01—Abstract
Summary
Summary of the 10-Q filed November 2, 2023. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. reported revenues of $1,431.1 milliona for the three months ended September 30, 2023, up 12% from $1,283.3 million a year earlier.
Operating income rose to $148.4 millionb from $87.5 million, and net earnings increased to $90.9 million from $50.4 million, with diluted earnings per share of $0.76 versus $0.42. Growth was led by Investor Communication Solutions, whose revenues rose $108.0 million to $1,028.6 million, and Global Technology and Operations, whose revenues rose $39.7 million to $402.4 million. Recurring revenues grew 8% to $871.2 million, event-driven revenues rose 39% to $86.9 million, and distribution revenues rose 14% to $473.0 million.
Cash flow was weaker: net cash flows from operating activities were negative $62.0 millionc, compared with negative $204.5 million a year earlier, and free cash flow (Non-GAAP) was negative $76.4 million. The company repurchased Treasury stock for $161.1 million and paid $85.6 million in dividends. Total debt was $3.68 billion at September 30, 2023, with the $1,178.5 million of Fiscal 2021 Term Loans reclassified to long-term debt after the Fiscal 2024 Amended Term Loan of $1.3 billion was entered into on August 17, 2023, and the company's Fiscal 2021 Revolving Credit Facility had $150.0 million drawn.
The company reported Adjusted Operating income (Non-GAAP) of $199.3 milliond, or a 13.9% margin, and Adjusted earnings per share (Non-GAAP) of $1.09, compared with $0.84 a year earlier. Management estimates a reduction in annual Recurring revenues of approximately $30 million from the SEC's tailored shareholder reports rule, phasing in over fiscal years 2025 and 2026.
02—Key points
Key Highlights
- Revenues rose 12% to $1,431.1 million, with recurring revenues up 8% to $871.2 million and event-driven revenues up 39% to $86.9 million.
- Operating income increased to $148.4 million from $87.5 million, and operating margin improved to 10.4% from 6.8%.
- Net earnings were $90.9 million, or $0.76 per diluted share, compared with $50.4 million, or $0.42 per diluted share, a year earlier.
- Adjusted earnings per share (Non-GAAP) was $1.09, compared with $0.84 in the prior-year period.
- Operating cash flow was negative $62.0 million, compared with negative $204.5 million, and free cash flow (Non-GAAP) was negative $76.4 million.
- Total debt was $3,682.0 million carrying value at September 30, 2023, and the Fiscal 2024 Amended Term Loan of $1.3 billion replaced the Tranche 2 Loan that was due May 2024.
- Closed sales were $47.6 million, up 64% from $29.0 million, and the company estimates a reduction of approximately $30 million in annual Recurring revenues from the SEC's tailored shareholder reports rule.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Broadridge Financial Solutions kept $0.06.
- Revenue$1.43B100.0%
- Cost of revenue−$1.08B75.1%
- Gross profit$355.8M24.9%
- Operating costs−$207.4M14.5%
- Operating income$148.4M10.4%
- Interest, other & tax−$57.5M4.0%
- Net income$90.9M6.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed November 2, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.43B$1.28B | +11.5% |
| Cost of Revenue | $1.08B$990.40M | +8.6% |
| Gross Profit | $355.80M$292.90M | +21.5% |
| SG&A Expenses | $207.30M$205.30M | +1.0% |
| Operating Expenses | $1.28B$1.20B | +7.3% |
| Operating Income | $148.40M$87.50M | +69.6% |
| Interest Expense | $36.40M$28.00M | +30.0% |
| Net Income | $90.90M$50.40M | +80.4% |
| EPS (Basic) | $0.77$0.43 | +79.1% |
| EPS (Diluted) | $0.76$0.42 | +81.0% |
| Shares Outstanding (Basic) | 117.90M117.50M | +0.3% |
| Shares Outstanding (Diluted) | 119.20M118.90M | +0.3% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue this quarter?
Revenues increased $147.8 million, or 12%, to $1,431.1 million. Distribution revenues rose $58.2 million, driven by higher event-driven mailings and a postage rate increase of approximately $27.4 million. Recurring revenues rose $65.4 million, with Net New Business contributing 5 points and Internal Growth 3 points within Investor Communication Solutions, and Net New Business contributing 7 points and Internal Growth 4 points within Global Technology and Operations.
Why was operating cash flow negative this quarter?
The filing states that the decrease in cash from operating activities of $142.5 million compared with the prior-year period was primarily due to higher net earnings and a decrease in client-related platform implementation and development, partially offset by an increase in cash used in working capital.
How is the company's debt structure changing?
On August 17, 2023, the company entered into a $1.3 billion Fiscal 2024 Amended Term Loan maturing in August 2026, which replaced the Tranche 2 Loan of the Fiscal 2021 Term Loans. The Fiscal 2021 Term Loans, previously shown as current debt of $1,178.5 million, were reclassified to long-term debt, and total long-term debt at September 30, 2023 was $3,682.0 million.
What is the outlook for the tailored shareholder reports rule?
The company is reviewing the full impact of the SEC rule, which went into effect January 24, 2023, with a final compliance date of July 24, 2024. It currently estimates a reduction in annual Recurring revenues of approximately $30 million, phasing in over fiscal years 2025 and 2026, assuming no offset from new services.
What is the company's restructuring status?
In the fourth quarter of fiscal 2023, Broadridge implemented a corporate restructuring initiative that resulted in $20.4 million of severance costs. Total estimated pre-tax costs are approximately $35.0 million to $50.0 million, and the company expects to incur the remaining charges in the third quarter of fiscal 2024.
06—Continue