Automatic Data Processing, Inc. · NASDAQ:ADP
Automatic Data Processing — Proxy Contest (October 2017)
173 slides from Automatic Data Processing's proxy contest presentation, Oct 11, 2017
Slide 1: ADP Ascending
ADP Ascending October 2017 VY ADPASCENDING *
Slide 2: Disclaimer
Disclaimer The information contained in this presentation (“Information”) is based on publicly available information about Automatic Data Processing, Inc. (“ADP” or the “Company”), which has not been independently verified by Pershing Square Capital Management, L.P. ("Pershing Square"). Pershing Squ
Slide 3: Introduction to Pershing Square
Introduction to Pershing Square Pershing Square is a concentrated, research-intensive, value investor We own high-quality businesses, often with a catalyst to unlock significant value Pershing Square has a strong activist track record as a long-term, value-creating shareholder Average return on 13Ds
Slide 4: Why We Invested in ADP
Why We Invested in ADP The Human Capital Management (“HCM”) business is fundamentally attractive ADP is a great business with a very large opportunity to improve its operating efficiency, product and service offerings, growth, and long-term shareholder value The case for change is straightforward: F
Slide 5: How We Think About ADP
Employer Services (“ES”) ADP’s core business, a software and service-based delivery of payroll and a broad suite of “Beyond Payroll” HCM tools including business process outsourcing Professional Employer Organization (“PEO”) A fully-outsourced HCM solution where ADP becomes the legal co-employer of
Slide 6: Employer Services segments by client size
SMB (Small Business) Mid-Market (Major Accounts) Enterprise (National Accounts) International & Multinational % of ES Revenue ~25% ~35% ~20% ~20% Client Size 1-49 50-999 1,000+ Varies Key Product Offering Payroll + Limited HCM Payroll + HCM Payroll + Full HCM Payroll + HCM Product Complexity Low Med
Slide 7: ADP Has Underperformed Its Potential and Can Be Substantially Improved
ADP Has Underperformed Its Potential and Can Be Substantially Improved
Slide 8: ADP's Employer Services business is underperforming its potential
ADP’s Employer Services business is underperforming its potential Operating efficiency and margins are well below competitors’ and ADP’s structural potential Growth is below the industry and ADP’s potential, driven mostly by weakness in ADP’s Enterprise segment ADP can significantly improve its perf
Slide 9: Key Evidence of ADP's Operational Underperformance
Key Evidence of ADP’s Operational Underperformance ADP’s labor productivity is 28% below its competitors’ (revenue per employee of $161k for ADP vs. $223k average for competitors) ADP’s Employer Services gross margins of ~58% are 1,600bps below the average gross margins of its competitors at ~74% Bl
Slide 10: Net Operational Revenue per Employee
Net Operational Revenue per Employee(1) (Ex-Float) ADP has a Substantial Opportunity to Improve its Labor Efficiency (2) Median: $232 Smallest Largest ES: ~$153 (2) Median: $223 Smallest Largest ES: ~$153 ________________________________________________ Note: Based on latest fiscal year end, as rele
Slide 11: ADP's Labor Productivity has Been Flat
ADP’s Labor Productivity has Been Flat ________________________________________________ 2009 used as a starting point given the availability of segment headcount for Dealer Services (reported as 7k in 2009) in the 2009 Analyst Day presentation. Alternatively, net operational revenue per employee gre
Slide 12: Gross margin comparison with competitors
________________________________________________ ADP’s gross margins adjusted to exclude float income (-$397m) but add-back Systems Development and Programming Costs (+$628m) and Depreciation and Amortization (+$226m) to be more consistent with competitor gross margin presentation. Competitor gross
Slide 13: ADP vs. Paychex
ADP vs. Paychex ________________________________________________ For both ADP and Paychex analysis excludes Client Funds and PEO pass-through costs. Paychex PEO pass-through estimated at $165m on ~$340m of gross PEO revenue. Assumes ADP has 2,500 dedicated PEO employees. Assumes Paychex has 650 dedi
Slide 14: Why are Paychex's Margins Higher than ADP's?
Why are Paychex’s Margins Higher than ADP’s? Jim Cramer: “You know, Marty, I was looking at your margins versus the margins of automatic data [ADP], which does large [clients], and I noticed your margins are appreciably better…” Paychex CEO, Marty Mucci: “…[Y]ou know, the margins are strong because
Slide 15: ADP vs. Paychex: the Gap is Widening
While Paychex historically generated similar Net Operational Revenue per Employee to ADP (from 2008-2011), it has dramatically outperformed ADP since 2011 ADP vs. Paychex: the Gap is Widening Net Operational Revenue per Employee(1) ($’000) Net Operational Revenue Benchmarking Per Employee(3,4) ($’00
Slide 16: A Comparison to Paychex is Revealing
A Comparison to Paychex is Revealing ADP directly competes with Paychex mostly in Small Business If ADP’s ~$2bn Small Business segment had Paychex’s ~41% margin,(1) it would achieve ~$820mm of operating profit from this sub-segment alone. This would imply the rest of the Employer Services business e
Slide 17: Paychex is Really Comparable to ~$3bn of ADP's ES Business
But We Are Being Too Conservative… Paychex is Really Comparable to ~$3bn of ADP’s ES Business Paychex has ~35k clients and ~$0.7bn of revenue in its mid-market business (avg. 75-100 EEs),(1) comparable to the smaller client sub-vertical of ADP’s mid-market (~$1bn of ADP revenue) “Our client base in
Slide 18: Mid-market and Enterprise Segments are Also Structurally High-Margin
The Mid-market and Enterprise Segment are Also Structurally High-Margin Although pricing power declines with client size, larger customers cost less to serve and have much higher retention (driving lower selling expense) All of ADP’s competitors in the mid-market and enterprise have gross profit mar
Slide 19: ADP's ES gross margins trail competitors by ~1,600bps
By P&L Item: ADP’s ES gross margins trail competitors by ~1,600bps (~58% vs. ~74%) Additional opportunities exist below gross profit: corporate restructuring, reduced spend on legacy technology, and sales force productivity By Business Mix: ADP’s various ES sub-segments are all structurally high-mar
Slide 20: Wall Street Analysts See the Opportunity
Wall Street Analysts See the Opportunity “[Pershing Square] did break out a number of analytically sound points that can add up to a sizeable benefit… ADP has been managed for risk-averse multi-year gain, it is appropriate to ask these tough questions and expect an answer on the likelihood of settin
Slide 21: ADP's Management Admits that its Margins Trail Competitors
ADP’s Management Admits that its Margins Trail Competitors Carlos Rodriguez, President & CEO “…When you look at ADP's overall pretax operating margin, it's pretty darn good, but when I stack it up against other companies that are in similar industries to us, I think there is plenty of room there. So
Slide 22: ADP is Falling Behind Competitors, Particularly in Enterprise HCM
ADP is Falling Behind Competitors, Particularly in Enterprise HCM ADP’s board and management have not developed a best-in-class offering for the Enterprise market, a failure which has allowed competitors to capture meaningful market share and value at the expense of ADP Change in HCM Client Count (S
Slide 23: A Timeline of ADP Enterprise HCM
“I think our Vantage platform is still selling well.”(2) “Vantage is I think our response to what is obviously a changing landscape… I think [Vantage and its functionality] will really create a real competitive differentiation for us.” (1) A Timeline of ADP Enterprise HCM ADP chose not to develop a
Slide 24: Growth in ADP's Employer Services is Decelerating
Growth in ADP’s Employer Services is Decelerating Growth in Employer Services has decelerated in recent years and will require an unexplained inflection to meet ADP’s September 12th plan ________________________________________________ Source: ADP SEC financials, financial press releases. FY 2012 th
Slide 25: Employer Services revenue growth notes
________________________________________________ Net operational revenues, excludes float allocations. Adjusts for currency and divestitures. Consistent with ADP’s prior presentation of “Internal Revenue Growth.” Based on ADP’s 2009 Analyst Day disclosure as contrasted against recent comments (Q3’20
Slide 26: Why is ADP Underperforming its Potential?
