ADP Investor Presentation
ADP Investor PresentationOverview and Strategy Governance and ESGDecember 2020Copyright 2020 ADP, Inc.1
Forward Looking StatementsThis document and other written or oral statements made from time to time by ADP may contain “forward-looking statements” within the meaning of the PrivateSecurities 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” “is designed to” and other words of similar meaning, are forward-looking statements. These statements arebased on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that maycause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forwardlooking 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; 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; competitive conditions; ourability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, fraudulent acts, and systeminterruptions and failures; employment and wage levels; changes in technology; availability of skilled technical associates; the impact of new acquisitions anddivestitures; the adequacy, effectiveness and success of our business transformation initiatives; and the impact of and uncertainties related to major naturaldisasters or catastrophic events, including the COVID-19 pandemic. ADP disclaims any obligation to update any forward-looking statements, whether as a result ofnew information, future events or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A. RiskFactors” of our most recent Annual Report on Form 10-K, and in other written or oral statements made from time to time by ADP, should be considered in evaluatingany forward-looking statements contained herein.Non-GAAP MeasuresAdjusted EBIT, adjusted EBIT margin, adjusted diluted earnings per share, adjusted effective tax rate, and organic constant currency are all non-GAAP financialmeasures. Please refer to the Q1 fiscal 2021 earnings release available at investors.adp.com for a discussion of why ADP believes these measures are important andfor a reconciliation of non-GAAP financial measures to their comparable GAAP financial measures.This presentation is a supplement to our Q1 fiscal 2021 earnings release; it is intended to be read in conjunction with, not as a substitute for, or in isolation from, theearnings release.Copyright 2020 ADP, Inc.2
At a Glance: ADP is the Pioneer and Global Leader of HCMCompany OverviewOur Strategic Pillars Global leader in Human Capital Management (HCM) software and solutions Delivers payroll for 22 million (1 in 6) US workers and 14 millioninternational workers Partners with over 7,000 tax agencies across all levels of governmentthroughout the US Moved 2.2 trillion of US payroll and taxes on behalf of our clients andour clients’ employees in FY2058,000860,000 EmployeesClientsGrow a completesuite of cloud-basedHCM Solutions140Countries 14.6BFY20 Adjusted EBIT1FY20 Client RevenueRetention90.5%S&P / Moody’s RatingsJune 30, 2020Market Cap 64BYears of ConsecutiveDividend IncreasesLeverage our globalpresence to offerHCM Solutionswherever clients dobusinessUnrivaled Client FootprintFinancial OverviewFY20 RevenueScale our market leadingHRO2 Solutions 3.3BAA / Aa346 SmallBusinessClient SizeLargeEnterprise PayrollClient NeedPEO2 and HROutsourcing Client LocationGlobal andMultinational Single-State1. Adjusted EBIT is a non-GAAP metric. For a reconciliation of these non-GAAP financial metrics to their closest comparable GAAP metrics see our Q1 2021 earnings release and Fiscal 2020 Form 10-K available at investors.adp.com2. Human Resource Outsourcing (HRO), Professional Employer Organization (PEO)Copyright 2020 ADP, Inc.3
COVID-19: Macroeconomic Impacts and Assumptions for ADPCOVID-19RelatedHeadwindQ4 FY 2020Q1 FY 2021FY 2021 Expectation1Pays Per Control(i.e. Employment)(11)%(9)%(4) to (3)% average for full yearOut-of-BusinessElevated out-of-business losses indown and mid-marketRecord Q1 retentionElevated losses in Q2 and Q3Client FundsBalances andInterest(8)% balance decline(30) bps change in average yield(7)% balance decline(30) bps change in average yield(3) to (1)% balance decline(50) bps change in average yieldNew BusinessBookings (ES)(67)% decline2% growth;Record Q1 bookingsGrowth of 10% to 20%1. As of ADP Q1 2021 earnings presentation on October 28, 2020Copyright 2020 ADP, Inc.4
