Broadridge Reports Fourth Quarter FY 2016 Results

The company expects a total revenue growth in the range of 43% to 45% in the fiscal year 2017.

Broadridge Financial Solutions, Inc. (NYSE:BR), a global provider of technology-based outsourcing solutions to the financial services industry, today reported financial results for the fourth quarter and fiscal year ending June 30, 2016.

Broadridge’s fourth-quarter revenues of $975 million increased 5% from the year-ago quarter. Year over year, revenues uptick was driven by recurring fee revenues (up 7% year over year), which also include contribution from net new business, internal growth and acquisitions related synergies.

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Moreover, revenues from the Investor Communication Solutions segment (82% of total revenue) increased 5% from the year-ago quarter to $804 million, compared to $766 million in Q4 2015. The improvement was attributable to higher recurring revenues from new business and higher event-driven fee and acquisitions in fiscal 2016.

The Global Technology and Operations segment (19% of total revenue) reported revenues of $190 million, up $12 million, or 7% from the year-ago quarter. The increase was driven by internal growth from increased usage of products and services as well as higher trading activity.

The company reported a pre-tax loss in Q4 2016 at $35 million, an increase of $15 million, or 74% from $20 million in Q2 2015. The increased loss was mainly due to higher compensation expenses of $13 million. However, it was partially offset by a benefit from a reduction in the fair value of obligation under contingent acquisition consideration arrangements of $4 million.

On August 8, 2016, Broadridge’s Board of Directors declared a quarterly dividend of $0.33 per share payable on October 1, 2016 to stockholders of record on September 15, 2016.

Fiscal year 2016 Highlights

  • Net earnings increased 7% to $307 million, compared to $287 million in the 2015.
  • Adjusted net earnings increased 8% to $332 million, compared to $307 million in the prior year.
  • Diluted earnings per share increased to $2.53, compared to $2.32 in the prior year.
  • Adjusted diluted earnings per share increased 11% to $2.73, compared to $2.47 in 2015.

Net earnings and Adjusted Net earnings increased due to higher revenues and a slightly favorable effective tax rate in fiscal year 2016, partially offset by higher operating and non-operating expenses.

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Revenues from Investor Communication Solutions segment in fiscal year 2016 increased $190 million, or 9%, to $2,220 million, compared to $2,030 million in the prior year.

The increase was attributable to higher recurring fee revenues which increased $109 million, or 10%, higher event-driven fee revenues which contributed $27 million, and higher distribution revenues which contributed $54 million.

Revenues of Global Technology and Operations segment in fiscal year 2016 rose $46 million, or 7%, to $738 million, compared to $693 million in the prior year.

Pre-tax loss increased by $6 million, or 7%, in fiscal year 2016 to $79 million from $74 million in FY 2015. The increased loss was mainly due to higher compensation expenses.

Finance Magnates reported about Broadridge earlier in July 2016, when the firm completed the acquisition of the North American Customer Communications business of DST Systems, Inc.. The aggregate purchase price was $410 million in cash, subject to customary working capital and other closing adjustments.

Fiscal 2017 Guidance

Broadridge provided its 2017 outlook. The Company anticipates the following metrics:

  • Recurring fee revenue growth in the range of 29% to 31%
  • Total revenue growth in the range of 43% to 45%
  • Adjusted Operating income margin of 15%
  • Diluted earnings per share growth in the range of 9% to 14%
  • Adjusted diluted earnings per share growth in the range of 12% to 17%
  • Free cash flows in the range of $350 million to $400 million
  • Closed sales in the range of $140 million to $180 million

Commenting on the results, Richard J. Daly, President and Chief Executive Officer, said: “Broadridge reported record results for fiscal year 2016. Revenues rose 8% to $2.9 billion, led by 9% growth in recurring fee revenues, and Adjusted EPS increased 11% to $2.73. I am especially pleased by the strong demand we saw for our products and services, as evidenced by $151 million of closed sales, an all-time high for Broadridge. We also continued to deploy capital to strengthen and grow our business, including the acquisition of DST’s North American Customer Communications business in July, which we expect will deliver significant strategic and financial benefits over a multi-year period.”

“Looking forward to fiscal year 2017, Broadridge is very well positioned to achieve the three year financial objectives we set out at the beginning of fiscal year 2015. Our guidance for 2017 includes recurring fee revenue growth in the range of 29% to 31%, Adjusted EPS growth of 12% to 17%, and closed sales in the range of $140 million to $180 million,” Mr. Daly concluded.

 

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