Broadridge Reports Fourth Quarter and Fiscal 2021 Results

Broadridge Financial Solutions, Inc. (NYSE:BR) today reported financial results for the fourth quarter and fiscal year 2021. Results compared with the same period last year were as follows:

Summary Financial Results			Fourth Quarter						Fiscal Year
Dollars in millions, except per share data			2021		2020		Change		2021 Advertisement		2020		Change
Recurring fee revenues			$1,065		$930		15%		$3,333		$3,036		10%
Total revenues Advertisement			$1,532		$1,362		12%		$4,994		$4,529		10%
Operating income			281		299		(6%) Advertisement		679		625		9%
Margin			18.4%		21.9%				13.6%		13.8%
Adjusted Operating income – Non-GAAP			349 Advertisement		335		4%		902		795		13%
Margin			22.8%		24.6%				18.1%		17.5% Advertisement
Diluted EPS			$2.20		$1.97		12%		$4.65		$3.95		18%
Adjusted EPS – Non-GAAP			$2.19		$2.15 Advertisement		2%		$5.66		$5.03		13%
Closed sales			$118		$112		6%		$242		$239 Advertisement		2%

“Broadridge delivered strong fiscal year 2021 results, with 10% Recurring revenue growth, 13% Adjusted EPS growth, and record sales driven by increased investor participation and strong demand for digital solutions,” said Tim Gokey, Broadridge’s CEO.

“We have continued to invest in our long-term growth both organically and with the recent acquisition of Itiviti.  We are also continuing to return cash to our shareholders, and we are raising our annual dividend by 11% to $2.56. Broadridge has increased its annual dividend every year since we became a public company, and we have announced double digit increases in eight of the past nine years, highlighting our commitment to delivering long-term shareholder returns,” Mr. Gokey added.

“Looking ahead to fiscal year 2022, we expect another strong year, with 12-15% Recurring revenue growth, continued margin expansion, and 11-15% Adjusted EPS growth. Broadridge continues to execute on our long-term strategic goals across Governance, Capital Markets and Wealth & Investment Management, and we remain on track to deliver at the higher end of our three-year financial objectives.”

Fiscal Year 2022 Financial Guidance

Recurring revenue growth		12-15%
Adjusted Operating income margin – Non-GAAP		~19%
Adjusted earnings per share growth – Non-GAAP Advertisement		11 – 15%
Closed sales		$240 – 280M

Financial Results for Fourth Quarter Fiscal Year 2021 compared to Fourth Quarter Fiscal Year 2020

• Total revenues increased 12% to $1,532 million from $1,362 million in the prior year period.
  • Recurring fee revenues increased 15% to $1,065 million from $930 million. The increase was primarily driven by 5pts of net new business and 7pts of internal growth. Internal growth of 7pts was driven by ICS. Acquisitions also contributed 3pts of growth primarily from the acquisition of Itiviti Holding AB (“Itiviti”).
  • Event-driven fee revenues increased $5 million, or 8%, to $73 million, due to increased equity contests, capital markets and other communications.
  • Distribution revenues increased $21 million, or 5%, to $429 million, driven by an increase in the volume of customer communications.
• Operating income was $281 million, a decrease of $17 million, or 6%. Operating income margin decreased to 18.4%, compared to 21.9% for the prior year period due to higher amortization expense from acquired intangible assets as well as higher spend from growth initiatives, more than offsetting the growth in Recurring and Event-driven revenues.
  • Adjusted Operating income was $349 million, an increase of $14 million, or 4%. The increase in Adjusted Operating income was driven by higher recurring and event-driven revenues offset by higher spending on growth initiatives. Adjusted Operating income margin decreased to 22.8%, compared to 24.6% for the prior year period due to higher spend on growth initiatives.
• Interest expense, net was $18 million, an increase of $2 million, driven by higher average debt outstanding.
• The effective tax rate was 22.6% compared to 22.1% in the prior year period. The increase in the effective tax rate was driven by the reduced impact of discrete tax items relative to pre-tax income in the current period compared to the prior year period.
• Net earnings increased 13% to $260 million and Adjusted Net earnings increased 3% to $258 million.
  • Diluted earnings per share increased 12% to $2.20, compared to $1.97 in the prior year period and Adjusted earnings per share increased 2% to $2.19, compared to $2.15 in the prior year period.

Segment and Other Results for Fourth Quarter Fiscal Year 2021 compared to Fourth Quarter Fiscal Year 2020

Investor Communication Solutions (“ICS”)

• ICS total revenues were $1,222 million, an increase of $129 million, or 12%.
  • Recurring fee revenues increased $103 million, or 17%, to $719 million. The increase was attributable to 5pts of revenue from net new business and 12pts of revenue from internal growth. Internal growth benefited from higher volume of equity proxy, mutual fund and exchange-traded fund communications.
  • Event-driven fee revenues increased $5 million, or 8%, to $73 million, due to increased equity contests, capital markets and other communications.
  • Distribution revenues increased $21 million, or 5%, to $429 million primarily from an increase in the volume of customer communications.
• ICS earnings before income taxes were $291 million, an increase of $32 million, or 12%, primarily due to the increase in Recurring fee revenues and Event-driven fee revenues. Pre-tax margins increased to 23.9% from 23.8%.

Global Technology and Operations (“GTO”)

• GTO Recurring fee revenues were $346 million, an increase of $32 million, or 10%, driven primarily by 9pts of Recurring fee revenue growth from the Itiviti acquisition.
• GTO earnings before income taxes were $31 million, a decrease of $41 million, or 57%, compared to $72 million in the prior year period. The earnings decrease was driven by increased amortization of acquired intangibles, increased expenditures to implement and support new business, and spending on growth initiatives more than offsetting higher revenues from acquisitions. Pre-tax margins decreased to 9.0% from 23.0%.

Other

• Other Income before income tax increased to $6 million from a Loss before income tax of $39 million in the prior year period. The increase was primarily due to a non-operating gain on an acquisition-related financial instrument, partially offset by spend on growth and other initiatives, and higher performance-based compensation expense.

Financial Results for Fiscal Year 2021 compared to Fiscal Year 2020

• Total revenues increased 10% to $4,994 million from $4,529 million in the prior year period.
  • Recurring fee revenues increased 10% to $3,333 million from $3,036 million driven primarily by growth from 5pts of new business onboarding, 3pts of internal growth, and 2pts related to the impact of acquisitions. Internal growth of 3pts was driven by increased equity and interim positions in ICS and primarily higher equity trade volumes in GTO, partially offset by lower interest rates on cash balances we hold for retirement accounts, lower customer communication volumes, and lower GTO license revenues.
  • Event-driven fee revenues increased $59 million, or 33%, to $237 million, due to increased equity contests and mutual fund proxy and other communications.
  • Distribution revenues increased $104 million, or 7%, to $1,555 million, driven by an increase in the volume of customer and regulatory communications as well as the mix of customer communication mailings.
• Operating income was $679 million, an increase of $54 million, or 9%. Operating income margin decreased to 13.6% from 13.8% in the prior year period.
  • Adjusted Operating income was $902 million, an increase of $107 million, or 13%. Adjusted Operating income margin increased to 18.1%, compared to 17.5% for the prior year period.
  • The increase in Adjusted Operating income was due to the impact of higher Recurring fee revenues and higher Event-driven fee revenues.
• Interest expense, net was $55 million, a decrease of $4 million, from lower average interest rates on borrowings.
• The effective tax rate was 21.4% compared to 20.2% in the prior year period. The increase in the effective tax rate was driven by the reduced impact of discrete tax items.
• Net earnings increased 18% to $548 million and Adjusted Net earnings increased 13% to $667 million.
  • Diluted earnings per share increased 18% to $4.65, compared to $3.95 in the prior year period and Adjusted earnings per share increased 13% to $5.66, compared to $5.03 in the prior year period.
  • The increases in Diluted earnings per share and Adjusted earnings per share were primarily due to the increase in Recurring fee revenues and higher Event-driven fee revenues.

Segment and Other Results for Fiscal Year 2021 compared to Fiscal Year 2020

ICS

• ICS total revenues were $3,868 million, an increase of $376 million, or 11%.
  • Recurring fee revenues increased $213 million, or 11%, to $2,075 million. The increase was attributable to 5pts of revenue from net new business, 5pts of revenue from internal growth, and 1pt of revenue from acquisitions. Internal growth resulted from increased equity and interim positions, partially offset from the impact of lower interest rates on retirement cash accounts and lower volumes in customer communications.
  • Event-driven fee revenues increased $59 million, or 33%, to $237 million, primarily from increased equity contests and mutual fund proxy and other communications.
  • Distribution revenues increased $104 million, or 7%, to $1,555 million driven by an increase in the volume of customer and regulatory communications as well as the mix of customer communication mailings.
• ICS earnings before income taxes were $606 million, an increase of $141 million, or 30%, primarily due to the increase in Recurring fee revenues and Event-driven fee revenues. Pre-tax margins increased to 15.7% from 13.3%.

GTO

• GTO Recurring fee revenues were $1,258 million, an increase of $84 million, or 7%, driven primarily by Net New Business. Internal growth was impacted by higher equity trading volumes offset by lower license sales. Acquisitions contributed 3 points to growth primarily from the Itiviti Acquisition.
• GTO earnings before income taxes were $223 million, a decrease of $22 million, or 9%, compared to $245 million in the prior year period. The earnings decrease was due to expenditures to implement and support new business, increased amortization of acquired intangibles and spending on growth initiatives more than offsetting higher organic revenues and higher revenues from acquisitions. Pre-tax margins decreased to 17.7% from 20.9%.

Other

• Other Loss before income tax increased 5% to $153 million from $146 million in the prior year period. The increased loss before income taxes was primarily due to costs associated with the Company’s real estate realignment initiative, including lease exit and impairment charges and other facility exit costs; higher performance-based compensation expense; higher spending on growth initiatives; and certain expenses associated with the Covid-19 pandemic; partially offset by a non-operating gain on a financial instrument designed to minimize the Company’s foreign exchange risk associated with the Itiviti acquisition net of acquisition-related costs; and charges associated with the agreement the Company entered into with International Business Machines Corporation for private cloud services (the “IBM Private Cloud Agreement”) that occurred in the prior year period.

Fourth Quarter 2021 Acquisitions

During the fourth quarter of fiscal year 2021, Broadridge completed two acquisitions with an aggregate purchase price of $2.6 billion

• Itiviti: Broadridge’s acquisition of Itiviti closed on May 12, 2021 at a purchase price of $2.6 billion. Itiviti is a leading provider of trading and connectivity technology to the capital markets industry. The acquisition of Itiviti extends the Company’s back office capabilities into the front office and deepens its multi-asset class solutions, better enabling the Company to help its clients adapt to a rapidly evolving marketplace. Itiviti is included in the Company’s GTO reportable segment.

• AdvisorStream Ltd. (“AdvisorStream”): During the quarter Broadridge also acquired AdvisorStream, a leading provider of digital engagement and marketing solutions for the global wealth and insurance industries. AdvisorStream’s advisor marketing platform enables advisors to drive revenue and growth by providing personalized and consistent client communications. AdvisorStream is included in the Company’s GTO reportable segment.

Additional Acquisitions

Subsequent to June 30, 2021, Broadridge announced the acquisitions of the assets of Jordan & Jordan, as well as the approximately 68% of Alpha Omega that Broadridge did not already own.

The acquisition of the Jordan & Jordan assets will enable Broadridge to further extend its strategic regulatory reporting capabilities as well as add compliance and regulatory reporting consulting capabilities. The Alpha Omega acquisition will enable Broadridge to fully consolidate Alpha Omega’s post-trade matching and consolidation solution into its existing NYFIX connectivity and FIX infrastructure to better automate buy-side and sell-side firms’ trade matching processes.

Dividend Declaration and Increase

Advertisement

On August 11, 2021, Broadridge’s Board of Directors (“the Board”) declared a quarterly dividend of $0.64 per share payable on October 5, 2021 to stockholders of record on September 15, 2021. This declaration reflects the Board’s approval of an increase in the annual dividend amount by 11% from $2.30 to $2.56 per share, subject to the discretion of the Board to declare quarterly dividends. With this increase, the Company’s annual dividend has increased for the 15th consecutive year since becoming a public company in 2007.

Earnings Conference Call

An analyst conference call will be held today, August 12, 2021 at 8:30 a.m. ET. A live webcast of the call will be available to the public on a listen-only basis. To listen to the live event and access the slide presentation, visit Broadridge’s Investor Relations website at www.broadridge-ir.com prior to the start of the webcast. To listen to the call, investors may also dial 1-877-328-2502 within the United States and international callers may dial 1-412-317-5419.

A replay of the webcast will be available and can be accessed in the same manner as the live webcast at the Broadridge Investor Relations site. Through August 19, 2021, the recording will also be available by dialing 1-877-344-7529 passcode: 10158595 within the United States or 1-412-317-0088 passcode: 10158595 for international callers.

Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures 

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

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

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Earnings and Adjusted Earnings Per Share

These Non-GAAP measures reflect Operating income, Operating income margin, Net earnings, and Diluted earnings per share, as adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of: (i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) IBM Private Cloud Charges, (iv) Real Estate Realignment and Covid-19 Related Expenses, (v) Investment Gain, (vi) Software Charge (vii) Gain on Acquisition-Related Financial Instrument, and (viii) Gain on Sale of a Joint Venture Investment. Amortization of Acquired Intangibles and Purchased Intellectual Property represents non-cash amortization expenses associated with the Company’s acquisition activities.  Acquisition and Integration Costs represent certain transaction and integration costs associated with the Company’s acquisition activities. IBM Private Cloud Charges represent a charge on the hardware assets transferred to IBM and other charges related to the IBM Private Cloud Agreement.  Real Estate Realignment and Covid-19 Related Expenses represent costs associated with the Company’s real estate realignment initiative, including lease exit and impairment charges and other facility exit costs, as well as certain expenses associated with the Covid-19 pandemic. Investment Gain represents a non-operating, non-cash gain on a privately held investment. Software Charge represents a charge related to an internal use software product that is no longer expected to be used.  Gain on Acquisition-Related Financial Instrument represents a non-operating gain on a financial instrument designed to minimize the Company’s foreign exchange risk associated with the acquisition of Itiviti, as well as certain other non-operating financing costs associated with the Itiviti Acquisition. Gain on Sale of a Joint Venture Investment represents a non-operating, cash gain on the sale of one of the Company’s joint venture investments.

We exclude Acquisition and Integration Costs, IBM Private Cloud Charges, Real Estate Realignment and Covid-19 Related Expenses, the Investment Gain, the Software Charge, the Gain on Acquisition-Related Financial Instrument, and the Gain on Sale of a Joint Venture Investment from our Adjusted Operating income (as applicable) and other adjusted earnings measures because excluding such information provides us with an understanding of the results from the primary operations of our business and enhances comparability across fiscal reporting periods, as these items are not reflective of our underlying operations or performance. We also exclude the impact of Amortization of Acquired Intangibles and Purchased Intellectual Property, as these non-cash amounts are significantly impacted by the timing and size of individual acquisitions and do not factor into the Company’s capital allocation decisions, management compensation metrics or multi-year objectives. Furthermore, management believes that this adjustment enables better comparison of our results as Amortization of Acquired Intangibles and Purchased Intellectual Property will not recur in future periods once such intangible assets have been fully amortized. Although we exclude Amortization of Acquired Intangibles and Purchased Intellectual Property from our adjusted earnings measures, our management believes that it is important for investors to understand that these intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.

Advertisement

Free Cash Flow

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

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

Forward-Looking Statements

This press release and other written or oral statements made from time to time by representatives of Broadridge may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, and which may be identified by the use of words such as “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. In particular, information appearing in the “Fiscal Year 2022 Financial Guidance” section and statements about our three-year objectives 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 described and discussed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended June 30, 2021 (the “2021 Annual Report”), as they may be updated in any future reports filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the date of this press release and are expressly qualified in their entirety by reference to the factors discussed in the 2021 Annual Report.

These risks include:

• the potential impact and effects of the Covid-19 pandemic (“Covid-19”) on the business of Broadridge, Broadridge’s results of operations and financial performance, any measures Broadridge has and may take in response to Covid-19 and any expectations Broadridge may have with respect thereto;
• the success of Broadridge in retaining and selling additional services to its existing clients and in obtaining new clients;
• Broadridge’s reliance on a relatively small number of clients, the continued financial health of those clients, and the continued use by such clients of Broadridge’s services with favorable pricing terms;
• a material security breach or cybersecurity attack affecting the information of Broadridge’s clients;
• changes in laws and regulations affecting Broadridge’s clients or the services provided by Broadridge;
• declines in participation and activity in the securities markets;
• the failure of Broadridge’s key service providers to provide the anticipated levels of service;
• a disaster or other significant slowdown or failure of Broadridge’s systems or error in the performance of Broadridge’s services;
• overall market and economic conditions and their impact on the securities markets;
• Broadridge’s failure to keep pace with changes in technology and the demands of its clients;
• Broadridge’s ability to attract and retain key personnel;
• the impact of new acquisitions and divestitures; and
• competitive conditions.

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