Why is ADP Underperforming its Potential? ADP has enjoyed a decades-long, leading position in Payroll. The market has evolved to “Beyond Payroll” and integrated HCM Historically, ADP chose to buy rather than build its HCM “Beyond Payroll” capabilities – this requires integration of disparate product
Slide 27: Root Causes of ADP's Underperformance
Root Causes of ADP’s Underperformance Insular executive management team (see appendix page 51) Amongst senior leadership, no operating executive has worked at another company in the last decade and their average tenure at ADP is ~20 years Lacking in critical capabilities and no outside talent from b
Slide 28: ADP's Management Compensation Is Not Aligned With Its Potential
ADP’s Management Compensation Is Not Aligned With Its Potential Management compensation is not presently aligned with ADP’s potential: Executive compensation is set at a lower bar than ADP’s long-term plan and annual guidance Management has missed its own long-term targets on revenue, margins, and o
Slide 29: ADP's Response: The Status Quo
ADP’s Response: The Status Quo
Slide 30: ADP's actual TSR of 141% trails its actual HCM competitors
ADP’s actual Total Shareholder Return (“TSR”) of 141% trails its actual HCM competitors’ TSR ADP Says to Shareholders That It Is Outperforming – But This is Not True ________________________________________________ Source: Capital IQ; Total Shareholder Return. Dividend adjusted share price, assuming
Slide 31: ADP Management Has Affirmed the Status Quo
Instead of Embracing the Opportunity, ADP Management Has Affirmed the Status Quo On September 12th, ADP responded to Pershing Square and released its “Transformation Plan,” which: Is an affirmation of the status quo Delivers no meaningful improvement despite the fact that ADP significantly trails co
Slide 32: ADP's Transformation Plan Delivers No Meaningful Improvement
ADP’s “Transformation Plan” Delivers No Meaningful Improvement – Shareholders Should Demand More ADP claims to generate ~500bps of operational margin expansion from FY17 to FY20, but that’s not true – net operational margin expansion is just ~300bps (1) ~30% of this total net operational margin impr
Slide 33: Questions ADP has not answered
What are ADP’s margins by sub-segment? Is ADP earning comparable margins to Paychex in the Small-Business and Small Mid-Market portions of its business? Why is ADP’s absolute labor productivity so much lower than competitors? Why do ADP’s gross margins trail competitors so significantly? Is ADP’s sp
Slide 34: ADP's response fails to address the substance of our arguments
ADP’s response fails to address the substance of our arguments ADP is fundamentally underperforming its potential and has an enormous margin improvement opportunity ADP’s board and management either (i) don’t recognize the magnitude of the opportunity, or (ii) are unwilling or unable to take the ste
Slide 35: ADP's Underperformance Can Be Fixed Without Increasing Risk
ADP’s Underperformance Can Be Fixed Without Increasing Risk
Slide 36: ADP's Prior Dispositions Demonstrate The Opportunity For Improvement
ADP’s Prior Dispositions Demonstrate The Opportunity For Improvement CDK (“Dealer Services”) Solera (“Claims Services”) Adjusted EBIT Margins (%) Adjusted EBIT Margins (%) ________________________________________________ Source: ADP, Solera and CDK Global financials. Adjusted EBIT as presented inclu
Slide 37: CDK's Board Took a Shareholder-Friendly Approach
CDK’s Board Took a Very Shareholder-Friendly Approach, Which Allowed CDK to Fulfill its Potential CDK’s board was totally refreshed as a result of the spinoff, and included the addition of two directors proposed by an activist shareholder. The new CDK board: Embraced the views of shareholders, which
Slide 38: CDK embraced the views of shareholders
Adj. Rev Growth (excl F/X): Adj. EBITA Margins: CDK embraced the views of shareholders, hired a consultant to evaluate its potential, and publicly announced a transformation plan. CDK’s financial results and share price performance have been consistently positive CDK: Dividend-Adjusted Share Price P
Slide 39: What Was CDK's Transformation Plan?
