Press Releases

Broadridge Reports Strong Second Quarter Fiscal 2008 Results

LAKE SUCCESS, New York – February 7, 2008 – Broadridge Financial Solutions, Inc. (NYSE:BR), a leading global provider of technology-based outsourcing solutions to the financial services industry, today reported earnings of $28.9 million, or $0.21 per share for the second quarter ended December 31, 2007, compared to $28.0 million or $0.20 per share for the comparable quarter of the previous fiscal year. 

Commenting on the results, Richard J. Daly, Chief Executive Officer, said, “We are pleased with our second quarter revenue and earnings, which continue to be enhanced by market activity.  Increased trading volume continues to provide positive momentum, although it provided less benefit this quarter than in our first quarter.  Event-driven revenue was a more significant contributor this quarter than it was in our first quarter.  Our operating margin increased, largely as a result of the inherent operating scale in our business.  We believe that our strong second quarter performance and volume trends move us towards the higher end of our $1.30 - $1.40 earnings per share guidance range.”

For the second quarter, net revenues grew 8% to $465.1 million from $431.3 million in the second quarter of fiscal year 2007.  Net earnings increased 3% to $28.9 million from $28.0 million, and diluted earnings per share increased to $0.21 per share on slightly more shares outstanding, compared to $0.20 per share in the second quarter of fiscal year 2007.  Excluding adjustments for one-time transition expenses and interest on debt related to Broadridge’s March 2007 spin-off from Automatic Data Processing, Inc. (NYSE:ADP), the Non-GAAP net earnings for the second quarter of fiscal year 2008 grew to $36.9 million from $28.6 million, an increase of 29%, or $0.26 per share from $0.21 per share, compared to the second quarter of fiscal year 2007. 

Net revenue growth in the second quarter of fiscal year 2008 was driven primarily by sales, internal growth from higher trading volumes, increases in Transaction Reporting and Fulfillment services, as well as higher event-driven activity in Mutual Fund Proxies and favorable foreign exchange rates, offset by the loss of two large clients previously announced in fiscal year 2007.  Pre-tax margin of 10.2% decreased by 0.5 percentage points primarily as a result of the aforementioned spin-off adjustments.  Our closed sales for the quarter were $38 million and are 5% greater than last year’s comparable quarter and 9% greater on a year-to-date basis. 

For the six months ended December 31, 2007, net revenues grew by 5% to $916.3 million primarily driven by sales, internal growth from higher trading volumes, increases in Interim Communication services and Transaction Reporting and Fulfillment services, as well as higher event-driven revenues related to Mutual Fund Proxies.  The growth in these revenue areas helped to more than offset the impact of the loss of two large clients we previously announced.  Pre-tax margins of 11.6% increased by 1.0 percentage point resulting from the inherent operating leverage in the business.  Diluted earnings per share increased 12% to $0.46 for the first six months of fiscal year 2008, compared to diluted earnings per share of $0.41 in the first six months of fiscal year 2007.  Excluding the aforementioned spin-off adjustments, the Non-GAAP net earnings for the six months ended December 31, 2007 grew to $79.5 million from $57.5 million, an increase of 38%, or $0.57 per share from $0.42 per share.  A reconciliation of Non-GAAP to GAAP measures is included at the end of this release.

Analysis of Second 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

Net revenues for the Investor Communication Solutions segment increased 6% compared to the second quarter of fiscal year 2007, on both an as adjusted and as reported basis, to $303.2 million in the second quarter of fiscal year 2008.  The increase was driven primarily by internal growth from Interim Communications and Transaction Reporting and Fulfillment services, as well as higher event-driven revenues related to Mutual Fund Proxies.  Net new business (sales less losses) reduced revenue growth by 3%.  Operating margin increased 3.3 percentage points compared to the second quarter of fiscal year 2007, as adjusted, and 3.2 percentage points on an as reported basis, primarily as a result of operating leverage associated with internal growth and event-driven revenues, and to a lesser degree a more favorable mix in distribution fees.

Securities Processing Solutions

Net revenues for the Securities Processing Solutions segment increased 2% compared to the second quarter of fiscal year 2007, on an as adjusted basis, to $127.6 million in the second quarter of fiscal year 2008, and essentially unchanged compared to the second 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.  Net new business reduced revenue growth by 3%.  Operating margin decreased 1.4 percentage points compared to the second quarter of fiscal year 2007, as adjusted, as a result of higher expenses associated with incremental investments and slightly higher operating cost.  Operating margin decreased 2.4 percentage points compared to the second quarter of fiscal year 2007, on an as reported basis.

