Company: ADP
Filing Date: 2025-01-30
Form Type: 10-Q
Source: 0000008670-25-000007
Chunk: 6

Company: AUTOMATIC DATA PROCESSING INC
Filing Date: 2025-01-30
Form: 10-Q
Item: Part I, Item 2
Chunk 6
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28

Earnings Before Income Taxes ("EBIT") and Adjusted EBIT 

For the three and six months ended December 31:

Three Months EndedSix Months EndedDecember 31,December 31,20242023YoY Growth20242023YoY GrowthEBIT$1,261.3 $1,143.8 10 %$2,497.5 $2,236.6 12 %  EBIT Margin25.0 %24.5 %50 bps25.3 %24.4 %90 bpsAdjusted EBIT$1,272.0 $1,147.1 11 %$2,504.5 $2,240.4 12 %  Adjusted EBIT Margin25.2 %24.6 %60 bps25.3 %24.4 %90 bps

Earnings before income taxes increased for the three and six months ended December 31, 2024, due to the components discussed above.

EBIT Margin increased for the three and six months ended December 31, 2024, due to contributions from client funds interest revenues discussed above, increased interest income on corporate funds, and operating efficiencies for costs of servicing our clients on growing revenue, partially offset by increased interest expense and acquisition related expenses.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds extended investment strategy, legal settlements, and net charges related to our broad-based transformation initiatives, in the applicable periods. 

Provision for Income Taxes

The effective tax rate for the three months ended December 31, 2024 and 2023 was 23.6% and 23.2%, respectively. The increase in the effective tax rate is primarily due to a benefit for adjustments to prior year tax liabilities in the three months ended December 31, 2023, partially offset by a higher excess tax benefit on stock-based compensation in the three months ended December 31, 2024.

The effective tax rate for the six months ended December 31, 2024 and 2023 was 23.1% and 22.3%, respectively. The increase in the effective tax rate is primarily due to a benefit for adjustments to prior year tax liabilities, lower reserves for uncertain tax positions and a valuation allowance release in the six months ended December 31, 2023.

Adjusted Provision for Income Taxes

The adjusted