CDK Global: What Was CDK’s Transformation Plan? Under ADP’s Ownership / Post-Spin CDK Transformation Plan Segments Sales R&D “We’re committed to an avg. 40-50 BPS of margin improvement over the next five years” (10) ________________________________________________ CDK 8K (May 23, 2016). Q3’2016 Earn
Slide 40: CDK's Transformation Provides a Roadmap for ADP
CDK’s Transformation Provides a Roadmap for ADP Restructuring the corporate organization to reduce business complexity, improve efficiency, and build a more client-centric structure Reducing management bureaucracy and bloat through fewer layers and larger spans of control Consolidating its sprawling
Slide 41: By adopting a CDK-like approach, ADP can become more competitive
By adopting a CDK-like approach, ADP can become a more competitive and efficient company for the benefit of all stakeholders. This will drive increased margins, earnings, and long-term growth for ADP
Slide 42: Transformation Plan for ADP
Transformation Plan for ADP Commit to a transformation plan to achieve ADP’s potential Fix corporate structure, Business Unit silos, matrix structure, corporate inefficiency (real estate sprawl, bureaucracy, spans-and-layers) Deliver necessary product and back-end improvements Best-in-class enterpri
Slide 43: ADP's transformation should include two primary components
ADP’s transformation should include two primary components: Operational efficiency improvements Improvements include corporate restructuring initiatives, service / support efficiencies, implementation automation, back-end technology improvements, and reduced spend on legacy platforms Will substantia
Slide 44: Transformation action items and timing
Action Item Staging / Timing Materiality to Earnings Increase(1) Improves Client Experience Materiality to Exit Growth Rate Corporate restructuring / reducing legacy silos / spans-and-layers Immediate N/M Geographic office consolidation / wage and tenure arbitrage Immediate N/M N/M Invest in automat
Slide 45: The Time is Now
The Time is Now With the vast majority of revenue no longer on legacy platforms, ADP must deliver on its long-promised efficiencies post migrations For years, ADP has been highlighting efficiency opportunities post-migrations: ADP has recently said that it doubled its margins in its small business s
Slide 46: The Time is Now (continued)
The Time is Now (continued) ADP should promptly address its efficiency opportunities across the vast majority of its business where product migrations are no longer needed. This will be beneficial to clients and improve growth Small- (~25% of ES revenue) and Mid-market (~35%) migrations will be comp
Slide 47: Margin Opportunity by Sub-Segment
The vast majority (~75%) of the increase in Employer Services margins will be driven by improvements in the Small, Mid-Market, and International sub-segments This margin expansion will be driven by basic operational efficiency These improvements can be captured in the short- to medium-term, with no
Slide 48: A Transformation of ADP Will Not Increase Risk
A Transformation of ADP Will Not Increase Risk ADP has made vague and alarmist assertions about the risk of a transformation – claims which are not supported by facts and do not align with our proposals for improving ADP The vast majority of our proposed initiatives do not involve “touching” ADP’s c
Slide 49: A Transformation Will Not Require a Reset of Earnings
A Transformation of ADP Will Not Require a Reset of Earnings While a transformation of ADP may require new or redirected investments, such investments should not cause a decline in ADP’s near-term earnings ADP’s technology R&D spend is already dramatically higher than competitors’ $859mm per annum o
Slide 50: Employer Services should achieve 35% or greater margins
ADP’s Employer Services business, currently ~2/3rds of profits and earning a ~19% operational margin, should achieve 35% or greater margins through improved operational efficiency ADP’s Employer Services business can increase its growth from ~5% historically to ~7%+ with greater technology leadershi
Slide 51: ADP Has The Potential to Drive Material Long-Term Value
Results: EPS (FY 2022) $5.90 $8.70 P/E Multiple 24x 24x - 28x Value, incl. Dividends (June 2021) $152 $221 - $255 Continued ~3% – 5% growth from FY 2018 to 2022 Incremental margin improvement of +50-75bps per annum after FY’18 Continued secular growth from underpenetrated base Conservatively assumin
Slide 52: The Nominees for ADP's Transformation
The Nominees for ADP’s Transformation
Slide 53: Overview of Our Engagement with the Board
Overview of Our Engagement with the Board In late July, following rumors of our investment in ADP, we initiated a dialogue with ADP’s board. Our desire was to engage in private, constructive discussions about our views for value creation at ADP We requested that ADP extend its nomination deadline by
Slide 54: What We are Not Seeking
What We are Not Seeking We are not seeking control of the company We are seeking to add three independent directors (out of 10), with only one Pershing Square representative on the board We do not plan to alter the company’s dividend policy In fact, an acceleration of profits under our plan will all
Slide 55: ADP's Governance Needs to Align to its Potential
ADP’s Governance Needs to Align to its Potential ADP’s primary governance deficiency has been (i) its failure to recognize ADP’s vast underperformance relative to its potential, and (ii) its failure to hold management responsible for delivering on this potential ADP’s longest-tenured directors have
Slide 56: The Choice for Shareholders
The Choice for Shareholders The choice for shareholders is clear – support the status quo or support ADP in achieving its potential Pershing Square Plan – Achieve Potential Management – Status Quo “[N]o material change to the financial outlook for the company”(1) Nominal margin expansion (but signif
Slide 57: The Nominees Bring Fresh Perspectives & Relevant Skills
The Nominees for ADP’s Transformation Will Bring Fresh Perspectives & Relevant Skills to ADP’s Board To fulfill its potential, ADP’s board needs expertise in both (i) business transformation and operating efficiency and (ii) technology and the HCM industry ADP’s board already has relevant technology
Slide 58: Nominees and Incumbent Long-Tenured Directors
Director since 2007 (10 years) Has overseen ADP’s underperformance relative to its peers and its potential No technology / HCM experience beyond ADP board role Divested assets which promptly doubled margins – didn’t see the opportunity As Audit Committee Chair, has presided over significant reductio
Slide 59: Pershing Square case studies
________________________________________________ Note: Excludes Chipotle, an ongoing investment, in its early stages. Each of the above case studies did not involve any significant change in strategy, they were premised on executing the existing strategy more successfully – driving significant margi
Slide 60: With Support From Shareholders, ADP Can Create Enormous Value
With Support From Shareholders, ADP Can Create Enormous Value Add a major shareholder and two new independent directors to the Board Form Board Committee to oversee the transformation plan Hire an independent consultant to help develop detailed plan Evaluation of necessary product, technology, and o
Slide 61: A Vote for The Nominees for ADP's Transformation
A Vote for The Nominees for ADP’s Transformation The election of The Nominees for ADP’s Transformation would add to the board: A major shareholder’s voice Fresh perspectives Relevant expertise in business transformation and operating efficiency Directors who are ADP shareholders with significant “sk
Slide 62: Henry Taub quote
“As a company, we've had a knack of making a friend out of change, turning its uncertainty into opportunity. That's a relationship I hope we're able to renew for a very long time to come.” - Henry Taub, Founder of ADP
Slide 63: ADP Ascending: Detailed Supporting Materials
ADP Ascending: Detailed Supporting Materials October 2017
Slide 64: Detailed Supporting Materials
Detailed Supporting Materials ADP is Underperforming its Potential……………………………………………...2 ADP is Falling Behind Competitors……………………………………………….15 Why is ADP Underperforming?....................................................................... 28 Root Causes of ADP’s Underperformance……………………………………....
