Broadridge Financial Solutions, Inc. November 2010 J.P. Morgan Ultimate Services Conference Presentation Richard J. Daly Chief Executive Officer Exhibit 99.1 |
2 Forward-Looking Statements This presentation and other written or oral statements made from time to time by representatives of Broadridge may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, such as our fiscal year 2011 financial guidance, and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. These risks and uncertainties include those risk factors discussed in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 (the “2010 Annual Report”), as they may be updated in any future reports filed with the Securities and Exchange Commission. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the 2010 Annual Report. These risks include: the success of Broadridge in retaining and selling additional services to its existing clients and in obtaining new clients; the pricing of Broadridge’s products and services; changes in laws and regulations affecting the investor communication services provided by Broadridge; declines in participation and activity in the securities markets; overall market and economic conditions and their impact on the securities markets; any material breach of Broadridge security affecting its clients’ customer information; the failure of Broadridge’s outsourced data center services provider to provide the anticipated levels of service; any significant slowdown or failure of Broadridge’s systems or error in the performance of Broadridge’s services; Broadridge’s failure to keep pace with changes in technology and demands of its clients; Broadridge’s ability to attract and retain key personnel; the impact of new acquisitions and divestitures; and competitive conditions. Broadridge disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation may include certain Non-GAAP (generally accepted accounting principles) financial measures in describing Broadridge’s performance. Management believes that such Non-GAAP measures, when presented in conjunction with comparable GAAP measures provide investors a more complete understanding of Broadridge’s underlying operational results. These Non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior reported results, and as a basis for planning and forecasting for future periods. These measures should be considered in addition to and not a substitute for the measures of financial performance prepared in accordance with GAAP. The reconciliations of such measures to the comparable GAAP figures are included in this presentation. |
3 Use of Material Contained Herein The information contained in this presentation is being provided for your convenience and information only. This information is accurate as of the date of its initial presentation. If you plan to use this information for any purpose, verification of its continued accuracy is your responsibility. Broadridge assumes no duty to update or revise the information contained in this presentation. You may reproduce information contained in this presentation provided you do not alter, edit, or delete any of the content and provided you identify the source of the information as Broadridge Financial Solutions, Inc., which owns the copyright. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc. |
4 Agenda Broadridge Overview and Summary Business Overview Business Expansion Strategy Overview Financial Overview Conclusion |
5 Broadridge Investment Thesis Generate very strong and highly predictable free cash flows Strong core Investor Communications business which generates over 70% of annual revenues and earnings Market leader with high client retention rates driven by product innovation Approximately 80% in recurring annual revenues Dependable mid-single-digit revenue growth business Highly experienced management team Scalable business model with core business generating margin expansion Aim to invest in existing businesses and acquisitions to generate mid to high- single-digit revenue growth and return excess cash to shareholders |
