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| 8-K - FORM 8-K - BROADRIDGE FINANCIAL SOLUTIONS, INC. | d8k.htm |
 ©
2011 Broadridge Financial Solutions, Inc.
Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial
Solutions, Inc. Broadridge Financial Solutions, Inc.
February 2011
Investor Presentation
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.
Financial information presented for periods prior to the March 30, 2007
spin-off of Broadridge from Automatic Data Processing, Inc.
(“ADP”) represents the operations of the brokerage services
business which were operated as part of ADP. Broadridge’s
financial results for
periods before the spin-off from ADP may not be indicative of our future
performance and do
not necessarily reflect what our results would have been had Broadridge
operated as a
separate, stand-alone entity during the periods presented, including changes in
our operations and capitalization as a result of the spin-off from
ADP. 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
BroadridgeFree Cash Flow & Capital Allocation
Dividends
Stock
Repurchases
Acquisitions
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. (2)
Forecast includes an increase in investment implementation cost of
~$45M (Penson and IBM) and a reversal of FY10 $30M additional
contribution to working capital in
FY11. Also impacted positively in FY10 and negatively in
FY11by Event-Driven revenues.
•Doubled annual dividend
amount from $0.28 to $0.56
per share for FY10, and
further increased annual
dividend amount 7% to
$0.60 per share for FY11
•Repurchased 20.4 million
shares pursuant to stock
repurchase plans since
spin-off with an additional
11.6 million authorization as
of December 31, 2010
•Strategic acquisitions to
leverage the Broadridge
brand and distribution
channels
FY07
FY08
FY09
FY10
FY11
Free Cash Flow
(Non-GAAP)
(1)
($ in millions)
Low: $131
High: $189
$268
$247
Forecast
(2)
$262
$325 |
 7
Broadridge
Mission
Partner with
Financial Institutions
to:
Reduce
Risk & Cost
Increase
Performance
Our
Mission
is
To
Reduce
Clients’
Risk
While
Lowering
Their
Total
Cost
of
Ownership
•
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 |
 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
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
30th
year
end |
       11
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
interimcommunications
(~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 |
 12
Revenue Growth Drivers
Historical CAGR
Actual
Forecast
(FY05-FY10)
FY10
FY11
6%
Total Revenue Growth
7%
(2)-(1)%
4%
Closed
Sales
(Recurring)
4%
3%
(2)%
Client Losses
(2)%
(1)%
2%
Net New Business
2%
2%
3%
Internal Growth
(a)
(2)%
0%
0%
Acq/FX/Other
2%
5-6%
5%
Total Recurring
2%
7-8%
1%
Event-Driven & Distribution
(b)
5%
(9)%
(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 |
 13
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
$77
$92
$63
$82
$95
$119
$24
$33
$49
$63
$43
$56
FY05
FY06
FY07
FY08
FY09
FY10
FY11
Forecast
High: $190
Low: $140
Closed Sales
(Fee Only, $ in millions)
Recurring (RC) Event-Driven (ED)
CAGR* = 12%
RC = 9%
ED = 18%
$175
$145
$125
$112
$139
* CAGR from FY05-10
$101 |
 14
Recurring Fee Revenues and Closed Sales FY05-FY11
ICS recurring fee revenue is a very high quality revenue, 7% CAGR FY05-10
SPS recurring revenue has been more resilient than the markets it serves, 2% CAGR
FY05-10 The acquisitions will enhance the performance of both ICS and SPS
recurring fee revenues Recurring Closed Sales grew at a 9% CAGR
FY05-10 These
recurring
revenues,
especially
in
ICS,
are
due
to
the
high
retention
rates
and
new
closed
sales
$-
$250
$500
$750
$1,000
$1,250
$1,500
FY05
FY06
FY07
FY08
FY09
FY10
FY11
Total Recurring Fee Revenues
Acquisitions
SPS
ICS
Forecast
+9%
+7%
+5%
+5%
+1
%
Growth
Rate
$ in millions
$873
$955
$1,018
$1,064
$1,117
$1,133
$1,284
to $1,301
FY05
FY06
FY07
FY08
FY09
FY10
FY11
Recurring Closed Sales
Recurring
Closed Sales
Forecast
+19
%
(32)
%
+30
%
+16
%
+25
%
Growth
Rate
$ in millions
$77
$92
$63
$82
$95
$119
$110-150 |
 15
Event-Driven Fee and Distribution Revenues FY05-FY11
Volatile, but consistently grows
Position growth CAGR of 7% for FY05-11
Good value-creation, despite volatility
High margin, growing segment
Position growth enables higher revenue growth
New mutual fund solicitation product should
enable market share gains
Distribution revenue should continue to be
flat or down and convert to higher margin
ICS fee revenue
Volatility in distribution revenue is tied to
volatility in event-driven fee revenue
$487
$552
$579
$566
$556
$554
~ $540
$162
$178
$242
$242
$201
$227
~ $160
$0
$250
$500
$750
$1,000
FY05
FY06
FY07
FY08
FY09
FY10
FY11
Total Distribution Revenues
Event-driven
Recurring
Forecast
$649
$781
~$700
$808
$757
$730
$821
Distribution
Revenues
Related
to:
$ in millions
$0
$50
$100
$150
$200
$250
$300
FY05
FY06
FY07
FY08
FY09
FY10
FY11
Total Event
-
Driven Fee Revenues
Contest/Specials/
Other Comm.