Slide 65: ADP is Underperforming its Potential
ADP is Underperforming its Potential
Slide 66: Properly Operated, ADP is Worth Materially More
Properly Operated, ADP is Worth Materially More than its Current Valuation Backing out the value of ADP’s PEO and Float Income, and assuming ADP produced Paychex-like margins and value on its directly comparable ~$3bn of revenue, implies the balance of ADP’s business is valued at ~2x revenue ADP Rev
Slide 67: By P&L Item: Enormous Margin Opportunity in ES
By P&L Item: ADP has an Enormous Margin Opportunity in ES Employer Services (“ES”) Current Optimized Key Drivers Gross Margin ~58% 72% – 75% Automated product support, implementation, and reduced back-end spend Sales Expense NA Low 20s% Increased sales force productivity General & Admin NA L-S-D% Co
Slide 68: By Business Mix: Enormous Margin Opportunity in ES
By Business Mix: ADP has an Enormous Margin Opportunity in ES Employer Services is materially underperforming and should achieve 35% or greater margins by FY 2022 if properly managed Employer Services % of Revenue Optimized Margin (%) Evidence Small / Medium Business Low- to Mid-20%s 38% – 42% Paych
Slide 69: ADP provides "service" to its customers
“Unlike ADP’s competitors, ADP provides “service” to its customers” The vast majority of what ADP calls “service” is product support to compensate for weak software and technology, which when fixed, will improve growth and margins Value-added service – to the extent it is differentiated, unique, and
Slide 70: Only a minority of ADP's business is SMB
“Unlike Paychex, only a minority of ADP’s business is SMB” While this is true, if ADP achieved Paychex’s margins in its Small and Small Mid-market businesses (~$3bn of revenue), this would imply that the rest of Employer Services earns a ~6% margin on $5.5bn of revenue ADP is not achieving its struc
Slide 71: ADP has prioritized platform migrations
ADP has prioritized platform migrations, which should be the initial step towards product consolidation and significant business simplification ADP prioritized SMB and Mid-Market re-platforming given the relative retention characteristics and the ease of building next generation platforms ADP should
Slide 72: ADP's current initiatives should lead to material improvement
ADP’s current initiatives, executed effectively, should lead to material improvement ADP has outlined minimal payoff from these initiatives ADP has additional opportunities to improve performance, including: Corporate restructuring Service / support efficiencies Implementation automation Back-end te
Slide 73: ADP has Enormous Structural Advantages
ADP has Enormous Structural Advantages ADP should be the market leader, with world-class offerings ADP enjoys significant structural advantages: ADP’s significant scale, in total and by segment, provides: Significant free cash flow and financial resources so R&D resources are not a constraint ADP’s
Slide 74: Proper Enhancements Will Drive Long-Term Value
Long-term Shareholder Value Higher Growth Greater Efficiency Higher Margins Proper Enhancements to Product and Back-End Infrastructure Will Drive Long-Term Value Enhanced technology offerings, on the front-end and back-end, will drive improvements in ADP’s competitive position, long-term growth and
Slide 75: ADP has Enormous Upside If It Can Transition to a Technology Company
ADP has Enormous Upside If It Can Transition to a Real Technology Company ADP has a unique and incredibly valuable position at the epicenter of businesses of all sizes, collectively serving ~700,000 clients worldwide ADP should be the ecosystem and partner of choice, if it can become a technology le
Slide 76: ADP has a Strong Position in the PEO Market
ADP has a Strong Position in the PEO Market ADP’s advantages build further scale benefits: Sales force leads (~50-60% of new PEO clients), upselling existing clients At ~10.7k PEO clients, ADP’s PEO is under-penetrated as measured against ADP’s client count in small/medium size businesses (see next
Slide 77: ADP's PEO Can Grow Faster
ADP’s PEO Can Grow Faster ADP’s PEO appears significantly under-penetrated as a percentage of ADP’s client base ADP Addressable Client Base (2) 510k ~65k PEO “Sweet Spot” 10k – 30k Mid-Market 100k – 250k SMB Clients ~575k Est. 150k – 200k of ADP’s Clients may be a perfect fit for ADP’s PEO + ADP’s P
Slide 78: ADP is Falling Behind Competitors
ADP is Falling Behind Competitors
Slide 79: ADP was started by accountants with a heritage in data processing
ADP was started by accountants and has a long heritage in data processing Payroll “service bureaus” largely thrived on scale and processing efficiency, supplemented with human service, not innovative technology The rise of Beyond Payroll HCM, largely non-processing-related functionality, led to the
Slide 80: ADP's High-level Disclosures Do Not Tell the Full Story
ADP’s High-level Disclosures Do Not Tell the Full Story of ADP’s Competitive Position While ADP’s total client count appears to be growing, the loss of larger clients disproportionately impacts overall performance ADP needs ~185 SMB accounts or ~13 Mid-Market clients to replace the loss of just one
Slide 81: ADP's Reported Metrics are Overstating Growth
ADP’s Reported Metrics are Overstating Growth ADP’s PEO pass-throughs are inflating growth. Growth is slowing, while ADP’s sales force growth is accelerating ________________________________________________ Excludes Dealer Services in all periods. PEO estimated at ~11% of total revenue based on mana
Slide 82: ADP Management's Commentary on Client Wins/Losses is Misleading
________________________________________________ Q1’2015 Earnings Call. October 29, 2014. Ultimate Software Q1’2015 Investor Presentation. February 3, 2015. Scott Scheer. Q4’2016 Earnings Call. February 7, 2017. ADP Management’s Commentary on Client Wins/Losses is Misleading ADP Ultimate Software(2)
Slide 83: Client retention versus peers
ADP’s client retention appears to be in-line with weighted-average peer retention when adjusted for ADP’s estimated business mix Note that Ultimate has a best-in-class ~97% retention, while growing rapidly – this contradicts the notion that ADP’s “high touch service” model leads to differentiated re
Slide 84: ADP's Mid-Market Competitors are Gaining Share
________________________________________________ Source: Company SEC financials, press releases and news articles. Note: Financials have been adjusted to a June fiscal year end for Paycom and Paycor. Paycor financials based on public news articles. Includes both expensed and capitalized R&D. ADP’s M
Slide 85: ADP's Enterprise Competitors are Gaining Share
ADP’s Enterprise Competitors are Gaining Share ADP’s SaaS Cloud-based competitors, with high quality and integrated HCM offerings, are taking significant share in Enterprise Ultimate Software has spent only ~$590m on R&D cumulatively since 2011 while building and maintaining a world-class enterprise
Slide 86: ADP Appears to be Losing Significant Share in Enterprise HCM
________________________________________________ Source: ADP Analyst Day (2009), Company SEC financials, press releases and earnings transcripts. Note: Vantage reported as live clients, consistent with competitor customer counts. ADP reported 5,000 Enterprise clients as of the 2009 Analyst Day and 4
Slide 87: ADP Defends its Flat Comparable Client Counts in Enterprise
ADP Defends its Track Record of Flat “Comparable” Client Counts in Enterprise ADP introduced a new metric – “comparable up-market clients” (the definition of which is undisclosed) – which it claims have been “largely consistent” Regardless of the Enterprise client count: Absolute Enterprise revenue
Slide 88: Industry Research Notes ADP's Deficiencies in Enterprise HCM
Industry Research Notes ADP’s Deficiencies in Enterprise HCM Nucleus Research HCM Technology Value Matrix 2016 Emphasis Added ________________________________________________ (1) Nucleus Research, HCM Technology Value Matrix 2016, September 2016. (2) Gartner, Magic Quadrant for Cloud HCM Suites for
Slide 89: Why is ADP Losing to Competitors?
