Announces Adjusted Diluted EPS Growth of
23% and Recurring Fee Revenue Growth of 12%Reaffirms Full Year
Guidance
Broadridge Financial Solutions, Inc. (NYSE:BR) today reported
financial results for the third quarter of its fiscal year 2016.
Results for the three months ended March 31, 2016 compared
with the same period last year were as follows:
Third Quarter Fiscal Year 2016 Results: |
- Recurring fee revenues increased 12% to $455 million |
- Total revenues increased 9% to $689 million |
- Adjusted Operating income increased 14% to $110 million |
- Operating income increased 13% to $101 million |
- Adjusted Net earnings increased 19% to $70 million |
- Net earnings increased 18% to $64 million |
- Adjusted Diluted earnings per share increased 23% to $0.58 |
- Diluted earnings per share increased 21% to $0.52 |
- Closed sales increased 7% to $29 million |
|
Commenting on the results, Richard J. Daly, President and Chief
Executive Officer, said, "I am pleased with the strong third
quarter results which give us a high level of confidence to achieve
our full year guidance. We anticipate our full year Adjusted
EPS growth to be around the midpoint of our 8-12% guidance range.
The first three quarters were driven by solid business performance
across Broadridge enhanced by the acquisitions we made in the prior
year. Our broad product set and great value proposition keep us
firmly on track to achieve our long term objectives.”
Mr. Daly added, “We also delivered solid sales in the third
quarter keeping us well positioned to achieve our closed sales
guidance for the full year. Given our solid results, our 98%
revenue retention, and our continuing sales momentum, I remain
confident in Broadridge’s ability to achieve its three-year
objectives.”
Financial Results for Third Quarter Fiscal Year
2016
Revenues for the third quarter of fiscal year 2016 increased 9%
to $689 million, compared to $634 million for the prior year
period. The $55 million increase was driven by: (i) higher
recurring fee revenues of $49 million, or 12%; (ii) higher
distribution revenues of $13 million, or 7%; and (iii) higher
event-driven fee revenues of $1 million, or 2%. The positive
contribution from recurring fee revenues reflected gains from Net
New Business (6pts), contributions from acquisitions (4pts), and
internal growth (2pts). The higher distribution revenues of $13
million include $1 million from acquisitions. The Company defines
Net New Business as recurring revenue from closed sales less
recurring revenue from client losses.
Operating income for the third quarter ended March 31, 2016 was
$101 million, an increase of $12 million, or 13%, compared to $89
million for the prior year period. The increase is due to higher
revenues, partially offset by higher operating expenses including
$2 million of increased amortization from acquired intangibles.
Operating income margins increased to 14.6% compared to 14.0% for
the comparable prior year period. Adjusted operating income margins
increased to 15.9% compared to 15.2% for the comparable prior year
period.
For the third quarter of fiscal year 2016, Net earnings
increased 18% to $64 million, compared to $54 million for the prior
year period, primarily due to higher revenues. Adjusted Net
earnings increased 19% to $70 million compared to $59 million for
the same period last year.
Diluted earnings per share increased to $0.52 per share compared
to $0.43 per share for the same period last year. Adjusted
Diluted earnings per share were $0.58 per share compared to $0.47
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 $0.04 for the three months ended March 31, 2016
and 2015, respectively.
In addition, during the third quarter, the Company repurchased
1.6 million shares of Broadridge common stock at an average price
of $54.80 per share under its stock repurchase program.
Analysis of Third Quarter Fiscal Year 2016
Investor Communication Solutions
Investor Communication Solutions segment Revenues for the three
months ended March 31, 2016 increased $49 million, or 11%, to $515
million compared to $466 million in the third quarter of fiscal
year 2015. The increase was attributable to higher recurring fee
revenues which increased $35 million, or 15%, higher event-driven
fee revenues which contributed $1 million and higher distribution
revenues which contributed $13 million. Higher recurring fee
revenues of 15% were driven by: (i) contributions from our recent
acquisitions (7pts); (ii) Net New Business primarily driven by
increases in revenues from closed sales (8pts); and (iii) positive
internal growth (1pt). Higher event-driven fee revenues were the
result of increased mutual fund proxy and corporate actions
communications activity.
Global Technology and Operations
Global Technology and Operations segment Revenues for the three
months ended March 31, 2016 increased $13 million, or 7%, to $191
million compared to $178 million for the three months ended March
31, 2015. The increase was attributable to: (i) higher Net New
Business from closed sales (3 pts) and (ii) positive internal
growth (4 pts) due to higher trade activity levels and revenues
associated with a contract modification, partially offset by
contract renewals at lower rates.
