ADP 10-K & 10-Q changes, risk factors and insider trading

In addition, changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business. For example, a change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities would adversely impact average client balances and, thereby, adversely impact interest income from investing client funds before such funds are remitted to the applicable tax authorities. Changes in U.S. or foreign tax laws, regulations or rulings or the interpretation thereof could adversely affect our effective tax rate and our net income. In addition, changes in federal, state or local tax laws and regulations allowing for tax credits (including the non-renewal of such laws) could adversely impact our Tax Credit Services business, which helps clients in the United States realize tax credit opportunities in connection with the hiring of new employees and certain other activities. Changes in laws or regulations have caused, and could alsoin causethe future cause, us to modify our client funds investment strategy, which may reduce the interest income earned on such funds. Changes in laws, or interpretations thereof, that govern the co-employment arrangement between a professional employer organization and its worksite employees may require us to change the manner in which we conduct some aspects of our PEO business. In addition, changes in the manner in which health and welfare plans sponsored by PEOs or the TotalSource Health and Welfare Plan, in particular, are regulated could adversely impact the demand for our PEO offering.

Because our PEO is a co-employer with our PEO clients and a Certified PEO by the Internal Revenue Service, we may be subject to certain obligations, responsibilities and liabilities of an employer with respect to Worksite Employees (“WSE”), including with respect to their wages and the payment thereof, tax credits for employers, the payment of certain taxes with respect to WSE wages and employee benefits provided to the WSEs. Even though PEO clients are contractually responsible for the timely remittance of such costs, it is possible that our clients will not remit such payments despite their contractual obligations. The risk of failing to receive such payments from PEO clients could beis magnified during significant financial or other disruptions or catastrophic events, such as the failure of a bank with whom a significant number of PEO clients may bank at the time, or more widespread stress or failure within the U.S. banking system. Any such event could prevent or materially delay the recovery of any payments not timely remitted and could have an adverse impact on our financial results and liquidity.

Failure to comply with anti-corruption laws and regulations, antitrust and competition laws and regulations, economic and trade sanctions, anti-money laundering laws and regulations, and similar laws could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences

Regulators worldwide continue to exercise a high level of scrutiny with respect to anti-corruption, antitrust and competition, economic and trade sanctions, and anti-money laundering laws and regulations. Such scrutiny has resulted in aggressive investigations and enforcement of such laws and regulations, any of which could materially adversely impact our business. We operate our business around the world,world and continue to expand globally, including in numerous developing economies where companies and government officials are more likely to engage in business practices that are prohibited by domestic and foreign laws and regulations, including the United States Foreign Corrupt Practices Act and the U.K. Bribery Act 2010. Such laws generally prohibit improper payments or offers of payments to foreign government officials and leaders of political parties and, in some cases, to other persons, for the purpose of obtaining or retaining business. We are also subject to economic and trade sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control, which prohibit or restrict transactions or dealings with specified countries, their governments and, in certain circumstances, their nationals, and with individuals and entities that are specially designated, including narcotics traffickers and terrorists or terrorist organizations, among others. In addition, some of our businesses and entities in the U.S. and a number of other countries in which we operate are subject to anti-money laundering laws and regulations, including, for example, The Bank Secrecy Act of 1970, as amended by the USA PATRIOT Act of 2001 (the “BSA”). Among other things, theanti-money BSAlaundering requireslaws and regulations require certain financial institutions, including banks and money services businesses (such as national trust banks and providers of prepaid access like us), to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity, and maintain transaction records. We have registered our prepaid card business as a provider of prepaid access, and registered ADP Trust Bank and ADP Retirement Trust Services with the Treasury Department’s Financial Crimes Enforcement Network. ADP Canada Co. is a registered entity with FINTRAC as a Money Services Business with FINTRAC and a Payment Service Business. In November 2024, ADP Canada Co. filed its application for registrationProvider with the Bank of Canada as a Payment Services Provider as defined and required under the Retail Payment Activities Act.Canada.

We have implemented policies and procedures to monitor and address compliance with applicable anti-corruption, antitrust and competition, economic and trade sanctions and anti-money laundering laws and regulations, and we regularly review, upgrade and enhance our policies and procedures. However, there can be no assurance that our employees, consultants or agents will not take actions in violation of our policies for which we may be ultimately responsible, or that our policies and procedures will be adequate or will be determined to be adequate by regulators. Any violations of applicable anti-corruption, antitrust and competition, economic and trade sanctions or anti-money laundering laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations or financial condition. Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their BSAanti-money laundering obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering. As a result, our banking partners that assist us in processing our money movement transactions may limit the scope of services they provide to us or may impose additional material requirements on us. These regulatory restrictions on banks and changes to banks’ internal risk-based policies and procedures may result in a decrease in the number of banks that may do business with us, may require us to materially change the manner in which we conduct some aspects of our business, may decrease our revenues and earnings and could have a materially adverse effect on our results of operations or financial condition.

