Broadridge Financial Solutions, Inc. · NYSE:BR

Broadridge Financial Solutions — Q2 FY2021 Earnings Presentation

54 slides from Broadridge Financial Solutions's earnings presentation, Feb 17, 2021

  1. Slide 1: Q3 FY21 Investor Presentation

    0© 2020 | Q3 FY21 Investor Presentation F e b r u a r y 2 0 2 1

  2. Slide 2: Forward-Looking Statements

    1© 2020 | Forward-Looking Statements This presentation and other written or oral statements made from time to time by representatives of Broadridge Financial Solutions, Inc. ("Broadridge" or the "Company") may contain “forward-looking statements” within the meaning of the Private Securities Litigati

  3. Slide 3: Use of Non-GAAP Financial Measures and KPIs

    2© 2020 | Use of Non-GAAP Financial Measures and KPIs Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures The Company’s results in this presentation are presented in accordance with U.S. generally accepted accounting principles ("GAAP") except where otherwise noted. In

  4. Slide 4: A clear plan for sustained growth and top quartile TSR

    3© 2020 | A clear plan for sustained growth and top quartile TSR A global Fintech leader addressing a large and growing market Three franchise businesses executing on clear growth strategies Balanced capital allocation driving sustainable and consistent revenue and earnings growth 2014 Invest for Gr

  5. Slide 5: Broadridge is a global Fintech leader

    4© 2020 | Broadridge is a global Fintech leader Managing governance process for more than 80% of U.S. shares Powering $10T per day in fixed income and equity trades Distributing more than 6B critical communications each year 80% SHARES $10 TRILLION 6 BILLION Broadridge powers the critical infrastruc

  6. Slide 6: We have a strong track record of delivering growth and value

    5© 2020 | We have a strong track record of delivering growth and value $1,642 $1,742 $1,897 $2,452 $2,612 $2,760 $3,036 $2.25 $2.47 $2.73 $3.13 $4.19 $4.66 $5.03 0 1 2 3 4 5 6 0 500 1000 1500 2000 2500 3000 3500 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 Recurring revenue Adjusted EPS $M excep

  7. Slide 7: Technology and operations spend by global banks is over $190 Billion

    6© 2020 | Technology and operations spend by global banks is over $190 Billion Broadridge has a $46 billion and growing market opportunity $46B CURRENT OPPORTUNITY $19B GOVERNANCE $15B CAPITAL MARKETS $12B WEALTH

  8. Slide 8: We are committed to ongoing investment that supports future growth

    7© 2020 | • Building new products like LTX • Enhancing key growth products (e.g. VSM offering), and to meet new regulations (e.g. SRD II solution) • Adding digital capabilities PRODUCT PLATFORM PEOPLE We are committed to ongoing investment that supports future growth • Platform development including

  9. Slide 9: Our recurring revenue is broad based and growing across segments

    8© 2020 | $1.9B RECURRING REVENUE $1.2B RECURRING REVENUE Our recurring revenue is broad based and growing across business segments and product categories INVESTOR COMMUNICATION SOLUTIONS GLOBAL TECHNOLOGY & OPERATIONS $0.2B $1.5B $1.9B Regulatory Customer Communications Issuer Wealth & Investment M

  10. Slide 10: Segment Strategy: Investor Communication Solutions (ICS)

    9© 2020 | Segment Strategy: Investor Communication Solutions (“ICS”)

  11. Slide 11: ICS Strategy: We will extend our strong and growing Governance franchise

    10© 2020 | ICS Strategy: We will extend our strong and growing Governance franchise Grow End-to-End Issuer Solutions Build Data-Driven Fund Solutions Drive Next-Gen Regulatory Transform Omni-Channel Communications Leading position at the heart of a powerful governance network Recurring revenues of $

  12. Slide 12: Our network links investors, asset managers, and issuers across North America

    11© 2020 | 170M+ Retail shareholder accounts 120,000+ Institutional shareholders 30,000+ Mutual funds and ETFs ISSUERS OF SECURITIES SHAREHOLDERS 200,000+ Financial advisors 9,000+ Corporate issuers REGULATORY BODIES & TRADE ASSOCIATIONS 1,000+ Banks and broker-dealers Our network links investors, a

