20 July 2018
Visit www.avoka.com

Broadridge lowers FY2012 guidance

07 February 2012  |  1713 views  |  0 Source: Broadridge

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

For the three months ended December 31, 2011, the Company reported revenues of $480 million, GAAP net earnings from continuing operations of $7 million, Non-GAAP net earnings from continuing operations of $15 million, GAAP diluted earnings per share from continuing operations of $0.05 and Non-GAAP diluted earnings per share from continuing operations of $0.12. This compares with revenues of $442 million, GAAP net earnings from continuing operations of $11 million and GAAP diluted earnings per share from continuing operations of $0.08 for the comparable quarter of the previous fiscal year. Our Non-GAAP results exclude the impact of an impairment charge on our investment in the common stock of Penson Worldwide, Inc. ("Penson") and the costs associated with the migration of our data center to International Business Machines Corporation ("IBM"), as discussed in more detail below.

Commenting on the results, Richard J. Daly, Chief Executive Officer, said, "Overall, I am satisfied with our second quarter results. The core recurring revenues of the business are solid, recurring revenue closed sales are strong and our client revenue retention rate remains excellent. We did not include any significant improvement in event-driven revenues in our previous guidance, and we have not seen any such improvement to date as this activity still remains weak in this economic environment."

Mr. Daly concluded, "I am very pleased with the progress we have made in the implementation of our strategic initiatives and the integration of our recent acquisitions. The Penson conversion is complete, the IBM implementation is progressing as planned and our acquisitions are generating meaningful revenue and earnings. I remain confident about Broadridge's ability to achieve its fiscal year 2012 guidance and to continue to improve operating results in fiscal year 2013 and beyond."

IBM Data Center Migration
In March 2010, Broadridge entered into an Information Technology Services Agreement with IBM, under which IBM will provide certain aspects of our information technology infrastructure that are currently being provided under our data center outsourcing services agreement with ADP. Our Non-GAAP results exclude the impact of the costs the Company expects to incur in connection with the migration of our data center to IBM (the "Migration"). These Migration costs are significant and we believe this information helps investors understand the effect of the Migration on our reported results and provides a better representation of our actual performance. The Migration costs are recorded in our Other segment and Cost of revenues in the Condensed Consolidated Statements of Earnings. We remain confident that the Migration will be substantially complete by the end of our 2012 fiscal year.

Impairment of Penson Common Stock
During the second quarter of fiscal year 2012, Broadridge performed its periodic review of its investment in the common stock of Penson for impairment. We factored in the level of the decline in the fair value of the stock and determined that the market value of the stock may not equal or exceed the cost basis of our investment within a reasonable period of time. After consideration of the severity and duration of time of this decline in fair value as well as the reasons for the decline in value, the Company recorded a $10 million non-cash "other-than-temporary impairment" charge (the "Penson OTTI charge") in our Other segment and Other expenses, net in the Condensed Consolidated Statements of Earnings at December 31, 2011, and established a new cost basis for this investment.

Financial Results for Second Quarter Fiscal Year 2012
For the second quarter of fiscal year 2012, revenues increased 8% to $480 million, compared to $442 million for the comparable period last year. The increase was driven by a positive contribution from recurring fee revenues of approximately $39 million including net new business (defined as closed sales less client losses), internal growth, acquisitions, the Penson outsourcing services agreement, and higher distribution revenues of $3 million, partially offset by lower event-driven fee revenues of $4 million due to lower mutual fund activity. GAAP pre-tax margins from continuing operations of 2.2% decreased compared to 3.7% for the same period last year primarily due to the $10 million Penson OTTI charge and $4 million of IBM Migration costs. Non-GAAP pre-tax margins from continuing operations were 5.0%.

For the second quarter of fiscal year 2012, GAAP net earnings from continuing operations of $7 million decreased 36%, compared to $11 million for the same period last year, primarily due to the aforementioned Penson OTTI charge and IBM Migration costs. Non-GAAP net earnings from continuing operations were $15 million. GAAP diluted earnings per share from continuing operations decreased to $0.05 per share, compared to $0.08 per share in the second quarter of fiscal year 2011. Non-GAAP diluted earnings per share from continuing operations were $0.12. The Penson OTTI charge and the IBM Migration costs decreased GAAP diluted earnings per share by $0.05 and $0.02, respectively.

