Broadridge Financial Solutions, Inc. · NYSE:BR
Broadridge Financial Solutions — Investor Presentation (March 2012)
36 slides from Broadridge Financial Solutions's investor presentation, Mar 6, 2012
Slide 1: Continued Market Leadership through Execution and Innovation
Exhibit 99.1 Continued Market Leadership through Execution and Innovation Investor Presentation © 2012 Broadridge Financial Solutions, Inc. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc. March 2012
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: Broadridge Strategy Statement
Broadridge Strategy Statement Our vision is to be the leading provider of Investor Communications and Technology and Operations Solutions to Banks/Broker-Dealers, Mutual Funds, and Corporate Issuers globally – Our mission is to drive the industry we serve to higher levels of efficiency and complianc
Slide 6: 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 7: We are the leader in several markets
We are the leader in several markets Investor Communication Securities Processing Services Services Market Rank 1 Market Rank 1 Bank/Broker-Dealer US Brokerage Regulatory #1 Processing #1 Communications US Fixed Income Broker-Dealer Processing #1 Transactional #1 Communications Canadian Brokerage Pr
Slide 8: Investor Communication Solutions (ICS)
Investor Communication Solutions (ICS) 7
Slide 9: Large and attractive markets – Investor Communications 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 10: 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 11: 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 (Based on who pays BR as agent) Proxy $334M (21%) Mutual Fund (28%) Corporate Interims Distribution Issuer $146M (
Slide 12: ICS-Bank/Broker-Dealer
ICS-Bank/Broker-Dealer What We Do: Competitive Advantages: Indispensible data hub with established Regulatory communications relationships with majority of BBDs – Beneficial proxy and interims for equities – Beneficial mutual fund compliance Strong market position and innovative communications leade
Slide 13: ICS-Mutual Funds
ICS-Mutual Funds What We Do: Competitive Advantages: Long-standing relationships across Mutual Fund trade processing in the industry defined contribution/trust space Serve every mutual fund and majority of (Matrix) banks/broker-dealers Data aggregation and analytics Unique data capabilities (Access
Slide 14: ICS-Issuers
ICS-Issuers What We Do: Competitive Advantages: Beneficial proxy service Market Position – only full service provider of shareholder communications to all types of Registered shareholder communications shareholders – Registered proxy Unmatched Scale – able to leverage one billion – Interim communica
Slide 15: Securities Processing Solutions (SPS)
Securities Processing Solutions (SPS) 14
Slide 16: Technology and Operations spend adds ~$14B to our SPS addressable market
Technology and Operations spend adds ~$14B to our SPS 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
Slide 17: Broadridge global processing behind the scenes
Broadridge global processing behind the scenes Broadridge simplifies complex processes 16
Slide 18: Securities Processing North America Market Share Overview
Securities Processing North America Market Share Overview 1 Equity Processing Client Volume FY11 Product Revenues Broadridge ~30% Competitors M ~20% A In-house ~50% R K U.S. $ Fixed Income Client Volume E Equity (~75%) T Transactions, $239M Broadridge Non-transactions, $211M Fixed Income (~15%) ~55%
Slide 19: 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 20: SPS-Technology and Operations
SPS-Technology and Operations What We Do: Competitive Advantages: Best-of-breed processing solutions Unique global technology platform – Leading global platform provides processing access to over 50 – Broad asset class coverage countries Broad suite of add-on or point solutions Breadth of asset clas
Slide 21: Financial Overview
on — ——_ Financial Overview Bg Broadridge 20
Slide 22: Total expected annual growth of 5–8% through FY14 from recurring revenue
Total expected annual growth of 5–8% through FY14 from recurring revenue +~1% =6–9% =5–8% +1–2% +3–4% +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 FY11 Market Net new Tuck-in FY14 Event-driven F
Slide 23: Total EBIT margin improvement of ~400bps by FY14
Total EBIT margin improvement of ~400bps by FY14 before event-driven revenue =11–13% +2–3% =9–10% +6% 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
Slide 24: 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 25: 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, $M 281 392 1,263 191 1,072 213 395 155 198 Cash flow Capital Free Cash Freed-up Buy-backs1 Dividends Tuck-in Debt Change from expenditures Flow capital acquisitions reduction in cash 2 operations & software (Non-GA
Slide 26: Our financial strategy is a key part of our value creation strategy
Our financial strategy is a key part of our value creation strategy 35% dividend payout, but expect no less than 64 cents per share annually subject to Board approval Organic growth with limited financial risk – Avoid significant balance sheet risk – Invest in projects delivering at least 20% IRR Tu
Slide 27: Appendix
Appendix me 26 Big Broadridge
Slide 28: Revenue Growth Drivers
Revenue Growth Drivers Historical CAGR Actual 2Q 2Q YTD Forecast (FY05-FY10) FY11 FY12 FY12 FY12 6% (2)% Total Revenue Growth 8% 11% 8-9% 4% 3% Closed Sales (Recurring) 4% 3% 4-5% (2)% (1)% Client Losses (1)% (1)% (1)% 2% 2% Net New Business 3% 2% 3-4% (a) 3% 1% Internal Growth 1% 2% ~1% 0% 4% Acqui
Slide 29: Broadridge 2Q and YTD from Continuing Operations
Broadridge 2Q and YTD from Continuing Operations Revenue Earnings FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12 Q2 Q2 YTD Q2 YTD Q2 ($ in millions) Q2 Q2 YTD Q2 YTD Q2 $294 $317 $574 $630 ICS $3 $11 $9 $19 -25% 8% -18% 10% Growth % / Margin % 0.9% 3.3% 1.6% 3.0% $146 $161 $288 $319 SPS $19 $20 $40 $48 9%
Slide 30: Broadridge FY12 Guidance from Continuing Operations
Broadridge FY12 Guidance from Continuing Operations Revenue Earnings FY11 FY12 Range FY11 FY12 Range Actual Low High ($ in millions) Actual Low High $1,559 $1,677 $1,688 ICS $213 $247 $257 -7% 7% 8% Growth % / Margin % 13.7% 14.7% 15.2% $594 $656 $672 SPS $87 $96 $112 11% 10% 13% Growth % / Margin %
Slide 31: Cash Flow – YTD FY12 Results and FY12 Forecast
Cash Flow – YTD FY12 Results and FY12 Forecast Free Cash Flow (Non-GAAP) Unaudited ($ in millions) Six Months Ended FY12 Range (a) December 2011 Low High Free Cash Flow (Non-GAAP) : Net earnings from continuing operations (GAAP) $ 24 $ 165 $ 179 Depreciation and amortization (includes other LT asset
Slide 32: 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 $54
Slide 33: Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Non-GAAP to GAAP Measures EBIT Reconciliation 2Q11 2Q12 YTD11 YTD12 FY11 FY12 Range ($ in millions) Actual Actual Actual Actual Actual Low High EBIT from continuing operations (Non-GAAP / excluding IBM Migration costs and Penson OTTI charge) $19 $28 $42 $59 $285 $319 $341 Margin %
Slide 34: 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 35: 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 36: Broadridge ICS Definitions
Broadridge ICS Definitions 35
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