6 $290 $251 Broadridge Free Cash Flow & Capital Allocation Note: Free Cash Flow excludes financing activities in the Clearing and Outsourcing Solutions segment Dividends •Doubled annual dividend amount from $0.28 to $0.56 per share for FY10, and further increased annual dividend amount 7% to $0.60 per share for FY11 Stock Repurchases •Repurchased 20.2 million shares pursuant to stock repurchase plans since spin-off with an additional 11.8 million authorization as of September 30, 2010 Acquisitions •Strategic acquisitions to leverage the Broadridge brand and distribution channels Strong predictable free cash flow allows for flexible capital allocation options (1) Free cash flow is a Non-GAAP financial measure and is defined as net cash flow provided by continuing operating activities, less capital expenditures and intangibles. A reconciliation to the nearest GAAP numbers are provided in the Appendix. $325 FY07 FY08 FY09 FY10 FY11 Free Cash Flow (Non-GAAP) (1) ($ in millions) High: $222 Low: $166 $252 Forecast Range |
7 Broadridge Mission Partner with Financial Institutions to: Reduce Risk & Cost Increase Performance • Enable the financial services industry to achieve higher levels of performance by allowing firms to focus on their core business • Help clients manage their regulatory compliance risk by improving clients’ processing, communication accuracy and data security • Deliver cost savings to financial institutions through outsourcing their non-differentiating back- office processes • Develop long lasting relationships with world class companies built on mutual success Our Mission is To Reduce Clients’ Risk While Lowering Their Total Cost of Ownership |
8 Individual (Retail) and Institutional Clients Broker-Dealers, Banks, Mutual Funds, Corporate Issuers Integrated Solutions Spanning the Investment Lifecycle Investment Decision (Pre-Trade) Trade Processing & Books and Records Asset Servicing (Post-Trade) New Accounts Welcome Kits Proxy Fulfillment Archival Confirms Across the investment lifecycle... ...By partnering with the world’s leading financial institutions... ...And delivering broad and innovative global solutions Investor Communications Proxy management, corporate governance, and stockholder communications Securities Processing Global trade processing for equities, options, mutual funds, and fixed income securities and operations outsourcing solutions Processing Reporting Statements ...Broadridge touches investors... |
9 Resilient and Predictable Business Model Business is resilient and largely independent of the stock market being at its highs or lows……….predictable revenue stream drives predictable free cash flow Recurring Revenue (~80%) Event- Driven Revenue (~20%) Shareholder Positions Images and Pieces Processed Revenue Drivers A Market Leader with High Retention Rates Recurring Revenue Complex Proprietary Processing Platforms High Client Satisfaction and Highly Engaged Associates Investor Communication Solutions Securities Processing Solutions Indispensable Provider for Mission Critical Processing Processing Fees (Trades Per Day) # of Accounts |
10 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 8,000 9,000 10,000 11,000 12,000 13,000 14,000 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Broadridge Total Revenues Dow Jones Industrial Average Business is Resilient in Changing Markets Our revenue growth has been resilient through various economic and market cycles Stock Market Rebounds Decimalization of Trades Internet Bubble Impact Financial Crisis Note: Fiscal year is based on June 30 th year end |
11 Revenue Growth Drivers Low double-digit revenue growth in robust markets and flat to slightly negative growth in severe down markets. Historically, growth from Sales is consistent in all markets cycles Average historical growth of 6%, including a severe down market cycle In high growth economic cycles revenue growth averages 10-12% and 0-(3)% in severe down markets Historical sales growth component consistent in all market cycles ICS sales expected to be driven by market share gains in transaction reporting and registered proxy SPS sales expected to be driven by our Operations Outsourcing offering ICS internal growth is driven by stock record growth for equities and mutual funds and SPS is driven by trades per day (TPD), which is somewhat offset by price concessions Event-driven revenue activity declines in severe down markets and rebounds to new highs in robust markets Last trough to peak cycle had 20% CAGR (FY03-07) Mutual Fund Proxy is the most volatile component of event-driven revenue activity Historical (FY05-FY10) Actual Forecast CAGR FY10 FY11 6% Total Revenue Growth 7% 1-4% 4% Sales (Recurring). 4% 3-4% (2)% Client Losses (2)% (1)% 2% Net New Business 2% 2-3% 3% Internal Growth (a) (2)% 0-1% 1% Event-Driven (b) 4% (5)-(4)% 0% Distribution 1% 0% 0% Acq/FX/Other 2% 4% (a) Internal Growth includes SPS Equity & Fixed Income Trades, ICS Equity & Mutual Fund Stock Record Growth, Transaction Reporting and Time & Materials (b) Event-Driven includes ICS Proxy Contest/Specials, Mutual Fund Proxy and Marketing Communications Fulfillment |
12 Business Expansion Focus Closed Sales Long-Term Growth Challenges Broadridge is well-positioned and on the high ground as a result of our recurring revenue base, great value propositions, new initiatives, free cash flow and solid balance sheet • Strong and growing pipeline with large opportunities in all segments • Winning a meaningful percentage of each year’s market-driven sales activity • Growth in recurring closed sales >25% in FY10, representing the second consecutive year of record sales • Leverage our core capabilities and unique communications network • Investments in the business have started to introduce new and exciting opportunities • Meaningful growth opportunities in the mutual fund area via data hub strategy • SPS business, despite retaining its market leadership position, faces challenges of price compression and how to monetize its unique opportunities for growth • Overcoming conversion decision hurdles for large clients and industry consolidation $92 $63 $82 $95 $119 $33 $49 $63 $43 $56 FY06 FY07 FY08 FY09 FY10 FY11 Forecast Range High: $215 Low: $160 Closed Sales (Fee Only, $ in millions) Recurring (RC) Event-Driven (ED) CAGR* = 9% RC = 7% ED = 14% $175 $145 $125 $112 $139 * CAGR from FY06-10 |
13 This is Broadridge We are a market leader in processing and distributing shareholder communications, and provider of choice for mission-critical securities processing solutions Over 40 years of experience and a solid customer base with long standing relationships Our core business is resilient and largely independent of the stock market being at its highs or lows Strong and predictable Free Cash Flow averaging >$275M over last 4 fiscal years FY10 Segment Revenues FY10 Segment Margins Investor Communications $1,670M (76%) Securities Processing $536M (24%) Investor Communications EBIT $273M Margin 16.3% Securities Processing EBIT $99M Margin 18.5% Outsourcing Innovative industry service provider of outsourcing of critical back-office labor functions that are integrated with our processing technology platform: Operations Outsourcing offering - growth opportunity to expand existing relationships and add new clients • Outsourcing (~5%) Investor Communications (1) Securities Processing Leading global back-office service provider for both equity and fixed income processing: Hosted applications for self-clearing firms using Broadridge’s service bureau for: • Equity (~80%) • Fixed Income (~15%) World’s largest processor and provider of investor communications with over one billion communications processed annually: Primary business unit is a clear market leader with over 70% of Broadridge revenues and pre-tax earnings Proxy communications and vote processing and interim communications (~65%) Transaction reporting and fulfillment services (~30%) Other (~5%) Securities Processing (1) Only service provider offering service bureau and operations outsourcing on a single multi-entity and multi-currency platform (1 Percentages represent revenue contribution within each reporting segment |
14 ICS Unique Business Systems Processing Model (1) Represents Broadridge’s estimated total number of brokerage firms and banks in the U.S. and international markets (2) Represents Broadridge’s estimated total number of positions managed by U.S. brokers and banks (3) Represents Broadridge’s estimated total number of corporate issuers in the U.S. (4) Represents total number of Fund Sponsors in the U.S. who manage over 16,000 funds including Mutual Funds, Closed-end Funds, ETFs and UITs, according to the Investment Company Institute’s 2009 Investment Company Year Book Proxy and Interim processing system is the “plumbing” supporting the voting process for corporate governance |
15 Bank/Broker- Dealer $1,474M (88%) Mutual Fund $138M (8%) Corporate Issuer $58M (4%) Distribution $781M (47%) Other $53M (3%) Fulfillment $110M (7%) Transaction Reporting $143M (9%) Interims $137M (8%) Proxy $447M (27%) ICS Product and Client Revenue Overview: We have a strong and diverse product offering… ICS is highly resilient due to our deep customer relationships with our Bank/Broker-Dealer clients Primarily Postage …and we have deep and longstanding client relationships Increase in electronic distribution reduces postage revenue and increases profits FY10 Product Revenues FY10 Client Revenues |