We believe that providing insights and content from data, including via AI and ML, will become increasingly important to the value that our solutions and services deliver to our clients. We are increasingly leveraging AI and ML in our solutions and service delivery and are exploring how bestcontinuing to integrate AI technologies, including generative AIand technologiesagentic andAI, to develop and deploy capabilities that are beneficial to our clients and their employees. However, legislation that governs the development and/or use of AI has been adopted or is under consideration in the U.S. at the state and local level, as well as abroad, most notably the European Union’s Artificial Intelligence Act. In addition, self-regulatory frameworks like the National Institute of Standards and Technology AI Risk Management Framework are being promulgated and adherence to these may become an industry standard or a client expectation. As a result, the ability to provide data-driven insights and otherwise leverage AI and ML may be constrained by current or future laws (including product liability regimes), regulatory or self-regulatory requirements or ethical considerations, including our own published, guiding ethical principles regarding AI and ML, that could restrict or impose burdensome and costly requirements on our ability to leverage data and/or these technologies in innovative ways. Our use of AI, including generative AIand agentic AI, in our products and operations also introduces additional risks, including risks related to accuracy, bias, discrimination, transparency, security, and privacy.privacy, that could expose us to regulatory investigations, enforcement actions, litigation and reputational damage. For example, if the data used to train a model or the model’s output is inaccurate or biased, or alleged to be inaccurate or biased, we could be subject to reputational damage or litigation.

Our ability to compete and our success depend, in part, upon our intellectual property. We rely on patent, copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees, clients, vendors, partners and others to protect our intellectual property rights. We may need to devote significant resources, including cybersecurity resources, to monitoring our intellectual property rights. In addition, the steps we take to protect our intellectual property rights may be inadequate or ineffective, or may not provide us with a significant competitive advantage. Our intellectual property (including source code) could be wrongfully acquired as a result of a cyber-attack or other wrongful conduct by third parties or our personnel, or as a result of increased use of AI tools, including generative AIand toolsagentic AI, by us or our vendors. Litigation brought to protect and enforce our intellectual property rights could be costly and time-consuming. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, which may be successful. In addition, use of AI tools may result in the release of confidential or proprietary information which could limit our ability to protect, or prevent us from protecting, our intellectual property rights.

We are focused on safeguarding and protecting personal and business information and client funds, and we devote significant resources to maintain and regularly update our systems and processes. Nonetheless, the global environment continues to grow increasingly hostile as attacks on information technology systems continue to grow in frequency, complexityspeed, complexity, sophistication and sophisticationeffectiveness (including due to the use of AI), and we are regularly targeted by unauthorized parties using malicious tactics, code and viruses. Certain of these unauthorized parties may be state-sponsored and/or supported by significant financial and technological resources. Although this is a global problem, it may affect our businesses more than other businesses because unauthorized parties (which could include our personnel) may focus on the amount and type of personal and business information that our businesses collect, host, store, transfer, process, disclose, use, secure, retain and dispose of, and the client funds that we collect and transmit.

We have programs and processes in place designed to prevent, detect and respond to data or cybersecurity incidents. However, as a result of the complexity of our operating environment, the period over which hardware and software has been acquired or other reasons, our programs and processes may not be sufficient or adequate or may fail to prevent, detect or respond to a cybersecurity incident or identify and/or remediate a security vulnerability in our operating environment. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently,frequently and are increasingly more complexcomplex, sophisticated and sophisticatedeffective (including due to the use of AI). As AI technologies, including generative and agentic AI, continue to evolve, threat actors are increasingly leveraging these technologies to enhance the sophistication, scale, speed and effectiveness of cyberattacks making them more difficult to detect and defend against. The adoption and deployment of AI technologies within our and our authorized third parties’ solutions, services, and systems may also introduce novel security, data governance and operational risks. In addition, new computing technologies, including quantum computing, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we or our authorized third parties use or have used to encrypt and protect data. We may fail to anticipate or detect these techniques and/or incidents for long periods of time and, even when we do so, we may be unable or fail to implement adequate or timely preventive or responsive measures. Our ability to address data or cybersecurity incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies. Hardware, software, applications or services that we develop or procure from authorized third parties, or are required by governmental or law enforcement agencies to install on our systems, may contain defects in design or manufacture or other problems that could (or in respect of third party software, may be designed to) compromise the confidentiality, integrity or availability of data or our systems. Unauthorized parties have also attempted to gain (and in certain cases have gained), and will continue to attempt to gain, access to our systems and facilities, and those of our authorized third parties, through fraud, trickery, and other methods of deceit, including using stolen identities to obtain employment with us or our authorized third parties as well as phishing and other social engineering techniques whereby attackers use end-user behaviors to distribute computer viruses and malware into our systems, our authorized third parties’ systems or otherwise compromise the confidentiality, integrity or availability of data or our systems. As these threats continue to evolve and increase (including due to the use of AI), we continue to invest significant resources, and may be required to invest significant additional resources, to modify and enhance our cybersecurity controls and to investigate and remediate any security vulnerabilities. In addition, as we become increasingly interconnected with our authorized third parties, the security risk of our networks and the larger ecosystem in which we operate is heightened. While our operating environments are designed to safeguard and protect confidential personal and business information, we do not have the ability to monitor the systems, personnel or physical facilities of, or the implementation or effectiveness of any safeguards by, our clients or our authorized third parties and, in any event, unauthorized parties have circumvented in the past, and may in the future be able to circumvent, those security measures. Information or system access obtained by unauthorized parties (which could include our personnel) resulting from successful attacks against our clients or our authorized third parties may, in turn, be used to attack and compromise our information technology systems, or result in production downtimes and operational disruptions that could have a material adverse effect on our business, results of operations or financial condition. Further, while we perform due diligence prior to acquisitions and take actions to safeguard the businesses that we acquire, these businesses may not have invested as significantly as we do in security and technology and may be more susceptible to cybersecurity incidents, which may make us more vulnerable to cybersecurity incidents as well.

