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LAKE SUCCESS, New York – November 7, 2007 – Broadridge Financial Solutions, Inc. (NYSE:BR), a leading global provider of technology-based outsourcing solutions to the financial services industry, today reported earnings of $36.0 million, or $0.26 per share for the first quarter of its fiscal year 2008, compared to $28.5 million or $0.21 per share for the comparable quarter of the previous fiscal year.
In the first quarter of fiscal year 2008, net revenues grew 3% to $451.2 million from $440.1 million in the first quarter of fiscal year 2007. Net earnings grew 26% to $36.0 million from $28.5 million, and diluted earnings per share increased 24% to $0.26 per share from $0.21 per share on slightly more shares outstanding, compared to the first quarter of fiscal 2007.
Excluding adjustments for one-time transition expenses related to Broadridge’s March 2007 spin-off from Automatic Data Processing, Inc. (NYSE:ADP), and interest on new debt, the non-GAAP net earnings for the first quarter of fiscal year 2008 grew to $42.8 million from $28.5 million, an increase of 50%, or $0.31 per share from $0.21 per share. A reconciliation of non-GAAP to GAAP measures is included at the end of this release.
In the first quarter of fiscal year 2008, net revenue growth was driven primarily by growth in trading volumes related to market activity, new business and one-time items, offset by two large client losses previously announced in fiscal year 2007. Pretax margin of 13.1% increased by 2.6 percentage points as a result of the inherent operating leverage in the business primarily driven by trade volume revenue, and one-time items that contributed approximately one percentage point of the improvement. Our sales for the quarter were $30 million; this amount is ahead of plan and just over 25% of our full year plan.
Commenting on the results, Richard J. Daly, Chief Executive Officer said, “We are very pleased with our first quarter results and earnings, and I’m encouraged by the market activity that drove us over our planned performance. For the quarter, we were even able to grow over the two large client losses we had previously announced. Our operating margin increased, largely as a result of higher trading volume revenue and the one-time items. This solid start puts us on track to exceed our expected results for our 2008 fiscal year. Therefore we are raising our earnings guidance. Our strong cash flows enabled us to pay down almost 15% of our outstanding long-term debt, and to continue to make strategic investments in our businesses.”
Analysis of First Quarter Fiscal Year 2008
In the third quarter of fiscal year 2007, we changed our method for determining intersegment transfer pricing. This change had no impact on our consolidated results. In the business segment discussion below, we compare actual results for fiscal year 2008 to results for fiscal year 2007 that are adjusted to reflect the change in transfer pricing. We believe this provides a more meaningful comparison between current quarter results and prior quarters. A reconciliation to fiscal year 2007 results, as reported, is included at the end of this release.
Investor Communication Solutions
Investor Communication Solutions segment net revenues decreased 3% compared to the first quarter of fiscal year 2007, on both an adjusted and as reported basis, to $299.1 million in the first quarter of fiscal year 2008. The decrease was driven primarily by lower distribution fees and the impact of the previously announced client loss, offset by higher internal growth. Operating margin increased 2.1 percentage points compared to the first quarter of fiscal year 2007, as adjusted, and 2.0 percentage points on an as reported basis, primarily as a result of a more favorable mix in distribution fees and to a lesser degree internal growth.
Securities Processing Solutions
Securities Processing Solutions segment net revenues grew to $124.4 million in the first quarter of fiscal year 2008, an increase of 10% compared to the first quarter of fiscal year 2007, as adjusted, and an increase of 7% compared to the first quarter of fiscal year 2007, on an as reported basis. The increase was primarily related to internal growth for equity and fixed income trade processing. Operating margin increased 6.2 percentage points compared to the first quarter of fiscal year 2007, as adjusted, and increased 5.0 percentage points compared to the first quarter of fiscal year 2007, on an as reported basis, as a result of the inherent operating leverage in the business associated with revenue from internal growth.
