UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-Q

______________

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30,~~December 31, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 1-5397

__________________________

AUTOMATIC DATA PROCESSING, INC.

(Exact name of registrant as specified in its charter)

__________________________


Delaware		22-1467904
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
One ADP Boulevard
Roseland,	NJ	07068
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (973) 974-5000

__________________________


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value (voting)	ADP	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the

Exchange Act). Yes ☐ No ý

The number of shares outstanding of the registrant’s common stock as of ~~October 31, 2023~~January 29, 2024 was ~~411,304,782.~~410,790,567.

Table of Contents



		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Statements of Consolidated Earnings Three and six months ended ~~September~~Dec ember 3 01 , 2023 and 2022	3

	Statements of Consolidated Comprehensive Income Three and six months ended ~~September~~December 3 01 , 2023 and 2022	4

	Consolidated Balance Sheets At ~~September~~ 3 0December 31 , 2023 and June 30, ~~202~~32023	5

	Statements of Consolidated Cash Flows ~~Three~~Six months ended ~~September~~ 3 0December 31 , 2023 and 2022	6

	Notes to the Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3637

Item 4.	Controls and Procedures	3637

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3637

Item 1A.	Risk Factors	3738

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

~~Item 5.~~	~~Other Information~~	38



Item 6.	Exhibits	39

	Signatures	40

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Automatic Data Processing, Inc. and Subsidiaries

Statements of Consolidated Earnings

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended								Three Months Ended				Six Months Ended
	December 31,										December 31,
	2023							2023		2022		2023		2022
				Three Months Ended
		September 30,
		2023			2022

REVENUES:
REVENUES:
REVENUES:	REVENUES:
Revenues, other than interest on funds held for clients and PEO revenues	Revenues, other than interest on funds held for clients and PEO revenues	$	2,843.0		$	2,646.5
Interest on funds held for clients	Interest on funds held for clients	201.7			141.0
PEO revenues (A)	PEO revenues (A)	1,467.7			1,428.1
TOTAL REVENUES	TOTAL REVENUES	4,512.4			4,215.6

EXPENSES:
EXPENSES:
EXPENSES:	EXPENSES:
Costs of revenues:	Costs of revenues:						Costs of revenues:
Operating expenses	Operating expenses	2,157.6			2,074.4
Research and development	Research and development	236.5			209.8
Depreciation and amortization	Depreciation and amortization	121.3			109.4
TOTAL COSTS OF REVENUES	TOTAL COSTS OF REVENUES	2,515.4			2,393.6

Selling, general, and administrative expenses	Selling, general, and administrative expenses	880.3			800.3
Selling, general, and administrative expenses
Selling, general, and administrative expenses
Interest expense	Interest expense	91.6			51.2
TOTAL EXPENSES	TOTAL EXPENSES	3,487.3			3,245.1

Other (income)/expense, net	Other (income)/expense, net	(67.7)			(39.5)
Other (income)/expense, net
Other (income)/expense, net

EARNINGS BEFORE INCOME TAXES
EARNINGS BEFORE INCOME TAXES
EARNINGS BEFORE INCOME TAXES	EARNINGS BEFORE INCOME TAXES	1,092.8			1,010.0

Provision for income taxes	Provision for income taxes	233.4			231.0
Provision for income taxes
Provision for income taxes

NET EARNINGS

NET EARNINGS

NET EARNINGS	NET EARNINGS	$	859.4		$	779.0

BASIC EARNINGS PER SHARE	BASIC EARNINGS PER SHARE	$	2.09		$	1.88

BASIC EARNINGS PER SHARE

BASIC EARNINGS PER SHARE

DILUTED EARNINGS PER SHARE

DILUTED EARNINGS PER SHARE

DILUTED EARNINGS PER SHARE	DILUTED EARNINGS PER SHARE	$	2.08		$	1.87

Basic weighted average shares outstanding	Basic weighted average shares outstanding	411.7			414.6
Basic weighted average shares outstanding
Basic weighted average shares outstanding
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	413.6			416.9

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of ~~$15,994.6~~$18,379.2 million and ~~$15,534.2~~$17,852.4 million for the three months ended ~~September 30,~~December 31, 2023 and 2022, respectively, and $34,373.8 million and $33,386.6 million for the six months ended December 31, 2023 and 2022, respectively.

See notes to the Consolidated Financial Statements.

Automatic Data Processing, Inc. and Subsidiaries

Statements of Consolidated Comprehensive Income

(In millions)

(Unaudited)


		Three Months Ended
		September 30,
		2023			2022
	Three Months Ended							Three Months Ended			Six Months Ended
	December 31,									December 31,
	2023							2023	2022			2023	2022
				2023			2022
Net earnings	Net earnings
Net earnings
Net earnings

Other comprehensive (loss)/income:
Other comprehensive income/(losses):
Other comprehensive income/(losses):
Other comprehensive income/(losses):
Currency translation adjustments
Currency translation adjustments
Currency translation adjustments	Currency translation adjustments	(44.6)			(84.7)

Unrealized net (losses)/gains on available-for-sale securities		(150.6)			(835.1)
Unrealized net gains/(losses) on available-for-sale securities
Unrealized net gains/(losses) on available-for-sale securities
Unrealized net gains/(losses) on available-for-sale securities
Tax effect	Tax effect	30.1			185.8
Reclassification of realized net losses/(gains) on available-for-sale securities to net earnings	Reclassification of realized net losses/(gains) on available-for-sale securities to net earnings	1.9			1.5
Tax effect	Tax effect	(0.4)			(0.3)

Amortization of unrealized losses on cash flow hedging activities

Amortization of unrealized losses on cash flow hedging activities

Amortization of unrealized losses on cash flow hedging activities	Amortization of unrealized losses on cash flow hedging activities	1.1			1.1
Tax effect	Tax effect	(0.3)			(0.3)

Reclassification of pension liability adjustment to net earnings	Reclassification of pension liability adjustment to net earnings	1.0			2.1

Reclassification of pension liability adjustment to net earnings

Reclassification of pension liability adjustment to net earnings
Tax effect	Tax effect	(0.2)			(0.5)

Other comprehensive (loss)/income, net of tax		(162.0)			(730.4)
Other comprehensive income/(loss), net of tax

Other comprehensive income/(loss), net of tax

Other comprehensive income/(loss), net of tax
Comprehensive income	Comprehensive income	$	697.4		$	48.6

See notes to the Consolidated Financial Statements.

Automatic Data Processing, Inc. and Subsidiaries

Consolidated Balance Sheets

(In millions, except per share amounts)

(Unaudited)


			September 30,		June 30,
			2023		2023
		December 31,						December 31,	June 30,
		2023						2023	2023
Assets	Assets
Current assets:
Current assets:
Current assets:	Current assets:
Cash and cash equivalents	Cash and cash equivalents		$	1,441.4	$	2,083.5

Accounts receivable, net of allowance for doubtful accounts of $50.3 and $53.0, respectively			3,095.1		3,009.6
Accounts receivable, net of allowance for doubtful accounts of $48.6 and $53.0, respectively
Accounts receivable, net of allowance for doubtful accounts of $48.6 and $53.0, respectively
Accounts receivable, net of allowance for doubtful accounts of $48.6 and $53.0, respectively
Other current assets	Other current assets		1,180.7		743.9

Total current assets before funds held for clients

Total current assets before funds held for clients

Total current assets before funds held for clients	Total current assets before funds held for clients		5,717.2		5,837.0
Funds held for clients	Funds held for clients		34,762.9		36,333.6
Total current assets	Total current assets		40,480.1		42,170.6

Long-term receivables, net of allowance for doubtful accounts of $0.0 and $0.1, respectively			8.3		8.5
Long-term receivables, net of allowance for doubtful accounts of $0.1 and $0.1, respectively
Long-term receivables, net of allowance for doubtful accounts of $0.1 and $0.1, respectively
Long-term receivables, net of allowance for doubtful accounts of $0.1 and $0.1, respectively
Property, plant and equipment, net	Property, plant and equipment, net		660.4		681.4
Operating lease right-of-use asset	Operating lease right-of-use asset		380.5		402.4
Deferred contract costs	Deferred contract costs		2,758.0		2,769.7
Other assets	Other assets		1,352.0		1,255.4
Goodwill	Goodwill		2,352.5		2,339.4
Intangible assets, net	Intangible assets, net		1,331.8		1,343.6
Total assets	Total assets		$	49,323.6	$	50,971.0
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity						Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:						Current liabilities:
Accounts payable	Accounts payable		$	67.4	$	96.8
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities		2,292.0		2,342.6
Accrued payroll and payroll-related expenses	Accrued payroll and payroll-related expenses		554.2		941.4
Dividends payable	Dividends payable		509.9		510.0
Short-term deferred revenues	Short-term deferred revenues		182.8		188.6
Obligations under reverse repurchase agreements (A)	Obligations under reverse repurchase agreements (A)		343.8		105.4

Income taxes payable	Income taxes payable		179.8		44.2

Income taxes payable

Income taxes payable

Total current liabilities before client funds obligations
Total current liabilities before client funds obligations
Total current liabilities before client funds obligations	Total current liabilities before client funds obligations		4,129.9		4,229.0
Client funds obligations	Client funds obligations		37,098.8		38,538.6
Total current liabilities	Total current liabilities		41,228.7		42,767.6
Long-term debt	Long-term debt		2,989.8		2,989.0
Operating lease liabilities	Operating lease liabilities		334.3		349.9
Other liabilities	Other liabilities		893.0		933.7
Deferred income taxes	Deferred income taxes		67.7		73.6
Long-term deferred revenues	Long-term deferred revenues		337.3		348.1
Total liabilities	Total liabilities		45,850.8		47,461.9

Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 13)

Stockholders' equity:	Stockholders' equity:
Stockholders' equity:
Stockholders' equity:
Preferred stock, $1.00 par value: authorized, 0.3 shares; issued, none	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 September 30, 2023 and June 30, 2023; outstanding, 411.7 and 412.1 shares at September 30, 2023 and June 30, 2023, respectively			63.9		63.9
Common stock, $0.10 par value: authorized, 1,000.0 shares; issued, 638.7 shares at December 31, 2023 and June 30, 2023; outstanding, 410.7 and 412.1 shares at December 31, 2023 and June 30, 2023, respectively
Capital in excess of par value	Capital in excess of par value		2,188.7		2,102.3
Retained earnings	Retained earnings		22,455.4		22,118.0
Treasury stock - at cost: 227.0 and 226.6 shares at September 30, 2023 and June 30, 2023, respectively			(18,767.4)		(18,469.3)
Treasury stock - at cost: 228.0 and 226.6 shares at December 31, 2023 and June 30, 2023, respectively
Accumulated other comprehensive (loss)/ income	Accumulated other comprehensive (loss)/ income		(2,467.8)		(2,305.8)
Total stockholders’ equity	Total stockholders’ equity		3,472.8		3,509.1
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity		$	49,323.6	$	50,971.0

(A) As of ~~September 30,~~December 31, 2023, ~~$131.9~~$21.5 million of short-term marketable securities ~~$211.2 million of long-term marketable securities~~ and ~~$0.7~~$0.1 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements. As of June 30, 2023, $104.6 million of long-term marketable securities and $0.8 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements (see Note 9).

See notes to the Consolidated Financial Statements.

Automatic Data Processing, Inc. and Subsidiaries

Statements of Consolidated Cash Flows

(In millions)

(Unaudited)

Six Months Ended

December 31,

2023

Three Months Ended

Cash Flows from Operating Activities:

September 30,

2023

2022

Cash Flows from Operating Activities:

2023

2022

Cash Flows from Operating Activities:

Net earnings

859.4

779.0

Net earnings

Adjustments to reconcile net earnings to cash flows provided by operating activities:

Depreciation and amortization

141.5

135.1

Depreciation and amortization

Amortization of deferred contract costs

262.3

243.5

Deferred income taxes

26.8

20.5

Deferred income taxes

Stock-based compensation expense

58.8

50.6

Net pension income

(5.8)

(9.3)

Net pension income

Net accretion of discounts and amortization of premiums on available-for-sale securities

(5.5)

16.0

Other

2.7

10.6

Other

Changes in operating assets and liabilities:

(Increase)/Decrease in accounts receivable

(107.9)

201.5

Changes in operating assets and liabilities:

Increase in accounts receivable

Increase in deferred contract costs

(261.9)

(239.6)

Increase in other assets

(304.9)

(264.4)

Increase in other assets

Decrease in accounts payable

(30.4)

(30.7)

Decrease in accounts payable

Decrease in accrued expenses and other liabilities

(308.6)

(194.7)

Net cash flows provided by operating activities

326.5

718.1

Net cash flows provided by operating activities

Cash Flows from Investing Activities:

Purchases of corporate and client funds marketable securities

(710.2)

(3,064.5)

Purchases of corporate and client funds marketable securities

Proceeds from the sales and maturities of corporate and client funds marketable securities

632.0

1,618.6

Capital expenditures

(39.3)

(45.4)

Capital expenditures

Additions to intangibles

(87.0)

(86.3)

Acquisitions of businesses, net of cash acquired

(33.6)

—

Acquisitions of businesses, net of cash acquired

Proceeds from sale of property, plant, and equipment and other assets

22.0

—

Proceeds from sale of property, plant, and equipment and other assets

Other

Net cash flows used in investing activities

(216.1)

(1,577.6)

Cash Flows from Financing Activities:

Net decrease in client funds obligations

(1,374.9)

(15,592.0)

Cash Flows from Financing Activities:

Net increase/(decrease) in client funds obligations

Payments of debt

(0.2)

Repurchases of common stock

(250.0)

(333.3)

Repurchases of common stock

Net proceeds from stock purchase plan and stock-based compensation plans

(36.6)

1.0

Dividends paid

(515.8)

(432.9)

Net proceeds related to reverse repurchase agreements

273.8

54.8

Dividends paid

Net payments related to reverse repurchase agreements

Net cash flows used in financing activities

(1,903.7)

(16,302.6)

Net cash flows provided by/(used in) financing activities

Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents

(16.3)

(44.9)

Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents

(1,809.6)

(17,207.0)

Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period

8,771.5

22,783.0

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period

6,961.9

5,576.0

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Consolidated Balance Sheets

Cash and cash equivalents

1,441.4

1,207.7

Restricted cash and restricted cash equivalents included in funds held for clients (A)

5,520.5

4,368.3

Restricted cash and restricted cash equivalents included in funds held for clients (A)

Total cash, cash equivalents, restricted cash, and restricted cash equivalents

6,961.9

5,576.0

Supplemental disclosures of cash flow information:

Cash paid for interest

97.0

56.7

Cash paid for interest

Cash paid for income taxes, net of income tax refunds

87.9

57.5

(A) See Note 6 for a reconciliation of restricted cash and restricted cash equivalents in funds held for clients on the Consolidated Balance Sheets.