Impact of COVID-19 on our Revenue GrowthA history of consistent revenue growth temporarily impacted by headwinds related to COVID-19PEO Services SegmentEmployer Services Segment10-YearCAGR1FY20FY21Guidance2ES Segment5%1%(2)% to flatPEO Segment14%8%Flat to 3%Total ES & PEO7%3%(1) to 1%through FY19 3.5B 8.9BFY173.9B9.5BFY184.2B9.9BFY194.5B10.1BFY201. Calculated using geometric average of annual growth rates to account for FY19 change in segment reporting2. As of ADP Q1 2021 earnings presentation on October 28, 2020Copyright 2020 ADP, Inc.5
Long-Term Structural Implications of COVID-19 on HCMToo early to be certain on long-term effects, but here are some considerations: Rapid global legislation changes make it more challenging for companies to navigate the tax, regulatory,and compliance environments on their own A remote workforce also makes it more difficult for our clients to manage their workers and keep themengaged ADP client satisfaction has been at record levels across several of our businesses (NPS scores movinghigher during COVID-19) We may see long-term operating expense benefits (real estate footprint, travel) if certain “temporary”changes to operations take permanent holdCopyright 2020 ADP, Inc.6
Big Picture: Our Addressable Market is Large, Growing, and EvolvingLarge & Growing MarketContinuous Evolution 150B AddressableGlobal HCM MarketHCM landscape continues to be shaped by secular changes across many categories5-6%Growth 90BWORK 40B 20BUS HCMHRInternationalOutsourcing HCM Growth of gigeconomy Emergence ofdynamic teamsPAY More workers paidin real-time or ontailored schedulesHRTECHBUSINESS HCM tech Becoming more Globalization oftransforming intoanalytical,workforceplatforms appleveraging AI/ML Evolving laborecosystems Increasing focusmarketson talent and Growing regulatory Emergence ofpublic cloudengagementpressureAdditional potential impacts from COVID-19Source: Census, D&B, IHS, Nelson Hall, Cerulli Associates, Internal FinancialReporting; growth rates FY17-20Copyright 2020 ADP, Inc.7
And as the Market Evolves, We Remain Positioned to WinHCM EvolutionHCMEvolutionADP PositioningWORK Only HCM provider with a freelancer labor solution (WorkMarket) Next Gen HCM platform uniquely built to serve dynamic, team-based organizationsPAY Industry-leading mobile HCM and payments platforms (Global Cash Card ) Next Gen payroll and tax engine with on-demand payroll calculation and real-time pay capability,supplemented by early wage access partner offeringsHR World’s richest and most accurate dataset (DataCloud) Pioneering Next Gen talent solutions (TMBC ) built natively into Next Gen HCM platform Proprietary and market-leading HRO solutionsBUSINESS Unmatched global footprint (GlobalView/Celergo) leveraging both local ADP in-country presenceand global partner network; Next Gen platforms built global at its core Deep compliance expertiseTECH Industry-leading HCM Marketplace and API portfolio Next Gen HCM open platform with “mini-apps” strategy Predictive models leveraging our differentiated big data (DataCloud)Copyright 2020 ADP, Inc.8
Our Product – An Unmatched Suite of Software and ServicesRUN Powered by ADP ADP Workforce Now ADP Vantage HCM US HCMADP SmartCompliance ADP TotalSource PEO, enabled by ADP Workforce NowADP Comprehensive Services, enabled by ADP Workforce NowADP Comprehensive Outsourcing Solutions,enabled by ADP Vantage HCMHROADP GlobalView HCMADP Celergo and ADP Streamline GlobalHCMCopyright 2020 ADP, Inc.ADP In-country SolutionsSmall BusinessesMidsized Businesses(49 employees and below)(50 – 999 employees)Large Businesses(1,000 employees)9
Our Distribution – Market Leadership Driving Scale Benefits7,50014020K TOTAL SELLERSCOUNTRIESREFERRING PARTNERSOur sellers are enabled to sell the bestfit HCM platform as well as valueadded complementary productsWe serve clients in 140countries worldwideOur partner ecosystem isunmatched with over 20K partnersreferring clients each yearCopyright 2020 ADP, Inc.1/3500 INSIDE SALESMARKETPLACE APPSWe are growing our inside salesorganization to capitalize on digitalsales and share of walletWe digitally distribute over 500 appsthrough the ADP Marketplace, theworld’s largest HCM marketplace10
