Broadridge Financial Solutions (NYSE:BR), a leading global provider of technology-based solutions to the financial services industry, today reported financial results for fiscal year 2009 with earnings per share slightly above the mid-point of its previously-announced guidance range.
In addition, the Board of Directors increased the annual dividend amount for fiscal year 2010 from $0.28 per share to $0.56 per share, and authorized the repurchase of up to 10 million shares of its outstanding common stock.
For the fiscal year ended June 30, 2009, the Company reported net revenues of $2,149.3 million, net earnings of $223.3 million, GAAP diluted earnings per share of $1.58, and Non-GAAP diluted earnings per share of $1.51, which excludes the one-time gain from the purchase and retirement of $125.0 million principal amount of its 6.125% Senior Notes due 2017 (the "Senior Notes"), and the one-time benefit from a state tax credit. This compares with net revenues of $2,207.5 million, net earnings of $192.2 million, GAAP diluted earnings per share of $1.36, and Non-GAAP diluted earnings per share of $1.42, for the previous fiscal year.
Commenting on the results, Richard J. Daly, Chief Executive Officer, said, "Overall, I am satisfied with our fiscal year 2009 results and our ability to meet the Non-GAAP earnings per share guidance we provided last August, before the beginning of the current financial crisis. I am pleased with the growth in recurring fee revenues in all segments, that our earnings increased and that we generated over $250.0 million in free cash flow. Annual closed sales growth of 5% resulted in solid sales performance for the quarter. I am particularly pleased by our recurring fee closed sales growth of greater than 30%. When coupled with our high client satisfaction and retention rates, the record-breaking growth we achieved in recurring fee sales positions us well for the future by creating a higher revenue base from which to grow."
Mr. Daly added, "The strength of our recurring revenues, particularly in our investor communications business, and the promising large sales opportunities in all of our segments, keeps our business on the right path. I am confident in our ability to extend our market leadership pot leadership position as we move forward. I believe we are well positioned to create greater shareholder value by increasing our dividend to approximately 35% of our GAAP net earnings, opportunistically repurchasing our stock, and executing our plan to make strategic acquisitions that will leverage the Broadridge brand and distribution channels."
For the fourth quarter of fiscal year 2009, net revenues decreased 7% to $736.5 million compared to $792.4 million for the same period last year, primarily as a result of lower distribution revenues related to higher adoption rates of Notice and Access, lower event-driven revenues and the unfavorable impact of foreign currency exchange rates.
Net earnings increased 20% to $116.9 million from $97.8 million, primarily due to a favorable revenue mix, less interest expense, the impact of one-time transition costs in the prior fiscal year and favorable tax rates. Diluted earnings per share increased 20% to $0.83 per share on less interest expense and favorable tax rates, compared to $0.69 per share in the fourth quarter of fiscal year 2008.
During the fourth quarter of fiscal year 2009, the Company repurchased one million shares of Broadridge common stock under its share repurchase plan for a total purchase price of $17.7 million, or $17.66 per share. At June 30, 2009, there were no shares remaining for repurchase under this share repurchase plan.
For fiscal year 2009, net revenues declined 3% to $2,149.3 million, due to lower distribution revenues related to higher adoption rates of Notice and Access, lower event-driven revenues and the unfavorable impact of foreign currency exchange rates. Excluding distribution revenues and the unfavorable impact of foreign currency exchange rates, net revenues grew 2%.
Pre-tax margins of 16.1% improved compared to 14.8% in the same period last year, as a result of lower interest expense on long-term debt, an $8.4 million gain from the purchase of $125.0 million principal amount of the Senior Notes, and the $13.7 million impact of one-time transition costs in the prior fiscal year, partially offset by the negative impact of foreign currency exchange rates. Diluted earnings per share were $1.58 for fiscal year 2009, an increase of $0.22 from $1.36 per share for fiscal year 2008, primarily due to lower interest expense on long-term debt, the effect of the one-time tax benefit in the current year and the gain from the purchase of the Senior Notes. For the fiscal year, closed sales were $156.0 million, an increase of 5% above last year's annual closed sales of $148.7 million.