See notes to the Consolidated Financial Statements.

Automatic Data Processing, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

(Tabular dollars in millions, except per share amounts or where otherwise stated)

(Unaudited)

Note 1. Basis of Presentation

The accompanying Consolidated Financial Statements and footnotes thereto of Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Consolidated Financial Statements and footnotes thereto are unaudited. In the opinion of the Company’s management, the Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, that are necessary for a fair presentation of the Company’s interim financial results.

The Company has a grantor trust, which holds the majority of the funds provided by its clients pending remittance to employees of those clients, tax authorities, and other payees. The Company is the sole beneficial owner of the trust. The trust meets the criteria in Accounting Standards Codification (“ASC”) 810, “Consolidation” to be characterized as a variable interest entity (“VIE”). The Company has determined that it has a controlling financial interest in the trust because it has both (1) the power to direct the activities that most significantly impact the economic performance of the trust (including the power to make all investment decisions for the trust) and (2) the right to receive benefits that could potentially be significant to the trust (in the form of investment returns) and, therefore, consolidates the trust. Further information on these funds and the Company’s obligations to remit to its clients’ employees, tax authorities, and other payees is provided in Note 6, “Corporate Investments and Funds Held for Clients.”

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the assets, liabilities, revenue, expenses, and accumulated other comprehensive income that are reported in the Consolidated Financial Statements and footnotes thereto. Actual results may differ from those estimates. Interim financial results are not necessarily indicative of financial results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“fiscal 2023”).

Certain amounts from the prior year's financial statements have been reclassified in order to conform to the current year's presentation. We also updated the description of "Systems development and programming costs" to "Research and development" within the Statement of Consolidated Earnings, this change did not result in changes to current or previously reported amounts.

Note 2. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

None.

Recently Issued Accounting Pronouncements

~~None.~~


Standard	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures	This update enhances the transparency and decision usefulness of income tax disclosures to better assess how an entity’s operations and related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows.	June 30, 2026 (Fiscal 2026)	The Company is assessing this guidance. The adoption will modify disclosures but will not have an impact on the Company's consolidated results of operations, financial condition, and cash flows.
ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures	This update improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and certain quantitative disclosures.	June 30, 2025 (Fiscal 2025)	The Company is assessing this guidance. The adoption will modify disclosures but will not have an impact on the Company's consolidated results of operations financial condition, and cash flows.

Note 3. Revenue

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated by its three ~~strategic~~business pillars: Human Capital Management (“HCM”), HR Outsourcing (“HRO”), and Global Solutions (“Global”), with separate disaggregation for PEO zero-margin benefits pass-through revenues and client funds interest revenues. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

The following tables provide details of revenue by our ~~strategic~~business pillars, and include a reconciliation to the Company’s reportable segments:


		Three Months Ended
		September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended							Six Months Ended
	December 31,									December 31,
Types of Revenues	Types of Revenues	2023		2022		Types of Revenues	2023	2022			2023	2022
HCM	HCM	$	1,914.4	$	1,811.0
HRO, excluding PEO zero-margin benefits pass-throughs	HRO, excluding PEO zero-margin benefits pass-throughs	811.7		777.3
PEO zero-margin benefits pass-throughs	PEO zero-margin benefits pass-throughs	976.7		945.8
Global	Global	607.9		540.5
Interest on funds held for clients	Interest on funds held for clients	201.7		141.0
Total Revenues	Total Revenues	$	4,512.4	$	4,215.6

Reconciliation of disaggregated revenue to our reportable segments for the three months ended ~~September 30,~~December 31, 2023:


Types of Revenues	Types of Revenues	Employer Services		PEO		Other		Total		Types of Revenues	Employer Services	PEO	Other	Total
HCM	HCM	$	1,916.7	$	—	$	(2.3)	$	1,914.4
HRO, excluding PEO zero-margin benefits pass-throughs	HRO, excluding PEO zero-margin benefits pass-throughs	322.0		491.0		(1.3)		811.7
PEO zero-margin benefits pass-throughs	PEO zero-margin benefits pass-throughs	—		976.7		—		976.7
Global	Global	607.9		—		—		607.9
Interest on funds held for clients	Interest on funds held for clients	199.8		1.9		—		201.7
Total Segment Revenues	Total Segment Revenues	$	3,046.4	$	1,469.6	$	(3.6)	$	4,512.4

Reconciliation of disaggregated revenue to our reportable segments for the three months ended ~~September 30,~~December 31, 2022:


Types of Revenues	Types of Revenues	Employer Services		PEO		Other		Total		Types of Revenues	Employer Services	PEO	Other	Total
HCM	HCM	$	1,813.2	$	—	$	(2.2)	$	1,811.0
HRO, excluding PEO zero-margin benefits pass-throughs	HRO, excluding PEO zero-margin benefits pass-throughs	296.8		482.3		(1.8)		777.3
PEO zero-margin benefits pass-throughs	PEO zero-margin benefits pass-throughs	—		945.8		—		945.8
Global	Global	540.5		—		—		540.5
Interest on funds held for clients	Interest on funds held for clients	139.7		1.3		—		141.0
Total Segment Revenues	Total Segment Revenues	$	2,790.2	$	1,429.4	$	(4.0)	$	4,215.6

Reconciliation of disaggregated revenue to our reportable segments for the six months ended December 31, 2023:


Types of Revenues	Employer Services		PEO		Other		Total
HCM	$	3,894.0	$	—	$	(4.6)	$	3,889.4
HRO, excluding PEO zero-margin benefits pass-throughs	638.5		1,064.3		(2.4)		1,700.4
PEO zero-margin benefits pass-throughs	—		1,947.5		—		1,947.5
Global	1,215.9		—		—		1,215.9
Interest on funds held for clients	423.2		3.9		—		427.1
Total Segment Revenues	$	6,171.6	$	3,015.7	$	(7.0)	$	9,180.3

Reconciliation of disaggregated revenue to our reportable segments for the six months ended December 31, 2022:


Types of Revenues	Employer Services		PEO		Other		Total
HCM	$	3,677.4	$	—	$	(4.6)	$	3,672.8
HRO, excluding PEO zero-margin benefits pass-throughs	595.2		1,039.7		(3.7)		1,631.2
PEO zero-margin benefits pass-throughs	—		1,890.0		—		1,890.0
Global	1,084.3		—		—		1,084.3
Interest on funds held for clients	325.3		3.0		—		328.3
Total Segment Revenues	$	5,682.2	$	2,932.7	$	(8.3)	$	8,606.6

Contract Balances

The timing of revenue recognition for HCM, HRO and Global Solutions is consistent with the invoicing of clients, as invoicing occurs in the period the services are provided. Therefore, the Company does not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in deferred revenues related to set up fees for the ~~three~~six months ended ~~September 30,~~December 31, 2023 were as follows:


Contract Liability
Contract liability, July 1, 2023	$	464.8
Recognition of revenue included in beginning of year contract liability	~~(35.7)~~(33.8)
Contract liability, net of revenue recognized on contracts during the period	~~31.1~~35.5
Currency translation adjustments	~~12.0~~5.0
Contract liability, ~~September 30,~~December 31, 2023	$	~~472.2~~471.5

Note 4. Earnings per Share (“EPS”)

Basic

Effect of Employee Stock Option Shares

Effect of
Employee
Restricted
Stock
Shares

Diluted

Three Months Ended September 30, 2023

Basic

Effect of Employee Stock Option Shares

Effect of
Employee
Restricted
Stock
Shares

Diluted

Three Months Ended December 31, 2023

Net earnings

859.4

Weighted average shares (in millions)

411.7

0.9

1.0

413.6

EPS

2.09

2.08

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

Net earnings

779.0

Weighted average shares (in millions)

414.6

1.1

1.2

416.9

EPS

1.88

1.87

Six Months Ended December 31, 2023

Net earnings

Weighted average shares (in millions)

EPS

Six Months Ended December 31, 2022

Net earnings

Weighted average shares (in millions)

EPS

For the three months ended ~~September 30,~~December 31, 2023, there were 0.1 million stock options excluded from the calculation of diluted earnings per share due to anti-dilution. For the six months ended December 31, 2023, there were no stock options excluded

from the calculation of diluted earnings per share due to anti-dilution. For the three and six months ended December 31, 2022, there were no stock options excluded from the calculation of diluted earnings per share due to anti-dilution. Stock Options to purchase 0.3 million shares of common stock for the three months ended September 30, 2022 were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Note 5. Other (Income)/Expense, Net


		Three Months Ended
		September 30,
		2023		2022
	Three Months Ended						Three Months Ended				Six Months Ended
	December 31,								December 31,
	2023					2023		2022		2023		2022
Interest income on corporate funds	Interest income on corporate funds	$	(46.5)	$	(29.7)

Realized losses/(gains) on available-for-sale securities, net	Realized losses/(gains) on available-for-sale securities, net	1.9		1.5

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

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

Gain on sale of assets
Gain on sale of assets
Gain on sale of assets	Gain on sale of assets	(14.6)		—

Impairment of assets
Impairment of assets
Impairment of assets	Impairment of assets	—		0.3

Non-service components of pension income, net (see Note 11)	Non-service components of pension income, net (see Note 11)	(8.5)		(11.6)

Non-service components of pension income, net (see Note 11)

Non-service components of pension income, net (see Note 11)
Other (income)/expense, net	Other (income)/expense, net	$	(67.7)	$	(39.5)

Note 6. Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at ~~September 30,~~December 31, 2023 and June 30, 2023 were as follows:


		September 30, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value (A)
											December 31, 2023
	Amortized Cost											Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Market Value (A)
Type of issue:	Type of issue:									Type of issue:
Money market securities, cash and other cash equivalents	Money market securities, cash and other cash equivalents	$	6,961.9	$	—	$	—	$	6,961.9
Available-for-sale securities:	Available-for-sale securities:
Corporate bonds
Corporate bonds
Corporate bonds	Corporate bonds	15,836.9		0.1		(1,407.3)		14,429.7
U.S. Treasury securities	U.S. Treasury securities	8,213.5		—		(283.8)		7,929.7
Canadian government obligations and Canadian government agency obligations	Canadian government obligations and Canadian government agency obligations	2,049.8		—		(149.2)		1,900.6
U.S. government agency securities	U.S. government agency securities	1,669.6		—		(197.9)		1,471.7
Asset-backed securities	Asset-backed securities	1,136.6		—		(68.1)		1,068.5
Canadian provincial bonds	Canadian provincial bonds	1,013.1		—		(88.0)		925.1
Commercial mortgage-backed securities	Commercial mortgage-backed securities	661.7		—		(51.9)		609.8
Other securities	Other securities	1,374.8		0.1		(109.6)		1,265.3

Total available-for-sale securities	Total available-for-sale securities	31,956.0		0.2		(2,355.8)		29,600.4
Total available-for-sale securities
Total available-for-sale securities

Total corporate investments and funds held for clients	Total corporate investments and funds held for clients	$	38,917.9	$	0.2	$	(2,355.8)	$	36,562.3
Total corporate investments and funds held for clients
Total corporate investments and funds held for clients

(A) Included within available-for-sale securities are corporate investments with fair values of ~~$358.0~~$24.4 million and funds held for clients with fair values of ~~$29,242.4~~$30,271.1 million. All available-for-sale securities were included in Level 2 of the fair value

hierarchy.