  13. Slide 13: ICS Segment product breakdown

    12© 2020 | Regulatory 8% Data-Driven Fund Solutions 12% Issuer Customer Communications 14% -2% ICS Segment product breakdown 6% TOTAL ICS 3YR CAGR $0.2B $1.5B $1.9B Regulatory Customer Communications Issuer Data-Driven Fund Solutions $157 M $792M $573M $339M ICS PRODUCT CATEGORIES FY17-FY20 THREE YE

  14. Slide 14: Recurring revenue benefits from the tailwind in position growth

    13© 2020 | Recurring revenue benefits from the tailwind in position growth… TOTAL U.S. EQUITY AND U.S. MUTUAL FUND & ETF POSITIONS FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 U.S. Equity Positions U.S. Mutual Fund & ETF Positions 8% 10YR CAGR 6% 10YR CAGR

  15. Slide 15: Regulatory Update

    14© 2020 | Regulatory Update RULE 30E-3 “NOTICE-AND- ACCESS” MUTUAL FUND INTERIM FEES MODERNIZATION OF MUTUAL FUND COMMUNICATIONS “RULE 498B” PROPOSED ON 8/5/2020 PROXY ROUNDTABLE • Mutual funds began to opt-in shareholders to receive “Notice-and-Access” as of January 2021 • Modestly net positive (h

  16. Slide 16: Segment Strategy: Global Technology & Operations (GTO)

    15© 2020 | Segment Strategy: Global Technology & Operations (“GTO”)

  17. Slide 17: GTO Strategy: Grow Capital Markets and build next-gen Wealth

    16© 2020 | GTO Strategy: Grow Capital Markets franchise and continue building next-gen Wealth & Investment Management franchise 1. In equity and fixed income trades processed on average per day Capital Markets Wealth & Investment Management • Leading provider of back office capabilities • Strong set

  18. Slide 18: GTO Segment product breakdown

    17© 2020 | Capital Markets Wealth & Investment Management 8% 14% GTO Segment product breakdown 11% TOTAL GTO 3YR CAGR Wealth & Investment Management Capital Markets $650M $524M $1.2B RECURRING REVENUE GTO PRODUCT CATEGORIES FY17-FY20 THREE YEAR CAGR All financial metrics are FY20 unless otherwise no

  19. Slide 19: Broadridge Business Model

    18© 2020 | Broadridge Business Model

  20. Slide 20: The Broadridge financial model is focused on driving steady revenue growth

    19© 2020 | The Broadridge financial model is focused on driving steady revenue growth and consistent earnings per share growth, generated by: Continued margin expansion from our scale and operational efficiencies Balanced capital allocation leveraging our strong free cash flow businesses Investments

  21. Slide 21: $46B addressable market and high-quality revenue mix

    20© 2020 | $46B ADDRESSABLE MARKET $46B $1B $2B $3B $4B Total Addressable Market Amounts may not sum due to rounding We have a long runway for growth and a high-quality revenue mix… 42% FY17 FY20 REVENUE MIX 65% RECURRING REVENUE $4.5B TOTAL REVENUE $4.1B -3% 7% 58% 65% $3.0B 35% $3B FY20 ■ Recurrin

  22. Slide 22: We have a long history of expanding margins

    21© 2020 | 80 bps annual FY17-20 average Adjusted Operating Income margin expansion Efficiency Contributions from business reengineering and internal growth Digital Margin expansion due to mix shift toward digital M&A Primarily weighted to early-stage businesses Investment Strategic investment align

  23. Slide 23: Capital-light business generates strong free cash flow

    22© 2020 | 119% 109% 106% 118% 98% 85% FY15 FY16 FY17 FY18 FY19 FY20 1. Calculated as Free Cash Flow / Adjusted Net Earnings 2. FY20 drops below 100% Cash Flow Yield due to significant increases in net Client platform spend, defined as net cash spent on new client conversions, including development

