Broadridge posts Q4 results

Source: Broadridge Financial Solutions

Broadridge Financial Solutions today reported financial results for the fourth quarter and fiscal year 2010 with earnings per share from continuing operations at the mid-point of its previously-announced guidance range.

In addition, the Board of Directors has authorized the repurchase of up to an additional 10 million shares of Broadridge's outstanding common stock.

For the fiscal year ended June 30, 2010, the Company reported revenues of $2,209.2 million, net earnings from continuing operations of $225.1 million, GAAP diluted earnings per share from continuing operations of $1.62, and Non-GAAP diluted earnings per share from continuing operations of $1.56. This compares with revenues of $2,073.0 million, net earnings from continuing operations of $223.1 million, GAAP diluted earnings per share from continuing operations of $1.58, and Non-GAAP diluted earnings per share from continuing operations of $1.51 for the previous fiscal year.

Commenting on the results, Richard J. Daly, Chief Executive Officer, said, "I am satisfied with our overall results for fiscal year 2010 and, in particular, our ability to achieve these results during these challenging market conditions. I am also very pleased with our record closed sales which increased 26% over last year's results."

Mr. Daly added, "Our significant increase in closed sales continues to demonstrate Broadridge's expanding indispensable role in our markets. Strong closed sales, a 98% client revenue retention rate and record event-driven mutual fund revenues would normally have resulted in very strong financial performance; however, the weaker market activity of this recession offset some of the benefits of our strong performance. Until individual investor participation in the securities markets returns to a consistently positive level, the value of our strong execution will be muted."

Mr. Daly further added, "Beyond our closed sales results, I am very pleased with the execution of our strategies throughout the year. In the fourth quarter, we closed the Penson transaction and expanded our global reach with the acquisition of City Networks, Ltd; in the third quarter, we signed a data center services agreement and a business alliance agreement with IBM and entered the stock transfer agency business with the acquisition of StockTrans, Inc.; and in the second quarter, we signed an agreement to provide customer communication services to Morgan Stanley Smith Barney ("MSSB"). We anticipate that each of these opportunities will contribute to our future ability to grow revenues and earnings."

Financial Results for Fourth Quarter Fiscal Year 2010

For the fourth quarter of fiscal year 2010, revenues from continuing operations increased 5% to $750.5 million, compared to $716.3 million for the comparable period last year. The results were primarily driven by the continued growth in event-driven mutual fund proxy revenues and increased transaction reporting revenues from the MSSB transaction. Pre-tax margin from continuing operations of 24.3% decreased compared to 25.6% in the same period last year as the contribution from higher fee revenues was offset by revenue mix and strategic initiatives including the MSSB transaction and acquisitions.

Net earnings from continuing operations were $116.2 million compared to $115.8 million for the same period last year. Diluted earnings per share from continuing operations increased to $0.84 per share on lower weighted-average shares outstanding, compared to $0.82 per share in the fourth quarter of fiscal year 2009. During the fourth quarter of fiscal year 2010, the Company repurchased approximately 7.1 million shares of Broadridge common stock under its stock repurchase plans at an average price of approximately $19.48 per share.

Beginning in the second quarter of the 2010 fiscal year, the financial results of the securities clearing business were accounted for as a discontinued operation and the results of the operations outsourcing solutions business retained by Broadridge have been included in the Securities Processing Solutions segment.

Financial Results for Fiscal Year 2010

Closed sales were $175.0 million for the fiscal year ended June 30, 2010, a 26% increase compared to last year's results. The client revenue retention rate was 98% for fiscal year 2010.

For the fiscal year ended June 30, 2010, revenues from continuing operations grew by 7% to $2,209.2 million, compared to $2,073.0 million in the previous fiscal year. The results were primarily driven by the growth in event-driven mutual fund proxies, new sales and acquisitions, which were partially offset by the prior year's client losses and price concessions as well as lower trade volumes in the Securities Processing Solutions segment. Pre-tax margin from continuing operations of 15.5% declined compared to 16.7% in the previous fiscal year primarily due to revenue mix and strategic initiatives. The margin decline also reflects the one-time gain of $8.4 million from the purchase of $125.0 million of our senior notes in fiscal year 2009.