Why is ADP Losing to Competitors? 40% to 50% of Ultimate Software’s wins in recent years have come from ADP “We typically get between 45% and 50% of our new units from ADP… I think our culture, product, and service -- we end up winning a lot. So, I don't know why that would change in the future, unl
Slide 90: Why is ADP Losing to Competitors? (cont'd)
Why is ADP Losing to Competitors? (cont’d.) Why are they looking to replace their old vendor (e.g., ADP)? What factors are allowing Ultimate to win versus incumbent providers (e.g., ADP)? Why is ADP losing to competitors? Inferior Product: Technology, Functionality, Reporting, and Non-Integrated HCM
Slide 91: Why is ADP Underperforming?
Why is ADP Underperforming?
Slide 92: Underperformance in Employer Services is Broad-Based, But Fixable
ADP’s Underperformance in Employer Services is Broad-Based, But Fixable ADP’s underperformance in Employer Services is driven by numerous inefficiencies across ADP’s organization: Service organization is overstaffed and poorly structured Implementation teams are siloed and lack automation tools Back
Slide 93: Service versus support
ADP does not distinguish between “service” and “support” when describing its service organization Service: Value-added enhancements which help clients utilize products Value-added services include compliance, tax, filings, etc. Adds value and should generate greater market share and/or higher pricin
Slide 94: ADP's Service Structure: Sprawling and Sub-Scale
ADP’s Service Structure: Sprawling and Sub-Scale ADP has ~10 million square feet of real estate and >130 US office locations
Slide 95: ADP Touts its Service Alignment Initiative
ADP Touts its Service Alignment Initiative ADP quantified for the first time the benefit of its Service Alignment Initiative. However, the “0.5-1.5%” “operational” margin uplift targeted suggests little benefit from this initiative Note that the stated uplift includes 20bps of duplicative costs depr
Slide 96: Implementation Teams are Siloed and Lack Automation Tools
ADP’s Implementation Teams are Siloed and Lack Automation Tools Implementations are labor intensive and generally siloed by product – the current structure precludes operating leverage Substantial “hands-on-keyboard” implementation teams – thousands of employees involved in implementation efforts La
Slide 97: ADP Payroll Product Architecture
________________________________________________ Compiled based on public sources and private interviews. Certain views may be dated and as such, ADP may have modernized the architecture in recent years. We understand that all of these products are premised on PeopleSoft code from the 1990s and are
Slide 98: Enterprise products cobbled together as Vantage
Enterprise consists of a combination of various products acquired over time, many of which have been cobbled together as Vantage HR Anytime (HRIS) PayForce Enterprise HR (HRIS & Payroll) Enterprise Payroll Pro Business Payroll Workforce Now(1) Full HR BPO (“COS”) Health and Welfare Services (Benefit
Slide 99: Sales force productivity analysis
________________________________________________. Note: Analysis spreads estimated competitor net bookings over their last fiscal year average sales head count. Net bookings estimated by subtracting the change in recurring revenue (excluding implementation, PEO pass-through costs and float revenue)
Slide 100: ADP Defends Its Sales Productivity
Measuring productivity through FY 2016 presents an incomplete picture as 2016 was inflated by ACA-related activity, and ignores productivity declines in FY 2017/18 Reported bookings include non-economic bookings, overstating salesforce productivity ADP’s salesforce productivity trails competitors (e
Slide 101: ADP dwarfs competitor systems spending
On an absolute dollar basis, ADP dwarfs competitor systems spending, other than Workday, which is growing rapidly and building out its ERP / financials product for Enterprise clients ADP should be an HCM technology leader given its vast spending and resources Systems Development and Programming Expe
Slide 102: Legacy Technology Spend Has Increased Since FY 2011
Legacy Technology Spend Has Increased Since FY 2011 ADP’s legacy technology expense has actually increased since FY 2011, despite ADP having “retired / divested 13 major legacy platforms”(1) over the same time period ADP’s legacy R&D spend alone is a multiple of most competitors’ entire technology b
Slide 103: ADP's Corporate Structure is Inefficient
ADP’s Corporate Structure is Inefficient Various business units operate in a mostly siloed manner Multiple HQs for each business unit Each business unit operates with its own staffing across most functions, including administrative functions (HR, Finance, etc.) Matrix structure with many functions h
Slide 104: ADP's Structure is Not Client Centric
Intl. In-Country Structure ________________________________________________ Note: Informed by primary research interviews. The above represents a complete understanding to the best of our ability. ADP’s Structure is Not Client Centric and Requires Duplicative Back-Office Functions ADP Corporate Smal
Slide 105: ADP's Sprawling Corporate Footprint
ADP’s Sprawling Corporate Footprint ADP’s Corporate HQ (Roseland, NJ), SMB (Florham Park, NJ), and Mid-Market (Parsippany, NJ) offices are a 15-20 minute drive from one another
Slide 106: ADP's Sprawling Corporate Footprint (cont'd)
ADP’s Sprawling Corporate Footprint (cont’d.) ADP’s business units and corporate offices are spread across the country largely due to historical locations for each business Mid-Market (Majors) Small Business (SMB) Corporate HQ Enterprise (National Accounts) Value-Add and Tax PEO
Slide 107: ADP's Business Structure is Sub-Optimal
ADP’s Business Structure is Sub-Optimal ________________________________________________ Source: Interviews with prior ADP executives. ADP’s current structure is hurting ADP’s ability to execute in the marketplace while incentivizing sub-optimal outcomes The current structure: Does not put the clien
Slide 108: BU Presidents Manage Cost-Centers Without Product Ownership
Hard-Line Divisional Functions Matrix Functions to Corporate ________________________________________________ Note: Informed by primary research interviews. Internal divisional segmentation may have changed in recent years. The above represents a complete understanding to the best of our ability. Ad
Slide 109: ADP's Functional Matrix Structure is Sub-Optimal
ADP’s Functional Matrix Structure is Sub-Optimal ________________________________________________ Source: Interviews with prior ADP executives. ADP’s functional matrix reporting structure hampers execution, precludes transformational change, and promotes waste The current structure: Prevents transfo
Slide 110: Product Migrations Should Yield Big Improvements
Better user experience More cross-selling of modules Higher retention Fewer errors with real-time capabilities Fewer manual processes Fewer support calls and less support activity Less maintenance expense Less R&D supporting legacy infrastructure Significantly higher growth and margins ADP’s Product
Slide 111: Product Migrations Before, During, After
