Broadridge Financial Solutions Inc.
) posted third-quarter fiscal 2013 adjusted earnings per share
(EPS) of 39 cents, missing the Zacks Consensus Estimate of $1.11
by a wide margin.
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Total revenue in the third quarter was $576.7 million, up 5.4%
from $547.0 million a year ago. The year-over-year improvement
was buoyed by increase in recurring revenues of approximately
$16.0 million and higher distribution revenues of $13.0 million.
Broadridge managed to sustain a 99% client retention rate.
Recurring revenue closed sales were $24.0 million in the third
quarter, up 50.0% from the year-ago quarter.
The Investor Communication Solutions segment generated $404.2
million in revenues, up 8.1% from $374.0 million in the
prior-year quarter. The increase was attributable to higher
recurring revenues from new business, revenue gains from
acquisitions, and higher distribution revenues.
The Securities Processing Solutions segment reported revenues of
$169.6 million, up 0.2% from $169.3 million in the prior-year
quarter. The increase was driven by strength in new business,
partially offset by decline in revenues from the new outsourcing
agreement with Apex Clearing Corporation, replacing the
terminated outsourcing agreement with Penson Worldwide Inc.
Total expenses in the quarter decreased 1.8% year over year to
$509.0 million. Reported pre-tax income was $67.7 million, up
from $28.8 million in the year-ago quarter. Pre-tax margin grew
490 basis points year over year to 8.7%.
GAAP net income from continuing operations increased 139.8% year
over year to $43.4 million. Earnings per share in the quarter
grew 146.3% to 35 cents from 14 cents in the year-ago quarter.
The significant increase in earnings from the prior-year figures
was due to the impact of the Penson impairment charge and
International Business Machines Corp.
) migration costs in the prior year.
The cost of migrating to IBM's platform follows an information
technology services agreement signed between the two companies in
Mar 2010. As 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.
Excluding the effect of acquisition amortization and other costs,
restructuring and impairment charges, adjusted net income was
$49.5 million or 39 cents per share compared with $40.6 million
or 32 cents in the year-ago quarter.
Broadridge exited the quarter with cash and cash equivalents of
$182.2 million, down from $259.1 million in the prior quarter.
Receivables increased 35.1% from the previous quarter to $412.2
million. Long-term debt remained sequentially unchanged at $524.5
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 15.1% and 15.7%.
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 $196.0 million to $249.0
million (previously $200.0 million to $250.0 million).
Though Broadridge's third quarter earnings missed the Zacks
Consensus Estimate by a wide margin, the top and bottom line were
above the prior-year figures. Despite positive momentum,
Broadridge reiterated its guidance for the fiscal year, which we
believe is due to the unpredictable nature of mutual fund proxy
The company believes that outsourcing will be a key driver of its
growth and we believe that Broadridge is in a 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. The company also states that internal growth appears
to be moving in a positive direction, which is a bright spot in
We remain optimistic on Broadridge's strategic acquisitions, new
product launches, share repurchase program and dividend payout.
But significant competition from companies such as HD Supply and
DST Systems Inc.
) has intensified pricing pressure for the company.
Currently, Broadridge has a Zacks Rank #3 (Hold).