Net earnings from continuing operations increased 1% to $225.1 million from $223.1 million, primarily due to a lower effective tax rate driven by the one-time recognition of a deferred tax asset in the second quarter of this fiscal year, partially offset by a tax credit in the third quarter of the previous fiscal year. Diluted earnings per share from continuing operations increased to $1.62 per share from higher net earnings and lower weighted-average shares outstanding, compared to $1.58 per share in fiscal year 2009. During fiscal year 2010, the Company repurchased approximately 13.7 million shares of Broadridge common stock under its stock repurchase plans at an average price of approximately $20.43 per share. On June 30, 2010, there were approximately 6.3 million shares available for repurchase under the stock repurchase plan authorized by the Company's Board on June 7, 2010.

Analysis of Fourth Quarter Fiscal Year 2010

Investor Communication Solutions

Revenues for the Investor Communication Solutions segment in the fourth quarter of fiscal year 2010 increased 4% to $609.9 million compared to the fourth quarter of fiscal year 2009. The increase was driven primarily by event-driven mutual fund proxies, the MSSB transaction and acquisitions. Operating margin decreased by 1.4 percentage points compared to the fourth quarter of fiscal year 2009 as the contribution from higher fee revenues was offset by strategic initiatives including the MSSB transaction and increased investment spend on acquisitions.

Securities Processing Solutions

Revenues for the Securities Processing Solutions segment in the fourth quarter of fiscal year 2010 increased 1% to $138.4 million compared to the fourth quarter of fiscal year 2009. The increase was primarily related to new business, offset by the carryover impact of fiscal year 2009 client losses and price concessions. Operating margin decreased 2.2 percentage points compared to the fourth quarter of fiscal year 2009, as a result of revenue mix.

Other

Revenues from Other in the fourth quarter of fiscal year 2010 were unchanged from the fourth quarter of fiscal year 2009. Pre-tax loss from continuing operations for Other increased by $0.7 million compared to the fourth quarter of fiscal year 2009.

Dividend Increase and Share Repurchase Plan

As previously announced, on August 3, 2010, the Company's Board of Directors declared a quarterly dividend of $0.15 per share payable on October 1, 2010 to stockholders of record on September 15, 2010. The annual dividend amount was increased approximately 7% from $0.56 per share to $0.60 per share, subject to the discretion of the Board of Directors. In addition, on August 11, 2010, the Company's Board of Directors authorized the repurchase of up to an additional 10 million shares of Broadridge's common stock. The share repurchases will be made in the open market or privately negotiated transactions in compliance with applicable legal requirements and other factors.

Fiscal Year 2011 Financial Guidance

We anticipate revenue growth in the range of 1% to 4%, earnings before interest and taxes margin in the range of 14.8% to 15.2%, and diluted earnings per share from continuing operations in the range of $1.55 to $1.65, based on diluted weighted-average shares outstanding in the range of approximately 128 million to 130 million shares. We expect earnings to be lower in the first six months of fiscal year 2011, as a result of a previously-announced client loss, the implementation of the Penson outsourcing services agreement and the non-recurrence of two significant mutual fund proxy jobs. Free cash flow is expected to be in the range of approximately $170 million to $220 million which includes approximately $45 million in investment implementation costs in connection with the Penson outsourcing implementation and the IBM data center services agreement. Free cash flow is defined as cash flow from operating activities, less capital expenditures and intangibles. Closed sales are expected to be in the range of $160 million to $215 million.

Our guidance does take into consideration share repurchases by the Company of approximately 2.5 million shares made between July 1, 2010 and July 27, 2010. 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 within our 128 million to 130 million weighted-average outstanding shares guidance.

Mr. Daly commented, "I am very pleased with our ability to close sales and execute our strategies during these difficult market conditions and I anticipate that we will grow even faster once retail investors return to the markets. Irrespective of market conditions, we will continue to execute our strategies, drive new revenues and manage our cash with the intent of creating long-term shareholder value."

Closing of Penson Transaction

On June 25, 2010, the Company completed the sale of the contracts of substantially all of the securities clearing clients of our subsidiary, Ridge Clearing & Outsourcing Solutions, Inc., to Penson Financial Services, Inc. ("PFSI"), a subsidiary of Penson Worldwide, Inc., for an aggregate purchase price of $35.2 million.

In addition, the Company announced the execution of an 11-year global outsourcing services contract to provide securities processing and back-office support services to PFSI. The Company expects the global outsourcing services contract to generate $50 to $55 million in annual revenue when PFSI's clients are fully converted onto the Company's securities processing platform.

The Company has now commenced the wind down of its securities clearing business. As a result, Broadridge gained access to net cash of approximately $240 million previously committed by the Company to its securities clearing business as regulatory capital.

Read the full statement here:

» Download the document now 69.1 kb (PDF File)

Comments: (0)

sponsored