We have been, and expect we will continue to be, the subject of cybersecurity attacks, including unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, insider threats, and theft of sensitive information (including our intellectual property). Although none of the cybersecurity incidents that we have identified to date have materially affected us, including our business strategy, operations, results of operations, or financial condition, we continue to face significant known and unknown cybersecurity threats. In the future, a cybersecurity attack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, theft of non-public or other sensitive information, exploitation of previously unknown "zero-day" vulnerabilities, or similar act by an unauthorized party (which could include our personnel) with respect to our businesses or our authorized third parties’ businesses, or inadvertent acts or inactions by our authorized third parties or personnel, could result in the loss, disclosure or misuse of confidential personal or business information or our intellectual property or the theft of client or ADP funds, which could have a materially adverse effect on our business or results of operations or that of our clients, result in liability, litigation, regulatory investigations and sanctions or a loss of confidence in our ability to serve clients, or cause current or potential clients to choose another service provider. As the global environment continues to grow increasingly hostile, the security of our operating environment is ever more important to our clients and potential clients. As a result, the breach or perceived breach of our security systems or the security systems of our authorized third parties could result in a loss of confidence by our clients or potential clients and cause them to choose another service provider, which could have a materially adverse effect on our business, financial condition or results of operations.

We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing and other technology services and systems that are provided, by third-party vendors. These data centers or cloud-computing and other technology services and systems have failed, become disabled or been disrupted, and may do so in the future. As our reliance on these third-party services and systems increases, particularly on third-party cloud computing platforms, our exposure to service interruptions and performance or quality issues could be impacted. Any failure, disablement or disruption, even for a limited period of time, could disrupt our businesses or operations and we could suffer financial loss, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a material adverse effect on our business, results of operations or financial condition. In addition, our third-party vendors may cease providing data center facilities or cloud-computing or other technology services or systems (including those on which our products or services are based), elect to not renew their agreements or licenses with us on commercially reasonable terms or at all, breach their agreements or licenses with us or fail to satisfy our expectations, which could disrupt our operations and require us to incur costs which could materially adversely affect our results of operations or financial condition.

Our businesses operate in industries that are subject to rapid technological advances (such as generative and agentic AI) and changing client needs and preferences. In order to remain competitive and responsive to client demands, we continually upgrade, enhance, and expand our technology, solutions and services, including by leveraging AI in our solutions. If we fail to respond successfully to technology challenges and client needs and preferences or our competitors or other third parties respond to such challenges more quickly or successfully than us, the demand for our solutions and services may diminish. As new technologies (such as generative and agentic AI) continue to emerge, they may be disruptive to the HCM industry. These technologies could result in new and innovative HCM products and solutions that could increase competition, place us at a competitive disadvantage or even render obsolete our technology, products and solutions. In addition, investment in product development and new technologies often involves a long return on investment cycle. We have made and expect to continue to make significant investments in product development and new technologies. We must continue to dedicate a significant amount of resources to our development efforts before knowing to what extent our investments will result in products the market will accept. In addition, our business could be adversely affected in periods surrounding our new product introductions if clients delay purchasing decisions to evaluate the new product offerings. Furthermore, we may not execute successfully on our product development strategy, including because of challenges with regard to product planning and timing and technical hurdles that we fail to overcome in a timely fashion. We may fail to realize all the economic benefit of our investment in the development of a product which could cause an impairment of goodwill or intangibles and result in a significant charge to earnings.

The COVID-19 outbreak created, and such otherSuch events may create,create significant volatility and uncertainty and economic and financial market disruption. The extent of any such impact depends on developments which are highly uncertain and cannot be predicted, including the duration and scope of the event; the governmental and business actions taken in response thereto; actions taken by the Company in response thereto and the related costs; the impact on economic activity and employment levels; the effect on our clients, prospects, suppliers and partners; our ability to sell and provide our solutions and services, including due to travel restrictions, business and facility closures, and employee remote working arrangements; the ability of our clients or prospects to pay for our services and solutions; and how quickly and to what extent normal economic and operating conditions can resume. In addition, clients or prospects may delay decision making, demand pricing and other concessions, reduce the value or duration of their orders, delay planned work or seek to terminate existing agreements. Our business is also impacted by employment levels across our clients, as we have varied contracts throughout our business that blend base fees and per-employee fees.

Trade, including the imposition of tariffs or other trade restrictions, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility. A slowdown in the economy or other negative changes, including in employment levels,levels (as a result of AI or otherwise), the level of interest rates or the level of inflation, may have a negative impact on our businesses. In addition, as our operating costs increase due to inflationary pressure or otherwise, we may not be able to offset these increases by corresponding price increases for our products and solutions. Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.

Our ability to grow and provide our clients with competitive services is, to an important degree, dependent on our ability to attract and retain highly skilled and motivated people reflecting diverse perspectives and the diversity of our communities and clients. Competition for skilled employees in the outsourcing and other markets in which we operate is increasingly intense, making it more difficult and expensive to attract and retain highly skilled, motivated and diverse personnel. If we are unable to attract and retain highly skilled, motivated and diverse personnel, results of our operations and culture may suffer.

Tabular dollars are presented in millions, except per share amounts The following section discusses our year ended June 30, 20252026 (“fiscal 20252026”), as compared to year ended June 30, 20242025 (“fiscal 20242025”). A detailed review of our fiscal 20242025 performance compared to our fiscal 20232024 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2024.2025.

