AUTOMATIC DATA PROCESSING INC

(Tabular dollars in millions, except per share amounts or where otherwise stated)

Note 1. Basis of Presentation

The accompanying Consolidated Financial Statements and footnotes thereto of Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Intercompany balances and transactions have been eliminated in consolidation. The Consolidated Financial Statements and footnotes thereto are unaudited. In the opinion of the Company’s management, the Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, that are necessary for a fair presentation of the Company’s interim financial results.

The Company has a grantor trust, which holds the majority of the funds provided by its clients pending remittance to employees of those clients, tax authorities, and other payees. The Company is the sole beneficial owner of the trust. The trust meets the criteria in Accounting Standards Codification (“ASC”) 810, “Consolidation” to be characterized as a variable interest entity (“VIE”). The Company has determined that it has a controlling financial interest in the trust because it has both (1) the power to direct the activities that most significantly impact the economic performance of the trust (including the power to make all investment decisions for the trust) and (2) the right to receive benefits that could potentially be significant to the trust (in the form of investment returns) and, therefore, consolidates the trust. Further information on these funds and the Company’s obligations to remit to its clients’ employees, tax authorities, and other payees is provided in Note 6, “Corporate Investments and Funds Held for Clients.”

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the assets, liabilities, revenues, expenses, and other comprehensive income that are reported in the Consolidated Financial Statements and footnotes thereto. Actual results may differ from those estimates. Interim financial results are not necessarily indicative of financial results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2026 (“fiscal 2026”). Certain amounts from the prior year's financial statements have been reclassified in order to conform to the current year's presentation.

Note 2. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

None.

Recently Issued Accounting Pronouncements

Note 3. Revenue

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated as follows: Human Capital Management (“HCM”), HR Outsourcing (“HRO”), and Global Solutions (“Global”), with separate disaggregation for PEO zero-margin benefits pass-through revenues and client fund interest revenues. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

The following tables provide details of the Company's revenues and includes a reconciliation to the Company’s reportable segments:

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2026:

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2025:

Contract Balances

The timing of revenue recognition for our HCM, HRO and Global Solutions services is generally consistent with client invoicing, which occurs monthly either as services are provided or in arrears. When invoicing occurs in arrears, our right to consideration is unconditional and arises solely from the passage of time. Accordingly, the Company does not recognize contract assets related to the timing of revenue recognition and invoicing.

Changes in deferred revenues related to set up fees for the three months ended September 30, 2026 were as follows:

Note 4. Earnings per Share (“EPS”)

Shares that could potentially dilute basic EPS in the future include outstanding share-based compensation awards, which are discussed in Note 11. For the three months ended September 30, 2026 and 2025, there were 0.8 million and 0.3 million shares, respectively, excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive.

Note 5. Other (Income)/Expense, Net

Note 6. Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at September 30, 2026 and June 30, 2026 were as follows:

(a) Included within available-for-sale securities are corporate investments with fair values of $245.2 million and funds held for clients with fair values of $37,327.1 million. All available-for-sale securities are included in Level 2 of the fair value hierarchy.

(b) Included within available-for-sale securities are corporate investments with fair values of $138.6 million and funds held for clients with fair values of $37,562.7 million. All available-for-sale securities were included in Level 2 of the fair value hierarchy.

For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2026. The Company concurred with and did not adjust the prices obtained from the independent pricing service. The Company hadno available-for-sale securities included in Level 1 or Level 3 at September 30, 2026.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of September 30, 2026, are as follows:

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of June 30, 2026, are as follows:

At September 30, 2026, Corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carrying credit ratings of A and above.

At September 30, 2026, asset-backed securities include AAA-rated senior tranches of securities with predomi nantly prime collateral of fixed-rate auto loan, credit card, and device payment plan agreement receivables with fair values of $1,233.7 million, $796.5 million, and $365.6 million, respectively. These securities are collateralized by the cash flows of the underlying pools of receivables. The primary risk associated with these securities is the collection risk of the underlying receivables. All collateral on such asset-backed securities has performed as expected through September 30, 2026.

At September 30, 2026, U.S. government agency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $630.6 million and $130.2 million, respectively. U.S. government agency securities represent senior, unsecured, non-callable debt that primarily carry ratings of Aa1 by Moody's, and AA+ by Standard & Poor's.

At September 30, 2026, other securities primarily include AA-rated United Kingdom Gilt securities of $730.4 million, commercial mortgage-backed securities of $298.0 million, and AAA-rated supranational bonds of $227.1 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:

(a) Restricted cash and short-term marketable securities are included within other current assets on the Consolidated Balance Sheets.

(b) Long-term marketable securities are included within other assets on the Consolidated Balance Sheets.

