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| 8-K - FORM 8-K - BROADRIDGE FINANCIAL SOLUTIONS, INC. | d8k.htm |
 Broadridge
Financial Solutions, Inc.
November 2010
J.P. Morgan Ultimate Services
Conference Presentation
Richard J. Daly
Chief Executive Officer
Exhibit 99.1 |
 2
Forward-Looking Statements
This
presentation
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,
such
as
our
fiscal
year
2011
financial
guidance,
and
which
may
be
identified
by
the
use
of
words
like
“expects,”
“assumes,”
“projects,”
“anticipates,”
“estimates,”
“we
believe,”
“could
be”
and
other
words
of
similar
meaning,
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
ended
June
30,
2010
(the
“2010
Annual
Report”),
as
they
may
be
updated
in
any
future
reports
filed
with
the
Securities
and
Exchange
Commission.
Any
forward-looking
statements
are
qualified
in
their
entirety
by
reference
to
the
factors
discussed
in
the
2010
Annual
Report.
These
risks
include:
the
success
of
Broadridge
in
retaining
and
selling
additional
services
to
its
existing
clients
and
in
obtaining
new
clients;
the
pricing
of
Broadridge’s
products
and
services;
changes
in
laws
and
regulations
affecting
the
investor
communication
services
provided
by
Broadridge;
declines
in
participation
and
activity
in
the
securities
markets;
overall
market
and
economic
conditions
and
their
impact
on
the
securities
markets;
any
material
breach
of
Broadridge
security
affecting
its
clients’
customer
information;
the
failure
of
Broadridge’s
outsourced
data
center
services
provider
to
provide
the
anticipated
levels
of
service;
any
significant
slowdown
or
failure
of
Broadridge’s
systems
or
error
in
the
performance
of
Broadridge’s
services;
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
any
forward-looking
statements,
whether
as
a
result
of
new
information,
future
events
or
otherwise.
This
presentation
may
include
certain
Non-GAAP
(generally
accepted
accounting
principles)
financial
measures
in
describing
Broadridge’s
performance.
Management
believes
that
such
Non-GAAP
measures,
when
presented
in
conjunction
with
comparable
GAAP
measures
provide
investors
a
more
complete
understanding
of
Broadridge’s
underlying
operational
results.
These
Non-GAAP
measures
are
indicators
that
management
uses
to
provide
additional
meaningful
comparisons
between
current
results
and
prior
reported
results,
and
as
a
basis
for
planning
and
forecasting
for
future
periods.
These
measures
should
be
considered
in
addition
to
and
not
a
substitute
for
the
measures
of
financial
performance
prepared
in
accordance
with
GAAP.
The
reconciliations
of
such
measures
to
the
comparable
GAAP
figures
are
included
in
this
presentation. |
 3
Use of Material Contained Herein
The information contained in this presentation is being provided
for your
convenience and information only. This information is accurate as of the date
of its initial presentation. If you plan to use this information for
any purpose, verification of its continued accuracy is your
responsibility. Broadridge assumes no duty to update or revise the
information contained in this
presentation. You may reproduce information contained in this presentation
provided you do not alter, edit, or delete any of the content and provided
you identify the source of the information as Broadridge Financial
Solutions, Inc., which owns the copyright.
Broadridge and the Broadridge logo are registered trademarks of Broadridge
Financial Solutions, Inc. |
 4
Agenda
Broadridge Overview and Summary
Business Overview
Business Expansion Strategy Overview
Financial Overview
Conclusion |
 5
Broadridge Investment Thesis
Generate
very strong and
highly predictable
free cash flows
Strong core Investor
Communications business
which generates over 70% of
annual revenues and earnings
Market leader with high
client retention rates
driven by product innovation
Approximately 80%
in recurring annual revenues
Dependable mid-single-digit
revenue growth business
Highly experienced
management team
Scalable business model
with core business
generating margin expansion
Aim to invest in existing businesses and acquisitions to generate mid to
high- single-digit revenue growth and return excess cash to
shareholders |
 6
$290
$251
Broadridge
Free Cash Flow & Capital Allocation
Note: Free Cash Flow excludes financing activities in the Clearing and Outsourcing
Solutions segment Dividends
•Doubled annual dividend
amount from $0.28 to $0.56
per share for FY10, and
further increased annual
dividend amount 7% to
$0.60 per share for FY11
Stock
Repurchases
•Repurchased 20.2 million
shares pursuant to stock
repurchase plans since
spin-off with an additional
11.8 million authorization as
of September 30, 2010
Acquisitions
•Strategic acquisitions to
leverage the Broadridge
brand and distribution
channels
Strong predictable free cash flow allows for flexible capital allocation
options (1) Free cash flow is a Non-GAAP financial measure
and is defined as net cash flow provided by continuing operating activities, less capital expenditures and intangibles. A
reconciliation to the nearest GAAP numbers are provided in the
Appendix. $325
FY07
FY08
FY09
FY10
FY11
Free Cash Flow
(Non-GAAP)
(1)
($ in millions)
High: $222
Low: $166
$252
Forecast
Range |
 7
Broadridge Mission
Partner with
Financial Institutions
to:
Reduce
Risk & Cost
Increase
Performance
•
Enable the financial services
industry to achieve higher levels
of performance by allowing firms
to focus on their core business
•
Help clients manage their
regulatory compliance risk by
improving clients’
processing,
communication accuracy and
data security
•
Deliver cost savings to financial
institutions through outsourcing
their non-differentiating back-
office processes
•
Develop long lasting relationships
with world class companies built
on mutual success
Our Mission is To Reduce Clients’
Risk While Lowering Their Total Cost of Ownership |
 8
Individual (Retail) and Institutional
Clients
Broker-Dealers, Banks, Mutual Funds, Corporate Issuers
Integrated Solutions Spanning the Investment Lifecycle
Investment
Decision
(Pre-Trade)
Trade Processing
&
Books and Records
Asset
Servicing
(Post-Trade)
New Accounts
Welcome Kits
Proxy
Fulfillment
Archival
Confirms
Across the
investment
lifecycle...
