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    Broadridge Financial Solutions Inc (BR)

    Business Description

    Broadridge Financial Solutions, Inc. is a global leader in financial technology, offering investor communications and technology-driven solutions to a diverse clientele, including banks, broker-dealers, asset and wealth managers, public companies, investors, and mutual funds . The company operates primarily through two segments: Investor Communication Solutions (ICS) and Global Technology and Operations (GTO), providing essential infrastructure and data solutions that enhance business performance and operational efficiency . Broadridge's offerings include processing and distributing proxy materials, facilitating vote processing, and delivering technology solutions for capital markets and wealth management .

    1. Investor Communication Solutions (ICS) - Processes and distributes proxy materials, facilitates vote processing, and provides data-driven solutions for asset managers and retirement service providers. This segment includes:

      • Regulatory Solutions - Offers compliance and regulatory communication services.
      • Data-Driven Fund Solutions - Provides analytics and insights for fund management.
      • Corporate Issuer Solutions - Delivers services for corporate governance and shareholder engagement.
      • Customer Communications Solutions - Manages customer communication strategies and execution.

    2. Global Technology and Operations (GTO) - Delivers technology solutions for capital markets and wealth and investment management, including securities processing and data and analytics solutions .

    Q1 2025 Summary

    Initial Price$197.57June 29, 2024
    Final Price$212.03September 29, 2024
    Price Change$14.46
    % Change+7.32%

    What went well

    • Acquisition of SIS expected to drive growth: Broadridge's recent acquisition of SIS for approximately $185 million is expected to add over 1 percentage point to overall growth , be accretive to wealth growth leading to low double-digit growth in their wealth business, and contribute to GTO growth at the high end of 5% to 8% .
    • Strong sales performance and pipeline: Broadridge reported closed sales of $57 million, up 21% from last year , representing a strong start to the year. The company has a $450 million backlog as of August , giving confidence in their outlook and visibility into recurring revenue over the medium term .
    • Expected acceleration in customer communications growth: Broadridge expects their BRCC (Broadridge Customer Communications) revenues to pick up from FY '24 levels, driven by new sales and growth in digital . The company is confident in achieving mid- to high single-digit growth in BRCC for the full year .

    What went wrong

    • The company's increased recurring revenue guidance is largely due to the acquisition of SIS, expected to add just under $60 million in revenue this year but be slightly dilutive to margins with no material impact on earnings . This raises concerns about the strength of organic growth.
    • Management indicated that the strong Q1 closed sales, which accounted for nearly 20% of the full-year outlook, may not signal increased expectations for the full year, attributing it to the timing of medium-sized deals rather than a trend of improved sales momentum . This suggests potential uncertainty in sustaining sales growth.
    • Customer Communications revenue growth remained consistent with the prior quarter instead of accelerating, despite expectations of increased growth from digital initiatives. This could indicate slower-than-expected growth in digital revenue streams .

    Q&A Summary

    1. Guidance Raise vs. EPS
      Q: Why raise revenue guidance but not EPS?
      A: Management raised their recurring revenue growth guidance to 6% to 8%, reflecting the SIS acquisition and increased confidence in organic growth of 6% to 7% for the rest of the year. However, EPS guidance remains at 8% to 12% growth because they plan to reinvest high-margin event activity into further growth opportunities. Additionally, the SIS acquisition is expected to be neutral to EPS in the first year.

    2. SIS Acquisition Details
      Q: What's SIS's revenue and impact on guidance?
      A: The SIS acquisition, costing $185 million, is expected to add just under $60 million in revenue this year, contributing over 1 percentage point to Broadridge's growth. It will slightly dilute margins but have no material impact on earnings. Management confirms the raised revenue guidance is largely due to SIS, but organic trends remain strong.

    3. M&A Plans and Capacity
      Q: What's your M&A appetite and focus?
      A: Broadridge views M&A as a way to meet client needs, expecting 1 to 2 percentage points contribution to recurring revenue over three years. They are tracking a strong pipeline of opportunities but will pursue deals that meet financial criteria and where they're the best owner. If compelling opportunities aren't found, they're comfortable repurchasing their own shares.

