Broadridge(BR) - 2024 Q1 - Quarterly Report

Revenue and Segment Performance - Total revenue for the three months ended September 30, 2023, was $1,431.1 million, compared to$1,283.3 million in the same period in 2022, representing an 11.5% increase[104] - Investor Communication Solutions segment revenue grew to $1,028.6 million in Q3 2023, up from$920.6 million in Q3 2022, a 11.7% increase[104] - Global Technology and Operations segment revenue increased to $402.4 million in Q3 2023, compared to$362.7 million in Q3 2022, a 10.9% growth[104] - Recurring revenue growth (GAAP) for Investor Communication Solutions was 5% in Q3 2023, with constant currency growth (Non-GAAP) also at 5%[135] - Recurring revenues increased by $65.4 million, or 8$871.2 million for the three months ended September 30, 2023, driven by Net New Business and Internal Growth[95] - Distribution revenues increased by $58.2 million, or 14$27.4 million[96] - Investor Communication Solutions segment revenues increased to $1,028.6 million, up from$920.6 million in the prior year period[104] - Global Technology and Operations segment revenues increased to $402.4 million, up from$362.7 million in the prior year period[104] - The company's total revenues for the three months ended September 30, 2023, were $1,431.1 million, compared to$1,283.3 million in the prior year period[104] - Recurring revenue growth (GAAP) for Investor Communication Solutions was 5%, Data-Driven Fund Solutions 10%, Issuer Customer Communications 19%, and total recurring revenue growth was 6%[135] - Recurring revenue growth constant currency (Non-GAAP) for Investor Communication Solutions was 5%, Data-Driven Fund Solutions 9%, Issuer Customer Communications 19%, and total recurring revenue growth was 6%[135] Earnings and Profitability - Net earnings (GAAP) for Q3 2023 were $90.9 million, up from$50.4 million in Q3 2022, an 80.4% increase[133] - The company's total earnings before taxes for the three months ended September 30, 2023, were $112.9 million, compared to$55.4 million in the prior year period[104] - Net earnings (GAAP) for 2023 increased to $90.9 million, up from$50.4 million in 2022[133] Cash Flow and Financial Position - Free cash flow (Non-GAAP) for Q3 2023 was $(76.4) million, an improvement from$(218.1) million in Q3 2022[190] - Cash and cash equivalents decreased to $234.0 million as of September 30, 2023, from$252.3 million as of June 30, 2023[3] - Net cash flows from operating activities were negative at $(62.0) million for Q3 2023, compared to$(204.5) million for the same period in 2022[4] - Debt proceeds amounted to $462.7 million in Q3 2023, while debt repayments were$192.7 million[4] - Dividends paid in Q3 2023 totaled $85.6 million, compared to$75.0 million in the same period in 2022[4] Debt and Liabilities - Total long-term debt as of September 30, 2023, was $3,700.0 million, compared to$3,347.0 million as of September 30, 2022[139] - Long-term debt increased to $3,682.0 million as of September 30, 2023, from$2,234.7 million as of June 30, 2023[3] - Total current liabilities decreased to $924.0 million as of September 30, 2023, from$2,397.8 million as of June 30, 2023, primarily due to a reduction in payables and accrued expenses[3] - Total long-term debt as of September 30, 2023, was $3,700.0 million, with a carrying value of$3,682.0 million[139] - The Fiscal 2021 Senior Notes have a carrying value of $1,000.0 million and a fair value of$793.1 million as of September 30, 2023[139] - The Fiscal 2020 Senior Notes have a carrying value of $750.0 million and a fair value of$634.0 million as of September 30, 2023[139] - The Fiscal 2016 Senior Notes have a carrying value of $500.0 million and a fair value of$469.9 million as of September 30, 2023[139] - The Fiscal 2024 Amended Term Loan has a carrying value of $1,300.0 million and a fair value of$1,300.0 million as of September 30, 2023[139] - The Fiscal 2021 Revolving Credit Facility has a total unused available capacity of $1,350.0 million as of September 30, 2023[139] Operating Expenses and Costs - Total operating expenses increased by$86.9 million, or 7%, to $1,282.6 million, primarily due to higher cost of revenues, including$50.1 million in postage and distribution expenses in the ICS segment[96] - Interest expense, net increased by $6.6 million to$33.4 million, primarily due to higher borrowing costs[96] - Other non-operating expenses, net decreased by $3.1 million to$2.1 million, driven by lower losses on investments associated with retirement plans[96] - Fixed operating lease costs for the three months ended September 30, 2023, were $10.2 million, compared to$10.3 million