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Broadridge Reports Second Quarter And Six Months Fiscal Year 2020 Results

·24 min read

Recurring Fee Revenues Rise 7%

Strong Year-to-Date Closed Sales of $83 million

Reaffirming Fiscal 2020 Revenue and Closed Sales Guidance with Adjusted EPS at Low End of Range

Updating GAAP Guidance for 2Q Acquisitions and Broadridge Private Cloud" Launch

NEW YORK , Jan. 31, 2020 /PRNewswire/ -- Broadridge Financial Solutions, Inc. (NYSE: BR) today reported financial results for the second quarter and six months ended December 31, 2019 of its fiscal year 2020. Results compared with the same period last year were as follows:  

Summary Financial Results


Second Quarter


Six Months


Dollars in millions, except per share data


2020

2019

Change

2020

2019

Change










Total revenues


$969

$953

2%

$1,917

$1,926


Recurring fee revenues


648

604

7%

1,272

1,179

8%










Operating income


27

78

(66)%

100

178

(44)%


Operating income margin


2.8%

8.2%


5.2%

9.3%











Adjusted Operating income - Non-GAAP


94

101

(7)%

198

224

(12)%


Adjusted Operating income margin - Non- GAAP


9.7%

10.6%


10.3%

11.6%











Diluted EPS


$0.09

$0.42

(79)%

$0.56

$1.06

(47)%

Adjusted EPS - Non-GAAP


$0.53

$0.56

(5)%

$1.22

$1.35

(10)%










Closed sales


$45

$106

(57)%

$83

$124

(33)%

"Broadridge continued to execute well in a mixed quarter.  Recurring revenues rose 7% to $648 million , driven by strong revenue from sales as well as contributions from recent acquisitions," said Tim Gokey , Broadridge's Chief Executive Officer. "Event-driven activity declined 36%, leading to a 5% decline in Adjusted EPS in a seasonally small quarter. Importantly, demand remains robust with strong Closed sales and performance by our recent acquisitions. 

"As we enter the more significant second half, we expect a pick-up in organic growth and full-year Recurring revenue growth of 8-10%. We also expect to deliver within our 8-12% Adjusted EPS guidance, albeit at the low end. We continue to be well on-track to achieve the three-year objectives laid out at our 2017 Investor Day, including the high end of our Adjusted EPS objectives," Mr. Gokey added. "Broadridge remains very well-positioned for growth, and we continue to invest in new products and technology to create value."

Fiscal Year 2020 Financial Guidance - Updated




Change / Update 1

Recurring fee revenue growth


8-10%

No change

Total revenue growth


3-6%

No change





Operating income margin - GAAP


~14%

Reduced from ~15% 2

Adjusted Operating income margin - Non-GAAP


~18%

No change





Diluted earnings per share growth


(4)-0%

Reduced from 5-9% 2

Adjusted earnings per share growth - Non-GAAP


8-12%

Expected to be at low end of range





Closed sales


$190-230M

No change





(1) From full-year guidance provided in earnings release Q1 FY20 on 11/6/2019

(2) Fiscal Year 2020 GAAP Operating income margin and Diluted EPS growth guidance has been updated to reflect the impact of acquisitions made in the second quarter and the impact of the IBM Private Cloud Charges

Financial Results for the Second Quarter Fiscal Year 2020 compared to the Second Quarter Fiscal Year 2019

  • Total   revenues increased 2% to $969 million from $953 million in the prior year period.

  • Operating income  was $27 million , a decrease of $51 million , or 66%. Operating income margin decreased to 2.8%, compared to 8.2% for the prior year period.

  • Interest expense, net  was $14 million , an increase of $3 million , or 30%, primarily due to an increase in interest expense from higher borrowings related to acquisitions.

  • The effective tax rate  was 3.8% compared to 22.4% in the Second Quarter 2019. The effective tax rate was impacted by discrete tax items relative to pre-tax income, including excess tax benefits of $2.2 million , which increased from $0.8 million in the Second Quarter 2019.