  24. Slide 24: Targeted acquisitions to support growth

    23© 2020 | 4% 50% 42% 3% $802M M&A SPEND1 19% PORTFOLIO IRR3 10% AVERAGE REVENUE GROWTH2 Capital Markets WealthData-Driven Fund Solutions Issuer TARGETED M&A FY18-FY20 …and allows us to make targeted acquisitions to support growth Note: Amounts may not sum due to rounding 1. For acquisitions from FY

  25. Slide 25: Steady earnings over time resulting in top quartile TSR growth

    24© 2020 | This simple financial model has produced steady and consistent earnings over time resulting in top quartile TSR growth FY14 - FY17 (CAGR) FY17 - FY20 (CAGR) Organic Recurring revenue growth1 5% 5% Recurring revenue growth 7%2 7% Adj. Operating Income Margin (bps/ year) 532 80 Adj. Earning

  26. Slide 26: New 3yr Growth Objectives FY20 – FY23

    25© 2020 | NEW 3yr Growth Objectives (CAGR) FY20 – FY23 Organic Recurring revenue growth 5-7% Recurring revenue growth 7-9% Adj. Operating Income Margin expansion (bps/year) 50+ Adj. Earnings per Share Growth 8-12% We set new three-year growth objectives for FY20 – FY23 at Investor Day 2020. This fi

  27. Slide 27: FY'21 Guidance

    26© 2020 | FY’21 Guidance1 Updates / Changes Recurring revenue growth 3-6% At the higher end Total revenue growth 1-4% At the higher end Adj. Operating Income Margin (Non-GAAP) ~18% Changed from previous ~100bps expansion Adj. Earnings per Share Growth (Non-GAAP) 6-10% At the higher end Closed sales

  28. Slide 28: Second Quarter Fiscal 2021 Results

    27© 2020 | Second Quarter Fiscal 2021 Results

  29. Slide 29: Key messages

    28© 2020 | Key messages Well-positioned to achieve the three-year growth objectives presented at Investor Day Executing on key strategic initiatives across Governance, Capital Markets and Wealth & Investment Management Increasing investments to support long-term growth Broadridge is on-track to deli

  30. Slide 30: Executing on our clear growth strategy

    29© 2020 | Executing on our clear growth strategy • Continued momentum around SRD II solution • Major sale of data & analytics to leading global Asset Manager • Continued strong momentum for VSM solution • Double-digit growth in Digital Communications • Announced R.J. O’Brien selected Broadridge’s p

  31. Slide 31: Summary financial performance

    30© 2020 | Summary financial performance $ in millions, except per share data SECOND QUARTER SUMMARY FINANCIAL RESULTS 2021 2020 Inc./(Dec.) Recurring revenues $696 $648 7% Total revenues 1,055 969 9% Operating Income 79 27 197% Adjusted Operating income (Non-GAAP) 119 94 26% Adjusted Operating inco

  32. Slide 32: Key volume drivers: Position and Trade Volume Growth

    31© 2020 | Key volume drivers: Position and Trade Volume Growth 7% 11% 7% 11% 16% 24% 1% 6% 0% 2% 6% 5% Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Equity MF/ETF EQUITY & MUTUAL FUND/ETF POSITION GROWTH (1)% (11)% 26% 22% 12% 24% TOTAL INTERNAL TRADE VOLUME GROWTH

  33. Slide 33: Closed Sales remain on track with FY21 guidance

    32© 2020 | Closed Sales remain on track with FY21 guidance HISTORICAL CLOSED SALES PERFORMANCE $239 FY'18 FY'19 FY'20 FY'21 CLOSED SALES TO DATE $83 $79 H1'20 H1'21 $190- $235 $ in millions Guidance

  34. Slide 34: Recurring revenue growth increased 7% in Q2'21

    33© 2020 | Recurring revenue growth increased 7% in Q2’21 RECURRING REVENUE GROWTH 6% 6% 10% FY'18 FY'19 FY'20 FY'21 3 - 6% Guidance $648 $696 Q2'20 Q2'21 +7% $ in millions