MIGRATIONS Before During After Quality of Offering vs. Best-in-Class LOW IMPROVING HIGH Customers at Risk HIGH LOWER LOW Retention OK Revenue per Customer / Cross-Sell LOW IMPROVING Support /Service Needs On-going and Maintenance Costs Implementation and Migration Costs Margins ADP’s Product Migrati
Slide 112: Root Causes of ADP's Underperformance
Root Causes of ADP’s Underperformance
Slide 113: ADP Built its HCM Offering Through Acquisitions
ADP Built its HCM Offering Almost Entirely Through Acquisitions, Which Require Integration ADP “cobbled” together a collection of HCM products across disparate platforms which have largely remained siloed operationally ADP should be focusing on integration of acquired operations and products, while
Slide 114: ADP's senior executive management
ADP’s senior executive management Executives have decades of tenure at ADP and effectively no outside experience and perspective “He’s [Bill Ackman] saying that somehow the company is insular and that people stick around forever, and the people that have worked for me have been around the company fo
Slide 115: ADP's Management Team Needs Improvement
ADP’s Management Team Needs Improvement ADP’s senior executive management team needs outside experience and fresh perspectives; historically, outsiders have been rejected ADP’s senior executive management team is lacking critical capabilities ADP should be hiring from leading companies in its quest
Slide 116: ADP's Culture Needs to Change
ADP’s Culture Needs to Change ADP’s insular, bureaucratic, and staid corporate culture causes the Company to trail competitors in recruiting talent, eroding the Company’s long-term competitive position Many of ADP’s direct competitors rank amongst the best places to work in the country, according to
Slide 117: Employee satisfaction metrics vs peers
________________________________________________ Source: Glassdoor, Inc. July 2017. Note: Green stars denote Glassdoor Highest Rated CEOs from 2016 or 2017 based on U.S. employee feedback between 5/2/15 - 5/1/17. Overall Rating Approval of CEO Approve of Senior Management ADP Rank: Last 2nd to Last
Slide 118: Employee satisfaction metrics vs peers (cont.)
________________________________________________ Source: Glassdoor, Inc. July 2017. Culture & Values Recommend to a Friend Positive Business Outlook ADP Rank: Last Last Last ADP Trails Major Peers Across a Variety of Employee Satisfaction Metrics
Slide 119: Focus on Hitting the Numbers Led to Value-Destructive Decisions
ADP’s Focus on “Hitting the Numbers” Has Led to Value-Destructive Decisions with Negative Long-Term Consequences ADP Total Shareholder Return Expectations – 2015 Analyst Day ________________________________________________ Source: ADP Analyst Day, March 3, 2015. “[ADP is] very focused on per share v
Slide 120: ADP's Response and Plan
ADP’s Response and Plan
Slide 121: ADP's Response and Transformation Plan Argue For The Status Quo
On September 12th, ADP responded to Pershing Square and released its “Transformation Plan,” which: Is an affirmation of the status quo Fails to address critical deficiencies and the magnitude of the opportunity for improvement Selectively focuses on certain, often incorrect, data points and ignores
Slide 122: ADP's Transformation Plan Delivers No Meaningful Improvement
ADP’s “Transformation Plan” Delivers No Meaningful Improvement – Shareholders Should Demand More ADP’s “Transformation Plan” ________________________________________________ Note: Emphasis added. Observations Management’s commitment to ~200bps of margin expansion over 3 years is slightly below to in
Slide 123: The Numbers Don't Add Up With Management's Plan
The Numbers Don’t Add Up With Management’s Plan ADP’s Self-Described SMB Transformation ________________________________________________ Note: Emphasis added. ADP claims to have doubled SMB margins while growing the topline 8% and improving retention by 320bps The company notes they “Anticipate Simi
Slide 124: Why is management not committing to margin improvement from migrations?
Why is management not committing to margin improvement from platform migrations? For years, ADP has been highlighting efficiency opportunities post-migrations: ADP is set to complete Workforce Now platform migrations in the mid-market later this year, representing ~$3bn+ of revenue Despite this, ADP
Slide 125: ADP's ~500bps margin expansion claim
ADP claims to generate ~500bps of operational margin expansion from FY17 through FY20, but that’s not true ADP’s cadence of operational margin expansion (300bps over 3 years) is consistent with its historical results ~30% of the total net margin improvement is driven by PEO mix-shift, NOT underlying
Slide 126: Deconstructing ADP's Long-Term Operating Plan
Deconstructing ADP’s Long-Term Operating Plan Note: Blue boxes represent mid-point of ADP’s long-term plan. Green boxes represent PSCM assumptions. Red boxes denote a highlighted output. ~300bps of net operational margin expansion ADP’s Long Term Plan ES margins expanding only ~220bps
Slide 127: What is The Risk of the Status Quo?
What is The Risk of the Status Quo? ADP’s current status quo is harming its long-term competitive position The risk of inaction is great; ADP is already losing share If customers are lost, they can be lost for a decade or more Exceedingly slow transformation is harmful Competitors are moving faster
Slide 128: ADP's Advisors Roll Out Activist Defense 101
ADP’s Advisors Roll Out Activist Defense 101… We’ve Seen This Playbook Before “Pershing Square's Proposal is Ill-Conceived and Introduces Unwarranted Risk to Shareholder Value.” “We’re Already Doing This” Tactic “They Don’t Understand” “It’s Just Too Risky” “Pershing Square has demonstrated a lack o
Slide 129: Canadian Pacific: What We Said – What Happened
Canadian Pacific: What We Said – What Happened “Curves and grades is physics, and the dismissive comments by Mr. Harrison indicates a clear lack of research or understanding or both.” (4) Projected Future Share Price Existing Margins / Unaffected Share Price (1) Company Response to Pershing’s Target
Slide 130: Why is ADP Unwilling to Achieve its True Potential?
Why is ADP Unwilling to Achieve its True Potential? Current initiatives should be paired with a more comprehensive plan to achieve ADP’s full structural potential ADP has additional opportunities to improve performance, including: Corporate restructuring / reducing legacy silos / spans-and-layers De
Slide 131: ADP's Usage of Select Data Points is Misleading
You Can’t Have it Both Ways: ADP’s Usage of Select Data Points is Misleading ADP: “Compounded annual revenue growth of 7% over the last 5 years, with 580bps increase in net operational margins” ________________________________________________ Revenue growth includes PEO pass-throughs while stated ma
Slide 132: ADP's Prior Dispositions Demonstrate the Opportunity for Improvement
ADP’s Prior Dispositions Demonstrate the Opportunity for Improvement at ADP
Slide 133: Solera and CDK margin gains after disposition
Solera (f.k.a. Claims Services within ADP): sold by ADP April 2006 Operating margins increased 2,000bps from 18% to 40% five years post-ADP Key drivers: “attack waste,” facility rationalization, organizational restructuring, delayering the organization, improved customer relationships CDK Global (f.