    4. Sales Activity and Outlook
      Q: Is strong Q1 sales a trend or pull-forward?
      A: Management is pleased with a strong start to the year, with Q1 closed sales representing about 20% of the full-year sales outlook midpoint. They attribute this to the timing of medium-sized deals rather than pull-forward. The full-year sales guidance remains at $290 million to $330 million, and they feel good about the outlook.

    5. Customer Communications Growth Outlook
      Q: Will BRCC growth accelerate this year?
      A: Yes, Broadridge expects BRCC revenues to pick up over the remainder of the year, driven by new sales and digital growth. A significant sale onboarded late in Q1 will contribute to higher growth in the rest of FY '25. They are confident in achieving mid- to high-single-digit growth for BRCC this year.

    6. Stock Record Growth Outlook
      Q: Will stock record growth improve?
      A: Management expects stock record growth to improve to mid- to high-single digits. Q1's 3% growth was in line with expectations due to the mix of small issuers sending proxies in that period. They anticipate high-single-digit growth in Q2 and have good visibility, with testing showing mid- to high-single-digit growth for the full year.

    7. T+1 Implementation in Europe
      Q: How is Broadridge helping with T+1 in Europe?
      A: Broadridge acknowledges challenges arising from the U.S. moving to T+1 settlement while Europe hasn't yet. They offer managed services and BPO to help clients navigate these timing disparities. If a significant timing gap persists, they may develop technology solutions to assist.

    Key Metrics

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    Revenue by Segment - in Millions of USDQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    Investor Communication Solutions1,438.44,535.61,028.6999.51,301.41,528.44,857.91,015.6
    - Recurring Revenues--402.4405.4425.14161,648.9407.2
    -- Regulatory444.21,141.4179.4194.7344.6476.91,195.6189.9
    -- Data-driven Fund Solutions113.4404.3101.8105.3106.2121.9435.2108.0
    -- Issuer134.5242.628.530.659.6141.1259.830.9
    -- Customer Communications165.8673.1159.1162.7190.8170.5683.1164.2
    - Event-driven Revenues58.9211.086.955.267.076.1285.263.0
    -- Equity and Other--40.822.1--151.021.1
    -- Mutual Funds--46.133.1--134.241.9
    - Distribution Revenues521.51,863.1473.0450.9533.3541.81,999.0459.5
    Global Technology and Operations400.51,525.2402.4405.4425.14161,648.9407.2
    -- Capital Markets-965.2248.5262.4265.8272.51,049.2261.0
    -- Wealth and Investment Management-560.1153.9143.0159.3143.5599.7146.2
    Foreign Currency Exchange Impact--------
    Total Revenue1,8396,060.91,431.11,405.01,726.51,944.26,506.81,422.9
    Revenue by Geography - in Millions of USDQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    United States-5,260.0----5,620.1-
    Canada-367.4----393.9-
    United Kingdom--------
    Europe-392.2----445.9-
    Other-41.3----46.8-
    Total Revenue-6,060.9----6,506.81,422.9
    KPIs - Metric / QuarterQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    Fixed Minimum Commitments - IT Services Agreement ($ million)132.1-132.1112.191.6113.4-91.2
    Fixed Minimum Commitments - Private Cloud Agreement ($ million)143.1-143.1133.2128.8106.3-94.8
    Fixed Minimum Commitments - AWS Cloud Agreement ($ million)178.6-178.6153.9148.7136.1-124.6
    Deferred Client Conversion and Start-up Costs ($ million)937.0-934.6930.6905.2892.1-882.0

