LAKE SUCCESS, NY--(Marketwire - November 2, 2009) - Broadridge Financial Solutions, Inc.
(
NYSE:
BR), a leading global provider of technology-based solutions to the
financial services industry, today reported net revenues of $457.9 million,
net earnings of $26.4 million, and fully-diluted earnings per share of
$0.19 for the first quarter ended September 30, 2009. This compares with
net revenues of $472.4 million, net earnings of $35.6 million, and
fully-diluted earnings per share of $0.25 for the comparable quarter of the
previous fiscal year.
Post-First Quarter Strategic Transactions
On November 2, 2009, Broadridge entered into agreements with Penson
Worldwide, Inc. ("PWI") and Penson Financial Services, Inc., a subsidiary
of PWI ("Penson"), that provide for the sale of its clearing client
contracts to Penson and a ten-year outsourcing services contract under
which Broadridge will provide certain securities processing and back-office
services to Penson. This transaction is part of Broadridge's strategy to
exit the securities clearing business, which is expected to provide
Broadridge with access to net cash estimated to be in the range of $180
million to $200 million that was previously committed to our securities
clearing business as regulatory capital. Exiting the clearing business
will enable the securities processing business to solely focus on the
revenue opportunities associated with securities processing and operations
outsourcing services.
Broadridge will receive between $60 million and $70 million in total
consideration from PWI for the sale of the clearing client contracts
consisting of a five-year subordinated note from PWI and shares of PWI's
common stock in an amount calculated as the lesser of one-third of the
total consideration and an amount not exceeding 9.9% of PWI's outstanding
common stock. The specific amount of such consideration will be determined
immediately prior to closing pursuant to an agreed formula. In addition,
Broadridge has agreed to make an eighteen-month $50 million subordinated
loan to PWI to fund its additional regulatory capital requirements in the
event it is not able to obtain these funds from other sources prior to
closing. Broadridge expects the outsourcing services contract to generate
approximately $65 million to $75 million in annual revenue when the
business is fully converted onto Broadridge's securities processing
platform over the next 12 to 18 months.
The outsourcing services contract will include selective processing
services for Penson's existing securities processing operations and
back-office functions, as well as selective processing services related to
the clearing client contracts acquired by Penson from Broadridge.
Broadridge is expecting to incur one-time expenses and a pre-tax loss on
the transaction in the aggregate amount of approximately $30 million to $35
million which are substantially non-cash items. It is anticipated that the
transaction will close within the next six months, subject to agreement on
outsourcing service levels and the satisfaction of customary closing
conditions, including regulatory approvals.
The Company also announced that subsequent to the end of its first quarter,
it has signed an agreement with Morgan Stanley Smith Barney LLC ("Morgan
Stanley Smith Barney") for customer communications services, which includes
the production and distribution of account statements, performance reports,
tax reporting documents, and certain trade confirms, as well as the
provision of prospectus fulfillment services. The length of the agreement
is seven years and is expected to generate annual fee revenue greater than
$35 million when the systems are fully converted onto the Broadridge
production platform over the next two years.
CEO Comments on Results and Transactions
Commenting on the results, Richard J. Daly, Chief Executive Officer, said,
"I am very pleased with the overall momentum across the entire business,
when I consider the transactions that we have executed post-quarter and the
financial results for the quarter. Our first quarter performance is in-line
with our expectations and overall, I am satisfied with our financial
results and the positive activity in our sales pipeline."
Mr. Daly continued, "The Morgan Stanley Smith Barney contract signing has
enabled us to not only win back the statement processing business we lost
from Morgan Stanley around the time of our spin-off from ADP, but to
further expand our relationship with the recently formed Morgan Stanley
Smith Barney."
Mr. Daly added, "The Penson transaction creates considerable momentum for
our securities processing strategy. It will enable us to have use of
significant free cash that had previously been restricted, will eliminate
any balance sheet risk associated with the clearing business, and provides
us with a clear strategy for our securities processing business which now
includes outsourcing. We are delighted to be working with Penson going
forward because of their long track record of success in growing their
global clearing business and particularly because of their singular
strategic focus on the global clearing market. The Penson transaction puts
our securities processing business in a position where I believe we are on
the right path to increase shareholder value from this segment."
Financial Results for First Quarter Fiscal Year 2010
For the first quarter of fiscal year 2010, net revenues decreased 3% to
$457.9 million compared to $472.4 million for the same period last year.
The revenue increase from higher fee revenues related to new business and
increased event-driven activity was more than offset by the decline in low
margin distribution revenues, the negative impact from previously-disclosed
client losses and price concessions, and unfavorable foreign currency
exchange rates.
