(Source: MARKETWIRE)Broadridge Financial Solutions, Inc. (NYSE: BR), a leading global provider of technology-based solutions to the financial services industry, today reported net revenues of $457.9 million, net earnings of $26.4 million, and fully-diluted earnings per share of $0.19 for the first quarter ended September 30, 2009. This compares with net revenues of $472.4 million, net earnings of $35.6 million, and fully-diluted earnings per share of $0.25 for the comparable quarter of the previous fiscal year.

Post-First Quarter Strategic Transactions

On November 2, 2009, Broadridge entered into agreements with Penson Worldwide, Inc. ("PWI") and Penson Financial Services, Inc., a subsidiary of PWI ("Penson"), that provide for the sale of its clearing client contracts to Penson and a ten-year outsourcing services contract under which Broadridge will provide certain securities processing and back-office services to Penson. This transaction is part of Broadridge's strategy to exit the securities clearing business, which is expected to provide Broadridge with access to net cash estimated to be in the range of $180 million to $200 million that was previously committed to our securities clearing business as regulatory capital. Exiting the clearing business will enable the securities processing business to solely focus on the revenue opportunities associated with securities processing and operations outsourcing services.

Broadridge will receive between $60 million and $70 million in total consideration from PWI for the sale of the clearing client contracts consisting of a five-year subordinated note from PWI and shares of PWI's common stock in an amount calculated as the lesser of one-third of the total consideration and an amount not exceeding 9.9% of PWI's outstanding common stock. The specific amount of such consideration will be determined immediately prior to closing pursuant to an agreed formula. In addition, Broadridge has agreed to make an eighteen-month $50 million subordinated loan to PWI to fund its additional regulatory capital requirements in the event it is not able to obtain these funds from other sources prior to closing. Broadridge expects the outsourcing services contract to generate approximately $65 million to $75 million in annual revenue when the business is fully converted onto Broadridge's securities processing platform over the next 12 to 18 months.

The outsourcing services contract will include selective processing services for Penson's existing securities processing operations and back-office functions, as well as selective processing services related to the clearing client contracts acquired by Penson from Broadridge. Broadridge is expecting to incur one-time expenses and a pre-tax loss on the transaction in the aggregate amount of approximately $30 million to $35 million which are substantially non-cash items. It is anticipated that the transaction will close within the next six months, subject to agreement on outsourcing service levels and the satisfaction of customary closing conditions, including regulatory approvals.

The Company also announced that subsequent to the end of its first quarter, it has signed an agreement with Morgan Stanley Smith Barney LLC ("Morgan Stanley Smith Barney") for customer communications services, which includes the production and distribution of account statements, performance reports, tax reporting documents, and certain trade confirms, as well as the provision of prospectus fulfillment services. The length of the agreement is seven years and is expected to generate annual fee revenue greater than $35 million when the systems are fully converted onto the Broadridge production platform over the next two years.

CEO Comments on Results and Transactions

Commenting on the results, Richard J. Daly, Chief Executive Officer, said, "I am very pleased with the overall momentum across the entire business, when I consider the transactions that we have executed post-quarter and the financial results for the quarter. Our first quarter performance is in-line with our expectations and overall, I am satisfied with our financial results and the positive activity in our sales pipeline."

Mr. Daly continued, "The Morgan Stanley Smith Barney contract signing has enabled us to not only win back the statement processing business we lost from Morgan Stanley around the time of our spin-off from ADP, but to further expand our relationship with the recently formed Morgan Stanley Smith Barney."

Mr. Daly added, "The Penson transaction creates considerable momentum for our securities processing strategy. It will enable us to have use of significant free cash that had previously been restricted, will eliminate any balance sheet risk associated with the clearing business, and provides us with a clear strategy for our securities processing business which now includes outsourcing. We are delighted to be working with Penson going forward because of their long track record of success in growing their global clearing business and particularly because of their singular strategic focus on the global clearing market. The Penson transaction puts our securities processing business in a position where I believe we are on the right path to increase shareholder value from this segment."

Financial Results for First Quarter Fiscal Year 2010

For the first quarter of fiscal year 2010, net revenues decreased 3% to $457.9 million compared to $472.4 million for the same period last year. The revenue increase from higher fee revenues related to new business and increased event-driven activity was more than offset by the decline in low margin distribution revenues, the negative impact from previously-disclosed client losses and price concessions, and unfavorable foreign currency exchange rates.

Net earnings, as expected, decreased 26% to $26.4 million from $35.6 million primarily as a result of lower revenues and the one-time gain from the purchase of $125.0 million principal amount of our 6.125% senior notes due in 2017 (the "Senior Notes") in the prior fiscal year. Diluted earnings per share decreased to $0.19 per share on slightly less weighted-average shares outstanding, compared to $0.25 per share in the first quarter of fiscal year 2009. Closed sales of $30.7 million for the first quarter of fiscal year 2010 were in-line with expectations and were $2.2 million lower than last year's comparable quarter results, which benefited from a large new client sale.

During the first quarter of fiscal year 2010, the Company repurchased approximately 3.5 million shares of Broadridge common stock under its share repurchase plan at an average price of $20.53 per share.

Analysis of First Quarter Fiscal Year 2010

Investor Communication Solutions

Net revenues for the Investor Communication Solutions segment decreased 1% to $309.9 million in the first quarter of fiscal year 2010, compared to the first quarter of fiscal year 2009. The increase in fee revenues related to internal growth and mutual fund activity was more than offset by a decline in low margin distribution revenues. Operating margin increased slightly by 0.2 percentage points or 20 basis points compared to the first quarter of fiscal year 2009, as the positive margin impact from higher fee revenues were offset by higher investment spending and lower distribution revenue.

Securities Processing Solutions

Net revenues for the Securities Processing Solutions segment decreased 7% to $124.2 million in the first quarter of fiscal year 2010, compared to the first quarter of fiscal year 2009. This decrease, as expected, was primarily driven by the carry-over impact of price concessions related to contract renewals and the previously-announced client losses that occurred last fiscal year. Operating margin decreased 5.6 percentage points or 560 basis points compared to the first quarter of fiscal year 2009, primarily as a result of the higher margin impact associated with lost revenues related to client losses and price concessions.

Clearing and Outsourcing Solutions

Net revenues for the Clearing and Outsourcing Solutions segment increased 10% to $25.6 million in the first quarter of fiscal year 2010, compared to the first quarter of fiscal year 2009. The increase was driven by net new business (sales less losses) primarily from the addition of Neuberger Berman and higher trading activity. Operating loss of $2.4 million for the first quarter of fiscal year 2010 decreased by $0.7 million from an operating loss of $3.1 million in the first quarter of fiscal year 2009 as a result of higher revenues and a benefit from one-time expense reductions.

Other

Net revenues for Other decreased by $0.1 million, compared to the first quarter of fiscal year 2009. This decrease was related to lower interest income in the current fiscal year compared to the same period last year. Pre-tax loss for Other increased by $6.0 million, compared to the first quarter of fiscal year 2009. This increase was primarily due to the effect of the one-time gain of $8.4 million from the purchase of the Senior Notes during the first quarter of fiscal year 2009 and a negative impact from foreign currency exchange in the first quarter of fiscal year 2010, partially offset by a decrease in interest expense of $2.8 million in the first quarter of fiscal year 2010 related to a lower outstanding balance on the Senior Notes.

Fiscal Year 2010 Financial Guidance

We are increasing our full year net revenues growth guidance to a range of 6% to 8% from our previous guidance range of 4% to 8%.