Other
Pre-tax loss decreased by $2 million in the third quarter of
fiscal year 2016. The decreased loss was mainly due to lower
compensation expenses and a gain on the sale of assets, partially
offset by an increase in interest expense.
Financial Results for the Nine Months ended March 31,
2016
Revenues for the nine months ended March 31, 2016 increased 9%
to $1,923 million, compared to $1,765 million for the comparable
period last year. The increase was primarily driven by: (i)
higher recurring fee revenues of $112 million, or 10%; (ii) higher
distribution revenues of $51 million, or 10%; and (iii) higher
event-driven fee revenues of $23 million, or 19%. The higher
recurring fee revenues of $112 million reflected gains from Net New
Business (5pts), contributions from acquisitions (4pts) and
internal growth (1pt). The higher distribution revenues of $51
million include $19 million from acquisitions.
Operating income for the nine months ended March 31, 2016 was
$230 million, an increase of $25 million, or 12%, compared to $205
million for the nine months ended March 31, 2015. The increase is
due to higher revenues, partially offset by higher operating
expenses including $6 million of increased amortization from
acquired intangibles. Operating income margins increased to 12.0%
for the nine months ended March 31, 2016, compared to 11.6% for the
nine months ended March 31, 2015. Adjusted Operating income margins
increased to 13.4% compared to 12.8% for the comparable prior year
period.
For the nine months ended March 31, 2016, Net earnings increased
13% to $137 million compared to $121 million for the comparable
period last year, primarily due to higher revenues. Adjusted Net
earnings increased 15% to $156 million compared to $135 million for
the same period last year.
Diluted earnings per share increased to $1.13 per share compared
to $0.97 per share for the comparable period last year.
Adjusted Diluted earnings per share were $1.28 compared to $1.09
per share for the comparable period last year. Acquisition
Amortization and Other Costs, net of taxes, decreased Diluted
earnings per share by $0.15 and $0.11 for the nine months ended
March 31, 2016 and 2015, respectively.
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.
Explanation of the Company’s Use of Non-GAAP Financial
Measures
The Company's results in this press release are presented in
accordance with generally accepted accounting principles in the
United States ("GAAP") except where otherwise noted. In certain
circumstances, results have been presented on an adjusted basis and
are not generally accepted accounting principles measures
(“Non-GAAP”). These Non-GAAP financial measures should be viewed in
addition to, and not as a substitute for, the Company's reported
results.
With regard to statements in this press release that include
certain Non-GAAP financial measures, the adjusted operating income
and adjusted earnings measures are adjusted to exclude the impact
of certain costs, expenses, gains and losses and other specified
items that management believes are not indicative of our ongoing
performance. These adjusted measures exclude the impact of
Acquisition Amortization and Other Costs which represent the
amortization charges associated with intangible asset values as
well as other deal costs associated with the Company’s acquisition
activities.
The Adjusted Operating income margin and Adjusted Diluted
earnings per share fiscal year 2016 guidance provided above is
adjusted to exclude the projected impact of Acquisition
Amortization and Other Costs.
We provide information on our Free cash flows because we believe
this helps investors understand the amount of cash available for
dividends, share repurchases, acquisitions and other discretionary
investments. Free cash flows is a Non-GAAP measure and is defined
by the Company as Net cash flows provided by operating activities
less capital expenditures, software purchases and capitalized
internal use software.
The Company believes Non-GAAP financial information helps
investors understand the effect of these items on our reported
results and provides a better representation of our operating
performance. These Non-GAAP measures are indicators that management
uses to provide additional meaningful comparisons between our
current results and prior reported results, and as a basis for
planning and forecasting for future periods.
Reconciliations of such Non-GAAP measures to the most directly
comparable financial measures presented in accordance with GAAP can
be found in the tables that are part of this press release.
Earnings Conference Call
An analyst conference call will be held today, Thursday,
May 5, 2016 at 8:30 a.m. ET. A live webcast of the call will
be available to the public on a listen-only basis. To listen to the
webcast and view the slide presentation, go to
www.broadridge-ir.com. The presentation will also be available to
download and print approximately one hour before the webcast.
Broadridge’s news releases, current financial information, SEC
filings and Investor Relations presentations are accessible on the
same website.
