01—Abstract
Summary
Summary of the 10-K filed August 12, 2011. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. reported fiscal year 2011 (ended June 30, 2011) revenues of $2,166.9 milliona, down $42.3 million or 2% from $2,209.2 million in fiscal 2010, while net earnings from continuing operations fell $53.3 million, or 24%, to $171.8 million.
The decline was driven mainly by lower event-driven mutual fund proxy activity, with event-driven fee revenues down $121.4 millionb, partly offset by $143.2 million of recurring fee revenue growth from acquisitions and the Penson Outsourcing Agreement. Diluted EPS from continuing operations was $1.34, versus $1.62 a year earlier. Earnings from continuing operations before income taxes declined 21% to $269.7 million, and the margin fell from 15.5% to 12.4%.
The company made three Investor Communication Solutions acquisitions during the year: NewRiver ($77.6 millionc), Forefield ($18.3 million) and Matrix Financial Solutions ($197.6 million), which together with the Penson Outsourcing Agreement contributed $122.5 million of revenue. Operating cash flow fell to $190.9 million from $360.1 million, and cash and cash equivalents ended at $241.5 million. Working capital was negative $31.3 million, largely because $400.0 million of borrowings were reclassified to short-term, and the company plans to refinance its revolving credit and term loan facilities, which expire March 29, 2012, at higher expected interest rates.
The company also raised its quarterly dividend to $0.16d per share on August 10, 2011, and repurchased 8.7 million shares during the year. It continues to migrate its data center processing from ADP to IBM, with completion expected by June 2012, and estimates total migration costs of approximately $95.0 million. Risks highlighted include reliance on a small number of clients (five clients provided about 24% of consolidated revenues), regulatory scrutiny of the proxy system, and an ongoing patent lawsuit filed by Inveshare, Inc.
02—Key points
Key Highlights
- Revenues fell 2% to $2,166.9 million, driven by a 74% decline in mutual fund proxy fee revenues versus the record fiscal 2010 level
- Net earnings from continuing operations decreased 24% to $171.8 million; diluted EPS from continuing operations was $1.34 versus $1.62
- Three acquisitions in Investor Communication Solutions, led by Matrix Financial Solutions at $197.6 million, plus the City Networks deal in fiscal 2010
- Operating cash flow dropped to $190.9 million from $360.1 million, reflecting higher receivables and lower earnings
- Short-term borrowings of $400.0 million at June 30, 2011 produced negative working capital of $31.3 million; facilities expire March 29, 2012
- Quarterly dividend increased to $0.16 per share on August 10, 2011; 7,567,139 shares remained under the repurchase authorization
- Five clients accounted for about 24% of consolidated revenues; the largest single client about 5%
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Broadridge Financial Solutions kept $0.08.
- Revenue$2.17B100.0%
- Cost of revenue−$1.62B74.6%
- Gross profit$549.8M25.4%
- Operating costs−$280.1M12.9%
- Operating income$269.7M12.4%
- Interest, other & tax−$100.1M4.6%
- Net income$169.6M7.8%
Where FY2011 revenue went
$2.17B- Cost of revenue: $1.62B, 75% of revenue
- SG&A: $270.0M, 12% of revenue
- Net income: $169.6M, 7.8% of revenue
- Interest, other & tax: $100.1M, 4.6% of revenue
Kept 7.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed August 12, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $2.17B$2.21B | −1.9% |
| Cost of Revenue | $1.62B$1.62B | 0.0% |
| Gross Profit | $549.80M$592.80M | −7.3% |
| SG&A Expenses | $270.00M$241.60M | +11.8% |
| Operating Expenses | $1.90B$1.87B | +1.6% |
| Operating Income | $269.70M$342.10M | −21.2% |
| Net Income | $169.60M$190.00M | −10.7% |
| EPS (Basic) | $1.36$1.40 | −2.9% |
| EPS (Diluted) | $1.32$1.37 | −3.6% |
| Shares Outstanding (Basic) | 124.80M135.90M | −8.2% |
| Shares Outstanding (Diluted) | 128.30M139.10M | −7.8% |
05—Questions
Frequently Asked Questions
Why did Broadridge's earnings decline in fiscal 2011?
Revenues fell $42.3 million, driven mainly by a $121.4 million drop in event-driven fee revenues as mutual fund proxy activity declined from a record level in fiscal 2010. Total expenses rose $30.1 million, largely from acquisitions and the Penson Outsourcing Agreement, and the effective tax rate increased to 36.3% from 34.2%, pushing net earnings from continuing operations down 24%.
What acquisitions did Broadridge complete in fiscal 2011?
Broadridge acquired NewRiver, Inc. for $77.6 million in August 2010, Forefield, Inc. for $18.3 million in December 2010, and Matrix Financial Solutions, Inc. for $197.6 million in January 2011, all net of cash acquired. The filing states these acquisitions were not material to the company's operations, financial position, or cash flows, except that Matrix resulted in $154.7 million of goodwill.
Is Broadridge exposed to refinancing risk?
Yes. At June 30, 2011, $400.0 million of debt was classified as short-term, consisting of a $200.0 million term loan and $200.0 million of revolving credit borrowings. Both facilities expire March 29, 2012, and the company expects the refinanced facilities to carry higher interest rates than the current ones.
How concentrated is Broadridge's client base?
In fiscal 2011, approximately 24% of consolidated revenues came from five clients, and the largest single client accounted for approximately 5% of consolidated revenues. Approximately 70% of Securities Processing Solutions segment revenues came from its 15 largest clients.
What is Broadridge's dividend and share repurchase activity?
Dividends declared were $0.60 per share for fiscal 2011, and on August 10, 2011 the board raised the quarterly dividend to $0.16 from $0.15 per share. During the year the company repurchased 8.7 million shares under its stock repurchase plans, and 7,567,139 shares remained available for repurchase at June 30, 2011.
06—Continue