | 5,483 | 7.3% |
| SG&A | 2,370 | 2,497 | 2,637 | 2,783 | 2,972 | 6.8% |
| EBITDA | 2,176 | 2,292 | 2,479 | 2,643 | 2,889 | 9.3% |
| EBIT | 1,815 | 2,014 | 2,191 | 2,327 | 2,512 | 7.9% |
| Interest expence | 6 | 7 | 56 | 80 | 103 | 28.4% |
| Tax | 637 | 694 | 741 | 798 | 550 | -31.0% |
| Net Income | 1,516 | 1,453 | 1,493 | 1,733 | 1,621 | -6.5% |
| Stock Based Compensation | 67 | 143 | 138 | 139 | 175 | 26.3% |
Balance Sheet
|
|---|
| Cash | 1,584 | 1,639 | 3,191 | 2,780 | 2,170 | -22.0% |
| Accounts Receivable | 1,499 | 1,547 | 1,743 | 1,704 | 1,984 | 16.5% |
| Accounts Payable | 152 | 195 | 152 | 150 | 135 | -9.6% |
| Short Term Debt | 2,173 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 12 | 9 | 2,008 | 2,002 | 2,002 | 0.0% |
Cash flow
|
|---|
| Capex | 160 | 159 | 169 | 240 | 206 | -14.2% |
| Dividends | 883 | 928 | 944 | 995 | 1,064 | 6.9% |
| Acquisitions | | 8 | | 87 | 612 | 600.7% |
Ratios
|
|---|
| Revenue growth | 8.3% | 7.0% | 6.7% | 6.1% | 7.6% | |
| EBITDA growth | 11.3% | 5.3% | 8.2% | 6.6% | 9.3% | |
|
|---|
| Gross Margin | 40.9% | 41.2% | 41.4% | 41.3% | 41.1% | -0.1% |
| EBITDA Margin | 21.3% | 21.0% | 21.2% | 21.3% | 21.7% | 0.3% |
| EBIT Margin | 17.7% | 18.4% | 18.8% | 18.8% | 18.8% | 0.1% |
| SG&A, % of revenue | 23.2% | 22.8% | 22.6% | 22.5% | 22.3% | -0.2% |
| SBC, % of revenue | 0.7% | 1.3% | 1.2% | 1.1% | 1.3% | 0.2% |
| Net Income Margin | 14.8% | 13.3% | 12.8% | 14.0% | 12.2% | -1.8% |
| CAPEX, % of revenue | 1.6% | 1.5% | 1.4% | 1.9% | 1.5% | -0.4% |
|
|---|
| ROIC | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% | 0.8% |
| ROE | 23.6% | 25.3% | 32.1% | 41.0% | 37.2% | -3.8% |
| Net Debt/EBITDA | 0.3x | -0.7x | -0.5x | -0.3x | -0.1x | 0.2x |
| Interest expence / Average debt | 0.3% | 0.6% | 5.6% | 4.0% | 5.1% | 1.1% |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | 61,000 | 55,000 | 57,000 | 58,000 | 57,000 | -1.7% |
| Revenue/Employee, th. $ | 168 | 199 | 205 | 213 | 234 | 9.5% |
Automatic Data Processing, Inc. ($ADP) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,077 | 3,238 | 3,696 | 3,319 | | 5.5% | 8.4% | 8.4% | 8.3% |
| EBITDA | 638 | 672 | 963 | 629 | | 5.7% | 2.2% | 5.5% | 33.6% |
| Net Income | 413 | 670 | 661 | 109 | | 11.9% | 31.2% | 12.4% | -59.1% |
Balance Sheet
|
|---|
| Cash | 2,364 | 1,773 | 2,294 | 2,170 | | -14.9% | -34.4% | -23.4% | -22.0% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 2,002 | 2,002 | 2,002 | 2,002 | | -0.3% | -0.0% | -0.0% | 0.0% |
Ratios
|
|---|
| Gross Margin | 39.8% | 40.2% | 43.7% | 41.2% | | -0.4% | -0.7% | -0.2% | 1.4% |
| EBITDA Margin | 20.7% | 20.7% | 26.1% | 18.9% | | 0.0% | -1.3% | -0.7% | 3.6% |
| Net Income Margin | 13.4% | 20.7% | 17.9% | 3.3% | | 0.8% | 3.6% | 0.6% | -5.4% |
Peers in Data Processing & Outsourced S
Below we provide Automatic Data Processing, Inc. benchmarking against other companies in Data Processing & Outsourced S industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.7% | 11.8% | 7.4% |
|---|
| Automatic Data Processing, Inc. ($ADP) | | 7.0% | 6.7% | 6.1% | 7.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 38.4% | 39.5% | 39.2% | 38.9% | 40.9% |
|---|
| Automatic Data Processing, Inc. ($ADP) | 40.9% | 41.2% | 41.4% | 41.3% | 41.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.4% | 21.2% | 21.2% | 20.6% | 19.2% |
|---|
| Automatic Data Processing, Inc. ($ADP) | 21.3% | 21.0% | 21.2% | 21.3% | 21.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Automatic Data Processing, Inc. ($ADP) | 1.6% | 1.5% | 1.4% | 1.9% | 1.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| 3PEA International, Inc. ($TPNL) | 118.8% | -0.3% | 48.2% | 44.9% | 36.0% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| Automatic Data Processing, Inc. ($ADP) | 0.3x | -0.7x | -0.5x | -0.3x | -0.1x |