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value (B)
Type of issue:
Money market securities, cash and other cash equivalents	$	8,771.5	$	—	$	—	$	8,771.5
Available-for-sale securities:
Corporate bonds	15,870.7		4.7		(1,308.3)		14,567.1
U.S. Treasury securities	8,054.7		0.7		(290.4)		7,765.0
Canadian government obligations and Canadian government agency obligations	2,070.4		—		(145.0)		1,925.4
U.S. government agency securities	1,670.0		0.2		(179.8)		1,490.4
Asset-backed securities	1,234.7		—		(69.7)		1,165.0
Canadian provincial bonds	1,000.5		0.2		(78.1)		922.6
Commercial mortgage-backed securities	679.2		—		(46.7)		632.5
Other securities	1,391.6		1.7		(96.4)		1,296.9

Total available-for-sale securities	31,971.8		7.5		(2,214.4)		29,764.9

Total corporate investments and funds held for clients	$	40,743.3	$	7.5	$	(2,214.4)	$	38,536.4

(B) Included within available-for-sale securities are corporate investments with fair values of $119.3 million and funds held for clients with fair values of $29,645.6 million. All available-for-sale securities were included in Level 2 of the fair value hierarchy.

For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form

10-K for fiscal 2023. The Company concurred with and did not adjust the prices obtained from the independent pricing service. The Company had no available-for-sale securities included in Level 1 or Level 3 at ~~September 30,~~December 31, 2023.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of ~~September 30,~~December 31, 2023, are as follows:


		September 30, 2023
		Securities in Unrealized Loss Position Less Than 12 Months				Securities in Unrealized Loss Position Greater Than 12 Months				Total
		Gross Unrealized Losses		Fair Market Value		Gross Unrealized Losses		Fair Market Value		Gross Unrealized Losses		Fair Market Value
	December 31, 2023																			December 31, 2023
	Securities in Unrealized Loss Position Less Than 12 Months														Securities in Unrealized Loss Position Less Than 12 Months			Securities in Unrealized Loss Position Greater Than 12 Months			Total
	Gross Unrealized Losses													Gross Unrealized Losses		Fair Market Value	Gross Unrealized Losses		Fair Market Value		Gross Unrealized Losses	Fair Market Value
Corporate bonds	Corporate bonds	$	(50.3)	$	1,297.5	$	(1,357.0)	$	13,097.5	$	(1,407.3)	$	14,395.0
U.S. Treasury securities	U.S. Treasury securities	(33.8)		2,090.5		(250.0)		5,836.0		(283.8)		7,926.5
Canadian government obligations and Canadian government agency obligations	Canadian government obligations and Canadian government agency obligations	(4.3)		186.8		(144.9)		1,713.8		(149.2)		1,900.6
U.S. government agency securities	U.S. government agency securities	(1.9)		36.0		(196.0)		1,435.6		(197.9)		1,471.6
Asset-backed securities	Asset-backed securities	(3.2)		251.0		(64.9)		801.5		(68.1)		1,052.5
Canadian provincial bonds	Canadian provincial bonds	(6.9)		143.3		(81.1)		781.8		(88.0)		925.1
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		—		(51.9)		609.8		(51.9)		609.8
Other securities	Other securities	(12.3)		380.7		(97.3)		850.6		(109.6)		1,231.3
		$	(112.7)	$	4,385.8	$	(2,243.1)	$	25,126.6	$	(2,355.8)	$	29,512.4

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of June 30, 2023, are as follows:


	June 30, 2023
	Securities in Unrealized Loss Position Less Than 12 Months				Securities in Unrealized Loss Position Greater Than 12 Months				Total
	Gross Unrealized Losses		Fair Market Value		Gross Unrealized Losses		Fair Market Value		Gross Unrealized Losses		Fair Market Value
Corporate bonds	$	(62.0)	$	2,255.9	$	(1,246.3)	$	12,050.5	$	(1,308.3)	$	14,306.4
U.S. Treasury securities	(85.5)		4,629.4		(204.9)		2,876.3		(290.4)		7,505.7
Canadian government obligations and Canadian government agency obligations	(5.8)		333.9		(139.2)		1,588.0		(145.0)		1,921.9
U.S. government agency securities	(0.6)		28.2		(179.2)		1,432.2		(179.8)		1,460.4
Asset-backed securities	(2.0)		159.7		(67.7)		975.6		(69.7)		1,135.3
Canadian provincial bonds	(2.7)		127.0		(75.4)		757.3		(78.1)		884.3
Commercial mortgage-backed securities	(6.7)		126.9		(40.0)		505.6		(46.7)		632.5
Other securities	(14.5)		574.0		(81.9)		629.0		(96.4)		1,203.0
	$	(179.8)	$	8,235.0	$	(2,034.6)	$	20,814.5	$	(2,214.4)	$	29,049.5

At ~~September 30,~~December 31, 2023, corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carrying credit ratings of A and above, and have maturities ranging from ~~October 2023~~January 2024 through ~~May~~November 2033.

At ~~September 30,~~December 31, 2023, asset-backed securities include AAA-rated senior tranches of securities with predominantly prime collateral of fixed-rate auto loan, credit card, and equipment lease receivables with fair values of ~~$522.3~~$552.4 million, ~~$352.1~~$377.7 million, and ~~$168.3~~$157.3 million, respectively. These securities are collateralized by the cash flows of the underlying pools of receivables. The primary risk associated with these securities is the collection risk of the underlying receivables. All collateral on such asset-backed securities has performed as expected through ~~September 30,~~December 31, 2023.

At ~~September 30,~~December 31, 2023, U.S. government agency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of ~~$952.3~~$990.5 million and ~~$442.1~~$447.1 million, respectively. U.S. government agency securities represent senior, unsecured, non-callable debt that primarily carry ratings of Aaa by Moody's, and AA+ by Standard & Poor's, with maturities ranging from ~~December 2023~~February 2024 through March 2033.

At ~~September 30,~~December 31, 2023, U.S. government agency commercial mortgage-backed securities of ~~$609.8~~$568.8 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At ~~September 30,~~December 31, 2023, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair values of ~~$521.2~~$534.3 million, AA-rated United Kingdom Gilt securities of ~~$375.5~~$399.5 million, and AAA-rated supranational bonds of ~~$203.2~~$211.9 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:


			September 30,		June 30,
			2023		2023
		December 31,						December 31,	June 30,
		2023						2023	2023
Corporate investments:	Corporate investments:						Corporate investments:
Cash and cash equivalents	Cash and cash equivalents		$	1,441.4	$	2,083.5
Short-term marketable securities (a)	Short-term marketable securities (a)		146.8		14.7
Long-term marketable securities (b)	Long-term marketable securities (b)		211.2		104.6
Total corporate investments	Total corporate investments		$	1,799.4	$	2,202.8

(a) - Short-term marketable securities are included within Other current assets on the Consolidated Balance Sheets.

(b) - Long-term marketable securities are included within Other assets on the Consolidated Balance Sheets.

Funds held for clients represent assets that, based upon the Company's intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories:


			September 30,		June 30,
			2023		2023
		December 31,						December 31,	June 30,
		2023						2023	2023
Funds held for clients:	Funds held for clients:						Funds held for clients:
Restricted cash and cash equivalents held to satisfy client funds obligations	Restricted cash and cash equivalents held to satisfy client funds obligations		$	5,520.5	$	6,688.0
Restricted short-term marketable securities held to satisfy client funds obligations	Restricted short-term marketable securities held to satisfy client funds obligations		6,061.5		5,601.9
Restricted long-term marketable securities held to satisfy client funds obligations	Restricted long-term marketable securities held to satisfy client funds obligations		23,180.9		24,043.7
Total funds held for clients	Total funds held for clients		$	34,762.9	$	36,333.6

Client funds obligations represent the Company's contractual obligations to remit funds to satisfy clients' payroll, tax, and other payee payment obligations and are recorded on the Consolidated Balance Sheets at the time that the Company impounds funds from clients. The client funds obligations represent liabilities that will be repaid within one year of the balance sheet date. The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling ~~$37,098.8~~$44,002.1 million and $38,538.6 million at ~~September 30,~~December 31, 2023 and June 30, 2023, respectively. The Company has classified funds held for clients as a current asset since these funds are held solely for the purpose of satisfying the client funds obligations. Of the Company’s funds held for clients at ~~September 30,~~December 31, 2023 and June 30, 2023, ~~$31,932.5~~$39,005.9 million and $32,758.1 million, respectively, are held in the grantor trust. The liabilities held within the trust are intercompany liabilities to other Company subsidiaries and are eliminated in consolidation.

The Company has reported the cash flows related to the purchases of corporate and client funds marketable securities and related to the proceeds from the sales and maturities of corporate and client funds marketable securities on a gross basis in the investing section of the Statements of Consolidated Cash Flows. The Company has reported the cash and cash equivalents related to client funds investments with original maturities of ninety days or less, within the beginning and ending balances of cash, cash equivalents, restricted cash, and restricted cash equivalents. The Company has reported the cash flows related to the cash received from and paid on behalf of clients on a net basis within net increase / (decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.

All available-for-sale securities were rated as investment grade at ~~September 30,~~December 31, 2023.

Expected maturities of available-for-sale securities at ~~September 30,~~December 31, 2023 are as follows:


One year or less	$	~~6,208.3~~6,504.0
One year to two years	~~6,246.6~~6,799.5
Two years to three years	~~7,275.3~~7,078.7
Three years to four years	~~2,980.7~~2,336.7
After four years	~~6,889.5~~7,576.6
Total available-for-sale securities	$	~~29,600.4~~30,295.5

Note 7. Leases

The Company records leases on the Consolidated Balance Sheets as operating lease right-of-use (“ROU”) assets, records the current portion of operating lease liabilities within accrued expenses and other current liabilities and, separately, records long-term operating lease liabilities. The difference between total ROU assets and total lease liabilities is primarily attributable to prepayments of our obligations and the recognition of various lease incentives.

The Company has entered into operating lease agreements for facilities and equipment. The Company's leases have remaining lease terms of up to approximately eleven years.

The components of operating lease expense were as follows:


		Three Months Ended
		September 30,
		2023		2022
	Three Months Ended						Three Months Ended				Six Months Ended
	December 31,								December 31,
	2023					2023		2022		2023		2022
Operating lease cost	Operating lease cost	$	34.0	$	35.6
Short-term lease cost	Short-term lease cost	0.5		0.3
Variable lease cost	Variable lease cost	3.2		3.0
Total operating lease cost	Total operating lease cost	$	37.7	$	38.9

The following table provides supplemental cash flow information related to the Company's leases:


		Three Months Ended
		September 30,
		2023		2022
	Six Months Ended						Six Months Ended
	December 31,						December 31,
	2023					2023		2022
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	$	30.5	$	33.5
Operating lease ROU assets obtained in exchange for new operating lease liabilities	Operating lease ROU assets obtained in exchange for new operating lease liabilities	$	26.9	$	12.4

Other information related to our operating lease liabilities is as follows:

September 30, June 30,
2023 2023
Weighted-average remaining lease term (in years) 5 6
Weighted-average discount rate 2.9 % 2.7 %
Current operating lease liability $ 97.4 $ 95.5


	December 31,			June 30,
	2023			2023
Weighted-average remaining lease term (in years)	5			6
Weighted-average discount rate	3.0		%	2.7		%
Current operating lease liability	$	96.5		$	95.5

As of ~~September 30,~~December 31, 2023, maturities of operating lease liabilities are as follows:


~~Nine~~Six months ending June 30, 2024	$	~~83.7~~56.9
Twelve months ending June 30, 2025	~~97.9~~100.4
Twelve months ending June 30, 2026	~~83.1~~86.7
Twelve months ending June 30, 2027	~~72.9~~75.7
Twelve months ending June 30, 2028	~~53.5~~56.0
Thereafter	~~74.1~~81.0
Total undiscounted lease obligations	~~465.2~~456.7
Less: Imputed interest	~~(33.5)~~(33.4)
Net lease obligations	$	~~431.7~~423.3

Note 8. Goodwill and Intangible Assets, net

Changes in goodwill for the ~~three~~six months ended ~~September 30,~~December 31, 2023 are as follows:


		Employer Services		PEO Services		Total
		Employer Services
		Employer Services
		Employer Services						PEO Services	Total
Balance at June 30, 2023	Balance at June 30, 2023	$	2,334.6	$	4.8	$	2,339.4
Additions and other adjustments	Additions and other adjustments	27.5		—		27.5
Currency translation adjustments	Currency translation adjustments	(14.4)		—		(14.4)

Balance at September 30, 2023		$	2,347.7	$	4.8	$	2,352.5
Balance at December 31, 2023
Balance at December 31, 2023
Balance at December 31, 2023

Components of intangible assets, net, are as follows:


			September 30,		June 30,
			2023		2023
		December 31,						December 31,	June 30,
		2023						2023	2023
Intangible assets:	Intangible assets:						Intangible assets:
Software and software licenses	Software and software licenses		$	3,608.6	$	3,548.9
Customer contracts and lists	Customer contracts and lists		1,148.2		1,140.6
Other intangibles	Other intangibles		241.9		241.9
			4,998.7		4,931.4
Less accumulated amortization:	Less accumulated amortization:						Less accumulated amortization:
Software and software licenses	Software and software licenses		(2,496.2)		(2,442.6)
Customer contracts and lists	Customer contracts and lists		(931.9)		(907.5)
Other intangibles	Other intangibles		(238.8)		(237.7)
			(3,666.9)		(3,587.8)
Intangible assets, net	Intangible assets, net		$	1,331.8	$	1,343.6

Other intangibles consist primarily of purchased rights, trademarks and trade names (acquired directly or through acquisitions). All intangible assets have finite lives and, as such, are subject to amortization. The weighted average remaining useful life of the intangible assets is 6 years (6 years for software and software licenses, 3 years for customer contracts and lists, and 1 year for other intangibles). Amortization of intangible assets was ~~$95.7~~$94.5 million and ~~$92.3~~$93.7 million for the three months ended ~~September 30,~~December 31, 2023 and 2022, respectively, and $190.2 million and $186.1 million for the six months ended December 31, 2023 and 2022, respectively.