...By partnering
with the world’s
leading financial
institutions...
...And delivering
broad and
innovative
global solutions
Investor Communications
Proxy management, corporate governance, and stockholder
communications Securities Processing
Global trade processing for equities, options,
mutual funds, and fixed income securities
and operations outsourcing solutions
Processing
Reporting
Statements
...Broadridge
touches
investors... |
 9
Resilient and Predictable Business Model
Business is resilient and largely independent of the stock market being at its highs
or lows……….predictable revenue stream drives predictable free
cash flow Recurring
Revenue
(~80%)
Event-
Driven
Revenue
(~20%)
Shareholder Positions
Images and Pieces
Processed
Revenue Drivers
A Market Leader
with
High Retention Rates
Recurring Revenue
Complex Proprietary
Processing Platforms
High Client Satisfaction
and Highly Engaged
Associates
Investor Communication
Solutions
Securities Processing
Solutions
Indispensable Provider for
Mission Critical Processing
Processing Fees
(Trades Per Day)
# of Accounts |
 10
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
8,000
9,000
10,000
11,000
12,000
13,000
14,000
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
Broadridge Total Revenues
Dow Jones Industrial Average
Business is Resilient in Changing Markets
Our revenue growth has been resilient through various economic and
market cycles
Stock Market
Rebounds
Decimalization
of Trades
Internet Bubble
Impact
Financial
Crisis
Note:
Fiscal
year
is
based
on
June
30
th
year
end |
 11
Revenue Growth Drivers
Low double-digit revenue growth in robust markets and flat to slightly negative growth in severe
down markets. Historically, growth from Sales is consistent in all markets cycles
Average historical growth of 6%, including a severe down
market cycle
In high growth economic cycles revenue growth averages
10-12% and 0-(3)% in severe down markets
Historical sales growth component consistent in all market
cycles
ICS sales expected to be driven by market share gains in
transaction reporting and registered proxy
SPS sales expected to be driven by our Operations
Outsourcing offering
ICS internal growth is driven by stock record growth for
equities and mutual funds and SPS is driven by trades per
day (TPD), which is somewhat offset by price concessions
Event-driven revenue activity declines in severe down
markets and rebounds to new highs in robust markets
Last trough to peak cycle had 20% CAGR (FY03-07)
Mutual Fund Proxy is the most volatile component of
event-driven revenue activity
Historical (FY05-FY10)
Actual
Forecast
CAGR
FY10
FY11
6%
Total Revenue Growth
7%
1-4%
4%
Sales
(Recurring).
