Announces Record YTD Closed Sales and Reaffirms Full Year Guidance
LAKE SUCCESS, N.Y., May 8, 2015 – Broadridge Financial Solutions, Inc. (NYSE:BR) today reported financial results for the third quarter of its fiscal year 2015. Results for the three months ended March 31, 2015 compared with the same period last year were as follows:
Commenting on the results, Richard J. Daly, President and Chief Executive Officer, said, “I am pleased with our third quarter financial performance which was primarily driven by recurring revenues including Net New Business gains and the continuation of favorable market-based activities. Recurring revenue closed sales grew 14% in the third quarter and have grown 75% year to date. Given our year to date performance, we are reaffirming our full year guidance. Further, with $108 million in record recurring revenue closed sales year to date, we expect the full year to come in at the upper half of our guidance range of $110 to $150 million, which would result in another full year record. We also anticipate Adjusted Diluted EPS to be around the mid-point of our full year guidance range of $2.42 to $2.52, representing about 10% growth."
Mr. Daly added, “We are delivering on our capital commitments including making tuck-in acquisitions and returning capital to shareholders through dividends and share repurchases. In April, we completed the previously announced acquisition of the trade processing business of M&T Bank Corporation’s Wilmington Trust Retirement and Institutional Services unit and during the quarter, we acquired Direxxis, a provider of cloud-based marketing solutions and services for wealth and asset managers.”
Mr. Daly concluded, “I am confident in Broadridge’s ability to achieve our long term strategy. We are off to a solid start towards achieving our three-year performance objectives which include recurring fee growth of 7% to 10% and earnings growth of 9% to 11%.”
Financial Results for Third Quarter Fiscal Year 2015
Revenues for the three months ended March 31, 2015 were $634 million, an increase of $28 million, or 5%, compared to $606 million for the three months ended March 31, 2014. The $28 million increase was driven by higher recurring fee revenues of $19 million, or 5%, higher event-driven fee revenues of $9 million, or 25%, and higher distribution revenues of $8 million, or 4%. The positive contribution from recurring fee revenues reflected gains from Net New Business (2pts), internal growth (1pt) and contributions from acquisitions (1pt). Fluctuations in foreign currency exchange rates negatively impacted revenues by $8 million.
For the third quarter of fiscal year 2015, Net earnings increased 6% to $54 million, compared to $51 million for the prior year period, primarily due to higher revenues and improvement in pre-tax margins, which increased to 12.9% compared to 12.7% for the same period last year.
Adjusted Net earnings were $59 million compared to $55 million for the same period last year. Adjusted pre-tax margins were 14.1% compared to 13.7% for the same period last year.
Diluted earnings per share increased to $0.43 per share compared to $0.41 per share for the same period last year. Adjusted Diluted earnings per share were $0.47 compared to $0.44 per share for the same period last year. Acquisition Amortization and Other Costs, net of taxes, decreased Diluted earnings per share by $0.04 and $0.03 for the three months ended March 31, 2015 and 2014, respectively.
In addition, during the third quarter, the Company repurchased 2.4 million shares of Broadridge common stock at an average price of $52.90 per share.
Analysis of Third Quarter Fiscal Year 2015
Investor Communication Solutions
Investor Communication Solutions segment’s Revenues for the three months ended March 31, 2015 were $466 million, an increase of $31 million, or 7%, compared to $436 million for the three months ended March 31, 2014. The increase was attributable to higher recurring fee revenues which contributed $14 million, higher event-driven fee revenues which contributed $9 million and a $8 million increase in distribution revenues. Higher recurring fee revenues of 6% were driven by contributions from our recent acquisitions of Emerald Connect, LLC and Direxxis LLC (2pts), Net New Business (2pts) from increases in revenues from closed sales, and market-based internal growth activities (2pts). Position growth for mutual fund interim and annual equity proxy communications, both components of internal growth, was 8% and 12%, respectively, as compared to the same period in the prior year. Higher event-driven fee revenues were the result of increased mutual fund proxy communications activity.
Global Technology and Operations (formerly known as Securities Processing Solutions)
Global Technology and Operations segment’s Revenues for the three months ended March 31, 2015 were $178 million, an increase of $5 million, or 3%, compared to $173 million for the three months ended March 31, 2014. The 3% increase was mainly the result of higher Net New Business (2pts) from increases in revenues from closed sales and contributions from our recent acquisition of TwoFour Systems LLC (1pt).
In connection with an organizational change made in 2014 in order to further align and enhance our portfolio of services, certain discrete services that were previously reported in our Global Technology and Operations reportable segment are now reported within the Investor Communication Solutions reportable segment. As a result, our prior period segment results have been revised to reflect this change in reporting segments.