16 ICS Market Share Overview by Products and Markets Product depth and relationships with Bank/Broker-Dealers provide high client retention with large potential upside We have deep penetration in our core business and clients, yet large potential to grow market share |
17 M A R K E T S H A R E Equity (~80%) Transactions, $238M Non-transactions, $195M Fixed Income (~15%) Transactions, $50M Non-transactions, $28M Outsourcing (~5%) $25M FY10 Product Revenues Securities Processing North America Market Share Overview(1) Equity Processing Client Volume Broadridge ~30% Competitors ~20% In-house ~50% (1) All market share information is based on management’s 2010 estimates and is part of much larger market. No attempt has been made to size such market Broadridge ~2% Untapped Market ~98% (>$1 Billion) In-house ~43% Competitors ~2% Broadridge ~55% Fixed Income (US$ only) Client Volume High client retention rates (~98%) with growth opportunity During recent market turmoil, BR continued to close sales with major clients Fixed Income platform is the industry standard BR processes for 11 of the 18 primary dealers of fixed income securities In FY10, BR processed on average approximately $3.5 trillion in trades daily BR is the only provider of Operations Outsourcing for self-clearing firms >$1 Billion market potential is based on clearing firms in North America Expected to exit FY11 with run- rate of ~$90M annualized revenue Operations Outsourcing |
18 Securities Processing Solutions Top 15 Clients for FY10 Broadridge has fared well during the recent industry consolidations and financial crisis The top 15 SPS clients generate approximately 70% of the SPS segment’s revenues 13 of 15 top clients have multi- years remaining under their existing agreements; contract extensions for additional clients are in progress Closed contract with Barclays to handle new trade volume as result of Lehman Closed contract with JP Morgan for Bear Stearns fixed income processing Bank of America/Merrill Lynch transaction resulted in loss of equity processing business and win of fixed income processing business SPS client relationships are stable in volatile market Alliance Bernstein Bank of America/Merrill Lynch* Barclays Capital Services BMO Nesbitt Burns BNP Paribas CIBC World Markets Deutsche Bank E*Trade Group Edward Jones J.P. Morgan Chase Jefferies & Company Royal Bank of Canada Scotia Capital State Street UBS Securities Note: The above schedule is an alphabetical listing of the top 15 SPS clients as of June 30, 2010 based on FY10 revenues * Bank of America/Merrill Lynch includes loss of equity processing business as previously disclosed Equity Processing Fixed Income Processing Retail Institutional Top Clients Outsourcing |
19 Business Expansion Strategy Focused on core processing and communication businesses and making investments in business that leverage these strong industry positions Offer New Solutions Leverage Industry Position Margin Improvement Foundation Five Pillars • Improve world class service scores for every product every year • Zero losses to competition • Be “indispensable” • Increase total sales year-over- year • Increase existing client penetration • Value propositions with “teeth” • Improve margins in all products every year Data center Leverage technology Smart/Off-shoring Strict financial controls Challenge the status quo • Create (build or buy) unique solutions enabled by our heritage Global outsourcing Electronic delivery solutions Global proxy Mutual Funds Global Processing Expansion CULTURE Trusting / Engaging / Accountable / Client-Centric / Committed / Caring / Passionate/ Ethical “A Great Place to Work” Vision Be Indispensable! We enable the financial services industry to achieve superior levels of performance through our passion to deliver extraordinary value to our clients, shareholders, and associates Accelerate Sales • More than 2 dozen new products introduced since spin-off Virtual Shareholder meeting The Investor Network/ Shareholder Forum Know-On-Pay 12b-1/ 22c-2 reporting Compliance Client On-boarding Data aggregation/ analytics Client Retention Successful execution of strategy is expected to accelerate average revenue growth forecast from mid-single digits to high single-digits |
20 $352 $352 $364 $347 $310 FY10 FY09 FY08 FY07 FY06 Earnings Before Interest & Taxes (1) ($ in millions) $1,688 $1,655 $1,652 $1,584 $1,504 $521 $418 $479 $483 $365 FY10 FY09 FY08 FY07 FY06 Net Revenues ($ in millions) Recurring Event-Driven Financial Performance is Driven by Recurring Revenues (1) Earnings before provision for interest and income taxes is a Non-GAAP financial measure. In fiscal 2010, it excludes approximately $10 million in interest expense and impact of F/X. In fiscal 2009, it excludes approximately $14 million in interest expense and impact of F/X and one-time gain of approximately $8 million on purchase of senior notes. In fiscal 2008, it excludes approximately $30 million in interest expense and impact of F/X and one-time transition expenses of approximately $14 million. In fiscal 2007, it excludes approximately $12 million in interest expense and impact of F/X and one-time transition expenses of approximately $14 million. In fiscal 2006, it excludes approximately $1 million in interest expense and impact of F/X. We believe that this measure is useful to investors because it excludes the impact of certain transactions or events that we expect to occur infrequently in order to provide meaningful comparisons between current results and previously reported results. Management, therefore, believes such Non-GAAP measure provides a useful means for evaluating Broadridge's comparative operating performance % Revenue 81% 77% 78% 80% 76% % Margins 16.6% 16.8% 17.1% 17.0% 15.9% $1,869 $2,209 |
21 Broadridge FY11 Guidance from Continuing Operations as of November 4, 2010 Guidance does not take into consideration the effect of any future acquisitions, additional debt and/or share repurchases in excess of the repurchases needed to be within our 128 million to 130 million diluted weighted-average outstanding shares guidance. Revenue ($ in millions) Earnings FY10 FY11 Range FY10 FY11 Range Actual Low High Actual Low High $1,670 $1,641 $1,682 ICS $273 $271 $284 9% -2% 1% Growth % / Margin % 16.3% 16.5% 16.9% $536 $589 $615 SPS $99 $80 $96 -4% 10% 15% Growth % / Margin % 18.5% 13.5% 15.6% $2,205 $2,230 $2,297 Total Segments $372 $351 $380 6% 1% 4% Growth % / Margin % 16.9% 15.7% 16.5% $2 $0 $0 Other ($25) ($28) ($35) $1 $7 $11 FX * $5 $3 $6 $2,209 $2,237 $2,308 Total Broadridge $352 $327 $350 7% 1% 4% Growth % / Margin % 15.9% 14.6% 15.2% Interest & Other ($10) ($11) ($11) Total EBT $342 $316 $339 FY11 Range Margin % 15.5% 14.1% 14.7% Segments Low High ICS $85 $115 Income Taxes ($117) ($114) ($127) SPS $75 $100 Tax Rate (a) 34.2% 36.2% 37.5% Total $160 $215 Total Net Earnings $225 $201 $212 Margin % 10.2% 9.0% 9.2% Diluted Shares 139 130 128 Diluted EPS (GAAP) $1.62 $1.55 $1.65 Diluted EPS Before 1-Times (Non-GAAP) (b) $1.56 $1.55 $1.65 * Includes impact of FX P&L Margin and FX Transaction Activity (a) FY10 Full Year Tax Rate of 34.2% is attributable to the release of a valuation allowance on a deferred tax asset relating to tax loss carryforwards of approximately $8M. Excluding the year-to-date benefit the FY10 Full Year tax rate would be 36.5% (b) FY10 Full Year Diluted EPS Before 1-Times (Non-GAAP) excludes the release of a valuation allowance on a deferred tax asset relating to tax loss carryforwards of approximately $8M (gain reflected in Income Taxes). $0.06 impact to EPS. Closed Sales |
22 Focused on Capital Stewardship and Long-Term Shareholder Value Cash Level on Balance Sheet • We expect to keep approximately $100M of cash on hand Strong Predictable FCF Allows for Flexible Capital Allocation Options • Investing for organic growth • Tuck-in acquisitions to sustain organic growth expand product offering • Continue to grow dividend payout • Pursue stock repurchases to offset any dilution from equity compensation plan and opportunistic repurchases versus scheduled steady repurchases Manage to a Debt to EBITDA Ratio 1:1 Debt • Maintain investment grade rating with rating agencies as this is important to our large clients and prospects Mid-single-digit organic revenue growth • Capitalize on fundamentals driving long-term market growth • Invest in and drive new sales of existing solutions • Rollout new solutions to enable client efficiencies and facilitate client growth • Capture the global securities processing opportunity Improve Margins • Initiatives to sustain and drive continued efficiencies and enhance our scalability Aim to invest through existing businesses and acquisitions to generate mid to high single-digit revenue growth and return excess cash to shareholders |
23 Summary Broadridge is a dependable mid-single-digit revenue grower with a scalable business model providing opportunity for margin expansion We expect to continue to invest in our existing businesses and execute strategic acquisitions to generate mid to high single- digit average revenue growth We expect to generate strong free cash flows and aim to return cash to shareholders through dividends, repurchasing shares to offset dilution and to opportunistically repurchase shares |
24 Appendix Appendix |
25 Regulatory Update (1) For our complete comments, see http://sec.gov/comments/s7-14-10/s71410.shtml or http://www.broadridge.com/comment_letters/ The Securities and Exchange Commission (“SEC”) issued its Concept Release on the U.S. Proxy System on July 14, 2010 Broadridge submitted comments on the following topics (1): Vote accuracy • Accuracy is critical to the U.S. proxy system • Vote accuracy, process integrity and transparency goals have been achieved through Broadridge’s leadership and technology investments Process efficiency • The U.S. proxy system supports the needs of the most efficient and liquid markets in the world • Broadridge’s systems and technologies, which support the street clearance and settlement environment, create significant efficiencies for all constituencies involved in the proxy distribution process Voting participation • Effective participation requires the provision of communications and voting in ways that reflect beneficial shareholder preferences and choices • Broadridge’s system, in which we have invested >$1 billion, accurately and consistently tracks and applies shareholder delivery preferences to all investments in investor accounts creating a consistent scalable process across all issuers • Broadridge has pioneered the client-directed voting solution being considered by the SEC in the Concept Release – another tangible example of how Broadridge’s innovations raise investor participation Broadridge has developed a social network solution that we believe would increase levels of participation, transparency and efficiency beyond what is viewed as attainable today Broadridge has consistently identified ways to improve the proxy system’s accuracy and efficiency First we invest and then we execute |
26 Free Cash Flow (Non-GAAP) – FY10 Actual and FY11 Forecast as of November 4, 2010 Unaudited (In millions) FY10 Low High Free Cash Flow (Non-GAAP) : Net earnings from continuing operations per GAAP 225 $ 201 $ 212 $ Depreciation and amortization (includes other LT assets) 57 65 75 Stock-based compensation expense 27 30 30 Other 4 (5) 5 Subtotal 313 291 322 Working capital changes 59 (30) (25) Long-term assets & liabilities changes 6 (30) (20) Net cash flow provided by continuing operating activities 378 231 277 Cash Flows From Investing Activities IBM / ITO data center investment - (20) (15) Capital expenditures & purchased of intangibles (53) (45) (40) Free cash flow 325 $ 166 $ 222 $ Cash Flows From Other Investing and Financing Activities Acquisitions (35) (77) (77) Clearing capital freed-up 75 - - Clearing capital to be freed-up 165 - - Stock repurchases net of options proceeds (212) (111) (176) Long-term debt repayment - - - Dividends paid (67) (76) (76) Other (FY10 Disc Ops) (11) 9 9 Net change in cash and cash equivalents 240 (89) (98) Cash and cash equivalents, at the beginning of year 173 413 413 Cash and cash equivalents, at the end of period 413 $ 324 $ 315 $ (a) Guidance does not take into consideration the effect of any future acquisitions, additional debt and/or share repurchases in excess of the repurchases needed to be within our 128 million to 130 million diluted weighted-average outstanding shares guidance. FY11 Range (a) Freed -up Capital $240M Free Cash Flow $166-222M |
27 Historical Free Cash Flow Non-GAAP to GAAP Reconciliation Reconciliation of Non-GAAP to GAAP Measures Free Cash Flow (Non-GAAP) ($ in millions) (Unaudited) FY07 FY08 FY09 FY10 Actual Actual Actual Actual Low High Net cash flow provided by continuing operating activities (GAAP) 306 308 277 378 (b) 231 277 Capital expenditures & Intangibles (a) (38) (46) (30) (53) (65) (55) Free cash flow (Non-GAAP) 268 $ 262 $ 247 $ 325 $ 166 $ 222 $ (a) Includes IBM/ITO data center investment (b) Adjusted for certain non-recurring items in the amount of approximately $18M due to loss on disposal of discontinued operations FY11 Range |