Mutual Fund
Supplemental/
Pre-sale
Mutual Fund
Proxy
Forecast
$ in millions
$158
$292
$175
$237
$216
$186
$241 |
 16
ICS Unique Business Systems Processing Model
Proxy and Interim processing system is the “plumbing”
supporting the voting
process for corporate governance
(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 |
 17
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 |
 18
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 |
 19
Matrix Acquisition
Matrix processing system is a leading platform solution supporting
Mutual Fund and ETF trading and administration
National Securities Clearing Corp. (NSCC)
Clearance & Settlement Platform
Matrix Provides Mutual Fund
Processing, Trust, and Custody Services
to Third Party Administrators (TPA)
TPA Client #1
TPA Client #2
TPA Client #3
>130 TPA Clients with $30B
In Assets Under Admin. (AUA)
Matrix Provides Mutual Fund
Processing Services to
Bank/Trust (B/T) Clients
B/T Client #1
B/T Client #2
B/T Client #3
>200 B/T Clients with ~$100B
In Assets Under Admin. (AUA)
Matrix Has Long-Term
Contractual Relationships
with Mutual Fund (MF) Families
and
Provides Connectivity
to >800 ETFs
(Exchange Traded Funds)
MF Client #1
MF Client #2
MF Client #3
>500 Mutual Fund Families
Covering ~25,000 Funds
Matrix Data Hub &
Processing Engine
•Automated Trade & Settlement Processing
•T+1 mutual fund settlement processing
•T+0 money market portal
•Designed for single net settlement execution
•Significantly reduces costs & human error
Matrix Processing Model |
 20
Matrix Value Proposition
Provides Broadridge with an entry into the attractive post-trade mutual fund
processing market Post-trade processing is a large and growing market
($600M in 2010 and expected to grow to $1B in 2015)
Matrix is competitively well positioned with attractive stand-alone
economics Broadridge’s brand halo and sales force positions it
exceptionally well to provide immediate uplift to Matrix’s entire
product suite Win additional sales in third party administrators (TPAs) and
bank trust markets Bring 401(k) product to current and prospective brokerage
clients Enables Broadridge to leverage Matrix’s clients and
relationships to accelerate the mutual fund team’s strategy focused on
data- and distribution-channels
Mutual fund distributors (146 TPAs and 200 bank trusts) comprise
Matrix’s core client base
Matrix has 500 mutual fund families, representing 25,000 funds; it also has
connectivity to 800 ETFs
By positioning Broadridge as a distributor of mutual funds, Matrix enhances
Broadridge’s ability to sell Access Data solutions, statements,
fulfillment, proxy solicitation, etc. Affords Broadridge immediate
cross-sell opportunities to Matrix’s TPA and trust client base for
client communications, data storage and archiving |
 21
M
A
R
K
E
T
S
H
A
R
E
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
Equity
(~80%)
Transactions, $238M
Non-transactions, $195M |
 22
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 |
 23
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
|
 24
$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
%
Revenue
%
Margins
16.6%
16.8% 17.1% 17.0%
15.9%
$1,869
$2,209
(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 $1 million in interest
