Broadridge Financial Solutions, Inc. · NYSE:BR
Broadridge Financial Solutions — Investor Presentation (September 2011)
54 slides from Broadridge Financial Solutions's investor presentation, Sep 20, 2011
Slide 1: Continued Market Leadership through Execution and Innovation
Exhibit 99.1 Continued Market Leadership through Execution and Innovation Investor Presentation © 2011 Broadridge Financial Solutions, Inc. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc. September 2011
Slide 2: Forward-looking statements
Forward-looking statements This presentation and other written or oral statements made from time to time by representatives of Broadridge may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature,
Slide 3: Broadridge Overview
\Geties Overview ’ ea Broadridge
Slide 4: Broadridge is a strong, resilient business with significant growth potential
Broadridge is a strong, resilient business with significant growth potential History of market leadership – Proven ability to address increasingly complex customer needs through technology – Innovation and thought leader in industry for >40 years Strong position in large and attractive markets – Lea
Slide 5: Consistent shareholder returns through careful capital stewardship
Consistent shareholder returns through careful capital stewardship Strong expected Total Shareholder Return (TSR) over next three years through a balanced return model with low risk to investors – Mid-to-high single-digit revenue growth in current and adjacent markets – Mid single-digit margin expan
Slide 6: We have led the industry in shareholder value creation through challenging times
We have led the industry in shareholder value creation through challenging times Annual TSR %, FY 2007–11 10.4 6.2 3.6 S&P 500 1.2% -0.4 -5.4 -6.3 -9.4 Jack Broad- Fiserv Computer- Fidelity SEI Invest- DST 1 Henry ridge share National ments Systems Broadridge delivered strong shareholder value throu
Slide 7: Our market position is differentiated and sustainable
Our market position is differentiated and sustainable Investor Communication Services Securities Processing Services • Proxy services for >85% of outstanding shares in US • Processed >600 billion shares in 2011 • Used by >4,000 institutional investors Processes Enable Ranked #1 globally >$4 trillion
Slide 8: We are the leader in several markets
We are the leader in several markets Investor Communication Securities Processing Services Services 1 1 Market Rank Market Rank Bank/Broker-Dealer US Brokerage Regulatory #1 Processing #1 Communications US Fixed Income Broker-Dealer Processing #1 Transactional #1 Communications Canadian Brokerage Pr
Slide 9: Our vision is clear
Our vision is clear Leading provider of investor communications and technology-driven solutions to broker-dealers, mutual funds, and corporate issuers globally 8
Slide 10: We are building a strong future
We are building a strong future Our history Our future Small-cap financial services Leading provider of investor outsourcing company with a strong communications and technology-driven position serving U.S. brokerage solutions to broker-dealers, mutual industry funds, and corporate issuers globally G
Slide 11: Broadridge's investment thesis
Broadridge's investment thesis ICS is a highly defensible, scalable business with new growth opportunities SPS is a market share leader in mission-critical services with high client retention and emerging growth opportunities Industry trends becoming tailwinds instead of headwinds Broadridge is an e
Slide 12: Strategy Overview
11 Strategy Overview Bg Broadridge
Slide 13: Large and attractive markets – Investor Communications (ICS) is a $10B+ market
Large and attractive markets – Investor Communications (ICS) is a $10B+ market Total addressable market $10B+ fee revenue Bank/Broker-Dealer (BBD)—Core Regulatory communications (proxy, interims, etc.) Mutual Fund—Natural adjacencies Customer communications Transaction reporting (transaction stateme
Slide 14: Technology and Operations (SPS) adds ~$14B to our addressable market
Technology and Operations (SPS) adds ~$14B to our addressable market Securities and investment firms’ overall technology and operations spend is over $100 billion and growing at 5% Total addressable market ~ $14B fee revenue US Brokerage Processing Core equities and fixed income Adjacent markets $1.
