Broadridge Financial Solutions (NYSE:BR), a leading global provider of technology-based outsourcing solutions to the financial services industry, today reported financial results for the first quarter of its fiscal year 2009.
For the three months ended September 30, 2008, net revenues grew 5% from the prior fiscal year, with net earnings of $35.6 million and diluted earnings per share of $0.25, compared to net earnings of $36.0 million and diluted earnings per share of $0.26 for the comparable quarter of the previous fiscal year.
Commenting on the results, Richard J. Daly, Chief Executive Officer, said, "I am pleased with our first quarter results, as they were slightly better than our expectations. The business fundamentals in our operating units continue to be solid, and despite the economic turbulence caused by unprecedented market conditions, our operating units continue to demonstrate their resiliency. The significant recent events in the financial services industry have had both positive and negative effects on our revenues. Overall, our business continues to be on track."
Mr. Daly added, "We expect our business to continue to generate significant free cash flow. The major contributor to this cash generation is our Investor Communication Solutions business. This business represents over 70% of our revenue and earnings and is the foundation of our overall business. In addition, the breadth of our product offerings and the flexibility of our solutions demonstrated by transitioning the Neuberger Berman business within days of the Lehman Brothers bankruptcy, makes me confident that Broadridge has a real opportunity to leave this unprecedented period stronger than when we entered it. I am confident in our ability to continue to extend our market leadership as we move forward through these challenging times for our markets."
For the first quarter of fiscal year 2009, net revenues grew 5% to $472.4 million compared to $451.2 million for the same period last year driven primarily by sales and internal growth resulting from higher trading volume. Net earnings, while better than expected, decreased 1% to $35.6 million from $36.0 million, as result of the prior year's delayed timing of recurring expenses related to the build-out of the company's corporate infrastructure and product development investments. Diluted earnings per share decreased to $0.25 per share on slightly more weighted-average shares outstanding, compared to $0.26 per share in the first quarter of fiscal year 2008. Closed sales of $33 million for the first quarter of fiscal year 2009 were 15% greater than last year's comparable quarter results.
Analysis of First Quarter Fiscal Year 2009
Investor Communication Solutions
Net revenues for the Investor Communication Solutions segment increased 5% compared to the first quarter of fiscal year 2008, to $313.8 million in the first quarter of fiscal year 2009. This increase was driven primarily by higher internal growth, resulting from position growth in equity proxy and mutual fund interims and from transaction reporting communications. Operating margin decreased 2.6 percentage points as anticipated, compared to the first quarter of fiscal year 2008, resulting from a less favorable product mix, higher investment spending and a one-time benefit realized in the prior year.
Securities Processing Solutions
Net revenues for the Securities Processing Solutions segment increased 7% compared to the first quarter of fiscal year 2008, to $133.2 million in the first quarter of fiscal year 2009. The increase was primarily driven by internal growth related to higher trading volumes for equity and fixed-income trade processing, as well as net new business. Operating margin decreased 3.1 percentage points as anticipated, compared to the first quarter of fiscal year 2008, as a result of higher expenses associated with incremental investments and lower capitalized conversion cost.
Clearing and Outsourcing Solutions
Net revenues for the Clearing and Outsourcing Solutions segment decreased 6% as anticipated, compared to the first quarter of fiscal year 2008, to $23.2 million in the first quarter of fiscal year 2009. The decrease was driven by lower internal growth associated with the reduction in the Federal funds rate and lower customer margin balances, somewhat offset by the gains from net new business. Operating loss increased by $1.1 million to $3.1 million for the first quarter of fiscal year 2009 as anticipated, from an operating loss of $2.0 million in the first quarter of fiscal year 2008, as a result of lower revenue.
In the first quarter of fiscal year 2009, Broadridge completed the purchase of $125.0 million principal amount of its 6.125% senior notes due 2017. The transaction resulted in a one-time non-cash pre-tax gain from early extinguishment of debt of $8.4 million. This one-time gain further increases our performance beyond the better than expected performance from the business units this quarter.
Fiscal Year 2009 Financial Guidance
As a result of the one-time gain from early extinguishment of debt we are increasing our fiscal year 2009 GAAP earnings per share guidance to a range of $1.49 to $1.59. We are reaffirming the fiscal year 2009 Non-GAAP earnings per share guidance in a range of $1.45 to $1.55, which excludes the one-time gain from the purchase of our senior notes. The earnings per share guidance is based on diluted weighted-average shares outstanding of approximately 143 million shares. We anticipate net revenue growth in the range of 0% to 3%, which is slightly lower than our original guidance of 2% to 4%, primarily as a result of unfavorable foreign exchange rates due to the strengthening U.S. dollar and lower distribution fees. We anticipate earnings before interest and taxes margin in the range of 15.9% to 16.8%, which is slightly higher than our original guidance of 15.9% to 16.6%.
Mr. Daly commented, "With the success we enjoyed during our first fiscal quarter, we are off to a good start to a fiscal year where we will be faced with known and unknown challenges of unprecedented markets. I believe we are well-positioned to continue to perform well in spite of these challenges. We all witnessed our business model withstand the stress test of recent events. I am confident Broadridge will continue to be successful through these unprecedented times."
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