Analysis of Fourth Quarter Fiscal Year 2009
Investor Communication Solutions
Net revenues for the Investor Communication Solutions segment in the fourth quarter of fiscal year 2009 decreased 7% to $587.0 million compared to the fourth quarter of fiscal year 2008. The decrease was driven primarily by lower event-driven activity and lower distribution revenues resulting from higher adoption rates of Notice and Access, partially offset by sales less losses ("Net New Business") and internal growth in recurring revenues. Operating margin increased by 3.1 percentage points compared to the fourth quarter of fiscal year 2008 as a result of a higher margin product mix and the timing of investment spend.
Securities Processing Solutions
Net revenues for the Securities Processing Solutions segment in the fourth quarter of fiscal year 2009 decreased 2% to $131.0 million compared to the fourth quarter of fiscal year 2008. The decrease was primarily related to a previously-announced client loss that occurred earlier in the fiscal year, and price concessions related to contract renewals and extensions. Operating margin increased 2.9 percentage points compared to the fourth quarter of fiscal year 2008, as a result of lower data center costs and one-time items in the prior fiscal year.
Clearing and Outsourcing Solutions
Net revenues for the Clearing and Outsourcing Solutions segment in the fourth quarter of fiscal year 2009 increased 10% to $25.9 million compared to the fourth quarter of fiscal year 2008. The increase was driven by the positive contribution from Net New Business consisting of both securities clearing and outsourcing services, partially offset by negative internal growth. The negative net interest income internal growth is a result of a decrease in average margin balances and the impact from a lower Federal Funds rate. Operating loss was $1.8 million for the fourth quarter of fiscal year 2009 compared to an operating loss of $0.9 million in the fourth quarter of fiscal year 2008, due to an unfavorable revenue mix.
Net revenues for Other, which is primarily comprised of one-time contract termination fees, decreased by $0.5 million, compared to the fourth quarter of fiscal year 2008. Pre-tax loss for Other decreased by $10.1 million, compared to the fourth quarter of fiscal year 2008. This decrease was primarily due to lower corporate interest expense resulting from lower corporate borrowings and a decline in interest rates, lower expenses related to stock compensation and one-time transition costs incurred in the fourth quarter of the prior year, partially offset by a negative impact from foreign currency exchange.
Dividend Increase and Share Repurchase Plan
On August 11, 2009, the Company's Board of Directors declared a quarterly dividend of $0.14 per share payable on October 1, 2009 to stockholders of record on September 14, 2009. The annual dividend amount was doubled as the annual dividend increased from $0.28 per share to $0.56 per share, subject to the discretion of the Board of Directors. In addition, the Company's Board of Directors authorized the repurchase of up to 10 million shares of the Company's common stock to offset share dilution created by the Company's equity compensation plans and to opportunistically repurchase shares. The share repurchases will be made in open market or privately negotiated transactions in compliance with applicable legal requirements and other factors.
Fiscal Year 2010 Financial Guidance
We anticipate net revenue growth in the range of 4% to 8%, earnings before interest and taxes margin in the range of 16.0% to 16.3%, and earnings per share in the range of $1.50 to $1.60, based on diluted weighted-average shares outstanding of approximately 144 million shares. We expect earnings to be lower in the first six months of fiscal year 2010, as a result of the carryover impact of a previously-announced client loss and the impact of higher than historical average price concessions into the next fiscal year, as well as one-time benefits in the first half of fiscal year 2009 primarily related to the gain on the purchase of our Senior Notes. Free cash flow is expected to be in the range of $235.0 million to $270.0 million. Free cash flow is defined as cash flow from operating activities, excluding the financing activities in the clearing business, less capital expenditures and intangibles. Our guidance does not take into consideration any share repurchases.
Mr. Daly commented, "I am pleased by the strength of our free cash flows. Our revenues are projected to grow notwithstanding the impact of a client loss and price concessions in our securities processing businesses, and the impact that lower interest rates and margin balances have had on the securities clearing business. I expect our resilient business fundamentals to generate modest revenue growth in the first half of fiscal year 2010 and stronger growth in the second half of the fiscal year. I believe we are well positioned to meet our goals for fiscal year 2010 and expect to exit next fiscal year with positive momentum. Our Investor Communications business is stronger than ever, and although we still have some work to do in our Securities Processing, and Clearing and Outsourcing segments, we have the right strategic focus and direction as we continue to execute our unique processing strategy."
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