Slide 15: Favorable macro trends
Favorable macro trends Industry trends Implications for Broadridge Regulatory change Increasingly strict requirements are creating new demand for our services Move to e-delivery Broadridge’s content, connectivity, and unique channels create new competitive advantages Will drive higher margins over t
Slide 16: Our strategy is to leverage our market role to expand our client relationships
Our strategy is to leverage our market role to expand our client relationships Grow core Reinforce role as the industry thought leader to lead e-transition Bank/Broker-Dealer Drive growth in adjacent markets through new organic or Communications acquired solutions Leverage unique data hub position a
Slide 17: Investor Communication Solutions (ICS)
Investor Communication Solutions (ICS) 16
Slide 18: ICS Unique Business Systems Processing Model
ICS Unique Business Systems Processing Model Proxy and Interim processing system is the “plumbing” supporting the voting process for corporate governance (1) Represents Broadridge’s estimated total number of brokerage firms and banks in the U.S. and international markets (2) Represents Broadridge’s
Slide 19: ICS Product and Client Revenue Overview
ICS Product and Client Revenue Overview We have a strong and diverse product …and we have deep and longstanding offering… client relationships FY11 Product Revenues FY11 Client Revenues Proxy $334M (21%) Distribution Interims $704M (45%) $146M (9%) Bank/Broker- Primarily Dealer Mutual Fund $1,310M (
Slide 20: ICS- Bank/Broker-Dealer Communications
ICS- Bank/Broker-Dealer Communications 19
Slide 21: What we do
What we do Communications sent to >110M Regulatory communications accounts –Beneficial proxy, interims, etc. for equities Over 4,000 institutional –Beneficial mutual fund compliance investors use our communications platform globally Customer communications Process ~85% –Transaction statements, trade
Slide 22: Our unique competitive advantage
Our unique competitive advantage Strong market position—indispensible data hub connecting Bank and Broker–Dealers (BBDs) to thousands of issuers/mutual funds and 100+ million shareholders Thought leadership leading to numerous innovations – First/only certified voting results – First e-delivery, pho
Slide 23: ICS- Mutual Fund Solutions
ICS- Mutual Fund Solutions 22
Slide 24: What we do
What we do Service relationships with Mutual Fund trade every mutual fund processing in the defined contribution/trust space Leading (Matrix) independent defined-contribution trade processor Data aggregation and analytics (Access Data) Market intelligence for 90% of ETF assets Marketing/Regulatory c
Slide 25: Our unique competitive advantage
Our unique competitive advantage Long-standing relationships across industry — Serve every mutual fund and majority of bank/broker-dealers Unique data capabilities — Proprietary platform to allow mutual funds to understand their clients — Innovative business applications that address unique industry
Slide 26: ICS- Corporate Issuer Solutions
ICS- Corporate Issuer Solutions 25
Slide 27: What we do
What we do Service relationships with Beneficial proxy service >6,000 issuers Registered shareholder Direct relationships communications with 45% Fortune – Registered proxy 500 companies – Interim communications Adding one Transfer agency (TA) Transfer Agency – Stock share registry, client per week
Slide 28: Our unique competitive advantage
Our unique competitive advantage Market Position – only full service provider of shareholder communications to all shareholders Relationships – relationships with and connectivity to virtually every US broker–dealer create a unique network that facilitates shareholder communications and intelligence
Slide 29: Global Technology and operations Solutions (SPS)
Global Technology and operations Solutions (SPS) 28
Slide 30: Securities Processing North America Market Share Overview