Funds held for clients represent assets that, based upon the Company's intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories:

Client funds obligations represent the Company's contractual obligations to remit funds to satisfy clients' payroll, tax, and other payee payment obligations and are recorded on the Consolidated Balance Sheets at the time that the Company impounds funds from clients. The client funds obligations represent liabilities that will be repaid withinone year of the balance sheet date. The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $46,039.6 million and $44,415.5 million at September 30, 2026 and June 30, 2026, respectively. The Company has classified funds held for clients as a current asset since these funds are held solely for the purpose of satisfying the client funds obligations. Of the Company’s funds held for clients at September 30, 2026 and June 30, 2026,$39,999.7 million and $38,969.2 million, respectively, are held in the grantor trust. The liabilities held within the trust are intercompany liabilities to other Company subsidiaries and eliminate in consolidation.

The Company has reported the cash flows related to the purchases of corporate and client funds marketable securities and related to the proceeds from the sales and maturities of corporate and client funds marketable securities on a gross basis in the investing section of the Statements of Consolidated Cash Flows. The Company has reported the cash and cash equivalents related to client funds investments with original maturities ofninety days or less, within the beginning and ending balances of cash, cash equivalents, restricted cash, and restricted cash equivalents. The Company has reported the cash flows related to the cash received from and paid on behalf of clients on a net basis within net increase/(decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.

All available-for-sale securities were rated as investment grade at September 30, 2026.

Expected maturities of available-for-sale securities at September 30, 2026 are as follows:

Note 7. Leases

The Company records leases on the Consolidated Balance Sheets as operating lease right-of-use ("ROU") assets, records the current portion of operating lease liabilities within accrued expenses and other current liabilities and, separately, records long-term operating lease liabilities. The difference between total ROU assets and total lease liabilities is primarily attributable to prepayments of our obligations and the recognition of various lease incentives.

The Company has entered into operating lease agreements for facilities and equipment. The Company's leases have remaining lease terms of up to approximately twelve years.

The components of operating lease expense were as follows:

The following table provides supplemental cash flow information related to the Company's leases:

Other information related to our operating lease liabilities is as follows:

As of September 30, 2026, maturities of operating lease liabilities are as follows:

Note 8. Goodwill and Intangible Assets, net

Changes in goodwill for the three months ended September 30, 2026 are as follows:

Components of intangible assets, net, are as follows:

Other intangibles consist primarily of purchased rights, purchased content, trademarks and trade names (acquired directly or through acquisitions). All intangible assets have finite lives and, as such, are subject to amortization. The weighted average remaining useful life of the intangible assets is 6 years (6 years for software and software licenses,5 years for customer contracts and lists, and 2 years for other intangibles). Amortization of intangible assets was $104.9 million and $95.4 million for the three months ended September 30, 2026 and 2025, respectively.

Estimated future amortization expenses of the Company's existing intangible assets are as follows:

Note 9. Short-term Financing

The Company has a $5.7 billion,364-day credit agreement that matures in June 2027 with aone year term-out option. The Company also has a $2.5 billion five-year credit facility that matures in June 2030 that contains an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. In addition, the Company also has a $3.5 billion five-year credit facility maturing in June 2031 that contains an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. The interest rate applicable to committed borrowings is tied to SOFR, the effective federal funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing. The Company is also required to pay facility fees on the credit agreements. The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary. The Company hadno borrowings through September 30, 2026 under the credit agreements.

The Company's 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$11.7 billion in aggregate maturity value. The Company’s commercial paper program is rated A-1+ by Standard & 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 September 30, 2026 and June 30, 2026, the Company hadno commercial paper outstanding. Details of the borrowings under the commercial paper program are as follows:

The Company’s 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 toten business days. As of September 30, 2026 and June 30, 2026, the Company had $198.3 million and $139.3 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:

Note 10. Debt

The Company issued five series of fixed-rate notes with staggered maturities of 7 and 10 years totaling $5.0 billion (collectively the “Notes”). The Notes are senior unsecured obligations, and interest is payable in arrears, semi-annually.

The principal amounts and associated effective interest rates of the Notes and other debt as of September 30, 2026 and June 30, 2026, are as follows:

(a) Current portion of long-term debt as of September 30, 2026 is included within accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The effective interest rates for the Notes include the interest on the Notes and amortization of the discount and debt issuance costs.

As of September 30, 2026, the fair value of the Notes, based on Level 2 inputs, was $4,618.1 million. For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2026.

Note 11. Employee Benefit Plans

A. Stock-based Compensation Plans

The Company's share-based compensation plan consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, performance-based restricted stock units, and other stock awards. The Company also offers an employee stock purchase plan for eligible employees. Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock. Awards granted September 2022 and after have been grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility. Time-based restricted stock units and performance-based restricted stock units granted to employees with a home country of the United States are settled in stock, and those units granted to employees with a home country outside the United States are generally settled in cash.

•Restricted Stock.

•Time-Based Restricted Stock Units. Time-based restricted stock units generally vest ratably over 3 years. Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Time-based restricted stock units granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period. Time-based restricted stock units granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period. Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period. Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently remeasured at each reporting date during the vesting period based on the change in the ADP stock price. Dividend cash equivalents are paid on share-settled units, and dividend cash equivalents are not paid on cash-settled units.

