© 2014 Broadridge Financial Solutions, Inc. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc. February 6, 2014 Earnings Webcast & Conference Call Second Quarter 2014 Exhibit 99.2 |
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2 Today’s Agenda Opening Remarks Rich Daly, President and CEO Second Quarter and YTD 2014 Michael Liberatore, Highlights and Segment Results Acting Principal Financial Officer Summary Rich Daly, President and CEO Q&A Rich Daly, President and CEO Michael Liberatore, Acting Principal Financial Officer Closing Remarks Rich Daly, President and CEO |
3 Financial Highlights Recurring revenue growth momentum continues Q2 Recurring revenue was up 9% (YTD 10%) Primarily due to Net New Business (closed sales less client losses) and internal growth Q2 Event-driven fees were flat (YTD were up $9M primarily from mutual fund proxy activities) Q2 Non-GAAP diluted Earnings Per Share (EPS) of $0.25 was up 47% Record YTD Non-GAAP diluted EPS of $0.64 was up 83% Q2 GAAP diluted EPS of $0.22 was up 69% (YTD $0.58 was up 115%) Primarily due to increased revenues and improved productivity from strategic initiatives Raising fiscal year 2014 guidance 7-8% recurring revenue growth (4-5% total revenue growth) $2.15-2.25 Non-GAAP diluted EPS ($2.03-2.13 GAAP diluted EPS) Free cash flow of $300M (at mid-point of range) |
4 Closed Sales Performance Q2 Recurring revenue closed sales were up 13% (YTD 12%) Recurring revenue closed sales were $23M compared to $20M in the prior year (YTD $38M compared to $34M) Historically, first half closed sales of less than $5M contribute a lower amount than second half to the full year No large transactions of $5M or greater Sales pipeline remains very strong Continued momentum across both segments which includes Emerging and Acquired (E&A) products and the jointly launched Accenture Post-Trade Processing Platform Reaffirming fiscal year 2014 recurring revenue closed sales guidance of $110-150M Achievement of this range requires closing $20-40M of large transactions of $5M or greater Anticipate closing at least one large transaction and would be disappointed if this did not occur during this fiscal year |
5 Key Updates Current favorable market-based activities continue to positively impact internal growth Expect equity and Interim position growth to remain in a positive and stable range Trade volumes and Post-sale activity are less predictable and expect growth to continue for remainder of the year We anticipate that the mean of event-driven revenues over the next years will remain relatively stable Positioning our E&A portfolio for long term growth Acquisitions on track to generate ~$210M in fee revenue with ~$65M in EBITDA (Non-GAAP) in fiscal year 2014 • Actively seeking strategic tuck-in acquisitions that meet our investment criteria • Will be disappointed if we are not able to close additional strategic tuck-in acquisitions this year E&A products approaching 50% of recurring revenue closed sales in FY14 Increasing strategic investments across the three key macro-trends Digital transformation of investor communications Cost/Capability mutualization Intelligence created from our unique data Total investments of $28 million or approximately $0.14 impact to EPS NYSE EBIP regulations and new proxy distribution fees live for meetings that have record dates on or after January 1, 2014 |
6 Key Financial Drivers 2Q 2Q YTD Actual FY14 FY14 FY14 FY13 Range Growth Drivers as a % of Recurring Revenue Closed Sales (Recurring) 7% 8% 6% 7% Client Losses (3%) (3%) (1%) (3%) Net New Business 4% 5% 5% 4% Internal Growth (a) 4% 4% (1%) 2-3% Organic Growth 8% 9% 4% 6-7% Acquisitions 1% 1% 0% 1% Total Recurring Revenue Growth 9% 10% 4% 7-8% Growth Drivers as a % of Total Revenue Recurring Revenue 6% 6% 3% 4-5% Event-Driven (b) 0% 1% 1% 0% Distribution (c) 0% 1% 2% 0% FX/Other 0% 0% 0% 0% Total Revenue Growth 6% 8% 6% 4-5% EBIT Margin (Non-GAAP) 9.4% 11.7% 14.8% 16.5-17.1% EPS (Non-GAAP) $0.25 $0.64 $1.88 $2.15-2.25 (a) Internal Growth includes SPS Equity & Fixed Income Trades, ICS Equity & Mutual Fund Stock Record Growth, Transaction Reporting, Fulfillment, and Time & Materials (b) Event-Driven includes ICS Proxy Contest/Specials, Mutual Fund Proxy and Interim Communications (c) Distribution includes pass-through fees from Matrix |