About Broadridge
Broadridge Financial Solutions, Inc. (NYSE:BR) is the leading
provider of investor communications and technology-driven solutions
for broker-dealers, banks, mutual funds and corporate issuers
globally. Broadridge’s investor communications, securities
processing and managed services solutions help clients reduce their
capital investments in operations infrastructure, allowing them to
increase their focus on core business activities. With over 50
years of experience, Broadridge’s infrastructure underpins proxy
voting services for over 90% of public companies and mutual funds
in North America, and processes on average $5 trillion in equity
and fixed income trades per day. Broadridge employs
approximately 7,400 full-time associates in 14 countries. For
more information about Broadridge, please visit
www.broadridge.com.
Forward-Looking StatementsThis press release
and other written or oral statements made from time to time by
representatives of Broadridge may contain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Statements that are not historical in nature,
and which may be identified by the use of words such as “expects,”
“assumes,” “projects,” “anticipates,” “estimates,” “we believe,”
“could be” and other words of similar meaning, are forward-looking
statements. In particular, information appearing in the “Fiscal
Year 2016 Financial Guidance” section are forward-looking
statements. These statements are based on management’s expectations
and assumptions and are subject to risks and uncertainties that may
cause actual results to differ materially from those expressed.
These risks and uncertainties include those risk factors discussed
in Part I, “Item 1A. Risk Factors” of our Annual Report on Form
10-K for the fiscal year ended June 30, 2015 (the “2015 Annual
Report”), as they may be updated in any future reports filed with
the Securities and Exchange Commission. All forward-looking
statements speak only as of the date of this press release and are
expressly qualified in their entirety by reference to the factors
discussed in the 2015 Annual Report.
These risks include: the success of Broadridge in retaining and
selling additional services to its existing clients and in
obtaining new clients; Broadridge’s reliance on a relatively small
number of clients, the continued financial health of those clients,
and the continued use by such clients of Broadridge’s services with
favorable pricing terms; changes in laws and regulations affecting
Broadridge’s clients or the services provided by Broadridge;
declines in participation and activity in the securities markets;
any material breach of Broadridge security affecting its clients’
customer information; the failure of Broadridge’s outsourced data
center services provider to provide the anticipated levels of
service; a disaster or other significant slowdown or failure of
Broadridge’s systems or error in the performance of Broadridge’s
services; overall market and economic conditions and their impact
on the securities markets; Broadridge’s failure to keep pace with
changes in technology and demands of its clients; Broadridge’s
ability to attract and retain key personnel; the impact of new
acquisitions and divestitures; and competitive conditions.
Broadridge disclaims any obligation to update or revise
forward-looking statements that may be made to reflect events or
circumstances that arise after the date made or to reflect the
occurrence of unanticipated events, other than as required by
law.
Broadridge Financial Solutions, Inc. |
|
Condensed Consolidated Statements of
Earnings(In millions, except per share
amounts)(Unaudited) |
|
|
Three Months Ended March
31, |
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
$ |