4%
3-4%
(2)%
Client Losses
(2)%
(1)%
2%
Net New Business
2%
2-3%
3%
Internal Growth
(a)
(2)%
0-1%
1%
Event-Driven
(b)
4%
(5)-(4)%
0%
Distribution
1%
0%
0%
Acq/FX/Other
2%
4%
(a) Internal Growth includes SPS Equity & Fixed Income Trades, ICS Equity
& Mutual Fund Stock Record Growth, Transaction Reporting and Time &
Materials
(b) Event-Driven includes ICS Proxy Contest/Specials, Mutual Fund Proxy
and Marketing Communications Fulfillment |
 12
Business Expansion Focus
Closed
Sales
Long-Term
Growth
Challenges
Broadridge
is well-positioned and on the high ground as a result of our recurring revenue
base, great value propositions, new initiatives, free cash flow and solid
balance sheet •
Strong
and
growing
pipeline
with
large
opportunities in all segments
•
Winning
a
meaningful
percentage
of
each year’s market-driven sales activity
•
Growth
in
recurring
closed
sales
>25%
in FY10, representing the second
consecutive year of record sales
•
Leverage
our
core
capabilities
and
unique
communications network
•
Investments
in
the
business
have
started
to introduce new and exciting opportunities
•
Meaningful
growth
opportunities
in
the
mutual fund area via data hub strategy
•
SPS
business,
despite
retaining
its
market
leadership position, faces challenges of
price compression and how to monetize its
unique opportunities for growth
•
Overcoming
conversion
decision
hurdles
for large clients and industry consolidation
$92
$63
$82
$95
$119
$33
$49
$63
$43
$56
FY06
FY07
FY08
FY09
FY10
FY11
Forecast
Range
High: $215
Low: $160
Closed Sales
(Fee Only, $ in millions)
Recurring (RC) Event-Driven (ED)
CAGR* = 9%
RC = 7%
ED = 14%
$175
$145
$125
$112
$139
* CAGR from FY06-10 |
       13
This is Broadridge
We are a market leader in processing and
distributing shareholder communications,
and provider of choice for mission-critical
securities processing solutions
Over 40 years of experience and a solid
customer base with long standing
relationships
Our core business is resilient and largely
independent of the stock market being at its
highs or lows
Strong and predictable Free Cash Flow
averaging >$275M over last 4 fiscal years
FY10 Segment Revenues
FY10 Segment Margins
Investor
Communications
$1,670M (76%)
Securities
Processing
$536M
(24%)
Investor
Communications
EBIT $273M
Margin 16.3%
Securities
Processing
EBIT $99M
Margin 18.5%
Outsourcing
Innovative industry service provider of
outsourcing of critical back-office labor
functions that are integrated with our
processing technology platform:
Operations
Outsourcing
offering
-
growth opportunity to expand existing
relationships and add new clients
•
Outsourcing
(~5%)
Investor Communications
(1)
Securities Processing
Leading global back-office service provider for
both equity and fixed income processing:
Hosted
applications
for
self-clearing
firms
using Broadridge’s
service bureau for:
•
Equity
(~80%)
•
Fixed
Income
(~15%)
World’s largest processor and provider of investor
communications with over one billion
communications processed annually:
Primary
business
unit
is
a
clear
market
leader
with
over
70%
of
Broadridge
revenues
and
pre-tax
earnings
Proxy
communications
and
vote
processing
and
interim
communications
(~65%)
Transaction
reporting
and
fulfillment
services
(~30%)
Other
(~5%)
Securities Processing
(1)
Only service provider offering service bureau and operations outsourcing
on a single multi-entity and multi-currency
platform (1 Percentages represent revenue contribution within
each reporting segment |
 14
ICS Unique Business Systems Processing Model
(1)
Represents Broadridge’s
estimated total number of brokerage firms and banks in the U.S.
and international markets
(2)
Represents Broadridge’s
estimated total number of positions managed by U.S. brokers and
banks
(3)
Represents Broadridge’s
estimated total number of corporate issuers in the U.S.
(4)
Represents total number of Fund Sponsors in the U.S. who manage over
16,000 funds including Mutual Funds, Closed-end Funds,
ETFs
and UITs, according to the Investment Company Institute’s 2009
Investment Company Year Book Proxy
and
Interim
processing
system
is
the
“plumbing”
supporting
the
voting
process for corporate governance |
 15
Bank/Broker-
Dealer
$1,474M (88%)
Mutual Fund
$138M (8%)
Corporate
Issuer
$58M (4%)
Distribution
$781M (47%)
Other
$53M (3%)
Fulfillment
$110M (7%)
Transaction
Reporting
$143M (9%)
Interims
$137M (8%)
Proxy
$447M (27%)
ICS Product and Client Revenue Overview:
We have a strong and diverse product
offering…
ICS is highly resilient due to our deep customer relationships with our
Bank/Broker-Dealer clients
Primarily
Postage
…and we have deep and longstanding
client relationships
Increase in electronic
distribution reduces postage
revenue and increases profits
FY10 Product Revenues
FY10 Client Revenues |
 16
ICS Market Share Overview by Products and Markets
Product depth and relationships with Bank/Broker-Dealers provide high client
retention with large potential upside
We have deep penetration in our core business and clients, yet
large potential to grow market share |
 17
M
A
R
K
E
T
S
H
A
R
E
Equity
(~80%)
Transactions, $238M
Non-transactions, $195M
Fixed Income
(~15%)
Transactions, $50M
Non-transactions, $28M
Outsourcing
(~5%)
$25M
FY10 Product Revenues
Securities Processing North America Market Share Overview(1)
Equity Processing Client Volume
Broadridge
~30%
Competitors
~20%
In-house
~50%
(1)
All market share information is based on management’s 2010
estimates and is part of much larger market. No attempt has been
made to size such market Broadridge
~2%
Untapped
Market
~98%
(>$1 Billion)
In-house
~43%
Competitors
~2%
Broadridge
~55%
Fixed Income (US$ only) Client Volume
High client retention rates
(~98%) with growth opportunity
During recent market turmoil,
BR continued to close sales
with major clients
Fixed Income platform is the
industry standard
BR processes for 11 of the 18
primary dealers of fixed income
securities
In FY10, BR processed on
average approximately $3.5
trillion in trades daily
BR is the only provider of
Operations Outsourcing for
self-clearing firms
>$1 Billion market potential is
based on clearing firms in North
America
Expected to exit FY11 with run-
rate of ~$90M annualized
revenue
Operations Outsourcing |
 18
Securities Processing Solutions Top 15 Clients for FY10
Broadridge
has fared well
during the recent industry
consolidations and financial
crisis
The top 15 SPS clients generate
approximately 70% of the SPS
segment’s revenues
13 of 15 top clients have multi-
years remaining under their
existing agreements; contract
extensions for additional clients
are in progress
Closed contract with Barclays to
handle new trade volume as
result of Lehman
Closed contract with JP Morgan
for Bear Stearns fixed income
processing
Bank of America/Merrill Lynch
transaction resulted in loss of
equity processing business and
win of fixed income processing
business
SPS client relationships are stable in volatile market
Alliance Bernstein
Bank of America/Merrill Lynch*
Barclays Capital Services
BMO Nesbitt Burns
BNP Paribas
CIBC World Markets
Deutsche Bank
E*Trade Group
Edward Jones
J.P. Morgan Chase
Jefferies & Company
Royal Bank of Canada
Scotia Capital
State Street
UBS Securities
Note: The above schedule is an alphabetical listing of the top 15 SPS clients as of
June 30, 2010 based on FY10 revenues * Bank of America/Merrill Lynch includes
loss of equity processing business as previously disclosed Equity
Processing Fixed
Income
Processing
Retail
Institutional
Top
Clients
Outsourcing |
 19
Business Expansion Strategy
Focused on core processing and communication businesses and making
investments in business that leverage these strong industry positions
Offer New
Solutions
Leverage
Industry
Position
Margin
Improvement
Foundation
Five Pillars
•
Improve world class
service scores for
every product every
year
•
Zero losses to
competition
•
Be “indispensable”
•
Increase total
sales year-over-
year
•
Increase existing
client penetration
•
Value
propositions with
“teeth”
•
Improve margins in all
products every year
Data center
Leverage
technology
Smart/Off-shoring
Strict financial
controls
Challenge the status
quo
•
Create (build or buy)
unique solutions enabled
by our heritage
Global outsourcing
Electronic delivery
solutions
Global proxy
Mutual Funds
Global Processing
Expansion
CULTURE
Trusting / Engaging / Accountable / Client-Centric / Committed /
Caring / Passionate/ Ethical “A Great Place to
Work” Vision
Be Indispensable!
We enable the financial services industry
to achieve superior levels of performance through our passion to
deliver extraordinary
value to our clients, shareholders, and associates
Accelerate
Sales
•
More than 2 dozen new
products introduced since
spin-off
Virtual Shareholder
meeting
The Investor Network/
Shareholder Forum
Know-On-Pay
12b-1/ 22c-2 reporting
Compliance
Client On-boarding
Data aggregation/
analytics
Client
Retention
Successful
execution