expense and impact of F/X. We believe that this measure is useful to investors because it excludes the impact of certain transactions or events that we expect to occur
infrequently in order to provide meaningful comparisons between current results and previously
reported results. Management, therefore, believes such Non-GAAP measure provides a
useful means for evaluating Broadridge's comparative operating performance
81%
77%
78%
80%
76% |
 25
Broadridge
FY11 Guidance from Continuing Operations
Guidance does not take into consideration the effect of any future acquisitions
beyond the Matrix acquisition which closed in January 2011, additional debt and/or share
repurchases in excess of the repurchases needed to achieve our 128 million
weighted-average outstanding shares guidance. ($ in millions)
FY10
FY11 Range
FY10
FY11 Range
Actual
Low
High
Actual
Low
High
$1,670
$1,567
$1,578
ICS
$273
$216
$226
9%
-6%
-6%
Growth % / Margin %
16.3%
13.8%
14.3%
$536
$589
$599
SPS
$99
$80
$88
-4%
10%
12%
Growth % / Margin %
18.5%
13.5%
14.6%
$2,205
$2,156
$2,177
Total Segments
$372
$296
$314
6%
-2%
-1%
Growth % / Margin %
16.9%
13.7%
14.4%
$2
$1
$1
Other
($25)
($28)
($30)
$1
$8
$14
FX
*
$5
$6
$9
$2,209
$2,164
$2,191
Total
Broadridge
(EBIT:
Non-GAAP
)
$352
$274
$293
7%
-2%
-1%
Growth % / Margin %
15.9%
12.7%
13.4%
Interest & Other
($10)
($10)
($10)
Total EBT (GAAP)
$342
$264
$283
FY11 Range
Margin %
15.5%
12.2%
12.9%
Segments
Low
High
ICS
$65
$90
Income Taxes
($117)
($98)
($103)
SPS
$75
$100
Tax Rate (a)
34.2%
37.0%
36.5%
Total
$140
$190
Total Net Earnings
$225
$166
$179
Margin %
10.2%
7.7%
8.2%
Diluted Shares
139
128
128
Diluted EPS (GAAP)
$1.62
$1.30
$1.40
Diluted EPS Before 1-Times (Non-GAAP)
(b)
$1.56
$1.30
$1.40
* Includes impact of FX P&L Margin and FX Transaction Activity
Closed Sales
Revenue
Earnings
(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. |
 26
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
AllocationOptions
•
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 1:1Debt
•
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 |
 27
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
|
 28
Appendix
Appendix |
 29
1
half historically represents ~40% of total year revenues and ~30% of total year
EBIT due to seasonality
of
Issuer
Equity
Proxy
activity
1
half EPS
down
$0.38
primarily
due
to
fall
off
in
event-driven
revenues
($0.28)
and
other
previously
announced “grow-overs”
(Bank
of
America
Merrill
Lynch
(“BAML”)
client
loss,
Penson
and
one-time
FY10 foreign tax benefit)
2
half EPS
expected
to
be
up
$0.06
to
$0.16
(mid-point
$0.11)
year
over
year
as
positive
momentum
in
recurring
revenues,
acquisitions
and
expense
savings
along
with
“bottoming
out”
of
event-driven
revenues,
creates
growth
opportunities
heading
into
FY12
and
beyond
Recurring revenues
up
due
to
positive
contributions
from
Net
New
Business
and
some
improvement
in
internal
growth
(stock
record
positions/trade
volumes).
Positioned
for
positive
growth
into
FY12
given
expected
recurring
sales
and
lower
losses
as
BAML
hits
its
anniversary
date
in
Q4
FY11
Event-driven
revenues
down
in
2
half
at
about
the
same
as
1
half
excluding
2
large
Q2
jobs
in
FY10.
Expect
we are
at
the
“bottom”
here
so
future
years
should
see
uptick
since
not
aware
of
secular
changes
Acquisitions,
including
Matrix,
adding
$69M
in
revenues
and
slightly
accretive
this
year
and
expected
to
drive
growth
in
FY12
(carryover
and
organic
growth)
Key initiatives
are
on
track
and
as
expected,
dilutive
in
FY11,
then
positive
contributions
from
Penson
and
MSSB
offset
by
IBM/ITO
integration
in
FY12
with
pick
up
in
FY13
of
$0.27/share
Expense
reductions
in
2
half,
partially
offset
by
one-time
charge,
benefit
FY12
and
beyond
by
$0.11 to
$0.14/share
st
st
nd
nd
st
nd
1
Half
Results
and
2
Half
Guidance
Addressing
Key
Initiatives
(see next page for Revenue/EPS reconciliation year/year)
st
nd |
 30
FY11 Financial Guidance
$ in millions, except EPS
Revenues
EPS
Revenues
EPS
Revenues
EPS
Revenues
EPS
Revenues
EPS
FY10
(GAAP)
968
$
0.56
$
1,241
$
1.06
$
2,209
$
1.62
$
Core Business
Recurring
-
-
27
0.11
27
0.11
Closed Sales (without MSSB)
16
0.07
30
0.11
46
0.18
Losses
(13)
(0.06)
(11)
(0.04)
(24)
(0.10)
Internal Growth
(3)
(0.01)
8
0.04
5
0.03
`
Event-Driven Fees
(84)
(0.25)
(32)
(0.09)
(116)
(0.34)
Distribution
(64)
(0.03)
(19)
(0.01)
(83)
(0.04)
Acquisitions
21
-
69
0.01
90
0.01
Key Initiatives
Penson
11
(0.04)
19
(0.04)
30
(0.08)
20
0.08
-
-
MSSB
12
-
7
0.02
19
0.02
5
0.03
-
0.03
IBM
-
-
-
(0.01)
-
(0.01)
-
(0.12)
-
0.24
Key Initiatives
23
(0.04)
26
(0.03)
49
(0.07)
25
(0.01)
-
0.27
Other
One-time Charge
-
-
-
(0.05)
-
(0.05)
-
0.11
-
0.03
Expense Savings / FX / Other
-
(0.02)
7
0.08
7
0.06
Share Repurchases
-
0.02
-
0.09
-
0.11
Tax Rate
-
(0.06)
-
-
-
(0.06)
Total Change
(104)
(0.38)
78
0.11
(26)
(0.27)
FY11
(GAAP)
864
$
0.18
$
1,319
$
1.17
$
2,183
$
1.35
$
Note:
(A)
1st Half FY11
Actual
Mid-Point Guidance
Mid-Point Guidance
Key Initiatives
(A)
Key Initiatives
(A)
2nd Half FY11
FY11
FY12
FY13
Shows only directional view for key initiatives discussed. Does not include forward looking guidance
for core business, acquistions, taxes or share repurchases. |
 31
Regulatory Update
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
(1) For our complete comments, see http://sec.gov/comments/s7-14-10/s71410.shtml or
http://www.broadridge.com/comment_letters/ |
 32
Cash Flow –
2Q11 Results and FY11 Forecast
(a)
Guidance
does
not
take
into
consideration
the
effect
of
any
future
acquisitions
beyond
the
Matrix
acquisition
which
closed
in
January
2011,
additional
debt and/or share repurchases in excess of the repurchases needed to achieve our
128 million weighted-average outstanding shares guidance. Unaudited
(In millions)
Six Months Ended
December 2010
Low
High
Free
Cash
Flow
(Non-GAAP)
:
Net earnings from continuing operations (GAAP)
24
$
166
$
179
$
Depreciation and amortization (includes other LT assets)
32
65
75
Stock-based compensation expense
15
30
30
Other
(1)
(5)
5
Subtotal
70
256
289
Working capital changes
(33)
(30)
(25)
Long-term assets and liabilities changes
(10)
(30)
(20)
Net cash flow (used in) provided by continuing operating activities
27
196
244
Cash Flows From Investing Activities
IBM / ITO data center investment
-
(20)
(15)
Capital expenditures and software purchases
(16)
(45)
(40)
Free cash flow (Non-GAAP)
11
$
131
$
189
$
Cash
Flows
From
Other
Investing
and
Financing
Activities
Acquisitions
(96)
(297)
(297)
Stock repurchases net of options proceeds
(112)
(176)
(176)
Long-term debt proceeds
-
200
200
Dividends paid
(38)
(76)
(76)
Other (includes Disc Ops)
10
10
12
Net change in cash and cash equivalents
