BROADRIDGE FINANCIAL SOLUTIONS, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following discussion should be read in conjunction with our Condensed
Consolidated Financial Statements and accompanying Notes thereto included
elsewhere herein.
Overview
Broadridge, a Delaware corporation and a part of the S&P 500® Index, is a global
financial technology leader providing investor communications and
technology-driven solutions to banks, broker-dealers, asset and wealth managers
and corporate issuers. With over 50 years of experience, including over 10 years
as an independent public company, we provide financial services firms with
advanced, dependable, scalable and cost-effective integrated solutions and an
important infrastructure that powers the financial services industry. Our
solutions enable better financial lives by powering investing, governance and
communications and help reduce the need for our clients to make significant
capital investments in operations infrastructure, thereby allowing them to
increase their focus on core business activities.
We operate our business in two reportable segments: Investor Communication
Solutions and Global Technology and Operations.

Investor Communication Solutions
We provide the following governance and communications solutions through our
Investor Communication Solutions business segment: Regulatory Solutions,
Data-Driven Fund Solutions, Corporate Issuer Solutions, and Customer
Communications Solutions.
A large portion of our Investor Communication Solutions business involves the
processing and distribution of proxy materials to investors in equity securities
and mutual funds, as well as the facilitation of related vote processing.
ProxyEdge® is our innovative electronic proxy delivery and voting solution for
institutional investors and financial advisors that helps ensure the voting
participation of the largest stockholders of many companies. We have implemented
digital applications to make voting easier for retail investors. We also provide
the distribution of regulatory reports, class action and corporate
action/reorganization event information, as well as tax reporting solutions that
help our clients meet their regulatory compliance needs.
For asset managers and retirement service providers, we offer data-driven
solutions and an end-to-end platform for content management, composition, and
omni-channel distribution of regulatory, marketing, and transactional
information. Our data and analytics solutions provide investment product
distribution data, analytical tools, insights, and research to enable asset
managers to optimize product distribution across retail and institutional
channels globally. Through Matrix Financial Solutions, Inc. ("Matrix"), we
provide mutual fund trade processing services for retirement service providers,
third-party administrators, financial advisors, banks and wealth management
professionals.
In addition, we provide public corporations and mutual funds with a full suite
of solutions to help manage their annual meeting process, including registered
and beneficial proxy materials distribution, proxy processing and tabulation
services, digital voting solutions, proxy and shareholder report document
management solutions, virtual shareholder meeting services, and shareholder data
services. We also offer financial reporting document composition and management
solutions, SEC disclosure and filing services, and registrar, stock transfer and
record-keeping services through Broadridge Corporate Issuer Solutions.
We provide omni-channel customer communications solutions, which include print
and digital solutions, to modernize technology infrastructures, simplify
communications processes, accelerate digital adoption and improve the customer
experience. Through one point of integration, the Broadridge Communications
CloudSM platform (the "Communications Cloud") helps companies create, deliver,
and manage their communications and customer engagement. The platform includes
data-driven composition tools, identity and preference management, omni-channel
optimization and digital communication experience, archive and information
management, digital and print delivery, and analytics and reporting tools.

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Global Technology and Operations

