NEW YORK, Feb. 7, 2019
/PRNewswire/ -- Broadridge Financial Solutions, Inc. (NYSE:
BR) today reported financial results for the second quarter and six
months ended December 31, 2018 of its
fiscal year 2019. Results for the three and six months ended
December 31, 2018 compared with the
same period last year were as follows:
Summary Financial
Results
|
|
Second
Quarter
|
|
Six
Months
|
|
Dollars in
millions, except per share data
|
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$953
|
$1,013
|
(6)%
|
$1,926
|
$1,938
|
(1)%
|
Recurring fee
revenues
|
|
604
|
562
|
7%
|
1,179
|
1,110
|
6%
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
78
|
116
|
(33)%
|
178
|
201
|
(11)%
|
|
Operating income
margin
|
|
8.2%
|
11.4%
|
|
9.3%
|
10.4%
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
income - Non-GAAP
|
|
101
|
138
|
(27)%
|
224
|
245
|
(9)%
|
|
Adjusted Operating
income margin - Non-GAAP
|
|
10.6%
|
13.7%
|
|
11.6%
|
12.6%
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$0.42
|
$0.52
|
(19)%
|
$1.06
|
$0.93
|
14%
|
Adjusted EPS -
Non-GAAP
|
|
$0.56
|
$0.79
|
(29)%
|
$1.35
|
$1.32
|
2%
|
|
|
|
|
|
|
|
|
|
Closed
sales
|
|
$106
|
$39
|
174%
|
$124
|
$62
|
102%
|
"Broadridge had a strong second quarter and is well
positioned for the full year 2019 and beyond," said
Tim Gokey, Broadridge's President
and CEO. "We generated strong increases in recurring
revenue, record closed sales, and earnings in-line with our
expectations, all of which further strengthen our ability to
deliver future growth. As anticipated, event-driven revenues
declined significantly, returning to more normalized levels from a
near-record quarter a year ago.
"We enter our seasonally strong second half with positive
momentum and on track to achieve our full-year guidance, including
5-7% recurring fee growth and 9-13% Adjusted EPS growth. Broadridge
also remains well positioned to deliver on our three-year
growth objectives," Mr. Gokey added.
Fiscal Year 2019 Financial Guidance
Broadridge's fiscal year 2019 financial guidance is
unchanged.
Recurring fee revenue
growth
|
|
5-7%
|
Total revenue
growth
|
|
3-5%
|
|
|
|
Operating income
margin - GAAP
|
|
~14.5%
|
Adjusted Operating
income margin - Non-GAAP
|
|
~16.5%
|
|
|
|
Diluted earnings per
share growth
|
|
12-16%
|
Adjusted Earnings per
share growth - Non-GAAP
|
|
9-13%
|
|
|
|
Free cash flow -
Non-GAAP
|
|
$565-615M
|
Closed
sales
|
|
$185-225M
|
|
|
|
Note: Fiscal year
2019 guidance includes $25 million of excess tax benefits related
to stock-based compensation, down from $41 million in fiscal year
2018.
|
Third Quarter Fiscal Year 2019 Supplemental Financial
Guidance
Broadridge also provided supplemental guidance for the third
quarter of Fiscal Year 2019
Recurring fee
revenue
|
|
$755 million - $780
million
|
Total
revenue
|
|
$1,195 million -
$1,245 million
|
|
|
|
Diluted earnings per
share
|
|
$1.25 -
$1.41
|
Adjusted Earnings per
share - Non-GAAP
|
|
$1.40 -
$1.56
|
Financial Results for the Second Quarter of Fiscal Year
2019
Revenues
Revenues for the three months ended December 31, 2018 ("second quarter of fiscal year
2019") decreased 6% to $953 million
from $1,013 million in the prior year
period.
Recurring fee revenues rose 7% to $604
million from $562 million. The
increase in recurring fee revenues reflected organic growth of 6%
(including 3pts from Net New Business and 3pts from internal
growth), 1pt from our recent acquisitions and 1pt from the impact
of the revenue accounting change. Event-driven fee revenues
decreased $49 million, or 51%, to
$48 million, primarily from decreased
mutual fund proxy revenues and equity proxy contests, after
previously increasing 227% in the fiscal second quarter of 2018
from increased mutual fund proxy activity and equity proxy
contests. Distribution revenues decreased $48 million, or 13%, to $323 million. Changes in foreign currency rates
negatively impacted revenues by $4
million as compared to the prior year period.
Operating Income
For the second quarter of fiscal year 2019:
- Operating income was $78 million,
a decrease of $38 million, or 33%,
compared to $116 million for the
prior year period. Operating income margin decreased to 8.2%,
compared to 11.4% for the prior year period.
- Adjusted Operating income was $101
million, a decrease of $37
million, or 27%, compared to $138
million for the prior year period. Adjusted Operating income
margin decreased to 10.6%, compared to 13.7% for the prior year
period.
- The decreases in Operating income margin and Adjusted Operating
income margin are primarily due to (i) the decrease in
higher-margin event-driven fee revenues and (ii) higher selling,
general and administrative expenses, primarily due to higher
selling expenses and increased spending on technology initiatives,
which more than offset (iii) the decrease in cost of revenues
primarily from the decrease in distribution revenues and (iv) the
increase in recurring fee revenues.
