Broadridge Q1 net income rises

Source: Broadridge Financial Solutions

Broadridge Financial Solutions, Inc. (NYSE: BR) today reported financial results for the first quarter of its fiscal year 2016. Results for the three months ended September 30, 2015 compared with the same period last year were as follows:

First Quarter Fiscal Year 2016 Results:
- Recurring fee revenues increased 10% to $393 million
- Total revenues increased 7% to $595 million
- Adjusted Operating income increased 8% to $68 million
- Operating income increased 4% to $59 million
- Adjusted Net earnings increased 8% to $40 million
- Net earnings increased 3% to $34 million
- Adjusted Diluted earnings per share increased 10% to $0.33
- Diluted earnings per share increased 8% to $0.28
- Closed sales decreased 47% to $17 million

Commenting on the results, Richard J. Daly, President and Chief Executive Officer, said, "Building on the momentum we generated in fiscal year 2015, the first quarter results place us on track to achieve our full year guidance, including recurring fee revenue growth of 10% to 12% and adjusted diluted earnings per share growth of 8% to 12%. Our first quarter results also keep us well positioned to achieve our three-year objectives. During the first quarter, recurring fee revenues grew 10% driven by gains in Net New Business and the acquisitions we made during fiscal 2015."

Mr. Daly added, "Our sales pipeline is strong, which positions us to achieve our full year closed sales plan given our solid start in the first quarter. I am as confident as ever in Broadridge and our ability to achieve our long-term objectives as we continue to execute our long-term growth strategy."

Financial Results for First Quarter Fiscal Year 2016

Revenues for the three months ended September 30, 2015 were $595 million, an increase of $39 million, or 7%, compared to $556 million for the three months ended September 30, 2014. The $39 million increase was driven by higher recurring fee revenues of $35 million, or 10%, higher event-driven fee revenues of $3 million, or 9%, and higher distribution revenues of $12 million, or 7%. The positive contribution from recurring fee revenues reflected gains from Net New Business (4pts), contributions from acquisitions (4pts) and internal growth (2pts). Fluctuations in foreign currency exchange rates negatively impacted revenues by $11 million. The Company defines Net New Business as recurring revenue from closed sales less recurring revenue from client losses.

Operating income for the three months ended September 30, 2015 was $59 million, an increase of $2 million, or 4%, compared to $57 million for the three months ended September 30, 2014. The increase is due to higher revenues, partially offset by higher operating expenses. Operating income margins decreased to 9.9% compared to 10.3% for the comparable prior year period due to increased amortization of acquired intangibles. Adjusted operating income margins were 11.5% compared to 11.4% for the same period last year.

For the first quarter of fiscal year 2016, Net earnings increased 3% to $34 million, compared to $33 million for the prior year period, primarily due to higher revenues. Adjusted Net earnings increased 8% to $40 million compared to $37 million for the prior year period.

Diluted earnings per share increased to $0.28 per share compared to $0.26 per share for the same period last year. Adjusted Diluted earnings per share were $0.33 compared to $0.30 per share for the same period last year. Acquisition Amortization and Other Costs, net of taxes, decreased Diluted earnings per share by $0.05 and $0.03 for the three months ended September 30, 2015 and 2014, respectively.

Closed sales for the three months ended September 30, 2015 were $17 million, a decrease of $15 million, or 47%, compared to $32 million for the three months ended September 30, 2014. The decrease is the result of two large sales that were signed during the prior year period which elevated the prior period total. Closed sales were previously described by the Company as recurring revenue closed sales.

In addition, during the first quarter, the Company repurchased 0.1 million shares of Broadridge common stock at an average price of $54.89 per share.

Analysis of First Quarter Fiscal Year 2016

Investor Communication Solutions

Investor Communication Solutions segment's Revenues for the three months ended September 30, 2015 were $430 million, an increase of $35 million, or 9%, compared to $394 million for the three months ended September 30, 2014. The increase was attributable to higher recurring fee revenues which contributed $20 million, higher event-driven fee revenues which contributed $3 million, and a $12 million increase in distribution revenues. The increase in higher recurring fee revenues of 10% was driven by: (i) contributions from recent acquisitions (7pts); and (ii) Net New Business from increases in revenues from closed sales (4pts); which were offset by (iii) a decrease in internal growth as a result of lower fund fulfillment revenues (-1pt). Position growth compared to the same period in the prior year, which is a component of internal growth, was 6% for mutual fund interims and 2% for annual equity proxy communications. Higher event-driven fee revenues were the result of increased equity proxy specials and corporate actions communications activity.

Global Technology and Operations

Global Technology and Operations segment's Revenues for the three months ended September 30, 2015 were $177 million, an increase of $14 million, or 9%, compared to $163 million for the three months ended September 30, 2014. The 9% increase was attributable to: (i) higher Net New Business from closed sales (4pts); (ii) higher internal growth from higher trade and non-trade activity levels (4pts); and (iii) revenue from a recent acquisition (1pt).

Other

Pre-tax loss decreased by $4 million in the first quarter of fiscal year 2016. The decreased loss was mainly due to lower compensation expense, partially offset by an increase in interest expense.

Fiscal Year 2016 Financial Guidance

  • The Company continues to anticipate:
  • Recurring fee revenue growth in the range of 10% to 12% and total revenue growth in the range of 8% to 10%
  • Adjusted Operating income margin of ~18.4%
  • Effective tax rate of ~34.8%
  • Adjusted Diluted earnings per share growth in the range of 8% to 12%
  • Free cash flows in the range of $350 million to $400 million
  • Closed sales in the range of $120 million to $160 million

Our guidance does not take into consideration the effect of any future acquisitions, additional debt or share repurchases. 

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