  • Net earnings  decreased 80% to $10 million and Adjusted Net earnings decreased 7% to $62 million .

Segment and Other Results for the Second Quarter 2020 compared to Second Quarter 2019

The results for the Company's Advisor Solutions services that were previously reported in our Investor Communication Solutions segment are now reported within the Global Technology and Operations segment. As a result, our prior period segment results have been revised to reflect this change.

Investor Communication Solutions ("ICS")  

  • ICS total revenues were $716 million , a decrease of $12 million , or 2%.

  • ICS earnings before income taxes were $22 million , a decrease of $15 million , or 40%, primarily due to the decrease in event-driven fee revenues more than offsetting the contribution from higher recurring fee revenues. Pre-tax margins decreased to 3.1% from 5.1%.

Global Technology and Operations ("GTO")

  • GTO recurring fee revenues were $281 million , an increase of $34 million , or 14%. The increase was attributable to the combination of revenues from acquisitions (10pts) and organic growth (4pts).

  • GTO earnings before income taxes were $49 million , an increase of $2 million , or 3%, compared to $48 million in the prior year period. The increased earnings were primarily due to higher organic revenues, partially offset by the impact of expenditures to implement and support new business. Pre-tax margins decreased to 17.4% from 19.2%.

Other

  • Other Loss before income tax increased 144% to $68 million from $28 million in the Second Quarter 2019. The increased loss was primarily due to charges associated with the IBM Private Cloud Agreement, and higher interest expense compared to the prior year period.

Financial Results for the Six Months Fiscal Year 2020 compared to the Six Months Fiscal Year 2019

  • Total   revenues fell slightly to $1,917 million from $1,926 million in the prior year period.

  • Operating income  was $100 million , a decrease of $78 million , or 44%. Operating income margin decreased to 5.2%, compared to 9.3% in the prior year period.

  • Interest expense, net  was $27 million , an increase of $7 million , or 32%, primarily due to an increase in interest expense from higher borrowings related to acquisitions.

  • The effective tax rate  was 11.2% compared to 17.6% in the prior year period. The effective tax rate was impacted by discrete tax items relative to pre-tax income, including excess tax benefits of $8 million , unchanged from $8 million in the prior year period.

  • Net earnings  decreased 48% to $66 million and Adjusted Net earnings decreased 12% to $142 million .

Segment and Other Results for the Six Months Fiscal Year 2020 compared to the Six Months Fiscal Year 2019
The results for the Company's Advisor Solutions services that were previously reported in our Investor Communication Solutions segment are now reported within the Global Technology and Operations segment. As a result, our prior period segment results have been revised to reflect this change.

Investor Communication Solutions  

  • ICS total revenues were $1,418 million , a decrease of $65 million , or 4%.

  • ICS earnings before income taxes were $45 million , a decrease of $51 million , or 53%, primarily due to decreased event-driven fee revenues more than offsetting the contribution from higher recurring fee revenues. Pre-tax margins decreased to 3.2% from 6.4%.

Global Technology and Operations

  • GTO recurring fee revenues were $555 million , an increase of $69 million , or 14%. Revenue from acquisitions contributed (11pts) to the increase.

  • GTO earnings before income taxes were $105 million , an increase of $11 million , or 12%, compared to $94 million in the prior year period. The increased earnings were primarily due to higher revenues from acquisitions, including software license sales, and higher organic revenues, partially offset by the impact of expenditures to implement and support new business. Pre-tax margins decreased to 19.0% from 19.4%.

Other

  • Other Loss before income tax increased 75% to $89 million from $51 million in the six months ended December 31, 2019 . The increased loss was primarily due to charges associated with the IBM Private Cloud Agreement, and higher interest expense compared to the prior year period.

