01—Abstract
Summary
Summary of the 10-K filed August 12, 2010. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. reported fiscal year 2010 (ended June 30, 2010) revenues of $2,209.2 milliona, up $136.2 million or 7% from $2,073.0 million in fiscal 2009, driven mainly by $77.0 million in event-driven mutual fund proxy revenues.
Earnings from continuing operations before income taxes were $342.1 millionb, down $3.9 million or 1%, and net earnings from continuing operations rose to $225.1 million, up $2.0 million or 1%. Diluted EPS from continuing operations was $1.62, up from $1.58. Total net earnings fell to $190.0 million, reflected a $35.1 million loss from discontinued operations tied to the securities clearing business, which was sold to Penson Financial Services in June 2010 for an aggregate purchase price of $35.2 million and is being wound down, with the exit expected in fiscal 2011.
Securities Processing Solutions revenue declined 4% to $535.9 millionc with segment pre-tax earnings down 26% to $99.3 million, while Investor Communication Solutions revenue rose 9% to $1,669.6 million and segment pre-tax earnings rose 10% to $272.8 million. Cash flow from continuing operations was $360.1 million, and cash and cash equivalents rose to $412.6 million. The company repurchased $268.9 million of common stock in fiscal 2010 and paid $66.6 million in dividends.
Stockholders' equity declined to $807.1 milliond from $909.0 million, and long-term debt was $324.1 million at June 30, 2010. The company also entered into an Information Technology Services Agreement with IBM in March 2010 to move data center processing from ADP by June 2012, with commitments of $561.5 million through fiscal year 2022. Management disclosed a patent suit filed by Inveshare, Inc. in which the defendant counterclaimed for injunctive relief and unspecified damages, and noted the SEC's July 2010 Concept Release on the U.S. proxy system as a regulatory uncertainty.
02—Key points
Key Highlights
- Revenues rose 7% to $2,209.2 million, driven by $77.0 million in event-driven mutual fund proxy fee revenues and $23.8 million higher distribution revenues.
- Earnings from continuing operations before income taxes fell 1% to $342.1 million; the margin declined from 16.7% to 15.5%.
- Diluted EPS from continuing operations increased to $1.62 from $1.58; net earnings declined to $190.0 million due to a $35.1 million loss from discontinued operations.
- Securities clearing business sold to Penson Financial Services for $35.2 million (a $20.6 million subordinated note plus 2,455,627 PWI shares), with the wind-down expected to complete in fiscal 2011.
- Securities Processing Solutions revenue fell 4% to $535.9 million and segment pre-tax earnings fell 26% to $99.3 million, while Investor Communication Solutions revenue rose 9% to $1,669.6 million.
- Repurchased $268.9 million of common stock and paid $66.6 million in dividends; cash and cash equivalents rose to $412.6 million from $173.4 million.
- Entered a March 2010 IT Services Agreement with IBM, with migration from ADP expected by June 2012 and commitments of $561.5 million through fiscal 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Broadridge Financial Solutions kept $0.09.
- Revenue$2.21B100.0%
- Cost of revenue−$1.62B73.2%
- Gross profit$592.8M26.8%
- Operating costs−$250.7M11.3%
- Operating income$342.1M15.5%
- Interest, other & tax−$152.1M6.9%
- Net income$190.0M8.6%
Where FY2010 revenue went
$2.21B- Cost of revenue: $1.62B, 73% of revenue
- Net income: $190.0M, 8.6% of revenue
- SG&A: $241.6M, 11% of revenue
- Interest, other & tax: $152.1M, 6.9% of revenue
Kept 8.6% as net incomeNet income $190.0M · 8.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed August 12, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $2.21B$2.07B | +6.6% |
| Cost of Revenue | $1.62B$1.51B | +7.0% |
| Gross Profit | $592.80M$562.90M | +5.3% |
| SG&A Expenses | $241.60M$212.90M | +13.5% |
| Operating Expenses | $1.87B$1.73B | +8.1% |
| Operating Income | $342.10M$346.00M | −1.1% |
| Net Income | $190.00M$223.30M | −14.9% |
| EPS (Basic) | $1.40$1.60 | −12.5% |
| EPS (Diluted) | $1.37$1.58 | −13.3% |
| Shares Outstanding (Basic) | 135.90M140.00M | −2.9% |
| Shares Outstanding (Diluted) | 139.10M141.60M | −1.8% |
05—Questions
Frequently Asked Questions
How did Broadridge perform financially in fiscal year 2010?
Revenues increased 7% to $2,209.2 million from $2,073.0 million. Earnings from continuing operations before income taxes decreased 1% to $342.1 million, and net earnings from continuing operations increased 1% to $225.1 million. Diluted EPS from continuing operations was $1.62 versus $1.58 in fiscal 2009.
Why did net earnings decline when continuing operations improved?
Net earnings were $190.0 million, down from $223.3 million, because of a $35.1 million loss from discontinued operations. This loss relates to the securities clearing business, which was sold in June 2010 and is being wound down.
What is the outlook for the securities clearing business?
Broadridge completed the sale of substantially all securities clearing client contracts to Penson Financial Services on June 25, 2010, for $35.2 million. The company expects to completely exit the clearing business in fiscal year 2011, while continuing to provide operations outsourcing services within Securities Processing Solutions.
What are the main risks disclosed to investors?
Risks include client concentration (about 25% of consolidated revenues from five clients and about 6% from the largest single client), industry consolidation, regulatory change including the SEC's July 2010 Concept Release on the proxy system, reliance on ADP and IBM for data center services during the migration, and seasonality with the greatest activity in the fourth fiscal quarter. The company also disclosed a patent lawsuit filed by Inveshare, Inc., in which the defendant seeks injunctive relief and unspecified damages.
What capital allocation actions did the company take?
Broadridge repurchased $268.9 million of common stock during fiscal 2010 and paid $66.6 million in dividends. Its Board declared $0.14 quarterly dividends during fiscal 2010 and, on August 3, 2010, increased the quarterly dividend to $0.15 per share. A 10 million share repurchase plan authorized in June 2010 had 6,311,522 shares remaining at June 30, 2010.
06—Continue