01—Abstract
Summary
Summary of the 10-K filed August 10, 2017. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. (BR) reported fiscal 2017 (year ended June 30, 2017) revenues of $4,142.6 milliona, up from $2,897.0 million in fiscal 2016, an increase of $1,245.5 million, or 43%.
The filing attributes most of the growth to acquisitions, particularly the North American Customer Communications (NACC) business of DST Systems, Inc., which contributed $1,067.1 millionb of revenue. Operating income rose to $531.6 million from $500.3 million, but operating margin declined to 12.8% from 17.3%, primarily due to the NACC acquisition. Net earnings increased to $326.8 million, and diluted earnings per share were $2.70 versus $2.53 a year earlier.
Free cash flow (a non-GAAP measure) was $402.2 millionc, compared with $362.2 million in fiscal 2016. The balance sheet expanded in connection with acquisitions. Total assets were $3,149.8 million and total debt was $1,110.0 million at June 30, 2017, with a $1.0 billion revolving credit facility of which $210.0 million was drawn.
Goodwill rose to $1,159.3 milliond, and the company repurchased 4.6 million shares during the year. Stockholders' equity declined to $1,003.8 million. Management also disclosed that its Board increased the quarterly dividend to $0.365 per share on August 9, 2017, and authorized up to 6.3 million additional shares for repurchase.
The filing identifies client concentration as a key risk: about 20% of consolidated revenues came from the five largest clients, and the largest single client accounted for approximately 6%. Seasonality is also pronounced, with the fourth fiscal quarter typically generating the highest revenues and earnings. Management excluded NACC from its internal control assessment for fiscal 2017, noting the business will be in scope for the fiscal 2018 assessment.
02—Key points
Key Highlights
- Revenues rose 43% to $4,142.6 million, driven largely by $1,067.1 million of NACC revenue from the July 2016 acquisition.
- Operating income increased 6% to $531.6 million, but operating margin fell to 12.8% from 17.3%, primarily due to the NACC acquisition.
- Net earnings grew 6% to $326.8 million; diluted EPS was $2.70 versus $2.53 in fiscal 2016.
- Free cash flow (non-GAAP) was $402.2 million, up from $362.2 million, with operating cash flow of $515.9 million.
- Total debt was $1,110.0 million at June 30, 2017, following a $500.0 million senior notes issuance in fiscal 2017 and repayment of $125.0 million in 2007 Senior Notes.
- Client concentration is significant: five largest clients represented about 20% of consolidated revenues, and the largest single client about 6%.
- Board increased the quarterly dividend to $0.365 per share on August 9, 2017, and about 10.0 million shares are now available for repurchase.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Broadridge Financial Solutions kept $0.08.
- Revenue$4.14B100.0%
- Cost of revenue−$3.11B75.1%
- Gross profit$1.03B24.9%
- Operating costs−$501.4M12.1%
- Operating income$531.6M12.8%
- Interest, other & tax−$204.8M4.9%
- Net income$326.8M7.9%
Where FY2017 revenue went
$4.14B- Cost of revenue: $3.11B, 75% of revenue
- SG&A: $500.7M, 12% of revenue
- Net income: $326.8M, 7.9% of revenue
- Interest, other & tax: $204.8M, 4.9% of revenue
Kept 7.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed August 10, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $4.14B$2.90B | +43.0% |
| Cost of Revenue | $3.11B$1.98B | +57.4% |
| Gross Profit | $1.03B$921.20M | +12.1% |
| SG&A Expenses | $500.70M$420.90M | +19.0% |
| Operating Expenses | $3.61B$2.40B | +50.6% |
| Operating Income | $531.60M$500.30M | +6.3% |
| Interest Expense | $44.70M$28.40M | +57.4% |
| Net Income | $326.80M$307.50M | +6.3% |
| EPS (Basic) | $2.77$2.60 | +6.5% |
| EPS (Diluted) | $2.70$2.53 | +6.7% |
| Shares Outstanding (Basic) | 118.00M118.30M | −0.3% |
| Shares Outstanding (Diluted) | 120.80M121.60M | −0.7% |
05—Questions
Frequently Asked Questions
What drove the large increase in Broadridge's revenue in fiscal 2017?
Revenues increased $1,245.5 million, or 43%, to $4,142.6 million. Acquisitions contributed $1,092.1 million of the increase, with NACC alone contributing $1,067.1 million. Recurring fee revenues rose $555.9 million and distribution revenues rose $690.2 million, or 80%, which includes $642.9 million of NACC distribution revenues.
Why did operating margin decline even though operating income increased?
Operating income rose $31.3 million, or 6%, to $531.6 million, but the margin decreased to 12.8% from 17.3%. The filing states this was primarily due to the acquisition of NACC.
How is the company's balance sheet and liquidity position?
At June 30, 2017, cash and cash equivalents were $271.1 million, total assets were $3,149.8 million, and total stockholders' equity was $1,003.8 million. Long-term debt was $1,102.1 million, and $790.0 million of the $1.0 billion revolving credit facility was unused. The company stated it expects cash from operations and existing resources to be sufficient for working capital, capital expenditures, acquisitions, dividends and share repurchases.
How concentrated is Broadridge's client base?
In fiscal 2017, approximately 20% of consolidated revenues came from the five largest clients, and the largest single client accounted for approximately 6% of consolidated revenues. Approximately 58% of Global Technology and Operations segment revenues came from its 15 largest clients.
What dividend and share repurchase actions did the company announce?
On August 9, 2017, the Board increased the quarterly cash dividend by $0.035 per share to $0.365, raising the expected annual dividend from $1.32 to $1.46 per share. On August 2, 2017, the Board authorized repurchase of up to an additional 6.3 million shares, bringing shares available for repurchase to approximately 10.0 million.
06—Continue