ADP Sets the Record Straight and Addresses Pershing Square's False and Misleading Claims With Facts - Seite 2

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Claim: "Operational Margins" do not appropriately capture ADP profitability.

Fact: ADP's approach to calculating operational margin contribution is the most relevant way to assess progress in ADP's business. ADP expects operational margin contribution to adjusted EBIT margin of 500 basis points from FY 2017 to FY 2020. Isolating the impact of PEO pass-throughs and client funds on adjusted EBIT margin is consistent with margin disclosures historically provided in ADP's financial results and guidance, and best captures progress in ADP's underlying operations

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Claim: ADP has lost thousands of Enterprise clients to competitors.

Fact: ADP's Enterprise client count between FY 2009 and FY 2017 has remained largely consistent and ADP's overall client retention has remained above 90% every year since FY 2011. ADP has also gained client share across every major category of the HCM market in which it competes, from FY2011 through FY2017.

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Claim: ADP's labor productivity is flat.

Fact: ADP's investments in technology and service have resulted in ongoing productivity gains. From FY 2011 to FY 2017, ADP's gross revenue per full-time employee grew at a 2% compound annual growth rate (CAGR) to $215,000, and adjusted EBIT per full-time employee, excluding client funds, grew at a 7% CAGR. Additionally, new business bookings have increased at a 7% CAGR from FY 2011 to FY 2017 while ADP's sales force only grew at a 4% CAGR over the same period.

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Claim: ADP's technology is outdated and not competitive.

Fact: 83% of ADP clients are on cloud-based strategic platforms and ADP shifted its strategy to primarily focus on organic, innovation-driven growth and increased investment in R&D innovation from $150 million in FY 2011 to $450 million in FY 2017, a 20% CAGR.

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Claim: ADP is not committed to reducing spend on legacy products.

Fact: ADP has retired/divested 13 major legacy platforms since FY 2011. During this period, ADP has shifted spend on innovation from 28% to 52% of its total R&D investment.

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Claim: ADP has too many real estate locations and a sprawling and subscale current service structure.

Fact: ADP has consolidated 29 net operations locations in FY 2017 (55% of total planned exits) as part of its Service Alignment Initiative.

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