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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.
May 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
Market leader with high
client retention rates
driven by product innovation
Dependable mid-single-digit
revenue growth business
Approximately 80%
in recurring annual revenues
Strong core Investor
Communications business
which generates over 70% of
annual revenues and earnings
Generate
very strong
free cash flows
Scalable business model
with core business
generating margin expansion
Highly experienced
management team
Aim to invest in existing businesses and acquisitions to generate mid to
high- single-digit revenue growth and return excess cash to
shareholders |
 6
$247
Forecast
(2)
$262
$268
Broadridge Free Cash Flow & Capital Allocation
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
~$35M
(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.
$325
•Doubled annual dividend
amount from $0.28 to $0.56
per share for FY10, and
further increased annual
dividend amount 7% to
$0.60 per share for FY11
•Repurchased 24.1 million
shares pursuant to stock
repurchase plans since
spin-off with an additional
7.9 million shares available
for repurchase as of March
31, 2011
•
Executed strategic
acquisitions to leverage the
Broadridge brand and
distribution channels
FY07
FY08
FY09
FY10
FY11
Free Cash Flow
(Non-GAAP)
(1)
($ in millions)
High: $200
Low: $140
Dividends
Stock
Repurchases
Acquisitions |
 7
Broadridge Mission
•
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
Partner with
Financial Institutions
to:
Increase
Performance
Reduce
Risk & Cost |
 8
Integrated Solutions Spanning the Investment Lifecycle
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
Processing
Reporting
Statements
...Broadridge
touches
investors...
Investment
Decision
(Pre-Trade)
Trade Processing
&
Books and Records
Asset
Servicing
(Post-Trade)
Securities Processing
Global trade processing for equities, options,
mutual funds, and fixed income securities
and operations outsourcing solutions
Investor Communications
Proxy management, corporate governance, and stockholder
communications Clients
Broker-Dealers, Banks, Mutual Funds, Corporate Issuers
Individual (Retail) and Institutional |
 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 Revenue Drivers
A Market Leader
with
High Retention Rates
Recurring Revenue
Complex Proprietary
Processing Platforms
High Client Satisfaction
and Highly Engaged
Associates
Indispensable Provider for
Mission Critical Processing
Recurring
Revenue
(~80%)
Event-
Driven
Revenue
(~20%)
Shareholder Positions
Images and Pieces
Processed
Processing Fees
(Trades Per Day)
# of Accounts
Investor Communication
Solutions
Securities Processing
Solutions |
 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
year
end
th |
       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
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
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 Investor
Communications
$1,670M (76%)
Securities
Processing
$536M
(24%)
Investor
Communications
EBIT $273M
Margin 16.3%
Securities
Processing
EBIT $99M
Margin 18.5%
(1) |
 12
Revenue Growth Drivers
Historical CAGR
Actual
Forecast
(FY05-FY10)
FY10
FY11
6%
Total Revenue Growth
7%
(3)-(2)%
4%
Closed Sales
(Recurring)
4%
2%
(2)%
Client Losses
(2)%
(1)%
2%
Net New Business
2%
1%
3%
Internal Growth
(a)
(2)%
0-1%
0%
Acq/FX/Other
2%
5%
5%
Total Recurring
2%
6-7%
1%
Event-Driven
(b)
& Distribution
5%
(9)%
(a) Internal Growth includes SPS Equity & Fixed Income Trades, ICS Equity & Mutual Fund Stock
Record Gowth, 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 revenue 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: $180
Low: $135
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 Expect acquisitions to enhance the performance of both ICS
and SPS recurring fee revenues Recurring revenue Closed Sales grew at a 9%
CAGR FY05-10 These
recurring
revenues,
especially
in
ICS,
are
due
to
the
high
revenue
retention
rates
and
new
closed
sales
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
