17 April 2014

Broadridge Q3 revenues dip, earnings halve

08 May 2012  |  1649 views  |  0 Source: Broadridge

Broadridge Financial Solutions, Inc. (BR) today reported financial results for the third quarter of its fiscal year 2012.

For the three months ended March 31, 2012, the Company reported revenues of $547 million, GAAP net earnings from continuing operations of $18 million, Non-GAAP net earnings from continuing operations of $36 million, GAAP diluted earnings per share from continuing operations of $0.14 and Non-GAAP diluted earnings per share from continuing operations of $0.28. This compares with revenues of $527 million, GAAP net earnings from continuing operations of $33 million and GAAP diluted earnings per share from continuing operations of $0.25 for the comparable quarter of the previous fiscal year. Our Non-GAAP results exclude the impact of the Penson Impairment charges and IBM Migration costs. These adjustments are described in more detail below.

Commenting on the results, Richard J. Daly, Chief Executive Officer, said, "Overall, I am satisfied with our third quarter results. Our recurring revenues grew 9% and we had excellent client revenue retention of 99%; however, as anticipated, event-driven revenues continue to remain weak. We believe we are well positioned to finish fiscal year 2012 with strong operating results which should enable us to achieve our full year Non-GAAP earnings per share guidance."

Financial Results for Third Quarter Fiscal Year 2012

For the third quarter of fiscal year 2012, revenues increased 4% to $547 million, compared to $527 million for the comparable period last year. The increase was driven by a positive contribution from recurring fee revenues of approximately $29 million including net new business (defined as closed sales less client losses), internal growth, the Paladyne Systems, Inc. acquisition, and the Penson outsourcing services agreement, partially offset by lower event-driven fee revenues which declined by $4 million and lower distribution revenues which declined by $4 million. The declines in event-driven and distribution revenues were due to lower mutual fund activity. GAAP pre-tax margins from continuing operations of 5.3% decreased compared to 9.7% for the same period last year primarily due to the $22 million of Penson Impairment charges and $6 million of IBM Migration costs. Non-GAAP pre-tax margins from continuing operations were 10.4%.

For the third quarter of fiscal year 2012, GAAP net earnings from continuing operations of $18 million decreased 44%, compared to $33 million for the same period last year. Non-GAAP net earnings from continuing operations were $36 million. GAAP diluted earnings per share from continuing operations decreased to $0.14 per share, compared to $0.25 per share in the third quarter of fiscal year 2011. Non-GAAP diluted earnings per share from continuing operations were $0.28 per share. The Penson Impairment charges and IBM Migration costs decreased GAAP diluted earnings per share by $0.11, and $0.03, respectively.

Analysis of Third Quarter Fiscal Year 2012

Investor Communication Solutions

Revenues for the Investor Communication Solutions segment increased 1% to $374 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011. Higher recurring fee revenues contributed $13 million, partially offset by $4 million in lower event-driven fee revenues and $4 million in lower distribution revenues. The declines in event-driven and distribution revenues were driven by lower mutual fund activity. The positive contribution from recurring fee revenues was driven primarily by net new business and internal growth. Operating margin increased by 1.7 percentage points to 9.9% as a result of higher recurring revenues and cost containment efforts.

Securities Processing Solutions

Revenues for the Securities Processing Solutions segment increased 10% to $169 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011. The increase was driven by net new business, the Paladyne Systems, Inc. acquisition and the Penson outsourcing services agreement. Operating margin decreased by 3.0 percentage points to 14.6% as a result of integration costs associated with the Paladyne Systems, Inc. acquisition coupled with lower revenues from internal growth.

Other

Pre-tax loss from continuing operations increased by $28 million in the third quarter of fiscal year 2012, primarily due to the Penson Impairment charges of $22 million and IBM Migration costs of $6 million.

Financial Results for Year-to-Date Fiscal Year 2012

For the nine months ended March 31, 2012, revenues increased 8% to $1,503 million, compared to $1,391 million for the comparable period last year. The increase was driven by a positive contribution from recurring fee revenues of approximately $109 million including net new business, internal growth, acquisitions, the Penson outsourcing services agreement, and $9 million in higher distribution revenues, partially offset by lower event-driven fee revenues which declined $9 million due to lower mutual fund activity. GAAP pre-tax margins from continuing operations of 4.4% declined compared to 6.4% for the same period last year as a result of the $32 million Penson Impairment charges and $13 million of IBM Migration costs. Non-GAAP pre-tax margins from continuing operations were 7.3%.

For the nine months ended March 31, 2012, GAAP net earnings from continuing operations of $42 million declined 26% compared to the same period last year. Non-GAAP net earnings from continuing operations were $70 million. GAAP diluted earnings per share from continuing operations decreased to $0.33 per share compared to $0.44 per share for the comparable period of fiscal year 2011. Non-GAAP diluted earnings per share from continuing operations were $0.55 per share. The Penson Impairment charges and the IBM Migration costs decreased GAAP diluted earnings per share by $0.16 and $0.06, respectively.

During the nine months of fiscal year 2012, recurring revenue closed sales of $79 million increased 10% from last year's comparable period. Free cash flow was $72 million. In addition, the Company repurchased approximately 1.5 million shares of Broadridge common stock under its stock repurchase plan at an average price of approximately $23.39 per share, and approximately 6.1 million shares remain available for purchase under the current stock repurchase plan as of March 31, 2012.

Fiscal Year 2012 Financial Guidance

We have lowered our fiscal year 2012 full year revenue, GAAP earnings margins and GAAP diluted earnings per share guidance to reflect the impact of lower than expected distribution revenues, and to a lesser extent, lower event-driven revenues coupled with the Penson Impairment charges. We anticipate revenue growth in the range of 7% to 8%, GAAP earnings from continuing operations before income taxes margins in the range of 10.2% to 10.7%, and Non-GAAP earnings from continuing operations before income taxes margins in the range of 13.0% to 13.5%. We anticipate GAAP diluted earnings per share from continuing operations in the range of $1.18 to $1.28, and we are reaffirming Non-GAAP diluted earnings per share from continuing operations in the range of $1.50 to $1.60, based on diluted weighted-average shares outstanding of approximately 128 million shares. The Penson Impairment charges and the IBM Migration costs decreased our fiscal year 2012 GAAP diluted earnings per share from continuing operations guidance by $0.16 and $0.16, respectively.

We are reaffirming our free cash flow guidance, which is expected to be in the range of approximately $210 million to $260 million, excluding the IBM Migration costs. We are also reaffirming our recurring revenue closed sales guidance which is expected to be in the range of $110 million to $150 million.

Our guidance does not take into consideration the effect of any future acquisitions, additional debt or share repurchases in excess of the repurchases needed to be at our 128 million diluted weighted-average shares outstanding guidance.

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