28 Reconciliation of Non-GAAP to GAAP Measures Free Cash Flow Reconciliation ($ in millions) FY10 Low High Net earnings from continuing operations (GAAP) 225 $ 201 $ 212 $ Depreciation and amortization (includes other LT assets) 57 65 75 Stock-based compensation expense 27 30 30 Other 4 (5) 5 Subtotal 313 291 322 Working capital changes 59 (30) (25) Long-term assets & liabilities changes 6 (30) (20) Net cash flow provided by continuing operating activities 378 231 277 Cash Flows From Investing Activities IBM / ITO data center investment - (20) (15) Capital expenditures & purchased of intangibles (53) (45) (40) Free cash flow (Non-GAAP) 325 $ 166 $ 222 $ FY11 Range (a) Guidance does not take into consideration the effect of any future acquisitions, additional debt and/or share repurchases in excess of the repurchases needed to be within our 128 million to 130 million diluted weighted-average outstanding shares guidance. EBIT Reconciliation FY10 FY11 Range (a) ($ in millions) Actual Low High EBIT (Non-GAAP)* $352 $327 $350 Margin % 17.0% 14.6% 15.2% Interest & Other ($0) ($11) ($11) Total EBT (GAAP) $342 $316 $339 Margin % 15.5% 14.1% 14.7% EPS Reconciliation Low High Diluted EPS from continuing operations (GAAP) $1.62 $1.55 $1.65 One-time recognition of a deferred tax asset ($0.06) - - Diluted EPS before One-Times (Non-GAAP) $1.56 $1.55 $1.65 * Includes impact of FX Transaction Activity |
29 Closed Sales to Revenue Contribution Closed Sales Stats: Recurring • Both ICS and SPS trending toward longer revenue recognition cycle • Larger strategic deals could take 12- 24 months to convert Event-Driven • Majority usually recognized during the year the deal closed • Sales are less predictable dependent on size of the client Revenue contribution could be +/-5% each year depending on the complexity of the conversion ($ in millions) Forecast Recurring FY09 FY10 FY11 ICS $55 $80 $35-50 ~ Revenue Contribution Year 1-3 55% 35% 10% 50% 40% 10% 35% 40% 25% SPS $40 $40 $75-100 ~ Revenue Contribution Year 1-3 25% 50% 25% 10% 50% 40% 5% 45% 50% Event-Driven $45 $55 $50-65 ~ Revenue Contribution Year 1-3 70% 10% 20% 80% 10% 10% 60% 20% 20% Total Closed Sales $140 $175 $160-215 ~ Revenue Contribution Year 1-3 50% 30% 20% 50% 30% 20% 30% 40% 30% |
30 Broadridge ICS Key Statistics $ in millions RC= Recurring ED= Event-Driven Fee Revenues (1) FY08 FY09 FY10 Type Proxy Equities (2) 259.8 $ 272.5 $ 276.5 $ RC Stock Record Position Growth 2% -2% -1% Pieces 297.8 288.0 293.2 Mutual Funds 92.1 $ 55.0 $ 149.7 $ ED Pieces 176.6 73.5 204.2 Contests/Specials 19.7 $ 26.9 $ 20.6 $ ED Pieces 21.2 30.8 26.0 Total Proxy 371.6 $ 354.4 $ 446.8 $ Total Pieces 495.6 392.3 523.4 Notice and Access Opt-in % 28% 50% 54% Suppression % 49% 50% 52% Interims Mutual Funds (Annual/Semi-Annual Reports/Annual Prospectuses) 73.9 $ 78.1 $ 88.8 $ RC Position Growth 9% 3% 6% Pieces 401.1 440.5 476.0 Mutual Funds (Supplemental Prospectuses) & Other 48.9 $ 58.0 $ 47.8 $ ED Pieces 301.3 349.6 266.2 Total Interims 122.8 $ 136.1 $ 136.6 $ Total Pieces 702.4 790.1 742.2 Transaction Transaction Reporting 124.6 $ 132.0 $ 142.8 $ RC Reporting Fulfillment Post-Sale Fulfillment 70.4 $ 72.9 $ 74.0 $ RC Pre-Sale Fulfillment 37.5 $ 36.6 $ 35.5 $ ED Total Fulfillment 107.9 $ 109.5 $ 109.5 $ Other Other - Recurring 0.6 $ 0.9 $ 12.1 $ RC Communications Other - Event-Driven (2), (3) 39.9 $ 41.3 $ 41.2 $ ED Total Other 40.5 $ 42.2 $ 53.3 $ Total Fee Revenues 767.4 $ 774.2 $ 889.0 $ Total Distribution Revenues 807.8 $ 756.8 $ 780.6 $ Total Revenues as reported - GAAP 1,575.2 $ 1,531.0 $ 1,669.6 $ Total RC Fees 529.3 $ 556.4 $ 594.2 $ Total ED Fees 238.1 $ 217.8 $ 294.8 $ FY11 Ranges Low High Sales 1% 1% 3% 3% 3% Losses -1% 0% -1% 0% 0% Key Net New Business 0% 1% 2% 3% 3% Revenue Internal growth 3% 0% 0% 0% 1% Drivers Event-Driven 0% -1% 5% -5% -4% Acquisitions 0% 0% 1% 1% 1% Distribution -1% -3% 1% -1% 0% TOTAL 2% -3% 9% -2% 1% (1) As of 4Q09, these items represent fee revenues only and exclude distribution revenues which are set out separately. The historical numbers have been adjusted to exclude distribution revenues. (2) For comparability purposes, Other Proxy related fee revenue has been reclassified from Other Event-Driven to Annual Equity Proxy (FY08: $3.8M, FY09: $4.1M & FY10: $4.5M). (3) Other includes 12.6M pieces for FY08, 14.4M pieces for FY09 and 10.5M pieces for FY10 primarily related to corporate actions. |