Launch of Broadridge Private Cloud
On December 31, 2019 , Broadridge and IBM entered into the IBM Private Cloud Agreement under which IBM will operate, manage and support the Broadridge Private Cloud, the Company's private cloud global distributed platforms and products.  This agreement has an initial term of approximately 10 years and three months, expiring on March 31, 2030 . As a result of this agreement, Broadridge expects to transfer the ownership of certain Company-owned hardware located at Company facilities worldwide along with the Company's maintenance agreements associated with such hardware to IBM.  Accordingly, the Company has recorded charges of $33.4 million representing a charge on the hardware assets to be transferred to IBM and other charges related to the IBM Private Cloud Agreement (the "IBM Private Cloud Charges").

Second Quarter 2020 Acquisitions
Broadridge completed three primary acquisitions in the Second Quarter 2020, with an aggregate purchase price of approximately $227 million .

  • Shadow Financial Systems, Inc. ("Shadow Financial") : In October 2019 , the Company acquired Shadow Financial, a provider of multi-asset class post-trade solutions for the capital markets industry. The acquisition builds upon Broadridge's post-trade processing capabilities by adding a market-ready solution for exchanges, inter-dealer brokers and proprietary trading firms. In addition, the acquisition adds capabilities across exchange traded derivatives and cryptocurrency. The purchase price was approximately $39 million .

  • Fi360, Inc. : In November 2019 , the Company acquired Fi360, Inc., a provider of fiduciary and Regulation Best Interest solutions for the wealth and retirement industry, including the accreditation and continuing education for the Accredited Investment Fiduciary® (AIF®) Designation, the leading designation focused on fiduciary responsibility. The acquisition is expected to enhance Broadridge's retirement solutions by providing wealth and retirement advisors with fiduciary tools that will complement its Matrix trust and trading platform and further strengthen Broadridge's data and analytics tools and solutions suite. The purchase price was approximately $120 million .

  • Clear Structure Financial Technology, LLC ("ClearStructure") : In November 2019 , the Company acquired ClearStructure, a global provider of portfolio management solutions for the private debt markets. ClearStructure's component services are expected to enhance Broadridge's existing multi-asset class, front-to-back office asset management technology suite, providing Broadridge clients with a capability to access the public and private markets. The purchase price was approximately $69 million .

Third Quarter 2020 Acquisition
In January 2020 , the Company signed an agreement to acquire FundsLibrary Limited ("FundsLibrary"), a leader in fund document and data dissemination in the European market.  The combination of FundsLibrary's capabilities with Broadridge's existing regulatory communications offerings is expected to enable Broadridge to reduce complexity and cost for global fund managers, helping them to increase distribution opportunities and meet their regulatory requirements across multiple jurisdictions.  The acquisition is expected to close in February 2020 , with an expected purchase price of approximately $69 million net of cash acquired and subject to normal closing adjustments. 

Earnings Conference Call
An analyst conference call will be held today, Friday, January 31, 2020 at 8:30 a.m. ET . A live webcast of the call will be available to the public on a listen-only basis. To listen to the live event and access the slide presentation, visit Broadridge's Investor Relations website at www.broadridge-ir.com  prior to the start of the webcast. To listen to the call, investors may also dial 1-877-328-2502 within the United States and international callers may dial 1-412-317-5419.

A replay of the webcast will be available and can be accessed in the same manner as the live webcast at the Broadridge Investor Relations site. Through February 14, 2020 , the recording will also be available by dialing 1-877-344-7529 passcode: 10136507 within the United States or 1-412-317-0088 passcode: 10136507 for international callers.

Explanation and Reconciliation of the Company's Use of Non-GAAP Financial Measures 
The Company's results in this press release are presented in accordance with U.S. generally accepted accounting principles ("GAAP") except where otherwise noted. In certain circumstances, results have been presented that are not generally accepted accounting principles measures ("Non-GAAP"). These Non-GAAP measures are Adjusted Operating income, Adjusted Operating income margin, Adjusted Net earnings, Adjusted earnings per share, and Free cash flow. These Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results.