Net earnings, as expected, decreased 26% to $26.4 million from $35.6
million primarily as a result of lower revenues and the one-time gain from
the purchase of $125.0 million principal amount of our 6.125% senior notes
due in 2017 (the "Senior Notes") in the prior fiscal year. Diluted earnings
per share decreased to $0.19 per share on slightly less weighted-average
shares outstanding, compared to $0.25 per share in the first quarter of
fiscal year 2009. Closed sales of $30.7 million for the first quarter of
fiscal year 2010 were in-line with expectations and were $2.2 million lower
than last year's comparable quarter results, which benefited from a large
new client sale.
During the first quarter of fiscal year 2010, the Company repurchased
approximately 3.5 million shares of Broadridge common stock under its share
repurchase plan at an average price of $20.53 per share.
Analysis of First Quarter Fiscal Year 2010
Investor Communication Solutions
Net revenues for the Investor Communication Solutions segment decreased 1%
to $309.9 million in the first quarter of fiscal year 2010, compared to the
first quarter of fiscal year 2009. The increase in fee revenues related to
internal growth and mutual fund activity was more than offset by a decline
in low margin distribution revenues. Operating margin increased slightly
by 0.2 percentage points or 20 basis points compared to the first quarter
of fiscal year 2009, as the positive margin impact from higher fee revenues
were offset by higher investment spending and lower distribution revenue.
Securities Processing Solutions
Net revenues for the Securities Processing Solutions segment decreased 7%
to $124.2 million in the first quarter of fiscal year 2010, compared to the
first quarter of fiscal year 2009. This decrease, as expected, was
primarily driven by the carry-over impact of price concessions related to
contract renewals and the previously-announced client losses that occurred
last fiscal year. Operating margin decreased 5.6 percentage points or 560
basis points compared to the first quarter of fiscal year 2009, primarily
as a result of the higher margin impact associated with lost revenues
related to client losses and price concessions.
Clearing and Outsourcing Solutions
Net revenues for the Clearing and Outsourcing Solutions segment increased
10% to $25.6 million in the first quarter of fiscal year 2010, compared to
the first quarter of fiscal year 2009. The increase was driven by net new
business (sales less losses) primarily from the addition of Neuberger
Berman and higher trading activity. Operating loss of $2.4 million for the
first quarter of fiscal year 2010 decreased by $0.7 million from an
operating loss of $3.1 million in the first quarter of fiscal year 2009 as
a result of higher revenues and a benefit from one-time expense reductions.
Other
Net revenues for Other decreased by $0.1 million, compared to the first
quarter of fiscal year 2009. This decrease was related to lower interest
income in the current fiscal year compared to the same period last year.
Pre-tax loss for Other increased by $6.0 million, compared to the first
quarter of fiscal year 2009. This increase was primarily due to the effect
of the one-time gain of $8.4 million from the purchase of the Senior Notes
during the first quarter of fiscal year 2009 and a negative impact from
foreign currency exchange in the first quarter of fiscal year 2010,
partially offset by a decrease in interest expense of $2.8 million in the
first quarter of fiscal year 2010 related to a lower outstanding balance on
the Senior Notes.
Fiscal Year 2010 Financial Guidance
We are increasing our full year net revenues growth guidance to a range of
6% to 8% from our previous guidance range of 4% to 8%. We are reaffirming
our Non-GAAP earnings per share guidance range of $1.50 to $1.60 on a
fully-diluted basis, which excludes a negative $0.08 per share impact of
one-time items related to the net effect of the Penson transaction and a
foreign tax credit. The one-time items from the Penson transaction
accounted for a negative $0.14 per share impact on EPS, offset by a
positive $0.06 per share EPS impact from the foreign tax credit.
As a result of the impact of the one-time items, we are decreasing the GAAP
earnings per share guidance range to $1.42 to $1.52 from $1.50 to $1.60 on
a fully-diluted basis. The earnings per share guidance is based on diluted
weighted-average shares outstanding of approximately 141 million shares. In
addition, our fiscal year 2010 financial guidance assumes that the Penson
transaction closes in our third fiscal quarter of 2010.
We anticipate earnings margin before interest and taxes, excluding one-time
items related to the Penson transaction in the range of 15.3% to 16.0%
(Non-GAAP), and in the range of 13.9% to 14.7% (GAAP). Our effective
annual tax rate will be approximately 37.5%, excluding the one-time foreign
tax credit (Non-GAAP), and 35.0% including the one-time tax credit (GAAP).
Free cash flow is expected to be in the range of $235 million to $270
million. We are increasing our closed sales forecast for fiscal year 2010
to a range of $185 million to $205 million from our previous guidance range
of $165 million to $185 million.