Interest Expense and Other Non-Operating Expenses
Interest expense, net for the second quarter of fiscal year 2019
was $11 million, an increase of less
than $1 million, or 5%, compared to
$10 million for the prior year
period. Other non-operating expense, net was $3 million, an increase of less than $1 million, compared to $2
million for the prior year period.
Effective Tax Rate
The effective tax rate for the second quarter of fiscal year
2019 was 22.4% compared to 40.0% for the prior year period. The
decrease in the effective tax rate is primarily due to the U.S.
federal corporate income tax rate change under the Tax Cuts and
Jobs Act (the "Tax Act"). Included in the provision for taxes
is $0.8 million of excess tax
benefits attributable to stock-based compensation, a decline from
the $1.5 million benefit recognized
in the second quarter of fiscal 2018.
Net Earnings and Earnings per Share
For the second quarter of fiscal year 2019:
- Net earnings decreased 20% to $50
million, compared to $62
million for the prior year period.
- Adjusted Net earnings decreased 29% to $67 million, compared to $95 million for the prior year period.
- Diluted earnings per share decreased 19% to $0.42, compared to $0.52 for the prior year period.
- Adjusted earnings per share decreased 29% to $0.56, compared to $0.79 for the prior year period.
Segment and Other Results for the Second Quarter of Fiscal
Year 2019
Investor Communication Solutions ("ICS")
ICS revenues for the second quarter of fiscal year 2019 were
$738 million, a decrease of
$64 million, or 8%, compared to
$802 million for the prior year
period.
- Recurring fee revenues rose $33
million, or 10%, to $367
million. The increase was attributable to: (i) higher
internal growth (4pts), (ii) Net New Business from increases in
revenue from Closed sales (4pts), (iii) revenues from acquisitions
(1pt) and (iv) the impact of the revenue accounting change
(1pt).
- Event-driven fee revenues decreased $49
million, or 51%, to $48
million, the result of decreased mutual fund proxy revenues
and equity proxy contests.
- Distribution revenues decreased $48
million, or 13%, to $323
million.
During the second quarter of fiscal year 2019, Broadridge was
able to separate certain annually recurring mutual fund related
communications that were previously included in event-driven fee
revenues. These activities are presented within recurring fee
revenues commencing in the second quarter of fiscal 2019 and
resulted in an increase of $4 million
in ICS recurring fee revenues and the impact of this
reclassification will add approximately $15
million to recurring fee revenues for the year.
ICS earnings before income taxes for the second quarter of
fiscal year 2019 were $37 million, a
decrease of $35 million, or 49%,
compared to $72 million for the prior
year period, primarily due to lower event-driven fee revenues
offsetting higher recurring fee revenues. Pre-tax margins decreased
by 4.0 percentage points to 5.0% from 9.0%.
Global Technology and Operations ("GTO")
GTO revenues for the second quarter of fiscal year 2019 were
$237 million, an increase of
$9 million, or 4%, compared to
$228 million in the prior year
period. The increase was attributable to: (i) higher Net New
Business from Closed sales (3pts) and (ii) internal growth driven
by higher trade levels (1pt). The impact of the revenue accounting
change was negligible.
GTO earnings before income taxes for the second quarter of
fiscal year 2019 were $47 million, a
decrease of $3 million, or 7%,
compared to $51 million in the prior
year period, due in part to the impact of ongoing new product
development expenses and increased conversion costs related to
client go-lives. Pre-tax margins decreased by 2.2 percentage points
to 20.0% from 22.2%.
Other
Other Pre-tax loss increased 5% in the second quarter of fiscal
year 2019 to $28 million from
$26 million in the prior year period.
The increased loss was primarily due to higher corporate expenses
and unrealized losses on marketable securities pursuant to an
accounting change that was not in the comparable prior year
period.
Financial Results for the Six Months Ended December 31, 2018
Revenues
Revenues for the six months ended December 31, 2018 decreased 1% to $1,926 million from $1,938
million in the prior year period.
Recurring fee revenues rose 6% to $1,179
million from $1,110 million.
The increase in recurring fee revenues reflected organic growth of
5% (including 4pts from Net New Business and 2pts from internal
growth) and 1pt from our recent acquisitions. The impact of the
revenue accounting change was negligible. Event-driven fee revenues
decreased $32 million, or 20%, to
$125 million, primarily from
decreased equity proxy contests and mutual fund proxy activity.
Distribution revenues decreased $40
million, or 6%, to $664
million. Changes in foreign currency rates negatively
impacted revenues by $8 million as
compared to the prior year period.
Operating Income
For the six months ended December 31,
2018:
- Operating income was $178
million, a decrease of $23
million, or 11%, compared to $201
million for the prior year period. Operating income margin
decreased to 9.3%, compared to 10.4% for the prior year period.
- Adjusted Operating income was $224
million, a decrease of $21
million, or 9%, compared to $245
million for the prior year period. Adjusted Operating income
margin decreased to 11.6%, compared to 12.6% for the prior year
period.
- The decreases in Operating income margin and Adjusted Operating
income margin are primarily due to (i) the decrease in
higher-margin event-driven fee revenues and (ii) higher selling,
general and administrative expenses, primarily due to higher
selling expenses and increased spending on technology initiatives,
which more than offset (iii) the decrease in cost of revenues
primarily from the decrease in distribution revenues and (iv) the
increase in recurring fee revenues.
