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Broadridge (BR) Q2 Earnings Beat, Revenues Miss Estimates
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Broadridge Financial Solutions Inc. (BR - Free Report) posted second-quarter fiscal 2017 adjusted earnings per share (EPS) of 39 cents (excluding acquisition and amortization related expenses), which beat the Zacks Consensus Estimate of 38 cents.
Over the last one year, Broadridge’s share price has gained 27.4%, outperforming the Zacks categorized Outsourcing industry, which gained just 17.2%.
Quarter Details
Broadridge’s second-quarter revenues of $892.6 increased a whopping 39.7% year over year. However, it missed the Zacks Consensus Estimate of $939 million. The year-over-year increase was primarily driven by North American Customer Communications (NACC) acquired DST Systems Inc. . Also, better-than-expected revenues from closed sale drove the quarterly revenues.
Recurring fee revenues were up 34% during the quarter, including contribution from Net New Business, internal growth and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $56 million, up 15% on a year-over-year basis. Distribution revenues during the quarter went up 76%, primarily backed by the acquisition of NACC.
Revenues from the Investor Communication Solutions segment (79% of total revenue) increased 50.4% from the year-ago quarter to $709.6 million. The improvement was attributable to higher recurring revenues from net new business and NACC acquisitions.
The Global Technology and Operations segment (22% of total revenue) reported revenues of $201.8 million, up 11.9% from the year-ago quarter. The increase was driven by higher Net New Business from closed sales and recent acquisition.
Broadridge’s adjusted operating income margin contracted from 12.5% to 9.4%. Selling, general and administrative expenses as a percentage of revenues also contracted from 16.3% to 14.1% on a year-over-year basis. The company reported adjusted net income of $46.8 million or 39 cents per share, up from $46.6 million or 38 cents per share in the year-ago comparable period.
Broadridge exited the quarter with cash and cash equivalents of $235.7 million compared with $227.4 million in the previous quarter. Long-term debt (including current portion) on the balance sheet totaled $1.206 billion.
Cash flow used in operating activities during the six months ended Dec 31, 2016 was $5.5 million. Free cash flow came in at ($37.5) million. The company did not repurchase any shares during the quarter but declared a dividend of 33 cents during the quarter.
Fiscal 2017 Guidance
Broadridge lowered its 2017 revenue outlook. It now projects revenue growth in a range of 40% to 42% (previously 43% to 45%), while recurring revenue growth is still expected in a range of 29% to 31%. The company continues to expect recurring revenues from closed sales to be a key growth driver and range within $140 million to $180 million. Adjusted operating income margin is expected to be approximately 15%. Adjusted earnings are expected to increase in a range of 12% to 17%. Management expects free cash flow to range within $350 million to $400 million.
Our Take
Broadridge reported mixed second-quarter results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. Year-over-year comparisons on both the counts were favorable driven by higher recurring revenues, contribution from Net New Business, higher distribution revenues and acquisition-related synergies. The company however lowered its fiscal 2017 revenue guidance.
We remain optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase program and dividend paying initiatives. We also believe that the company’s close association with Accenture (ACN - Free Report) will be beneficial over the long term.
However, competition from DST Systems Inc. and pricing pressure remain headwinds.
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Broadridge (BR) Q2 Earnings Beat, Revenues Miss Estimates
Broadridge Financial Solutions Inc. (BR - Free Report) posted second-quarter fiscal 2017 adjusted earnings per share (EPS) of 39 cents (excluding acquisition and amortization related expenses), which beat the Zacks Consensus Estimate of 38 cents.
Over the last one year, Broadridge’s share price has gained 27.4%, outperforming the Zacks categorized Outsourcing industry, which gained just 17.2%.
Quarter Details
Broadridge’s second-quarter revenues of $892.6 increased a whopping 39.7% year over year. However, it missed the Zacks Consensus Estimate of $939 million. The year-over-year increase was primarily driven by North American Customer Communications (NACC) acquired DST Systems Inc. . Also, better-than-expected revenues from closed sale drove the quarterly revenues.
Recurring fee revenues were up 34% during the quarter, including contribution from Net New Business, internal growth and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $56 million, up 15% on a year-over-year basis. Distribution revenues during the quarter went up 76%, primarily backed by the acquisition of NACC.
Revenues from the Investor Communication Solutions segment (79% of total revenue) increased 50.4% from the year-ago quarter to $709.6 million. The improvement was attributable to higher recurring revenues from net new business and NACC acquisitions.
The Global Technology and Operations segment (22% of total revenue) reported revenues of $201.8 million, up 11.9% from the year-ago quarter. The increase was driven by higher Net New Business from closed sales and recent acquisition.
Broadridge’s adjusted operating income margin contracted from 12.5% to 9.4%. Selling, general and administrative expenses as a percentage of revenues also contracted from 16.3% to 14.1% on a year-over-year basis. The company reported adjusted net income of $46.8 million or 39 cents per share, up from $46.6 million or 38 cents per share in the year-ago comparable period.
Broadridge exited the quarter with cash and cash equivalents of $235.7 million compared with $227.4 million in the previous quarter. Long-term debt (including current portion) on the balance sheet totaled $1.206 billion.
Cash flow used in operating activities during the six months ended Dec 31, 2016 was $5.5 million. Free cash flow came in at ($37.5) million. The company did not repurchase any shares during the quarter but declared a dividend of 33 cents during the quarter.
Fiscal 2017 Guidance
Broadridge lowered its 2017 revenue outlook. It now projects revenue growth in a range of 40% to 42% (previously 43% to 45%), while recurring revenue growth is still expected in a range of 29% to 31%. The company continues to expect recurring revenues from closed sales to be a key growth driver and range within $140 million to $180 million. Adjusted operating income margin is expected to be approximately 15%. Adjusted earnings are expected to increase in a range of 12% to 17%. Management expects free cash flow to range within $350 million to $400 million.
Our Take
Broadridge reported mixed second-quarter results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. Year-over-year comparisons on both the counts were favorable driven by higher recurring revenues, contribution from Net New Business, higher distribution revenues and acquisition-related synergies. The company however lowered its fiscal 2017 revenue guidance.
We remain optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase program and dividend paying initiatives. We also believe that the company’s close association with Accenture (ACN - Free Report) will be beneficial over the long term.
However, competition from DST Systems Inc. and pricing pressure remain headwinds.
Currently, Broadridge has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Seagate Technology plc (STX - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Seagate has a long-term EPS growth rate of 8.17%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>