Clearing and Outsourcing Solutions

Net revenues for the Clearing and Outsourcing Solutions segment increased 7% compared to the second quarter of fiscal year 2007, on both an as adjusted and as reported basis, to $24.7 million in the second quarter of fiscal year 2008. The increase was driven primarily from net new business growth across both the clearing services and outsourcing services businesses and to a lesser degree internal growth from increased trade volume.  Net new business increased revenue growth by 2%. Operating loss of $1.6 million for the second quarter of fiscal year 2008 improved by $0.5 million from a loss of $2.1 million in the second quarter of fiscal year 2007, as adjusted, and improved by $3.0 million from a loss of $4.6 million in the second 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

Our fiscal year 2008 financial guidance, which we increased in the first quarter of fiscal year 2008, is as follows: 1% - 4% revenue growth, and earnings per share before one-time transition expenses towards the higher end of our $1.30 - $1.40 per share range, based on diluted weighted average shares outstanding of approximately 141 million shares.  Mr. Daly commented, “The first half of our fiscal year has provided a great start.  However, we do not expect to see the same magnitude of positive year-over-year performance in our financial results in the second half of the year. Markets are difficult to predict, therefore our guidance does not contemplate any major change in the markets we serve that could result in a significant change 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, Thursday, February 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-ir.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: Broadridge’s success in retaining and selling additional services to its existing clients and obtaining new clients; the pricing of Broadridge’s products and services; changes in laws affecting the investor communication services provided by Broadridge; changes in laws regulating registered clearing agencies and broker-dealers; declines in trading volume, market prices, liquidity of securities markets or proprietary trading activity; Broadridge’s ability to continue to obtain data center services from its former parent company, Automatic Data Processing, Inc. (“ADP”); Broadridge’s debt levels and financing costs, including the impact of its credit ratings on such costs; the ability of Broadridge to develop brand recognition and its reputation with its clients and employees following its separation from ADP in March 2007; the incurrence of additional costs attributable to Broadridge’s operations as a stand-alone public company; Broadridge’s ability to continue 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 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       Six months

                                              ended             ended

                                           December 31,       December 31,

                                        ----------------- -----------------

                                          2007     2006     2007     2006

                                        -------- -------- -------- --------

Revenues:

  Services revenues                     $  450.5 $  416.8 $  886.0 $  842.9

  Other                                     23.9     20.7     48.4     40.1

                                        -------- -------- -------- --------

    Total revenues                         474.4    437.5    934.4    883.0

  Interest expense from securities

   operations                                9.3      6.2     18.1     11.6

                                        -------- -------- -------- --------

  Net revenues                             465.1    431.3    916.3    871.4

                                        -------- -------- -------- --------

Cost of net revenues                       345.7    333.2    679.9    675.8

Selling, general and administrative

 expenses                                   62.5     51.1    111.6    101.6

Other expenses, net                          9.6      1.0     18.4      1.6

                                        -------- -------- -------- --------

    Total expenses                         417.8    385.3    809.9    779.0

 

Earnings before income taxes                47.3     46.0    106.4     92.4

Provision for income taxes                  18.4     18.0     41.5     35.9

                                        -------- -------- -------- --------

Net earnings                            $   28.9 $   28.0 $   64.9 $   56.5

                                        ======== ======== ======== ========

Earnings per share:

  Basic                                 $   0.21 $   0.20 $   0.47 $   0.41

  Diluted                               $   0.21 $   0.20 $   0.46 $   0.41

 

Weighted-average shares outstanding:

  Basic                                    139.3    138.8    139.2    138.8

  Diluted                                  140.9    138.8    140.3    138.8

 

Dividends declared per common share     $   0.06       na $   0.12       na

na - not applicable

 

                       Broadridge Financial Solutions, Inc.

                      Condensed Consolidated Balance Sheets

                     (In millions, except per share amounts)

                                  (Unaudited)

 

                                                  December 31,   June 30,

                                                      2007         2007

                                                  -----------  -----------

Assets

Current assets:

  Cash and cash equivalents                       $     104.2  $      88.6

  Cash and securities segregated for regulatory

   purposes and securities deposited with

   clearing organizations                                 3.1         66.4

  Accounts receivable, net of allowance for

   doubtful accounts of $4.3 and $2.6,

   respectively                                         333.0        502.7

  Securities clearing receivables, net of

   allowance for doubtful accounts of $2.1 and

   $2.1, respectively                                 1,665.3      1,241.2

  Other current assets                                   63.2         61.1

                                                  -----------  -----------

   Total current assets                               2,168.8      1,960.0

Property, plant and equipment, net                       77.7         77.4

Other non-current assets                                145.8        129.2

Goodwill                                                487.2        480.2

Intangible assets, net                                   31.8         31.4

                                                  -----------  -----------

     Total assets                                 $   2,911.3  $   2,678.2

                                                  ===========  ===========

Liabilities and Stockholders' Equity

Current liabilities:

  Accounts payable                                $      82.9  $      91.5

  Accrued expenses and other current liabilities        184.3        287.9

  Securities clearing payables                          961.7        915.4

  Deferred revenues                                       9.8         24.6

  Short-term borrowings                                 426.0        109.2

                                                  -----------  -----------

   Total current liabilities                          1,664.7      1,428.6

Long-term debt                                          522.8        617.7

Other non-current liabilities                            59.3         61.0

Deferred revenues                                        54.7         39.8

                                                  -----------  -----------

     Total liabilities                                2,301.5      2,147.1

                                                  -----------  -----------

 

Commitments and contingencies

 

Stockholders' equity:

  Preferred stock:  Authorized, 25.0 shares;

   issued and outstanding, none                            --           --

  Common stock, $0.01 par value:  Authorized,

   650.0 shares; issued, 139.9 shares and 139.3

   shares, respectively                                   1.4          1.4

  Additional paid-in capital                            437.0        412.9

  Retained earnings                                     137.7         90.3

  Treasury stock - at cost                               (0.5)        (0.1)

  Accumulated other comprehensive income                 34.2         26.6

                                                  -----------  -----------

   Total stockholders' equity                           609.8        531.1

                                                  -----------  -----------

     Total liabilities and stockholders' equity   $   2,911.3  $   2,678.2

                                                  ===========  ===========

 

                      Broadridge Financial Solutions, Inc.

                                Segment Results

                                 (In millions)

                                  (Unaudited)

 

 

                                                   Net revenues

                                        -----------------------------------

                                          Three months

                                              ended       Six months ended

                                          December 31,      December 31,

                                        ----------------- -----------------

                                          2007     2006     2007     2006

                                        -------- -------  -------- -------

Investor Communication Solutions        $  303.2 $ 287.1  $  602.3 $ 595.1

Securities Processing Solutions            127.6   127.7     252.0   244.2

Clearing and Outsourcing Solutions          24.7    23.2      49.4    45.0

Other                                        5.2    (4.0)      7.6    (7.9)

 

Foreign exchange                             4.4    (2.7)      5.0    (5.0)

                                        -------- -------  -------- -------

   Total                                $  465.1 $ 431.3  $  916.3 $ 871.4

                                        ======== =======  ======== =======

 

                                           Earnings before Income Taxes

                                        ----------------------------------

                                          Three months       Six months

                                             ended             ended

                                          December 31,       December 31,

                                        ----------------  ----------------

                                          2007     2006     2007     2006

                                        -------  -------  -------  -------

Investor Communication Solutions        $  27.2  $  16.7  $  57.0  $  41.3

Securities Processing Solutions            35.0     38.1     73.8     68.6

Clearing and Outsourcing Solutions         (1.6)    (4.6)    (3.6)   (10.2)

Other                                     (15.2)    (3.0)   (23.0)    (5.3)

Foreign exchange                            1.9     (1.2)     2.2     (2.0)

                                        -------  -------  -------  -------

   Total                                $  47.3  $  46.0  $ 106.4  $  92.4

                                        =======  =======  =======  =======


                   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 December 31, 2007

                    -------------------------------------------

                     Earnings

                      before                            Net

                      income    Pre-tax      Net      earnings

                       taxes    margin     earnings  per share

                    ---------- ---------  ---------- ----------

GAAP basis measures $     47.3      10.2% $     28.9 $     0.21

Non-GAAP

 adjustments:

    One-time

     transition

     expenses              3.5       0.7%        2.1       0.01

    Interest on new

     debt & other          9.6       2.1%        5.9       0.04

                    ---------- ---------  ---------- ----------

      Total

       Non-GAAP

       adjustments        13.1       2.8%        8.0       0.05

                    ---------- ---------  ---------- ----------

Non-GAAP measures   $     60.4      13.0% $     36.9 $     0.26

                    ========== =========  ========== ==========

 

 

                        Three months ended December 31, 2006

                    -------------------------------------------

                     Earnings

                      before                            Net

                      income    Pre-tax      Net      earnings

                       taxes    margin     earnings  per share

                    ---------- ---------  ---------- ----------

GAAP basis measures $     46.0      10.7% $     28.0 $     0.20

Non-GAAP

 adjustments:

    One-time

     transition

     expenses               --        --          --         --

    Interest on new

     debt & other          1.0       0.2%        0.6       0.01

                    ---------- ---------  ---------- ----------

      Total

       Non-GAAP

       adjustments         1.0       0.2%        0.6       0.01

                    ---------- ---------  ---------- ----------

Non-GAAP measures   $     47.0      10.9% $     28.6 $     0.21

                    ========== =========  ========== ==========

 

 

                        Six months ended December 31, 2007

                    -------------------------------------------

                     Earnings

                      before                            Net

                      income    Pre-tax      Net      earnings

                       taxes    margin     earnings  per share

                    ---------- ---------  ---------- ----------

 

GAAP basis measures $    106.4      11.6% $     64.9 $     0.46

Non-GAAP

 adjustments:

    One-time

     transition

     expenses              5.6       0.6%        3.4       0.03

    Interest on new

     debt & other         18.4       2.0%       11.2       0.08

                    ---------- ---------  ---------- ----------

      Total

       Non-GAAP

       adjustments        24.0       2.6%       14.6       0.11

                    ---------- ---------  ---------- ----------

Non-GAAP measures   $    130.4      14.2% $     79.5 $     0.57

                    ========== =========  ========== ==========

 

 

                        Six months ended December 31, 2006

                    -------------------------------------------

                     Earnings

                      before                            Net

                      income    Pre-tax      Net      earnings

                       taxes    margin     earnings  per share

                    ---------- ---------  ---------- ----------

 

GAAP basis measures $     92.4      10.6% $     56.5 $     0.41

Non-GAAP

 adjustments:

    One-time

     transition

     expenses               --        --          --         --

    Interest on new

     debt & other          1.6       0.2%        1.0       0.01

                    ---------- ---------  ---------- ----------

      Total

       Non-GAAP

       adjustments         1.6       0.2%        1.0       0.01

                    ---------- ---------  ---------- ----------

Non-GAAP measures   $     94.0      10.8% $     57.5 $     0.42

                    ========== =========  ========== ==========

 

 

              Intersegment Transfer Price Reconciliation

                  (In millions, except margin data)

                               (Unaudited)

 

                                    Three months ended   Six months ended

                                        December 31,        December 31,

                                    ------------------  ------------------

                                      2007      2006      2007      2006

                                    --------  --------  --------  --------

Investor Communication Solutions

Net revenue as reported             $  303.2  $  287.1  $  602.3  $  595.1

Transfer pricing adjustment               --      (1.0)       --      (2.0)

                                    --------  --------  --------  --------

Net revenue as adjusted - Non-GAAP  $  303.2  $  286.1  $  602.3  $  593.1

                                    --------  --------  --------  --------

EBT as reported                     $   27.2  $   16.7  $   57.0  $   41.3

Transfer pricing adjustment               --      (0.3)       --      (0.7)

                                    --------  --------  --------  --------

EBT as adjusted - Non-GAAP          $   27.2  $   16.4  $   57.0  $   40.6

                                    --------  --------  --------  --------

Margin % as reported                     9.0%      5.8%      9.5%      6.9%

Margin % as adjusted - Non-GAAP          9.0%      5.7%      9.5%      6.8%

 

 

Securities Processing Solutions

Net revenue as reported             $  127.6  $  127.7  $  252.0  $  244.2

Transfer pricing adjustment               --      (3.1)       --      (6.0)

                                    --------  --------  --------  --------

Net revenue as adjusted - Non-GAAP  $  127.6  $  124.6  $  252.0  $  238.2

                                    --------  --------  --------  --------

EBT as reported                     $   35.0  $   38.1  $   73.8  $   68.6

Transfer pricing adjustment               --      (2.2)       --      (4.3)

                                    --------  --------  --------  --------

EBT as adjusted - Non-GAAP          $   35.0  $   35.9  $   73.8  $   64.3

                                    --------  --------  --------  --------

Margin % as reported                    27.4%     29.8%     29.3%     28.1%

Margin % as adjusted - Non-GAAP         27.4%     28.8%     29.3%     27.0%

 

 

Clearing and Outsourcing Solutions

Net revenue as reported             $   24.7  $   23.2  $   49.4  $   45.0

Transfer pricing adjustment               --        --        --        --

                                    --------  --------  --------  --------

Net revenue as adjusted - Non-GAAP  $   24.7  $   23.2  $   49.4  $   45.0

                                    --------  --------  --------  --------

EBT as reported                     $   (1.6) $   (4.6) $   (3.6) $  (10.2)

Transfer pricing adjustment               --       2.5        --       5.0

                                    --------  --------  --------  --------

EBT as adjusted - Non-GAAP          $   (1.6) $   (2.1) $   (3.6) $   (5.2)

                                    --------  --------  --------  --------

Margin % as reported                    -6.5%    -19.8%     -7.3%    -22.7%

Margin % as adjusted - Non-GAAP         -6.5%     -9.1%     -7.3%    -11.6%

-ends-

About Broadridge

Broadridge Financial Solutions, Inc. (NYSE:BR) is the leading provider of investor communications and technology-driven solutions for broker-dealers, banks, mutual funds and other corporations. Broadridge’s investor and customer communications, securities processing and managed services solutions help clients reduce their capital investments in operations infrastructure, allowing them to increase their focus on core business activities. With over 50 years of experience, Broadridge's infrastructure underpins proxy voting services for over 90% of public companies and mutual funds in North America and processes on average $5 trillion in equity and fixed income trades per day. Broadridge employs approximately 10,000 associates in 14 countries.

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 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.

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