Interest Expense and Other Non-Operating Expenses
Interest expense, net for the six months ended December 31, 2018 was $20
million, an increase of less than $1
million, or 4%, compared to $20
million for the prior year period. Other non-operating
expense, net was $4 million, an
increase of less than $1 million,
compared to $4 million for the prior
year period.
Effective Tax Rate
The effective tax rate for the six months ended December 31, 2018 was 17.6% compared to 37.0% for
the prior year period. The decrease in the effective tax rate is
primarily due to the U.S. federal corporate income tax rate change
under the Tax Act as well as the recognition of $8 million in excess tax benefits attributable to
stock-based compensation as compared to $3
million for the prior year period.
Net Earnings and Earnings per Share
For the six months ended December 31,
2018:
- Net earnings increased 13% to $127
million, compared to $112
million for the prior year period.
- Adjusted Net earnings increased 2% to $162 million, compared to $159 million for the prior year period.
- Diluted earnings per share increased 14% to $1.06, compared to $0.93 for the prior year period.
- Adjusted earnings per share increased 2% to $1.35, compared to $1.32 for the prior year period.
Segment and Other Results for the Six Months Ended
December 31, 2018
Investor Communication Solutions
ICS revenues for the six months ended December 31, 2018 were $1,504 million, a decrease of $25 million, or 2%, compared to $1,529 million for the prior year period.
- Recurring fee revenues rose $47
million, or 7%, to $715
million. The increase was attributable to: (i) Net New
Business from increases in revenue from Closed sales (4pts), (ii)
revenues from acquisitions (2pt) and (iii) higher internal growth
(1pt). The impact of the revenue accounting change on recurring fee
revenue was negligible.
- Event-driven fee revenues decreased $32
million, or 20%, to $125
million, the result of decreased equity proxy contests and
mutual fund proxy activity.
- Distribution revenues decreased $40
million, or 6%, to $664
million.
ICS earnings before income taxes for the six months ended
December 31, 2018 were $96 million, a decrease of $22 million, or 19%, compared to $118 million for the prior year period, primarily
due to lower event-driven fee revenues. Pre-tax margins decreased
by 1.3 percentage points to 6.4% from 7.7%.
Global Technology and Operations
GTO revenues for the six months ended December 31, 2018 were $464 million, an increase of $21 million, or 5%, compared to $443 million in the prior year period. The
increase was attributable to: (i) higher Net New Business from
Closed sales (3pts) and (ii) internal growth driven by higher trade
levels (2pts). The impact of the revenue accounting change was
negligible.
GTO earnings before income taxes for the six months ended
December 31, 2018 were $94 million, a decrease of $2 million, or 2%, compared to $96 million in the prior year period, primarily
due to the impact of incremental expenditures to drive new business
and increased conversion costs related to client go-lives. Pre-tax
margins decreased by 1.4 percentage points to 20.2% from 21.6%.
Other
Other Pre-tax loss increased 6% in the six months ended
December 31, 2018 to $51 million from $48
million in the prior year period. The increased loss was
primarily due to higher corporate expenses.
Adoption of New Accounting Standards
Effective July 1, 2018, Broadridge
adopted Accounting Standards Update No. 2014-09 "Revenue from
Contracts with Customers" and its related amendments (the "revenue
accounting change"). Results for reporting periods beginning after
July 1, 2018 reflect the revenue
accounting change while prior period amounts have not been adjusted
and continue to be reported in accordance with historical
accounting guidelines. Please refer to Broadridge's Quarterly
Report on Form 10-Q for the period ended December 31, 2018 for additional information
related to this change.
Earnings Conference Call
An analyst conference call will be held today, Thursday,
February 7, 2019 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 live event and
access the slide presentation, visit Broadridge's Investor
Relations website at www.broadridge-ir.com prior to the start of
the webcast. To listen to the call, investors may also dial
1-844-348-2805 within the United
States and international callers may dial
1-213-785-7185.
A replay of the webcast will be available and can be accessed in
the same manner as the live webcast at the Broadridge Investor
Relations site. Through February 21,
2019, the recording will also be available by dialing
1-855-859-2056 passcode: 3145519 within the United States or 1-404-537-3406 passcode:
3145519 for international callers.
Explanation and Reconciliation of the Company's Use of
Non-GAAP Financial Measures
The Company's results in this press release are presented in
accordance with U.S. generally accepted accounting principles
("GAAP") except where otherwise noted. In certain circumstances,
results have been presented that are not generally accepted
accounting principles measures ("Non-GAAP"). These Non-GAAP
measures are Adjusted Operating income, Adjusted Operating income
margin, Adjusted Net earnings, Adjusted earnings per share, and
Free cash flow. These Non-GAAP financial measures should be viewed
in addition to, and not as a substitute for, the Company's reported
results.
The Company believes our Non-GAAP financial measures help
investors understand how management plans, measures and evaluates
the Company's business performance. Management believes that
Non-GAAP measures provide consistency in its financial reporting
and facilitates investors' understanding of the Company's operating
results and trends by providing an additional basis for comparison.