Our Margin Performance is Supported by our TransformationService Alignment Initiative Chief TransformationOfficer reportingdirectly to CEO Consolidated projectmilestones and plansVoluntary Early Retirement ProgramWorkforce Optimization and Procurement InitiativesDigital Transformation and Procurement Initiatives Disciplined trackingand executionOther Transformation InitiativesOperating Leveragesupported by consistent organic growth and disciplined expense managementCopyright 2020 ADP, Inc.1111
We Take a Disciplined Approach to Capital AllocationINVESTMENT PRIORITYPROGRESS1Reinvest in the business to driveorganic revenue growth andmargin improvement FY20 1B invested in Systems Development & Programming, continue to keep strategicplatforms differentiated and continue to scale Next Gen platforms Reinvesting in growing sales force and enhancing productivity Invested in transformation initiatives to drive hundreds of millions in run-rate savings2Invest in acquisitions tosupplement ADP’s existingstrategy and capabilities Maintain disciplined M&A approach and focus on transactions with high strategic value In FY18 invested 615M to acquire Global Cash Card and WorkMarket; in FY19 invested 120M to acquire Celergo3Return cash to shareholders viadividend and shares repurchasesCopyright 2020 ADP, Inc. Target dividend payout ratio 55-60% 46 years of consecutive dividend increases Incremental dividend increase in April ’18 due to tax reform; board approved anotherdividend increase in Nov ’18, Nov ’19, and Nov ‘20 Long-standing share buyback program to return excess cash, averaging 1% share countreduction per year over the past 10 years12
Governance and ESG FocusCopyright 2020 ADP, Inc.13
Governance – Committed to Shareholder EngagementWe are committed to proactively engaging with shareholders; our Board is highlyattuned to shareholder feedback, including governance & compensation best practicesMonitoring & AssessmentOutreach & Engagement Board and management review: ADP regularly meets with shareholders to actively gather feedback ona range of issues Annual meeting voting results Investor feedback from IR & governance engagement Trends and best practices across the governance, executivecompensation, regulatory, and environmental & social landscape This review allows ADP to identify and prioritize topics for discussion Fiscal Year 2020: We invited shareholders representing nearly half ofour shares outstanding to discuss our strategy, corporate governanceand executive compensation programs, and held meetings withshareholders representing over 40% of our shares outstandingEvaluation & Response Board of Directors & key committees evaluate and discuss feedback fromstockholders and key stakeholders ADP enhances disclosure and practices, as appropriate ADP updates governance practices and documents to align with bestpractices, and incorporates feedback, as appropriateCopyright 2020 ADP, Inc.14
Governance – Responsive to Shareholder FeedbackTopics of DiscussionBoard orate SocialResponsibilityCopyright 2020 ADP, Inc.ADP Actions Taken Board composition, self-assessment, and refreshmentprocess Ongoing Board Refreshment: New Board members joined in April 2018, May 2019,April 2020 and November 2020 Governance practices and oversight structures (proxyaccess proactively adopted in Aug 2016) Committee chair and membership rotations (November 2018, 2019 and 2020) Reduced the % of the voting power of the company’s outstanding shares required tocall of special meeting of shareholders from 33% to 25% (August 2020) Amended Corporate Governance Principles to adopt more stringent overboardingpolicy (April 2018) Shareholder friendly Equity Plan (November 2018) Compensation peer group refinements for FY’18 Approved freeze of corporate officer supplemental retirement plan as of July 1,2019 (previously closed to new entrants in FY’14) Ongoing enhanced risk management disclosures in proxy statement including in theareas of cyber, privacy and HCM Announced enhanced financial disclosures at 2018 Investor Day, which began FY’19 Issued second Corporate Social Responsibility report in November 2019 Compensation program and practices, including ADP’s shiftto using Net Income instead of EPS to measure LTIP goals Performance metric selection and weighting, pay mix, andpeer group selection Enterprise risk management structure and how the Boardoversees the risk assessment process Sustainability efforts and the underlying economic rationalefor our ESG initiatives15