Securities Processing North America Market Share Overview 1 Equity Processing Client Volume FY11 Product Revenues Broadridge Competitors ~30% M ~20% A In-house R ~50% K Fixed Income (US$ only) Client Volume E Equity (~75%) T Transactions, $239M Broadridge Non-transactions, $211M Fixed Income ~55% (~
Slide 31: SPS Top 15 Clients for FY11
SPS Top 15 Clients for FY11 Top Equity Processing Fixed Income Clients Retail Institutional Processing Outsourcing Alliance Bernstein Bank of America/Merrill Lynch Barclays Capital Services BMO Nesbitt Burns CIBC World Markets Deutsche Bank E*Trade Group Edward Jones Jefferies & Company JP Morgan Ch
Slide 32: Broadridge processing behind the scenes
Broadridge processing behind the scenes Front office Middle office Back office Transaction Client Validation & Clearing and Capture/ Asset Servicing Set-up Confirmation Settlement Execution Investor Investor initiates Confirmation of Securities are Dividends/interest is account set order to buy all
Slide 33: What we do
What we do Industry standard for fixed income Best-of-breed securities processing processing, >$4 solutions trillion trades daily – Leading global platform On average – Broad asset class coverage processing >1.5 million equity Broad suite of add-on or point trades per day solutions – Desk top applic
Slide 34: Our unique competitive advantage
Our unique competitive advantage Unique global technology platform provides processing access to over 50 countries Breadth of asset classes on single “platform” Leading market position and scale Flexible business model that can be tailored to unique client needs Trusted brand 33
Slide 35: Financial Overview
on — ——_ Financial Overview Bg Broadridge 34
Slide 36: We plan to deliver strong Total Shareholder Return (TSR) through FY14
We plan to deliver strong Total Shareholder Return (TSR) through FY14 Total Shareholder Return Operational Portfolio Financial strategy excellence Margin 35% payout 6–9% that currently expansion revenue from 13% to yields 2–3%, growth 17–19% plus buybacks Drive organic growth Leverage economies Gene
Slide 37: Since spin-off, we have focused on the drivers of TSR
Since spin-off, we have focused on the drivers of TSR TSR driver Key actions 1 Portfolio Drive profitable growth Spending >$300M annually on technology Introduced >20 new products since spin-off Made several strategic acquisitions Divested Ridge and pruned underperforming products 2 Operational Impr
Slide 38: Our future is bright, even assuming weak market environment continues
Our future is bright, even assuming weak market environment continues Grow revenue by 6–9% Revenue ($B) Next 6–9% CAGR Increase EBIT margins three from ~13% to 17-19% 2.6–2.9 years 2.2 0.7-0.8 0.6 Continue shareholder- (FY11– friendly use of cash 1.6 1.9-2.1 FY14) Strong TSR FY11 FY14 estimate SPS I
Slide 39: Total expected annual growth of 5–8% through FY14 from recurring
Total expected annual growth of 5–8% through FY14 from recurring +~1% =6–9% +1–2% =5–8% +3–4% CAGR +1–2% ~$70M ~$2,600–2,900M ~$200-300M ~$70–130M ~$2,500–2,800M ~$70-130M ~$2,200M Return of mutual fund activity should provide additional opportunity FY14 FY11 Market Net new Tuck-in FY14 Event-driven
Slide 40: Total EBIT margin improvement of ~400bps by FY14 before event-driven
Total EBIT margin improvement of ~400bps by FY14 before event-driven +2–3% =11–13% +6% =9–10% CAGR 3–4% 90–150bps 17.6-18.9% 250–280bps 16.7–17.4% 80–180bps 13.9–14.9% 13.1% Return of mutual fund activity should provide additional opportunity FY11 Economies FY14 Key initiatives FY14 Event-driven FY1
Slide 41: By FY14 cash generation planned to expand to $270-315M
By FY14 cash generation planned to expand to $270-315M, plus $20–40M event-driven $20–40M $290-355M $82-127M $270-315M ~$45M ~$143M FY11 Key Core FY14 Event-driven FY14 FCF FCF initiatives and operations FCF estimate estimate (Non- (Non-GAAP) restructuring (recurring (Non-GAAP) GAAP) incl. revenue)
Slide 42: Since spin-off, we have reduced “spin debt” and returned capital
