Broadridge Earnings: Continued Steady Performance in Seasonally Soft Fiscal Q1

Broadridge BR started its fiscal 2024 on solid footing. Revenues in the firm’s seasonally soft fiscal quarter of $1.43 billion and adjusted EPS of $1.09 edged out the FactSet consensus estimates of $1.39 billion and $0.97 respectively. As is often the case during first quarter earnings, Broadridge reaffirmed its fiscal-year outlook. Overall, there was little in Broadridge’s earnings release that would alter our long-term view of the firm, and we will maintain our fair value estimate of $190 on Broadridge’s shares. Broadridge’s steady performance amid an uncertain macroeconomic backdrop and topsy-turvy market movement support our Morningstar Uncertainty Rating of Low.

Broadridge’s recurring regulatory communications grew 5%. In our view, equity position growth of 8% was healthy, though mutual fund and ETF position growth of 3% decelerated from the mid-to-high single-digit percentages seen in recent quarters. Broadridge noted that equity position growth was driven by managed accounts rather than self-directed accounts. Broadridge expects equity position growth of mid- to high-single digits and mutual fund and ETF position growth of midsingle digits for the full year.

We believe a good chunk of the revenue beat was due to higher event-driven revenue, which include equity proxy activity unrelated to an annual meeting such as shareholder approval for a merger or a proxy context as well as the election of mutual fund directors. Event-driven revenue increased from $63 million in the year-ago quarter to $87 million. On the equity side, Broadridge benefited from notable corporate action activity at Johnson & Johnson. We do not expect this elevated level of activity to continue.

Global technology and operations revenue grew 11% organically, driven by the strong trade growth and the inclusion of the UBS contract in the wealth management business. We understand about 30%-40% of GTO is revenue is tied to volume in some way, either directly or through tiers.