Pre-tax loss decreased by $4 million in the third quarter of fiscal year 2015. The decreased loss was mainly due to a $6 million decrease in performance-based compensation expenses, partially offset by a $1 million increase in expenses related to corporate staffing changes, and an increase in expenses related to corporate initiatives in the current year.
Financial Results for the Nine Months Ended March 31, 2015
Revenues for the nine months ended March 31, 2015 were $1,765 million, an increase of $93 million, or 6%, compared to $1,672 million for the nine months ended March 31, 2014. The $93 million increase was driven by higher recurring fee revenues of $59 million, or 5%, and higher distribution revenues of $34 million, or 7%. The positive contribution from recurring fee revenues reflected gains from Net New Business (3pts), internal growth (1pt), and contributions from acquisitions (1pt). Event-driven fee revenues were $120 million, an increase of $13 million, or 12%, compared to $107 million for the nine months ended March 31, 2014. Fluctuations in foreign currency exchange rates negatively impacted revenues by $14 million.
For the nine months ended March 31, 2015, Net earnings decreased 1% to $121 million compared to $123 million for the comparable period last year, primarily due to higher commissions related to the growth in closed sales, higher performance-based compensation expenses, the continued expansion of our sales capabilities and growth initiatives, higher acquisition related expenses, and additional costs incurred for corporate staffing changes. Also, contributing to the decrease was a credit in the prior period resulting from a decline in the fair value of our obligations under contingent acquisition consideration arrangements. Pre-tax margins decreased to 10.4% compared to 11.3% for the same period last year mainly due to higher expenses discussed above more than offsetting the contributions from the growth in revenues.
Adjusted Net earnings were $135 million compared to $134 million for the same period last year. Adjusted Pre-tax margins decreased to 11.6% compared to 12.4% for the same period last year. Diluted earnings per share decreased to $0.97 per share compared to $0.99 per share for the comparable period last year. Adjusted Diluted earnings per share were $1.09 compared to $1.08 per share for the comparable period last year. Acquisition Amortization and Other Costs, net of taxes, decreased Diluted earnings per share by $0.11 and $0.09 for the nine months ended March 31, 2015 and 2014, respectively.
Fiscal Year 2015 Financial Guidance
Broadridge is reaffirming its full year guidance and expects:
The Adjusted Pre-tax margins and Adjusted Diluted earnings per share guidance ranges exclude the projected impact of Acquisition Amortization and Other Costs. Our guidance does not take into consideration the effect of any future acquisitions, additional debt or share repurchases.
Explanation of the Company’s Use of Non-GAAP Financial Measures
In certain circumstances, results have been presented that are not generally accepted accounting principles measures (“Non-GAAP”) and should be viewed in addition to, and not as a substitute for, the Company’s reported 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. In addition, Broadridge believes this Non-GAAP information helps investors understand the effect of these items on reported results and provides a better representation of the Company’s performance. Accompanying this release is a reconciliation of these Non-GAAP measures to the comparable GAAP measures.
Adjusted Net earnings, Adjusted Earnings before income taxes, Adjusted Diluted earnings per share and Adjusted Pre-tax margins results are Non-GAAP measures. These results are adjusted to exclude the impact of Acquisition Amortization and Other Costs for the three and nine months ended March 31, 2015 and 2014. Acquisition Amortization and Other Costs represents amortization charges associated with acquired intangible asset values as well as other transaction costs associated with the Company’s acquisitions. Acquisition Amortization and Other Costs are recorded in our Cost of revenues in the Condensed Consolidated Statements of Earnings for the three and nine months ended March 31, 2015 and 2014.
Free cash flows is a Non-GAAP measure and is defined by the Company as Net cash flows from operating activities, less capital expenditures and software purchases.
Earnings Conference Call
An analyst conference call will be held today, Friday, May 8, 2015 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. The presentation will also be available to download and print approximately one hour before the webcast. Broadridge’s news releases, current financial information, SEC filings and Investor Relations presentations are accessible on the same website.
Broadridge Financial Solutions, Inc. (NYSE:BR) is the leading provider of investor communications and technology-driven solutions for broker-dealers, banks, mutual funds and corporate issuers globally. Broadridge’s investor communications, securities processing and business process outsourcing 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 more than $5 trillion in fixed income and equity trades per day. Broadridge employs approximately 6,700 full-time associates in 14 countries.
For more information about Broadridge, please visit www.broadridge.com.
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.
Brian S. Shipman, CFA
Broadridge Financial Solutions, Inc.