With less than a week to go before facing a heated boardroom battle, Automatic Data Processing Inc. (ADP) on Thursday beat consensus forecasts and posted a quarterly profit of 91 cents a share for its first quarter of 2018.
The quarterly earnings per share were slightly ahead of a FactSet polled consensus estimate of 85 cents a share. The payroll processor and human resources company also reported first-quarter net profits of $401.5 million for the quarter, which ended in September. It also reported quarterly revenue of $3.08 billion, above a consensus estimate of $3.06 billion.
Nevertheless, the results are unlikely to appease embattled activist billionaire Bill Ackman, who is seeking to install three dissident directors onto the board of the payroll processor at the company's 2018 annual meeting scheduled for Tuesday, Nov. 7. Ackman is seeking to integrate the company's corporate headquarters and U.S. offices. He also wants the firm to integrate operations and focus more on innovation and technology so that its margins can get closer to those of Paychex, a smaller competitor.
In comments to analysts, ADP CEO Carlos Rodriguez sought to diminish the impact of the boardroom battle on the company's ongoing operations. "There is a lot of concern about the proxy contest," Rodriguez said. "I would say it is an extremely high distraction for an extremely small group of people. As you can see from the quarter, it did not distract from our associates or sales force."
Rodriguez suggested recently that Ackman's goals at ADP can only be achieved fast by eliminating 15,000 to 20,000 of its 58,000 employees. However, in an interview with The Street on Wednesday, Ackman lashed back, arguing that Rodriguez's suggestion is just a "scare tactic."
"When the CEO goes on TV and says my plan would result in the laying off of 20,000 people, that's not a smart thing to do," Ackman said.
Ackman noted that roughly 11% of the ADP workforce leaves every year, which means that they have to hire roughly 6.000 people just to maintain their current employee count. He added that ADP needs to slow the rate of growth in its headcount and accelerate growth in revenue and margin improvement. "Every talented person that works for this company will have a job," he said.
Nevertheless, Ackman's strategy for restoring growth at ADP has a number of elements that appear to indicate that employees would be let go. In a recent presentation, Ackman focused some attention on Roseland, N.J.-based ADP's real estate footprint, with 130 offices around the U.S. He argued that many of these offices are a "vestige" of a previous era when payroll services needed costly physical offices in a variety of locations.