Broadridge Financial Solutions (BR)

F2Q2013 Results Earnings Call

February 7, 2013 8:30.m. ET

Executives

David Ng - Director, Investor Relations

Rich Daly - Chief Executive Officer

Dan Sheldon - Chief Financial Officer

Steve Racioppo - Chief Revenue Officer

Analysts

George Mihalos - Credit Suisse

Chris Donat - Sandler O’Neill

Mark Best - Evercore Partners

Peter Heckmann - Avondale Partners

Presentation

Operator

At this time, I would like to welcome everyone to the Broadridge Financial Solutions Second Quarter Fiscal Year 2013 Earnings Conference Call. [Operator instructions.] I’d like to turn the conference over to David Ng, Senior Director, Investor Relations. Please go ahead, sir.

David Ng

Thank you. Good morning everyone, and welcome to the Broadridge quarterly earnings call and webcast for the second quarter fiscal year 2013 results. This morning I’m here with Rich Daly, our Chief Executive Officer; and Dan Sheldon, our Chief Financial Officer.

I trust that by now everyone has had the chance to review the earnings release we issued this morning. The news release and slide presentation that accompany today’s earnings call and webcast can be found on the Investor Relations page at broadridge.com.

During today’s conference call, we’ll discuss some forward-looking statements regarding Broadridge that involve risks. These risks are summarized on slide one. We encourage participants to refer to our SEC filings, including our annual report on Form 10-K, for a complete discussion of forward-looking statements and risk factors faced by our business.

Before we begin, I’d like to point out to everyone that as a result of the Penson transaction we closed in the fourth quarter of fiscal year 2010, the clearing business is now shown as discontinued operations, and our remaining outsourcing business is included in the Securities Processing Solutions segment. As a result of the reporting treatment of the Penson transaction, the financial results discussed today will address continuing operations unless otherwise stated.

Our non-GAAP fiscal year 2013 earnings results exclude the impact of acquisition and amortization and other costs and restructuring charges. These costs are significant, and we believe the non-GAAP information provides investors with a more complete understanding of Broadridge’s underlying operating results. A description of these non-GAAP adjustments and reconciliation to the comparable GAAP measures can be found in the earnings release.

Now, let’s turn to slide two and review today’s agenda. Rich Daly will start today’s call with his opening remarks and will provide you with a summary of the financial highlights for the second quarter of fiscal year 2013, followed by discussion of a few key topics. Dan Sheldon will then review the second quarter financial results in further detail. Rich will then return and provide his overall summary and closing thoughts before we head to the Q&A part of the call.

Now, let’s turn to slide three and I’ll turn the call over to Rich Daly. Rich?

Rich Daly

Thanks, David, and good morning everyone. This morning as part of my opening remarks, I’ll talk about the following topics. First, I’ll start with an overview of our second quarter and year to date fiscal year 2013 financial highlights and guidance. Then, I’ll discuss our closed sales performance, followed by an update of our key activities.

After Dan provides you more of the financial details, I’ll wrap it up with my closing comments, in which you will hear our fact-based confidence regarding the clear and executable strategy for both of our business segments going forward.

Let’s start on slide four, our second quarter fiscal year 2013 financial highlights. Overall, I’m satisfied with our first half financial results. Recurring revenues were up 3% for the quarter and year to date versus the comparable periods in fiscal 2012. The recurring revenue increase was the result of net new business and a 99% client revenue retention rate.

Event-driven activity was flat for the quarter, and up 9% year to date as we saw some pickup in activity in the first quarter. Trade volumes remained challenging, and were lower for the quarter. Notably, we have seen a pickup in volumes month over month from October through January.

Our earnings continued to grow in both the quarter and year to date. Our non-GAAP diluted earnings per share increased $0.02 to $0.17 per share, and $0.35 per share for the quarter and year to date respectively versus fiscal year 2012. This was primarily due to higher revenues, increased margins driven by business mix, and our continuing focus on cost containment.

While we’re off to a solid start for the first half of the fiscal year, due to the seasonal nature of our business, our first half earnings per share represent about 20% of our full year results. We are reaffirming our full year guidance at this time of $1.76 to $1.86 non-GAAP diluted earnings per share.

Please turn to slide five for an update on closed sales performance. Recurring revenue closed sales year to date were $34 million, down from $63 million, primarily due to longer than anticipated sales cycles for large transactions. We did not close any transactions greater than $5 million during the first half of the fiscal year. Closed sales of less than $5 million decreased approximately 16%.

While I am disappointed at the closed sales results to date, historically the majority of our closed sales less than $5 million occur in the second half of our fiscal year. I am pleased with our solid pipeline, driven by large pending sales. We continue to have very good momentum in our dialogs with these potential clients.

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