Estimated future amortization expenses of the Company's existing intangible assets are as follows:


	Amount
~~Nine~~Six months ending June 30, 2024	$	~~315.8~~210.2
Twelve months ending June 30, 2025	$	~~282.9~~313.9
Twelve months ending June 30, 2026	$	~~193.3~~204.7
Twelve months ending June 30, 2027	$	~~152.7~~163.2
Twelve months ending June 30, 2028	$	~~115.6~~125.0
Twelve months ending June 30, 2029	$	~~88.0~~95.3

Note 9. Short-term Financing

The Company has a $4.25 billion, 364-day credit agreement that matures in June 2024 with a one year term-out option. The Company also has a five year, $3.2 billion credit facility maturing in June 2026 that contains an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. In addition, the Company also has a $2.25 billion, five year credit facility that matures in June 2028 that contains an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. The interest rate applicable to committed borrowings is tied to SOFR, the effective federal funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing. The Company is also required to pay facility fees on the credit agreements. The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary. The Company had no borrowings through ~~September 30,~~December 31, 2023 under the credit agreements.

The Company's U.S. 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. This commercial paper program provides for the issuance of up to $9.7 billion in aggregate maturity value. The Company’s commercial paper program is rated A-1+ by Standard & 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 ~~September 30,~~December 31, 2023 and June 30, 2023, the Company had no commercial paper borrowing outstanding. Details of the borrowings under the commercial paper program are as follows:


		Three Months Ended
		September 30,
		2023			2022
	Three Months Ended												Three Months Ended							Six Months Ended
	December 31,														December 31,
	2023										2023			2022					2023				2022
Average daily borrowings (in billions)	Average daily borrowings (in billions)	$	4.1		$	4.6
Weighted average interest rates	Weighted average interest rates	5.3		%	2.3		%	Weighted average interest rates	5.4	%		3.5	%			5.3	%				2.8	%
Weighted average maturity (approximately in days)	Weighted average maturity (approximately in days)	2 days			2 days			Weighted average maturity (approximately in days)	2 days									2 days

The Company’s 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. At ~~September 30,~~December 31, 2023 and June 30, 2023, the Company had ~~$343.8~~$21.6 million and $105.4 million, respectively, of outstanding obligations related to reverse repurchase agreements. Details of the reverse repurchase agreements are as follows:


		Three Months Ended
		September 30,
		2023			2022
	Three Months Ended												Three Months Ended						Six Months Ended
	December 31,														December 31,
	2023										2023			2022				2023				2022
Average outstanding balances	Average outstanding balances	$	1,379.0		$	1,119.4
Weighted average interest rates	Weighted average interest rates	5.3		%	2.4		%	Weighted average interest rates	5.4	%		3.4	%			5.4	%			2.9	%

Note 10. Debt

The Company issued three series of fixed-rate notes with staggered maturities of 7 and 10-years totaling $3.0 billion~~(collectively~~ (collectively the “Notes”). The Notes are senior unsecured obligations, and interest is payable in arrears, semi-annually.

1516

The principal amounts and associated effective interest rates of the Notes and other debt as of ~~September 30,~~December 31, 2023 and June 30, 2023, are as follows:


Debt instrument	Debt instrument	Effective Interest Rate		September 30, 2023		June 30, 2023		Debt instrument	Effective Interest Rate	December 31, 2023	June 30, 2023

Fixed-rate 3.375% notes due September 15, 2025	Fixed-rate 3.375% notes due September 15, 2025	3.47%		$	1,000.0	$	1,000.0
Fixed-rate 3.375% notes due September 15, 2025
Fixed-rate 3.375% notes due September 15, 2025
Fixed-rate 1.700% notes due May 15, 2028	Fixed-rate 1.700% notes due May 15, 2028	1.85%		1,000.0		1,000.0
Fixed-rate 1.250% notes due September 1, 2030	Fixed-rate 1.250% notes due September 1, 2030	1.83%		1,000.0		1,000.0
Other	Other			4.7		4.9
				3,004.7		3,004.9
			3,004.5
Less: current portion (a)	Less: current portion (a)			(0.9)		(1.2)
Less: unamortized discount and debt issuance costs	Less: unamortized discount and debt issuance costs			(14.0)		(14.7)
Total long-term debt	Total long-term debt			$	2,989.8	$	2,989.0

(a) - Current portion of long-term debt as of ~~September 30,~~December 31, 2023 is included within accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The effective interest rates for the Notes include the interest on the Notes and amortization of the discount and debt issuance costs.

As of ~~September 30,~~December 31, 2023, the fair value of the Notes, based on Level 2 inputs, was ~~$2,600.1~~$2,716.4 million. For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2023.

Note 11. Employee Benefit Plans

A. Stock-based Compensation Plans. Stock-based compensation consists of the following:

The Company's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, and performance-based restricted stock units. The Company also offers an employee stock purchase plan for eligible employees. Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock. Any such future awards will be grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility. Time-based restricted stock unit awards and performance-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock, and for awards granted to employees with a home country outside the United States are generally settled in cash.

•~~Restricted Stock.~~

•~~Time-Based Restricted Stock Units.~~ ~~Time-based restricted stock units generally vest ratably over 3 years. Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.~~

Time-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period. Time-based restricted stock unit awards granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period. Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period. Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently remeasured at each reporting date during the vesting period based on the change in the ADP stock price. Dividend cash equivalents are paid on share-settled units, and dividend cash equivalents are not paid on cash-settled units.

•~~Performance-Based Restricted Stock Units.~~ ~~Performance-based restricted stock units generally vest over a~~ ~~one~~ ~~to three year performance period and a subsequent service period of up to 38 months. Under these programs, the Company communicates “target awards” at the beginning of the performance period with~~

possible payouts at the end of the performance period ranging from 0% to 200% of the “target awards.” Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Performance-based restricted stock units cannot be transferred and are settled in either cash or stock, depending on the employee's home country. Compensation expense relating to the issuance of performance-based restricted stock units settled in cash is recognized over the vesting period initially based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded during the performance period based on probable and actual performance against targets. In addition, compensation expense is remeasured at each reporting period during the vesting period based on the change in the ADP stock price. Compensation expense relating to the issuance of performance-based restricted stock units settled in stock is recorded over the vesting period based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded based on the probable and actual performance against targets. Dividend equivalents are paid on awards under the performance-based restricted stock unit program.

•~~Employee Stock Purchase Plan.~~ The Company offers an employee stock purchase plan that allows eligible employees to purchase shares of common stock at a price equal to 95% of the market value for the Company's common stock on the last day of the offering period. This plan has been deemed non-compensatory and, therefore, no compensation expense has been recorded.

The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under the Company's employee stock purchase plan, and restricted stock awards. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company repurchased ~~1.0~~1.1 million and ~~1.4~~0.9 million shares in the three months ended ~~September 30,~~December 31, 2023 and 2022, respectively,. and repurchased 2.1 million and 2.3 million shares in the six months ended December 31, 2023 and 2022, respectively. 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.

The following table represents pre-tax stock-based compensation expense for the three and six months ended ~~September 30,~~December 31, 2023 and 2022, respectively:

Three Months Ended
September 30,
2023 2022
Operating expenses $ 7.4 $ 6.0
Selling, general and administrative expenses 42.8 37.1
Research and development 8.6 7.5
Total stock-based compensation expense $ 58.8 $ 50.6

~~During the three months ended September 30, 2023, the following activity occurred under the Company’s existing plans.~~

~~Stock Options:~~
Number
of Options
(in thousands) Weighted
Average Price
(in dollars)
Options outstanding at July 1, 2023 2,654 $ 155
Options exercised (305) $ 148
Options forfeited/cancelled (5) $ 176
Options outstanding at September 30, 2023 2,344 $ 156

~~Time-Based Restricted Stock and Time-Based Restricted Stock Units:~~
Number of Shares
(in thousands) Number of Units
(in thousands)
Restricted shares/units outstanding at July 1, 2023 450 730
Restricted shares/units granted — 605
Restricted shares/units vested (289) (256)
Restricted shares/units forfeited (4) (8)
Restricted shares/units outstanding at September 30, 2023 157 1,071

~~Performance-Based Restricted Stock and Performance-Based Restricted Stock Units:~~
Number of Shares
(in thousands) Number of Units
(in thousands)
Restricted shares/units outstanding at July 1, 2023 197 821
Restricted shares/units granted 113 224
Restricted shares/units vested (103) (363)
Restricted shares/units forfeited (3) (3)
Restricted shares/units outstanding at September 30, 2023 204 679


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2023		2022		2023		2022
Operating expenses	$	7.4	$	6.5	$	14.8	$	12.5
Selling, general and administrative expenses	57.6		44.4		100.4		81.5
Research and development	8.6		7.5		17.2		15.0
Total stock-based compensation expense	$	73.6	$	58.4	$	132.4	$	109.0

B. Pension Plans

The components of net pension income were as follows:


		Three Months Ended
		September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended							Six Months Ended
	December 31,							December 31,		December 31,
		2023		2022		2023	2022				2023	2022
Service cost – benefits earned during the period	Service cost – benefits earned during the period	$	1.3	$	1.2
Interest cost on projected benefits	Interest cost on projected benefits	21.2		19.5
Expected return on plan assets	Expected return on plan assets	(29.0)		(31.9)
Net amortization and deferral	Net amortization and deferral	0.7		0.5
Settlement charges and special termination benefits	Settlement charges and special termination benefits	—		1.4
Net pension (income)/expense	Net pension (income)/expense	$	(5.8)	$	(9.3)

Note 12. Income Taxes

The effective tax rate for the three months ended ~~September 30,~~December 31, 2023 and 2022 was ~~21.4%~~23.2%. The rate remained flat due to a lower state income tax rate and ~~22.9%~~a lower benefit for adjustments to prior year tax liabilities in the three months ended December 31, 2023.

The effective tax rate for the six months ended December 31, 2023 and 2022 was 22.3% and 23.0%, respectively. The decrease is primarily due to lower reserves for uncertain tax positions and a valuation allowance release offset by a lower excess tax benefit on stock-based compensation in the ~~three~~six months ended ~~September 30,~~December 31, 2023.

Note 13. Commitments and Contingencies

In May 2020, a putative class action complaint was filed against ADP, TotalSource and related defendants in the U.S. District Court, District of New Jersey. The complaint asserts violations of the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with the ADP TotalSource Retirement Savings Plan’s fiduciary administrative and investment decision-making. The complaint seeks statutory and other unspecified monetary damages, injunctive relief and attorney’s fees. ~~These claims are still in their early stages and the~~The Company is unable to estimate any reasonably possible loss, or range of loss, with respect to this matter. The Company ~~intends to~~is vigorously ~~defend~~defending against this lawsuit.

The Company is subject to various claims, litigation, and regulatory compliance matters in the normal course of business. When a loss is considered probable and reasonably estimable, the Company records a liability in the amount of its best estimate for the ultimate loss. Management currently believes that the resolution of these claims, litigation and regulatory compliance matters against us, individually or in the aggregate, will not have a material adverse impact on our consolidated results of operations,

financial condition or cash flows. These matters are subject to inherent uncertainties and management's view of these matters may change in the future.

It is not the Company’s business practice to enter into off-balance sheet arrangements. In the normal course of business, the Company may enter into contracts in which it makes representations and warranties that relate to the performance of the Company’s services and products. The Company does not expect any material losses related to such representations and warranties.