This document and other written or oral statements made from time to time by Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “outlook,” “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could,” “is designed to” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, including as a result of artificial intelligence, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions. The factors identified above are not exhaustive. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A. Risk Factors”, and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.

•Cash returned via shareholder friendly actions of $3.7B,$4.7B, including $2.4B$2.6B of dividends and $1.3B$2.1B of share repurchases For fiscal 2025,2026, we delivered strong revenue growth of 7%7%, both6% growth on a reported andan organic constant currency basis. Our United States pays per control metric, which represents the approximate growth in the number of employees on ADP clients' processed payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the year ended June 30, 20252026 as compared to the year ended June 30, 2024.2025. PEO average worksite employees increased 3%2% for the year ended June 30, 2025,2026, as compared to the year ended June 30, 2024.2025. Additionally, our ES new business bookings grew 3%6% in fiscal 2025,2026, and our ES client revenue retention was 92.1%. Our strong retention stems in part from our company-wide client satisfaction scores reaching new record highs for the year. These impressive client satisfaction results were broad-based and are a testament to the productmeaningful investments we arehave makingmade in our solutions and the efforts of our associates to improvedeliver theexceptional levels of client experience.service.

We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions. We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long termlong-term strategy and commitments to shareholder friendly actions. We are committed to building upon our past successes by investing in our business through enhancements in research and development to enhance our products and services and by driving meaningfulcontinuous transformationimprovement in the way we operate. Our financial condition remains solid at June 30, 20252026 and we remain well positioned to support our associates and our clients.

For the year ended June 30, respectively30:

RevenuesTotal revenues increased in fiscal 20252026 due to new business started from new business bookings, strong client revenue retention, an increase in zero-margin benefits pass-throughs,pass-throughs of $318.3 million, an increase in pricing, a 1% year-over-year growth impact of foreign currency, and an increase in interest on funds held for clients, and the impact from the WorkForce Software acquisition. Refer to “Analysisclients of Reportable$165.7 Segments” for additional discussion of the changes in revenue for each of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services.million.

Total revenues for fiscal 20252026 include interest on funds held for clients of $1,189.1$1,354.8 million, as compared to $1,024.7$1,189.1 million in fiscal 2024.2025. The increase in interest earned on funds held for clients resulted from an increase in our average interestclient ratefunds earnedbalances of 7.4% to 3.2%$40.4 billion in fiscal 2025,2026 as compared to 2.9% in fiscal 2024,2025, coupled with an increase in our average clientinterest fundsrate balances of 6.4%earned to $37.6 billion3.4% in fiscal 20252026, as compared to 3.2% in fiscal 2024.2025.

Operating expenses increased in fiscal 20252026 due to an increase of $313.1$318.3 million ofin PEO Services zero-margin benefits pass-through costs to $4,607.3 million in fiscal 2026 from $4,289.0 million in fiscal 2025 from $3,975.9 million in fiscal 2024.2025. Additionally, operating expenses increased by $137.3$188.9 million due to higher service and implementation costs in support of our growing revenuerevenue, $74.4 million million primarily due to higher hosting, cloud-based service, and software license costs in support of our products and solutions, and by $67.8$37.1 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased in fiscal 20252026 due to increased costs to develop, support, and maintain our new and existing productsproducts, andincluding the integration costs associated with the WorkForce Software acquisition.

Depreciation and amortization increased in fiscal 20252026 due to the WorkForce Software acquisition, amortization of investments in internally developed software primarily for our next-gen products,products and amortizationsolutions, ofintangible assets acquired in the WorkForce Software acquisition, and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, generalgeneral, and administrative expenses increased in fiscal 20252026 primarily due to increases in selling and marketing expenses of $184.4$241.4 million as a result of investments in our sales organization andorganization, an increase fromin acquisitioncosts related costs.to non-recurring, broad-based, company-wide initiatives of $67.2 million and a non-recurring net legal settlement of $18.0 million.

Interest income on corporate funds increased in fiscal 20252026 due to higher average investment balances of $9.2$10.4 billion as compared to $7.4$9.2 billion in fiscal 2024,2025, coupled with an increase in average interest rates of 2010 basis points, as compared to fiscal 2024. See Note 11 of our Consolidated Financial Statements for further details on non-service components of pension income, net.2025.

For the year ended June 30, respectively30:

Earnings before income taxes increased in fiscal 20252026 due to the increasesincrease in total revenues, partially offset by the increasesincrease in total expenses discussed above.

EBIT Margin increased in fiscal 20252026 due to contributions from client funds interest revenues, discussedincreased above,interest income on corporate funds, lower amortization of client contracts and operating efficiencies for costs of servicinglists, and implementinglower ourinterest clientsexpense onrelated growingto revenue,commercial paper and reverse repurchase borrowings, partially offset by increased interest expenseselling and acquisitionmarketing expenses and costs related expenses.to non-recurring, broad-based, company-wide initiatives.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds extended investment strategy, and net charges, including certain legal matters, non-recurring, broad-based, company-wide initiatives, gain on sale of assets, and broad-based(gains)/losses optimizationon initiatives,ADP Ventures' investments, in the applicable periods.

The effective tax rate in fiscal 20252026 and 20242025 was 23.2%23.0% and 23.0%,23.2%, respectively. The increasedecrease in the effective tax rate is primarily due to highera reservesdecrease forin uncertain tax positions in fiscal 2025 and a valuation allowance release in fiscal 2024 offset by an increase in thetax credits, partially offset by a lower benefit for adjustments to prior year tax liabilities and a lower excess tax benefit on stock-based compensation infor fiscal 2026 as compared to fiscal 2025. Refer to Note 12, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.