Since spin-off, we have reduced “spin debt” and returned capital Use of cash FY07–11, $M 281 392 1,263 191 1,072 213 395 155 198 Cash flow Capex FCF Freed-up Buy- Dividends Tuck-in Debt Change from (Non- capital backs 1 acquisi- reduction in cash 2 operations GAAP) tions (GAAP) Focus on prudent capi
Slide 43: Our financial strategy is a key part of our value creation strategy
Our financial strategy is a key part of our value creation strategy 35% dividend payout, but expect no less than 64 cents per share Organic growth with limited financial risk – Avoid significant balance sheet risk – Invest in projects delivering at least 20% IRR Tuck-in acquisitions with clear growt
Slide 44: Financial summary
Financial summary Clear focus on shareholder value – Driving all TSR levers – growth, margins and FCF Strong and disciplined capital stewardship Maintain healthy balance sheet 43
Slide 45: Appendix
Appendix me 44 ea Broadridge’
Slide 46: Broadridge's TSR math through FY14
Broadridge's TSR math through FY14 1-2% 6-9% market revenue growth growth 8-12% earnings growth from recurring revenue 3-4% organic 120-150bps growth recurring margin improvement (3-4% CAGR) 17–22% 1-2% earnings tuck-in 250-280bps growth acquisitions margin improvement from key initiatives ~1% (~6%
Slide 47: Revenue Growth Drivers
Revenue Growth Drivers Historical CAGR Actual Forecast (FY05-FY10) FY11 FY12 6% Total Revenue Growth (2)% 8-10% 4% Closed Sales (Recurring) 3% 4-5% (2)% Client Losses (1)% (1)% 2% Net New Business 2% 3-4% 3% Internal Growth(a) 1% 0-1% 0% Acquisitions 4% ~2% 5% Total Recurring 7% 5-7% (b) 1% Event-Dr
Slide 48: Revenues and Closed Sales FY05-FY12
Revenues and Closed Sales FY05-FY12 ($ in millions) FY05-10 Forecast FY11-12 Recurring Fee Revenues FY05 FY06 FY07 FY08 FY09 FY10 CAGR FY11 FY12 Growth Rates ICS $ 444 $ 513 $ 519 $ 558 $ 583 $ 610 7% $ 650 $706-715 9-10% Growth 16% 1% 8% 4% 5% 7% SPS $ 459 $ 458 $ 509 $ 515 $ 537 $ 513 2% $ 522 $54
Slide 49: Broadridge FY12 Guidance from Continuing Operations
Broadridge FY12 Guidance from Continuing Operations Revenue ($ in millions) Earnings FY11 FY12 Range FY11 FY12 Range Actual Low High Actual Low High $1,559 $1,707 $1,718 ICS $213 $254 $263 -7% 9% 10% Growth % / Margin % 13.7% 14.9% 15.3% $594 $631 $647 SPS $87 $99 $115 11% 6% 9% Growth % / Margin %
Slide 50: Cash Flow – FY11 Results and FY12 Forecast
Cash Flow – FY11 Results and FY12 Forecast Unaudited (In millions) Year Ended FY12 Range (a) June 2011 Low High Free Cash Flow(Non-GAAP) : Net earnings from continuing operations per GAAP $ 172 $ 172 $ 184 Depreciation and amortization (includes other LT assets) 72 95 100 Stock-based compensation ex
Slide 51: Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Non-GAAP to GAAP Measures EBIT Reconciliation 4Q10 4Q11 FY10 FY11 FY12 Range ($ in millions) Actual Actual Actual Actual Low High EBIT (Non-GAAP / excluding IBM migration costs) (a) & (b) $185 $190 $352 $285 $323 $343 Margin % 24.6% 24.4% 15.9% 13.1% 13.8% 14.4% Interest & Other ($
Slide 52: ICS Key Segment Revenue Stats
ICS Key Segment Revenue Stats Fee Revenues FY09 FY10 FY11 Type $ in millions Proxy Equities $ 272.5 $ 276.5 $ 279.5 RC RC= Recurring Stock Record Position Growth -2% -1% 0% Pieces 288.0 293.2 283.8 2.50 ED= Event-Driven Mutual Funds $ 55.0 $ 149.7 $ 39.0 ED Pieces 73.5 204.2 51.4 Contests/Specials $
Slide 53: SPS and Outsourcing Key Segment Revenue Stats
SPS and Outsourcing Key Segment Revenue Stats FY09 FY10 FY11 $ in millions All Revenues are Recurring Equity Transaction-Based Equity Trades $ 258.5 $ 237.8 $ 238.8 Internal Trade Growth 6% -2% 3% Trade Volume (Average Trades per Day in '000) 1,602 1,542 1,572 Non-Transaction Other Equity Services $
Slide 54: Broadridge ICS Definitions
Broadridge ICS Definitions Proxy Equities – Refers to the proxy services we provide in connection with annual stockholder meetings for publicly traded corporate issuers. Annual meetings of public companies include shares held in "street name" (meaning that they are held of record by brokers or banks
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