7 Segment Results & Forecast – Investor Communication Solutions Q2 and YTD recurring revenue growth driven by continued higher than expected internal growth from market-based activities (Interims and Post-sale) and expected Net New Business Raising full year recurring revenue guidance as favorable market-based activities (fulfillment, interims and equity stock record position growth) are expected to continue Increasing event-driven fee revenue guidance to be in-line with the prior year (expecting mutual fund proxy “new normal” activity level of 14-19% of estimated total beneficial positions) Margin improvements for Q2, YTD and expected full year reflects operating leverage Client revenue retention rate remains at 99% Recurring revenue closed sales of $16M for Q2 ($26M YTD) and reaffirming guidance of $60-70M (range does not include transactions of $5M or greater) |
8 Q2 and YTD revenues increased due to Net New Business and higher than expected trade activity Reaffirming high-end of full year revenue range of 5% growth (narrowed low end to 4%) as current trade volumes are expected to continue Strong margin expansion for Q2, YTD, and expected full year driven by operating leverage and greater than expected productivity improvements Reaffirming full year recurring revenue closed sales range of $30- 40M (range does not include transactions of $5M or greater) Revenue/Growth EBIT/Growth (Non-GAAP) Margin/Growth (Non-GAAP) Q2: $174M / 6% $35M / 73% 19.9% / 770 bps Q2 YTD: $343M / 8% $66M / 126% 19.3% / 1000 bps FY14: $687 to 695M / 4 to 5% $117 to 125M / 38 to 47% 17.0% to 18.0% / 410 to 510 bps Segment Results & Forecast – Securities Processing Solutions |
9 Summary Record first half diluted EPS with both segments contributing Recurring revenue continues to be strong led by Net New Business Recurring closed sales pipeline is very strong and growing Positive impact from favorable market-based activities Strong client revenue retention rate of 98% Raising fiscal year 2014 guidance 7-8% recurring revenue growth (4-5% total revenue growth) $2.15-2.25 Non-GAAP diluted EPS ($2.03-2.13 GAAP diluted EPS) Free cash flow of $300M (at mid-point of range) Strong business model includes stable recurring revenue with slight internal growth, consistent closed sales results, plus E&A execution driving top quartile performance Well known and highly respected brand in providing investor communications and securities processing solutions Both segments contributing to top and bottom line results Stable recurring revenue and slight internal growth Strong and reliable free cash flows Best suited to benefit from three strategic disruptive macro-trends Proven ability to create diversity of growth opportunities in all markets through our E&A product portfolio Ongoing journey to sustainable top quartile performance with momentum Paying meaningful dividend currently targeting 40% payout ratio Reinvesting in our business with a focus on 3 key macro-trends and strategic tuck-in acquisitions Opportunistic share repurchases to offset dilution and reduce share count All of the above while maintaining investment grade credit rating Highly engaged associates aligned to service profit chain Recognized as one of the Best Companies to Work for in New York State for the seventh consecutive year |
10 Q&A There are no slides during this portion of the presentation |
11 Closing Comments There are no slides during this portion of the presentation |
12 Appendix |
13 Segment Results & Forecast – Other & Foreign Exchange (FX) Corporate Expenses: Increased full year guidance range as expenses are expected to be in line with growth in the business and increased strategic investments Interest Expense, net: Reflects higher interest rate from previous year due to refinancing of term loan with senior fixed-rate notes |
