Broadridge Financial Solutions ‘ latest earnings report generally matched expectations, and added solid guidance for the year ahead. The results show progress on a set of three-year goals the company laid out last December.
Broadridge stock (ticker: BR) was about flat in Thursday trading, around $172.
Broadridge’s businesses generally qualify as market plumbing . They’re necessary services like investor communications—Broadridge processes and distributes the proxies and regulatory filings for nearly every public U.S. company—and back-office functions for asset managers and broker-dealers like trade processing, record-keeping, and compliance.
Broadridge has been one of those stuff-it-in-a-drawer-and-forget-about-it stocks . Recurring revenues, exposure to growing markets and trends, and leading scale for acquisitions and client wins make its quarterly reports a relative non-event , and investors needn’t worry about excessive volatility in Broadridge’s results. The company’s shares have compounded at about 25% including dividends annually over the past decade, versus a 17% annual return for the S&P 500 .
Broadridge’s total sales and recurring revenues both grew by 10% in its fiscal 2021, which ended in June, to just under $5 billion and $3.3 billion, respectively. Adjusted earnings per share rose by 12.5% to $5.66.
For the coming year, management expects to report recurring revenue growth of 12% to 15% and adjusted earnings-per-share growth in the 11% to 15% range. Wall Street’s consensus numbers had been for recurring revenue growth of 13% and adjusted EPS growth of 12% in Broadridge’s fiscal 2022.
In the fiscal fourth quarter reported on Thursday, Broadridge earned $2.19 per share, up 2% year over year, and about equal to Wall Street consensus. Sales came in at $1.5 billion, which was slightly ahead of estimates.
No matter what the broader economy, market, or policy backdrop is, companies need to file documents with securities regulators and hold shareholder votes, and asset managers need to process and record trades and communicate with clients. Long-term trends toward digitization of more of these tasks and outsourcing of back-office functions to save costs have driven Broadridge’s organic growth, while the company pursues a parallel acquisition strategy.
It was active on that front in the most recent quarter, closing a $2.6 billion purchase—its largest ever—of electronic trading platform Itiviti and three smaller deals. The Itiviti acquisition will be responsible for about half of the increase in Broadridge’s expected recurring revenue in the coming year, with the rest from organic growth.
Broadridge’s investor communications segment—the largest of its divisions—is benefiting from the popularization of investing driven by platforms like Robinhood (HOOD) that has riveted market watchers over the past year.
For Broadridge, more individual shareholders means more proxies and other investors communications to distribute, and thus more revenue and profits.
“Equity stock record growth, which is our measure of the number of positions held by shareholders, grew 26% in fiscal 2021, including 33% in the seasonally strongest fourth quarter,” said CEO Tim Gokey on Broadridge’s earnings call Thursday. “We continue to be struck by the broad-based nature of this growth. We’re seeing growth across large and small issuers, not simply a handful of mega cap tech or meme stocks.”
Gokey said that the fastest growth has come from buzzier sectors like technology and consumer cyclicals, but healthcare, industrials, and materials companies were likewise seeing double-digit percentage growth in the number of people owning their stock.
Broadridge on Thursday also increased its dividend by 11% to $2.56 per share annually. That represents a yield of about 1.5% at the stock’s recent levels. Broadridge has hiked its dividend every year since going public in 2007. The Itiviti acquisition lifted the company’s leverage to about 3.5 times net debt to Ebitda—short for earnings before interest, taxes, depreciation, and amortization. Gokey says Broadridge plans to get that back down to about 2.5 times by the end of its fiscal 2023.
Broadridge stock has returned 43% including dividends since the start of 2020, before the Covid-19 pandemic, versus a 41% return for the S&P 500.
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