The Company believes our Non-GAAP financial measures help investors understand how management plans, measures and evaluates the Company's business performance. Management believes that Non-GAAP measures provide consistency in its financial reporting and facilitates investors' understanding of the Company's operating results and trends by providing an additional basis for comparison. Management uses these Non-GAAP financial measures to, among other things, evaluate our ongoing operations, for internal planning and forecasting purposes and in the calculation of performance-based compensation. In addition, and as a consequence of the importance of these Non-GAAP financial measures in managing our business, the Company's Compensation Committee of the Board of Directors incorporates Non-GAAP financial measures in the evaluation process for determining management compensation.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Earnings and Adjusted Earnings Per Share
These Non-GAAP measures reflect Operating income, Operating income margin, Net earnings, and Diluted earnings per share, as adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operating performance. These adjusted measures exclude the impact of: (i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, and (iii) IBM Private Cloud Charges. Amortization of Acquired Intangibles and Purchased Intellectual Property represents non-cash amortization expenses associated with the Company's acquisition activities. Acquisition and Integration Costs represent certain transaction and integration costs associated with the Company's acquisition activities. IBM Private Cloud Charges represent a charge on the hardware assets to be transferred to IBM and other charges related to the IBM Private Cloud Agreement.

We exclude IBM Private Cloud Charges from our Adjusted Operating income and other earnings measures because excluding such information provides us with an understanding of the results from the primary operations of our business and this item does not reflect ordinary operations or earnings. We also exclude the impact of Amortization of Acquired Intangibles and Purchased Intellectual Property, as these non-cash amounts are significantly impacted by the timing and size of individual acquisitions and do not factor into the Company's capital allocation decisions, management compensation metrics or multi-year objectives. Furthermore, management believes that this adjustment enables better comparison of our results as Amortization of Acquired Intangibles and Purchased Intellectual Property will not recur in future periods once such intangible assets have been fully amortized. Although we exclude Amortization of Acquired Intangibles and Purchased Intellectual Property from our adjusted earnings measures, our management believes that it is important for investors to understand that these intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.

Free Cash Flow
In addition to the Non-GAAP financial measures discussed above, we provide Free cash flow information because we consider Free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated that could be used for dividends, share repurchases, strategic acquisitions, other investments, as well as debt servicing. Free cash flow is a Non-GAAP financial measure and is defined by the Company as Net cash flows provided by operating activities less Capital expenditures as well as Software purchases and capitalized internal use software.

Reconciliations of such Non-GAAP measures to the most directly comparable financial measures presented in accordance with GAAP can be found in the tables that are part of this press release.

Forward-Looking Statements
This press release and other written or oral statements made from time to time by representatives of Broadridge may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, and which may be identified by the use of words such as "expects," "assumes," "projects," "anticipates," "estimates," "we believe," "could be" and other words of similar meaning, are forward-looking statements. In particular, information appearing in the "Fiscal Year 2020 Financial Guidance" section are forward-looking statements. These statements are based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. These risks and uncertainties include those risk factors discussed in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year 2019 (the "2019 Annual Report"), as they may be updated in any future reports filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the date of this press release and are expressly qualified in their entirety by reference to the factors discussed in the 2019 Annual Report.

These risks include:

  • the success of Broadridge in retaining and selling additional services to its existing clients and in obtaining new clients;

  • Broadridge's reliance on a relatively small number of clients, the continued financial health of those clients, and the continued use by such clients of Broadridge's services with favorable pricing terms;

  • a material security breach or cybersecurity attack affecting the information of Broadridge's clients;

  • changes in laws and regulations affecting Broadridge's clients or the services provided by Broadridge;

  • declines in participation and activity in the securities markets;

  • the failure of Broadridge's key service providers to provide the anticipated levels of service;

  • a disaster or other significant slowdown or failure of Broadridge's systems or error in the performance of Broadridge's services;

  • overall market and economic conditions and their impact on the securities markets;

  • Broadridge's failure to keep pace with changes in technology and demands of its clients;

  • Broadridge's ability to attract and retain key personnel;

  • the impact of new acquisitions and divestitures; and

  • competitive conditions.