Mr. Daly commented, "I am pleased that the consolidated operating
businesses are tracking to our original expectations for both revenue and
earnings per share. When you exclude the short-term earnings impact
related to the Penson and Morgan Stanley Smith Barney transactions, the
consolidated operating businesses are expected to perform slightly better
than we originally anticipated. Our success in the current fiscal year, as
expected, will be led by the strength of our Investor Communications
business, as we continue to see a solid rebound in event-driven mutual fund
proxy activity. I continue to believe we are well-positioned to meet our
goals for fiscal year 2010 and with the strength of our sales results and
pipeline, I anticipate exiting this fiscal year with good revenue
momentum."
Non-GAAP Financial Measures
In certain circumstances, results have been presented that are Non-GAAP
measures and should be viewed in addition to, and not as a substitute for,
the Company's reported results. Management believes such Non-GAAP measures
provide investors with a more complete understanding of Broadridge's
underlying operational results. These Non-GAAP measures are indicators that
management uses to provide additional meaningful comparisons between
current results and prior reported results, and as a basis for planning and
forecasting for future periods. Accompanying this release is a
reconciliation of Non-GAAP measures to the comparable GAAP measures.
Earnings Conference Call
An analyst conference call will be held on Tuesday, November 3rd 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 and click on the webcast icon. The presentation will
be available to download and print before the webcast on the Broadridge
Investor Relations home page at
www.broadridge-ir.com. Broadridge's news releases, current financial
information, filings with the Securities and Exchange Commission, and
Investor Relations presentations are accessible on the same website.
About Broadridge
Broadridge Financial Solutions, Inc., with over $2.1 billion in revenues in
fiscal year 2009 and more than 40 years of experience, is a leading global
provider of technology-based solutions to the financial services industry.
Our systems and services include investor communication, securities
processing, and clearing and outsourcing solutions. We offer advanced,
integrated systems and services that are dependable, scalable and
cost-efficient. Our systems help reduce the need for clients to make
significant capital investments in operations infrastructure, thereby
allowing them to increase their focus on core business activities. For more
information about Broadridge, please visit
www.broadridge.com.
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, such as our
fiscal year 2010 financial guidance, and which may be identified by the use
of words like "expects," "assumes," "projects," "anticipates," "estimates,"
"we believe," "could be" and other words of similar meaning, 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, 2009 (the "2009 Annual Report"), as they may be updated
in any future reports filed with the Securities and Exchange Commission.
Any forward-looking statements are qualified in their entirety by reference
to the factors discussed in the 2009 Annual Report. These risks include:
the success of Broadridge in retaining and selling additional services to
its existing clients and in obtaining new clients; the pricing of
Broadridge's products and services; changes in laws affecting the investor
communication services provided by Broadridge; changes in laws regulating
registered securities clearing firms and broker-dealers; declines in
trading volume, market prices, or the liquidity of the securities markets;
any material breach of Broadridge security affecting its clients' customer
information; Broadridge's ability to continue to obtain data center
services from its former parent company, Automatic Data Processing, Inc.
("ADP"); any significant slowdown or failure of Broadridge's systems;
Broadridge's failure to keep pace with changes in technology and demands of
its clients; availability of skilled technical employees; the impact of new
acquisitions and divestitures; competitive conditions; overall market and
economic conditions; and any adverse consequences from Broadridge's
spin-off from ADP. Broadridge disclaims any obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Broadridge Financial Solutions, Inc.
Consolidated Statements of Earnings
(In millions except per share amounts)
(Unaudited)
Three Months
Ended September 30,
----------------------
2009 2008
----------- ----------
Revenues:
Services revenues $ 449.5 $ 460.5
Other 8.8 14.0
----------- ----------
Total revenues 458.3 474.5
Interest expense from securities operations 0.4 2.1
----------- ----------
Net revenues 457.9 472.4
----------- ----------
Expenses:
Cost of net revenues 355.4 363.0
Selling, general and administrative expenses 56.4 56.7