of
strategy
is
expected
to
accelerate
average
revenue
growth
forecast
from
mid-single digits to high single-digits |
 20
$352
$352
$364
$347
$310
FY10
FY09
FY08
FY07
FY06
Earnings Before Interest & Taxes (1)
($ in millions)
$1,688
$1,655
$1,652
$1,584
$1,504
$521
$418
$479
$483
$365
FY10
FY09
FY08
FY07
FY06
Net Revenues
($ in millions)
Recurring
Event-Driven
Financial Performance is Driven by Recurring Revenues
(1)
Earnings before provision for interest and income taxes is a Non-GAAP financial
measure. In fiscal 2010, it excludes approximately $10 million in interest
expense and impact of F/X. In fiscal 2009, it excludes approximately $14
million in interest expense and impact of F/X and one-time gain of approximately $8
million on purchase of senior notes. In fiscal 2008, it excludes
approximately $30 million in interest expense and impact of F/X
and one-time transition
expenses of approximately $14 million. In fiscal 2007, it excludes approximately
$12 million in interest expense and impact of F/X and one-time transition
expenses of approximately $14 million. In fiscal 2006, it excludes approximately $1
million in interest expense and impact of F/X. We believe that this measure
is useful to investors because it excludes the impact of certain
transactions or events that we expect to occur infrequently in order to provide
meaningful comparisons between current results and previously reported
results. Management, therefore, believes such Non-GAAP measure provides a useful means for
evaluating Broadridge's
comparative operating performance
%
Revenue
81%
77% 78%
80%
76% %
Margins
16.6%
16.8% 17.1%
17.0% 15.9%
$1,869
$2,209 |
 21
Broadridge
FY11 Guidance from Continuing Operations as of November 4,
2010 Guidance does not take into consideration the effect of any
future acquisitions, additional debt and/or share repurchases in excess of the repurchases
needed to be within our 128 million to 130 million diluted weighted-average
outstanding shares guidance. Revenue
($ in millions)
Earnings
FY10
FY11 Range
FY10
FY11 Range
Actual
Low
High
Actual
Low
High
$1,670
$1,641
$1,682
ICS
$273
$271
$284
9%
-2%
1%
Growth % / Margin %
16.3%
16.5%
16.9%
$536
$589
$615
SPS
$99
$80
$96
-4%
10%
15%
Growth % / Margin %
18.5%
13.5%
15.6%
$2,205
$2,230
$2,297
Total Segments
$372
$351
$380
6%
1%
4%
Growth % / Margin %
16.9%
15.7%
16.5%
$2
$0
$0
Other
($25)
($28)
($35)
$1
$7
$11
FX
*
$5
$3
$6
$2,209
$2,237
$2,308
Total Broadridge
$352
$327
$350
7%
1%
4%
Growth % / Margin %
15.9%
14.6%
15.2%
Interest & Other
($10)
($11)
($11)
Total EBT
$342
$316
$339
FY11 Range
Margin %
15.5%
14.1%
14.7%
Segments
Low
High
ICS
$85
$115
Income Taxes
($117)
($114)
($127)
SPS
$75
$100
Tax Rate (a)
34.2%
36.2%
37.5%
Total
$160
$215
Total Net Earnings
$225
$201
$212
Margin %
10.2%
9.0%
9.2%
Diluted Shares
139
130
128
Diluted EPS (GAAP)
$1.62
$1.55
$1.65
Diluted EPS Before 1-Times (Non-GAAP)
(b)
$1.56
$1.55
$1.65
* Includes impact of FX P&L Margin and FX Transaction Activity
(a)
FY10
Full
Year
Tax
Rate
of
34.2%
is
attributable
to
the
release
of
a
valuation
allowance
on
a
deferred
tax
asset
relating
to
tax
loss
carryforwards
of
approximately
$8M.
Excluding the year-to-date benefit the FY10 Full Year tax rate would be
36.5% (b) FY10 Full Year Diluted EPS Before 1-Times (Non-GAAP)
excludes the release of a valuation allowance on a deferred tax asset relating to tax loss carryforwards
of
approximately
$8M
(gain
reflected
in
Income
Taxes).
$0.06
impact
to
EPS.
Closed Sales |
 22
Focused on Capital Stewardship and Long-Term Shareholder Value
Cash Level on
Balance Sheet
•
We expect to keep approximately $100M of cash on hand
Strong Predictable
FCF Allows for
Flexible Capital
Allocation
Options
•
Investing for organic growth
•
Tuck-in acquisitions to sustain organic growth expand product offering
•
Continue to grow dividend payout
•
Pursue stock repurchases to offset any dilution from equity compensation plan
and opportunistic repurchases versus scheduled steady repurchases
Manage to a
Debt to EBITDA
Ratio 1:1
Debt
•
Maintain
investment
grade
rating
with
rating
agencies
as
this
is
important
to
our
large clients and prospects
Mid-single-digit
organic revenue
growth
•
Capitalize on fundamentals driving long-term market growth
•
Invest in and drive new sales of existing solutions
•
Rollout new solutions to enable client efficiencies and facilitate client
growth •
Capture the global securities processing opportunity
Improve Margins
•