14 Broadridge Q2 and YTD FY14 (a) FY13 Q2 excludes Restructuring Charges of $4M (after tax $2M, or $0.01 EPS impact). FY13 Q2 YTD excludes Restructuring Charges of $4M (after tax $3M, or $0.02 EPS impact). (b) Includes impacts of FX P&L and FX transaction activity. (c) Represents amortization charges associated with intangible asset values as well as other deal costs associated with the Company’s acquisitions. (d) FY13 Q2 excludes Restructuring Charges of $4M (after tax $2M, or $0.01 EPS impact) and Acquisition Amortization and Other Costs of $6M (after tax $4M, or $0.03 EPS impact). FY13 Q2 YTD excludes Restructuring Charges of $4M (after tax $3M, or $0.02 EPS impact) and Acquisition Amortization and Other Costs of $11M (after tax $7M, or $0.06 EPS impact). FY14 Q2 excludes Acquisition Amortization and Other Costs of $6M (after tax $4M, or $0.03 EPS impact) and FY14 Q2 YTD excludes Acquisition Amortization and Other Costs of $11M (after tax $7M, or $0.06 EPS impact). (e) FY13 represents transition costs related to termination of the Penson agreement including shutdown costs. |
15 Broadridge FY14 Guidance (a) FY13 excludes Restructuring and Impairment Charges, net of $20M (after tax $13M, or $0.10 EPS impact). (b) Includes impacts of FX P&L and FX Transaction Activity. (c) Represents amortization charges associated with intangible asset values as well as other deal costs associated with the Company’s acquisitions. (d) FY13 excludes Acquisition Amortization and Other Costs of $24M (after tax $15M or $0.12 EPS impact), Restructuring Charges of $20M (after tax $13M, or $0.10 EPS impact) and a one time tax credit of $4M (or $0.03 EPS impact). FY14 guidance excludes Acquisition Amortization and Other Costs of $23M (after tax $15M or $0.12 EPS impact). (e) FY13 represents transition costs related to termination of the Penson agreement including shutdown costs, a one-time cost to restructure and outsource certain processing related to our decktop applications and one-time tax credit. * Guidance does not take into consideration the effect of any future acquisitions, additional debt and/or share repurchases. |
16 Cash Flow –YTD FY14 Results and FY14 Forecast Six Months Ending December 2013 Low High Free Cash Flow (Non-GAAP) : Net earnings from operations (GAAP) 72 $ 252 $ 265 $ Depreciation and amortization (includes other LT assets) 46 100 110 Stock-based compensation expense 15 33 35 Other (4) �� (5) 5 Subtotal 129 380 415 Working capital changes (40) (5) 5 Long-term assets & liabilities changes 2 (35) (35) Net cash flow (used in) provided by operating activities 91 340 385 Cash Flows From Investing Activities Capital expenditures and software purchases (31) (65) (60) Free cash flow (Non-GAAP) 60 $ 275 $ 325 $ Cash Flows From Other Investing and Financing Activities Acquisitions (38) (38) (38) Stock repurchases net of options proceeds (2) (2) (2) Proceeds from borrowing net of debt repayments (1) (1) (1) Dividends paid (47) (96) (96) Other 2 (5) 5 Net change in cash and cash equivalents (26) 133 193 Cash and cash equivalents, at the beginning of year 266 266 266 Cash and cash equivalents, at the end of period 240 $ 399 $ 459 $ (a) Guidance does not take into consideration the effect of any future acquisitions, additional debt and/or share repurchases. FY14 Range (a) Free Cash Flow - Non-GAAP Unaudited ($ millions) |
17 Recurring Revenue Closed Sales to Revenue Contribution ($ in millions) Closed Sales Revenue Contribution (a) Backlog (b) Forecast Forecast Forecast FY14 FY14 FY14 ICS (less than $5M deals) $60-70 ~$45-55 ~$60-70 ~Contribution to recurring revenue growth ~6% SPS (less than $5M deals) $30-40 ~$50-55 ~$70-90 ~Contribution to recurring revenue growth ~8% Total deals (less than $5M) $90-110 ~$95-110 ~$130-160 ~Contribution to recurring revenue growth 7-8% Large Deals ($5M or greater) $20-40 $0 ~$20-40 ~Contribution to recurring revenue growth Total Recurring Revenue Closed Sales $110-150 ~$95-110 ~$150-200 ~Contribution to recurring revenue growth 7-8% (a) Revenue from current year and prior year Closed Sales. (b) Closed Sales expected to convert to revenue in future years. |
18 Revenues and Closed Sales FY08-FY13 (a) Includes reclassification of Pre-sale Fulfillment from event-driven revenues to recurring revenues. (b) Includes reclassification of Pre-sale Fulfillment related distribution revenues from event-driven distribution to recurring distribution and Matrix pass-through administrative services revenues from recurring fee to recurring distribution. |
Reconciliation of Non-GAAP to GAAP Measures Free Cash Flow - Non-GAAP Unaudited ($ millions) 19 |
20 ICS Key Segment Revenue Stats RC= Recurring ED= Event-Driven In millions Fee Revenues 2Q13 2Q14 YTD FY13 YTD FY14 Type Proxy Equities 25.3 $ 24.4 $ 50.9 $ 50.4 $ RC Stock Record Position Growth 4% 1% 1% 1% Pieces 20.8 20.0 41.1 41.5 Mutual Funds 9.1 $ 10.7 $ 15.6 $ 26.5 $ ED Pieces 15.4 15.5 23.6 35.9 Beneficial Proxy Activity as a % of Est Total Market Contests/Specials 2.0 $ 2.4 $ 5.0 $ 6.6 $ ED Pieces 1.9 2.4 4.6 6.8 Total Proxy 36.4 $ 37.5 $ 71.5 $ 83.5 $ Total Pieces 38.1 37.9 69.3 84.2 Notice and Access Opt-in % 75% 74% 61% 66% Suppression % 59% 58% 57% 58% Interims Mutual Funds (Annual/Semi-Annual Reports/Annual Prospectuses) 31.5 $ 39.0 $ 63.3 $ 77.8 $ RC Position Growth 11% 13% 10% 12% Pieces 153.2 187.5 303.9 361.0 Mutual Funds (Supplemental Prospectuses) & Other 9.1 $ 7.8 $ 23.8 $ 20.0 $ ED Pieces 46.2 35.7 121.6 107.5 Total Interims 40.6 $ 46.8 $ 87.1 $ 97.8 $ Total Pieces 199.4 223.2 425.5 468.5 Transaction Transaction Reporting/Customer Communications 37.9 $ 35.8 $ 78.5 $ 71.9 $ RC Reporting Fulfillment Fulfillment 31.9 $ 36.2 $ 65.1 $ 76.1 $ RC Emerging, Acquired Emerging/Acquired (a) 26.4 $ 34.9 $ 52.2 $ 69.1 $ RC and Other Other (b) 7.5 $ 7.1 $ 15.6 $ 15.5 $ ED Total Emerging, Acquired and Other 33.9 $ 42.0 $ 67.8 $ 84.6 $ Total Fee Revenues 180.7 $ 198.3 $ 370.0 $ 413.9 $ Total Distribution Revenues (c) 146.1 $ 147.6 $ 296.3 $ 308.2 $ Total Revenues as reported -GAAP 326.8 $ 345.9 $ 666.3 $ 722.1 $ FY14 Forecast Ranges FY14 Plan Ranges Low High Total RC Fees 153.1 $ 170.3 $ 310.1 $ 345.3 $ 923 $ 931 $ % RC Growth 5% 11% 7% 11% 8% 9% Total ED Fees 27.6 $ 28.0 $ 59.9 $ 68.6 $ Low High Sales 4% 5% 5% 5% 6% 6% Key Losses -1% -1% -1% -2% -2% -2% Revenue Net New Business 3% 4% 4% 3% 4% 4% Drivers Internal growth 1% 6% 2% 6% 3% 4% (Recurring) Recurring (Excluding Acquisitions) 4% 10% 6% 9% 7% 8% Acquisitions 0% 1% 0% 2% 1% 1% Total Recurring 4% 11% 6% 11% 8% 9% Low High Key Recurring, Net (d) 2% 5% 3% 5% 4% 5% Revenue Event-Driven 0% 0% 1% 1% 0% 0% Drivers Distribution 1% 1% 2% 2% 0% 0% (Total) TOTAL 3% 6% 6% 8% 4% 5% (a) Emerging and Acquired includes fee revenues from acquisitions (i.e. Access Data, NewRiver, Matrix, Transfer Agency, Forefield, and Bonaire) and the portfolio of emerging products (i.e. TaxServices, Vote Recommendations, and Class Actions). (b) Other includes other event-driven fee revenues such as corporate actions and development. (c) Total Distribution Revenues primarily include pass-through revenues related to the physical mailing of Proxy, Interims, Transaction Reporting, and Fulfillment as well as Matrix administrative services. (d) Recurring, Net includes contribution from Net New Business, Internal Growth, and Acquisitions ~$156 |
21 SPS Key Segment Revenue Stats RC= Recurring ED= Event-Driven In millions Note: Outsourcing is now included in Other Equity Services 2Q13 2Q14 YTD FY13 YTD FY14 Type Equity Transaction-Based Equity Trades 31.1 $ 33.4 $ 61.1 $ 65.9 $ RC Internal Trade Volume 792 934 786 913 Internal Trade Growth -6% 18% -13% 16% Trade Volume (Average Trades per Day in '000) 860 953 844 931 Non-Transaction Other Equity Services 107.1 111.4 205.6 $ 219.4 $ RC Total Equity 138.1 $ 144.9 $ 266.7 $ 285.3 $ Fixed Income Transaction-Based Fixed Income Trades 13.6 $ 14.5 $ 27.5 $ 29.2 $ RC Internal Trade Volume 293 293 294 296 Internal Trade Growth -1% 0% 0% 1% Trade Volume (Average Trades per Day in '000) 293 297 294 299 Non-Transaction Other Fixed Income Services 12.0 $ 14.7 $ 23.5 $ 28.3 $ RC Total Fixed Income 25.6 $ 29.2 $ 51.0 $ 57.5 $ Total Net Revenue as reported - GAAP 163.8 $ 174.1 $ 317.7 $ 342.8 $ FY14 Ranges Low High Sales 5% 9% 4% 10% 8% 8% Losses -2% -4% -2% -3% -4% -3% Key Net New Business 3% 5% 2% 7% 4% 5% Revenue Internal growth -1% 1% -5% 1% 0% 0% Drivers Acquisitions 0% 0% 2% 0% 0% 0% TOTAL 2% 6% -1% 8% 4% 5% |
22 Broadridge ICS Definitions |