Clearing and Outsourcing Solutions
Clearing and Outsourcing Solutions segment net revenues grew to $24.7 million in the first quarter of fiscal year 2008, an increase of 13% compared to the first quarter of fiscal year 2007, on both an adjusted and as reported basis, primarily from internal growth and net new business growth across both the clearing services and outsourcing services businesses. Operating loss of $2.0 million for the first quarter of fiscal year 2008 improved by $1.1 million from a loss of $3.1 million in the first quarter of fiscal year 2007, as adjusted, and improved by $3.6 million from a loss of $5.6 million in the first quarter of fiscal year 2007, on an as reported basis, as a result of the inherent operating leverage in the business associated with revenue from internal growth and new clients.
Fiscal Year 2008 Financial Guidance
We are raising the fiscal year 2008 financial guidance as follows: (1) 1% - 4% revenue growth; and (2) earnings per share before one-time transition expenses within a range of $1.30 - $1.40 per share, based on diluted weighted average shares outstanding of approximately 141 million shares.
Mr. Daly commented, “We are off to a very good start for fiscal year 2008, and this has put us in a position to increase our guidance. Our new range anticipates that the level of trading activity from the first quarter will continue for the remainder of the year. However, once beyond the first quarter summer months this level of activity is only slightly above our original plan for the remaining three quarters. Our guidance does not contemplate any major downturn in the markets we serve that could result in a significant drop in market activity.”
Non-GAAP Measures
In certain circumstances, results have been presented that are non-GAAP measures and should be viewed in addition to, and not as a substitute for, the Company’s reported results. Management believes such non-GAAP measures provide investors a more complete understanding of Broadridge’s underlying operational results. These non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior reported results, and as a basis for planning and forecasting for future periods. A reconciliation of non-GAAP to GAAP measures is available in the accompanying schedules to this release and on the Broadridge Investor Relations home page atwww.broadridge-ir.com.
Earnings Conference Call
An analyst conference call will be held today, Wednesday, November 7th at 8:30 a.m. ET. A live webcast of the call will be available to the public on a listen-only basis. To listen to the webcast and view the slide presentation, go to www.broadridge.com and click on the webcast icon. The presentation will be available to download and print approximately 30 minutes before the webcast on the Broadridge Investor Relations home page at www.broadridge-ir.com. Broadridge's news releases, current financial information, SEC filings and Investor Relations presentations are accessible on the same website.
About Broadridge
Broadridge Financial Solutions, Inc., with over $2.0 billion in revenues and more than 40 years of experience, is a leading global provider of technology-based outsourcing solutions to the financial services industry. Our systems and services include investor communication, securities processing, and clearing and outsourcing solutions. We offer advanced, integrated systems and services that are dependable, scalable and cost-efficient. Our systems help reduce the need for clients to make significant capital investments in operations infrastructure, thereby allowing them to increase their focus on core business activities. For more information about Broadridge, please visit www.broadridge.com.
Forward-Looking Statements
This press release and other written or oral statements made from time to time by representatives of Broadridge may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, such as our fiscal 2008 financial guidance, and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. These risks and uncertainties include those risk factors discussed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 (the “2007 Annual Report”). Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the 2007 Annual Report. These risks include: the ability of Broadridge to develop brand recognition and its reputation with its clients and employees following its separation from Automatic Data Processing, Inc., (“ADP”) in March 2007; Broadridge’s success in obtaining, retaining and selling additional services to clients; the pricing of Broadridge’s products and services; the incurrence of additional costs attributable to Broadridge’s operations as a stand-alone public company; Broadridge’s ability to continue to obtain data center services from its former parent company, ADP, as well as to obtain transitional services from ADP for up to one year from the date of Broadridge’s March 2007 spin-off from ADP; changes in laws affecting the investor communications services provided by Broadridge; changes in laws regulating registered clearing agencies and broker-dealers; Broadridge’s debt levels and financing costs, including the impact of its credit ratings on such costs; financial market activity; changes in technology; availability of skilled technical employees; the impact of new acquisitions and divestitures; competitive conditions; and overall market and economic conditions.
Broadridge disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Broadridge Financial Solutions, Inc.