•Performance-Based Restricted Stock Units. Performance-based restricted stock units generally vest over aone tothree-year performance period and a subsequent service period of up to 38 months. Under these programs, the Company communicates “target awards” at the beginning of the performance period with possible payouts at the end of the performance period ranging from 0% to 200% of the “target awards.” Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Performance-based restricted stock units cannot be transferred and are settled in either cash or stock, depending on the employee's home country. Compensation expense relating to the issuance of performance-based restricted stock units settled in cash is recognized over the vesting period initially based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded during the performance period based on probable and actual performance against targets. In addition, compensation expense is remeasured at each reporting period during the vesting period based on the change in the ADP stock price. Compensation expense relating to the issuance of performance-based restricted stock units settled in stock is recorded over the vesting period based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded based on the probable and actual performance against targets. Dividend equivalents are paid on awards under the performance-based restricted stock unit program.

•Employee Stock Purchase Plan. The Company offers an employee stock purchase plan that allows eligible employees to purchase shares of common stock at a price equal to 95% of the market value of the Company's common stock on the last day of the offering period. This plan has been deemed non-compensatory and, therefore, no compensation expense has been recorded.

The Company currently utilizes treasury stock to satisfy stock option exercises and issuances related to restricted stock units and the Company's employee stock purchase plan. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company repurchased 2.9 million and 1.2 million shares in the three months ended September 30, 2026 and 2025, respectively. 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.

The following table represents pre-tax stock-based compensation expense for the three months ended September 30, 2026 and 2025, respectively:

During the three months ended September 30, 2026, the following activity occurred under the Company’s existing plans:

Stock Options:

Time-Based Restricted Stock Units:

Performance-Based Restricted Stock Units:

B. Pension Plans

The components of net pension (income)/expense were as follows:

Note 12. Income Taxes

The effective tax rate for the three months ended September 30, 2026 and 2025 was 22.7% and 22.5%, respectively. The increase in the effective tax rate is primarily due to higher reserves for uncertain tax positions and a lower excess tax benefit on stock-based compensation primarily offset by an increase in tax credits and a deferred tax benefit for the capitalization of certain foreign research and development expenses in the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.

Note 13. Commitments and Contingencies

In May 2020, a putative class action complaint was filed against ADP, TotalSource and related defendants in the U.S. District Court, District of New Jersey. The complaint asserts violations of the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with the ADP TotalSource Retirement Savings Plan’s fiduciary administrative and investment decision-making. The Company reached a settlement of all outstanding claims for $48 million, subject to the court's approval. Accordingly, as of June 30, 2026, the Company recorded a $48 million accrual within accrued expenses and other current liabilities on the Consolidated Balance Sheet. Additionally, the Company recorded insurance receivables of $30 million within accounts receivable on the Consolidated Balance Sheet, which represents recoveries considered probable from purchased insurance.

The Company is subject to various claims, litigation, and regulatory compliance matters in the normal course of business. When a loss is considered probable and reasonably estimable, the Company records a liability in the amount of its best estimate for the ultimate loss. Management currently believes that the resolution of these claims, litigation and regulatory compliance matters against us, individually or in the aggregate, will not have a material adverse impact on our consolidated results of operations, financial condition or cash flows. These matters are subject to inherent uncertainties and management's view of these matters may change in the future.

It is not the Company’s business practice to enter into off-balance sheet arrangements. In the normal course of business, the Company may enter into contracts in which it makes representations and warranties that relate to the performance of the Company’s services and products. The Company does not expect any material losses related to such representations and warranties.

Note 14. Stockholders' Equity

Changes in stockholders' equity by component are as follows:

Note 15. Reclassifications out of Accumulated Other Comprehensive Income/(Loss) (“AOCI”)

Changes in AOCI by component are as follows:

(a) Reclassification adjustments out of AOCI are included within Other (income)/expense, net, on the Statements of Consolidated Earnings.

(b) Reclassification adjustments out of AOCI are included in Net pension (income)/expense (see Note 11).

(c) Reclassification adjustments out of AOCI are included in Interest expense on the Statements of Consolidated Earnings.

Note 16. Interim Financial Data by Segment

Based upon similar economic and operational characteristics, the Company’s strategic business units have been aggregated into the followingtwo reportable segments: Employer Services and PEO Services. Certain revenues and expenses are charged to the reportable segments at a standard rate for management reasons. Other costs are recorded based on management responsibility.

The Company's Chief Operating Decision Maker ("CODM") is the Chief Executive Officer. For each reportable segment, the CODM uses earnings before income taxes, including plan-to-actual and forecast-to-actual results, to assess segment performance and allocate resources (including personnel and capital resources) amongst its strategic business units. The CODM does not review assets at the reportable segment level, hence segment disclosure relating to total assets has not been provided.

The following tables present the Company's revenues, significant segment expenses, and earnings before income taxes by reportable segment:

(a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intercompany expenses are included in the amounts shown.

(b) Other segment expenses for both reportable segments include operating, research and development, depreciation and amortization, and other general and administrative expenses.

(c) Other represents certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, legal settlements, company-wide severance initiatives, non-recurring gains and losses, the elimination of intercompany transactions, and interest income and expense.

The following table presents the Company's depreciation and amortization included in earnings before income taxes for each reportable segment: