Q1 2025 Earnings Summary
- 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 .
- 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 .
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Recurring Revenue yoy Growth | Q1 2025 vs Q1 2024 | 5% to 7% yoy | ICS: 407.2MVs 402.4M(up 1.2%); GTO: 407.2MVs 402.4M(up 1.2%) | Missed |
Event-Driven Revenues yoy Growth | Q1 2025 vs Q1 2024 | High end of historic range | 63.0MVs 86.9M(down 27.5%) | Missed |
Distribution Revenues yoy Growth | Q1 2025 vs Q1 2024 | Low double-digit growth | 459.5MVs 473.0M(down 2.9%) | Missed |
EPS yoy Growth | Q1 2025 vs Q1 2024 | 8% to 12% yoy | 0.68 USDVs 0.77 USD(down -11.7%) | Missed |
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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. -
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. -
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. -
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. -
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. -
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. -
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.