Note 14. Stockholders' Equity

Changes in stockholders' equity by component are as follows:


		Three Months Ended
		September 30, 2023
		Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		AOCI		Total
Balance at June 30, 2023		$	63.9	$	2,102.3	$	22,118.0	$	(18,469.3)	$	(2,305.8)	$	3,509.1
	Three Months Ended																	Three Months Ended
	December 31, 2023																	December 31, 2023
	Common Stock													Common Stock	Capital in Excess of Par Value	Retained Earnings	Treasury Stock		AOCI	Total
Balance at September 30, 2023
Net earnings	Net earnings	—				859.4				—		859.4
Other comprehensive income	Other comprehensive income	—				—				(162.0)		(162.0)
Stock-based compensation expense	Stock-based compensation expense	—		54.0		—				—		54.0
Issuances relating to stock compensation plans	Issuances relating to stock compensation plans	—		32.4		—		49.4		—		81.8
Treasury stock acquired (1.0 million shares repurchased)		—		—				(347.5)		—		(347.5)
Dividends declared ($1.25 per share)		—		—		(522.0)		—		—		(522.0)
Treasury stock acquired (1.1 million shares repurchased)
Dividends declared ($1.40 per share)

Balance at September 30, 2023		$	63.9	$	2,188.7	$	22,455.4	$	(18,767.4)	$	(2,467.8)	$	3,472.8
Balance at December 31, 2023
Balance at December 31, 2023
Balance at December 31, 2023


		Three Months Ended
		September 30, 2022
		Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		AOCI		Total
Balance at June 30, 2022		$	63.9	$	1,794.2	$	20,696.3	$	(17,335.4)	$	(1,993.7)	$	3,225.3
	Three Months Ended																	Three Months Ended
	December 31, 2022																	December 31, 2022
	Common Stock													Common Stock	Capital in Excess of Par Value	Retained Earnings	Treasury Stock		AOCI	Total
Balance at September 30, 2022
Net earnings	Net earnings	—				779.0		—		—		779.0
Other comprehensive income	Other comprehensive income	—				—		—		(730.4)		(730.4)
Stock-based compensation expense	Stock-based compensation expense	—		46.0		—		—		—		46.0
Issuances relating to stock compensation plans	Issuances relating to stock compensation plans	—		52.9		—		40.3		—		93.2
Treasury stock acquired (1.4 million shares repurchased)		—				—		(400.3)		—		(400.3)
Dividends declared ($1.04 per share)		—		—		(436.3)		—		—		(436.3)
Treasury stock acquired (0.9 million shares repurchased)
Dividends declared ($1.25 per share)

Balance at September 30, 2022		$	63.9	$	1,893.1	$	21,039.0	$	(17,695.4)	$	(2,724.1)	$	2,576.5
Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022


	Six Months Ended
	December 31, 2023
	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		AOCI		Total
Balance at June 30, 2023	$	63.9	$	2,102.3	$	22,118.0	$	(18,469.3)	$	(2,305.8)	$	3,509.1
Net earnings	—		—		1,737.8		—		—		1,737.8
Other comprehensive income	—		—		—		—		560.6		560.6
Stock-based compensation expense	—		121.7		—		—		—		121.7
Issuances relating to stock compensation plans	—		38.9		—		49.7		—		88.6
Treasury stock acquired (2.1 million shares repurchased)	—		—		—		(599.5)		—		(599.5)
Dividends declared ($2.65 per share)	—		—		(1,098.7)		—		—		(1,098.7)

Balance at December 31, 2023	$	63.9	$	2,262.9	$	22,757.1	$	(19,019.1)	$	(1,745.2)	$	4,319.6


	Six Months Ended
	December 31, 2022
	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		AOCI		Total
Balance at June 30, 2022	$	63.9	$	1,794.2	$	20,696.3	$	(17,335.4)	$	(1,993.7)	$	3,225.3
Net earnings	—				1,592.2		—		—		1,592.2
Other comprehensive income	—				—		—		(457.2)		(457.2)
Stock-based compensation expense	—		97.0		—		—		—		97.0
Issuances relating to stock compensation plans	—		63.0		—		46.5		—		109.5
Treasury stock acquired (2.3 million shares repurchased)	—		—		—		(624.6)		—		(624.6)
Dividends declared ($2.29 per share)	—		—		(955.5)		—		—		(955.5)

Balance at December 31, 2022	$	63.9	$	1,954.2	$	21,333.0	$	(17,913.5)	$	(2,450.9)	$	2,986.7

Note 15. Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”)

Changes in AOCI by component are as follows:


	Three Months Ended
	December 31, 2023
	Currency Translation Adjustment		Net Gains/Losses on Available-for-sale Securities			Cash Flow Hedging Activities			Pension Liability			Accumulated Other Comprehensive (Loss) /Income
Balance at September 30, 2023	$	(385.4)	$	(1,824.6)		$	(22.5)		$	(235.3)		$	(2,467.8)
Other comprehensive income/(loss) before reclassification adjustments	53.9		860.5			—			—			914.4
Tax effect	—		(194.9)			—			—			(194.9)
Reclassification adjustments to net earnings	—		2.0		(A)	1.1		(C)	0.9		(B)	4.0
Tax effect	—		(0.5)			(0.2)			(0.2)			(0.9)

Balance at December 31, 2023	$	(331.5)	$	(1,157.5)		$	(21.6)		$	(234.6)		$	(1,745.2)


	Three Months Ended
	December 31, 2022
	Currency Translation Adjustment		Net Gains/Losses on Available-for-sale Securities			Cash Flow Hedging Activities			Pension Liability			Accumulated Other Comprehensive (Loss) /Income
Balance at September 30, 2022	$	(438.9)	$	(1,978.1)		$	(25.8)		$	(281.3)		$	(2,724.1)
Other comprehensive (loss)/income before reclassification adjustments	71.1		242.2			—			—			313.3
Tax effect	—		(51.2)			—			—			(51.2)
Reclassification adjustments to net earnings	—		11.5		(A)	1.1		(C)	1.5		(B)	14.1
Tax effect	—		(2.7)			(0.2)			(0.1)			(3.0)

Balance at December 31, 2022	$	(367.8)	$	(1,778.3)		$	(24.9)		$	(279.9)		$	(2,450.9)


	Six Months Ended
	December 31, 2023
	Currency Translation Adjustment		Net Gains/Losses on Available-for-sale Securities			Cash Flow Hedging Activities			Pension Liability			Accumulated Other Comprehensive (Loss) /Income
Balance at June 30, 2023	$	(340.8)	$	(1,705.6)		$	(23.3)		$	(236.1)		$	(2,305.8)
Other comprehensive (loss)/income before reclassification adjustments	9.3		709.9			—			—			719.2
Tax effect	—		(164.8)			—			—			(164.8)
Reclassification adjustments to net earnings	—		4.0		(A)	2.2		(C)	1.9		(B)	8.1
Tax effect	—		(1.0)			(0.5)			(0.4)			(1.9)

Balance at December 31, 2023	$	(331.5)	$	(1,157.5)		$	(21.6)		$	(234.6)		$	(1,745.2)

Three Months Ended
September 30, 2023
Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income
Balance at June 30, 2023 $ (340.8) $ (1,705.6) $ (23.3) $ (236.1) $ (2,305.8)
Other comprehensive (loss)/income before reclassification adjustments (44.6) (150.6) — — (195.2)
Tax effect — 30.1 — — 30.1
Reclassification adjustments to net earnings — 1.9 (A) 1.1 (C) 1.0 (B) 4.0
Tax effect — (0.4) (0.3) (0.2) (0.9)
Balance at September 30, 2023 $ (385.4) $ (1,824.6) $ (22.5) $ (235.3) $ (2,467.8)


		Three Months Ended
		September 30, 2022
		Currency Translation Adjustment		Net Gains/Losses on Available-for-sale Securities			Cash Flow Hedging Activities			Pension Liability			Accumulated Other Comprehensive (Loss) /Income
	Six Months Ended																	Six Months Ended
	December 31, 2022																	December 31, 2022
	Currency Translation Adjustment														Currency Translation Adjustment	Net Gains/Losses on Available-for-sale Securities	Cash Flow Hedging Activities		Pension Liability	Accumulated Other Comprehensive (Loss) /Income
Balance at June 30, 2022	Balance at June 30, 2022	$	(354.2)	$	(1,330.0)		$	(26.6)		$	(282.9)		$	(1,993.7)
Other comprehensive (loss)/income before reclassification adjustments	Other comprehensive (loss)/income before reclassification adjustments	(84.7)		(835.1)			—			—			(919.8)
Tax effect	Tax effect	—		185.8			—			—			185.8
Reclassification adjustments to net earnings	Reclassification adjustments to net earnings	—		1.5		(A)	1.1		(C)	2.1		(B)	4.7
Tax effect	Tax effect	—		(0.3)			(0.3)			(0.5)			(1.1)

Balance at September 30, 2022		$	(438.9)	$	(1,978.1)		$	(25.8)		$	(281.3)		$	(2,724.1)
Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022

(A) Reclassification adjustments out of AOCI are included within Other (income)/expense, net, on the Statements of Consolidated Earnings.

(B) Reclassification adjustments out of AOCI are included in net pension (income)/expense (see Note 11).

(C) Reclassification adjustments out of AOCI are included in Interest expense on the Statements of Consolidated Earnings (see Note 10).

Note 16. Interim Financial Data by Segment

Based upon similar economic and operational characteristics, the Company’s strategic business units have been aggregated into the following two reportable segments: Employer Services and PEO Services. The primary components of the “Other” segment 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 interest expense. Certain revenues and expenses are charged to the reportable segments at a standard rate for management reasons. Other costs are recorded based on management responsibility.

Segment Results:


		Revenues				Revenues
		Three Months Ended
		September 30,
	Three Months Ended								Three Months Ended			Six Months Ended
	December 31,									December 31,
		2023		2022			2023	2022			2023		2022
Employer Services	Employer Services	$	3,046.4	$	2,790.2
PEO Services	PEO Services	1,469.6		1,429.4
Other	Other	(3.6)		(4.0)
		$	4,512.4	$	4,215.6
	$


		Earnings before Income Taxes				Earnings before Income Taxes
		Three Months Ended					Three Months Ended		Six Months Ended
		September 30,
	December 31,									December 31,
		2023		2022				2023	2022		2023	2022
Employer Services	Employer Services	$	1,008.5	$	863.5
PEO Services	PEO Services	222.9		230.3
Other	Other	(138.6)		(83.8)
		$	1,092.8	$	1,010.0
	$

2122

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

(Tabular dollars are presented in millions, except per share amounts)

FORWARD-LOOKING STATEMENTS

This document and other written or oral statements made from time to time by Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” ~~“could”,~~“could,” "is designed to" and other words of similar meaning, are forward-looking statements. 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. 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 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, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; 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; and supply-chain disruptions. 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. These risks and uncertainties, along with the risk factors discussed under “Item 1A. - Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“fiscal 2023”), and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.

NON-GAAP FINANCIAL MEASURES

In addition to our U.S. GAAP results, we use adjusted results and other non-GAAP metrics to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods. 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.

2223

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. 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.

Highlights from the ~~three~~six months ended ~~September 30,~~December 31, 2023 include:

•Revenue growth of 7% to ~~$4,512.4~~$9,180.3 million; 7%6% organic constant currency

•Earnings before income taxes margin expansion of 30 bps, and adjusted EBIT margin expansion of 1020 bps

•Diluted and adjusted diluted earnings per share ("EPS") growth of ~~11%~~10% to ~~$2.08, and adjusted diluted EPS growth of 12% to $2.08~~$4.20, respectively.

•Cash returned via shareholder friendly actions of ~~$0.8B,~~$1.5B, including ~~$0.5B~~$1.0B of dividends and ~~$0.3B~~$0.5B share repurchases

•~~Acquisition of Sora, an intelligent workflow automation and data integration tool~~

During the ~~first~~second quarter we made ~~meaningful~~continued progress ~~in pursuit of~~on our ~~key Strategic Priorities.~~strategy with several product enhancements and partnership expansions aimed at improving the overall experience for our clients. We ~~took actions to lead with Best-in-Class HCM Technology by embedding generative AI (gen AI) features into our products, including~~continued the ~~integration of gen AI into Roll to further enhance its conversational user interface, as well as the launch~~rollout of ADP Assist, which utilizes generative AI (GenAI) technology to proactively surface insights that enhance HR productivity, aid decision-making with data-driven insights, and streamline day-to-day tasks for our ~~embedded smart support AI designed~~clients and their employees. We also extended GenAI powered capabilities to ~~help make HR work easier, smarter and ultimately, more human. We continued to provide Unmatched Expertise and Outsourcing Solutions with the launch~~a greater portion of ~~Agent Assist, which embeds gen AI in the flow of work for ADP implementation and~~our service associates to ~~increase their agility and expertise in order~~support greater client engagement. Additionally, we expanded on partnerships with other leading technology providers to ~~help them deliver a better client experience. And we continued to Leverage our Global Scale to Benefit our Clients by acquiring~~further simplify the payroll ~~business of BTR, our long-time partner in Sweden,~~experience and ~~by launching Roll in Ireland to expand our SMB business outside of the U.S.~~drive more personalized interactions.

For the ~~three~~six months ended ~~September 30,~~December 31, 2023, we delivered solid revenue growth of 7%, 7%6% organic constant currency. Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, grew 2% for the ~~three~~six months ended ~~September 30,~~December 31, 2023 as compared to the ~~three~~six months ended ~~September 30,~~December 31, 2022. PEO average worksite employees increased 2% for the ~~three~~six months ended ~~September 30,~~December 31, 2023, as compared to the ~~three~~six months ended ~~September 30,~~December 31, 2022.

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 remains solid at ~~September 30,~~December 31, 2023 and we remain well positioned to support our clients and our associates.

RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

For the three and ~~three~~six months ended ~~September 30,~~December 31, respectively:

Three Months Ended
September 30,
2023 2022
Total Revenues 4,512.4 4,215.6
YoY Growth 7 % 10 %
YoY Growth, Organic Constant Currency 7 % 11 %


	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2023			2022			2023			2022

Total Revenues	$	4,668.0		$	4,391.0		$	9,180.3		$	8,606.6
YoY Growth	6		%	9		%	7		%	10		%
YoY Growth, Organic Constant Currency	6		%	10		%	6		%	11		%

Revenues for the three months ended ~~September 30,~~December 31, 2023 increased due to new business started from New Business Bookings, strong client retention, an increase in ~~zero-margin benefits pass-throughs,~~pricing, an increase in our pays per control, and an increase in ~~pricing.~~zero-margin benefits pass-throughs.

