Broadridge Financial Solutions, Inc. (NYSE:BR) today reported financial results for the second quarter ended December 31, 2022 of its fiscal year 2023.
Total revenues for the three-month period to end-December 2022 increased 3% year-over-year to $1,293 million from $1,260 million.
Recurring revenues increased $47 million, or 6%, to $840 million. Recurring revenue growth constant currency (Non-GAAP) was 8%, driven by organic growth from a combination of growth in Net New Business in GTO and ICS and Internal Growth, primarily in Broadridge’s ICS business.
Event-driven revenues decreased $27 million, or 42%, to $38 million, primarily due to the decrease in volume of mutual fund proxy communications.
Distribution revenues increased $13 million, or 3%, to $415 million, primarily driven by the impact of a postage rate increase of approximately $20 million, partially offset by lower volume of ICS mutual fund communications.
Operating income was $108 million, an increase of $39 million, or 57%. Operating income margin increased to 8.3%, compared to 5.5% for the prior year period, due to the growth in Recurring revenues and lower amortization expense from acquired intangible assets, more than offsetting lower event-driven revenues, an increase in low-margin distribution revenues, growth investments and other expenses.
Adjusted Operating income was $173 million, an increase of $32 million, or 23%. The increase was primarily driven by higher Recurring revenues, partially offset by lower event-driven revenues.
Adjusted Operating income margin increased to 13.4% compared to 11.2% for the prior year period. The increase in pass through distribution revenues negatively impacted margins by approximately 20 basis points.
Interest expense, net was $34 million, an increase of $13 million, primarily due to an increase in interest expense from higher borrowing costs, partially offset by savings from the Company’s cross-currency swap transaction.
Net earnings increased 22% to $58 million and Adjusted Net earnings increased 11% to $108 million.
Diluted earnings per share increased 20% to $0.48, compared to $0.40 in the prior year period, and Adjusted earnings per share increased 11% to $0.91, compared to $0.82 in the prior year period.
Tim Gokey, Broadridge’s CEO, commented:
“Broadridge delivered strong results in the second quarter. Recurring revenues grew 8% constant currency and Adjusted EPS grew 11%, driven by continued revenue growth and disciplined expense management. We continue to see growth driven by conversion of sales backlog into new revenue and strength in investor participation.
The strength of our results and the resilience of our business keep us on track to deliver on our full-year guidance, including 6-9% Recurring revenue growth constant currency and 7-11% Adjusted EPS growth. As a result, we continue to expect to deliver at or above the higher end of our three-year financial objectives, including 7-9% Recurring revenue and 8-12% Adjusted EPS growth.”