Broadridge disclaims any obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

About Broadridge
Broadridge Financial Solutions, Inc. (NYSE: BR), a $4 billion global Fintech leader, is a leading provider of investor communications and technology-driven solutions to banks, broker-dealers, asset and wealth managers and corporate issuers. Broadridge's infrastructure underpins proxy voting services for over 50 percent of public companies and mutual funds globally, and processes on average more than U.S. $7 trillion in fixed income and equity securities trades per day. Broadridge is part of the S&P 500 ® Index and employs over 11,000 associates in 18 countries.

For more information about Broadridge, please visit www.broadridge.com .

Contact Information 

Investors:
W. Edings Thibault
Investor Relations
(516) 472-5129

Media:
Gregg Rosenberg
Corporate Communications
(212) 918-6966

Condensed Consolidated Statements of Earnings

(Unaudited)


In millions, except per share amounts


Three Months Ended 
December 31,


Six Months Ended 
December 31,



2019


2018


2019


2018

Revenues


$

968.7


$

953.4


$

1,917.2


$

1,926.2

Operating expenses:









      Cost of revenues


780.9


734.0


1,508.4


1,473.0

      Selling, general and administrative expenses


161.0


141.2


309.0


274.9

      Total operating expenses


941.9


875.2


1,817.3


1,747.9

Operating income


26.8


78.2


99.9


178.3

Interest expense, net


(13.9)


(10.7)


(27.0)


(20.4)

Other non-operating income (expenses), net


(2.4)


(3.2)


1.4


(4.4)

Earnings before income taxes


10.5


64.3


74.3


153.6

Provision for income taxes


0.4


14.4


8.3


27.0

Net earnings


$

10.1


$

49.9


$

66.0


$

126.6










Basic earnings per share


$

0.09


$

0.43


$

0.58


$

1.09

Diluted earnings per share


$

0.09


$

0.42


$

0.56


$

1.06










Weighted-average shares outstanding:









      Basic


114.7


116.3


114.5


116.3

      Diluted


117.2


119.1


117.1


119.4


Amounts may not sum due to rounding.

 

 

Condensed Consolidated Balance Sheets

(Unaudited)


In millions, except per share amounts



December 31,
2019


June 30,
2019

Assets






Current assets:






Cash and cash equivalents



$

234.0


$

273.2

Accounts receivable, net of allowance for doubtful accounts of $2.7 and $2.6, respectively



616.0


664.0

Other current assets



160.7


105.2

Total current assets



1,010.6


1,042.3

Property, plant and equipment, net



137.5


189.0

Goodwill



1,660.8


1,500.0

Intangible assets, net



611.2


556.2

Other non-current assets



964.5


593.1

Total assets



$

4,384.6


$

3,880.7

Liabilities and Stockholders' Equity






Current liabilities:






Current portion of long-term debt



$

399.5


$

Payables and accrued expenses



615.4


711.7

Contract liabilities



109.9


90.9

Total current liabilities



1,124.8


802.6

Long-term debt



1,449.3


1,470.4

Deferred taxes



98.9


86.7

Contract liabilities



150.3


160.7

Other non-current liabilities



435.9


232.8

Total liabilities



3,259.2


2,753.2

Commitments and contingencies






Stockholders' equity:






Preferred stock: Authorized, 25.0 shares; issued and outstanding, none




Common stock, $0.01 par value: 650.0 shares authorized; 154.5 and 154.5 shares issued, respectively; and 114.8 and 114.3 shares outstanding, respectively



1.6


1.6

Additional paid-in capital



1,150.1


1,109.3

Retained earnings



2,030.1


2,087.7

Treasury stock, at cost: 39.7 and 40.2 shares, respectively



(1,988.7)


(1,999.8)

Accumulated other comprehensive loss



(67.7)


(71.2)

Total stockholders' equity



1,125.4


1,127.5

Total liabilities and stockholders' equity



$

4,384.6


$

3,880.7


Amounts may not sum due to rounding.