For fiscal 2025, inIn addition to the increase in net earnings, diluted EPS increased in fiscal 2026 as a result of the impact of fewer shares outstanding resulting from theshare repurchases under our authorized share repurchase of approximately 4.4 million shares during fiscal 2025 and 5.1 million shares during fiscal 2024,program, partially offset by the issuances of shares under our employee benefit plans. The Company repurchased 8.6 million and 4.4 million shares in fiscal 2026 and 2025, respectively.

For fiscal 2025,2026, adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above.

Employer Services' revenues increased in fiscal 20252026 due to new business started from new business bookings, strong client revenue retention, an increase in pricing, a 1% year-over-year growth impact of foreign currency, an increase in interest earned on funds held for clients,clients theof impact$164.1 from the WorkForce Software acquisition,million, and an increase in the volume of our pays per control when measured on a same-store-sales basis of 1%, as compared to fiscal 2024.1%.

Employer Services' earnings before income taxes increased in fiscal 20252026 due to increasedthe increase in revenues, including contributions from client funds interest, discussed above, partially offset by increases in expenses, including $188.6 million in selling and operatingmarketing efficienciesexpenses forand $159.7 million in costs of servicing and implementing our clients on growing revenue, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition.revenue.

Employer Services' margin increased in fiscal 20252026 due to contributions from client funds interest revenues, operating efficiencies for costs of servicing and implementing our clients on growing revenue, and lower amortization of client fundscontracts interestand revenues discussed above,lists, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition relatedin expenses.October 2024.

PEO Services' revenues increased in fiscal 20252026 due to thean increase in zero-margin benefits pass-throughs,pass-throughs of $318.3 million, and an increasegrowth in average worksite employees of 3%,2% coupled with increases in average wages and state unemployment taxes per worksite employee, as compared to fiscal 2024.2025.

PEO Services’ earnings before income taxes increaseddecreased in fiscal 20252026 due to increasedincreases revenuesin discussedexpenses, above,including partially$318.3 offsetmillion byin increaseszero-margin benefits pass-through costs, $52.8 million in selling and marketing expenses, and $37.1 million in operating costs related to workers'worker's compensation coverage and state unemployment insurance, zero-marginpartially benefitsoffset pass-throughby costs,the andincrease sellingin andrevenues marketingdiscussed expenses.above.

ADP Indemnity provides workers’ compensation and employer's liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence. PEO Services has secured a workers’ compensation and employer’s liability insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in fiscalthe yearsyear ended June 30, 2012 and prior from an admitted and licensed insurance company of AIG. We utilize historical loss experience and actuarial judgment to determine the estimated claim liability, and changes in estimated ultimate incurred losses are included in the PEO segment.

Additionally, starting in fiscalthe year ended June 30, 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to the $1 million per occurrence related to the workers’ compensation and employer's liability deductible reimbursement insurance protection for PEO Services' worksite employees. Each of these reinsurance arrangements limits our overall exposure incurred up to a certain limit. The Company believes the likelihood of ultimate losses exceeding this limit is remote. During fiscal 2025, ADP Indemnity paid a premium of $276 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2025 policy year up to $1 million per occurrence. ADP Indemnity recorded a pre-tax benefitactuarial gain of approximately $10$2.8 million in fiscal 20252026, andas compared to a pre-tax benefitactuarial gain of approximately $3$8.8 million in fiscal 2024,2025, whichdue wereto primarily the results of moreless favorable actuarial loss development in workers’ compensation reserves. ADP Indemnity paid a premium of $278$327.8 million in July 2025,2026, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 20262027 policy year on terms substantially similar to the fiscal 20252026 reinsurance policy.

(db) In fiscal 2025, there were $23.9 million of severance charges related to broad-based, company-wide initiatives, including efforts to align resources with respect to our new global HCM products, offset by a $4.6 millionRepresents partial reversalreversals of the workforce optimization initiativeinitiatives from fiscal 2025 and 2024. Severance charges/(reversals) have been taken in the past and not included as an adjustment to get to adjusted results. Unlike severance charges/(reversals) in prior periods, these specific chargesreversals relate to broad-based, company-wide initiatives.

(ef) The income tax (benefit)/provision was calculated based on the marginal rate in effect forduring the yearperiod endedof Junethe 30, 2025.adjustment.

(fg) The adjusted effective tax rate is calculated as our adjusted provision for income taxes divided by the sum of our adjusted net earnings plus our adjusted provision for income taxes.

Net cash flows provided by operating activities increased due to growth in our business,business and a net favorable changeschange in the components of operating assets and liabilities,liabilities primarily due to timing of collections and payments, as compared to fiscal 2024.2025.

Net cash flows used in investing activities changed primarily due to the acquisition of WorkForce Software with a net cash disbursement of $1,158.3 million and timing of the net proceeds and purchases of corporate and client funds marketable securities of $523.0$2,696.2 million.million, offset by a net decrease in acquisitions of businesses, which totaled $1,165.1 million in fiscal 2025, primarily related to the Workforce Software acquisition.