  35. Slide 35: Second quarter 2021 segment recurring revenues

    34© 2020 | Regulatory Customer Comms. Data-Driven Fund Solutions Issuer Note: Amounts may not sum due to rounding $137 $137 $18 $21 $82 $89 $130 $147 FY'20 FY'21 $368 $394 +7% $ in millions $119 $135 $162 $168 FY'20 FY'21 $281 $302 Capital Markets Wealth & Investment Management +8% +14% (0)% +9% +13

  36. Slide 36: Second quarter 2021 revenue growth drivers

    35© 2020 | $576M $1,211M $623 $648 $696 Q2'20 Recurring Revenue Closed Sales Client Losses Internal Growth Acquisitions Q2'21 Recurring Revenue Second quarter 2021 revenue growth drivers SECOND QUARTER 2021 RECURRING REVENUES GREW 7% TO $696M Note: Amounts may not sum due to rounding. +6 pts (2) pts

  37. Slide 37: Second quarter 2021 total revenue growth drivers

    36© 2020 | Second quarter 2021 total revenue growth drivers $51 $40 $31 $39 $68 $46 $45 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 EVENT-DRIVEN REVENUE $52M FY14-FY20 AVERAGE1 $ in millions Pts contribution to growth $969 $1,055 Q2'20 Total Revenue Recurring Event-Driven Distribution FX Q2'21 Total R

  38. Slide 38: Adjusted Operating Income Margin and Operating Income Margin

    37© 2020 | Adjusted Operating Income Margin and Operating Income Margin 15.9% 17.1% 17.5% FY'18 FY'19 FY'20 FY'21 9.7% 11.2% Q2'20 Q2'21 ~18% Guidance +80bps +120bps +40bps +150 bps 13.8% 15.0% 13.8% OPERATING INCOME MARGIN (GAAP) 2.8% 7.5% Adjusted Operating Income Margin (Non-GAAP)

  39. Slide 39: Capital allocation

    38© 2020 | Capital allocation $51 $0 $128 CapEx and Software M&A Client Platform Spend 3. Capital returns to shareholder per share through Annual Dividend and total share repurchase net of option proceeds $391 $578 $269 FY18 FY19 FY20 1 1. Net cash spent on new client conversions, including developm

  40. Slide 40: Prior and Current Recurring revenue reporting categories

    39© 2020 | Prior and Current Recurring revenue reporting categories

  41. Slide 41: Current Recurring revenue reporting categories

    40© 2020 | Current Recurring revenue reporting categories • Beginning with the second quarter of fiscal year 2021, Broadridge changed its product line reporting for Recurring revenue categories from the current format as disclosed in its 2020 Annual Report in Note 3 “Revenue Recognition” to the Cons

  42. Slide 42: Recurring revenue reporting categories: FY17 – FY20

    41© 2020 | Recurring revenue reporting categories: FY17 – FY20 Prior Reporting View RECURRING REVENUE REPORTING CATEGORIES GROWTH FY17 FY18 FY19 FY20 3YR CAGR Equities and other $ 729.8 $ 803.6 $ 831.7 $ 996.2 11% Fixed income $ 139.3 $ 154.3 $ 164.6 $ 178.0 9% Total GTO Recurring fee revenues $ 869

  43. Slide 43: Recurring revenue reporting categories: FY20 by quarter, and Q1 FY21

    42© 2020 | Recurring revenue reporting categories: FY20 by quarter, and Q1 FY21 Prior Reporting View RECURRING REVENUE REPORTING CATEGORIES Q1'FY20 Q2'FY20 Q3'FY20 Q4'FY20 FY20 Q1'FY21 Equities and other $ 230.9 $ 237.2 $ 259.4 $ 268.8 $ 996.2 $ 252.4 Fixed income $ 43.1 $ 43.7 $ 46.1 $ 45.1 $ 178.0

  44. Slide 44: 43© 2020 | 2020 2021 % Dollars in millions Q1 Q2 Q3 Q4 FY

    43© 2020 | 2020 2021 % Dollars in millions Q1 Q2 Q3 Q4 FY Q1 Q2 Growth Investor Communication Solutions ("ICS") Regulatory $120 $130 $241 $300 $792 $136 $147 13% Data-driven fund solutions 79 82 89 90 339 82 89 9% Issuer 15 18 35 89 157 18 21 14% Customer communications 135 137 164 137 573 139 137 -