Condensed Consolidated and Combined Statements of Earnings
(In millions, except per share amounts)
(Unaudited)
Three months ended
September 30,
-------------------
2007 2006
--------- ---------
Revenues:
Services revenues $ 435.5 $ 426.1
Other 24.5 19.4
--------- ---------
Total revenues 460.0 445.5
Interest expense from securities operations 8.8 5.4
--------- ---------
Net revenues 451.2 440.1
--------- ---------
Cost of net revenues 334.2 342.6
Selling, general and administrative expenses 49.1 50.5
Other expenses, net 8.8 0.6
--------- ---------
392.1 393.7
Earnings before income taxes 59.1 46.4
Provision for income taxes 23.1 17.9
--------- ---------
Net earnings $ 36.0 $ 28.5
========= =========
Earnings per share:
Basic $ 0.26 $ 0.21
Diluted $ 0.26 $ 0.21
Weighted-average shares outstanding:
Basic 139.1 138.8
Diluted 139.8 138.8
Dividends declared per common share $ 0.06 na
na - not applicable
Broadridge Financial Solutions, Inc.
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
September
30, June 30,
2007 2007
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 86.4 $ 88.6
Cash and securities segregated for regulatory
purposes and securities deposited with clearing
organizations 27.0 66.4
Accounts receivable, net of allowance for doubtful
accounts of $3.1 and $2.6, respectively 374.2 502.7
Securities clearing receivables, net of allowance
for doubtful accounts of $2.1 and $2.1,
respectively 1,290.6 1,241.2
Other current assets 66.7 61.1
--------- ---------
Total current assets 1,844.9 1,960.0
Property, plant and equipment, net 74.5 77.4
Other non-current assets 138.1 129.2
Goodwill 484.4 480.2
Intangible assets, net 33.0 31.4
--------- ---------
Total assets $ 2,574.9 $ 2,678.2
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 91.3 $ 91.5
Accrued expenses and other current liabilities 193.0 287.9
Securities clearing payables 963.2 915.4
Deferred revenues 18.9 24.6
Short-term borrowings 108.7 109.2
--------- ---------
Total current liabilities 1,375.1 1,428.6
Long-term debt 532.7 617.7
Other non-current liabilities 59.6 61.0
Deferred revenues 42.3 39.8
--------- ---------
Total liabilities 2,009.7 2,147.1
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock: Authorized, 25.0 shares; issued
and outstanding, none -- --
Common stock, $.01 par value: Authorized, 650.0
shares; issued, 139.4 shares and 139.3 shares,
respectively 1.4 1.4
Additional paid-in capital 418.9 412.9
Retained earnings 117.2 90.3
Treasury stock - at cost (0.5) (0.1)
Accumulated other comprehensive income 28.2 26.6
--------- ---------
Total stockholders' equity 565.2 531.1
--------- ---------
Total liabilities and stockholders' equity $ 2,574.9 $ 2,678.2
========= =========
Broadridge Financial Solutions, Inc.
Segment Results
(In millions)
(Unaudited)
Net revenues
-------------------------
Three months ended
September 30,
-------------------------
2007 2006
------------ -----------
Investor Communication Solutions $ 299.1 $ 308.0
Securities Processing Solutions 124.4 116.5
Clearing and Outsourcing Solutions 24.7 21.8
Other 2.4 (3.9)
Foreign exchange 0.6 (2.3)
------------ -----------
Total $ 451.2 $ 440.1
============ ===========
Earnings before
Income Taxes
------------------------
Three months ended
September 30,
------------------------
2007 2006
----------- -----------
Investor Communication Solutions $ 29.8 $ 24.6
Securities Processing Solutions 38.8 30.5
Clearing and Outsourcing Solutions (2.0) (5.6)
Other (7.8) (2.3)
Foreign exchange 0.3 (0.8)
----------- -----------
Total $ 59.1 $ 46.4
=========== ===========
Broadridge Financial Solutions, Inc.
