Broadridge Financial Solutions Financial Model

Broadridge categorises its revenues into three main types: Recurring fee revenues, Event-driven fee revenues, and Distribution revenues.

• Total assets: Approximately $8.0 billion to $8.5 billion.
• Key asset categories: Goodwill, intangible assets, deferred client conversion costs, and accounts receivable.
• Goodwill & intangibles: Represents over 40% of total assets, reflecting Broadridge's history of consistent bolt-on acquisitions.
• Working capital profile:
• Days Sales Outstanding (DSO): 55 to 65 days.
• Days Inventory Outstanding (DIO): Not material (service business).
• Days Payable Outstanding (DPO): 40 to 50 days.
• Net working capital as % of revenue: Typically slightly positive but fluctuates with the proxy season peak in the fiscal fourth quarter.
• PP&E: Relatively small (asset-light model), consisting mainly of data centre equipment and printing/insertion machinery for the physical communications business.
• Right-of-use assets: Material but manageable, representing leased office space and production facilities.

• Capex as % of revenue: 3% to 5% (including capitalised internal-use software).
• Maintenance capex vs. growth capex: Heavily skewed toward growth, specifically the development of new wealth management platforms and digital ledger technology (e.g., Distributed Ledger Repo platform).
• Capitalised software: Highly material. Broadridge capitalises a significant portion of its development costs for client-facing platforms, which are then amortised over 3 to 7 years.
• M&A pattern: Serial bolt-on acquirer. The company regularly deploys $100 million to $400 million annually on tuck-in acquisitions (e.g., SIS, CompSci, AdvisorTarget) to acquire new capabilities or geographic reach.

• Total debt: Approximately $3.2 billion to $3.4 billion.
• Debt/EBITDA ratio: Management targets a gross leverage ratio of 2.0x to 2.5x.
• Credit rating: Investment grade (typically BBB+ / Baa1).
• Key debt instruments: Senior unsecured notes, a revolving credit facility, and term loans.
• Maturity profile: Well-laddered with notes maturing in tranches over the next 5 to 10 years.
• Interest rate profile: Predominantly fixed-rate senior notes, with floating rate exposure on the revolving credit facility.
• Share repurchase programme: Active. The company typically repurchases $100 million to $450 million of shares annually to offset dilution and return capital.
• Dividend policy: Strong dividend growth track record. The annual dividend is currently $3.90 per share, representing a payout ratio of approximately 40% to 45% of Adjusted EPS.

• Operating cash flow conversion: Exceptionally strong. OCF typically exceeds 100% of GAAP Net Income.
• Free cash flow margin: 10% to 15% of total revenues.
• Major non-cash items: Depreciation and amortisation, stock-based compensation, and deferred income taxes.
• Working capital cash flow impact: Highly seasonal. The company builds receivables during the spring proxy season and collects them in the summer (fiscal first quarter).
• Capex intensity: Low physical capex, but moderate software capitalisation intensity.
• Cash tax rate: Typically aligns closely with the GAAP effective tax rate of 20% to 22%, though occasionally lowered by excess tax benefits from stock-based compensation.

1. Assumptions: Contains all hardcoded drivers, growth rates, margin targets, tax rates, and capital allocation inputs.
2. Revenue Build: Projects ICS and GTO revenues. Splits ICS into Regulatory, Data-driven fund solutions, Issuer, and Customer communications. Projects Recurring, Event-driven, and Distribution revenues separately.
3. Income Statement: Consolidated P&L mirroring the 10-K. Includes Cost of Revenues, SG&A, Operating Income, Interest Expense, and Net Income. Calculates Adjusted Operating Income and Adjusted EPS.
4. Balance Sheet: Standard assets, liabilities, and equity. Must explicitly break out Deferred Client Conversion Costs and Contract Liabilities.
5. Cash Flow Statement: Indirect method starting from Net Income. Includes specific lines for Additions to Capitalised Software and Client Conversion Costs.
6. Debt Schedule: Tracks senior notes, term loans, and revolver balances. Calculates interest expense based on weighted average rates.
7. Working Capital & Intangibles: Schedules out the buildup and amortisation of capitalised software, deferred conversion costs, and standard working capital items (AR, AP, Accrued Expenses).
8. DCF Valuation: Unlevered free cash flow calculation, WACC derivation, terminal value calculation, and implied share price output.

1. `ICS Recurring Revenue = Prior Year ICS Recurring Revenue * (1 + ICS Organic Growth Rate + ICS Acquired Growth Rate)`
2. `Distribution Revenue = Estimated Mailings Volume * Average Postage Rate`
3. `Total ICS Revenue = ICS Recurring Revenue + ICS Event-Driven Revenue + Distribution Revenue`
4. `GTO Recurring Revenue = Prior Year GTO Recurring Revenue * (1 + GTO Organic Growth Rate + GTO Acquired Growth Rate)`
5. `Total Revenues = Total ICS Revenue + Total GTO Revenue`
6. `Cost of Revenues = (Total Revenues - Distribution Revenue) * Core Cost of Revenue Margin + Distribution Revenue` (Distribution is a 100% pass-through cost).
7. `Adjusted Operating Income = GAAP Operating Income + Amortisation of Acquired Intangibles + Restructuring Charges`
8. `Adjusted EPS = (Adjusted Operating Income - Net Interest Expense - Adjusted Taxes) / Diluted Shares Outstanding`
9. `Free Cash Flow = Cash from Operations - Capital Expenditures - Capitalised Internal Use Software`
10. `Ending Share Count = Beginning Share Count - (Share Repurchase Amount / Average Share Price) + Shares Issued for SBC`

• The Assumptions sheet dictates the growth rates in the Revenue Build.
• The Revenue Build feeds the top line of the Income Statement and drives the AR balance in the Working Capital sheet.
• The Income Statement generates Net Income, which is the starting point for the Cash Flow Statement.
• The Cash Flow Statement determines the ending cash balance and any required revolver drawdowns, which feed the Balance Sheet and Debt Schedule.
• The Debt Schedule calculates interest expense, which loops back to the Income Statement. This is a circular reference that must be managed with a toggle switch.
• The DCF Valuation pulls Unlevered Free Cash Flow from the Cash Flow Statement and tax outputs from the Income Statement.

• Revenues and Expenses: Entered as positive numbers on their respective build sheets. On the Income Statement, expenses are subtracted from revenues.
• Assets and Liabilities: Entered as positive balances on the Balance Sheet.
• Cash Flow: Cash inflows are positive; cash outflows (including capex, share repurchases, and dividends) are negative.
• Contra-accounts: Treasury stock is entered as a negative number in the equity section of the Balance Sheet.

• Mismodelling Distribution Revenues: Distribution revenues are purely pass-through postage costs. If you apply a standard gross margin to total revenues, you will overstate profits. Distribution revenue must be modelled with a 0% margin.
• Ignoring Deferred Client Conversion Costs: Broadridge spends heavily to onboard new GTO clients. These costs are capitalised and amortised over the contract life. Failing to model this cash outflow overstates Free Cash Flow.
• Event-Driven Revenue Volatility: Mutual fund proxy contests are highly unpredictable. Straight-lining event-driven revenue will cause major quarterly variances against actuals.
• Constant Currency vs. Reported Growth: Management guides on a constant currency basis, but the financial statements are reported in USD. The model must include an FX impact line to bridge the two.
• Float Income: Broadridge earns interest on funds held for clients. In a high-interest-rate environment, this float income boosts margins. It must be modelled separately from core operating fees.
• Adjusted vs. GAAP EPS: Management compensation and Wall Street consensus are based on Adjusted EPS, which excludes acquired intangible amortisation. The model must explicitly calculate both.
• Seasonality Mismatch: If building a quarterly model, applying an even 25% revenue split per quarter will fail. The fiscal fourth quarter (ending June) contains the bulk of annual proxy mailings.
• Share Count Dilution: Stock-based compensation creates steady dilution. If the share repurchase programme is paused, the share count will drift upward, depressing EPS.

• "Distribution Revenue Margin must equal exactly 0% in all periods."
• "Adjusted Operating Margin should remain in the 20.0% to 22.5% range; flag if it expands beyond this without a stated structural change."
• "Free Cash Flow Conversion (FCF / Adjusted Net Income) should be between 95% and 105%."
• "Debt / Adjusted EBITDA must remain below 2.5x to align with management's investment-grade rating target."
• "Balance sheet must balance: Total Assets = Total Liabilities + Stockholders' Equity in every period."
• "ICS Recurring Revenue growth should not exceed 10% organically, as the underlying position growth typically caps at mid-single digits."
• "Effective tax rate should remain between 19.0% and 21.0%."
• "Dividend payout ratio should remain between 40% and 50% of Adjusted EPS."

• Filings: SEC EDGAR (Broadridge Financial Solutions, Inc. Form 10-K, 10-Q, 8-K).
• Investor Relations: Broadridge IR website for quarterly earnings presentations, financial supplements, and Investor Day transcripts.
• Key Peers for Benchmarking: SS&C Technologies (SSNC), Fiserv (FI), Fidelity National Information Services (FIS), Jack Henry & Associates (JKHY).
• Industry Data Sources: SIFMA (Securities Industry and Financial Markets Association) for retail investor participation trends and trading volumes; USPS rate announcements for distribution cost forecasting.
• Consensus Estimates: FactSet or Bloomberg for forward-looking Adjusted EPS and revenue consensus.

• Broadridge Financial Solutions, Inc. Form 10-K for the Fiscal Year Ended June 30, 2025.
• Broadridge Reports Fourth Quarter and Fiscal 2025 Results (Press Release, August 2025).
• Broadridge Reports Second Quarter Fiscal 2025 Results (Press Release, January 2025).
• Broadridge Reports Third Quarter Fiscal 2025 Results (Press Release, May 2025).
• Broadridge Reports First Quarter Fiscal 2025 Results (Press Release, November 2024).