Automatic Data ProcessingADP

01ADP's payroll float model generates substantial recurring interest income because clients pre-fund payroll obligations that ADP holds and invests before disbursement. This float grows automatically with client payrolls and employment levels, creating a capital-light earnings stream that compounds as balances rise. The thesis depends on ADP retaining the right to invest these funds and earning a positive spread versus funding costs.

02Employer Services client revenue retention was 92.1% in fiscal 2026 Expected client relationship periods for deferred contract costs range from three to eight years Set-up fees are deferred and recognized over approximately five to seven years, the period clients are expected to benefit from the material right

03The PEO segment bundles HR, benefits, and workers' compensation administration for small and mid-size employers who cannot replicate scale-based insurance underwriting and compliance capabilities. The reinsurance structure caps catastrophic loss exposure while ADP retains spread income. This co-employment model creates recurring, compliance-driven revenue that is difficult for clients to self-replicate.

04Employer Services new business bookings grew 6% in fiscal 2026 Total revenues increased 7%, or 6% on an organic constant currency basis, in fiscal 2026 Operating cash flow from operating activities increased due to growth in business The Company acquired WorkForce Software in October 2024 to expand workforce management solutions for large global enterprises