Net cash flows provided by/(used in) financing activities changed primarily due to a net decreaseincrease in the cash flow from client funds obligations of $9,288.1$21,516.6 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, a net increasedecrease in cash distributed to our clients that was received from the Internal Revenue Service,Service andof a$576.2 net increase in payments related to reverse repurchase agreements,million, partially offset by netthe proceedsrepayment fromof $4,769.5 million related to borrowings outstanding as of June 30, 2025 under the issuancecommercial paper program and redemptionan increase of debt.$802.8 million in repurchases of common stock.

We have $4.0$5.0 billion of senior unsecured notes with maturity dates in 2028, 2030, 2032, 2034, and 2034.2036. We may from time to time revisit the long-term debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure. However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all. See Note 10 of our Consolidated Financial Statements for a description of our senior unsecured notes.

Our U.S. short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. This commercial paper program provides for the issuance of up to $10.6$11.7 billion in aggregate maturity value. Our commercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days. As of June 30, 2026, the Company had no commercial paper outstanding. As of June 30, 2025, the Company had $4.8 billion of commercial paper outstanding, which was repaid in early July 2025. As of June 30, 2024, the Company had no commercial paper borrowing outstanding. Details of the borrowings under the commercial paper program are as follows:

Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. These agreements generally have terms ranging from overnight to up to fiveten business days. We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations. As of June 30, 2026 and 2025, wethe Company had $7.5 billion available to us on a committed basis under the U.S. reverse repurchase agreements. As of June 30, 2025 and 2024, there were $38.4$139.3 million and $385.4$38.4 million, respectively, of outstanding obligations related to reverse repurchase agreements. The Company has $7.5 billion available on a committed basis under the U.S. reverse repurchase agreements. Details of the reverse repurchase agreements are as follows:

Our contractual obligations atas of June 30, 20252026 relate primarily to operating leases (Note 7 of our Consolidated Financial Statements) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 11 of our Consolidated Financial Statements), liabilities for uncertain tax positions (Note 12 of our Consolidated Financial Statements), purchase obligations (Note 13 of our Consolidated Financial Statements), debt obligations (Note 10 of our Consolidated Financial Statements) and $875.0$1,333.0 million of interest payments on our debt, of which $121.5$171.5 million is expected to be paid within one year.

As the assumptions used to estimate the amortization period of the deferred costs could have a material impact on timing of recognition, we assess the amortization periods annually using historical retention rates. Actual retention rates were not materially different than those used in our calculation to determine the amortization period. We regularly review our deferred costs for impairment. There were no impairment losses incurred during the fiscal years ended June 30, 2025,2026, June 30, 2024,2025, or June 30, 2023.2024.

This document and other written or oral statements made from time to time by Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “outlook,” “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could,” “is designed to” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches,breaches including as a result of artificial intelligence, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A. - Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (“fiscal 2025”), and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.

Highlights from the sixnine months ended DecemberMarch 31, 20252026 include:

•Diluted and adjusted diluted earnings per share ("EPS") growth of 10% and 9%, to $5.12$8.49 and $5.11,$8.48, respectively

•Cash returned via shareholder friendly actions of $2.1B,$3.4B, including $1.3B$1.9B of dividends and $0.9B$1.5B of share repurchases For the sixnine months ended DecemberMarch 31, 2025,2026, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis. Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the sixnine months ended DecemberMarch 31, 20252026 as compared to the sixnine months ended DecemberMarch 31, 2024.2025. PEO average worksite employees increased 2% for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to the sixnine months ended DecemberMarch 31, 2024.2025.

We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions. We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long-term strategy and commitments to shareholder friendly actions. We are committed to building upon our past successes by investing in research and development to enhance our products and services and by driving continuous improvement in the way we operate. Our financial condition remains solid at DecemberMarch 31, 20252026 and we remain well positioned to support our associates and our clients.

Total revenues increased for the three and sixnine months ended DecemberMarch 31, 20252026 due to new business started from new business bookings, strong client retention, an increase in zero-margin benefits pass-throughs, an increase in pricing, the impact of foreign currency, an increase in pricing, and an increase in interest on funds held for clients.

Total revenues for the three months ended DecemberMarch 31, 20252026 include interest on funds held for clients of $308.6$403.9 million, as compared to $272.8$355.2 million for the three months ended DecemberMarch 31, 2024.2025. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 6.5%8.5% to $37.6$48.3 billion for the three months ended DecemberMarch 31, 20252026 as compared to the three months ended DecemberMarch 31, 2024,2025, coupled with an increase in our average interest rate earned to 3.3% for the three months ended DecemberMarch 31, 2025,2026, as compared to 3.1%3.2% for the three months ended DecemberMarch 31, 2024.2025.

Total revenues for the sixnine months ended DecemberMarch 31, 20252026 include interest on funds held for clients of $595.5$999.4 million, as compared to $526.1$881.3 million for the sixnine months ended DecemberMarch 31, 2024.2025. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 6.5%7.3% to $36.2$40.2 billion for the sixnine months ended DecemberMarch 31, 20252026 as compared to the sixnine months ended DecemberMarch 31, 2024,2025, coupled with an increase in our average interest rate earned to 3.3% for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to 3.1% for the sixnine months ended DecemberMarch 31, 2024.2025.

Operating expenses increased for the sixthree months ended DecemberMarch 31, 20252026 due to an increase of $152.8$80.0 million of PEO Services zero-margin benefits pass-through costs to $2,257.2$1,170.0 million from $2,104.4$1,090.0 million for the sixthree months ended DecemberMarch 31, 2024.2025. Additionally, for the sixthree months ended DecemberMarch 31, 20252026, operating expenses increased by $109.4$50.4 million due to higher service and implementation costs in support of our growing revenue and by $13.0$18.9 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased for the three months ended DecemberMarch 31, 20252026 due to increased costs to develop, support, and maintain our new and existing products.

