Shares of payroll processor and human resources technology vendor Automatic Data Processing (ADP) are down 8 cents at $56.65 after the company this morning met analysts’ estimates for its fiscal Q2 results but brought down the top end of its forecast for the year’s profit growth owing to a one-time asset sale.
Revenue in the three months ended in December rose 7%, year over year, to $2.6 billion, yielding EPS of 68 cents, all exactly as the Street had been modeling.
CEO Carlos Rodriguez called the quarter’s results “solid” and said he was particularly pleased with the sales teams execution. The number of employees on customers’ payrolls served by ADP rose 2.8%. Client retention was “excellent,” the company said, though it has dipped 0.2 percentage points this fiscal year.
The company reiterated an expectation for 7% to 9% revenue growth, but said profit will rise 8% to 9%, down from a prior range of 8% to 10%. The decline resulted from profit projected to be lost as the result of the company having sold off an asset last quarter.
CFO Chris Reidy told me during a phone call today that the most important factor in the quarter was an improved outlook for bookings, which is basically the new sales the company is adding during the year.
Bookings were up 14% in this last quarter, faster than the 8% growth in the first quarter.
The company raised its outlook for bookings to 12% growth this year from a prior range of 8% to 10%.
“It is a bit of a positive indicator for the economy,” said Reidy of the bookings acceleration. “The question is how much is attributable to sales execution and to our product innovation?”
Reidy says part of the acceleration is the company’s introduction of a product called “Run,” a Web-based software platform that makes it easier for small businesses to manage payroll, including submitting data through a smartphone.
Regarding payroll employee growth of 2.8%, Reidy said the company sees that rising 2.5% for the full year. Although it is a positive trend, “it is a bit of a rear-view mirror,” he said as far as being an economic indicator.
Reidy had some further caveats about the economy:
With the 12% sales [bookings] growth projected, we went to length on the call to say that we did get good growth in our large businesses, but some of that is lumpy, it’s a couple of big deals, still seeing very long sales cycles in the national account space. We’re not ready to declare victory that large businesses are buying at the same levels they did in ’06-’07 time frame. Small business has been strong and its continues to be strong.
Regarding the company’s “Vantage” platform for human capital management, which is meant to compete with the offerings of younger companies such as Taleo (TLEO),�Reidy said the company was seeing new bookings proceed about as expected, and the company is very happy with it,” but he said it would take some time before ADP has more specific numbers to report on how sales of the product are progressing.
No comments:
Post a Comment