Broadridge Financial Solutions, Inc. (BR)

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Broadridge Financial Solutions, Inc. (BR)

F3Q09 Earnings Call

May 11, 2009 8:30 am ET


Marvin Sims - Vice President Investor Relations

Richard Daly - Chief Executive Officer

Dan Sheldon - Chief Financial Officer


Anurag Rana – KeyBanc Capital

Ian Zaffino – Oppenheimer

Tien-Tsin Huang - J.P. Morgan

Stefan Mykytiuk - Pike Place Capital



(Operator Instructions) Welcome everyone to the Broadridge Financial Solutions, Inc. Third Quarter Fiscal 2009 Earnings Conference Call. I will now turn the conference over to Marvin Sims, Vice President of Investor Relations.

Marvin Sims

I’d like to welcome everyone to the Broadridge quarterly earnings call and webcast for the third quarter of the fiscal year 2009. I'm Marvin Sims, Vice President of Investor Relations. As usual this morning I am here with Richard Daly, Chief Executive Officer for Broadridge and Dan Sheldon, Chief Financial Officer for Broadridge.

I'm sure by now everyone has had the opportunity to review the earnings release we issued this morning. The news release and slide presentation that accompany today's earnings call and webcast can be found on the Investor Relations homepage of our website at At the end of today’s call, as some of you have requested we’ll also post our quarterly revenue metrics on our IR website as well.

Before we begin, I would like to remind everyone that during today's conference call we will discuss some forward looking statements regarding Broadridge that involve risks. These risks are discussed here on slide one and we encourage participants to refer to our SEC filings including those on Forms 8-K, 10-Q, and 10-K for the complete discussion of forward looking statements and risks.

Now let's turn to the next slide and review today's agenda. Rich Daly will start today's call with his opening remarks and will provide you with a summary of the financial results for the quarter, followed by a discussion of a few key topics. Dan Sheldon will then review the third quarter financial results in further detail including a review of cash flows for the quarter end. Rich will then return and summarize the fiscal year 2009 guidance and provide his overall summary and some closing thoughts before we head into the Q&A part of the call.

Now please turn to the next slide and I'll turn the call over to Rich Daly.

Rich Daly

This morning as part of my opening remarks I’ll talk about the following topics. First, a summary of our third quarter financial results and the reaffirmation of our 2009 fiscal year non-GAAP EPS guidance and the increase in our GAAP EPS guidance. Next, an update on the current market dynamics including the latest update on industry consolidation and how to put these dynamics into context for Broadridge. Finally, a review of our closed sales performance and our sales pipeline.

Let’s start of slide number four. Give the current economic environment in the financial services market we’re satisfied with our results for the third quarter. Our third quarter performance for our GAAP EPS and non-GAAP EPS were better than expected. Our GAAP net earnings for the quarter are up 39% and our non-GAAP earnings are up 15%.

Our positive earnings performance was driven primarily by the growth in the higher margin recurring fee revenue, the benefit from the state tax credit granted this quarter, lower interest expenses and the positive benefit this year from the grow overs related to the one time transition expenses from last year.

For the quarter we had fee revenue growth of 2%, with fee revenue growth in all three of our operating segments. However, when you factor in lower distribution revenues and the negative impact from our foreign currency exchange our revenues for the quarter were down 4%. As we look forward to the remainder of the year we are increasing our full year GAAP EPS guidance range to $1.52 to $1.62 from our previous guidance of $1.49 to $1.59 as a result of the $0.03 EPS benefit related to the one time shore from the state tax credit from our previous fiscal year.

We are reaffirming our full year non-GAAP EPS guidance of $1.45 to $1.55 as the negative impact from lower event-driven mutual fund proxy activity and the impact from lower margin balances and unfavorable trade volume mix primarily in our Clearing and Outsourcing solutions segment are being offset by the recurring benefit from our state tax credit. The state tax credit will lower our effective tax rate by approximately one percentage point and will continue for the next eight years.

We’re reaffirming our revenue guidance of flat to -3% which reflects the negative impact from foreign currency exchange, lower event-driven mutual fund activity and lower distribution revenues resulting from Notice and Access. We’re also anticipating higher free cash flow with a new range of $230 to $270 million which is $20 million higher on both the low and high end of our previous guidance. We anticipate lower needs of cash for working capital and capital expenditures.

Now let’s move on to slide number five for an update of the general market conditions. For the most part the headwinds and uncertainty we’ve discussed in our previous quarters remain in the market. However, we have not seen an increased intensity of these headwinds. All of the headwinds we discussed in our last earnings call back in February are for the most part playing out as anticipated.

As expected, we’ve also seen event-driven mutual fund proxy activity decline as well as a reduction in the revenue contribution coming our trades per day growth. In addition, we’ve seen a larger than anticipated decline in our margin lending balances. It continues to be difficult to predict any short term increase in margin lending balances or trading activity.

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