Initiatives to sustain and drive continued efficiencies and enhance our
scalability Aim to invest through existing businesses and acquisitions to
generate mid to high single-digit revenue growth and return excess cash
to shareholders |
 23
Summary
Broadridge is a dependable mid-single-digit revenue grower
with a scalable business model providing opportunity for margin
expansion
We expect to continue to invest in our existing businesses and
execute strategic acquisitions to generate mid to high single-
digit average revenue growth
We expect to generate strong free cash flows and aim to return
cash to shareholders through dividends, repurchasing shares to
offset dilution and to opportunistically repurchase shares
|
 24
Appendix
Appendix |
 25
Regulatory Update
(1)
For
our
complete
comments,
see
http://sec.gov/comments/s7-14-10/s71410.shtml
or
http://www.broadridge.com/comment_letters/
The Securities and Exchange Commission (“SEC”) issued its Concept Release
on the U.S. Proxy System on July 14, 2010
Broadridge
submitted comments on the following topics (1):
Vote accuracy
•
Accuracy is critical to the U.S. proxy system
•
Vote
accuracy,
process
integrity
and
transparency
goals
have
been
achieved
through
Broadridge’s
leadership
and
technology investments
Process efficiency
•
The U.S. proxy system supports the needs of the most efficient and liquid markets
in the world •
Broadridge’s
systems and technologies, which support the street clearance and settlement
environment, create significant efficiencies for all constituencies
involved in the proxy distribution process Voting participation
•
Effective
participation
requires
the
provision
of
communications
and
voting
in
ways
that
reflect
beneficial
shareholder
preferences and choices
•
Broadridge’s
system, in which we have invested >$1 billion, accurately and consistently
tracks and applies shareholder delivery preferences to all investments in
investor accounts creating a consistent scalable process across all issuers
•
Broadridge
has pioneered the client-directed voting solution being considered by the SEC
in the Concept Release – another
tangible
example
of
how
Broadridge’s
innovations
raise
investor
participation
Broadridge
has developed a social network solution that we believe would increase levels
of participation, transparency and efficiency beyond what is viewed as
attainable today Broadridge
has consistently identified ways to improve the proxy system’s accuracy and
efficiency
First we invest and then we execute |
 26
Free Cash Flow (Non-GAAP) –
FY10 Actual and FY11 Forecast as of November 4, 2010
Unaudited
(In millions)
FY10
Low
High
Free Cash Flow
(Non-GAAP)
:
Net earnings from continuing operations per GAAP
225
$
201
$
212
$
Depreciation and amortization (includes other LT assets)
57
65
75
Stock-based compensation expense
27
30
30
Other
4
(5)
5
Subtotal
313
291
322
Working capital changes
59
(30)
(25)
Long-term assets & liabilities changes
6
(30)
(20)
Net cash flow provided by continuing operating activities
378
231
277
Cash Flows From Investing Activities
IBM / ITO data center investment
-
(20)
(15)
Capital expenditures & purchased of intangibles
(53)
(45)
(40)
Free cash flow
325
$
166
$
222
$
Cash Flows From Other Investing and Financing Activities
Acquisitions
(35)
(77)
(77)
Clearing capital freed-up
75
-
-
Clearing capital to be freed-up
165
-
-
Stock repurchases net of options proceeds
(212)
(111)
(176)
Long-term debt repayment
-
-
-
Dividends paid
(67)
(76)
(76)
Other (FY10 Disc Ops)
(11)
9
9
Net change in cash and cash equivalents
240
(89)
(98)
Cash and cash equivalents, at the beginning of year
173
413
413
Cash and cash equivalents, at the end of period
413
$
324
$
315
$
(a) Guidance does not take into consideration the effect of any future
acquisitions, additional debt and/or share repurchases in excess
of the repurchases needed to be within our 128 million to 130 million diluted
weighted-average outstanding shares guidance. FY11 Range
(a)
Freed
-up Capital $240M
Free Cash Flow
$166-222M |
 27
Historical Free Cash Flow Non-GAAP to GAAP Reconciliation
Reconciliation of Non-GAAP to GAAP Measures
Free Cash Flow (Non-GAAP)
($ in millions)
(Unaudited)
FY07
FY08
FY09
FY10
Actual
Actual
Actual
Actual
Low
High
Net cash flow provided by continuing operating activities (GAAP)
306
308
277
378
(b)
231
277
Capital expenditures & Intangibles
(a)
(38)
(46)
(30)
(53)
(65)
(55)
Free cash flow (Non-GAAP)
268
$
262
$
247
$
325
$
166
$
222
$
