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Broadridge (BR) Q3 Earnings and Revenues Beat Estimates
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Shares of Broadridge Financial Solutions Inc. (BR - Free Report) escalated more than 3% after the company reported better-than-expected third-quarter fiscal 2017 results.
The company posted adjusted earnings per share (EPS) of 69 cents (excluding acquisition and amortization related expenses), beating the Zacks Consensus Estimate of 59 cents.
In the last one year, Broadridge’s share price increased 15.6%, outperforming the Zacks categorized Outsourcing industry, which gained only 1.5%.
Quarter Details
Broadridge’s third-quarter revenues of $1008.9 increased a whopping 46.5% year over year. Also, it surpassed the Zacks Consensus Estimate of $994 million. The year-over-year increase was driven primarily by North American Customer Communications (NACC) acquired from DST Systems Inc. .Better-than-expected revenues from closed sale was also a drive.
Recurring fee revenues increased 30% during the quarter that included contribution from Net New Business and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $48 million, reflecting an increase of 66% on a year-over-year basis. Distribution revenues during the quarter increased 85%, primarily backed by the acquisition of NACC.
Revenues from the Investor Communication Solutions segment (82% of total revenue) increased 60.3% from the year-ago quarter to $826.4 million. The improvement was attributable to higher recurring revenues from net new business and NACC acquisitions.
The Global Technology and Operations segment (20% of total revenue) revenues came in at $202.7 million, reflecting an increase of 5.9% 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 15.9% to 13.2%. Selling, general and administrative expenses as a percentage of revenues also contracted from 14.8% to 12.4% on a year-over-year basis. The company’s adjusted net income of $83.3 million or 69 cents per share was up from $70 million or 58 cents per share in the year-ago period.
Broadridge exited the quarter with cash and cash equivalents of $269.5 million compared with $235.7 million in the previous quarter. Long-term debt (including current portion) on the balance sheet totalled $1.266 billion.
Cash flow used in operating activities during the nine months ended Mar 31, 2017 was $162.1 million. Free cash flow came in at 92.6 million. The company did not repurchase any shares during the quarter but declared a dividend of 33 cents during this period.
Fiscal 2017 Guidance
Broadridge reiterated its 2017 revenue outlook. It continues to projects revenue growth in the range of 40–42%, while recurring revenue growth is expected in the range of 29–31%. 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 the range of 12– 17%. Management expects free cash flow in the range of $350– $400 million.
Our Take
Broadridge reported impressive third-quarter results. 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 reaffirmed its fiscal 2017 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 in the long run.
However, competition from DST Systems Inc. and pricing pressure remain headwinds.
Computer Sciences has a long-term EPS growth rate of 8%.
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Broadridge (BR) Q3 Earnings and Revenues Beat Estimates
Shares of Broadridge Financial Solutions Inc. (BR - Free Report) escalated more than 3% after the company reported better-than-expected third-quarter fiscal 2017 results.
The company posted adjusted earnings per share (EPS) of 69 cents (excluding acquisition and amortization related expenses), beating the Zacks Consensus Estimate of 59 cents.
In the last one year, Broadridge’s share price increased 15.6%, outperforming the Zacks categorized Outsourcing industry, which gained only 1.5%.
Quarter Details
Broadridge’s third-quarter revenues of $1008.9 increased a whopping 46.5% year over year. Also, it surpassed the Zacks Consensus Estimate of $994 million. The year-over-year increase was driven primarily by North American Customer Communications (NACC) acquired from DST Systems Inc. .Better-than-expected revenues from closed sale was also a drive.
Recurring fee revenues increased 30% during the quarter that included contribution from Net New Business and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $48 million, reflecting an increase of 66% on a year-over-year basis. Distribution revenues during the quarter increased 85%, primarily backed by the acquisition of NACC.
Revenues from the Investor Communication Solutions segment (82% of total revenue) increased 60.3% from the year-ago quarter to $826.4 million. The improvement was attributable to higher recurring revenues from net new business and NACC acquisitions.
The Global Technology and Operations segment (20% of total revenue) revenues came in at $202.7 million, reflecting an increase of 5.9% 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 15.9% to 13.2%. Selling, general and administrative expenses as a percentage of revenues also contracted from 14.8% to 12.4% on a year-over-year basis. The company’s adjusted net income of $83.3 million or 69 cents per share was up from $70 million or 58 cents per share in the year-ago period.
Broadridge exited the quarter with cash and cash equivalents of $269.5 million compared with $235.7 million in the previous quarter. Long-term debt (including current portion) on the balance sheet totalled $1.266 billion.
Cash flow used in operating activities during the nine months ended Mar 31, 2017 was $162.1 million. Free cash flow came in at 92.6 million. The company did not repurchase any shares during the quarter but declared a dividend of 33 cents during this period.
Fiscal 2017 Guidance
Broadridge reiterated its 2017 revenue outlook. It continues to projects revenue growth in the range of 40–42%, while recurring revenue growth is expected in the range of 29–31%. 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 the range of 12– 17%. Management expects free cash flow in the range of $350– $400 million.
Our Take
Broadridge reported impressive third-quarter results. 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 reaffirmed its fiscal 2017 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 in the long run.
However, competition from DST Systems Inc. and pricing pressure remain headwinds.
Currently, Broadridge carries a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Computer Sciences Corporation (DXC - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Computer Sciences has a long-term EPS growth rate of 8%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>