Management uses these Non-GAAP financial measures to, among other
things, evaluate our ongoing operations, for internal planning and
forecasting purposes and in the calculation of performance-based
compensation. In addition, and as a consequence of the importance
of these Non-GAAP financial measures in managing our business, the
Company's Compensation Committee of the Board of Directors
incorporates Non-GAAP financial measures in the evaluation process
for determining management compensation.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted Net Earnings and Adjusted Earnings per Share
These Non-GAAP measures reflect Operating income, Operating
income margin, Net earnings, and Diluted earnings per share, as
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 operating performance. These adjusted
measures exclude the impact of: (i) Amortization of Acquired
Intangibles and Purchased Intellectual Property, (ii) Acquisition
and Integration Costs and (iii) Tax Act items. Amortization of
Acquired Intangibles and Purchased Intellectual Property represents
non-cash amortization expenses associated with the Company's
acquisition activities. Acquisition and Integration Costs represent
certain transaction and integration costs associated with the
Company's acquisition activities. Tax Act items represent the net
impact of a U.S. federal transition tax on earnings of certain
foreign subsidiaries, foreign jurisdiction withholding taxes and
certain benefits related to the remeasurement of the Company's net
U.S. federal and state deferred tax liabilities attributable to the
Tax Act.
We exclude Amortization of Acquired Intangibles and Purchased
Intellectual Property as well as Acquisition and Integration Costs
and Tax Act items from our earnings measures because excluding such
information provides us with an understanding of the results from
the primary operations of our business and these items do not
reflect ordinary operations or earnings. Management believes these
adjusted measures may be useful to an investor in evaluating the
underlying operating performance of our business.
Free Cash Flow
In addition to the Non-GAAP financial measures discussed above,
we provide Free cash flow information because we consider Free cash
flow to be a liquidity measure that provides useful information to
management and investors about the amount of cash generated that
could be used for dividends, share repurchases, strategic
acquisitions, other investments, as well as debt servicing. Free
cash flow is a Non-GAAP financial measure and is defined by the
Company as Net cash flows provided by operating activities less
Capital expenditures as well as Software purchases and capitalized
internal use software.
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.
Forward-Looking Statements
This 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 2019 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, 2018 (the "2018 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 2018
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; a material security breach or
cybersecurity attack affecting the information of Broadridge's
clients; changes in laws and regulations affecting Broadridge's
clients or the services provided by Broadridge; declines in
participation and activity in the securities markets; the failure
of Broadridge's key service providers 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.
About Broadridge
Broadridge Financial Solutions, Inc. (NYSE: BR), a $4
billion global Fintech leader and a part of the S&P 500®
Index, is a leading provider of investor communications and
technology-driven solutions to banks, broker-dealers, asset
managers 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 50 percent of public companies and mutual funds globally, and
processes on average more than US $5 trillion in fixed
income and equity trades per day. Broadridge employs over 10,000
full-time associates in 18 countries. For more information about
Broadridge, please visit www.broadridge.com.
Contact Information
Investors:
W. Edings Thibault
Investor Relations
(516) 472-5129
Media:
Gregg
Rosenberg
Corporate Communications
(212) 918-6966
Condensed
Consolidated Statements of Earnings
|
(Unaudited)
|
|
In millions,
except per share amounts
|
|
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
|
|
$
|
953.4
|
|
|
$
|
1,012.8
|
|
|
$
|
1,926.2
|
|
|
$
|
1,937.6
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
734.0
|
|
|
769.3
|
|
|
1,473.0
|
|
|
1,495.3
|
|
Selling, general and
administrative expenses
|
|
|
141.2
|
|
|
127.7
|
|
|
274.9
|
|
|
241.2
|
|
Total operating
expenses
|
|
|
875.2
|
|
|
896.9
|
|
|
1,747.9
|
|
|
1,736.5
|
|
Operating
income
|
|
|
78.2
|
|
|
115.9
|
|
|
178.3
|
|
|
201.1
|
|
Interest expense,
net
|
|
|
10.7
|
|
|
10.2
|
|
|
20.4
|
|
|
19.6
|
|
Other non-operating
expenses, net
|
|
|
3.2
|
|
|
2.2
|
|
|
4.4
|
|
|
3.7
|
|
Earnings before
income taxes
|
|
|
64.3
|
|
|
103.5
|
|
|
153.6
|
|
|
177.8
|
|
Provision for income
taxes
|
|
|
14.4
|
|
|
41.4
|
|
|
27.0
|
|
|
65.8
|
|
Net
earnings
|
|
|
$
|
49.9
|
|
|
$
|
62.1
|
|
|
$
|
126.6
|
|
|
$
|
112.0
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
|
$
|
0.43
|
|
|
$
|
0.53
|
|
|
$
|
1.09
|
|
|
$
|
0.96
|
|
Diluted earnings per
share
|
|
|
$
|
0.42
|
|
|
$
|
0.52
|
|
|
$
|
1.06
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
116.3
|
|
|
116.6
|
|
|
116.3
|
|
|
116.5
|
|
Diluted
|
|
|
119.1
|
|
|
120.3
|
|
|
119.4
|
|
|
120.1
|
|
Dividends declared
per common share
|
|
|
$
|
0.485
|
|
|
$
|
0.365
|
|
|
$
|
0.97
|
|
|
$
|
0.73
|
|
|
Amounts may not
sum due to rounding.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
In millions,
except per share amounts
|
|
|
December 31,
2018
|
|
June 30,
2018
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
249.8
|
|
|
$
|
263.9
|
|
Accounts receivable,
net of allowance for doubtful accounts of $2.2 and
$2.7, respectively
|
|
|
607.4
|
|
|
615.0
|
|
Other current
assets
|
|
|
109.3
|
|
|
112.2
|
|
Total current
assets
|
|
|
966.4
|
|
|
991.1
|
|
Property, plant and
equipment, net
|
|
|
187.9
|
|
|
204.1
|
|
Goodwill
|
|
|
1,254.3
|
|
|
1,254.9
|
|
Intangible assets,
net
|
|
|
445.4
|
|
|
494.1
|
|
Other non-current
assets
|
|
|
503.6
|
|
|
360.5
|
|
Total
assets
|
|
|
$
|
3,357.6
|
|
|
$
|
3,304.7
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Payables and accrued
expenses
|
|
|
$
|
509.1
|
|
|
$
|
671.0
|
|
Contract
liabilities
|
|
|
88.8
|
|
|
106.3
|
|
Total current
liabilities
|
|
|
597.9
|
|
|
777.3
|
|
Long-term
debt
|
|
|
1,194.1
|
|
|
1,053.4
|
|
Deferred
taxes
|
|
|
74.0
|
|
|
57.9
|
|
Contract
liabilities
|
|
|
169.2
|
|
|
75.2
|
|
Other non-current
liabilities
|
|
|
199.7
|
|
|
246.5
|
|
Total
liabilities
|
|
|
2,234.9
|
|
|
2,210.4
|
|
Commitments and
contingencies
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Preferred stock:
Authorized, 25.0 shares; issued and outstanding, none
|
|
|
—
|
|
|
—
|
|
Common stock, $0.01
par value: 650.0 shares authorized; 154.5 and 154.5
shares issued, respectively; and
115.7 and 116.3 shares outstanding,
respectively
|
|
|
1.6
|
|
|
1.6
|
|
Additional paid-in
capital
|
|
|
1,087.8
|
|
|
1,048.5
|
|
Retained
earnings
|
|
|
1,843.8
|
|
|
1,727.0
|
|
Treasury stock, at
cost: 38.8 and 38.1 shares, respectively
|
|
|
(1,741.4)
|
|
|
(1,630.8)
|
|
Accumulated other
comprehensive loss
|
|
|
(69.2)
|
|
|
(51.9)
|
|
Total stockholders'
equity
|
|
|
1,122.6
|
|
|
1,094.3
|
|
Total liabilities and
stockholders' equity
|
|
|
$
|
3,357.6
|
|
|
$
|
3,304.7
|
|
|
Amounts may not
sum due to rounding.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
Dollars in
millions
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
Cash Flows From
Operating Activities
|
|
|
|
Net
earnings
|
$
|
126.6
|
|
|
$
|
112.0
|
|
Adjustments to
reconcile net earnings to net cash flows provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
42.5
|
|
|
40.0
|
|
Amortization of
acquired intangibles and purchased intellectual property
|
43.2
|
|
|
39.2
|
|
Amortization of other
assets
|
44.6
|
|
|
22.9
|
|
Stock-based
compensation expense
|
29.4
|
|
|
24.7
|
|
Deferred income
taxes
|
(10.0)
|
|
|
(11.2)
|
|
Other
|
(13.4)
|
|
|
(1.7)
|
|
Changes in operating
assets and liabilities, net of assets and liabilities
acquired:
|
|
|
|
Current assets and
liabilities:
|
|
|
|
Decrease in Accounts
receivable, net
|
11.0
|
|
|
18.0
|
|
Increase in Other
current assets
|
(12.1)
|
|
|
(6.2)
|
|
Decrease in Payables
and accrued expenses
|
(158.4)
|
|
|
(147.5)
|
|
Increase (decrease)
in Contract liabilities
|
13.3
|
|
|
(5.5)
|
|
Non-current assets
and liabilities:
|
|
|
|
Increase in Other
non-current assets
|
(87.3)
|
|
|
(37.9)
|
|
Increase in Other
non-current liabilities
|
52.8
|
|
|
95.1
|
|
Net cash flows
provided by operating activities
|
82.1
|
|
|
141.8
|
|
Cash Flows From
Investing Activities
|
|
|
|
Capital
expenditures
|
(21.0)
|
|
|
(42.1)
|
|
Software purchases
and capitalized internal use software
|
(9.3)
|
|
|
(10.4)
|
|
Acquisitions, net of
cash acquired
|
—
|
|
|
(30.2)
|
|
Other investing
activities
|
(1.8)
|
|
|
(2.8)
|
|
Net cash flows used
in investing activities
|
(32.0)
|
|
|
(85.4)
|
|
Cash Flows From
Financing Activities
|
|
|
|
Debt
proceeds
|
210.0
|
|
|
190.0
|
|
Debt
repayments
|
(70.0)
|
|
|
(70.0)
|
|
Dividends
paid
|
(99.0)
|
|
|
(80.4)
|
|
Purchases of Treasury
stock
|
(120.3)
|
|
|
(3.0)
|
|
Proceeds from
exercise of stock options
|
19.1
|
|
|
4.4
|
|
Other financing
activities
|
(1.8)
|
|
|
(5.5)
|
|
Net cash flows (used
in) provided by financing activities
|
(61.9)
|
|
|
35.4
|
|
Effect of exchange
rate changes on Cash and cash equivalents
|
(2.3)
|
|
|
3.6
|
|
Net change in Cash
and cash equivalents
|
(14.1)
|
|
|
95.4
|
|
Cash and cash
equivalents, beginning of period
|
263.9
|
|
|
271.1
|
|
Cash and cash
equivalents, end of period
|
$
|
249.8
|
|
|
$
|
366.5
|
|
|
Amounts may not
sum due to rounding.
|
Segment
Results
|
(Unaudited)
|
|
Dollars in
millions
|
Revenues
|
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(in
millions)
|
|
(in
millions)
|
Investor
Communication Solutions
|
$
|
738.1
|
|
|
$
|
802.2
|
|
|
$
|
1,503.9
|
|
|
$
|
1,528.6
|
|
Global Technology and
Operations
|
236.6
|
|
|
228.0
|
|
|
464.3
|
|
|
442.9
|
|
Foreign currency
exchange
|
(21.4)
|
|
|
(17.4)
|
|
|
(42.0)
|
|
|
(33.9)
|
|
Total
|
$
|
953.4
|
|
|
$
|
1,012.8
|
|
|
$
|
1,926.2
|
|
|
$
|
1,937.6
|
|
|
|
Earnings (Loss)
before Income
Taxes
|
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(in
millions)
|
|
(in
millions)
|
Investor
Communication Solutions
|
$
|
37.0
|
|
|
$
|
72.4
|
|
|
$
|
96.0
|
|
|
$
|
118.0
|
|
Global Technology and
Operations
|
47.3
|
|
|
50.6
|
|
|
93.7
|
|
|
95.7
|
|
Other
|
(27.9)
|
|
|
(26.5)
|
|
|
(51.0)
|
|
|
(48.0)
|
|
Foreign currency
exchange
|
7.9
|
|
|
7.0
|
|
|
15.0
|
|
|
12.1
|
|
Total
|
$
|
64.3
|
|
|
$
|
103.5
|
|
|
$
|
153.6
|
|
|
$
|
177.8
|
|
|
|
|
|
|
|
|
|
Pre-tax
margins:
|
|
|
|
|
|
|
|
Investor
Communication Solutions
|
5.0
|
%
|
|
9.0
|
%
|
|
6.4
|
%
|
|
7.7
|
%
|
Global Technology and
Operations
|
20.0
|
%
|
|
22.2
|
%
|
|
20.2
|
%
|
|
21.6
|
%
|
|
Amounts may not
sum due to rounding.
|
Supplemental
Reporting Detail - Additional Product Line Reporting
|
(Unaudited)
|
|
Dollars in
millions
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
Investor
Communication Solutions
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Equity
Proxy
|
$
|
41.7
|
|
|
$
|
33.6
|
|
|
24
|
%
|
|
$
|
72.7
|
|
|
$
|
63.6
|
|
|
14
|
%
|
Mutual fund and
exchange-traded funds
("ETF") interims
|
60.7
|
|
|
46.9
|
|
|
29
|
%
|
|
118.5
|
|
|
96.2
|
|
|
23
|
%
|
Customer
communications and fulfillment
|
182.6
|
|
|
187.3
|
|
|
(3)
|
%
|
|
357.5
|
|
|
368.9
|
|
|
(3)
|
%
|
Other ICS
|
82.1
|
|
|
66.5
|
|
|
23
|
%
|
|
165.9
|
|
|
138.7
|
|
|
20
|
%
|
Total ICS Recurring fee revenues
|
367.2
|
|
|
334.4
|
|
|
10
|
%
|
|
714.6
|
|
|
667.4
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and
other
|
19.5
|
|
|
28.8
|
|
|
(32)
|
%
|
|
43.6
|
|
|
59.5
|
|
|
(27)
|
%
|
Mutual
funds
|
28.6
|
|
|
68.6
|
|
|
(58)
|
%
|
|
81.4
|
|
|
97.1
|
|
|
(16)
|
%
|
Total ICS Event-driven fee revenues
|
48.1
|
|
|
97.3
|
|
|
(51)
|
%
|
|
125.1
|
|
|
156.6
|
|
|
(20)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
revenues
|
322.9
|
|
|
370.4
|
|
|
(13)
|
%
|
|
664.2
|
|
|
704.7
|
|
|
(6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ICS
Revenues
|
$
|
738.1
|
|
|
$
|
802.2
|
|
|
(8)
|
%
|
|
$
|
1,503.9
|
|
|
$
|
1,528.6
|
|
|
(2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Technology
and Operations
|
|
|
|
|
|
|
|
|
|
|
|
Equities and
Other
|
$
|
196.5
|
|
|
$
|
189.4
|
|
|
4
|
%
|
|
$
|
384.2
|
|
|
$
|
368.4
|
|
|
4
|
%
|
Fixed
income
|
40.1
|
|
|
38.5
|
|
|
4
|
%
|
|
80.1
|
|
|
74.5
|
|
|
8
|
%
|
Total GTO Recurring fee revenues
|
236.6
|
|
|
228.0
|
|
|
4
|
%
|
|
464.3
|
|
|
442.9
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
exchange
|
(21.4)
|
|
|
(17.4)
|
|
|
23
|
%
|
|
(42.0)
|
|
|
(33.9)
|
|
|
24
|
%
|
Total Revenues
|
$
|
953.4
|
|
|
$
|
1,012.8
|
|
|
(6)
|
%
|
|
$
|
1,926.2
|
|
|
$
|
1,937.6
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Type
|
|
|
|
|
|
|
|
|
|
|
|
Recurring fee
revenues
|
$
|
603.8
|
|
|
$
|
562.4
|
|
|
7
|
%
|
|
$
|
1,179.0
|
|
|
$
|
1,110.2
|
|
|
6
|
%
|
Event-driven fee
revenues
|
48.1
|
|
|
97.3
|
|
|
(51)
|
%
|
|
125.1
|
|
|
156.6
|
|
|
(20)
|
%
|
Distribution
revenues
|
322.9
|
|
|
370.4
|
|
|
(13)
|
%
|
|
664.2
|
|
|
704.7
|
|
|
(6)
|
%
|
Foreign currency
exchange
|
(21.4)
|
|
|
(17.4)
|
|
|
23
|
%
|
|
(42.0)
|
|
|
(33.9)
|
|
|
24
|
%
|
Total Revenues
|
$
|
953.4
|
|
|
$
|
1,012.8
|
|
|
(6)
|
%
|
|
$
|
1,926.2
|
|
|
$
|
1,937.6
|
|
|
(1)
|
%
|
|
Amounts may not
sum due to rounding.
|
Recurring Fee
Revenue Growth Drivers
|
(Unaudited)
|
|
|
Three Months
Ended,
December 31,
2018
|
|
Six Months
Ended,
December 31,
2018
|
|
ICS
|
|
GTO
|
|
Total
|
|
ICS
|
|
GTO
|
|
Total
|
Internal
growth
|
4%
|
|
1%
|
|
3%
|
|
1%
|
|
2%
|
|
2%
|
Net new
business
|
4%
|
|
3%
|
|
3%
|
|
4%
|
|
3%
|
|
4%
|
Organic Recurring
fee revenue growth
|
8%
|
|
4%
|
|
6%
|
|
5%
|
|
5%
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
1%
|
|
—%
|
|
1%
|
|
2%
|
|
—%
|
|
1%
|
Revenue accounting
change impact
|
1%
|
|
—%
|
|
1%
|
|
—%
|
|
—%
|
|
—%
|
Total Recurring
fee revenue growth
|
10%
|
|
4%
|
|
7%
|
|
7%
|
|
5%
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts may not
sum due to rounding.
|
Select Operating
Metrics
|
(Unaudited)
|
|
|
Three Months
Ended
December
31,
|
|
|
|
Six Months
Ended
December
31,
|
|
|
|
Dollars in
millions
|
2018
|
|
2017
|
|
%
Change
|
|
2018
|
|
2017
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed
Sales
|
$105.9
|
|
$38.7
|
|
174%
|
|
$124.3
|
|
$61.6
|
|
102%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Record
Growth1
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
proxy
|
15%
|
|
12%
|
|
|
|
15%
|
|
8%
|
|
|
|
Mutual fund
interims
|
20%
|
|
10%
|
|
|
|
14%
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Trade
Growth2
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
16%
|
|
9%
|
|
|
|
18%
|
|
8%
|
|
|
|
Fixed
Income
|
6%
|
|
2%
|
|
|
|
5%
|
|
1%
|
|
|
|
|
Amounts may not
sum due to rounding.
|
|
1 Stock
record growth and interim record growth measure the annual change
in total positions eligible for equity proxies and mutual fund
& ETF interims, respectively, for equities and mutual funds
position data reported to Broadridge in both the current and prior
year periods.
|
|
|
2 Internal
trade growth represents the growth in trade volumes for clients
whose contracts are linked to trade volumes and who were on
Broadridge's trading platforms in both the current and prior year
period.
|
|
|
Reconciliation of
Non-GAAP to GAAP Measures
|
(Unaudited)
|
|
Dollars in
millions, except per share amounts
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(in
millions)
|
Operating income
(GAAP)
|
$
|
78.2
|
|
|
$
|
115.9
|
|
|
$
|
178.3
|
|
|
$
|
201.1
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortization of
Acquired Intangibles and Purchased Intellectual
Property
|
21.3
|
|
|
19.7
|
|
|
43.2
|
|
|
39.2
|
|
Acquisition and
Integration Costs
|
1.3
|
|
|
2.6
|
|
|
2.2
|
|
|
4.7
|
|
Adjusted Operating
income (Non-GAAP)
|
$
|
100.8
|
|
|
$
|
138.3
|
|
|
$
|
223.7
|
|
|
$
|
244.9
|
|
Operating income
margin (GAAP)
|
8.2
|
%
|
|
11.4
|
%
|
|
9.3
|
%
|
|
10.4
|
%
|
Adjusted Operating
income margin (Non-GAAP)
|
10.6
|
%
|
|
13.7
|
%
|
|
11.6
|
%
|
|
12.6
|
%
|
|
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(in
millions)
|
Net earnings
(GAAP)
|
$
|
49.9
|
|
|
$
|
62.1
|
|
|
$
|
126.6
|
|
|
$
|
112.0
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortization of
Acquired Intangibles and Purchased Intellectual Property
|
21.3
|
|
|
19.7
|
|
|
43.2
|
|
|
39.2
|
|
Acquisition and
Integration Costs
|
1.3
|
|
|
2.6
|
|
|
2.2
|
|
|
4.7
|
|
Taxable
adjustments
|
22.6
|
|
|
22.4
|
|
|
45.4
|
|
|
43.8
|
|
Tax Act
items
|
—
|
|
|
16.1
|
|
|
—
|
|
|
16.1
|
|
Tax impact of
adjustments (a)
|
(5.3)
|
|
|
(5.9)
|
|
|
(10.3)
|
|
|
(13.0)
|
|
Adjusted Net earnings
(Non-GAAP)
|
$
|
67.2
|
|
|
$
|
94.7
|
|
|
$
|
161.8
|
|
|
$
|
158.9
|
|
|
|
Three Months
Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Diluted earnings per
share (GAAP)
|
$
|
0.42
|
|
|
$
|
0.52
|
|
|
$
|
1.06
|
|
|
$
|
0.93
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortization of
Acquired Intangibles and Purchased Intellectual Property
|
0.18
|
|
|
0.16
|
|
|
0.36
|
|
|
0.33
|
|
Acquisition and
Integration Costs
|
0.01
|
|
|
0.02
|
|
|
0.02
|
|
|
0.04
|
|
Taxable
adjustments
|
0.19
|
|
|
0.19
|
|
|
0.38
|
|
|
0.37
|
|
Tax Act
items
|
—
|
|
|
0.13
|
|
|
—
|
|
|
0.13
|
|
Tax impact of
adjustments (a)
|
(0.04)
|
|
|
(0.05)
|
|
|
(0.09)
|
|
|
(0.11)
|
|
Adjusted earnings per
share (Non-GAAP)
|
$
|
0.56
|
|
|
$
|
0.79
|
|
|
$
|
1.35
|
|
|
$
|
1.32
|
|
|
(a) Calculated using
the GAAP effective tax rate, adjusted to exclude $0.8 million and
$7.9 million of excess tax benefits associated with stock-based
compensation for the three and six months ended December 31,
2018, as well as the net $16.1 million charges associated with the
Tax Act and $1.5 million and $3.0 million of excess tax benefits
associated with stock-based compensation, for the three and six
months ended December 31, 2017. For purposes of calculating the
Adjusted earnings per share, the same adjustments were made on a
per share basis.
|
|
Six Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
(in
millions)
|
Net cash flows
provided by operating activities (GAAP)
|
$
|
82.1
|
|
|
$
|
141.8
|
|
Capital expenditures
and Software purchases and capitalized internal use
software
|
(30.3)
|
|
|
(52.5)
|
|
Free cash flow
(Non-GAAP)
|
$
|
51.8
|
|
|
$
|
89.3
|
|
|
|
|
|
Amounts may not
sum due to rounding.
|
Guidance for Third
Quarter and Fiscal Year 2019 Guidance
|
Reconciliation of
Non-GAAP to GAAP Measures
|
Adjusted Earnings
Per Share Growth, Adjusted Operating Income Margin and Free Cash
Flow
|
(Unaudited)
|
|
Dollars in
millions, except per share amounts
|
|
|
Third Quarter FY19
Adjusted Earnings Per Share (1)
|
|
|
Diluted
earnings per share (GAAP)
|
|
$1.25 -
$1.41
|
Adjusted earnings per share (Non-GAAP)
|
|
$1.40 -
$1.56
|
|
|
|
FY19 Adjusted
Earnings Per Share Growth Rate (1)
|
|
|
Diluted earnings per
share (GAAP)
|
|
12% - 16%
growth
|
Adjusted earnings per
share (Non-GAAP)
|
|
9% - 13%
growth
|
|
|
|
FY19 Adjusted
Operating Income Margin (2)
|
|
|
Operating income
margin % (GAAP)
|
|
~14.5%
|
Adjusted Operating
income margin % (Non-GAAP)
|
|
~16.5%
|
|
|
|
FY19 Free Cash
Flow
|
|
|
Net cash
flows provided by operating activities (GAAP)
|
|
$660 -
$730
|
Capital expenditures
and Software purchases and capitalized internal use
software
|
|
(95) -
(115)
|
Free
cash flow (Non-GAAP)
|
|
$565 -
$615
|
|
(1) Adjusted
earnings per share growth (Non-GAAP) is adjusted to exclude the
projected impact of Amortization of Acquired Intangibles and
Purchased Intellectual Property, and Acquisition and Integration
Costs, and is calculated using diluted shares outstanding. Fiscal
year 2019 Non-GAAP Adjusted earnings per share guidance estimates
exclude Amortization of Acquired Intangibles and Purchased
Intellectual Property, and Acquisition and Integration Costs, net
of taxes, of approximately $0.60 per share. For the third quarter
of Fiscal Year 2019, the guidance excludes Amortization of Acquired
Intangibles and Purchased Intellectual Property, and Acquisition
and Integration Costs, net of taxes, of approximately $0.15 per
share
|
|
(2) Adjusted
Operating income margin (Non-GAAP) is adjusted to exclude the
projected impact of Amortization of Acquired Intangibles and
Purchased Intellectual Property, and Acquisition and Integration
Costs. Fiscal year 2019 Non-GAAP Adjusted Operating income margin
guidance estimates exclude Amortization of Acquired Intangibles and
Purchased Intellectual Property, and Acquisition and Integration
Costs of approximately $94 million.
|
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SOURCE Broadridge Financial Solutions, Inc.