31 Broadridge SPS Key Statistics $ in millions RC= Recurring ED= Event-Driven FY08 (3) FY09 FY10 Type Equity Transaction-Based Equity Trades 259.8 $ 258.5 $ 237.8 $ RC Internal Trade Growth 12% 6% -2% Trade Volume (Average Trades per Day in '000) (1) (2) 1,559 1,602 1,542 Non-Transaction Other Equity Services 178.9 $ 193.6 $ 195.4 $ RC Total Equity 438.7 $ 452.1 $ 433.3 $ Fixed Income Transaction-Based Fixed Income Trades 51.0 $ 52.3 $ 49.9 $ RC Internal Trade Growth 19% 11% -6% Trade Volume (Average Trades per Day in '000) (2) 237 287 283 Non-Transaction Other Fixed Income Services 24.6 $ 29.4 $ 27.7 $ RC Total Fixed Income 75.6 $ 81.7 $ 77.5 $ Outsourcing Outsourcing 19.2 $ 25.1 $ 25.0 $ # of Clients 5 6 9 Total Net Revenue as reported - GAAP 533.5 $ 558.9 $ 535.9 $ FY11 Ranges Low High Sales 4% 6% 5% 5% 6% Losses -8% -4% -4% -4% -4% Key Net New Business -4% 2% 2% 1% 2% Revenue Transaction & Non-transaction 8% 5% -2% 0% 4% Drivers Concessions -3% -3% -4% -2% -2% Internal growth 5% 2% -6% -2% 2% Acquisitions 0% 1% 0% 11% 11% TOTAL 1% 5% -4% 10% 15% (1) Equity Trade volume adjusted to exclude trades processed under fixed priced contracts. Management believes excluding this trade volume presents a stronger correlation between trade volume and Equity Trade revenue. (2) Prior Year's trade volume re-stated for comparability. (3) FY 2009 trade volumes re-stated for step-pricing clients; FY 2008 has not been re-stated. |
32 Broadridge ICS Definitions Proxy Equities - Refers to the proxy services we provide in connection with annual stockholder meetings for publicly traded corporate issuers. Annual meetings of public companies include shares held in "street name" (meaning that they are held of record by brokers or banks, which in turn hold the shares on behalf of their clients, the ultimate beneficial owners) and shares held in "registered name" (shares registered directly in the names of their owners). Mutual Funds - Refers to the proxy services we provide for funds, classes or trusts of an investment company. Open-ended mutual funds are not required to have annual meetings. As a result, mutual fund proxy services provided to open-ended mutual funds are driven by a "triggering event." These triggering events can be a change in directors, fee structures, investment restrictions, or mergers of funds. Contests - Refers to the proxy services we provide when a separate agenda is put forth by one or more stockholders that is in opposition to the proposals presented by management of the company which is separately distributed and tabulated from the company’s proxy materials. Specials - Refers to the proxy services we provide in connection with stockholder meetings held outside of the normal annual meeting cycle and are primarily driven by special events (e.g., mergers and acquisitions in which the company being acquired is a public company and needs to solicit the approval of its stockholders). Interims Mutual Funds (Annual/Semi-Annual Reports/Annual Prospectuses) – Refers to the services we provide investment companies in connection with information they are required by regulation to distribute periodically to their investors. These reports contain pertinent information such as holdings, fund performance, and other required disclosure. Mutual Funds (Supplemental Prospectuses) – Refers primarily to information required to be provided by mutual funds to supplement information previously provided in an annual mutual fund prospectus (e.g., change in portfolio managers, closing funds or class of shares to investors, or restating or clarifying items in the original prospectus). The events could occur at any time throughout the year. Other – Refers to communications provided by corporate issuers and investment companies to investors including newsletters, notices, tax information, marketing materials and other information not required to be distributed by regulation. Transaction Reporting Transaction Reporting– Refers primarily to the printing and distribution of account statements, trade confirmations and tax reporting documents to account holders, including electronic delivery and archival services. Fulfillment Post-Sale Fulfillment – Refers primarily to the distribution of prospectuses, offering documents, and required regulatory disclosure information to investors in connection with purchases of securities. Pre-Sale Fulfillment – Refers to the distribution of marketing literature, welcome kits, enrollment kits, and investor information to prospective investors, existing stockholders and other targeted recipients on behalf of broker-dealers, mutual fund companies and 401(k) administrators. Other Communications Other – Refers to the services we provide in connection with the distribution of communications material not included in the above definitions such as non-objecting beneficial owner (NOBO) lists, and corporate actions such as mergers, acquisitions, and tender offer transactions. |