Revenues for the six months ended December 31, 2023 increased due to new business started from New Business Bookings, strong client retention, an increase in pricing, an increase in our pays per control, an increase in zero-margin benefits pass-throughs, and a favorable impact of one percentage point from foreign currency.

Total revenues for the three months ended ~~September 30,~~December 31, 2023 include interest on funds held for clients of ~~$201.7~~$225.3 million, as compared to ~~$141.0~~$187.2 million for the three months ended ~~September 30,~~December 31, 2022. The increase in the interest earned on funds held for clients resulted from an increase in our average interest rate earned to ~~2.6%~~2.8% for the three months ended ~~September 30,~~December 31, 2023, as compared to ~~1.9%~~2.2% for the three months ended ~~September 30,~~December 31, 2022, partially offset by a decrease in our average client funds balances of 2.3% to $32.6 billion for the three months ended December 31, 2023.

Total revenues for the six months ended December 31, 2023 include interest on funds held for clients of $427.1 million, as compared to $328.3 million for the six months ended December 31, 2022. The increase in the interest earned on funds held for clients resulted from an increase in our average interest rate earned to 2.7% for the six months ended December 31, 2023, as compared to 2.1% for the six months ended December 31, 2022, and an increase in our average client funds balances of ~~5.9%~~1.6% to ~~$31.1~~$31.9 billion for the ~~three~~six months ended ~~September 30,~~December 31, 2023.

Total Expenses


		Three Months Ended
		Three Months Ended
		Three Months Ended
		December 31,
		December 31,
		December 31,
		Three Months Ended
		September 30,
		2023		2022		% Change

Costs of revenues:	Costs of revenues:

Costs of revenues:

Costs of revenues:
Operating expenses
Operating expenses
Operating expenses	Operating expenses	$	2,157.6	$	2,074.4	4	%
Research and development	Research and development	236.5		209.8		13	%
Research and development
Research and development
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	121.3		109.4		11	%
Total costs of revenues	Total costs of revenues	2,515.4		2,393.6		5	%
Total costs of revenues
Total costs of revenues
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	880.3		800.3		10	%
Interest expense	Interest expense	91.6		51.2		79	%
Interest expense
Interest expense
Total expenses	Total expenses	$	3,487.3	$	3,245.1	7	%
Total expenses
Total expenses

For the three and six months ended ~~September 30,~~December 31, 2023, operating expenses increased due to an increase in our PEO Services zero-margin benefits pass-through costs of ~~$30.9~~$944.2 million to ~~$976.7~~$970.7 million for the three months ended ~~September 30,~~December 31, 2023, and an increase of $1,890.0 million to $1,947.5 million for the six months ended December 31, 2023. Additionally, for the three and six months ended December 31, 2023 operating expenses increased ~~$21.0~~by $26.4 million and $47.1 million, respectively, due to increased service and implementation costs in support of our growing ~~revenue, and an unfavorable impact of one percentage point from foreign currency.~~revenue.

Research and development expenses increased for the three and six months ended ~~September 30,~~December 31, 2023 due to increased investments and costs to develop, support, and maintain our new and existing products, and increased investments for integration of generative AI (gen AI) in our existing products.

Depreciation and amortization expenses increased for the three months ended ~~September 30,~~December 31, 2023 due to the amortization of new investments in purchased software.

Depreciation and amortization expenses increased for the six months ended December 31, 2023 due to the amortization of internally developed software products and new investments in purchased software.

Selling, general and administrative expenses increased for the three and six months ended ~~September 30,~~December 31, 2023 due to increased selling expenses as a result of investments in our sales organization.

Interest expense increased for the three months ended December 31, 2023 due to the increase in average interest rates on commercial paper issuances and reverse repurchases to 5.4% and 5.4%, respectively, for the three months ended December 31, 2023, as compared to 3.5% and 3.4%, respectively, for the three months ended December 31, 2022, coupled with a higher volume of average commercial paper and reverse repurchases borrowings, as compared to the three months ended December 31, 2022.

Interest expense increased for the ~~three~~six months ended ~~September 30,~~December 31, 2023 due to the increase in average interest rates on commercial paper issuances and reverse repurchases to 5.3% and ~~5.3%~~5.4%, respectively, for the six months ended ~~September 30,~~December 31, 2023, as compared to ~~2.3%~~2.8% and ~~2.4%~~2.9%, respectively, for the six months ended ~~September 30,~~December 31, 2022, ~~respectively, partially offset by lower~~coupled with a higher volume of average ~~commercial paper~~reverse repurchases borrowings, as compared to the ~~three~~six months ended ~~September 30,~~December 31, 2022.

Other (Income)/Expense, net


		Three Months Ended
		September 30,
		2023		2022		$ Change
	Three Months Ended
		December 31,
		December 31,
		December 31,
		2023
		2023
		2023						2022	$ Change	2023	2022	$ Change
Interest income on corporate funds	Interest income on corporate funds	$	(46.5)	$	(29.7)	$	16.8

Realized losses/(gains) on available-for-sale securities, net	Realized losses/(gains) on available-for-sale securities, net	1.9		1.5		(0.4)

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

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

Gain on sale of assets
Gain on sale of assets
Gain on sale of assets	Gain on sale of assets	(14.6)		—		14.6
Impairment of assets	Impairment of assets	—		0.3		0.3

Non-service components of pension income, net	Non-service components of pension income, net	(8.5)		(11.6)		(3.1)
Non-service components of pension income, net
Non-service components of pension income, net
Other (income)/expense, net	Other (income)/expense, net	$	(67.7)	$	(39.5)	$	28.2

Interest income on corporate funds increased due to higher average interest rates of ~~2.6%~~2.9% and 2.8% for the three and six months ended ~~September 30,~~December 31, 2023, respectively, as compared to ~~1.7%~~2.0% and 1.8% for the three and six months ended ~~September 30, 2022.~~ December 31, 2022, respectively, coupled with higher average investment balances of $7.8 billion and $7.5 billion for the three and six months ended December 31, 2023, respectively, as compared to $5.7 billion and $6.4 billion for the three and six months ended December 31, 2022, respectively.

In the three months ended ~~September 30,~~December 31, 2023, the Company recognized a gain of ~~$14.6~~$1.4 million in relation to the sale of land. In the six months ended December 31, 2023, the Company recognized a gain of $16.0 million in relation to the sale of a ~~building.~~building and land. See Note 10 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 ~~three~~six months ended ~~September 30:~~December 31:


		Three Months Ended
		September 30,
		2023			2022			YoY Growth
	Three Months Ended
		December 31,
		December 31,
		December 31,
		2023
		2023
		2023													2022				YoY Growth			2023				2022				YoY Growth
EBIT	EBIT	$	1,092.8		$	1,010.0		8	%	EBIT	$	1,143.8		$	$	1,058.1		8		8	%		$	2,236.6	$		$	2,068.1	8		8	%
EBIT Margin	EBIT Margin	24.2		%	24.0		%	30 bps		EBIT Margin	24.5		%		24.1		%		40 bps			24.4		%		24.0		%		30 bps
Adjusted EBIT	Adjusted EBIT	$	1,093.3		$	1,017.5		7	%	Adjusted EBIT	$	1,147.1		$	$	1,069.0		7		7	%		$	2,240.4	$		$	2,086.4	7		7	%
Adjusted EBIT Margin	Adjusted EBIT Margin	24.2		%	24.1		%	10 bps		Adjusted EBIT Margin	24.6		%		24.3		%		20 bps			24.4		%		24.2		%		20 bps

Earnings before income taxes increased for the three and six months ended ~~September 30,~~December 31, 2023, due to the components discussed above.

Margin increased for the three months ended ~~September 30,~~December 31, 2023, due to contributions from client funds interest revenues discussed above, operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased interest expense, increased investments and costs to develop, support and maintain our new and existing products, and increased selling expense.

Margin increased for the six months ended December 31, 2023, due to contributions from client funds interest revenues discussed above, operating efficiencies for costs of servicing our clients on growing revenue, and a gain on sale of assets, partially offset by increased interest expense, increased investments and costs to develop, support and maintain our new and existing products, ~~increased interest expense,~~ and increased selling expense.

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

Provision for Income Taxes

Adjusted Provision for Income Taxes

The adjusted effective tax rate for the three months ended ~~September 30,~~December 31, 2023 and 2022 was ~~21.4%~~23.2%. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

The adjusted effective tax rate for the six months ended December 31, 2023 and ~~22.9%~~2022 was 22.3% and 23.0%, 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 ~~three~~six months ended ~~September 30:~~December 31:

Three Months Ended
September 30,
2023 2022 YoY Growth
Net earnings $ 859.4 $ 779.0 10 %
Diluted EPS $ 2.08 $ 1.87 11 %
Adjusted net earnings $ 859.9 $ 775.4 11 %
Adjusted diluted EPS $ 2.08 $ 1.86 12 %


	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2023		2022		YoY Growth		2023		2022		YoY Growth

Net earnings	$	878.4	$	813.1	8	%	$	1,737.8	$	1,592.2	9	%
Diluted EPS	$	2.13	$	1.95	9	%	$	4.20	$	3.82	10	%
Adjusted net earnings	$	880.5	$	814.9	8	%	$	1,740.4	$	1,590.4	9	%
Adjusted diluted EPS	$	2.13	$	1.96	9	%	$	4.20	$	3.82	10	%

For the three and six months ended ~~September 30,~~December 31, 2023, net earnings reflect the changes described above in our earnings before income taxes and our effective tax rate.

For the three months ended ~~September 30,~~December 31, 2023, 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~~1.1 million shares during the three months ended ~~September 30,~~December 31, 2023, and ~~1.4~~0.9 million shares during the three months ended ~~September 30,~~December 31, 2022, partially offset by the issuances of shares under our employee benefit plans.

For the six months ended December 31, 2023, in addition to the increase in net earnings, diluted EPS increased as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 2.1 million shares during the six months ended December 31, 2023, and 2.3 million shares during the six months ended December 31, 2022, partially offset by the issuances of shares under our employee benefit plans.

2627

ANALYSIS OF REPORTABLE SEGMENTS


		Revenues
	Revenues																																										Revenues
	Three Months Ended																Three Months Ended										% Change											Six Months Ended										% Change
	December 31,
		Three Months Ended				% Change
		September 30,
		2023		2022		As Reported		Organic constant currency		2023				2022						As Reported						Organic constant currency							2023							2022						As Reported					Organic constant currency
Employer Services	Employer Services	$	3,046.4	$	2,790.2	9	%	8	%	Employer Services	$	3,125.2	$		$	2,891.9		8				8		%					7		%				$	6,171.6		$				$	5,682.2		9			9	%				8	%
PEO Services	PEO Services	1,469.6		1,429.4		3	%	3	%	PEO Services	1,546.1		1,503.3			1,503.3			3				3		%					3		%				3,015.7			2,932.7					2,932.7		3			3	%				3	%
Other	Other	(3.6)		(4.0)		n/m		n/m		Other	(3.3)		(4.2)			(4.2)			n/m									n/m						(7.0)			(8.3)					(8.3)			n/m							n/m

		$
		$	4,512.4	$	4,215.6	7	%	7	%
		$

		$										4,668.0			$	4,391.0					6		%					6		%				$	9,180.3						$	8,606.6					7	%				6	%


		Earnings before Income Taxes
		Earnings before Income Taxes
		Earnings before Income Taxes
		Earnings before Income Taxes
	Three Months Ended
		December 31,
		December 31,
		December 31,
		Three Months Ended				% Change
		September 30,
		2023		2022		As Reported
Employer Services	Employer Services	$	1,008.5	$	863.5	17	%
Employer Services
Employer Services
PEO Services	PEO Services	222.9		230.3		(3)	%
PEO Services
PEO Services
Other
Other
Other	Other	(138.6)		(83.8)		n/m

		$
		$	1,092.8	$	1,010.0	8	%

		$

		$

Margin

Three Months Ended

December 31,

Three Months Ended

September 30,

2023

2022

YoY Growth

Employer Services

33.1

30.9

220 bps

Employer Services

PEO Services

15.2

16.1

(90) bps

PEO Services

n/m - not meaningful

Employer Services

Revenues

Revenues increased for the three and six months ended ~~September 30,~~December 31, 2023 due to new business started from New Business Bookings, strong client retention, an increase in ~~our pays per control of 2%,~~pricing, an increase in interest earned on funds held for clients, an increase in ~~pricing,~~our pays per control of 2%, respectively, and a favorable impact of one percentage point from foreign currency.

Earnings before Income Taxes

Employer Services' earnings before income taxes increased ~~17%~~14% and 15% for the three and six months ended ~~September 30,~~December 31, 2023, respectively, due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased investments and costs to develop, support, and maintain our new and existing products, and increased selling expenses.

Margin

Employer Services' margin increased for the three and six months ended December 31, 2023 due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased investments and costs to develop, support and maintain our new and existing ~~products.~~

~~Margin~~

~~Employer Services' margin~~products, and increased for the three months ended September 30, 2023 due to contributions from client funds interest revenues discussed above, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased investments and costs to develop, support, and maintain our new and existing products.selling expenses.

