01—Abstract
Summary
Summary of the 10-K filed August 7, 2018. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. (BR) reported fiscal 2018 (year ended June 30, 2018) revenues of $4,329.9 milliona, up $187.3 million, or 5%, from $4,142.6 million in fiscal 2017.
Operating income rose $63.3 millionb, or 12%, to $594.9 million, and operating margin improved to 13.7% from 12.8%. Net earnings increased $101.2 million, or 31%, to $427.9 million, and diluted earnings per share were $3.56 versus $2.70. The effective tax rate fell to 23.7% from 33.1%, mainly due to $40.9 million of excess tax benefits from stock-based compensation, partially offset by $15.4 million of net charges from the Tax Act.
Company-defined Adjusted Operating income was $685.1 millionc, and Adjusted earnings per share was $4.19 (non-GAAP). The Investor Communication Solutions segment generated $3,495.6 million of revenue (recurring fee revenues $1,698.9 million, event-driven revenues $283.9 million, distribution revenues $1,512.9 million), and Global Technology and Operations generated $911.6 million. Free cash flow (non-GAAP) was $595.7 million, up from $402.2 million, and net cash from operating activities was $693.6 million.
Long-term debt was $1,053.4 milliond at June 30, 2018, and the Company repurchased 1,896,115 shares during the fourth quarter. The Board increased the quarterly dividend to $0.485 per share on August 7, 2018. Concentration remains a key consideration: about 21% of consolidated revenues came from the five largest clients, and the largest single client accounted for about 6%.
The Company completed three fiscal 2018 acquisitions (Summit, ActivePath and FundAssist) and purchased blockchain-related intellectual property from Inveshare for $40.0 million. Management highlighted that the adoption of ASU 2014-09 (revenue recognition) beginning in fiscal 2019 will shift the majority of equity proxy revenue into the third and fourth quarters.
02—Key points
Key Highlights
- Revenues rose 5% to $4,329.9 million, driven by recurring fee revenues up $159.2 million, or 6%, and event-driven fee revenues up $65.0 million, or 30%, partly offset by distribution revenues down $41.0 million, or 3%.
- Net earnings increased 31% to $427.9 million; diluted EPS rose to $3.56 from $2.70, aided by a lower effective tax rate of 23.7% versus 33.1%.
- Operating income grew 12% to $594.9 million, with operating margin expanding to 13.7% from 12.8%.
- Free cash flow (non-GAAP) increased to $595.7 million from $402.2 million, and operating cash flow reached $693.6 million.
- Investor Communication Solutions revenues were $3,495.6 million (about 81% of total), while Global Technology and Operations revenues were $911.6 million (about 21%, per the filing's segment percentage disclosure).
- Client concentration is significant: five largest clients represented about 21% of consolidated revenues and the largest single client about 6%.
- The Board raised the quarterly dividend by $0.12 to $0.485 per share, implying an expected annual dividend of $1.94 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Broadridge Financial Solutions kept $0.10.
- Revenue$4.33B100.0%
- Cost of revenue−$3.17B73.2%
- Gross profit$1.16B26.8%
- Operating costs−$564.4M13.0%
- Operating income$598.1M13.8%
- Interest, other & tax−$170.2M3.9%
- Net income$427.9M9.9%
Where FY2018 revenue went
$4.33B- Cost of revenue: $3.17B, 73% of revenue
- SG&A: $564.5M, 13% of revenue
- Net income: $427.9M, 9.9% of revenue
- Interest, other & tax: $170.2M, 3.9% of revenue
Kept 9.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed August 7, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.33B$4.14B | +4.5% |
| Cost of Revenue | $3.17B$3.11B | +1.9% |
| Gross Profit | $1.16B$1.03B | +12.5% |
| SG&A Expenses | $564.50M$500.70M | +12.7% |
| Operating Expenses | $3.73B$3.61B | +3.4% |
| Operating Income | $598.10M$531.60M | +12.5% |
| Interest Expense | $42.40M$44.70M | −5.1% |
| Net Income | $427.90M$326.80M | +30.9% |
| EPS (Basic) | $3.66$2.77 | +32.1% |
| EPS (Diluted) | $3.56$2.70 | +31.9% |
| Shares Outstanding (Basic) | 116.80M118.00M | −1.0% |
| Shares Outstanding (Diluted) | 120.40M120.80M | −0.3% |
05—Questions
Frequently Asked Questions
What drove the increase in Broadridge's fiscal 2018 net earnings?
Net earnings rose $101.2 million, or 31%, to $427.9 million. Revenue growth of $187.3 million and operating income growth of $63.3 million contributed, and the effective tax rate fell to 23.7% from 33.1%, largely due to $40.9 million of excess tax benefits from stock-based compensation, partially offset by $15.4 million of net Tax Act charges.
How concentrated is Broadridge's client base?
In fiscal 2018, about 21% of consolidated revenues came from the five largest clients, and the largest single client accounted for about 6%. Approximately 55% of Global Technology and Operations segment revenues came from its 15 largest clients.
What is the impact of the new revenue standard on future results?
Beginning in fiscal 2019, Broadridge will adopt ASU 2014-09, and the majority of equity proxy service revenues will be recognized in the third and fourth fiscal quarters. The Company estimates the annual income statement impact to be less than 1% of fiscal 2017 revenues and less than 3% of fiscal 2017 earnings before income taxes, with a cumulative opening retained earnings impact of less than $100 million.
How much debt does Broadridge carry and what are its maturities?
Total debt principal was $1,060.0 million at June 30, 2018, comprising $160.0 million drawn on the Fiscal 2017 Revolving Credit Facility (expiring February 2022, with $840.0 million of unused capacity), $400.0 million of 3.95% senior notes due September 2020, and $500.0 million of 3.40% senior notes due June 2026.
What acquisitions and investments did Broadridge make in fiscal 2018?
Broadridge acquired Summit for $30.6 million, ActivePath for $24.2 million, and FundAssist for $47.0 million aggregate purchase price. It also paid $40.0 million to an affiliate of Inveshare for blockchain technology applications.
06—Continue