Broadridge Financial Solutions Inc.
) posted first-quarter fiscal 2013 adjusted earnings per share
(EPS) of 18 cents, which beat the Zacks Consensus Estimate of 16
AUTOMATIC DATA (ADP): Free Stock Analysis
BROADRIDGE FINL (BR): Free Stock Analysis
DST SYSTEMS (DST): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis
PENSON WORLDWD (PNSN): Free Stock Analysis
To read this article on Zacks.com click here.
Total revenue in the first quarter was $495.8 million, up 4.1%
from $476.4 million a year ago. The revenue figure too came above
the Zacks Consensus Estimate of $488.0 million. The
year-over-year improvement was buoyed by a 3.0% increase in
recurring revenues, improved contribution from event-driven
mutual fund and higher distribution revenues.
Broadridge managed to sustain a 99% client retention rate.
Recurring revenue closed sales were down approximately 30% year
The Investor Communication Solutions segment generated $339.5
million in revenues, up 8.5% from $313.0 million in the
prior-year quarter. The increase was attributable to higher
recurring revenues from net new business, revenue gains from
acquisitions, and higher event-driven mutual fund proxies and
The Securities Processing Solutions segment reported revenues of
$153.9 million, down 2.8% from $158.4 million in the prior-year
quarter. The decrease was due to lower volume sales and
termination of the outsourcing agreement with
Penson Worldwide Inc.
), partially offset by new outsourcing agreement with Apex
Clearing Corporation, strength in new business and contribution
from the Paladyne acquisition.
Total expenses in the quarter crept up 3.8% year over year to
$467.2 million. Reported pre-tax income was $28.6 million, up
from $26.2 million in the year-earlier quarter. Pre-tax margin
grew 20 basis points year over year to 3.7%.
GAAP net income from continuing operations increased 9.6% year
over year to $18.3 million. Earnings per share in the quarter
grew 9.2% to 14 cents from 13 cents in the year-ago quarter.
Excluding the effect of
International Business Machines Corp.
) migration costs; impairment charge on investment in the common
stock of Penson Worldwide and restructuring charges, adjusted net
income was $22.3 million or 18 cents per share. This cost of
migrating to IBM's platform follows an information technology
services agreement signed between the two companies in March
2010. Per the deal, IBM will provide certain aspects of
Broadridge's information technology infrastructure that are
currently being provided under a data center outsourcing services
Automatic Data Processing Inc.
Balance Sheet & Share Buyback
Broadridge exited the quarter with cash and cash equivalents of
$211.8 million, down from $320.5 million in the prior quarter.
Receivables decreased 13.3% from the previous quarter to $321.4
million. Long-term debt remained sequentially unchanged at $524.4
During the quarter, Broadridge bought back 3.2 million of its
common stock at an average price of $23.61 per share. The company
now has 6.7 million of common stock available for repurchase.
For fiscal 2013, Broadridge expects revenue growth of 3.0% to
4.0%, and recurring revenue growth of 4.0% to 7.0%. The company
expects recurring revenue closed sales to be the key driver of
revenue growth. Recurring revenue closed sales are forecast in
the range of $110.0 million to $150.0 million.
GAAP pretax margin is expected in the range of 13.8% to 14.4%,
while non-GAAP margin is expected between 14.2% and 14.8%.
Earnings per share are expected between $1.60 and $1.70. However,
excluding the effect of Penson charges, adjusted EPS is still
expected in the range of $1.76-$1.86. Management also expects
adjusted free cash flow in the range of $200.0 million to $250.0
Management is quite confident of achieving its fiscal target
based on strong sales pipeline, 99% client revenue retention rate
and product strength.
Broadridge Financial posted a decent first quarter by beating the
Zacks Consensus Estimates on both the bottom and top lines.
Despite positive momentum, Broadridge reiterated its guidance for
fiscal, which we believe is due to the unpredictable nature of
mutual fund proxy revenues.
The company believes that outsourcing will be a key driver of its
growth and we believe that Broadridge seems to be in a good
position to make such deals. Broadridge entered into a 10-year
Master Services Agreement with Apex, under which Apex will
outsource its securities processing and back office support
services to Broadridge.
Broadridge faces significant competition from companies such as
HD Supply and
DST Systems Inc.
), which have intensified pricing pressure for the company. But,
we remain optimistic on Broadridge's strategic acquisitions and
new product launches.
Currently, Broadridge has a Zacks #3 Rank, implying a short-term