(a) Includes IBM/ITO data center investment
(b) Adjusted for certain non-recurring items in the amount of
approximately $18M due to loss on disposal of discontinued operations
FY11 Range |
 28
Reconciliation of Non-GAAP to GAAP Measures
Free Cash Flow Reconciliation
($ in millions)
FY10
Low
High
Net earnings from continuing operations (GAAP)
225
$
201
$
212
$
Depreciation and amortization (includes other LT assets)
57
65
75
Stock-based compensation expense
27
30
30
Other
4
(5)
5
Subtotal
313
291
322
Working capital changes
59
(30)
(25)
Long-term assets & liabilities changes
6
(30)
(20)
Net cash flow provided by continuing operating activities
378
231
277
Cash Flows From Investing Activities
IBM / ITO data center investment
-
(20)
(15)
Capital expenditures & purchased of intangibles
(53)
(45)
(40)
Free cash flow (Non-GAAP)
325
$
166
$
222
$
FY11 Range
(a)
Guidance
does
not
take
into
consideration
the
effect
of
any
future
acquisitions,
additional
debt
and/or
share
repurchases
in
excess
of
the
repurchases needed to be within our 128 million to 130 million diluted
weighted-average outstanding shares guidance. EBIT Reconciliation
FY10
FY11 Range (a)
($ in millions)
Actual
Low
High
EBIT (Non-GAAP)*
$352
$327
$350
Margin %
17.0%
14.6%
15.2%
Interest & Other
($0)
($11)
($11)
Total EBT (GAAP)
$342
$316
$339
Margin %
15.5%
14.1%
14.7%
EPS Reconciliation
Low
High
Diluted EPS from continuing operations (GAAP)
$1.62
$1.55
$1.65
One-time recognition of a deferred tax asset
($0.06)
-
-
Diluted EPS before One-Times (Non-GAAP)
$1.56
$1.55
$1.65
* Includes impact of FX Transaction Activity
|
 29
Closed Sales to Revenue Contribution
Closed Sales Stats:
Recurring
•
Both ICS and SPS trending toward
longer revenue recognition cycle
•
Larger strategic deals could take 12-
24 months to convert
Event-Driven
•
Majority usually recognized during
the year the deal closed
•
Sales are less predictable
dependent on size of the client
Revenue contribution could be +/-5%
each year depending on the
complexity of the conversion
($ in millions)
Forecast
Recurring
FY09
FY10
FY11
ICS
$55
$80
$35-50
~ Revenue Contribution Year 1-3
55%
35%
10%
50%
40%
10%
35%
40%
25%
SPS
$40
$40
$75-100
~ Revenue Contribution Year 1-3
25%
50%
25%
10%
50%
40%
5%
45%
50%
Event-Driven
$45
$55
$50-65
~ Revenue Contribution Year 1-3
70%
10%
20%
80%
10%
10%
60%
20%
20%
Total Closed Sales
$140
$175
$160-215
~ Revenue Contribution Year 1-3
50%
30%
20%
50%
30%
20%
30%
40%
30% |
 30
Broadridge
ICS Key Statistics
$ in millions
RC= Recurring
ED= Event-Driven
Fee Revenues
(1)
FY08
FY09
FY10
Type
Proxy
Equities
(2)
259.8
$
272.5
$
276.5
$
RC
Stock Record Position Growth
2%
-2%
-1%
Pieces
297.8
288.0
293.2
Mutual Funds
92.1
$
55.0
$
149.7
$
ED
Pieces
176.6
73.5
204.2
Contests/Specials
19.7
$
26.9
$
20.6
$
ED
Pieces
21.2
30.8
26.0
Total Proxy
371.6
$
354.4
$
446.8
$
Total Pieces
495.6
392.3
523.4
Notice and Access Opt-in %
28%
50%
54%
Suppression %
49%
50%
52%
Interims
Mutual Funds
(Annual/Semi-Annual Reports/Annual Prospectuses)
73.9
$
78.1
$
88.8
$
RC
Position Growth
9%
3%
6%
Pieces
401.1
440.5
476.0
Mutual Funds
(Supplemental Prospectuses) & Other
48.9
$
58.0
$
47.8
$
ED
Pieces
301.3
349.6
266.2
Total Interims
122.8
$
136.1
$
136.6
$
Total Pieces
702.4
790.1
742.2
Transaction
Transaction Reporting
124.6
$
132.0
$
142.8
$
RC
Reporting
Fulfillment
Post-Sale Fulfillment
70.4
$
72.9
$
74.0
$
RC
Pre-Sale Fulfillment
37.5
$
36.6
$
35.5
$
ED
Total Fulfillment
107.9
$
109.5
$
109.5
$
Other
Other -
Recurring
0.6
$
0.9
$
12.1
$
RC
Communications
Other -
Event-Driven
(2), (3)
39.9
$
41.3
$
41.2
$
ED
Total Other
40.5
$
42.2
$
53.3
$
Total Fee Revenues
767.4
$
774.2
$
889.0
$
Total Distribution Revenues
807.8
$
756.8
$
780.6
$
Total Revenues as reported -
GAAP
1,575.2
$
1,531.0
$
1,669.6
$
Total RC Fees
529.3
$
556.4
$
594.2
$
Total ED Fees
238.1
$
217.8
$
294.8
$
FY11 Ranges
Low
High
Sales
1%
1%
3%
3%
3%
Losses
-1%
0%
-1%
0%
0%
Key
Net New Business
0%
1%
2%
3%
3%
Revenue
Internal growth
3%
0%
0%
0%
1%
Drivers
Event-Driven
0%
-1%
5%
-5%
-4%
Acquisitions
0%
0%
1%
1%
1%
Distribution
-1%
-3%
1%
-1%
0%
TOTAL
2%
-3%
9%
-2%
1%
(1) As of 4Q09, these items represent fee revenues only and exclude distribution
revenues which are set out separately. The historical numbers have been adjusted to exclude distribution revenues.
(2) For comparability purposes, Other Proxy related fee revenue has been
reclassified from Other Event-Driven to Annual Equity Proxy (FY08: $3.8M, FY09: $4.1M & FY10: $4.5M).
