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Broadridge (BR) Q3 Earnings Miss, Revenues Beat Estimates

Broadridge Financial Solutions, Inc. BR reported mixed third-quarter fiscal 2020 results. While earnings missed the Zacks Consensus Estimate, revenues beat the same.

Adjusted earnings of $1.67 per share missed the consensus estimate by 4% but improved 5% year over year. Total revenues of $1.25 billion marginally beat the consensus mark and were up 2% year over year. The company generated closed sales of $44 million in the quarter, up 20% year over year.

Shares of Broadridge have gained 0.7%, over the past year, as against the 13.1% decline of the industry it belongs to.

Revenues by Segment

Revenues in the Investor Communication Solutions segment declined 3% from the year-ago quarter level to $980 million.

The segment’s recurring fee revenues were up 2% to $529 million driven by net new business and acquisitions. Internal growth was negatively impacted by a shift of proxy communications into the fourth quarter as a result of the coronavirus pandemic. Event-driven fee revenues plummeted 43% to $39 million on lower mutual fund proxy activity and equity proxy contests. Distribution revenues decreased 1% to $412 million on lower event-driven activity.

Global Technology and Operations segment recurring fee revenues came in at $305 million, up 23% year over year. This improvement was driven by acquisitions and organic growth. Higher trading volumes resulting from the pandemic-related market uncertainty benefited the segment’s internal growth.

Operating Results

Adjusted operating income of $262 million improved 3% year over year. Adjusted operating income margin increased to 21% from 20.9% in the prior-year quarter.

Balance Sheet and Cash Flow

Broadridge exited the fiscal third quarter with cash and cash equivalents of $4.2 million compared with the $234 million witnessed at the end of the prior quarter. Long-term debt was $1.68 billion compared with the $1.45 billion recorded at the end of the previous quarter.

The company generated $144.1 million of cash in operating activities and capex was $16.9 million in the quarter. Broadridge paid out $62 million in dividends in the reported quarter.

Guidance

Broadridge reduced its fiscal-year 2020 guidance for adjusted EPS to 5-7% from the 8-12% expected previously. The company expects revenue growth at the lower end of the previously-guided range of 3% to 6%.

Broadridge continues to anticipate recurring fee revenue growth of 8-10%. Adjusted operating income margin is estimated to be approximately 18%. Closed sales are anticipated to be between $190 million and $230 million.

Broadridge currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

The Interpublic Group IPG reported first-quarter 2020 adjusted earnings of 11 cents per share, which beat the consensus mark by 22.2% but remained flat year over year.

Equifax EFX delivered first-quarter 2020 adjusted earnings of $1.40 per share, which outpaced the consensus mark by 8.5% and improved 16% on a year-over-year basis.

ManpowerGroup MAN recorded first-quarter 2020 adjusted earnings of 71 cents per share, which missed the Zacks Consensus Estimate by 2.7% and slumped 48.9% year over year.

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