Broadridge Financial Solutions, Inc. reports 30.9% Net Income growth in 2018 and 1.6 pp EBITDA Margin growth from 17.0% to 18.6%
08/07/2018 • About Broadridge Financial Solutions, Inc. (
$BR) • By InTwits
Broadridge Financial Solutions, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Broadridge Financial Solutions, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $66m in FY2018, $51m in FY2017, $69m in FY2016, $76m in FY2015, $133m in FY2014
- In the last 5 years the company invested considerably less than D&A: $310m vs. $698m. In FY2018 this situation was still the same: CAPEX was 77 while D&A was 212
- The company has highly profitable business model: ROIC is 26.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 4.5%. Revenue growth showed slowdown in FY18Q4 - it was -1.9% YoY. During FY2014-FY2018 Revenue growth topped in FY2017 at 43.0%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018.
Gross Margin increased slightly on 1.9 pp from 24.9% to 26.8% in FY2018. SG&A as a % of Revenue increased slightly on 0.95 pp from 12.1% to 13.1% in FY2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.1 pp from 0.13% to 1.3% in FY2018.
Net Income margin increased slightly on 2.0 pp from 7.9% to 9.9% in FY2018. The efficient tax rate was 23.7% in FY2018 while the average for the last five years was 31.5%.
Investments (CAPEX, working capital and M&A)
Broadridge Financial Solutions, Inc.'s CAPEX/Revenue was 1.8% in FY2018. Broadridge Financial Solutions, Inc. showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average level of CAPEX/Revenue for the last three years was 1.9%. During the last 5 years CAPEX as a % of Revenue topped in FY2017 at 2.1%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Accounts payable as a % of Revenue increased slightly on 0.67 pp from 5.4% to 6.1% in FY2018.
Broadridge Financial Solutions, Inc. has spent
$108m on M&A in FY2018 which accounts for 2.5% of revenue.
Return on investment
The company operates at high and attractive ROIC (26.5%) and ROE (40.8%). ROIC increased on 2.5 pp from 23.9% to 26.5% in FY2018. ROE increased on 8.9 pp from 31.9% to 40.8% in FY2018. ROE pursued a growing trend in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.0x and Debt / EBITDA is 1.3x. Net Debt / EBITDA dropped on 0.2x from 1.2x to 1.0x in FY2018. Debt decreased on 4.4% while cash decreased on 2.7%.
Broadridge Financial Solutions, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 14.0x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence paid by the company was 4.0% in FY2018.
Valuation and dividends
Broadridge Financial Solutions, Inc.'s trades at EV/EBITDA 19.7x and P/E 35.3x.
The company paid 38.8% of Net Income as dividends in FY2018. Dividends grew on average at 11.3% per annum in the last 5 years).
Management team
CEO total compensation was
$11,216,495 in FY2018 which included
$923,782 salary. The company's CFO James M Young "Jim" has spent 5 years with the company.
At the end of financial year the company had 0.72% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 10,000 employees. The number of employees didn't change in 2018. Average revenue per employee in FY2018 was
$432,990 and it increased on 4.5%.
Financial and operational results
FY ended 06/30/2018
Broadridge Financial Solutions, Inc. ($BR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,558 | 2,694 | 2,897 | 4,143 | 4,330 | 4.5% |
| Gross Profit | 797 | 866 | 921 | 1,033 | 1,160 | 12.3% |
| SG&A | 376 | 399 | 421 | 501 | 565 | 12.8% |
| EBITDA | 518 | 571 | 611 | 705 | 807 | 14.5% |
| EBIT | 421 | 467 | 500 | 532 | 595 | 11.9% |