PEO Services

Revenues


		PEO Revenues
	PEO Revenues																																					PEO Revenues
	Three Months Ended																Three Months Ended										Change								Six Months Ended									Change
	December 31,
		Three Months Ended				Change
		September 30,
		2023		2022		$		%		2023				2022						$						%					2023					2022					$					%
PEO Services' revenues	PEO Services' revenues	$	1,469.6	$	1,429.4	$	40.2	3	%	PEO Services' revenues	$	1,546.1	$		$	1,503.3		$			$	42.8		3				3	%			$	3,015.7		$		$	2,932.7		$			$	83.0	3			3	%
Less: PEO zero-margin benefits pass-throughs	Less: PEO zero-margin benefits pass-throughs	976.7		945.8		30.9		3	%	Less: PEO zero-margin benefits pass-throughs	970.7		944.2			944.2			26.5				26.5		3				3	%				1,947.5		1,890.0			1,890.0			57.5			57.5		3			3	%
PEO Services' revenues excluding zero-margin benefits pass-throughs	PEO Services' revenues excluding zero-margin benefits pass-throughs	$	492.9	$	483.6	$	9.3	2	%	PEO Services' revenues excluding zero-margin benefits pass-throughs	$	575.4	$		$	559.1		$			$	16.3		3				3	%			$	1,068.2		$		$	1,042.7		$			$	25.5	2			2	%

PEO Services' revenue increased for the three and six months ended ~~September 30,~~December 31, 2023, due to increases in zero-margin benefits pass-throughs, ~~an increase in pricing,~~ and increases in average worksite employees of 2% ~~for the three months ended September 30, 2023,~~, as compared to the three and six months ended ~~September 30,~~December 31, 2022.

Earnings before Income Taxes

PEO Services' earnings before income taxes ~~decreased 3%~~remained flat for the three months ended ~~September 30,~~December 31, 2023 due to a change of ~~$8.3~~$(2.3) million in our estimated losses related to ADP Indemnity compared to prior year, increases in zero-margin benefits pass-through costs of ~~$30.9~~$26.5 million, and increases in selling expenses for the three months ended ~~September 30,~~December 31, 2023, partially offset by increased revenues discussed above.

PEO Services' earnings before income taxes decreased 2% for the six months ended December 31, 2023 due to a change of $(10.7) million in our estimated losses related to ADP Indemnity compared to prior year, increases in zero-margin benefits pass-through costs of $57.5 million, and increases in selling expenses for the six months ended December 31, 2023, partially offset by increased revenues discussed above.

Margin

PEO Services' margin decreased for the three and six months ended ~~September 30,~~December 31, 2023 due to ~~incremental pressure from growth~~increases in ~~our zero-margin benefits pass-throughs,~~selling expenses, and changes in our estimated losses related to ADP Indemnity, ~~and increases in selling expenses,~~ 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. 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. 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. 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. ADP Indemnity recorded a pre-tax (loss)/benefit of approximately ~~$6.2~~$(1.7) million and $4.5 million for the three and six months ended ~~September 30,~~December 31, 2023, respectively, as compared to approximately ~~$14.5~~$0.6 million and $15.2 million for the three and six months ended ~~September 30,~~December 31, 2022, respectively, which was primarily a result of changes in our estimated actuarial losses. In July 2023, ADP Indemnity paid a premium of $269 million to enter into a reinsurance arrangement with Chubb

Limited to cover substantially all losses incurred by ADP Indemnity for the fiscal 2024 policy year on terms substantially similar to the fiscal 2023 reinsurance policy.

Other

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.

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:


Adjusted Financial Measure			U.S. GAAP Measures
Adjusted EBIT			Net earnings
Adjusted provision for income taxes			Provision for income taxes
Adjusted net earnings			Net earnings

Adjusted diluted earnings per share			Diluted earnings per share
Adjusted effective tax rate			Effective tax rate

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 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. The nature of these exclusions is for specific items that are not fundamental to our underlying business operations. Since these adjusted financial measures and other non-GAAP metrics are not measures of performance calculated in accordance with U.S. GAAP, they should not be considered in isolation from, as a substitute for, or superior to their corresponding U.S. GAAP measures, and they may not be comparable to similarly titled measures at other companies.

2930


		Three Months Ended
		Three Months Ended
		Three Months Ended
		December 31,
		December 31,
		December 31,
		2023
					2023
		2023
					Three Months Ended							% Change
Net earnings
		September 30,								% Change
		2023				2022
Net earnings
					2023					2022			As Reported
Net earnings	Net earnings
Adjustments:	Adjustments:
Adjustments:
Adjustments:
Provision for income taxes
Provision for income taxes
Provision for income taxes	Provision for income taxes	233.4							231.0
All other interest expense (a)	All other interest expense (a)	18.0				17.9
All other interest expense (a)
All other interest expense (a)
All other interest income (a)
All other interest income (a)
All other interest income (a)	All other interest income (a)	(18.2)				(5.6)

Transformation initiatives (b)	Transformation initiatives (b)	0.7				(1.0)

Legal settlements(c)		—				(3.8)

Transformation initiatives (b)

Transformation initiatives (b)

Legal settlements

Legal settlements

Legal settlements
Adjusted EBIT	Adjusted EBIT	$	1,093.3			$	1,017.5			7	%
Adjusted EBIT
Adjusted EBIT
Adjusted EBIT Margin
Adjusted EBIT Margin
Adjusted EBIT Margin	Adjusted EBIT Margin	24.2		%		24.1		%

Provision for income taxes	Provision for income taxes	$	233.4			$	231.0			1	%

Provision for income taxes

Provision for income taxes
Adjustments:
Adjustments:
Adjustments:	Adjustments:

Transformation initiatives (c)	Transformation initiatives (c)	0.2				(0.2)

Transformation initiatives (c)

Transformation initiatives (c)
Legal settlements(c)
Legal settlements(c)
Legal settlements (c)	Legal settlements (c)	—				(1.0)

Adjusted provision for income taxes	Adjusted provision for income taxes	$	233.6			$	229.8			2	%

Adjusted provision for income taxes

Adjusted provision for income taxes
Adjusted effective tax rate (d)
Adjusted effective tax rate (d)
Adjusted effective tax rate (d)	Adjusted effective tax rate (d)	21.4		%		22.9		%

Net earnings	Net earnings	$	859.4			$	779.0			10	%

Net earnings

Net earnings
Adjustments:
Adjustments:
Adjustments:	Adjustments:

Transformation initiatives (b)	Transformation initiatives (b)	0.7				(1.0)

Transformation initiatives (b)

Transformation initiatives (b)
Income tax (benefit)/provision for transformation initiatives (c)
Income tax (benefit)/provision for transformation initiatives (c)
Income tax (benefit)/provision for transformation initiatives (c)	Income tax (benefit)/provision for transformation initiatives (c)	(0.2)				0.2

Legal settlements	Legal settlements	—				(3.8)

Legal settlements

Legal settlements
Income tax (benefit)/provision for legal settlements (c)
Income tax (benefit)/provision for legal settlements (c)
Income tax (benefit)/provision for legal settlements (c)	Income tax (benefit)/provision for legal settlements (c)	—				1.0

Adjusted net earnings	Adjusted net earnings	$	859.9			$	775.4			11	%

Adjusted net earnings

Adjusted net earnings

Diluted EPS

Diluted EPS

Diluted EPS	Diluted EPS	$	2.08			$	1.87			11	%
Adjustments:	Adjustments:
Adjustments:
Adjustments:

Transformation initiatives (b) (c)

Transformation initiatives (b) (c)

Transformation initiatives (b) (c)	Transformation initiatives (b) (c)	—				—

Legal settlements (c)	Legal settlements (c)	—				(0.01)

Legal settlements (c)

Legal settlements (c)

Adjusted diluted EPS	Adjusted diluted EPS	$	2.08			$	1.86			12	%

Adjusted diluted EPS

Adjusted diluted EPS

(a) WeIn 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) In the three and six months ended ~~September 30,~~December 31, 2023, transformation initiatives include consulting costs relating to our company wide transformation initiatives.

(c) The income tax (benefit)/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.

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

3031

impact of foreign currency is determined by calculating the current year result using foreign exchange rates consistent with the prior year. The PEO segment is not impacted by acquisitions, dispositions or foreign currency.


	~~Three Months Ended~~
	~~September 30,~~
	~~2023~~
~~Consolidated revenue growth as reported~~	7	%
~~Adjustments:~~
~~Impact of acquisitions~~	—	%

~~Impact of foreign currency~~	—	%
~~Consolidated revenue growth, organic constant currency~~	7	%

~~Employer Services revenue growth as reported~~	9	%
~~Adjustments:~~
~~Impact of acquisitions~~	—	%

~~Impact of foreign currency~~	~~(1)~~	%
~~Employer Services revenue growth, organic constant currency~~	8	%


	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2023		2023
Consolidated revenue growth as reported	6	%	7	%
Adjustments:
Impact of acquisitions	—	%	—	%

Impact of foreign currency	—	%	(1)	%
Consolidated revenue growth, organic constant currency	6	%	6	%

Employer Services revenue growth as reported	8	%	9	%
Adjustments:
Impact of acquisitions	—	%	—	%

Impact of foreign currency	(1)	%	(1)	%
Employer Services revenue growth, organic constant currency	7	%	8	%

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At ~~September 30,~~December 31, 2023, cash and cash equivalents were ~~$1.4~~$1.6 billion, which were primarily invested in time deposits and money market funds.

For corporate liquidity, we expect existing cash, cash equivalents, ~~short-term and long-term~~ marketable securities, cash flow from operations together with our $9.7 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,~~December 31, 2023 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, together with our $9.7 billion of committed credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations. Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy. See Note 9 of our Consolidated Financial Statements for a description of our short-term financing including commercial paper.

3132

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 ~~three~~six months ended ~~September 30,~~December 31, 2023 and 2022, respectively, are summarized as follows:


			Three Months Ended
			September 30,
			2023		2022		$ Change
		Six Months Ended									Six Months Ended
		December 31,									December 31,
		2023							2023	2022		$ Change
Cash provided by / (used in):	Cash provided by / (used in):
Operating activities
Operating activities
Operating activities	Operating activities		$	326.5	$	718.1	$	(391.6)
Investing activities	Investing activities		(216.1)		(1,577.6)		1,361.5
Financing activities	Financing activities		(1,903.7)		(16,302.6)		14,398.9
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents	Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents		(16.3)		(44.9)		28.6
Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents	Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents		$	(1,809.6)	$	(17,207.0)	$	15,397.4

Net cash flows provided by operating activities decreased due to a net unfavorable change in the components of operating assets and liabilities, primarily due to timing on collections of accounts receivable, offset by growth in our underlying business (net income adjusted for non-cash adjustments), as compared to the ~~three~~six months ended ~~September 30,~~December 31, 2022.

Net cash flows used in investing activities changed due to the timing of purchases and proceeds of corporate and client funds marketable securities of ~~$1,367.7~~$1,379.2 million.

Net cash flows provided by/used in financing activities changed due to a net ~~decrease~~increase in the cash flow from client funds obligations of ~~$14,217.1~~$13,518.7 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, and a decrease in the ~~repurchases of common stock, and an increase in the~~ net ~~proceeds~~payments related to reverse repurchase agreements. These were offset by an increase in dividends paid.

We purchased approximately ~~1.0~~2.1 million shares of our common stock at an average price per share of $~~242.26~~238.29 during the ~~three~~six months ended ~~September 30,~~December 31, 2023, as compared to purchases of ~~1.4~~2.3 million shares at an average price per share of ~~$230.13~~$234.87 during the ~~three~~six months ended ~~September 30,~~December 31, 2022. 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.

Capital Resources and Client Funds Obligations

We have ~~$3.0~~$3.0 billion of senior unsecured notes with maturity dates in 2025, 2028 and 2030. 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 10 of our Consolidated Financial Statements for a description of our long-term financing.

Our U.S. 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. This commercial paper program provides for the issuance of up to $9.7 billion in aggregate maturity value. Our commercial paper program is rated A-1+ by Standard & 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 ~~September 30,~~December 31, 2023 and June 30, 2023, the Company had no commercial paper borrowing outstanding. Details of the borrowings under the commercial paper program are as follows:

3233


		Three Months Ended
		September 30,
		2023			2022
	Three Months Ended												Three Months Ended							Six Months Ended
	December 31,														December 31,
	2023										2023			2022					2023				2022
Average daily borrowings (in billions)	Average daily borrowings (in billions)	$	4.1		$	4.6
Weighted average interest rates	Weighted average interest rates	5.3		%	2.3		%	Weighted average interest rates	5.4	%		3.5	%			5.3	%				2.8	%
Weighted average maturity (approximately in days)	Weighted average maturity (approximately in 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 obligations. At ~~September 30,~~December 31, 2023 and June 30, 2023, the Company had ~~$343.8~~$21.6 million and $105.4 million, respectively, of outstanding obligations related to reverse repurchase ~~agreements.~~agreement. Details of the reverse repurchase agreements are as follows:


		Three Months Ended
		September 30,
		2023			2022
	Three Months Ended												Three Months Ended						Six Months Ended
	December 31,														December 31,
	2023										2023			2022				2023				2022
Average outstanding balances	Average outstanding balances	$	1,379.0		$	1,119.4
Weighted average interest rates	Weighted average interest rates	5.3		%	2.4		%	Weighted average interest rates	5.4	%		3.4	%			5.4	%			2.9	%

We vary the maturities of our committed credit facilities to limit the refinancing risk of any one facility. We have a $4.25 billion, 364-day credit agreement that matures in June 2024 with a one year term-out option. In addition, we have a five-year $3.2 billion credit facility and a five-year $2.25 billion credit facility maturing in June 2026 and June 2028, 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 ~~September 30,~~December 31, 2023 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 $9.7 billion available to us under the revolving credit agreements. See Note 9 of our Consolidated Financial Statements for a description of our short-term financing, including credit facilities.