Other (income) expenses, net 3.8 (5.5)
----------- ----------
Total expenses 415.6 414.2
----------- ----------
Earnings before income taxes 42.3 58.2
Provision for income taxes 15.9 22.6
----------- ----------
Net earnings $ 26.4 $ 35.6
=========== ==========
Earnings per share:
Basic $ 0.19 $ 0.25
Diluted $ 0.19 $ 0.25
Weighted-average shares outstanding:
Basic 138.1 140.4
Diluted 140.4 142.2
Dividends declared per common share $ 0.14 $ 0.07
Broadridge Financial Solutions, Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
September 30, June 30,
2009 2009
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 231.5 $ 280.9
Cash and securities segregated for regulatory
purposes and securities deposited with clearing
organizations 191.0 246.5
Accounts receivable, net of allowance for
doubtful accounts of $1.9 and $2.3, respectively 307.9 381.0
Securities clearing receivables, net of allowance
for doubtful accounts of $2.0 and $2.0,
respectively 1,282.9 1,011.3
Other current assets 110.3 83.9
---------- ----------
Total current assets 2,123.6 2,003.6
Property, plant and equipment, net 71.3 75.4
Other non-current assets 138.9 143.3
Goodwill 513.3 511.1
Intangible assets, net 39.1 41.3
---------- ----------
Total assets $ 2,886.2 $ 2,774.7
========== ==========
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable $ 77.0 $ 75.3
Accrued expenses and other current liabilities 177.1 222.7
Securities clearing payables 1,271.2 1,088.1
Deferred revenues 46.7 34.6
---------- ----------
Total current liabilities 1,572.0 1,420.7
Long-term debt 324.1 324.1
Other non-current liabilities 71.3 70.0
Deferred revenues 51.1 50.9
---------- ----------
Total liabilities 2,018.5 1,865.7
---------- ----------
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, 142.5 shares and 141.8 shares,
respectively; outstanding, 136.5 and 139.3
shares at September 30, 2009 and June 30, 2009,
respectively 1.4 1.4
Additional paid-in capital 525.2 505.9
Retained earnings 439.7 432.3
Treasury stock--at cost, 6.0 and 2.5 shares,
respectively (109.3) (37.5)
Accumulated other comprehensive income 10.7 6.9
---------- ----------
Total stockholders equity 867.7 909.0
---------- ----------
Total liabilities and stockholders'
equity $ 2,886.2 $ 2,774.7
========== ==========
Broadridge Financial Solutions, Inc.
Segment Results
(In millions)
(Unaudited)
Net Revenues
----------------------
Three Months Ended
September 30,
----------------------
2009 2008
---------- -----------
Investor Communication Solutions $ 309.9 $ 313.8
Securities Processing Solutions 124.2 133.2
Clearing and Outsourcing Solutions 25.6 23.2
Other 0.1 0.2
Foreign currency exchange (1.9) 2.0
---------- -----------
Total $ 457.9 $ 472.4
========== ===========
Earnings before Income
Taxes
----------------------
Three Months Ended
September 30,
----------------------
2009 2008
---------- ----------
Investor Communication Solutions $ 23.4 $ 23.3
Securities Processing Solutions 27.9 37.4
Clearing and Outsourcing Solutions (2.4) (3.1)
Other (6.7) (0.7)
Foreign currency exchange 0.1 1.3
---------- ----------
Total $ 42.3 $ 58.2
========== ==========
Broadridge Financial Solutions, Inc.
Ridge Clearing & Outsourcing Solutions, Inc. ("Ridge Clearing") Capital
(In millions)
(Unaudited)
Low High
----- -----
Ridge Clearing Stockholder's Equity - June 30, 2009 $ 331 $ 331
Settlement of Intercompany Activity, Investments and Working
Capital Remaining in the Business (151) (131)
----- -----
Excess Ridge Clearing Capital Available to Parent $ 180 $ 200
===== =====
Broadridge Financial Solutions, Inc.
Reconciliation of Non-GAAP to GAAP Measures
EBIT, Margin and Earnings per Share Guidance
(In millions)
(Unaudited)
Low High
------- -------
Diluted EPS Before One-Time Items (Non-GAAP) $ 1.50 $ 1.60
Penson Transaction One-time items (0.14) (0.14)
Foreign Tax Credit - One-time Tax Restructuring 0.06 0.06
------- -------
Diluted EPS (GAAP) $ 1.42 $ 1.52
------- -------
Low High
------- -------
EBIT Before One-time Items (Non-GAAP) $ 348 $ 371
Margin 15.3% 16.0%
Penson Transaction One-time items (32) (32)
------- -------
Margin 1.4% 1.3%
EBIT (GAAP) $ 316 $ 339
------- -------
Margin 13.9% 14.7%
Broadridge Financial Solutions, Inc.
Reconciliation of Non-GAAP to GAAP Measures
Free Cash Flow Guidance
(In millions)
(Unaudited)
FY10 Range (a)
Low High
------- -------
Earnings $ 199 $ 214
Depreciation and amortization 60 62
Stock-based compensation expense 31 33
Other 13 13
------- -------
Subtotal 303 322
Working capital changes (15) (10)
Long-term assets & liabilities changes (2) -
------- -------
Net cash flow provided by operating activities 286 312
Cash Flows From Investing Activities
Capital expenditures & intangibles (51) (42)
------- -------
Free cash flow $ 235 $ 270
======= =======
(a) Broadridge Total excluding Ridge Clearing Financing Activities
Contact Information: Contact Information
Investors:
Marvin Sims
Broadridge Financial Solutions, Inc.
Vice President, Investor Relations
(516) 472-5477