Governance – Leading with Best PracticesADP is committed to shareholder-friendly corporate governancepractices that help to drive long-term value creation Proxy access right at 3% / 3 year ownership threshold(adopted August 2016) Annually elected Board; directors may be removed withoutcause Independent Chairman Annual succession planning review Oversight of executive compensation by the CompensationCommittee Executive sessions of independent directors held regularlyMajority voting standardShareholder ability to call special meetingsShareholder right to act by written consentNo dual-class stock; one share, one voteNo overboardingNo poison pillSignificant Board role in strategy and risk oversightNon-employee director pay limitsAnnual Board assessment of corporate governance bestpracticesActive shareholder engagement to better understandinvestor perspectivesCopyright 2020 ADP, Inc.16
Governance – Best-in-Class Board With Balanced Skill SetDeliberate Board Composition Commitment to both continuity and fresh perspectives– 7 of our 11 Directors have a tenure of 5 years or less1– Average independent Director tenure of 4.7 years1, compared to an S&P 500average of 8.0 years Director succession planningSkill Set Aligns and Evolves With Corporate StrategyDirector Skill Set2Enterprise Risk Management– Skill set used to identify and recruit DirectorsFinancial Expertise– 8 of 10 independent Directors are current or former C-Suite of major publiccompanies– Leaders with significant technology experience (Peter Bisson, LinnieHaynesworth, Fran Katsoudas, Nazzic Keene, Tom Lynch, Bill Ready) Independent mindset and focus on accountability to shareholders– 10 of 11 Directors are independent– All Board Committees are composed of independent Directors– Committed to formal shareholder engagement program– 8 out of 10 independent Directors have shorter tenure than CEO Ongoing board refreshmentCopyright 2020 ADP, Inc.867Government / Regulatory6HR Management / CompensationInvestment Banking/Capital MarketsIndustry / HCM / HRO1411International6Product Marketing / Product ManagementPublic Company CEO Experience51011Other Public Company Board ExperienceStrategic PlanningTechnologyTransformation ExperienceSource: Spencer Stuart Board Index 20191. As of November 2020 Annual Meeting (10 independent directors; 1 management director)2. Skill set matrix as of 2020 Annual Meeting (11 Directors)3Cybersecurity– Conducted in the context of a skill set review The right set of skills and experience to set ADP’s corporate strategy10Business Operations6917
Governance – Strong Independent Chair RoleJohn Jones assumed role of Chairman ofthe Board in November 2015Background: Brings substantial knowledge of ADP to the role,having served on the Board prior to current CEO Retired Chairman & CEO of Air Products and Chemicals; former directorat Sunoco Extensive expertise in solving issues facing public companies andmultinational businesses, including organizational management,strategic planning, enterprise risk management and corporategovernance matters Significant experience in businesses operating within strict/shiftingregulatory frameworksCopyright 2020 ADP, Inc.Significant Chairman Responsibility Leads Board of Directors in its oversight, advisory,and risk management roles Plans, reviews, and approves board meeting agendasand schedules in coordination with the CEO Ensures effective functioning of and communicationbetween Board Committees Authority to call meeting of independent directors18
Compensation – Rigorous ApproachFive Guiding Principles1Emphasize variable, performance-based compensationto ensure that pay and performance are closely alignedCompensation GovernanceEnsures Alignment with Principles 2Rigorous metric selection and goal-setting process tosupport ADP’s financial and strategic objectives 3Pay competitively to attract and retain executivescritical to our long-term success 4Commitment to high standards of corporategovernance and best practices5Thoughtful design to minimize excessive risk-takingand to ensure high integrity Copyright 2020 ADP, Inc. Robust Clawback Policy applicable to cash and equity incentivesStock Ownership Guidelines for CEO (6x) & NEOs (3x)No option repricingTarget pay levels generally benchmarked to median, with variationbased on tenure and experienceRegular peer group analysis (peer group refined for FY2018 to enhancealignment with ADP strategy)Double-trigger change-in-control severance and equity vestingprovisionsLimited perquisitesAnti-Hedging and Pledging PolicyNo tax-gross upsNo dividends on unearned performance stock19