$-
$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
$1,289
to $1,300
$150
$-
$25
$50
$75
$100
$125 |
 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
$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
$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 |
 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
16 |
 17
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
Bank/Broker-
Dealer
$1,474M (88%)
Mutual Fund
$138M (8%)
Corporate
Issuer
$58M (4%)
Other
$53M (3%)
Fulfillment
$110M (7%)
Transaction
Reporting
$143M (9%)
Interims
$137M (8%)
Proxy
$447M (27%)
Distribution
$781M (47%) |
 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
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 |
 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
81%
77%
78%
80%
76%
%
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 $1 million in
interest expense and impact of F/X. We believe that this measure is useful to investors because
it excludes the impact of certain transactions or events that we expect to occur infrequently
in order to provide meaningful comparisons between current results and previously reported results. Management, therefore, believes such Non-GAAP measure
provides a useful means for evaluating Broadridge's comparative operating performance
|
 25
Broadridge FY11 Guidance from Continuing Operations
Guidance does not take into consideration the effect of any future acquisitions
beyond the Matrix acquisition which closed in January 2011, additional debt and/or share
repurchases in excess of the repurchases needed to achieve our 128 million
weighted-average outstanding shares guidance. ($ in millions)
FY10
FY11 Range
FY10
FY11 Range
Actual
Low
High
Actual
Low
High
$1,670
$1,549
$1,558
ICS
$273
$210
$219
9%
-7%
-7%
Growth % / Margin %
16.3%
13.5%
14.1%
$536
$593
$599
SPS
$99
$85
$90
-4%
11%
12%
Growth % / Margin %
18.5%
14.3%
15.1%
$2,205
$2,142
$2,157
Total Segments
$372
$294
$310
6%
-3%
-2%
Growth % / Margin %
16.9%
13.7%
14.4%
$2
$1
$1
Other
($25)
($27)
($30)
$1
$7
$14
FX
*
$5
$6
$11
$2,209
$2,150
$2,171
Total Broadridge
$352
$274
$291
7%
-3%
-2%
Growth % / Margin %
15.9%
12.7%
13.4%
Interest & Other
($10)
($10)
($10)
Total EBT
$342
$264
$281
FY11 Range
Margin %
15.5%
12.3%
12.9%
Segments
Low
High
ICS
$90
$130
Income Taxes
($117)
($98)
($102)
SPS
$45
$50
Tax Rate (a)
34.2%
37.0%
36.2%
Total
$135
$180
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
Excluding the year-to-date benefit the FY10 Full Year tax rate would be
36.5% Guidance does not take into consideration the effect of any future
acquisitions, additional debt and/or share repurchases in excess of Closed
Sales Revenue
Earnings
of approximately $8M (gain reflected in Income Taxes). $0.06 impact to EPS.
(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 carry forwards of approximately $8M. (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 carry forwards the repurchases needed to be within our 128 million weighted-average outstanding shares
guidance. |
 26
Focused on Capital Stewardship and Long-Term Shareholder Value
Cash Level on
Balance Sheet
•
We expect to keep approximately $150M of cash on hand
Strong 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 ~2:1
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 |
 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
FY11 Financial Guidance
Figures 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
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)
(42)
(0.01)
(106)
(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
Restructuring
-
(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)
Interest Refinanced Debt
Total Change
(104)
(0.38)
55
0.11
(49)
(0.27)
FY11 (GAAP)
864
$
0.18
$
1,296
$
1.17
$
2,160
$
1.35
$
Notes:
Circled numbers represent change from prior quarter which relates to postage
revenues (primarily related to mix of mailings). No EPS impact.
(A)
Shows only directional view for key initiatives discussed. Does not include forward
looking guidance for core business, acquistions, taxes or share repurchases.