 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)


In millions

Six Months Ended
December 31,


2019


2018

Cash Flows From Operating Activities




Net earnings

$

66.0


$

126.6

Adjustments to reconcile net earnings to net cash flows provided by operating activities:




Depreciation and amortization

41.4


42.5

Amortization of acquired intangibles and purchased intellectual property

58.4


43.2

Amortization of other assets

49.7


44.6

Write-down of long-lived assets

31.8


Stock-based compensation expense

30.3


29.4

Deferred income taxes

(0.8)


(10.0)

Other

(12.9)


(13.4)

Changes in operating assets and liabilities, net of assets and liabilities acquired:




Current assets and liabilities:




Decrease in Accounts receivable, net

53.2


11.0

Increase in Other current assets

(38.5)


(12.1)

Decrease in Payables and accrued expenses

(155.0)


(158.4)

Increase in Contract liabilities

11.5


13.3

Non-current assets and liabilities:




Increase in Other non-current assets

(167.7)


(87.3)

Increase in Other non-current liabilities

44.0


52.8

Net cash flows provided by operating activities

11.5


82.1

Cash Flows From Investing Activities




Capital expenditures

(31.6)


(21.0)

Software purchases and capitalized internal use software

(11.4)


(9.3)

Acquisitions, net of cash acquired

(269.6)


Other investing activities

(18.7)


(1.8)

Net cash flows used in investing activities

(331.2)


(32.0)

Cash Flows From Financing Activities




Debt proceeds

1,226.1


210.0

Debt repayments

(841.8)


(70.0)

Dividends paid

(117.2)


(99.0)

Purchases of Treasury Stock


(120.3)

Proceeds from exercise of stock options

21.6


19.1

Other financing activities

(8.3)


(1.8)

Net cash flows provided by (used in) financing activities

280.5


(61.9)

Effect of exchange rate changes on Cash and cash equivalents


(2.3)

Net change in Cash and cash equivalents

(39.2)


(14.1)

Cash and cash equivalents, beginning of period

273.2


263.9

Cash and cash equivalents, end of period

$

234.0


$

249.8


Amounts may not sum due to rounding.

 

 

Segment Results

(Unaudited)


In millions

Three Months Ended 
December 31,


Six Months Ended 
December 31,


2019



2018



2019



2018


Revenues









Investor Communication Solutions

$

715.6



$

727.8



$

1,418.2



$

1,482.8


Global Technology and Operations

280.9



247.0



554.8



485.4


Foreign currency exchange

(27.8)



(21.4)



(55.8)



(42.0)


Total

$

968.7



$

953.4



$

1,917.2



$

1,926.2








Earnings (Loss) before Income Taxes






Investor Communication Solutions

$

22.1



$

36.8



$

45.1



$

95.6


Global Technology and Operations

49.0



47.5



105.5



94.1


Other

(68.1)



(27.9)



(89.3)



(51.0)


Foreign currency exchange

7.5



7.9



13.0



15.0


Total

$

10.5



$

64.3



$

74.3



$

153.6










Pre-tax margins:








Investor Communication Solutions

3.1

%


5.1

%


3.2

%


6.4

%

Global Technology and Operations

17.4

%


19.2

%


19.0

%


19.4

%


Amounts may not sum due to rounding.


Note: The results for the Company's Advisor Solutions services that were previously reported in our Investor Communication Solutions reportable segment are now reported within the Global Technology and Operations reportable segment. As a result, our prior period segment results have been revised to reflect this change in reporting segments, which resulted in transferring $10.4 million and $21.1 million of revenues, respectively, and $0.3 million and $0.4 million of earnings before income taxes, respectively, for the three and six months ended December 31, 2018.

