Automatic Data Processing Inc (ADP)

Cash conversion cycle

		Jun 30, 2025	Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020
Days of inventory on hand (DOH)	days	—	—	—	—	—	1,842.92	—	1,313.14	—	—	—	1,296.61	2,024.16	2,425.44	1,996.28	2,084.09	1,586.39	1,910.94	1,704.76	1,388.63
Days of sales outstanding (DSO)	days	63.54	64.10	64.25	62.01	65.16	66.79	66.23	61.70	60.99	63.49	66.92	63.55	70.14	73.66	63.62	65.79	66.34	68.92	62.78	62.38
Number of days of payables	days	6.06	5.32	6.86	5.44	3.82	3.25	2.93	2.55	3.62	2.82	3.26	3.26	4.50	3.40	4.50	3.46	6.41	5.17	5.27	5.16
Cash conversion cycle	days	57.47	58.78	57.38	56.57	61.34	1,906.46	63.30	1,372.29	57.37	60.66	63.67	1,356.91	2,089.81	2,495.71	2,055.40	2,146.41	1,646.32	1,974.70	1,762.27	1,445.85

June 30, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 63.54 – 6.06
= 57.47

The analysis of Automatic Data Processing Inc.'s cash conversion cycle (CCC) over various periods reveals notable fluctuations in its operational liquidity management. From September 30, 2020, to March 31, 2022, the CCC exhibited a general upward trend, reaching peak durations exceeding 2,495 days, indicating extended periods to convert investments in working capital into cash. This prolonged cycle suggests challenges in receivables collection, inventory turnover, or payables management during this period.

Subsequently, a significant reduction occurred by December 31, 2022, with the CCC shrinking to approximately 63.67 days. This sharp decrease reflects notable improvements in operational efficiency, possibly through faster receivables collection, expedited inventory turnover, or extended payment terms to suppliers. The subsequent periods, up to September 30, 2023, maintained a relatively stable cycle around 56 to 58 days, indicating consistent cash flow management practices.

In the most recent periods, namely December 31, 2023, and beyond into March and June 2024, the CCC remained low, roughly around 57 days, maintaining the improved operational efficiency. However, a notable spike occurred on September 30, 2024, with the CCC rising again to approximately 1,372.29 days, suggesting a temporary reversal or disruption in the cash conversion process. This could be attributed to changes in receivables, inventory, or payables dynamics that warrant further investigation.

Overall, the trend reflects a period of inefficiency or elongated cash conversion times that climaxed around March 2022, followed by a significant improvement and stabilization in later periods, with brief periods of fluctuation. This pattern indicates the company's evolving management of working capital components, with recent data suggesting a more efficient cash cycle compared to earlier years.