Broadridge Financial Solutions Inc.
) reported adjusted earnings of 39 cents in the first quarter of
2014, which surpassed the Zacks Consensus Estimate of 20 cents.
The reported earnings also more than doubled from 18 cents earned
in the year-ago quarter.
Broadridge's first-quarter revenues increased 10.0% on a
year-over-year basis to $454.2 million and came ahead of the
Zacks Consensus Estimate of $515.0 million. Revenues were driven
by recurring fee revenues, which also include contribution from
Net New Business, higher distribution revenues and event-driven
Moreover, revenues from Investor Communication Solutions
segment (69% of total revenue) increased 10.8% from the year-ago
quarter to $376.2 million. The increase was attributable to
higher recurring revenues from new business, higher event-driven
fee and distribution revenues.
The Securities Processing Solutions segment (31% of total
revenue) reported revenues of $168.7 million, up 9.6% from the
year-ago quarter. The increase was driven by strength in new
business and higher equity trade volumes per day.
Better-than-expected revenues resulted from Broadridge's
client win for its new post-trade processing solution jointly
). Apart from this, the company witnessed higher demand for its
Fluent digital service, which aims at simplifying communications
between financial services firms and their clients.
Broadridge's total expenses as a percentage of revenues
decreased 694 basis points (bps) due to lower expenses. This
resulted in a 675 bps expansion in the adjusted pretax
The company reported adjusted net income of $48.1 million or
39 cents, which increased from $22.3 million or 18 cents reported
in the year-ago quarter.
Broadridge exited the quarter with cash and cash equivalents
of $183.1 million, down from $266 million in the previous
quarter. Long-term debt was $524 million compared to $524.5
million in the previous quarter.
During the quarter, Broadridge repurchased 0.3 million shares
at $30.10 per share and paid approximately $22 million as
Fiscal 2014 Guidance
Broadridge reiterated its fiscal 2014 guidance. For fiscal
2014, Broadridge expects revenue growth of 2.0% to 4.0% and
recurring revenue growth of 5.0% to 7.0%. The company expects
recurring revenues from closed sales to be the key driver of
revenue growth. Recurring revenues from closed sales are forecast
in the range of $110.0 million to $150.0 million. Client
retention rate is expected to be 98.0%.
Non-GAAP margin is expected between 15.6% and 16.1%. Adjusted
earnings per share are still expected in the range of
$2.00-$2.10. Management also expects adjusted free cash flow
within the range of $250.0 million to $300.0 million.
Apart from this, Broadridge is positive over the ramp up of
its post-trade processing service and digital communication
service, which have strengthened the company's deal pipeline.
Broadridge's first-quarter results were impressive as both the
top and bottom lines surpassed the Zacks Consensus Estimate. The
mutual fund proxy business, which is unpredictable, has done well
this quarter and boosted event-driven fee revenues. Also, cost
reduction initiatives and solid growth in net new businesses were
the quarter's positive.
We remain optimistic on Broadridge's strategic acquisitions,
product launches, share repurchase program and dividend hike. We
also believe that its close association with Accenture will
create long-term opportunities for Broadridge. However,
significant competition from companies such as
Barrett Business Services
DST Systems Inc.
) has intensified pricing pressure for the company.
Currently, Broadridge has a Zacks Rank #3 (Hold).
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