688.8 |
|
|
$ |
634.2 |
|
|
$ |
1,922.5 |
|
|
$ |
1,764.6 |
|
Operating expenses: |
|
|
|
|
|
|
|
Cost of revenues |
486.5 |
|
|
452.6 |
|
|
1,389.6 |
|
|
1,273.1 |
|
Selling, general and
administrative expenses |
101.7 |
|
|
92.6 |
|
|
303.0 |
|
|
286.3 |
|
Total
operating expenses |
588.2 |
|
|
545.2 |
|
|
1,692.6 |
|
|
1,559.4 |
|
Operating income |
100.6 |
|
|
89.0 |
|
|
229.9 |
|
|
205.2 |
|
Non-operating expenses,
net |
7.2 |
|
|
7.1 |
|
|
23.5 |
|
|
21.7 |
|
Earnings before income
taxes |
93.4 |
|
|
81.9 |
|
|
206.4 |
|
|
183.5 |
|
Provision for income
taxes |
29.7 |
|
|
27.9 |
|
|
68.9 |
|
|
62.3 |
|
Net earnings |
$ |
63.7 |
|
|
$ |
54.0 |
|
|
$ |
137.4 |
|
|
$ |
121.2 |
|
Basic earnings per
share |
$ |
0.54 |
|
|
$ |
0.45 |
|
|
$ |
1.16 |
|
|
$ |
1.01 |
|
Diluted earnings per
share |
$ |
0.52 |
|
|
$ |
0.43 |
|
|
$ |
1.13 |
|
|
$ |
0.97 |
|
Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
118.2 |
|
|
120.6 |
|
|
118.3 |
|
|
120.2 |
|
Diluted |
121.7 |
|
|
125.0 |
|
|
121.8 |
|
|
124.4 |
|
Dividends declared per
common share |
$ |
0.30 |
|
|
$ |
0.27 |
|
|
$ |
0.90 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts may not sum due to
rounding. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadridge Financial Solutions,
Inc. |
|
Condensed Consolidated Balance
Sheets(In millions, except per share
amounts)(Unaudited) |
|
March 31, 2016 |
|
June 30, 2015 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
354.4 |
|
|
$ |
324.1 |
|
Accounts
receivable, net of allowance for doubtful accounts of $3.2 and
$3.8, respectively |
503.8 |
|
|
444.5 |
|
Other
current assets |
145.6 |
|
|
92.8 |
|
Total
current assets |
1,003.8 |
|
|
861.4 |
|
Property, plant and
equipment, net |
108.2 |
|
|
97.3 |
|
Goodwill |
973.3 |
|
|
970.5 |
|
Intangible assets,
net |
181.6 |
|
|
195.7 |
|
Other non-current
assets |
257.0 |
|
|
243.2 |
|
Total
assets |
$ |
2,524.0 |
|
|
$ |
2,368.1 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts
payable |
$ |
123.8 |
|
|
$ |
115.9 |
|
Accrued
expenses and other current liabilities |
291.5 |
|
|
320.4 |
|
Deferred
revenues |
166.0 |
|
|
72.6 |
|
Total
current liabilities |
581.3 |
|
|
508.9 |
|
Long-term debt |
819.5 |
|
|
689.4 |
|
Deferred taxes |
41.4 |
|
|
61.7 |
|
Deferred revenues |
76.3 |
|
|
75.2 |
|
Other non-current
liabilities |
103.1 |
|
|
105.1 |
|
Total
liabilities |
1,621.5 |
|
|
1,440.3 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Preferred
stock: Authorized, 25.0 shares; issued and outstanding, none |
— |
|
|
— |
|
Common
stock, $0.01 par value: Authorized, 650.0 shares; issued, 154.5 and
154.5 shares, respectively; outstanding, 117.5 and 118.2 shares,
respectively |
1.6 |
|
|
1.6 |
|
Additional
paid-in capital |
901.3 |
|
|
855.5 |
|
Retained
earnings |
1,163.2 |
|
|
1,132.0 |
|
Treasury
stock, at cost: 37.0 and 36.3 shares, respectively |
(1,115.8 |
) |
|
(1,040.4 |
) |
Accumulated
other comprehensive loss |
(47.7 |
) |
|
(20.9 |
) |
Total
stockholders’ equity |
902.6 |
|
|
927.8 |
|
Total
liabilities and stockholders’ equity |
$ |
2,524.0 |
|
|
$ |
2,368.1 |
|
|
|
|
|
|
|
|
|
Amounts may not sum due to rounding. |
|
|
|
|
|
|
|
Broadridge Financial Solutions,
Inc.Segment Results(In
millions)(Unaudited) |
|
|
Revenues |
|
Three Months Ended March
31, |
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
Investor Communication
Solutions |
$ |
515.4 |
|
|
$ |
466.1 |
|
|
$ |
1,416.8 |
|
|
$ |
1,264.4 |
|
Global Technology and
Operations |
191.3 |
|
|
178.0 |
|
|
548.3 |
|
|
514.9 |
|
Foreign currency
exchange |
(17.8 |
) |
|
(9.9 |
) |
|
(42.6 |
) |
|
(14.7 |
) |
Total |
$ |
688.8 |
|
|
$ |
634.2 |
|
|
$ |
1,922.5 |
|
|
$ |
1,764.6 |
|
|
Earnings (Loss) before Income
Taxes |
|
Three Months Ended March
31, |