Research and development expenses increased for the sixnine months ended DecemberMarch 31, 20252026 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.

Depreciation and amortization expenses decreased for the three months ended DecemberMarch 31, 20252026 due to lower amortization of customer contracts and lists, partially offset by amortization of investments in internally developed software primarily for our next-gen productsproducts, and purchased software.

Depreciation and amortization expenses increased for the sixnine months ended DecemberMarch 31, 20252026 due to the amortization of intangible assets acquired in the WorkForce Software acquisition and investments in internally developed software primarily for our next-gen productsproducts, and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased for the three and sixnine months ended DecemberMarch 31, 20252026 primarily due to increases in selling and marketing expenses of $59.6$63.5 million and $117.0$180.4 million, respectively, as a result of investments in our sales organization.

Interest expense decreased for the sixnine months ended DecemberMarch 31, 20252026 primarily due to a decrease of $24.2$23.6 million related to commercial paper and reverse repurchase borrowings as a result of a decreasedecreases in average interest rates on commercial paper issuances and reverse repurchases of 80 and 70 basis points, coupled with a decrease in average daily commercial paper borrowings of $0.2 billion,respectively, offset by an increase in average reverse repurchase outstanding balances of $0.7$0.5 billion, as compared to the sixnine months ended DecemberMarch 31, 2024.2025. This decrease was partially offset by net increases in interest expense of $16.3$20.0 million related to the senior notes issued and redeemed during the year ended June 30, 2025.

Interest income on corporate funds increased for the three and six months ended DecemberMarch 31, 20252026 due to higher average investment balances of $11.0$7.3 billion and $11.2 billion, respectively, as compared to $10.0 billion and $10.3$6.3 billion for the three and six months ended DecemberMarch 31, 2024,2025, coupledoffset withby ana increasedecrease in average interest rates of 20 and 10 basis points for the three and six months ended December 31, 2025, respectively,points, as compared to the three and six months ended DecemberMarch 31, 2024.2025.

During the three and sixnine months ended DecemberMarch 31, 2025,2026, the Company recognized a net gain of $2.2$2.1 million and $4.3 million, respectively, related to investments made through our Corporate Venture Capital arm, ADP Ventures.

Earnings before income taxes increased for the three and sixnine months ended DecemberMarch 31, 20252026 due to the increase in total revenues, partially offset by the increase in total expenses discussed above.

EBIT Margin increased for the sixthree months ended DecemberMarch 31, 20252026 due to contributions from client funds interest revenuesrevenues, discussedlower above, decreased interest expense, the impactamortization of foreignclient currency,contracts and increasedlists, interestand incomeoperating onefficiencies corporaterelated funds,to research and development, service, and implementation expenses, partially offset by increased selling and marketing expenses.

The effective tax rate for the three months ended DecemberMarch 31, 20252026 and 20242025 was 23.2%23.7% and 23.6%,23.0%, respectively. The decreaseincrease in the effective tax rate is primarily due to loweran reservesincrease forin uncertain tax positions and a benefit for adjustments to prior year tax liabilities partially offset by a lower excess tax benefit on stock-based compensation in the three months ended DecemberMarch 31, 2026 as compared to the three months ended March 31, 2025.

The effective tax rate for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was 22.9%23.2% and 23.1%, respectively. The decreaseincrease in the effective tax rate is primarily due to lower reserves for uncertain tax positions partially offset by the cost of an intercompany transfer of certain assets and a lower excess tax benefit on stock-based compensation offset by a decrease in uncertain tax positions for the sixnine months ended DecemberMarch 31, 2026 as compared to the nine months ended March 31, 2025.

The adjusted effective tax rate for the three months ended DecemberMarch 31, 20252026 and 20242025 was 23.2%23.7% and 23.6%,23.0%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

The adjusted effective tax rate for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was 22.9%23.2% and 23.1%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

In addition to the increase in net earnings, diluted EPS increased for the three and nine months ended Decemberended March 31, 20252026 as a result of the impact of fewer shares outstanding resulting from theshare repurchases under our authorized share repurchase of approximately 1.9 million shares during the three months ended December 31, 2025, and 0.9 million shares during the three months ended December 31, 2024,program, partially offset by the issuances of shares under our employee benefit plans. The Company repurchased 2.6 million and 1.0 million shares in the three months ended March 31, 2026 and 2025, respectively, and repurchased 5.7 million and 3.4 million shares in the nine months ended March 31, 2026 and 2025, respectively.

Adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above for the three and sixnine months ended DecemberMarch 31, 2025.2026.

Employer Services' revenues increased for the three and six months ended DecemberMarch 31, 20252026 due to new business started from new business bookings, strong client retention, an increase in pricing, the impact of foreign currency, an increase in pricing, an increase in interest earned on funds held for clients, and an increase in our pays per control when measured on a same-store-sales basis of 1%.

Employer Services' earnings before income taxes increased for the three and sixnine months ended DecemberMarch 31, 20252026 due to increased revenues, including contributions from client funds interest, discussed above, partially offset by increased costs of servicing and implementing our clients on growing revenue, and increased selling and marketing expenses, and costs to develop, support, and maintain our new and existing products.expenses.

