01—Abstract
Summary
Summary of the 10-K filed August 8, 2013. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. (NYSE: BR) reported fiscal year 2013 (ended June 30, 2013) revenues of $2,430.8 milliona, up $127.3 million, or 6%, from $2,303.5 million in fiscal 2012.
Earnings from continuing operations before income taxes rose to $323.2 millionb from $200.9 million, and net earnings were $212.1 million, compared with $123.6 million in fiscal 2012. The prior year absorbed $74.2 million of impairment and other charges (largely tied to the Penson outsourcing contract termination) and $24.6 million of IBM migration costs, so much of the year-over-year improvement reflects the absence of those items. Diluted EPS from continuing operations was $1.69, versus $0.98.
The company's Adjusted net earnings from continuing operations (a non-GAAP measure) were $236.0 millionc, or $1.88 per diluted share. The Investor Communication Solutions segment generated $1,760.2 million of revenue and $302.1 million of pre-tax earnings, while Securities Processing Solutions produced $660.5 million of revenue and $85.2 million of pre-tax earnings. Cash flow from operating activities of continuing operations was $270.9 million.
The company repurchased 9.7 million shares in fiscal 2013 for $238.5 milliond and paid $85.8 million in dividends. Long-term debt was $524.5 million at year end, including a $400.0 million term loan, and stockholders' equity was $816.0 million. On August 7, 2013, the Board raised the quarterly dividend to $0.21 per share from $0.18.
Concentration remains a key risk: about 25% of consolidated revenues came from five clients, and the largest single client accounted for about 6%. The filing also highlights dependence on IBM for data center services under an agreement running through June 30, 2022, and on securities market activity levels.
02—Key points
Key Highlights
- Revenues rose 6% to $2,430.8 million in fiscal 2013, with recurring fee revenues up $56.9 million, distribution revenues up $50.3 million and event-driven fee revenues up $23.6 million.
- Earnings from continuing operations before income taxes increased 61% to $323.2 million; net earnings from continuing operations were $212.1 million, up 70%.
- Diluted EPS from continuing operations was $1.69 versus $0.98 in fiscal 2012; Adjusted diluted EPS (non-GAAP) was $1.88 versus $1.67.
- Investor Communication Solutions segment revenues were $1,760.2 million (up 8%) and pre-tax earnings were $302.1 million; Securities Processing Solutions revenues were $660.5 million (up 1%).
- Fiscal 2013 had no impairment charges, compared with $74.2 million in fiscal 2012, and the IBM data center migration was completed in August 2012.
- Broadridge repurchased 9.7 million shares for $238.5 million and paid $85.8 million in dividends; the Board increased the quarterly dividend to $0.21 per share on August 7, 2013.
- About 25% of consolidated revenues came from the five largest clients, and the largest client accounted for approximately 6% of consolidated revenues.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Broadridge Financial Solutions kept $0.09.
- Revenue$2.43B100.0%
- Cost of revenue−$1.77B72.7%
- Gross profit$663.0M27.3%
- Operating costs−$339.8M14.0%
- Operating income$323.2M13.3%
- Interest, other & tax−$111.1M4.6%
- Net income$212.1M8.7%
Where FY2013 revenue went
$2.43B- Cost of revenue: $1.77B, 73% of revenue
- SG&A: $323.6M, 13% of revenue
- Net income: $212.1M, 8.7% of revenue
- Other operating costs: $16.2M, 0.7% of revenue
- Interest, other & tax: $111.1M, 4.6% of revenue
Kept 8.7% as net incomeOther operating costs $16.2M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed August 8, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $2.43B$2.30B | +5.5% |
| Cost of Revenue | $1.77B$1.72B | +3.1% |
| Gross Profit | $663.00M$588.40M | +12.7% |
| SG&A Expenses | $323.60M$299.90M | +7.9% |
| Operating Expenses | $2.11B$2.10B | +0.2% |
| Operating Income | $323.20M$200.90M | +60.9% |
| Net Income | $212.10M$123.60M | +71.6% |
| EPS (Basic) | $1.74$1.00 | +74.0% |
| EPS (Diluted) | $1.69$0.97 | +74.2% |
| Shares Outstanding (Basic) | 121.90M124.10M | −1.8% |
| Shares Outstanding (Diluted) | 125.40M127.50M | −1.6% |
05—Questions
Frequently Asked Questions
What drove the increase in Broadridge's earnings in fiscal 2013?
Revenues grew $127.3 million, or 6%, to $2,430.8 million, led by higher recurring fee, distribution and event-driven fee revenues. Earnings from continuing operations before income taxes rose $122.3 million, or 61%, to $323.2 million. The filing attributes the increase mainly to higher revenues, improved margins from business mix, the absence of the $74.2 million of fiscal 2012 impairment and other charges and the IBM migration costs in that prior year, and cost containment.
How concentrated is Broadridge's client base?
In fiscal 2013, approximately 25% of consolidated revenues came from the five largest clients, and approximately 60% of Securities Processing Solutions revenues came from its 15 largest clients. The largest single client accounted for approximately 6% of consolidated revenues. The filing notes that loss of, or pricing pressure from, these clients would have a material adverse effect.
What are the main risks to Broadridge's business according to the filing?
Key risks include consolidation in the financial services industry reducing the client base, regulatory changes affecting clients and proxy processes (including the SEC's Concept Release on the U.S. proxy system), declines in securities market participation and activity, security breaches, and dependence on IBM for data center services under the IT Services Agreement expiring June 30, 2022. Operational failures and competition are also cited.
How is Broadridge funding its operations and shareholder returns?
Net cash flows provided by operating activities of continuing operations were $270.9 million in fiscal 2013. The company used $52.0 million in investing activities and $273.2 million in financing activities, including $238.5 million of treasury stock purchases and $85.8 million of dividends. Long-term debt was $524.5 million, of which $400.0 million was a floating-rate term loan, and the company stated it does not rely on short-term borrowings to meet liquidity needs.
What changed with Broadridge's dividend and share repurchase plans?
On August 7, 2013, the Board increased the quarterly cash dividend by $0.03 per share to $0.21, raising the annual dividend from $0.72 to $0.84 per share. Under the stock repurchase plans, 6,622,820 shares remained available at June 30, 2013, including 6,000,000 shares under a plan authorized on April 30, 2013.
06—Continue