Broadridge Financial Solutions reported before the market opened on February 2, 2021, it earned $0.48 per diluted share in the quarter that ended on December 31, 2020, up 433 percent from earnings of $0.09 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Adjusted earnings, a non-GAAP figure, rose 38 percent to $0.73 per share from $0.53 one year earlier, a less robust change than the GAAP percentage. The exclusions responsible for the $0.25 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Amortization of Acquired Intangibles and Purchased Intellectual Property [$0.28 per share], Real Estate Realignment and Covid-19 Related Expenses [$0.05 per share], and Tax impacts [($0.08) per share]. Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.
This post compares the quarterly Income Statement published by Broadridge to the estimates I made in a previous “Look Ahead” post. My estimates were based on publicly available guidance provided by Broadridge's management to financial analysts, news reports, and trends in the company's historical results. Unless otherwise mentioned, all reported values mentioned below are GAAP figures.
First, a little background about the company: Broadridge provides investor communications, securities processing and other financial services. Broadridge performs proxy voting services for more than half of all public companies and mutual funds globally, and in an average day it processes $8 trillion in fixed income and equity trades. Broadridge was spun off from Automatic Data Processing in 2007. In 2019, Broadridge completed four acquisitions: Rockall, a provider of securities-based lending and collateral management solutions; RPM, a provider of enterprise wealth management software solutions and services; retirement plan custody and trust assets from TD Ameritrade; and, Shadow Financial Systems, which had cryptocurrency and Exchange Traded Derivatives capabilities. On December 31, 2019, Broadridge and IBM agreed that IBM will operate, manage and support the Broadridge Private Cloud for the next 10 years.
The following table is a simplified version of Broadridge's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions. Figures from the year-earlier quarter are also provided to facilitate comparisons.
Revenue in the December 2020 quarter totaled $1.1 billion, 9 percent more than last year. The Investor Communications business was responsible for 74 percent of overall revenue, and this unit's revenue grew by 9.5 percent compared to the year-earlier result. The Global Technology and Operations business contributed 29 percent of revenue, and this unit's revenue increased by 7.6 percent.
I was expecting Broadridge to report revenue of $1.0 billion for the December 2020 quarter. The actual amount surpassed my estimate by $34.9 million (3.4 percent).
The Cost of Revenue (also known as Cost of Goods Sold) was $807 million in the latest quarter, which translates into a Gross Margin of 23.5 percent of revenue. Since it was higher than the 19.4 percent Gross Margin achieved in the year-earlier quarter, it signifies that Broadridge sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 25.1 percent in the December 2020 quarter, and Broadridge missed that prediction by 1.6 percent.
Sales, General, and Administrative expenses totaled $169 million in the December 2020 quarter, up 4.9 percent from one year ago. SG&A expenses decreased from 16.6 percent to 16.0 percent of quarterly revenue, which shows Broadridge spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 15.3 percent of revenue, and the actual percentage turned out to be higher than the prediction.
Broadridge's Operating Income was $80 million in the quarter, up 196.6 percent from the year-earlier period. Operating Income fell short of my $100 million estimate by $20 million.
Interest and other non-operating items summed to a net expense of $10 million. My estimate for non-operating items was $14 million.
The effective income tax rate rose by 15.1 percent to 18.9 percent, which had a negative effect on net income. I expected the tax rate to be 20.9 percent.
Net income attributable to Broadridge was $56 million, $0.48 per share in the quarter ending December 2020. The figures for the year-earlier quarter were $10 million, $0.09/share. My earnings estimate for the latest quarter was $68 million ($0.58/share), so Broadridge Financial Solutions earned $0.10 per share less than I had expected.
– Better than expected: Interest + Income tax rate
– Worse than expected: Gross Margin + SG&A
– Near expectations: Revenue growth + SG&A/Revenue + Misc non-operating items
This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed. Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company. These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).
#broadridge #br #gauges #gcfr #gcfr2 #QtrlyRpt #nac_financialanalysis
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