| Interest expence | 24 | 25 | 28 | 45 | 42 | -5.1% |
| Tax | 133 | 152 | 161 | 161 | 133 | -17.5% |
| Net Income | 263 | 287 | 308 | 327 | 428 | 30.9% |
| Stock Based Compensation | 12 | -2 | 22 | 6 | 55 | 901.8% |
Balance Sheet
|
|---|
| Cash | 348 | 324 | 728 | 271 | 264 | -2.7% |
| Accounts Receivable | 425 | 445 | 453 | 590 | 615 | 4.3% |
| Accounts Payable | 116 | 116 | 133 | 167 | 192 | 14.7% |
| Short Term Debt | 0 | 0 | 125 | 0 | 0 | |
| Long Term Debt | 524 | 689 | 891 | 1,102 | 1,053 | -4.4% |
Cash flow
|
|---|
| Capex | 40 | 50 | 58 | 85 | 77 | -10.2% |
| Dividends | 97 | 122 | 138 | 152 | 166 | 9.2% |
| Acquisitions | 97 | 203 | 53 | 449 | 108 | -75.9% |
Ratios
|
|---|
| Revenue growth | 5.2% | 5.3% | 7.5% | 43.0% | 4.5% | |
| EBITDA growth | 19.7% | 10.3% | 7.0% | 15.3% | 14.5% | |
|
|---|
| Gross Margin | 31.1% | 32.1% | 31.8% | 24.9% | 26.8% | 1.9% |
| EBITDA Margin | 20.3% | 21.2% | 21.1% | 17.0% | 18.6% | 1.6% |
| EBIT Margin | 16.4% | 17.3% | 17.3% | 12.8% | 13.7% | 0.9% |
| SG&A, % of revenue | 14.7% | 14.8% | 14.5% | 12.1% | 13.1% | 1.0% |
| SBC, % of revenue | 0.5% | -0.1% | 0.8% | 0.1% | 1.3% | 1.1% |
| Net Income Margin | 10.3% | 10.7% | 10.6% | 7.9% | 9.9% | 2.0% |
| CAPEX, % of revenue | 1.6% | 1.9% | 2.0% | 2.1% | 1.8% | -0.3% |
|
|---|
| ROIC | 27.6% | 28.3% | 25.8% | 23.9% | 26.5% | 2.5% |
| ROE | 29.6% | 30.4% | 31.2% | 31.9% | 40.8% | 8.9% |
| Net Debt/EBITDA | 0.3x | 0.6x | 0.5x | 1.2x | 1.0x | -0.2x |
| Interest expence / Average debt | 4.5% | 4.2% | 3.3% | 4.2% | 4.0% | -0.2% |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | | 7,400 | 8,000 | 10,000 | 10,000 | 0.0% |
| Revenue/Employee, th. $ | | 364 | 362 | 414 | 433 | 4.5% |
Broadridge Financial Solutions, Inc. ($BR) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 925 | 1,013 | 1,072 | 1,320 | | 3.3% | 13.5% | 6.2% | -1.9% |
| EBITDA | 123 | 156 | 172 | 357 | | 27.9% | 62.6% | 1.6% | 4.1% |
| Net Income | 50 | 62 | 109 | 207 | | 48.1% | 106.3% | 43.7% | 10.6% |
Balance Sheet
|
|---|
| Cash | 289 | 367 | 352 | 264 | | 27.0% | 55.5% | 30.6% | -2.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | -100.0% | |
| Long Term Debt | 1,292 | 1,223 | 1,203 | 1,053 | | 29.1% | 13.1% | 5.4% | -4.4% |
Ratios
|
|---|
| Gross Margin | 21.4% | 24.0% | 25.1% | 34.1% | | 1.6% | 3.3% | 1.8% | 1.7% |
| EBITDA Margin | 13.3% | 15.4% | 16.0% | 27.1% | | 2.6% | 4.7% | -0.7% | 1.6% |
| Net Income Margin | 5.4% | 6.1% | 10.2% | 15.7% | | 1.6% | 2.8% | 2.7% | 1.8% |
Peers in Data Processing & Outsourced S
Below we provide Broadridge Financial Solutions, Inc. benchmarking against other companies in Data Processing & Outsourced S industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.7% | 10.1% | 7.5% |
|---|
| Broadridge Financial Solutions, Inc. ($BR) | | 5.3% | 7.5% | 43.0% | 4.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 39.3% | 39.6% | 39.5% | 39.5% | 41.0% |
|---|
| Broadridge Financial Solutions, Inc. ($BR) | 31.1% | 32.1% | 31.8% | 24.9% | 26.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.0% | 21.3% | 21.1% | 19.4% |
|---|
| Broadridge Financial Solutions, Inc. ($BR) | 20.3% | 21.2% | 21.1% | 17.0% | 18.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Broadridge Financial Solutions, Inc. ($BR) | 1.6% | 1.9% | 2.0% | 2.1% | 1.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| Broadridge Financial Solutions, Inc. ($BR) | 27.6% | 28.3% | 25.8% | 23.9% | 26.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.6x | 1.6x | 2.3x | 2.2x |
|---|
| Broadridge Financial Solutions, Inc. ($BR) | 0.3x | 0.6x | 0.5x | 1.2x | 1.0x |