2Q11 YTD
2H11
FY11
FY12
FY13
Actual
Mid-Point Guidance
Mid-Point Guidance
Key Initiatives
(A)
Key Initiatives
(A) |
 30
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:
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/
|
 31
Cash Flow –
3Q11 Results and FY11 Forecast
Unaudited
(In millions)
Nine Months Ended
March 2011
Low
High
Free Cash Flow
(Non-GAAP)
:
Net earnings from continuing operations per GAAP
57
$
166
$
179
$
Depreciation and amortization (includes other LT assets)
51
65
75
Stock-based compensation expense
23
30
30
Other
(7)
(5)
5
Subtotal
124
256
289
Working capital changes
(68)
(30)
(25)
Long-term assets & liabilities changes
(18)
(30)
(20)
Net cash flow provided by continuing operating activities
38
196
244
Cash Flows From Investing Activities
IBM / ITO data center investment
(6)
(10)
(5)
Capital expenditures & software purchases
(24)
(45)
(40)
Free cash flow
8
$
141
$
199
$
Cash Flows From Other Investing and Financing Activities
Acquisitions
(293)
(293)
(293)
Stock repurchases net of options proceeds
(176)
(176)
(176)
Proceeds from Short-term borrowing
240
200
200
Dividends paid
(56)
(76)
(76)
Other (includes Disc Ops)
15
10
12
Net change in cash and cash equivalents
(262)
(194)
(134)
Cash and cash equivalents, at the beginning of year
413
413
413
Cash and cash equivalents, at the end of period
151
$
219
$
279
$
FY11 Range
(a)
Free Cash Flow
$141-199M
(a) Guidance does not take into consideration the effect of any future acquisitions beyond the
Matrix acquisition which closed in January 2011, additional debt and/or share repurchases in
excess of the repurchases needed to achieve our 128 million weighted-average outstanding shares guidance. |
 32
Closed Sales to Revenue Contribution
Closed Sales Stats:
Recurring
•
Both ICS and SPS trending toward longer revenue recognition cycle
•
Larger strategic deals could take 12-24 months to convert
Event-Driven
•
Majority usually recognized during the year the deal closed
•
Sales are less predictable depending on size of the client
Revenue contribution could be +/-5% each year depending on the complexity of
the conversion ($ in millions)
Forecast
Recurring
(B)
FY09
(A)
FY10
FY11
ICS
(C)
$55
$80
$65-100
~ Revenue Contribution Year 1-3
55%
35%
10%
50%
40%
10%
20%
50%
15%
SPS
$30
$40
$45-50
~ Revenue Contribution Year 1-3
33%
67%
0%
10%
40%
50%
10%
20%
60%
Event-Driven
$45
$55
$25-30
~ Revenue Contribution Year 1-3
70%
10%
20%
80%
10%
10%
50%
50%
0%
Total Closed Sales
(B)
$130
$175
$135-180
~ Revenue Contribution Year 1-3
50%
30%
20%
50%
30%
20%
25%
35%
30%
(A)
FY09 Closed Sales were adjusted down to $130M from $140M. The $10M difference relates to the Penson
Canada deal that is now being reflected as an acquisition.
(B)
FY11 Recurring Revenue Closed Sales are expected to contribute revenue over a four year
period. (C)
FY11 Closed Sales include approximately $9M related to acquisitions. |
   33
Revenues and Closed Sales Charts FY05-FY11
($ in millions)
FY05-10
Forecast
FY10-11
Recurring Fee Revenues
FY05
FY06
FY07
FY08
FY09
FY10
CAGR
FY11
Growth Rates
ICS
414
$
480
$
481
$
521
$
547
$
575
$
7%
$607-612
~6%
Growth
16%
0%
8%
5%
5%
SPS
459
$
458
$
509
$
515
$
537
$
513
$
2%
$521-527
2-3%
Growth
0%
11%
1%
4%
-4%
Segment Recurring Fee Revenues
873
$
937
$
990
$
1,036
$
1,084
$
1,088
$
5%
$1,127-1,138
4-5%
Growth
7%
6%
5%
5%
0%
Acquisitions
0
$
18
$
28
$
28
$
33
$
45
$
NM*
$162
NM*
Total Recurring Fee Revenues
873
$
955
$
1,018
$
1,064
$
1,117
$
1,133
$
5%
$1,289-1,300
14-15%
9%
7%
5%
5%
1%
Event-Driven
158
$
186
$
241
$
237
$
216
$
292
$
13%
$175
~(40)%
Growth
18%
30%
-2%
-9%
35%
Distribution
649
$
730
$
821
$
808
$
757
$
781
$
4%
$680-682
~(13)%
Growth
12%
12%
-2%
-6%
3%
Other/FX
(25)
$
(19)
$
(12)
$
22
$
(17)
$
4
$
NM*
$8-14
NM*
Total BR Revenues
1,656
$
1,853
$
2,067
$
2,131
$
2,073
$
2,209
$
6%
$2,150-2,171
(3)-(2)%
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%
$25-30
Growth
38%
48%
29%
-30%
27%
Total Closed Sales
101
$
125
$
112
$
145
$
139
$
175
$
12%
$135-180
Growth
24%
-10%
29%
-4%
26%
*NM= Not Meaningful
($ 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%
~$700
Growth
12%
12%
-2%
-6%
3% |
 34
Historical Free Cash Flow Non-GAAP to GAAP Reconciliation
Reconciliation of Non-GAAP to GAAP Measures
Free Cash Flow (Non-GAAP)
($ 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
(38)
(46)
(30)
(53)
(55)
(45)
Free cash flow (Non-GAAP)
268
$
262
$
247
$
325
$
141
$
199
$
(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
(a) |
 35
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). $0.06 impact to EPS.
EBIT Reconciliation
FY10
FY11 Range
($ in millions)
Actual
Low
High
EBIT (Non-GAAP)*
$352
$274
$291
Margin %
15.9%
12.7%
13.4%
Interest & Other
($10)
($10)
($10)
Total EBT (GAAP)
$342
$264
$281
Margin %
15.5%
12.3%
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
$1.40
* Includes impact of FX Transaction Activity
Free Cash Flow Reconciliation
Nine Months Ended
($ in millions)
March 2011
Low
High
Free Cash Flow
(Non-GAAP)
:
Net earnings from continuing operations (GAAP)
57
$
166
$
179
$
Depreciation and amortization (includes other LT assets)
51
65
75
Stock-based compensation expense
23
30
30
Other
(7)
(5)
5
Subtotal
124
256
289
Working capital changes
(68)
(30)
(25)
Long-term assets & liabilities changes
(18)
(30)
(20)
Net cash flow provided by continuing operating activities
38
196
244
Cash Flows From Investing Activities
IBM / ITO data center investment
(6)
(10)
(5)
Capital expenditures & software purchases
(24)
(45)
(40)
Free cash flow (Non-GAAP)
8
$
141
$
199
$
FY11 Range
(a)
(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 achieve our 128 million
weighted-average outstanding shares guidance. |
 36
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
$
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%
-6%
-6%
TOTAL
2%
-3%
9%
-7%
-7%
(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. |
 37
Broadridge
SPS Key Statistics
$ in millions
RC= Recurring
ED= Event-Driven
FY08
(3)
FY09
FY10
Type
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
Other Equity Services
178.9
$
193.6
$
195.4
$
RC
Total Equity
438.7
$
452.1
$
433.3
$
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
Other Fixed Income Services
24.6
$
29.4
$
27.7
$
RC
Total Fixed Income
75.6
$
81.7
$
77.5
$
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%
4%
4%
Losses
-8%
-4%
-4%
-3%
-3%
Net New Business
-4%
2%
2%
1%
1%
Transaction & Non-transaction
8%
5%
-2%
3%
4%
Concessions
-3%
-3%
-4%
-2%
-2%
Internal growth
5%
2%
-6%
1%
2%
Acquisitions
0%
1%
0%
9%
9%
TOTAL
1%
5%
-4%
11%
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 adjusted for comparability. (3) FY 2009 trade volumes
adjusted for step-pricing clients; FY 2008 has not been adjusted.
Equity
Transaction-Based
Non-Transaction
Fixed Income
Transaction-Based
Non-Transaction
Outsourcing
Key
Revenue
Drivers |
 38
Broadridge ICS Definitions |