Employer Services' margin increased for the three months ended DecemberMarch 31, 20252026 due to contributions from client funds interest revenuesrevenues, discussed above, decreasedlower amortization of client contracts and depreciation expenses,lists, and operating efficiencies forrelated coststo of servicingresearch and implementingdevelopment, ourservice, clientsand onimplementation growing revenue,expenses, partially offset by increased selling and marketing expenses.

Employer Services' margin remained flatincreased for the sixnine months ended DecemberMarch 31, 2025,2026 due to contributions from client funds interest revenuesrevenues, discussedand above,lower amortization of client contracts and lists, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition.acquisition in October 2024.

PEO Services' revenues increased for the three and six months ended DecemberMarch 31, 20252026 due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 2% for each period,2%, as compared to the three and six months ended DecemberMarch 31, 2024.2025.

PEO Services' earnings before income taxes decreased for the sixthree and nine months ended DecemberMarch 31, 20252026 due to increased selling and marketing expenses, increases in zero-margin benefits pass-through costscosts, and sellingincreased andoperating marketingcosts expenses,related to state unemployment insurance, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the three months ended DecemberMarch 31, 2025,2026, due to increased selling and marketing expensesexpenses, increased operating costs related to state unemployment insurance, a decrease in the pre-tax benefit from ADP Indemnity, and increases in zero-margin benefits pass-through costs, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the sixnine months ended DecemberMarch 31, 2025,2026, due to increased selling and marketing expensesexpenses, andincreases in zero-margin benefitsbenefit pass-throughpass through costs, and increased operating costs related to state unemployment insurance, and a decrease in the pre-tax benefit from ADP Indemnity, partially offset by increased revenues discussed above.

Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to the $1 million per occurrence related to the workers’ compensation and employer's liability deductible reimbursement insurance protection for PEO Services' worksite employees. Each of these reinsurance arrangements limits our overall exposure incurred up to a certain limit. The Company believes the likelihood of ultimate losses exceeding this limit is remote. ADP Indemnity recorded a pre-tax (loss)/benefit of approximately $(2.7)$2.4 million and $1.9$4.4 million for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, as compared to approximately $(0.8)$5.6 million and $4.1$9.7 million for the three and sixnine months ended DecemberMarch 31, 2024,2025, respectively, which were primarily the results of less favorable actuarial loss development in workers’ compensation reserves. ADP Indemnity paid a premium of $278 million in July 2025, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2026 policy year on terms substantially similar to the fiscal 2025 reinsurance policy.

The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, legal settlements, company-wide severance costs,initiatives, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense.

(c) Represents (gains)/losses on investments made through our Corporate Venture Capital arm, ADP Ventures. (Gains)/losses on these investments may result from observable price changes, changes in ownership interest, accrued interest income, and impairment charges. These adjustments may be highly variable, are predominantly non-cash, are outside our control, and are not fundamental to the underlying operations of our business model.

(d) In the sixnine months ended DecemberMarch 31, 2024,2025, this represents a reversal of a legal reserve recorded during the year ended June 30, 2023.

As of DecemberMarch 31, 2025,2026, cash and cash equivalents were $2.4$3.2 billion, which were primarily invested in time deposits and money market funds.

For corporate liquidity, we expect existing cash, cash equivalents, marketable securities, cash flow from operations together with our $10.6 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities, such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future. Our financial condition remains solid at DecemberMarch 31, 20252026 and we have sufficient liquidity.

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, are summarized as follows:

Net cash flows provided by operating activities decreased primarilyincreased due to growth in our business and a net unfavorablefavorable change in the components of operating assets and liabilities primarily due to timing of paymentscollections partiallyand offset by growth in our business,payments, as compared to the sixnine months ended DecemberMarch 31, 2024.2025.

Net cash flows used in investing activities changed primarily due to timing of net proceeds and purchases of corporate and client funds marketable securities of $749.3$1,359.7 million, offset by a net decrease in acquisitions of businesses, primarily related to the Workforce Software acquisition, with a cash disbursement of 1,160.6$1,165.1 million during the sixnine months ended DecemberMarch 31, 2024.2025.

Net cash flows provided by/(used in) financing activities changed primarily due to a net increase in the cash flow from client funds obligations of $27,182.7$14,896.8 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, partially offset by net payments of $4,769.5 million related to borrowings under the commercial paper program and a decrease in the net proceeds from the issuance of debt.

We purchased approximately 3.25.7 million shares of our common stock at an average price per share of $280.09$257.01 during the sixnine months ended DecemberMarch 31, 2025,2026, as compared to purchases of 2.43.4 million shares at an average price per share of $274.42$283.14 during the sixnine months ended DecemberMarch 31, 2024.2025. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.

Our U.S. short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. This commercial paper program provides for the issuance of up to $10.6 billion in aggregate maturity value. Our commercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days. As of DecemberMarch 31, 20252026, the Company had no commercial paper outstanding. As of June 30, 2025 the Company had $4.8 billion of commercial paper outstanding, which was repaid in early July 2025. Details of the borrowings under the commercial paper program are as follows:

Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. These agreements generally have terms ranging from overnight to up to five business days. We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations. As of DecemberMarch 31, 2025,2026, we had $7.5 billion available to us on a committed basis under the U.S. reverse repurchase agreements. As of DecemberMarch 31, 20252026, andthe Company had no outstanding obligations related to reverse repurchase agreements. As of June 30, 2025, the Company had $45.8 million and $38.4 million of outstanding obligations related to reverse repurchase agreements, respectively.agreements. Details of the reverse repurchase agreements are as follows: