01—Abstract
Summary
Summary of the 10-K filed August 9, 2012. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. (BR) reported fiscal 2012 (year ended June 30, 2012) revenues of $2,303.5 milliona, up $136.6 million, or 6%, from $2,166.9 million in fiscal 2011.
Earnings from continuing operations before income taxes fell to $200.9 millionb from $269.7 million, driven mainly by $74.2 million of Penson-related impairment and other charges, $24.6 million of IBM migration costs and $6.7 million of restructuring charges. Net earnings from continuing operations were $125.0 million, or $0.98 diluted EPS, compared with $171.8 million and $1.34 a year earlier. Adjusted net earnings from continuing operations, a non-GAAP measure the company defines, were $198.0 million, or $1.55 diluted EPS.
The company operates two segments: Investor Communication Solutions, which generated $1,634.0 millionc of revenue, and Securities Processing Solutions, which generated $655.5 million. Investor Communication Solutions is the larger segment and includes proxy distribution and vote processing. The filing states that about 23% of consolidated revenues came from five clients, and that the largest single client accounted for about 5%.
Mutual fund proxy fee revenues declined 28% in fiscal 2012 after falling 74% in fiscal 2011, which the company attributes to event-driven volatility. Balance sheet and cash flow data show total assets of $1,987.6 milliond, long-term debt of $524.4 million, and cash flow from operations of $290.6 million.
The company paid dividends of $0.64 per share in fiscal 2012 and, on August 8, 2012, raised its quarterly dividend to $0.18. Its Board also authorized a repurchase of up to 4 million additional shares, leaving about 10 million shares available for repurchase.
02—Key points
Key Highlights
- Revenues rose 6% to $2,303.5 million, an increase of $136.6 million, led by higher recurring fee revenues of $139.6 million.
- Pre-tax earnings from continuing operations fell 26% to $200.9 million, reflecting $74.2 million of Penson-related impairment and other charges, $24.6 million of IBM migration costs and $6.7 million of restructuring charges.
- Diluted EPS from continuing operations was $0.98, down from $1.34; non-GAAP adjusted diluted EPS was $1.55, compared with $1.37 in fiscal 2011.
- Investor Communication Solutions revenue was $1,634.0 million, up 5%, and segment pre-tax earnings rose 14% to $242.8 million.
- Securities Processing Solutions revenue grew 10% to $655.5 million, helped by the Paladyne acquisition and the Outsourcing Services Agreement.
- Concentration risk: about 23% of consolidated revenues came from five clients, and the largest single client accounted for about 5%.
- On August 8, 2012 the quarterly dividend was raised to $0.18 per share, and a new 4 million-share repurchase authorization was approved.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Broadridge Financial Solutions kept $0.05.
- Revenue$2.30B100.0%
- Cost of revenue−$1.72B74.5%
- Gross profit$588.4M25.5%
- Operating costs−$387.5M16.8%
- Operating income$200.9M8.7%
- Interest, other & tax−$77.3M3.4%
- Net income$123.6M5.4%
Where FY2012 revenue went
$2.30B- Cost of revenue: $1.72B, 74% of revenue
- SG&A: $299.9M, 13% of revenue
- Net income: $123.6M, 5.4% of revenue
- Other operating costs: $87.6M, 3.8% of revenue
- Interest, other & tax: $77.3M, 3.4% of revenue
Kept 5.4% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed August 9, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $2.30B$2.17B | +6.3% |
| Cost of Revenue | $1.72B$1.62B | +6.1% |
| Gross Profit | $588.40M$549.80M | +7.0% |
| SG&A Expenses | $299.90M$270.00M | +11.1% |
| Operating Expenses | $2.10B$1.90B | +10.8% |
| Operating Income | $200.90M$269.70M | −25.5% |
| Net Income | $123.60M$169.60M | −27.1% |
| EPS (Basic) | $1.00$1.36 | −26.5% |
| EPS (Diluted) | $0.97$1.32 | −26.5% |
| Shares Outstanding (Basic) | 124.10M124.80M | −0.6% |
| Shares Outstanding (Diluted) | 127.50M128.30M | −0.6% |
05—Questions
Frequently Asked Questions
Why did Broadridge's earnings decline in fiscal 2012 despite higher revenue?
Revenue rose $136.6 million, but total expenses rose $205.4 million. The filing attributes the increase mainly to the IBM migration costs, the Penson charges, net of $74.2 million, and restructuring charges. Those items reduced diluted EPS by $0.12, $0.42 and $0.03, respectively.
What were the Penson charges?
The filing describes Penson charges as a set of items tied to the termination of the U.S. schedule of the Outsourcing Services Agreement on June 5, 2012. These include a $47.2 million impairment of deferred client conversion and start-up costs, a $12.5 million other-than-temporary impairment on PWI common stock, a $21.4 million charge on the PWI note receivable, and $8.2 million of shutdown costs. These were partly offset by a $15.1 million benefit from the extinguished fee obligation.
How concentrated is Broadridge's client base?
In fiscal 2012, about 23% of consolidated revenues came from the five largest clients, and about 63% of Securities Processing Solutions revenues came from its 15 largest clients. The largest single client accounted for about 5% of consolidated revenues.
How is the company's debt structured?
As of June 30, 2012, total debt was $524.4 million, consisting of a $400.0 million term loan under the Fiscal 2012 Credit Facilities at a weighted-average rate of 1.54%, and $124.4 million of 6.125% Senior Notes due June 1, 2017. The $500.0 million revolving credit facility was undrawn.
What did the company say about future cost savings and its IBM data center migration?
The company expects about $25.0 million in average annual cost savings, net of deferred cost amortization, beginning in fiscal 2013. It estimates total migration costs of about $85.0 million, of which $30.9 million was expensed and $52.7 million capitalized through June 30, 2012. The migration of data center processing from ADP to IBM was substantially completed in June 2012, with completion expected in August 2012.
06—Continue