Supplemental Reporting Detail - Additional Product Line Reporting

(Unaudited)


In millions

Three Months Ended
December 31,


Six Months Ended
December 31,

Investor Communication Solutions

2019


2018


Change


2019


2018


Change

Equity Proxy

$

42.2


$

41.7


1

%


$

72.0


$

72.7


(1)

%

Mutual fund and exchange-traded funds ("ETF") interims

65.1


60.7


7

%


130.5


118.5


10

%

Customer communications and fulfillment

176.6


182.6


(3)

%


347.5


357.5


(3)

%

Other ICS

83.5


71.9


16

%


166.7


145.3


15

%

Total ICS Recurring fee revenues

367.5


357.0


3

%


716.7


694.0


3

%













Equity and other

15.3


19.5


(22)

%


32.8


43.6


(25)

%

Mutual funds

15.7


28.6


(45)

%


38.3


81.4


(53)

%

Total ICS Event-driven fee revenues

31.0


48.1


(36)

%


71.1


125.1


(43)

%













Distribution revenues

317.0


322.7


(2)

%


630.3


663.7


(5)

%













Total ICS Revenues

$

715.6


$

727.8


(2)

%


$

1,418.2


$

1,482.8


(4)

%













Global Technology and Operations












Equities and Other

$

237.2


$

206.8


15

%


$

468.1


$

405.3


15

%

Fixed income

43.7


40.1


9

%


86.8


80.1


8

%

Total GTO Recurring fee revenues

280.9


247.0


14

%


554.8


485.4


14

%













Foreign currency exchange

(27.8)


(21.4)


30

%


(55.8)


(42.0)


33

%

Total Revenues

$

968.7


$

953.4


2

%


$

1,917.2


$

1,926.2


%













Revenues by Type












Recurring fee revenues

$

648.4


$

603.9


7

%


$

1,271.6


$

1,179.5


8

%

Event-driven fee revenues

31.0


48.1


(36)

%


71.1


125.1


(43)

%

Distribution revenues

317.0


322.7


(2)

%


630.3


663.7


(5)

%

Foreign currency exchange

(27.8)


(21.4)


30

%


(55.8)


(42.0)


33

%

Total Revenues

$

968.7


$

953.4


2

%


$

1,917.2


$

1,926.2


%


Amounts may not sum due to rounding.


Note: The results for the Company's Advisor Solutions services that were previously reported in our Investor Communication Solutions reportable segment are now reported within the Global Technology and Operations reportable segment. As a result, our prior period segment results have been revised to reflect this change in reporting segments.

Select Operating Metrics

(Unaudited)



Three Months Ended
December 31,




Six Months Ended
December 31,




In millions

2019


2018


%
Change


2019


2018


%
Change















Closed Sales

$45.1


$105.9


(57)%


$82.7


$124.3


(33)%















Record Growth1













Equity proxy

11%


15%




10%


15%




Mutual fund interims

6%


20%




4%


14%

















Internal Trade Growth2













Equity

(16)%


16%




(12)%


18%




Fixed Income

6%


6%




12%


5%

















Amounts may not sum due to rounding.





















1 Stock record growth and interim record growth measure the annual change in total positions eligible for equity proxies and mutual fund & ETF interims, respectively, for equities and mutual fund position data reported to Broadridge in both the current and prior year periods.





2 Internal trade growth represents the growth in trade volumes for clients whose contracts are linked to trade volumes and who were on Broadridge's trading platforms in both the current and prior year periods.



Reconciliation of Non-GAAP to GAAP Measures

(Unaudited)


In millions, except per share amounts

Three Months Ended
December 31,


Six Months Ended
December 31,


2019


2018


2019


2018

Reconciliation of Adjusted Operating Income


Operating income (GAAP)

$

26.8



$

78.2



$

99.9



$

178.3


Adjustments:








Amortization of Acquired Intangibles and Purchased Intellectual Property

30.3



21.3



58.4



43.2


Acquisition and Integration Costs

3.4



1.3



5.9



2.2


IBM Private Cloud Charges

33.4





33.4




Adjusted Operating income (Non-GAAP)

