Automatic Data Processing Inc.'s (ADP) fiscal fourth-quarter profit improved 16% due to solid new-business sales growth and higher payroll revenue, while the number of employees on U.S. clients' payrolls increased.

The payroll-processing and human-resources-outsourcing company has seen its revenue grow in recent quarters, helped by strong new-business sales growth in its employer-services and professional employer organization services segments. The company said it is seeing strength from employers in the Central U.S.--including Chicago, Texas and Oklahoma, as well as Northern California.

In an interview with Dow Jones Newswires, Chief Financial Officer Chris Reidy said the company's investments in its sales and service staff and product innovation helped lift retention and new bookings. The company began making those investments in the fourth quarter of fiscal 2010, and has now achieved an all-time high retention of 91%.

Reidy added the company's focus on product innovation has helped drive results, including mobile applications and deal and management systems. For example, ADP earlier this month began offering small-business owners a mobile application that would allow them to input payroll and run reports on their smartphone.

For the quarter ended June 30, ADP reported a profit of $241.8 million, or 48 cents a share, compared with $207.9 million, or 42 cents a share, a year earlier. Revenue rose 14% to $2.51 billion.

Analysts surveyed by Thomson Reuters had expected a profit of 49 cents a share on revenue of $2.44 billion.

Gross margin declined to 39.4% from 41.5%.

Revenue at the company's employer-services segment, the largest top-line contributor by far, climbed 9%. New-business sales for Employer Services and PEO Services 8%.

In the U.S., revenue from the traditional payroll and payroll tax filing business grew by 4%. The number of employees on ADP's clients' payrolls in the U.S. increased 2.6%, as measured on a same-store-sales basis.

The company now sees earnings rising 8% to 10% and revenue growth of 7% to 9%. In a conference call with analysts, Chairman and Chief Executive Gary Butler said the company sees stronger top-line growth for dealer services, due to a larger sales force and new products. He did warn the new year would see pressure from the continued low-interest rate environment.

Shares were down 0.6% to $52.07 in recent trading. The stock is up 13% this year.

 
   -By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

--Mia Lamar contributed to this report.

Automatic Data Processing (NASDAQ:ADP)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more Automatic Data Processing Charts.
Automatic Data Processing (NASDAQ:ADP)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more Automatic Data Processing Charts.