We are one of the world’s leading providers of business solutions for capital markets, wealth management and investment firms. We offer advanced solutions that automate the trading lifecycle of businesses, from desktop productivity tools, data aggregation, performance reporting and portfolio management to order capture and execution , trade confirmation, margin, cash management, clearing and settlement, asset management, master data management, reconciliations, securities finance and collateral optimization, regulatory compliance and reporting, and services portfolio accounting and custody. In addition, we provide business process outsourcing (“BPO”) services that support the entire business lifecycle operations of our buying and selling clients’ businesses through a combination of our technology and our operational expertise. For capital markets firms, we help our clients reduce costs and improve the efficiency of their operations across the front, middle and back office. Our core post-trade services help financial institutions cost-effectively and efficiently consolidate their books and records, gather and maintain assets under management, and manage risk, allowing them to focus on their core business activities. Delivered on a Software as a Service (“SaaS”) basis within large user communities, our technology is a global solution, handling customs clearance and settlement in over 100 countries. Our multi-asset, multi-market, multi-entity and multi-currency solutions support real-time processing of global trades in equities, fixed income, mutual funds, currencies and traded derivatives in stock exchange. With the recent acquisition of Itiviti Holding AB
(“Itiviti”), we have strengthened our capabilities with a set of front-office order management and execution solutions, connectivity and network offerings that will integrate with our existing middle and back-office solutions. Our comprehensive wealth management platform provides functionality across the entire wealth management lifecycle and streamlines all aspects of wealth management services, including account management, expense management and onboarding client. The wealth management platform enables brokers and full-service, regional and independent investment advisors to better engage with clients through digital marketing and client communication tools. We also integrate data, content and technology to drive new customer acquisition, support holistic and personalized advice and cross-sell opportunities through the creation of sales and educational content, including seminars as well as customizable advisor websites, search engine marketing, and electronic and print newsletters. . Our advisor solutions help advisors optimize the management of their practice through the aggregation and reporting of client and account data. We also offer buy-side technology solutions for the global investment management industry, including portfolio management, compliance and operational workflow solutions for hedge funds, family offices, alternative asset managers , traditional asset managers and vendors serving this space.


Consolidation and Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") in the United States of
America ("U.S."). These Condensed Consolidated Financial Statements present the
condensed consolidated position of the Company and include the entities in which
the Company directly or indirectly has a controlling financial interest as well
as various entities in which the Company has investments recorded under the
equity method of accounting as well as certain marketable and non-marketable
securities. Intercompany balances and transactions have been eliminated. Amounts
presented may not sum due to rounding.
Beginning with the first quarter of fiscal year 2022, the Company revised the
foreign exchange rates used to present segment revenues, segment earnings (loss)
before income taxes, and Closed sales, to further allocate the foreign exchange
impact to the individual segment revenue and profit metrics. The presentation of
segment revenues and earnings (loss) before income taxes for the prior periods
provided has been changed to conform to the current period presentation. Total
consolidated revenues and earnings before income taxes were not impacted.
The results of operations reported for interim periods are not necessarily
indicative of the results of operations for the entire year or any subsequent
interim period. These Condensed Consolidated Financial Statements should be read
in conjunction with the Company's Consolidated Financial Statements for the
fiscal year ended June 30, 2021 in the 2021 Annual Report.
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Critical Accounting Policies
In presenting the Condensed Consolidated Financial Statements, management makes
estimates and assumptions that affect the amounts reported and related
disclosures. Management continually evaluates the accounting policies and
estimates used to prepare the Condensed Consolidated Financial Statements. The
estimates, by their nature, are based on judgment, available information, and
historical experience and are believed to be reasonable. However, actual amounts
and results could differ from these estimates made by management. In
management's opinion, the Condensed Consolidated Financial Statements contain
all normal recurring adjustments necessary for a fair presentation of results
reported. The results of operations reported for the periods presented are not
necessarily indicative of the results of operations for subsequent periods.
Certain accounting policies that require significant management estimates and
are deemed critical to our results of operations or financial position are
discussed in the "Critical Accounting Policies" section of Part II, Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 2021 Annual Report.
KEY PERFORMANCE INDICATORS
Management focuses on a variety of key indicators to plan, measure and evaluate
the Company's business and financial performance. These performance indicators
include Revenue and Recurring fee revenue as well as not generally accepted
accounting principles measures ("Non-GAAP") of Adjusted Operating income,
Adjusted Net earnings, Adjusted earnings per share, Free Cash flow, and Closed
sales. In addition, management focuses on select operating metrics specific to
Broadridge of Record Growth and Internal Trade Growth, as defined below.
Refer to the section "Explanation and Reconciliation of the Company's Use of
Non-GAAP Financial Measures" for a reconciliation of Adjusted Operating income,
Adjusted Net earnings, Adjusted earnings per share, and Free Cash flow to the
most directly comparable GAAP measures, and an explanation for why these
Non-GAAP metrics provide useful information to investors and how management uses
these Non-GAAP metrics for operational and financial decision-making. Refer to
the section "Results of Operations" for a description of Closed sales and an
explanation of why Closed sales is a useful performance metric for management
and investors.
Revenues
Revenues are primarily generated from fees for processing and distributing
investor communications and fees for technology-enabled services and solutions.
The Company monitors revenue in each of our two reportable segments as a key
measure of success in addressing our clients' needs. Fee revenues are derived
from both recurring and event-driven activity. The level of recurring and
event-driven activity the Company processes directly impacts distribution
revenues. While event-driven activity is highly repeatable, it may not recur on
an annual basis. Event-driven fee revenues are based on the number of special
events and corporate transactions the Company processes. Event-driven activity
is impacted by financial market conditions and changes in regulatory compliance
requirements, resulting in fluctuations in the timing and levels of event-driven
fee revenues. Distribution revenues primarily include revenues related to the
physical mailing of proxy materials, interim communications, transaction
reporting, customer communications and fulfillment services as well as Matrix
administrative services.
Recurring fee revenue growth represents the Company's total annual fee revenue
growth, less growth from event-driven fee revenues. We distinguish recurring fee
revenue growth between organic and acquired:

• Organic – We define organic revenue as recurring revenue generated from net new business and organic growth. • Earned – We define earned revenue as recurring revenue generated from services acquired within the first twelve months from the date of acquisition. This type of growth stems from our strategy of buying, integrating and optimizing the value of the assets we acquire.

Revenue and recurring commission income are useful measures for investors to understand how management measures and evaluates the Company’s ongoing operating performance. See “Results of Operations” and Note 3, “Revenue Recognition” to our summary consolidated financial statements in this Form 10-Q.

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Record Growth and Internal Trade Growth
The Company uses select operating metrics specific to Broadridge of Record
Growth and Internal Trade Growth in evaluating its business results and
identifying trends affecting its business. Record Growth is defined as stock
record growth and interim record growth which measure the estimated annual
change in total positions eligible for equity proxy materials and mutual fund
and exchange traded fund interim communications, respectively, for equities and
mutual fund position data reported to Broadridge in both the current and prior
year periods. Internal Trade Growth represents the estimated change in daily
average trade volumes for Broadridge securities processing clients whose
contracts are linked to trade volumes and who were on Broadridge's trading
platforms in both the current and prior year periods. Record Growth and Internal
Trade Growth are useful non-financial metrics for investors in understanding how
management measures and evaluates Broadridge's ongoing operational performance
within its Investor Communication Solutions and Global Technology and Operations
reportable segments, respectively.
The key performance indicators for the three and six months ended December 31,
2021, and 2020, are as follows:
                                              Select Operating Metrics

                                  Three Months Ended              Six Months Ended
                                      December 31,                   December 31,

                                    2021               2020         2021            2020

Record Growth
  Equity proxy                               20  %     24  %              29  %     20  %
  Mutual fund interims                       12  %      5  %              13  %      8  %

Internal Trade Growth                         1  %     24  %               1  %     17  %