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
Investor Communication
Solutions |
$ |
67.1 |
|
|
$ |
63.0 |
|
|
$ |
147.1 |
|
|
$ |
135.4 |
|
Global Technology and
Operations |
40.2 |
|
|
33.6 |
|
|
100.0 |
|
|
91.7 |
|
Other |
(14.8 |
) |
|
(16.4 |
) |
|
(44.3 |
) |
|
(53.5 |
) |
Foreign currency
exchange |
0.9 |
|
|
1.7 |
|
|
3.6 |
|
|
9.9 |
|
Total |
$ |
93.4 |
|
|
$ |
81.9 |
|
|
$ |
206.4 |
|
|
$ |
183.5 |
|
|
Amounts may not sum due to
rounding. |
Broadridge Financial Solutions,
Inc.Reconciliation of Non-GAAP to GAAP
Measures(In millions, except per share
amounts)(Unaudited) |
|
|
Three Months Ended March
31, |
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
($ in millions) |
Adjusted Operating
income (Non-GAAP) |
$ |
109.8 |
|
|
$ |
96.3 |
|
|
$ |
257.9 |
|
|
$ |
226.7 |
|
Acquisition
Amortization and Other Costs |
(9.1 |
) |
|
(7.3 |
) |
|
(28.0 |
) |
|
(21.6 |
) |
Operating income
(GAAP) |
$ |
100.6 |
|
|
$ |
89.0 |
|
|
$ |
229.9 |
|
|
$ |
205.2 |
|
Adjusted
Operating income margin (Non-GAAP) |
15.9 |
% |
|
15.2 |
% |
|
13.4 |
% |
|
12.8 |
% |
Operating
income margin (GAAP) |
14.6 |
% |
|
14.0 |
% |
|
12.0 |
% |
|
11.6 |
% |
|
Three Months Ended March
31, |
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
($ in millions) |
Adjusted Net earnings
(Non-GAAP) |
$ |
70.0 |
|
|
$ |
58.8 |
|
|
$ |
156.1 |
|
|
$ |
135.4 |
|
Acquisition
Amortization and Other Costs, net of taxes |
(6.3 |
) |
|
(4.8 |
) |
|
(18.7 |
) |
|
(14.2 |
) |
Net earnings (GAAP) |
$ |
63.7 |
|
|
$ |
54.0 |
|
|
$ |
137.4 |
|
|
$ |
121.2 |
|
|
Three Months Ended March
31, |
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Adjusted Diluted earnings
per share (Non-GAAP) |
$ |
0.58 |
|
|
$ |
0.47 |
|
|
$ |
1.28 |
|
|
$ |
1.09 |
|
Acquisition
Amortization and Other Costs, net of taxes |
(0.05 |
) |
|
(0.04 |
) |
|
(0.15 |
) |
|
(0.11 |
) |
Diluted earnings per share
(GAAP) |
$ |
0.52 |
|
|
$ |
0.43 |
|
|
$ |
1.13 |
|
|
$ |
0.97 |
|
|
Nine Months Ended March 31, |
|
2016 |
|
2015 |
|
($ in millions) |
Free cash flows
(Non-GAAP) |
$ |
105.0 |
|
|
$ |
126.0 |
|
Capital
expenditures, software purchases and capitalized internal use
software |
56.1 |
|
|
30.6 |
|
Net cash flows provided by
operating activities (GAAP) |
$ |
161.1 |
|
|
$ |
156.6 |
|
|
|
|
|
|
|
|
|
Amounts may
not sum due to rounding. |
Broadridge Financial Solutions,
Inc.Reconciliation of Non-GAAP to GAAP
MeasuresDiluted Earnings Per Share Growth and
Operating Income MarginFiscal Year 2016
Guidance(Unaudited) |
|
Earnings Per
Share Growth Rate (1) |
|
FY16 Guidance |
Adjusted
Diluted earnings per share (Non-GAAP) |
|
8% -
12% growth |
Diluted
earnings per share (GAAP) |
|
7% -
12% growth |
|
|
|
Operating
Income Margin (2) |
|
FY16 Guidance |
Adjusted
Operating income margin % (Non-GAAP) |
|
~18.4% |
Operating
income margin % (GAAP) |
|
~17.3% |
|
|
|
(1)
Adjusted Diluted EPS growth (Non-GAAP) is adjusted to exclude the
projected impact of Acquisition Amortization and Other Costs.
Fiscal year 2016 Non-GAAP Adjusted Diluted EPS guidance estimates
exclude Acquisition Amortization and Other Costs, net of taxes, of
$0.18 per share. |
|
(2)
Adjusted Operating income margin % (Non-GAAP) is adjusted to
exclude the projected impact of Acquisition Amortization and Other
Costs. Fiscal year 2016 Non-GAAP Adjusted Operating income margin
guidance estimates exclude Acquisition Amortization and Other Costs
of $34 million. |
|
Note:
Guidance does not take into consideration the effect of any
future acquisitions, additional debt and/or share repurchases. |
Contact Information
Investors:
Brian S. Shipman, CFA
Broadridge Financial Solutions, Inc.
Vice President, Head of Investor Relations
(516) 472-5129
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