Slide 134: Dealer Services under ADP vs. after spin-off
Gary Butler, ADP, Former CEO “Yes. Again, the business model there is no different than Employer Services. Again, sans acquisitions or significant investments, we would expect the core Dealer business to improve its margins 0.5 point a year as a way to think about it. So there are clearly 2 or 3 mor
Slide 135: Efficiency opportunities at CDK similar to ADP
Many areas of the transformative opportunity at CDK are similar to those which exist at ADP CDK Global: Many Efficiency Opportunities Similar to ADP ________________________________________________ Source: CDK FY Q3 2017 Results, May 2, 2017. CDK Business Transformation Plan
Slide 136: ADP Obfuscates with Misleading Margin Comparisons
ADP attacks our CDK case study based on the non-sequitur that CDK’s Adjusted EBITDA adds back both stock-based compensation and one-time restructuring charges If the goal of the comparison (at left) between ADP’s and CDK’s Adjusted EBITDA margins is to make the point that they are similar today (on
Slide 137: CDK's Performance Lagged Under ADP
ADP Attempts to Obfuscate the CDK Case Study – Any Way You Cut It, CDK’s Performance Lagged Under ADP ADP’s comparison misses the point: Whether looked at on an Adjusted EBITDA or Adjusted EBIT margin basis, CDK’s margins increased massively after it was disposed of by ADP. CDK’s underperformance un
Slide 138: Solera (Formerly ADP Claims Services Group)
Solera (Formerly ADP Claims Services Group) ________________________________________________ Source: ADP and Solera Holdings Inc. SEC filings and transcripts. Adjusted EBITA adds back restructuring costs, acquisition related costs, litigation related expenses (most notably in FY’2015) and amortizati
Slide 139: History Repeats Itself: WageWorks
________________________________________________ Source: WageWorks financial press releases, management commentary. Colm Callan, CFO, WageWorks. William Blair Growth Stock Conference (June 14, 2017). Joseph L. Jackson, Chairman and CEO, WageWorks. William Blair Growth Stock Conference (June 14, 2017
Slide 140: Governance and Management Compensation
Governance and Management Compensation
Slide 141: ADP is Highlighting the Wrong Director Choice For Shareholders
ADP is Highlighting the Wrong Director Choice For Shareholders ADP already has relevant technology experience on the board and we are NOT seeking to replace these directors – the directors we are replacing have no technology experience ADP says our directors are not qualified because they are not te
Slide 142: The Nominees Bring Relevant Skills and Fresh Perspectives
The Nominees for ADP’s Transformation Bring Relevant Skills and Fresh Perspectives William Ackman Veronica Hagen Paul Unruh Investor in the HCM industry for a decade Investments in a number of successful business transformations similar to ADP, providing valuable insights that can be applied to the
Slide 143: ADP's Attacks on Our Directors are Misleading
ADP’s Attacks on Our Directors are Purposely Misleading and Intellectually Dishonest ADP’s Selective and Misleading Claims Pershing Square’s Long-Term Track Record ADP’s dishonest tactics are not in the best interest of shareholders and obfuscate the real question at hand – Is ADP achieving its pote
Slide 144: The Value of a Large Shareholder on the Board
Perspective of a large shareholder in the boardroom Pershing Square’s analytical resources would be available to the full Board and Management Would allow for greater focus on long-term value creation Would enable the Board to test ideas privately with a large shareholder Greater credibility with sh
Slide 145: ADP's Governance Needs to Align to its Potential
ADP’s Governance Needs to Align to its Potential ADP’s governance deficiency has been (i) its failure to recognize its vast underperformance relative to its potential, and (ii) its failure to hold management responsible for delivering on this potential ADP is a market leader that should be deliverin
Slide 146: Executive Compensation is Set at a Lower Bar than ADP's Plan
Executive Compensation is Set at a Lower Bar than ADP’s Long-Term Plan and Annual Guidance ________________________________________________ Source: Company Filings, March 2015 Investor Day Presentation and September 2017 Investor Presentation (1) Excludes $0.02 benefit from repurchases related to $8
Slide 147: Management Has Not Met its Long-Term Plan
________________________________________________ Source: Company Filings and March 2015 Investor Day Presentation (1) Pro forma numbers per management proxy, adjusted for gains/losses on divestitures, charges related to service alignment and workforce optimization, accounting standard updates, acqui
Slide 148: Non-Operating Items are Aiding Compensation Results
Shortfall becomes outperformance, boosted by taxes and increased buybacks ________________________________________________ Source: Management Proxy Circular, Company filings, FY17 Q4 Earnings Transcript and Earnings Presentation Despite Operational Underperformance, Non-Operating Items are Aiding Co
Slide 149: Management Compensation is Misaligned: Example #1
Management Compensation is Misaligned: Example #1 – BU Leader Compensation Aligned? Mark Benjamin was the former Division President, Global Enterprise Services In FY 2016, Mark Benjamin received 91.2% of his target bonus… …despite abysmal performance in his Business Unit, as just 20% of his bonus wa
Slide 150: Management Compensation is Misaligned: Example #2
Management Compensation is Misaligned: Example #2 – New Bookings Targets Appropriate? In FY 2016, ADP management received a 185% payout on its New Business Bookings Growth target Were New Business Bookings Growth targets set properly in light of favorable industry conditions (including ACA tailwinds
Slide 151: Management Compensation is Misaligned: Example #3
Rather than set targets for actual reductions in bloated legacy R&D spend, in FY ‘15 and some prior years, the Board set targets based on legacy R&D as a % of total R&D spend Management Compensation is Misaligned: Example #3 – R&D Targets Appropriate? ________________________________________________
Slide 152: ADP's reduced historical disclosure
Category Example of Historical Disclosure Year Last Reported Currently Reported? Revenue and Client by Sub-Segment “[SMB] is about $1 billion of revenue, it comprises about 382,000 clients… Then in the major accounts space… our revenue is about $2 billion in that space, 63,000 payroll clients... We
Slide 153: Improved Disclosure Would Allow for Analysis of ADP's Performance
Improved Disclosure Would Allow for Analysis of ADP’s Performance Additional disclosures would allow investors to analyze the performance of the business in its underlying sub-segments and increase management accountability for performance relative to competitors and potential ADP should provide rel