Analysis of Second Quarter Fiscal Year 2012

Investor Communication Solutions
Revenues for the Investor Communication Solutions segment increased 8% to $317 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011. Higher recurring fee revenues contributed $24 million and higher distribution revenues contributed $3 million, partially offset by lower event-driven fee revenues of $4 million due to lower mutual fund activity. The positive contribution from recurring fee revenues was driven primarily by net new business, internal growth and acquisitions. Operating margin increased by 2.4 percentage points to 3.3% as a result of higher recurring revenues and cost containment efforts.

Securities Processing Solutions
Revenues for the Securities Processing Solutions segment increased 10% to $161 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011. The increase was driven by net new business, acquisitions and the Penson outsourcing services agreement. Operating margin decreased, as expected, by 0.7 percentage points to 12.5% as a result of integration costs associated with the acquisition of Paladyne Systems, Inc.

Other
Pre-tax loss from continuing operations increased by $16 million in the second quarter of fiscal year 2012, primarily due to the Penson OTTI charge of $10 million and IBM Migration costs of $4 million.

Financial Results for Year-to-Date Fiscal Year 2012
For the six months ended December 31, 2011, revenues increased 11% to $956 million, compared to $864 million for the comparable period last year. The increase was driven by a positive contribution from recurring fee revenues of approximately $84 million including net new business, internal growth, acquisitions, the Penson outsourcing services agreement, and higher distribution revenues of $13 million, partially offset by lower event-driven fee revenues of $5 million due to lower mutual fund activity. GAAP pre-tax margins from continuing operations of 3.8% declined compared to 4.3% for the same period last year as a result of the $10 million Penson OTTI charge and $7 million of IBM Migration costs. Non-GAAP pre-tax margins from continuing operations were 5.6%.

For the six months ended December 31, 2011, GAAP net earnings from continuing operations of $24 million were essentially unchanged compared to the same period last year. Non-GAAP net earnings from continuing operations were $34 million. GAAP diluted earnings per share from continuing operations increased to $0.19 per share compared to $0.18 per share for the comparable period of fiscal year 2011. Non-GAAP diluted earnings per share from continuing operations were $0.27. The Penson OTTI charge and the IBM Migration costs decreased GAAP diluted earnings per share by $0.05 and $0.03, respectively.

During the first six months of fiscal year 2012, our recurring revenue closed sales of $63 million increased 20% from last year's comparable period. Free cash flow was $67 million. In addition, the Company repurchased approximately 0.9 million shares of Broadridge common stock under its stock repurchase plan at an average price of approximately $22.71 per share, and approximately 6.7 million shares remain available for purchase under the current stock repurchase plan as of December 31, 2011.

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 event-driven revenues and the Penson OTTI charge. We anticipate revenue growth in the range of 8% to 9%, GAAP earnings from continuing operations before income taxes margins in the range of 11.2% to 12.0% and Non-GAAP earnings from continuing operations before income taxes margins in the range of 13.0% to 13.8%. We anticipate GAAP diluted earnings per share from continuing operations in the range of $1.29 to $1.39, 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 OTTI charge and the IBM Migration costs decreased our fiscal year 2012 GAAP diluted earnings per share from continuing operations guidance by $0.05 and $0.16, respectively.

Free cash flow, excluding the IBM Migration costs, is expected to be in the range of approximately $210 million to $260 million. Recurring revenue closed sales are 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 outstanding shares guidance.

Comments: (0)

Comment on this story (membership required)

Related company news

 

Related company information

Broadridge Financial Solutions

Related blogs

Create a blog about this story (membership required)
Visit iliad-solutions.com/Visit http://go.jumio.com/finextraAdVisit info.nice.com

Who is commenting?

Top topics

Most viewed Most shared
Calmejane quits Lloyds Bank to join SocGenCalmejane quits Lloyds Bank to join SocGen
12931 views comments | 6 tweets | 7 linkedin
Hong Kong plans September go-live for blockchain-based trade financeHong Kong plans September go-live for bloc...
10373 views comments | 9 tweets | 17 linkedin
Mastercard enlists Worldpay to push Vocalink's Pay by Bank appMastercard enlists Worldpay to push Vocali...
9764 views 19 comments | 15 tweets | 30 linkedin
IBM to test dollar-pegged 'stablecoin'IBM to test dollar-pegged 'stablecoin'
6804 views comments | 4 tweets | 14 linkedin
Bringing about new systems and faster payments globallyBringing about new systems and faster paym...
6606 views comments | 2 tweets | 7 linkedin

Featured job

Competitive base + commission + benefits
London, UK

Find your next job