(3) Other includes 12.6M pieces for FY08, 14.4M pieces for FY09 and 10.5M pieces for
FY10 primarily related to corporate actions. |
 31
Broadridge
SPS Key Statistics
$ in millions
RC= Recurring
ED= Event-Driven
FY08
(3)
FY09
FY10
Type
Equity
Transaction-Based
Equity Trades
259.8
$
258.5
$
237.8
$
RC
Internal Trade Growth
12%
6%
-2%
Trade Volume (Average Trades per Day in '000)
(1) (2)
1,559
1,602
1,542
Non-Transaction
Other Equity Services
178.9
$
193.6
$
195.4
$
RC
Total Equity
438.7
$
452.1
$
433.3
$
Fixed Income
Transaction-Based
Fixed Income Trades
51.0
$
52.3
$
49.9
$
RC
Internal Trade Growth
19%
11%
-6%
Trade Volume (Average Trades per Day in '000)
(2)
237
287
283
Non-Transaction
Other Fixed Income Services
24.6
$
29.4
$
27.7
$
RC
Total Fixed Income
75.6
$
81.7
$
77.5
$
Outsourcing
Outsourcing
19.2
$
25.1
$
25.0
$
# of Clients
5
6
9
Total Net Revenue as reported -
GAAP
533.5
$
558.9
$
535.9
$
FY11 Ranges
Low
High
Sales
4%
6%
5%
5%
6%
Losses
-8%
-4%
-4%
-4%
-4%
Key
Net New Business
-4%
2%
2%
1%
2%
Revenue
Transaction & Non-transaction
8%
5%
-2%
0%
4%
Drivers
Concessions
-3%
-3%
-4%
-2%
-2%
Internal growth
5%
2%
-6%
-2%
2%
Acquisitions
0%
1%
0%
11%
11%
TOTAL
1%
5%
-4%
10%
15%
(1) Equity Trade volume adjusted to exclude trades processed under fixed priced
contracts. Management believes excluding this trade volume presents a
stronger correlation between trade volume and Equity Trade revenue. (2) Prior
Year's trade volume re-stated for comparability. (3) FY 2009 trade volumes
re-stated for step-pricing clients; FY 2008 has not been re-stated. |
 32
Broadridge
ICS Definitions
Proxy
Equities - Refers to the proxy
services we provide in connection with annual stockholder meetings for publicly traded
corporate issuers. Annual meetings of public companies include shares held in "street
name" (meaning that they are held of record by brokers or banks, which in turn hold the
shares on behalf of their clients, the ultimate beneficial owners) and shares held in
"registered name" (shares registered directly in the names of their owners). Mutual Funds - Refers to the proxy
services we provide for funds, classes or trusts of an investment company. Open-ended mutual funds are not required
to have annual meetings. As a result, mutual fund proxy services provided to open-ended
mutual funds are driven by a "triggering event." These triggering events can be a change
in directors, fee structures, investment restrictions, or mergers of funds.
Contests - Refers to the proxy
services we provide when a separate agenda is put forth by one or more stockholders that is in
opposition to the proposals presented by management of the company which is separately distributed and
tabulated from the company’s proxy materials.
Specials - Refers to the proxy
services we provide in connection with stockholder meetings held outside of the normal annual
meeting cycle and are primarily driven by special events (e.g., mergers and acquisitions in which the
company being acquired is a public company and needs to solicit the approval of its
stockholders). Interims
Mutual Funds (Annual/Semi-Annual Reports/Annual Prospectuses) – Refers to the services we provide investment
companies in connection with information they are required by regulation to distribute periodically to
their investors. These reports contain pertinent information such as holdings, fund
performance, and other required disclosure. Mutual Funds (Supplemental Prospectuses) – Refers primarily to information required to be provided by mutual funds to
supplement information previously provided in an annual mutual fund prospectus (e.g., change in
portfolio managers, closing funds or class of shares to investors, or restating or clarifying
items in the original prospectus). The events could occur at any time throughout the
year. Other – Refers to communications
provided by corporate issuers
and investment companies to
investors including
newsletters, notices, tax information, marketing materials and other information not required to be
distributed by regulation. Transaction Reporting
Transaction Reporting– Refers
primarily to the printing and distribution of account statements, trade confirmations and tax
reporting documents to account holders, including electronic delivery and archival services.
Fulfillment
Post-Sale Fulfillment – Refers
primarily to the distribution of prospectuses, offering documents, and required regulatory
disclosure information to investors in connection with purchases of securities.
Pre-Sale Fulfillment – Refers
to the distribution of marketing literature, welcome kits, enrollment kits, and investor information
to prospective investors, existing stockholders and other targeted recipients on behalf of
broker-dealers, mutual fund companies and 401(k) administrators.
Other Communications
Other – Refers to the services we
provide in connection with the distribution of communications material not included in the
above definitions such as non-objecting beneficial owner (NOBO) lists, and corporate
actions such as mergers, acquisitions, and tender offer transactions.
|