The original outsourcer, Automatic Data Processing (ADP) has still got it. ADP is one of the largest payroll and tax filing processors in the world, serving about 625,000 clients. Employer services (payroll processing, tax and benefits administration services) account for the majority of the company's sales, and its PEO (professional employer organization) services are provided through ADP TotalSource. Other offerings include accounting, auto collision estimates for insurers, employment background checks, desktop support, and business development training services. The company in 2014 spun off its former dealer services segment.
The company provides services in more than 100 countries spread across the Americas, Europe, the Middle East, Africa, and the Asia Pacific region.
In 2014 the company spun off its former dealer services segment (contributed 15% of 2014 revenue). It now operates across two segments.
The employer services segment (67%) offers a range of business outsourcing and HCM services throughout 35 countries. Its Professional Employer Organization (PEO) services segment (18%; aka ADP TotalSource) provides employment administration outsourcing services through a co-employment relationship in which employees who work at a client's location are co-employed by ADP and its client.
Sales and Marketing
The company targets businesses of four types: Small Businesses with 1-49 employees; Midsized Business with 50-999 employees; Large Business with 1000+ employees; and Multinational Business, with any number of employees.
ADP has achieved unprecedented growth over the last several years, with revenues climbing 8% from $11.3 billion in 2013 to peak at a record-setting $12.2 billion in 2014. Profits also jumped 8% from $1.4 billion to $1.5 billion over that same time period. Net cash inflow increased 16% in 2014 due to additional cash inflows.
The historic growth for ADP was fueled by increases in all its segments. Employer services sales spiked due to new business started during the year from new business bookings growth, an increase in the number of employees on the company’s clients’ payrolls, and the impact of price increases. PEO services revenue increased due to a rise in the average number of worksite employees, resulting in a surge in the number of new clients and growth in the company’s existing clients.
The rise in profits for ADP in 2014 was driven by the increased revenues coupled with the absence of goodwill impairment losses it incurred the previous year.
Over the years, the data processing giant has been fortifying its core employer services and PEO operations while restructuring and working to cut costs in its dealer services division. Across all segments, ADP has been expanding internationally and extending its services through acquisitions. It also continues to boost its Web-based software offerings and small-business services. In late 2014 it spun off its ADP Dealer Services operations to form CDK Global in order to focus on its core operations.
Mergers and Acquisitions
The company acquired two businesses during fiscal 2013 for approximately $40.4 million while it acquired seven businesses in fiscal 2012 for an aggregate purchase price of approximately $292.3 million.