Slide 154: ADP Should Improve Transparency, Set Appropriate Targets, and Align Incentives
ADP should provide relevant, critical information to investors: Isolate float as a separate reported line item in segment financials Revenue, Client Count, Retention, and Bookings by Sub-Segments in ES (SMB, Mid-Market, Enterprise, International), as well as the PEO Profitability by Sub-Segment in E
Slide 155: ADP's Total Shareholder Return: Overstated and Trailing its Actual Peers
ADP’s Total Shareholder Return: Overstated and Trailing its Actual Peers
Slide 156: ADP Claims to Have Generated a 203% TSR
ADP Claims to Have Generated a 203% TSR… ADP Shareholder Letter ADP Investor Presentation “ADP’s Leadership has Delivered Results 203% Total Shareholder Return (TSR) under Carlos Rodriguez, significantly outperforming the S&P 500 and peers” ADP uses a purported 203% TSR over CEO Carlos Rodriguez’s t
Slide 157: ADP's Purported 203% TSR is Misleading
…But ADP’s Purported 203% TSR is Misleading ADP’s purported 203% TSR calculation is misleading: Wrong Start Date: Uses the day after Carlos Rodriguez became CEO as the start date of the TSR calculation, which boosts the TSR by 10 percentage points as the stock declined 3.9% on the day of the new CEO
Slide 158: 203% TSR: Wrong Start Date
ADP’s Purported 203% TSR: Wrong Start Date, Boosting ADP’s Reported TSR by 10ppts ADP TSR calculation uses the November 9th closing price, the day after Mr. Rodriguez was named CEO, which boosts ADP’s reported TSR by 10ppts ADP Share Price (Week of Nov 7, 2011) ADP TSR Calculation Page 5, footnote 2
Slide 159: 203% TSR Includes Pershing Square's Accumulation and Market Rumors
ADP Share Price & Spread in Share Volume vs. Prior 5 Year Avg. Daily Volume Pershing Square’s and our hedging counter party’s purchases from May 10th to July 27th intraday at 12:00pm represented ~13% of total ADP volume traded during that period, and 28% of July 27th volume(3) ADP’s Purported 203% T
Slide 160: Pershing Square volume assumptions and notes
________________________________________________ In determining Pershing Square’s volume, we assume that all derivatives purchased (or sold, respectively) by Pershing Square resulted in a hypothetical delta-equivalent purchase (or sale, respectively) of common stock in the marketplace. Historical av
Slide 161: TSR uses a Pershing Square-inflated stock price
“Prior to the recent developments between ADP and activist investor Bill Ackman of Pershing Square, many investors believed in a $95- $100 outcome for ADP (as did we, with our prior $98 target)... ”- Ashwin Shirvaikar, Citi (Aug 16, 2017) “[W]e get asked all the time, how much of Ackman is in the st
Slide 162: 203% TSR Includes CDK Outperformance
“We have done a deep dive in our organization and performed a comprehensive optimization analysis. As a result, we have developed and are in the process of implementing a compelling transformation plan to significantly increase profitability… “We will significantly expand margins. We are targeting 1
Slide 163: ADP's Form 10-K TSR (FY 2017)
ADP’s Form 10-K TSR (FY 2017) In ADP’s calculation of its TSR in its own SEC filings, it treats the CDK spinoff as a dividend, assuming it is sold by shareholders on the day of spinoff and the proceeds are reinvested in ADP stock on that day. This is the correct methodology In determining its 203% T
Slide 164: ADP's Actual TSR Relative to Management's Claim
Paychex TSR: (1) (3) (2) 138% 8% (5%) 9% 150% 146% NA 150% Spread (%): 3% 2% 23% 14% 41% 5% NA 53% ADP’s Actual TSR Relative to Management’s Claim ADP management’s TSR is 141% when measured correctly ________________________________________________ Source: Capital IQ; Dividend adjusted share price.
Slide 165: ADP's Selected Peer Group is Misleading
ADP’s Selected Peer Group is Misleading ________________________________________________ Estimated 2011-2017 CAGR. Based on Wall Street research, IDC (Payroll and HCM vendor share report) and ADP’s 2015 Analyst Day presentation. Jan Siegmund. Q2’2016 Earnings Call. February 3, 2016. Bloomberg Best b
Slide 166: Total Shareholder Return vs. Actual Competitors
________________________________________________ Source: Capital IQ; Total Shareholder Return from November 8, 2011 to May 9, 2017, prior to Pershing Square’s rapid accumulation of ADP’s stock. Dividend adjusted share price, assuming dividends reinvested (including CDK proceeds reinvested at time of
Slide 167: ADP's TSR Trails its Actual Competitors'
ADP’s TSR Trails its Actual Competitors’ ________________________________________________ Source: CapIQ, dividend adjusted share price. Total return through May 9, 2017. The starting date is the later of November 8, 2011 or the competitors’ IPO date/price (for Workday, TriNet, Paycom and Paylocity).
Slide 168: ADP's Recent TSR in Context
ADP’s Recent TSR in Context HCM market participants have benefited from employment growth since 2009, trends in HCM Beyond Payroll offerings, ACA demand drivers, and earnings multiple expansion Businesses which participate in attractive industries should have positive long-term performance, and thus
Slide 169: ADP Trails Its Actual Peers Over All Relevant Periods
ADP Trails Its Actual Peers Over All Relevant Periods Since Mr. Rodriguez Was Named CEO ________________________________________________ Source: Capital IQ; Total Shareholder Return. Dividend adjusted share price, assuming dividends reinvested (including CDK proceeds reinvested at time of spin-off).
Slide 170: Supplemental Materials
Supplemental Materials
Slide 171: Adjusted Segment Margins
Adjusted Segment Margins ________________________________________________ Source: ADP Form 10-K (2017), Q4’2017 financial press release. Note: Assumes Clients Funds / Float Income has a 100% profit margin to Operating Profit. Per the 10K, “there is a reconciling item for the difference between actua
Slide 172: The Nominees for ADP's Transformation
William Ackman Veronica Hagen Paul Unruh The Nominees for ADP’s Transformation William A. Ackman is the founder, chief executive officer and portfolio manager of Pershing Square Capital Management, L.P., an SEC-registered investment adviser founded in 2003. Pershing Square is a concentrated research
Slide 173: Endnotes
Endnotes Endnote 1: The companies shown on this page reflect all of the companies for which Pershing Square has filed a 13D. While the Pershing Square funds are concentrated and file 13Ds with respect to many if its investments, Pershing Square will own, and in the past has owned, a larger number of
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