01—Abstract
Summary
Summary of the 10-Q filed February 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Broadridge Financial Solutions, Inc. reported results for its fiscal second quarter and six months ended December 31, 2023.
Revenues rose 9% to $1,405.0 milliona for the quarter and 10% to $2,836.0 million for the six months, with recurring revenues up 7% and 8% respectively and Net New Business and Internal Growth as the main drivers. Operating income increased to $124.4 million for the quarter from $107.9 million, and net earnings rose to $70.3 million from $57.5 million, with diluted EPS of $0.59 versus $0.48. Results were boosted by higher postage rate pass-through in distribution revenue, and cost of revenues rose with postage and amortization expenses.
For the six months, net cash flows from operating activities were $127.8 millionb versus a $81.4 million outflow a year earlier, and free cash flow (non-GAAP) was $91.4 million. Total debt was $3,670.0 million principal at December 31, 2023, with the Fiscal 2021 Term Loans reclassified to long-term after the Fiscal 2024 Amended Term Loan of $1.3 billion replaced the Tranche 2 loan.
Stockholders' equity fell to $2,067.6 millionc, and the company repurchased treasury stock for $161.5 million in cash during the six months. The filing also flags a previously estimated reduction of about $30 million in annual recurring revenues from the SEC's tailored shareholder reports rule, phasing in over fiscal years 2025 and 2026, and a pending new trial on damages in the Plan Management Corp. claim scheduled for March 4, 2024, which the company does not believe will be material.
02—Key points
Key Highlights
- Revenues increased 9% to $1,405.0 million in the three months ended December 31, 2023, and 10% to $2,836.0 million for the six months.
- Net earnings rose to $70.3 million (diluted EPS $0.59) for the quarter, compared with $57.5 million (diluted EPS $0.48) a year earlier.
- Operating income was $124.4 million for the quarter versus $107.9 million, and $272.8 million for the six months versus $195.4 million.
- Free cash flow (non-GAAP) for the six months was $91.4 million, compared with a negative $114.5 million in the prior-year period, driven by operating cash flow of $127.8 million.
- Total debt principal was $3,670.0 million at December 31, 2023, including $2,250.0 million of senior notes and a $1,300.0 million Fiscal 2024 Amended Term Loan maturing August 2026.
- Management estimates a reduction of approximately $30 million in annual recurring revenues from the SEC tailored shareholder reports rule, phasing in over fiscal years 2025 and 2026.
- Treasury stock purchases totaled $161.5 million in cash during the six months, while Adjusted EPS (non-GAAP) for the six months was $2.01 versus $1.75.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Broadridge Financial Solutions kept $0.05.
- Revenue$1.41B100.0%
- Cost of revenue−$1.06B75.2%
- Gross profit$347.8M24.8%
- Operating costs−$223.4M15.9%
- Operating income$124.4M8.9%
- Interest, other & tax−$54.1M3.9%
- Net income$70.3M5.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed February 1, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.41B$1.29B | +8.7% |
| Cost of Revenue | $1.06B$988.20M | +7.0% |
| Gross Profit | $347.80M$304.70M | +14.1% |
| SG&A Expenses | $223.40M$196.80M | +13.5% |
| Operating Expenses | $1.28B$1.19B | +8.1% |
| Operating Income | $124.40M$107.90M | +15.3% |
| Interest Expense | $40.00M$36.30M | +10.2% |
| Net Income | $70.30M$57.50M | +22.3% |
| EPS (Basic) | $0.60$0.49 | +22.4% |
| EPS (Diluted) | $0.59$0.48 | +22.9% |
| Shares Outstanding (Basic) | 117.70M117.70M | 0.0% |
| Shares Outstanding (Diluted) | 119.10M118.90M | +0.2% |
05—Questions
Frequently Asked Questions
What drove the revenue growth in the quarter?
Revenues increased $112.1 million, or 9%, to $1,405.0 million. Recurring revenues rose $58.4 million, or 7%, driven by Net New Business and Internal Growth; event-driven revenues rose $17.7 million, or 47%, on higher mutual fund proxy activity; and distribution revenues rose $36.0 million, or 9%, including a postage rate increase of approximately $27.7 million.
How did operating expenses and margins change?
Total operating expenses rose $95.6 million, or 8%, to $1,280.6 million, led by cost of revenues up $68.9 million (including $31.9 million of higher postage and distribution expenses in ICS and $15.4 million of higher amortization in GTO). Operating margin improved to 8.9% from 8.3% for the quarter, and to 9.6% from 7.6% for the six months.
What is the company's debt position and how did it change?
Total debt principal was $3,670.0 million at December 31, 2023, versus a carrying value of $3,413.3 million at June 30, 2023. The Fiscal 2021 Term Loans of $1,178.5 million were reclassified from current to long-term after the Fiscal 2024 Amended Term Loan of $1.3 billion replaced the Tranche 2 loan. Current portion of long-term debt was zero at December 31, 2023.
What legal matter is disclosed?
In the Plan Management Corp. claim, a jury in December 2022 found that a Broadridge subsidiary breached a marketing agreement. The trial court later vacated the damages award but not the liability finding, and a new trial on damages is scheduled for March 4, 2024. The company does not believe a material loss is probable, and estimates reasonably possible losses of up to $30 million in excess of established reserves for other matters.
06—Continue