Reconciliation of GAAP to Non-GAAP Measures
Earnings, Margin and Per Share Reconciliation
(In millions, except per share and margin data)
(Unaudited)
Three months ended September 30, 2007
---------------------------------------
Earnings
before Net
income Pretax Net earnings
taxes margin earnings per share
--------- -------- --------- ---------
GAAP basis measures $ 59.1 13.1 % $ 36.0 $ 0.26
Non-GAAP adjustments:
One-time transition
expenses 2.1 0.5 % 1.3 0.01
Interest on new debt 9.0 2.0 % 5.5 0.04
--------- -------- --------- ---------
Total Non-GAAP
adjustments 11.1 2.5 % 6.8 0.05
--------- -------- --------- ---------
Non-GAAP measures $ 70.2 15.6 % $ 42.8 $ 0.31
========= ======== ========= =========
Three months ended September 30, 2006
---------------------------------------
Earnings
before Net
income Pretax Net earnings
taxes margin earnings per share
--------- -------- --------- ---------
GAAP basis measures $ 46.4 10.5 % $ 28.5 $ 0.21
Non-GAAP adjustments:
One-time transition
expenses -- -- -- --
Interest on new debt -- -- -- --
--------- -------- --------- ---------
Total Non-GAAP
adjustments -- -- -- --
--------- -------- --------- ---------
Non-GAAP measures $ 46.4 10.5 % $ 28.5 $ 0.21
========= ======== ========= =========
Broadridge Financial Solutions, Inc.
Intersegment Transfer Price Reconciliation
(In millions, except margin data)
(Unaudited)
Three months ended
September 30,
--------------------
2007 2006
--------- ---------
Investor Communication Solutions
Net revenue as reported $ 299.1 $ 308.0
Transfer pricing adjustment -- (1.0)
--------- ---------
Net revenue as adjusted - Non-GAAP $ 299.1 $ 307.0
--------- ---------
EBT as reported $ 29.8 $ 24.6
Transfer pricing adjustment -- (0.4)
--------- ---------
EBT as adjusted - Non-GAAP $ 29.8 $ 24.2
--------- ---------
Margin % as reported 10.0% 8.0%
Margin % as adjusted - Non-GAAP 10.0% 7.9%
Securities Processing Solutions
Net revenue as reported $ 124.4 $ 116.5
Transfer pricing adjustment -- (2.9)
--------- ---------
Net revenue as adjusted - Non-GAAP $ 124.4 $ 113.6
--------- ---------
EBT as reported $ 38.8 $ 30.5
Transfer pricing adjustment -- (2.1)
--------- ---------
EBT as adjusted - Non GAAP $ 38.8 $ 28.4
--------- ---------
Margin % as reported 31.2% 26.2%
Margin % as adjusted - Non-GAAP 31.2% 25.0%
Clearing and Outsourcing Solutions
Net revenue as reported $ 24.7 $ 21.8
Transfer pricing adjustment -- --
--------- ---------
Net revenue as adjusted - Non-GAAP $ 24.7 $ 21.8
--------- ---------
EBT as reported $ (2.0) $ (5.6)
Transfer pricing adjustment -- 2.5
--------- ---------
EBT as adjusted - Non-GAAP $ (2.0) $ (3.1)
--------- ---------
Margin % as reported -8.1% -25.7%
Margin % as adjusted - Non-GAAP -8.1% -14.2%
Forward-Looking Statements
This press release and other written or oral statements made from time to time by representatives of Broadridge may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, such as our fiscal year 2011 financial guidance, and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. These risks and uncertainties include those risk factors discussed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 (the “2010 Annual Report”), as they may be updated in any future reports filed with the Securities and Exchange Commission. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the 2010 Annual Report. These risks include: the success of Broadridge in retaining and selling additional services to its existing clients and in obtaining new clients; the pricing of Broadridge’s products and services; changes in laws and regulations affecting the investor communication services provided by Broadridge; declines in participation and activity in the securities markets; overall market and economic conditions and their impact on the securities markets; any material breach of Broadridge security affecting its clients’ customer information; the failure of Broadridge’s outsourced data center services provider to provide the anticipated levels of service; any significant slowdown or failure of Broadridge’s systems or error in the performance of Broadridge’s services; Broadridge’s failure to keep pace with changes in technology and demands of its clients; Broadridge’s ability to attract and retain key personnel; the impact of new acquisitions and divestitures; and competitive conditions. Broadridge disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
To contact media relations, please email us at mediarelations@broadridge.com.
