Automatic Data Processing (NASDAQ:ADP) released fiscal fourth-quarter 2018 results earlier this month, punctuated by solid organic growth and new business bookings, the temporary negative impact of its restructuring initiatives, and an early look at what to expect in the coming quarters.

Now that the dust has settled -- and with shares up 8% since then -- let's dig deeper to see how the HR management software company ended its latest fiscal year.

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IMAGE SOURCE: GETTY IMAGES.

Advanced Data Processing results: The raw numbers

Metric

Fiscal Q4 2018*

Fiscal Q4 2017

Year-Over-Year Growth

Revenue

$3.319 billion

$3.065 billion

8.3%

GAAP net income

$108.7 million

$265.8 million

(59.1%)

GAAP earnings per share (diluted)

$0.25

$0.59

(57.6%)

DATA SOURCE: AUTOMATIC DATA PROCESSING. *FOR THE QUARTER ENDED JUNE 30, 2018. 

What happened with ADP this quarter?

  • ADP incurred $365 million in pre-tax charges this quarter related to its Voluntary Early Retirement program (which was announced in March) and other business transformation initiatives.
  • On an adjusted (non-GAAP) basis, which excludes transformation expenses and the impact of tax reform, earnings increased 39% year over year to $406 million, or $0.92 per share.
  • Both the top and bottom lines arrived above consensus estimates, which predicted adjusted earnings of $0.90 per share on revenue of $3.11 billion. 
  • Organic revenue growth was 6% at constant currency.
  • Global new business bookings increased 18% year over year.
  • Employer Services revenue grew 7% (4% at constant currency) year over year to $2.5 billion, while Employer Services client revenue retention increased 50 basis points to 90.4%.
  • Professional Employer Organization (PEO) Services revenue grew 10% year over year to $976.7 million, driven by an 8% increase in average worksite employees to roughly 523,000 (up from 512,000 last quarter).
  • Subsequent to the end of the quarter, on July 31, ADP acquired global payroll management services company Celergo.

What management had to say

"We are pleased with our growing momentum from our multi-year investments in distribution, product, and operational initiatives," stated ADP CEO Carlos Rodriguez. "In particular, we remain confident that our client-centric focus and our drive to meet the evolving needs of the global HCM market through leading-edge product and unparalleled service is delivering clear and positive results that are also contributing to an improvement in retention and a sustained acceleration in our new business bookings."

CFO Jan Siegmund elaborated that the company sees "ample opportunity to add value in new and innovative ways." Siegmund added, "Investing in our strategic initiatives while executing on margin opportunities is a key focus of ours, and we believe that our strategy to create long-term shareholder value by balancing top line revenue growth and strong margins to drive EPS growth is working."

Looking ahead

For the full fiscal year 2019, ADP expects revenue to increase 5% to 7% year over year, which should translate to growth in adjusted earnings of 13% to 15% from $4.53 per share in fiscal 2018. 

In the end, between ADP's solid organic gains, its continued pursuit of acquisitive growth, and the steadily building impact of its restructuring/transformation initiatives, this was a solid quarter that should leave long-term investors more than pleased. And I think the market was right to bid the stock to new all-time highs in response.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.