  45. Slide 45: Explanation of Non-GAAP Measures and Reconciliation of GAAP to Non-GAAP Measures

    44© 2020 | Explanation of Non-GAAP Measures and Reconciliation of GAAP to Non-GAAP Measures

  46. Slide 46: Non-GAAP Measures

    45© 2020 | Non-GAAP Measures Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Earnings, and Adjusted Earnings Per Share These Non-GAAP measures reflect Operating income, Operating income margin, Net earnings, and Diluted earnings per share, each as adjusted to exclude the im

  47. Slide 47: 46© 2020 | Months Ended Dec. Months Ended Dec. Dollars in millions 2020 2019

    46© 2020 | 3 Months Ended Dec. 31 6 Months Ended Dec. 31 Dollars in millions 2020 2019 2020 2019 Operating income (GAAP) $79.5 $26.8 $158.1 $99.9 Adjustments: Amortization of Acquired Intangibles and Purchased Intellectual Property 32.6 30.3 64.9 58.4 Acquisition and Integration Costs 0.7 3.4 2.4 5.

  48. Slide 48: Reconciliation of GAAP to Non-GAAP Measures

    47© 2020 | Reconciliation of GAAP to Non-GAAP Measures FISCAL YEAR Dollars in millions 2020 2019 2018 2017 Operating income (GAAP) $624.9 $652.7 $598.1 $534.0 Adjustments: Amortization of Acquired Intangibles and Purchased Intellectual Property 122.9 87.4 81.4 72.6 Acquisition and Integration Costs

  49. Slide 49: Reconciliation of GAAP to Non-GAAP Measures

    48© 2020 | Reconciliation of GAAP to Non-GAAP Measures FISCAL YEAR Dollars in millions 2020 2019 2018 2017 2016 2015 Net Earnings (GAAP) $462.5 $482.1 $427.9 $326.8 $307.5 $287.1 Adjustments: Amortization of Acquired Intangibles and Purchased Intellectual Property 122.9 87.4 81.4 72.6 31.8 25.3 Acqu

  50. Slide 50: Reconciliation of GAAP to Non-GAAP Measures

    49© 2020 | (a) Calculated using the GAAP effective tax rate, adjusted to exclude $3.6 million and $12.8 million of excess tax benefits a ssociated with stock-based compensation for the three and six months ended December 31, 2020, and $2.2 million and $7.9 million for the three and six months ended

  51. Slide 51: Reconciliation of GAAP to Non-GAAP Measures

    50© 2020 | Reconciliation of GAAP to Non-GAAP Measures FISCAL YEAR Dollars in millions, except per share amounts 2020 2019 2018 2017 2016 2015 2014 Diluted earning per share (GAAP) $3.95 $4.06 $3.56 $2.70 $2.53 $2.32 $2.12 Adjustments: Amortization of Acquired Intangibles and Purchased Intellectual

  52. Slide 52: Reconciliation of Non-GAAP to GAAP Measures – Fiscal Year 2021 Guidance

    51© 2020 | Reconciliation of GAAP to Non-GAAP Measures FISCAL YEAR Dollars in millions 2020 2019 2018 2017 2016 2015 2014 Net cash flows provided by operating activities (GAAP) $598.2 $617.0 $693.6 $515.9 $437.7 $431.4 $387.7 Capital expenditures and Software purchases and capitalized internal use s

  53. Slide 53: Reconciliation of GAAP to Non-GAAP Measures

    52© 2020 | FISCAL YEAR 2021 Adjusted Earnings Per Share Growth and Adjusted Operating Income Margin FY21 Adjusted Earnings Per Share Growth Rate (a) Diluted earnings per share - GAAP 5 - 12% growth Adjusted earnings per share - Non-GAAP 6 - 10% growth FY21 Adjusted Operating Income Margin (b) Operat

  54. Slide 54: Broadridge Investor Relations Contact

    53© 2020 | W. Edings Thibault Tel: 516-472-5129 Email: Edings.Thibault@Broadridge.com Broadridge Investor Relations Contact

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