Broadridge (BR) Q4 Earnings and Revenues Trail Estimates

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Broadridge Financial Solutions, Inc. 's BR fourth-quarter fiscal 2018 results missed the Zacks Consensus estimate on both counts.

Adjusted earnings of $1.86 per share missed the consensus mark by 2 cents but came ahead of the year-ago figure by 15 cents. The year-over-year improvement can be attributed mainly to lower tax rates (as a result of the Tax Cuts and Jobs Act). Notably, Broadridge enjoyed a lower effective tax rate of 19.8% compared with 34.3% in the year-ago quarter.

Total revenues of $1.32 billion lagged the consensus estimate by $6.6 million and fell short of the year-ago figure by $26 million. Event-driven fee revenues and distribution revenues decreased significantly.

Recurring fee revenues of $862 million increased 7% from the year-ago quarter driven by organic growth and recent acquisitions. There was a positive impact of $2 million on revenues from foreign currency movements.

In the reported quarter, Broadridge completed two acquisitions. In May, the company completed the purchase of FundAssist Limited at an aggregate price of $47 million. In June, the company completed the purchase of MackayWilliams LLP at an aggregate price of $8 million.

So far this year, shares of Broadridge have gained 28.3% compared with the 10.6% rise of the industry it belongs to.

Let's check out the numbers in detail.

Revenues by Segment

Investor Communication Solutions segment (84% of total revenues) revenues decreased 3.8% from the year-ago quarter to $1.11 billion. Under this segment, recurring fee revenues of $628 million increased 7% from the year-ago quarter due to internal growth, net new business from increases in revenue from closed sales and revenues from acquisitions.  Event-driven fee revenues of $61 million decreased 33% year over year due to decrease in mutual fund proxy and equity proxy contests. Distribution revenues decreased 11% to $423 million.

Global Technology and Operations segment (17%) revenues came in at $233.5 million, up 7.8% from the year-ago quarter. Segment revenues were driven by internal growth from higher trade and non-trade activity levels and higher net new business from increase in revenues from closed sales.

Operating Results

Adjusted operating income of $290 million decreased 10.5% year over year. Adjusted operating income margin decreased to 21.9% from 24.1% in the prior-year quarter. Decrease in event-driven fee revenues and rise in other operating expenses, including growth initiatives, resulted in the margin contraction. Total operating expenses increased 0.6% to $1.06 billion.

Broadridge Financial Solutions, Inc. Price, Consensus and EPS Surprise

Broadridge Financial Solutions, Inc. Price, Consensus and EPS Surprise | Broadridge Financial Solutions, Inc. Quote

Balance Sheet and Cash Flow

Broadridge exited fourth-quarter fiscal 2018 with cash and cash equivalents of $263.9 million compared with $352.1 million at the end of prior quarter. Long-term debt was $1.05 billion compared with $1.20 billion at the end of the prior quarter.

The company generated $418.8 million of cash from operating activities in the reported quarter. Adjusted free cash flow was $391.5 million. Capital expenditures were $21.9 million.

Dividend Hike

On Aug 6, 2018, the board of directors of Broadridge declared a quarterly dividend of 48.5 cents per share payable on Oct 3 to shareholders of record on Sep 18. This includes a dividend hike of 33% to $1.94 per share from $1.46.  This marks the eleventh consecutive year of annual dividend increase since the company has become public in 2007.

In the reported quarter, Broadridge paid $42.8 million in dividends. In fiscal year 2018, Broadridge paid $165.8 million in dividends.

Fiscal 2019 Guidance

Broadridge provided guidance for fiscal year 2019. Total revenues are expected to grow in the range of 3-5%. Recurring revenue growth is expected in the range of 5-7%. Adjusted earnings per share are expected to register 9-13% growth.

Adjusted operating income margin is estimated to be register approximately 16.5% growth. Adjusted free cash flow expectations lie in the range of $565-$615 million.

Zacks Rank & Upcoming Releases

Broadridge currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Investors interested in the broader Business Services sector are keenly awaiting second-quarter earnings reports from key players like Dun & Bradstreet Corporation DNB , Delphi Technologies DLPH and Worldpay WP . While Dun & Bradstreet and Delphi Technologies will report their quarterly numbers on Aug 8, Worldpay will release results on Aug 9.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DLPH , BR , WP

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