(225)
(208)
(148)
Cash and cash equivalents, at the beginning of year
413
413
413
Cash and cash equivalents, at the end of period
188
$
205
$
265
$
FY11 Range
(a)
Free Cash Flow
$131-189M |
 33
Closed Sales to Revenue Contribution
Closed Sales Stats:
Recurring
•
Both ICS and SPS trending toward longer revenue recognition cycle
•
Larger strategic deals could take 12-24 months to convert
Event-Driven
•
Majority usually recognized during the year the deal closed
•
Sales are less predictable depending on size of the client
Revenue contribution could be +/-5% each year depending on the complexity of
the conversion ($ in millions)
Forecast
Recurring
FY09
FY10
FY11
ICS
$55
$80
$35-50
~ Revenue Contribution Year 1-3
55%
35%
10%
50%
40%
10%
33%
33%
33%
SPS
$40
$40
$75-100
~ Revenue Contribution Year 1-3
25%
50%
25%
10%
50%
40%
10%
30%
60%
Event-Driven
$45
$55
$30-40
~ Revenue Contribution Year 1-3
70%
10%
20%
80%
10%
10%
80%
20%
0%
Total Closed Sales
$140
$175
$140-190
~ Revenue Contribution Year 1-3
50%
30%
20%
50%
30%
20%
30%
30%
40% |
 34
Revenues and Closed Sales Charts FY05-FY11
($ in millions)
FY05-10
Forecast
Recurring Fee Revenues
FY05
FY06
FY07
FY08
FY09
FY10
CAGR
FY11
ICS
414
$
480
$
481
$
521
$
547
$
575
$
7%
$608-615
Growth
16%
0%
8%
5%
5%
SPS
459
$
458
$
509
$
515
$
537
$
513
$
2%
$512-522
Growth
0%
11%
1%
4%
-4%
Segment Recurring Fee Revenues
873
$
937
$
990
$
1,036
$
1,084
$
1,088
$
5%
$1,120-1,137
Growth
7%
6%
5%
5%
0%
Acquisitions
0
$
18
$
28
$
28
$
33
$
45
$
NM*
$164
Total Recurring Fee Revenues
873
$
955
$
1,018
$
1,064
$
1,117
$
1,133
$
5%
$1,284-1,301
9%
7%
5%
5%
1%
Event-Driven
158
$
186
$
241
$
237
$
216
$
292
$
13%
$175
Growth
18%
30%
-2%
-9%
35%
Distribution
649
$
730
$
821
$
808
$
757
$
781
$
4%
$698-701
Growth
12%
12%
-2%
-6%
3%
Other/FX
(25)
$
(19)
$
(12)
$
22
$
(17)
$
4
$
NM*
$8-14
Total BR Revenues
1,656
$
1,853
$
2,067
$
2,131
$
2,073
$
2,209
$
6%
$2,164-2,191
Growth
12%
12%
3%
-3%
7%
Recurring Closed Sales
77
$
92
$
63
$
82
$
95
$
119
$
9%
$110-150
Growth
19%
-32%
30%
16%
25%
ED Closed Sales
24
$
33
$
49
$
63
$
44
$
56
$
18%
$30-40
Growth
38%
48%
29%
-30%
27%
Total Closed Sales
101
$
125
$
112
$
145
$
139
$
175
$
12%
$140-190
Growth
24%
-10%
29%
-4%
26%
*NM= Not Meaningful
($ in millions)
FY05-10
Forecast
Event-Driven Fee Revenues
FY05
FY06
FY07
FY08
FY09
FY10
CAGR
FY11
Mutual Fund Proxy
51
$
61
$
79
$
92
$
55
$
150
$
24%
35
$
Mutual Fund Supplemental/ Pre-sale
70
$
76
$
88
$
86
$
95
$
83
$
3%
85
$
Contest/ Specials/ Other Communications
38
$
49
$
73
$
59
$
67
$
59
$
9%
55
$
Total Event-Driven Fee Revenues
158
$
186
$
241
$
237
$
216
$
292
$
13%
175
$
Growth
18%
30%
-2%
-9%
35%
Recurring Distribution Revenues
487
$
552
$
579
$
566
$
556
$
554
$
3%
~$540
Growth
13%
5%
-2%
-2%
0%
ED Distribution Revenues
162
$
178
$
242
$
242
$
201
$
227
$
7%
~$160
Growth
10%
36%
0%
-17%
13%
Total Distribution Revenues
649
$
730
$
821
$
808
$
757
$
781
$
4%
~$700
Growth
12%
12%
-2%
-6%
3% |
 35
Historical Free Cash Flow Non-GAAP to GAAP Reconciliation
Reconciliation of Non-GAAP to GAAP Measures
Free Cash Flow (Non-GAAP)
($ 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)
196
244
Capital expenditures & Intangibles (a)
(38)
(46)
(30)
(53)
(65)
(55)
Free cash flow (Non-GAAP)
268
$
262
$
247
$
325
$
131
$
189
$
(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 |
 36
Reconciliation of Non-GAAP to GAAP Measures
(a) 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). $0.06 impact to EPS.