Results of Operations
The following discussions of Analysis of Condensed Consolidated Statements of
Earnings and Analysis of Reportable Segments refer to the three and six months
ended December 31, 2021 compared to the three and six months ended December 31,
2020. The Analysis of Condensed Consolidated Statements of Earnings should be
read in conjunction with the Analysis of Reportable Segments, which provides a
more detailed discussion concerning certain components of the Condensed
Consolidated Statements of Earnings.
The following references are utilized in the discussions of Analysis of
Condensed Consolidated Statements of Earnings and Analysis of Reportable
Segments:
"Amortization of Acquired Intangibles and Purchased Intellectual Property" and
"Acquisition and Integration Costs" represent certain non-cash amortization
expenses associated with acquired intangible assets and purchased intellectual
property assets, as well as certain transaction and integration costs associated
with the Company's acquisition activities, respectively.
"Real Estate Realignment and Covid-19 Related Expenses" represent costs
associated with the Company's real estate realignment initiative, including
lease exit and impairment charges and other facility exit costs, as well as
certain expenses associated with the Covid-19 pandemic.
"Investment Gains" represents non-operating, non-cash gains on privately held
investments.
"Software Charge" represents a charge related to an internal use software
product that is no longer expected to be used.
"Net New Business" refers to recurring revenue from Closed sales less recurring
revenue from client losses.
The following definitions describe the Company's Revenues:
Fee revenues in the Investor Communication Solutions segment are derived from
both recurring and event-driven activity. In addition, the level of recurring
and event-driven activity we process directly impacts distribution revenues.
While event-driven activity is highly repeatable, it may not recur on an annual
basis. The types of services we provide that comprise event-driven activity are:
•Mutual Fund Proxy: The proxy and related services we provide to mutual funds
when certain events occur requiring a shareholder vote including changes in
directors, sub-advisors, fee structures, investment restrictions, and mergers of
funds.
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•Mutual Fund Communications: Mutual fund communications services consist
primarily of the distribution on behalf of mutual funds of supplemental
information required to be provided to the annual mutual fund prospectus as a
result of certain triggering events such as a change in portfolio managers. In
addition, mutual fund communications consist of notices and marketing materials
such as newsletters.
•Equity Proxy Contests and Specials, Corporate Actions, and Other: The proxy
services we provide in connection with shareholder meetings driven by special
events such as proxy contests, mergers and acquisitions, and tender/exchange
offers.
Event-driven fee revenues are based on the number of special events and
corporate transactions we process. Event-driven activity is impacted by
financial market conditions and changes in regulatory compliance requirements,
resulting in fluctuations in the timing and levels of event-driven fee revenues.
As such, the timing and level of event-driven activity and its potential impact
on revenues and earnings are difficult to forecast.
Generally, mutual fund proxy activity has been subject to a greater level of
volatility than the other components of event-driven activity. For the six
months ended December 31, 2021, mutual fund proxy fee revenues were 120% greater
compared to the six months ended December 31, 2020. During fiscal year 2021,
mutual fund proxy fee revenues were 17% greater than the prior fiscal year.
Although it is difficult to forecast the levels of event-driven activity, we
expect that the portion of fee revenues derived from mutual fund proxy activity
may continue to experience volatility in the future.
Distribution revenues primarily include revenues related to the physical mailing
of proxy materials, interim communications, transaction reporting, customer
communications and fulfillment services, as well as Matrix administrative
services.
Distribution cost of revenues consists primarily of postage-related expenses
incurred in connection with our Investor Communication Solutions segment, as
well as Matrix administrative services expenses. These costs are reflected in
Cost of revenues.
Closed sales represent an estimate of the expected annual recurring fee revenue
for new client contracts that were signed by Broadridge in the current reporting
period. Closed sales does not include event-driven or distribution activity. We
consider contract terms, expected client volumes or activity, knowledge of the
marketplace and experience with our clients, among other factors, when
determining the estimate. Management uses Closed sales to measure the
effectiveness of our sales and marketing programs, as an indicator of expected
future revenues and as a performance metric in determining incentive
compensation.
Closed sales is not a measure of financial performance under GAAP, and should
not be considered in isolation or as a substitute for revenue or other income
statement data prepared in accordance with GAAP. Closed sales is a useful metric
for investors in understanding how management measures and evaluates our ongoing
operational performance.
The inherent variability of transaction volumes and activity levels can result
in some variability of amounts reported as actual achieved Closed sales. Larger
Closed sales can take up to 12 to 24 months or longer to convert to revenues,
particularly for the services provided by our Global Technology and Operations
segment. For the three and six months ended December 31, 2021 and for the fiscal
year ended June 30, 2021, we reported Closed sales net of a 5.0% allowance
adjustment. Consequently, our reported Closed sales amounts will not be adjusted
for actual revenues achieved because these adjustments are estimated in the
period the sale is reported. We assess this allowance amount at the end of each
fiscal year to establish the appropriate allowance for the subsequent year using
the trailing five years actual data as the starting point, normalized for
outlying factors, if any, to enhance the accuracy of the allowance.
Closed sales for the three months ended December 31, 2021 were $82.7 million, an
increase of $38.4 million or 87%, compared to $44.3 million for the three months
ended December 31, 2020. Closed sales for the three months ended December 31,
2021 are net of an allowance adjustment of $4.4 million.
Closed sales for the six months ended December 31, 2021 were $112.6 million, an
increase of $36.4 million or 48%, compared to $76.1 million for the six months
ended December 31, 2020. Closed sales for the six months ended December 31, 2021
are net of an allowance adjustment of $5.9 million.
Recent Developments
The Covid-19 pandemic continues to persist throughout the world including the
U.S., India, Canada, Europe and other locations where we operate. To date, the
Covid-19 pandemic has negatively impacted the global economy, created
significant financial market volatility, disrupted global supply chains, and
resulted in a significant number of deaths and infections worldwide. In
response, several countries worldwide have enacted fiscal stimulus packages
while central banks have increased monetary stimulus, both designed to help
mitigate the negative macroeconomic effects of Covid-19. In addition, several
national, state and local governments continue to place restrictions on people
from gathering in groups or interacting within a certain physical distance (i.e.
social distancing) and they may also continue to place restrictions on
businesses, limit operations or mandate that people stay at home.
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The safety and well-being of our associates and our ability to fulfill our
client service commitments are our highest priorities. After addressing the
initial surge of the Covid-19 pandemic, we are now focused on running our
business effectively in the new work from home paradigm while preparing for a
more flexible workplace model in the future. Accordingly, the Company has taken
several measures and expect to take further actions designed to protect the
health of our employees and to minimize our operational disruption and resulting
provision of services to our clients from the Covid-19 pandemic, including
adopting masking, social distancing and cleaning measures in our production
facilities. We are compliant with applicable federal, state and local Covid-19
rules, restrictions, orders and guidance, and are promoting vaccination among
our associates.
In fiscal year 2022 to date, there has not been a material impact as a result of
Covid-19 on our consolidated revenues and pre-tax income. In addition, all of
our production-related facilities remain operational and are continuing to
provide ongoing services to our clients. Further, we have not experienced any
significant supply-chain issues as our critical vendors have also remained
operational and continue to meet their on-going service level requirements. We
continue to engage with our clients to assist with their service demands,
including our clients' needs for any supplemental operational services and/or
changes to existing service requirements in response to the Covid-19 pandemic.
Notwithstanding the foregoing, we are unable to precisely predict the impact
that Covid-19 will have in the future due to numerous uncertainties, including
the severity of the disease, the duration of the outbreak, actions that may be
taken by governmental authorities, the impact to the business of our clients,
and other factors identified in Part I, Item 1A. "Risk Factors" in our 2021
Annual Report. Given these uncertainties, Covid-19 could disrupt the business of
certain of our clients, decrease our clients' demand for our services, impact
our business operations and our ability to execute on our associated business
strategies and initiatives, and adversely impact our consolidated results of
operations and/or our financial condition in the future. We will continue to
closely monitor and evaluate the nature and extent of the impact of Covid-19 to
our business, consolidated results of operations, and financial condition.
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Table of Contents Analysis of Condensed Consolidated Statements of Earnings Quarters Ended December 31, 2021 compared to the three months ended December 31, 2020
The table below shows the data from the Condensed Consolidated Statements of Earnings for the three months ended December 31, 2021 and 2020, and dollar and percentage changes between periods:

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