in the same period in 2022[70] Contracts and Commitments - The company has fixed minimum commitments of $132.1 million under the Amended and Restated IT Services Agreement with Kyndryl, Inc., expiring on June 30, 2027[40] - Fixed minimum commitments under the Private Cloud Agreement with Kyndryl, Inc. are$143.1 million, expiring on March 31, 2030[40] - The company has fixed minimum commitments of $178.6 million under the AWS Cloud Agreement, expiring on December 31, 2026[41] Assets and Investments - The company's total assets decreased to$8,071.2 million as of September 30, 2023, from $8,233.2 million as of June 30, 2023[3] - Accounts receivable decreased to$916.2 million as of September 30, 2023, from $974.0 million as of June 30, 2023[3] - Long-term investments increased to$243.4 million as of September 30, 2023, up from $241.9 million in June 2023[53] - The company's total assets as of June 30, 2023, include$141.3 million in non-current securities and $66.7 million in derivative assets[50] - The company's non-marketable securities remained stable at$55.6 million as of September 30, 2023, unchanged from June 2023[24] - The company's total other non-current assets decreased to $817.5 million as of September 30, 2023, down from$829.2 million in June 2023[53] - The company's deferred data center costs decreased to $14.5 million as of September 30, 2023, down from$15.4 million in June 2023[53] Employee Compensation and Benefits - As of September 30, 2023, the company has a restructuring liability of $7.9 million related to employee compensation and benefits[29] - Employee compensation and benefits decreased to$165.3 million as of September 30, 2023, down from $335.6 million in June 2023[55] - The Rabbi Trust assets had a value of$56.2 million at September 30, 2023, with a total benefit obligation of $59.3 million for the SORP and SERP plans[63] Legal and Regulatory Matters - The company estimates an aggregate range of reasonably possible losses for litigation matters of up to$30 million in excess of established reserves[99] - The SEC's new rule on mutual fund and exchange-traded fund investor communications is estimated to reduce the company's annual recurring revenues by approximately $30 million, phasing in over fiscal years 2025 and 2026[92] Derivatives and Financial Instruments - The fair value of Level 3 financial instruments, which require significant management judgment, was determined using pricing models and discounted cash flow methodologies[22] - The company's derivative assets related to cross-currency swap contracts were$72.8 million as of September 30, 2023, up from $66.7 million as of June 30, 2023[27] - The company executed cross-currency swap derivative contracts with an aggregate notional amount of EUR 880 million, resulting in an asset position of$72.8 million as of September 30, 2023[101] Stock and Compensation - The company's President, Christopher J. Perry, adopted a Rule 10b5-1 trading arrangement for the sale of up to 35,438 shares of the company's common stock, effective from September 1, 2023, to August 31, 2024[180] - The company's stock-based compensation includes 2,286,011 stock options with a weighted-average exercise price of $120.92 as of September 30, 2023[37] Tax and Interest Rates - The company's effective tax rate for the three months ended September 30, 2023, was 19.5$127.8 million of revenue during Q3 2023 that was included in the contract liability balance as of June 30, 2023[16] - Total payables and accrued expenses decreased to $743.7 million as of September 30, 2023, down from$1,019.5 million in June 2023[55] - Deferred client conversion and start-up costs slightly decreased to $934.6 million as of September 30, 2023, from$937.0 million in June 2023[52] - Accrued broker fees decreased to $80.2 million as of September 30, 2023, down from$148.0 million in June 2023[55] - The company's potential maximum loss exposure related to its unconsolidated investments in a variable interest entity totaled $36.1 million as of September 30, 2023[69] - Total operating lease liabilities and post-employment retirement obligations amounted to$469.9 million as of September 30, 2023[61] Key Performance Indicators - The company focuses on key performance indicators including Revenue, Recurring revenue, Adjusted Operating income, Adjusted Net earnings, Adjusted earnings per share, Free Cash flow, and Closed sales[84] Reportable Segments - The company has two reportable segments: Investor Communication Solutions and Global Technology and Operations[145] - The company has two reportable segments: Investor Communication Solutions and Global Technology and Operations[145]