$

93.9



$

100.8



$

197.5



$

223.7


Operating income margin (GAAP)

2.8

%


8.2

%


5.2

%


9.3

%

Adjusted Operating income margin (Non-GAAP)

9.7

%


10.6

%


10.3

%


11.6

%

Reconciliation of Adjusted Net earnings


Net earnings (GAAP)

$

10.1



$

49.9



$

66.0



$

126.6


Adjustments:








Amortization of Acquired Intangibles and Purchased Intellectual Property

30.3



21.3



58.4



43.2


Acquisition and Integration Costs

3.4



1.3



5.9



2.2


IBM Private Cloud Charges

33.4





33.4




Taxable adjustments

67.1



22.6



97.7



45.4


Tax impact of adjustments (a)

(14.8)



(5.3)



(21.3)



(10.3)


Adjusted Net earnings (Non-GAAP)

$

62.4



$

67.2



$

142.3



$

161.8


Reconciliation of Adjusted EPS








Diluted earnings per share (GAAP)

$

0.09



$

0.42



$

0.56



$

1.06


Adjustments:








Amortization of Acquired Intangibles and Purchased Intellectual Property

0.26



0.18



0.50



0.36


Acquisition and Integration Costs

0.03



0.01



0.05



0.02


IBM Private Cloud Charges

0.28





0.28




Taxable adjustments

0.57



0.19



0.83



0.38


Tax impact of adjustments (a)

(0.13)



(0.04)



(0.18)



(0.09)


Adjusted earnings per share (Non-GAAP)

$

0.53



$

0.56



$

1.22



$

1.35



(a) Calculated using the GAAP effective tax rate, adjusted to exclude $2.2 million and $7.9 million of excess tax benefits associated with stock-based compensation for the three and six months ended December 31, 2019, and $0.8 million and $7.9 million of excess tax benefits associated with stock-based compensation for the three and six months ended December 31, 2018. For purposes of calculating Adjusted earnings per share, the same adjustments were made on a per share basis.


Amounts may not sum due to rounding.

Reconciliation of Free Cash Flow


Net cash flows provided by operating activities (GAAP)

$

11.5


$

82.1

Capital expenditures and Software purchases and capitalized internal use software

(43.0)


(30.3)

Free cash flow (Non-GAAP)

$

(31.5)


$

51.8

Fiscal Year 2020 Guidance

Reconciliation of Non-GAAP to GAAP Measures

Adjusted Earnings Per Share Growth and Adjusted Operating Income Margin

(Unaudited)




FY20 Adjusted Earnings Per Share Growth Rate (a)



Diluted earnings per share (GAAP)


(4)-0%

Adjusted earnings per share (Non-GAAP)


8-12%




FY20 Adjusted Operating Income Margin (b)



Operating income margin % (GAAP)


~14%

Adjusted Operating income margin % (Non-GAAP)


~18%





(a) Adjusted earnings per share growth (Non-GAAP) is adjusted to exclude the projected impact of Amortization of Acquired Intangibles and Purchased Intellectual Property, Acquisition and Integration Costs, and IBM Private Cloud Charges, and is calculated using diluted shares outstanding. Fiscal year 2020 Non-GAAP Adjusted earnings per share guidance estimates exclude Amortization of Acquired Intangibles and Purchased Intellectual Property, Acquisition and Integration Costs, and IBM Private Cloud Charges, net of taxes, of approximately $1.11 per share.


(b) Adjusted Operating income margin (Non-GAAP) is adjusted to exclude the projected impact of Amortization of Acquired Intangibles and Purchased Intellectual Property, Acquisition and Integration Costs, and IBM Private Cloud Charges. Fiscal year 2020 Non-GAAP Adjusted Operating income margin guidance estimates exclude Amortization of Acquired Intangibles and Purchased Intellectual Property, Acquisition and Integration Costs, and IBM Private Cloud Charges of approximately $170 million.

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SOURCE Broadridge Financial Solutions, Inc.