Free Cash Flow Reconciliation
Six Months Ended
FY11 Range (a)
($ in millions)
December 2010
Low
High
Net earnings from continuing operations (GAAP)
24
$
166
$
179
$
Depreciation and amortization (includes other LT assets)
32
65
75
Stock-based compensation expense
15
30
30
Other
(1)
(5)
5
Subtotal
70
256
289
Working capital changes
(33)
(30)
(25)
Long-term assets and liabilities changes
(10)
(30)
(20)
Net cash flow (used in) provided by continuing operating activities
27
196
244
Cash Flows From Investing Activities
IBM / ITO data center investment
-
(20)
(15)
Capital expenditures and purchases of intangibles
(16)
(45)
(40)
Free cash flow (Non-GAAP)
11
$
131
$
189
$
EBIT Reconciliation
FY10
FY11 Range (a)
($ in millions)
Actual
Low
High
EBIT (Non-GAAP)*
$352
$274
$293
Margin %
15.9%
12.7%
13.4%
Interest & Other
($10)
($10)
($10)
Total EBT (GAAP)
$342
$264
$283
Margin %
15.5%
12.2%
12.9%
EPS Reconciliation
Low
High
Diluted EPS from continuing operations (GAAP)
$1.62
$1.30
$1.40
One-time recognition of a deferred tax asset
($0.06)
-
-
Diluted EPS before One-Times (Non-GAAP)
(a)
$1.56
$1.30
$1.40
* Includes impact of FX Transaction Activity
(a) Guidance does not take into consideration the effect of any future acquisitions beyond the
Matrix acquisition which closed in January 2011, additional debt and/or share repurchases in
excess of the repurchases needed to achieve our 128 million weighted-average outstanding shares guidance. |
 37
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
73.9
$
78.1
$
88.8
$
RC
Position Growth
9%
3%
6%
Pieces
401.1
440.5
476.0
Mutual Funds
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
$
FY11
Total RC Fees
529.3
$
556.4
$
594.2
$
~$700
Total ED Fees
238.1
$
217.8
$
294.8
$
$175
Ranges
Low
High
Sales
1%
1%
3%
2%
2%
Losses
-1%
0%
-1%
0%
0%
Key
Net New Business
0%
1%
2%
2%
2%
Revenue
Internal growth
3%
0%
0%
0%
0%
Drivers
Event-Driven
0%
-1%
5%
-7%
-7%
Acquisitions
0%
0%
1%
4%
4%
Distribution
-1%
-3%
1%
-5%
-5%
TOTAL
2%
-3%
9%
-6%
-6%
(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. (Supplemental Prospectuses)
& Other (Annual/Semi-Annual Reports/Annual Prospectuses)
|
 38
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%
3%
4%
Losses
-8%
-4%
-4%
-3%
-3%
Key
Net New Business
-4%
2%
2%
0%
1%
Revenue
Transaction & Non-transaction
8%
5%
-2%
2%
3%
Drivers
Concessions
-3%
-3%
-4%
-2%
-2%
Internal growth
5%
2%
-6%
0%
1%
Acquisitions
0%
1%
0%
10%
10%
TOTAL
1%
5%
-4%
10%
12%
(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. |
 39
Broadridge
ICS Definitions
Proxy
Interims
Transaction Reporting
Fulfillment
Other Communications
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).
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. 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. 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).
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.
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.
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.
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.
Refers primarily to the distribution of prospectuses, offering documents, and required regulatory disclosure information to investors
in connection with purchases of securities.
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.
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.
Equities
-
Mutual Funds -
Contests -
Mutual
Funds
(Annual/Semi-Annual
Reports/Annual
Prospectuses)
–
Refers
to
the
services
we
provide
investment
companies
in
connection
with
information
Mutual
Funds
(Supplemental
Prospectuses)
–
Refers
primarily
to
information
required
to
be
provided
by
mutual
funds
to
supplement
information
previously
Other –
Transaction
Reporting
–
Post-Sale Fulfillment –
Pre-Sale Fulfillment –
Other –
Specials - |