Broadridge Reports Second Quarter Fiscal 2025 Results

Recurring revenues grew 9%; up 9% constant currency

Diluted EPS grew 103% to $1.20 and Adjusted EPS grew 70% to $1.56

Reaffirming FY'25 guidance, including 6-8% Recurring revenue growth constant currency, 8-12% Adjusted EPS growth, and Closed sales of $290 - $330 million

NEW YORK, Jan. 31, 2025 /PRNewswire/ -- Broadridge Financial Solutions, Inc. (NYSE:BR) today reported financial results for the second quarter ended December 31, 2024 of its fiscal year 2025. Results compared with the same period last year were as follows:  

"Broadridge delivered strong second quarter results, including 9% Recurring revenue growth constant currency, record event-driven revenues, and 70% Adjusted EPS growth to $1.56," said Tim Gokey, Broadridge CEO. "Our Recurring revenue growth was driven by a combination of 7% organic growth and our acquisition of SIS.

"Broadridge is executing on our long-term growth strategy to democratize and digitize investing, simplify and innovate trading, and modernize wealth management. Our strong organic growth continues to be powered by long-term trends, including increasing investor participation, and by the conversion of our record sales backlog," he continued.

"We are reaffirming our fiscal 2025 guidance, including 6-8% Recurring revenue growth constant currency, 8-12% Adjusted EPS growth, and Closed sales of $290 - $330 million. Our outlook for strong fiscal year 2025 results keeps us on track to deliver on the three-year growth objectives from our December 2023 Investor Day," Mr. Gokey concluded.

Fiscal Year 2025 Financial Guidance

Financial Results for Second Quarter Fiscal Year 2025 compared to Second Quarter Fiscal Year 2024

• Total revenues increased 13% to $1,589 million from $1,405 million.
  • Recurring revenues increased $81 million, or 9%, to $980 million. Recurring revenue growth constant currency (Non-GAAP) was 9%, driven by Net New Business in ICS and Internal Growth and Acquisitions in GTO.
  • Event-driven revenues increased $69 million, or 126%, to $125 million, driven by a higher volume of mutual fund communications.
  • Distribution revenues increased $34 million, or 7%, to $484 million, driven by the postage rate increase of approximately $30 million.
• Operating income was $211 million, an increase of $86 million, or 69%. Operating income margin increased to 13.3%, compared to 8.9% for the prior year period, primarily due to higher Recurring and event-driven revenues.
  • Adjusted Operating income was $263 million, an increase of $89 million, or 51%. Adjusted Operating income margin was 16.6% compared to 12.4% for the prior year period. The combination of higher distribution revenue and higher float income had an immaterial impact on the change in margin.
• Interest expense, net was $33 million, a decrease of $4 million, primarily due to a decrease in interest expense from lower average borrowing rates.
• The effective tax rate was 19.1% compared to 19.9% in the prior year period. The change in effective tax rate for the three months ended December 31, 2024 was primarily driven by an increase in discrete tax benefits inclusive of excess tax benefit related to equity compensation.
• Net earnings increased 103% to $142 million and Adjusted Net earnings increased 68% to $184 million.
  • Diluted earnings per share increased 103% to $1.20, compared to $0.59 in the prior year period, and
  • Adjusted earnings per share increased 70% to $1.56, compared to $0.92 in the prior year period.

Segment and Other Results for Second Quarter Fiscal Year 2025 compared to Second Quarter Fiscal Year 2024

Investor Communication Solutions ("ICS")

• Total revenues were $1,149 million, an increase of $150 million, or 15%.
  • Recurring revenues increased $47 million, or 9%, to $540 million. Recurring revenue growth constant currency (Non-GAAP) was 9%, driven by Net New Business and Internal Growth.
  • By product line, Recurring revenue growth and Recurring revenue growth constant currency (Non-GAAP) were as follows:
    • Regulatory rose 8% and 8%, respectively, which included the impact of equity position growth of 11% and mutual fund/ETF position growth of 5%.
    • Data-driven fund solutions rose 9% and 8%, respectively, driven by growth in our global distribution insights and retirement and workplace products.
    • Issuer rose 18% and 18%, respectively, driven by growth in disclosure solutions and shareholder engagement solutions.
    • Customer communications rose 10% and 10%, respectively, driven by growth in print revenues and digital communications.
  • Event-driven revenues increased $69 million, or 126%, to $125 million, driven by higher volume of mutual fund communications.
  • Distribution revenues increased $34 million, or 7%, to $484 million, primarily driven by the postage rate increase of approximately $30 million.
• Earnings before income taxes increased by $78 million, or 82%, to $174 million, from higher Recurring and event-driven revenues. Operating expenses rose 8%, or $71 million, to $975 million driven by the impact of the postage rate increase and higher volume related expenses.
• Pre-tax margins increased to 15.1% from 9.6% in the prior period.

Global Technology and Operations ("GTO")

• Recurring revenues were $440 million, an increase of $35 million, or 9%. Recurring revenue growth constant currency (Non-GAAP) was 8%, driven by 4pts of organic growth and 4pts from the acquisition of SIS.
• By product line, Recurring revenue growth and the corresponding Recurring revenue growth constant currency (Non-GAAP) were as follows:
  • Capital Markets rose 6% and 6%, respectively, driven by revenue from new sales and internal growth. Internal Growth benefited from higher trading volumes.
  • Wealth and Investment Management rose 12% and 12%, respectively, driven by 2pts of organic growth and 11pts from the SIS acquisition. Organic growth was negatively impacted by 4pts due to a large client loss during the prior year period.
• Earnings before income taxes were $50 million, an increase of $10 million, or 26%, as higher revenues more than offset higher expenses, including the impact of the SIS acquisition.
• Pre-tax margins increased to 11.3% from 9.7%.

Other

• Loss before income taxes was relatively flat at $48 million compared to $47 million in the prior year period.

Financial Results for the Six Months Fiscal Year 2025 compared to the Six Months Fiscal Year 2024

• Total revenues increased 6% to $3,012 million from $2,836 million.
  • Recurring revenues increased $110 million, or 6%, to $1,880 million. Recurring revenue growth constant currency (Non-GAAP) was 6%, driven by organic growth in ICS and GTO and acquisitions in GTO.
  • Event-driven revenues increased $45 million, or 32%, to $188 million, driven by higher volume of mutual fund communications.
  • Distribution revenues increased $20 million, or 2%, to $944 million, driven by the postage rate increase of approximately $54 million partially offset by lower print and mail volumes.
• Operating income was $345 million, an increase of $72 million, or 27%. Operating income margin increased to 11.5%, compared to 9.6% for the prior year period, primarily due to higher Recurring and event-driven revenues.
  • Adjusted Operating income was $448 million, an increase of $74 million, or 20%. Adjusted Operating income margin was 14.9% compared to 13.2% for the prior year period. The combination of higher distribution revenue and higher float income negatively impacted margins by 20 basis points.
• Interest expense, net was $65 million, a decrease of $5 million, primarily due to a decrease in interest expense from lower average borrowing rates.
• The effective tax rate was 19.6% compared to 19.7% in the prior year period. The change in effective tax rate for the six months ended December 31, 2024 was primarily driven by an increase in discrete tax benefits inclusive of excess tax benefit related to equity compensation.
• Net earnings increased 38% to $222 million and Adjusted Net earnings increased 27% to $303 million.
  • Diluted earnings per share increased 39% to $1.88, compared to $1.35 in the prior year period, and
  • Adjusted earnings per share increased 27% to $2.56, compared to $2.01 in the prior year period.

Segment and Other Results for Six Months Fiscal Year 2025 compared to Six Months Fiscal Year 2024

Investor Communication Solutions ("ICS")

• Total revenues were $2,165 million, an increase of $137 million, or 7%.
  • Recurring revenues increased $71 million, or 7%, to $1,033 million. Recurring revenue growth constant currency (Non-GAAP) was 7%, driven by Net New Business and Internal Growth.
  • By product line, Recurring revenue growth and Recurring revenue growth constant currency (Non-GAAP) were as follows:
    • Regulatory rose 7% and 7%, respectively, which included the impact of equity position growth of 8% and mutual fund/ETF position growth of 8%.
    • Data-driven fund solutions rose 7% and 7%, respectively, driven primarily by growth in our retirement and workplace products and global distribution insights.
    • Issuer rose 13% and 13%, respectively, driven by growth in shareholder engagement solutions and disclosure solutions products.
    • Customer communications rose 7% and 7%, respectively, driven by growth in print revenues and digital communications.
  • Event-driven revenues increased $45 million, or 32%, to $188 million, driven by a higher volume of mutual fund communications.
  • Distribution revenues increased $20 million, or 2%, to $944 million, driven by the postage rate increase of approximately $54 million partially offset by lower mail volumes.
• Earnings before income taxes increased by $60 million, or 28%, to $271 million from higher Recurring and event-driven revenues. Operating expenses rose 4%, or $77 million, to $1,894 million driven by the impact of the postage rate increase and higher volume related expenses.
• Pre-tax margins increased to 12.5% from 10.4% in the prior period.