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 ~~September 30,~~December 31, 2023. In addition, we own U.S. government securities which primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks. Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio). This investment strategy is supported by our short-term financing arrangements necessary to satisfy short-term funding requirements relating to client funds obligations. See Note 6 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients.

Capital expenditures for the ~~three~~six months ended ~~September 30,~~December 31, 2023 were ~~$42.2~~$94.0 million,, as compared to ~~$41.5~~$91.2 million for the ~~three~~six months ended ~~September 30,~~December 31, 2022. We expect capital expenditures in fiscal 2024 to be between $200 million and $225 million, as compared to $206.0 million in fiscal 2023.

3334

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our overall investment portfolio is comprised of corporate investments (cash and cash equivalents, ~~short-term and long-term~~ 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 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.

Our client funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives. Consistent with those objectives, we also seek to maximize interest income and to minimize the volatility of interest income. Client funds assets are invested in highly liquid, investment-grade marketable securities, with a maximum maturity of 10 years at the time of purchase, and money market securities and other cash equivalents.

We utilize a strategy by which we extend the maturities of our investment portfolio for funds held for clients and employ short-term financing arrangements to satisfy our short-term funding requirements related to client funds obligations. Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio). As part of our client funds investment strategy, we use the daily collection of funds from our clients to satisfy other unrelated client funds obligations, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. In circumstances where we experience a reduction in employment levels due to a slowdown in the economy, we may make tactical decisions to sell certain securities or not reinvest maturing securities in order to reduce the size of the funds held for clients to correspond to client funds obligations. We minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by impounding, in virtually all instances, the client’s funds in advance of the timing of payment of such client’s obligation. As a result of this practice, we have consistently maintained the required level of client funds assets to satisfy all of our obligations.

There are inherent risks and uncertainties involving our investment strategy relating to our client funds assets. 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. 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 $9.7 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), and our ability to engage in reverse repurchase agreement transactions and available borrowings under our $9.7 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. In addition to liquidity risk, our investments are subject to interest rate risk and credit risk, as discussed below.

We have established credit quality, maturity, and exposure limits for our investments. 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, ~~is 10 years, and for~~ AA-rated and AAA-rated securities is 10 years. Time deposits and commercial paper must be rated A-1 and/or P-1. Money market funds must be rated AAA/Aaa-mf.

3435

Details regarding our overall investment portfolio are as follows:


		Three Months Ended
		September 30,
		2023			2022
	Three Months Ended												Three Months Ended						Six Months Ended
	December 31,														December 31,
	2023										2023			2022				2023				2022
Average investment balances at cost:	Average investment balances at cost:							Average investment balances at cost:
Corporate investments	Corporate investments	$	7,129.0		$	7,141.9
Funds held for clients	Funds held for clients	31,129.4			29,396.4
Total	Total	$	38,258.4		$	36,538.3

Average interest rates earned exclusive of realized (gains)/losses on:	Average interest rates earned exclusive of realized (gains)/losses on:							Average interest rates earned exclusive of realized (gains)/losses on:
Corporate investments	Corporate investments	2.6		%	1.7		%	Corporate investments	2.9	%		2.0	%			2.8	%			1.8	%
Funds held for clients	Funds held for clients	2.6		%	1.9		%	Funds held for clients	2.8	%		2.2	%			2.7	%			2.1	%
Total	Total	2.6		%	1.9		%	Total	2.8	%		2.2	%			2.7	%			2.0	%

Net realized losses/(gains) on available-for-sale securities	Net realized losses/(gains) on available-for-sale securities	$	1.9		$	1.5

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

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


		September 30, 2023		June 30, 2023
	December 31, 2023					December 31, 2023	June 30, 2023
Net unrealized pre-tax (losses)/gains on available-for-sale securities	Net unrealized pre-tax (losses)/gains on available-for-sale securities	$	(2,355.6)	$	(2,206.9)

Total available-for-sale securities at fair value	Total available-for-sale securities at fair value	$	29,600.4	$	29,764.9
Total available-for-sale securities at fair value
Total available-for-sale securities at fair value

We are exposed to interest rate risk in relation to securities that mature, as the proceeds from maturing securities are reinvested. Factors that influence the earnings impact of interest rate changes include, among others, the amount of invested funds and the overall portfolio mix between short-term and long-term investments. This mix varies during the fiscal year and is impacted by daily interest rate changes. The annualized interest rate earned on our entire portfolio increased from ~~1.9%~~2.0% for the ~~three~~six months ended ~~September 30,~~December 31, 2022 to ~~2.6%~~2.7% for the ~~three~~six months ended ~~September 30,~~December 31, 2023. 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 ~~$17~~$19 million impact to earnings before income taxes over the ensuing twelve-month period ending ~~September 30,~~December 31, 2024. 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 $6$7 million impact to earnings before income taxes over the ensuing twelve-month period ending ~~September 30,~~December 31, 2024.

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. We limit credit risk by investing in investment-grade securities, primarily AAA-rated and AA- rated securities, as rated by Moody’s, Standard & Poor’s, DBRS for Canadian dollar denominated securities, and Fitch for asset-backed and commercial-mortgage-backed securities. In addition, we limit amounts that can be invested in any security other than U.S. government and government agency, Canadian government, and United Kingdom government securities.

We operate and transact business in various foreign jurisdictions and are therefore exposed to market risk from changes in foreign currency exchange rates that could impact our consolidated results of operations, financial position, or cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We may use derivative financial instruments as risk management tools and not for trading purposes.

3536

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. GAAP”). 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 2024.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 2, New Accounting Pronouncements, of Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures about Market Risk” under Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “evaluation”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of ~~September 30,~~December 31, 2023 in ensuring that (i) information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (ii) such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There was no change in the Company's internal control over financial reporting that occurred during the three months ended ~~September 30,~~December 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Except as noted below, all other items are either inapplicable or would result in negative responses and, therefore, have been omitted.

Item 1. Legal Proceedings

In the normal course of business, the Company is subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, the Company believes it has valid defenses with respect to the legal matters pending against it and the Company believes that the ultimate resolution of these matters will not have a material adverse impact on its financial condition, results of operations, or cash flows.

With respect to the disclosure of administrative or judicial proceedings arising under any Federal, State, or local provisions regulating the discharge of materials into the environment or that are primarily for the purpose of protecting the environment, the Company has determined that the following threshold is reasonably designed to result in disclosure of any such proceeding that is material to its business or financial condition: any proceeding when the potential monetary sanctions exceed $1 million.

3637

Item 1A. Risk Factors

There have been no material changes in our risk factors disclosed in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities
Total Number
of Shares Purchased (1) Average Price
Paid per Share Total Number of
Shares Purchased
as Part of the
Publicly
Announced
Common Stock Repurchase Plan (2) Maximum Approximate Dollar Value
of Shares that
may yet be
Purchased under
the Common Stock
Repurchase Plan (2) (3)
Period
July 1 to 31, 2023 352,087 $ 231.80 350,739 $ 4,234,453,654
August 1 to 31, 2023 318,804 $ 250.06 318,706 $ 4,154,757,578
September 1 to 30, 2023 728,113 $ 242.84 363,330 $ 4,065,531,455
Total 1,399,004 1,032,775


	Total Number of Shares Purchased (1)	Average Price Paid per Share (3)		Total Number of Shares Purchased as Part of the Publicly Announced Common Stock Repurchase Plan (2)	Maximum Approximate Dollar Value of Shares that may yet be Purchased under the Common Stock Repurchase Plan (2) (3)
Period
October 1 to 31, 2023	471,060	$	238.18	465,592	$	3,954,527,496

November 1 to 30, 2023	403,380	$	225.12	401,309	$	3,864,193,487

December 1 to 31, 2023	206,533	$	232.38	203,710	$	3,814,508,318
Total	1,080,973			1,070,611

(1) During the three months ended ~~September 30,~~December 31, 2023, pursuant to the terms of our restricted stock program, the Company purchased ~~366,229~~10,362 shares at the then-market value of the shares to satisfy certain tax withholding requirements for employees upon the vesting of their restricted shares.

(2) The Company received the Board of Directors' approval to repurchase shares of the Company's common stock as follows:


Date of Approval
November 2022						$5 billion


(3)			Inclusive of the impact of the one-percent excise tax under the Inflation Reduction Act of 2022.

There is no expiration date for the common stock repurchase authorization.

~~Item 5. Other Information~~

~~During the fiscal quarter ended September 30, 2023, our executive officers adopted the following trading arrangements that are intended to satisfy the affirmative defense of Rule 10b5–1(c)~~.


~~Name & Title~~	~~Date of Adoption~~	~~Duration of Trading Arrangement~~	~~The maximum number of securities to be sold pursuant to the trading arrangement (1)~~
~~Brock Albinson,~~ ~~Corporate Controller~~	~~August 31, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~9,993~~
~~John Ayala,~~ ~~Chief Operating Officer~~	~~September 7, 2023~~	~~January 16, 2024 – December 31, 2024~~	~~48,550~~
~~Maria Black,~~ ~~President and Chief Executive Officer~~	~~September 8, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~49,648~~
~~Michael Bonarti,~~ ~~Chief Administrative Officer~~	~~September 7, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~71,040~~
~~Christopher D’Ambrosio,~~ ~~Chief Strategy Officer~~	~~September 7, 2023~~	~~September 3, 2024 – September 4, 2024~~	~~752~~
~~Joseph DeSilva,~~ ~~President, Global Sales~~	~~September 8, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~17,953~~
~~Sreeni Kutam,~~ ~~President, Global Product and Innovation~~	~~September 7, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~40,959~~
~~David Kwon,~~ ~~Chief Legal Officer/General Counsel~~	~~September 8, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~5,671~~
~~Don McGuire,~~ ~~Chief Financial Officer~~	~~September 7, 2023~~	~~January 2, 2024 – December 31, 2024~~	~~26,288~~
~~Carlos Rodriguez,~~ ~~Executive Chair~~	~~September 7, 2023~~	~~January 3, 2024 – December 31, 2024~~	~~243,026~~

(1) Securities reported in this column reflect options, restricted stock units (“RSUs”), performance-based stock units (“PSUs”) and shares of common stock, as appropriate. In the case of RSUs, quantities included in this column reflect the full amount of RSUs as reported in an officer’s respective plan and do not reflect the impact of tax withholding which will not be determined until the RSUs vest. In the case of PSUs (which have a three-year performance period), quantities included in this column reflect the application of the actual performance factor for tranches where performance has been certified, application at target for tranches where performance is not yet complete, and inclusion of accrued dividend equivalents through the date of adoption of the trading arrangement. The PSU amounts do not reflect the impact of tax withholding which will not be determined until the PSUs vest. In addition, securities reported in this column include securities subject to limit orders and such orders may not fill if limit order conditions are not met.

Item 6. Exhibits


Exhibit Number			Exhibit





10.1			Automatic Data Processing, Inc. 2018 Omnibus Award Plan, as amended and restated as of December 1, 2023 (the "2018 Omnibus Award Plan") (Management Compensatory Plan)
10.2			Form of Restricted Stock Unit Award Agreement under the 2018 Omnibus Award Plan (three-year vesting schedule) (Management Compensatory Plan)
10.3			Form of Restricted Stock Unit Award Agreement under the 2018 Omnibus Award Plan (non-three-year vesting schedule) (Management Compensatory Plan)
10.4
			Form of Performance Stock Unit Award Agreement under the 2018 Omnibus Award Plan (Management Compensatory Plan)
31.1			Certification by Maria Black pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2			Certification by Don McGuire pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1			Certification by Maria Black pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification by Don McGuire pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB			Inline XBRL Taxonomy Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Document
104			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		AUTOMATIC DATA PROCESSING, INC. (Registrant)

Date:	~~November 2, 2023~~February 1, 2024	/s/ Don McGuire Don McGuire

		Chief Financial Officer (Title)


	Number of Options (in thousands)	Weighted Average Price (in dollars)
Options outstanding at July 1, 2023	2,654	$	155

Options exercised	(305)	$	148
Options forfeited/cancelled	(5)	$	176
Options outstanding at September 30, 2023	2,344	$	156


	Number of Shares (in thousands)	Number of Units (in thousands)
Restricted shares/units outstanding at July 1, 2023	450	730
Restricted shares/units granted	—	605
Restricted shares/units vested	(289)	(256)
Restricted shares/units forfeited	(4)	(8)
Restricted shares/units outstanding at September 30, 2023	157	1,071


	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Common Stock Repurchase Plan (2)	Maximum Approximate Dollar Value of Shares that may yet be Purchased under the Common Stock Repurchase Plan (2) (3)
Period
July 1 to 31, 2023	352,087	$	231.80	350,739	$	4,234,453,654

August 1 to 31, 2023	318,804	$	250.06	318,706	$	4,154,757,578

September 1 to 30, 2023	728,113	$	242.84	363,330	$	4,065,531,455
Total	1,399,004			1,032,775