    Executive Team

    NamePositionStart DateShort Bio
    Timothy C. GokeyChief Executive Officer and Director2019Timothy C. Gokey has been the CEO and a Director of Broadridge since 2019. He previously served as President from 2017 to 2020, COO from 2012 to 2019, and Chief Corporate Development Officer from 2010 to 2012. Before Broadridge, he was President of the Retail Tax business at H&R Block and a Partner at McKinsey & Company .
    Christopher J. PerryPresident2020Christopher J. Perry joined Broadridge in 2014 as Corporate SVP, Global Sales, Marketing, and Client Solutions, and became President in 2020. He previously held roles at Thomson Reuters, including Global Managing Director of Risk and President of Global Sales & Account Management .
    Richard J. DalyExecutive Chairman2019Richard J. Daly has been Executive Chairman since 2019 and a Board member since 2007. He was CEO from 2007 to 2019 and President from 2014 to 2017. Before Broadridge's spin-off from ADP, he was Group President of the Brokerage Services Group at ADP .
    Thomas P. CareyCorporate Vice President, Global Technology and Operations (GTO)October 2018Thomas P. Carey has been President of the GTO business segment since October 2018. He previously led Broadridge's International business and held various roles at ADP and Broadridge, including head of technology for ADP's Brokerage Services Group .
    Douglas R. DeSchutterCorporate Vice President, Investor Communication Solutions (ICS)September 2023Douglas R. DeSchutter has been Co-President of the ICS business segment since September 2023. He oversees various business aspects, including U.S. Proxy and Post Sale, and has been with Broadridge since its spin-off from ADP in 2007 .
    Ashima GheiInterim Chief Financial OfficerJuly 1, 2024Ashima Ghei became Interim CFO on July 1, 2024. She was previously CFO of Broadridge's ICS business and spent 18 years at American Express in senior finance and business strategy roles .
    Hope M. JarkowskiCorporate Vice President, Chief Legal OfficerMay 2024Hope M. Jarkowski joined Broadridge as Chief Legal Officer in May 2024. She oversees legal, compliance, regulatory, and government affairs functions. Before Broadridge, she was General Counsel at the NYSE .
    Laura MatlinCorporate Vice President, Deputy General Counsel and Chief Compliance Officer2017Laura Matlin is responsible for international legal teams and coordinates the enterprise compliance program. She has been with Broadridge since its spin-off from ADP in 2007 and became Chief Compliance Officer in 2017 .
    Richard J. StingiCorporate Vice President, Chief Human Resources OfficerFebruary 2021Richard J. Stingi became Chief Human Resources Officer in February 2021 after serving as Interim CHRO from September 2020. He leads global HR aspects and joined Broadridge in 2013. Before Broadridge, he was a Managing Director at Goldman Sachs .

    Questions to Ask Management

    1. Given that your adjusted operating income margin declined by 90 basis points in Q1 '25 due to factors like the E-Trade deconversion and ongoing reinvestment, how do you plan to offset these pressures and achieve your goal of 50 basis points of underlying core margin expansion for the full year?

    2. The acquisition of SIS is expected to be slightly dilutive to Broadridge's margins and have no material impact on earnings this year; how do you justify this acquisition in terms of shareholder value, and when do you anticipate it becoming accretive to both margins and earnings?

    3. You mentioned a lengthening of the sales pipeline with deals taking longer to close; with this uncertainty in client decision-making, how confident are you in achieving your closed sales guidance of $290 million to $330 million for fiscal '25, and what strategies are you employing to mitigate potential delays?

    4. With the challenges arising from T+1 settlement discrepancies between the U.S. and Europe increasing costs for brokers, what specific solutions is Broadridge developing to help clients navigate these issues, and how does this situation present an opportunity to drive growth in your capital markets franchise?

    5. Customer communications growth remained consistent with fiscal Q4 rather than accelerating; given your focus on digitization and the importance of digital revenues, why haven't we seen stronger growth in this area, and what concrete steps are you taking to achieve mid- to high single-digit growth in your customer communications business this fiscal year?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateN/A
    End Date/DurationN/A
    Total additional amountN/A
    Remaining authorization7.3 million shares
    DetailsNo shares repurchased during the fiscal quarter ended September 30, 2024.

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Independent proxy distribution service providers
    • Transfer agents
    • Proxy advisory firms
    • Proxy solicitation firms
    • Firms that process proxy votes
    • Financial printers
    • Vendors that provide trade processing, back-office record keeping, and sell-side order and execution management systems
    • Service providers that deliver data, technology solutions, and marketing services to wealth advisors
    • Firms that provide portfolio management, compliance, and operational support solutions for asset managers and hedge funds .

    Latest news

    Recent developments and announcements about BR.

    Corporate Leadership

      Leadership Change

      ·
      Dec 16, 2024, 8:52 PM

      Ashima Ghei has been appointed as the new Chief Financial Officer of Broadridge Financial Solutions, effective immediately. She has been serving as the Interim CFO since July 1, 2024, and has played a crucial role in advancing the company's financial strategy. Ghei joined Broadridge in January 2022 and has a strong background, including an 18-year career at American Express .