Global Technology and Operations ("GTO")

• Recurring revenues were $847 million, an increase of $39 million, or 5%. Recurring revenue growth constant currency (Non-GAAP) was 5%, driven by 3pts of organic growth and 2pts from the acquisition of SIS.
• By product line, Recurring revenue growth and the corresponding Recurring revenue growth constant currency (Non-GAAP) were as follows:
  • Capital Markets rose 6% and 6%, respectively, driven by revenue from new sales and Internal Growth. Internal Growth benefited from higher trading volumes.
  • Wealth and Investment Management rose 3% and 4%, respectively, as 5pts from the SIS acquisition more than offset an organic revenue decline of 1pt. Organic growth was negatively impacted by 7pts due to a large client loss during the prior year period.
• Earnings before income taxes were $97 million, an increase of $24 million, or 33% as higher revenues more than offset higher expenses, including those related to the acquisition of SIS.
• Pre-tax margins increased to 11.5% from 9.0%.

Other

• Loss before income tax increased to $91 million from $83 million in the prior year period, primarily due to higher compensation and acquisition related expenses, which more than offset a decline in net interest expense.

Acquisition of SIS

On November 1, 2024, the Company completed the acquisition of Kyndryl's Securities Industry Services ("SIS") business to provide wealth management, capital markets, and information technology solutions in Canada, expanding the Company's product offerings in the GTO reportable segment. The total purchase price, translated to U.S. dollars, was approximately $185 million.

Earnings Conference Call

An analyst conference call will be held today, January 31, 2025 at 8:30 a.m. ET. A live webcast of the call will be available to the public on a listen-only basis. To listen to the live event and access the slide presentation, visit Broadridge's Investor Relations website at www.broadridge-ir.com prior to the start of the webcast. To listen to the call, investors may also dial 1-877-328-2502 within the United States and international callers may dial 1-412-317-5419. A replay of the webcast will be available and can be accessed in the same manner as the live webcast at the Broadridge Investor Relations site. Through February 7, 2025, the recording will also be available by dialing 1-877-344-7529 within the United States or 1-412-317-0088 for international callers, using passcode 1423455 for either dial-in number.

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, Free cash flow, and Recurring revenue growth constant currency. 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, and for internal planning and forecasting purposes. 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 are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items the exclusion of which management believes provides insight regarding our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of certain of the following items:

       (i) Amortization of Acquired Intangibles and Purchased Intellectual Property, which represent non-cash amortization expenses associated with the Company's acquisition activities

       (ii) Acquisition and Integration Costs, which represent certain transaction and integration costs associated with the Company's acquisition activities.

We exclude Acquisition and Integration Costs 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.

Free cash flow

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

Recurring revenue growth constant currency

As a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. The exclusion of the impact of foreign currency exchange fluctuations from our Recurring revenue growth, or what we refer to as amounts expressed "on a constant currency basis," is a Non-GAAP measure. We believe that excluding the impact of foreign currency exchange fluctuations from our Recurring revenue growth provides additional information that enables enhanced comparison to prior periods.   

Changes in Recurring revenue growth expressed on a constant currency basis are presented excluding the impact of foreign currency exchange fluctuations. To present this information, current period results for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the corresponding period of the comparative year, rather than at the actual average exchange rates in effect during the current fiscal year.

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," "on track," and other words of similar meaning, are forward-looking statements. In particular, information appearing in the "Fiscal Year 2025 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, 2024 (the "2024 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 2024 Annual Report.

These risks include:

• changes in laws and regulations affecting Broadridge's clients or the services provided by Broadridge;
• 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;
• 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, economic and geopolitical conditions and their impact on the securities markets;
• the success of Broadridge in retaining and selling additional services to its existing clients and in obtaining new clients;
• Broadridge's failure to keep pace with changes in technology and demands of its clients;
• competitive conditions;
• Broadridge's ability to attract and retain key personnel; and
• the impact of new acquisitions and divestitures.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.

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

About Broadridge

Broadridge Financial Solutions (NYSE:BR), a global Fintech leader with over $6 billion in revenues, provides the critical infrastructure that powers investing, corporate governance and communications to enable better financial lives. We deliver technology-driven solutions to banks, broker-dealers, asset and wealth managers and public companies. Broadridge's infrastructure serves as a global communications hub enabling corporate governance by linking thousands of public companies and mutual funds to tens of millions of individual and institutional investors around the world. In addition, Broadridge's technology and operations platforms underpin the daily trading of on average more than U.S. $10 trillion of equities, fixed income and other securities globally. A certified Great Place to Work®, Broadridge is a part of the S&P 500^® Index, employing over 14,000 associates in 21 countries. For more information about Broadridge, please visit www.broadridge.com.

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SOURCE Broadridge Financial Solutions, Inc.