Compensation – Pay Closely Aligned to PerformanceStrategic Objectives at the Core of Executive CompensationBalanced, Performance-Based Compensation Policy Designed to incentivize sustainable value creation Thoughtful design to encourage strategic transformation while mitigating excessive risktaking Approved by independent compensation committee using independent compensationconsultant FY16 - FY19 CEO compensation was below Proxy Peer Median and near the median forFY20 Robust clawback policy allows for cash and stock recovery Emphasizes equity-based compensation to foster commonality of interest betweenmanagement and shareholders Strategic objectives represent 40% of the short-term incentive compensation for our executiveofficersImportant leading indicators of our transformation, creation of long-term value and future successStrategic objectives are measurable and pay out formulaicallySimplifyInnovateAdoption/utilization of clientengagement hub % of clients on Next Gensolutions Reduce low value contacts perclient % of revenues on strategicplatforms Digital Sales Sales from newest productsCEO Pay ( Improve client retention Improvement in net promoterscores, improving clientexperience Improve workforce diversityOther NEOs7%100%5Say On PayCEOCumulative TSR (%)15 Significant Pay at RiskStrong Performance Alignment & Shareholder Support20Grow 93 % Base Salary15 %85 % Performance-Based(STIP LTIP)Sources: Institutional Shareholder Services 2020 Report on ADP; ADP 2020 Proxy Statement.Copyright 2020 ADP, Inc.20
Enterprise Risk ManagementBoard and key committees maintain disciplined risk assessment process to effectively pursue strategic goalsCopyright 2020 ADP, Inc.*Includes CSR and sustainability, as well as philanthropic activities21
Corporate Social Responsibility ReportMost Recent CSR Report Issued November 2020 Commitment to Strong Governance,Ethics, and Compliance Associate Diversity, Engagement,and Wellness Client Betterment ThroughInnovation Community Engagement andVolunteer Involvement Environmental SustainabilityFor more information, please visit sustainability.adp.comCopyright 2020 ADP, Inc.22
Financial Disclosures – Leading TransparencyDisclosurePeer 1Peer 2Peer 3Peer 4Peer 5Peer 6Peer 7Peer 8Peer 9Peer 10Peer 212212123313Operational5 412324335 33Near-Term¹AAAQQ A/QQQAQALonger-Term Revenue Profitability KPI’s / Drivers GuidanceMetricsSegmentationRelative ScoreSource: Company filings, third party providersNote: Disclosure based on metrics explicitly stated in filings as opposed to those that can be calculated.¹ A Annual, Q QuarterlyCopyright 2020 ADP, Inc.23
Jun 30, 2020 · Only HCM provider with a freelancer labor solution (WorkMarket) Next Gen HCM platform uniquely built to serve dynamic, team-based organizations Industry-leading mobile HCM and payments platforms (Global Cash Card ) Next Gen payroll and tax engine with on
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ADP Trademarks ADP , the ADP logo , ADP A more human resource , The Bridge Sponsored by ADP & Bubble Talk Design , and . Welcome to Essential Time & Attendance Supervisor Timecard Basics for ADP Workforce Now. This training includes U.S. spellings and the date construct of month/day/year. You will
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Effective September 15, 2015 ADP Bi-Weekly Employee Supervisor eTime Instructions Go to ADP web portal - https://workforcenow.adp.com Enter your user ID and password that you created previously Approving An Employee’s Timecard Go to My Team Time & Attendance Individua
Mar 12, 2014 · ADP 6-0, ADRP 6-0, and ADP 5-0 forms the foundation for the tactics, techniques, and procedures for the exercise of mission command. ADP 6-0 uses joint terms where applicable. Selected joint and Army terms and definitions appear in both the glossary and the text. Terms for which ADP 6-0 is
forces integrate fires in support of unified land operations (see introductory figure, on page vii). This revised ADP 3-19 includes the following changes: Combines information from ADP 3-09 and ADRP 3-09 into one publication. Redesignates publication as ADP 3-19 and supersedes ADP 3-09/ADRP 3-09. Redefines the fires warfighting function.
