Broadridge Financial Solutions Inc (BR) 2011 Q3 法說會逐字稿

Good morning, my name is Roshira and I will be your conference facilitator.

At this time I'd like to welcome everyone to the Broadridge Financial Solutions, Inc.

Third Quarter Fiscal Year 2011 Earnings Conference Call.

I would like to inform you that this call is being recorded and that all lines have been placed on mute to prevent any background noise.

There will be a question and answer period after the speakers remarks.

(Operator Instructions).

I will now turn the conference over to Rick Rodick, Treasurer and Vice President of Investor Relations .

Please go ahead

Thank you.

Good morning, everyone, and welcome to the Broadridge quarterly earnings call and webcast for the third quarter of fiscal year 2011.

This morning I am here with Rich Daly, Chief Executive Officer of Broadridge, and Dan Sheldon, Chief Financial Officer of Broadridge .

I'm sure by now everyone has had the opportunity to review the earnings release we issued this morning.

The news release and slide presentation that accompanies today's earnings call and webcast can be found on the investor relations home page of our website at broadridge.com.

During today's conference call we'll discuss some forward-looking statements regarding Broadridge that involve risk.

These risks are discussed here on slide number 1.

We encourage participants to refer to our SEC filings, including those on forms 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements and the risk factors faced by our business.

Before we begin I'd like to point out to everyone that as a result of the Penson transaction that we closed in the fourth quarter of fiscal year 2010 declaring business is now shown as discontinued operations and our remaining outsourcing business is now part of Securities Processing Solutions.

Also as a result of the reporting treatment of the Penson transaction, the financial results discussed today will address continuing operations unless otherwise stated.

Now let's turn to slide number 2 and review today's agenda.

Rich Daly will start today's call with his opening remarks and will provide you with a summary of the financial results for third quarter of fiscal year 201, followed by a discussion of a few key topics.

Dan Sheldon will then review the third quarter fiscal year 2011 financial results and the full year fiscal financial guidance and further details.

Rich will then return and provide his overall summary and some closing thoughts before we head into the question and answer part of the call.

Now please turn to slide number 3 and I will turn the call over to Rich Daly.

Thanks, Rick.

Good morning, everyone.

This morning as part of my opening remarks I will talk about the following topics.

First, I'll start with an overview of our third quarter financial highlights.

Then I'll provide an important update of our closed sales and revenue growth opportunities, which continue to improve.

After Dan provides you more of the financial and guidance details, I will wrap it up with my closing remarks.

Let's start on slide 4, our third quarter financial highlights.

I am satisfied with our third quarter financial results.

Revenues for the quarter were up 7% and in line with our expectations.

The revenue growth was driven primarily by acquisitions, the Penson outsourcing services agreement, higher volumes and revenues from net new business offset by lower event driven revenues.

Our diluted earnings per share from continuing operations were $0.25 per share for the third quarter, up from $0.22 for the same period last year.

Dan will provide you with more context in a few minutes.

The increase was primarily due to the revenue increase and lower weighted average shares outstanding.

During the quarter we opportunistically bought back 3.6 million shares of Broadridge stock at an average price of approximately $22.82 per share.

These purchases get us to the 128 million weighted average shares outstanding that we directed you to at the beginning of this year.

Now let's move to slide 5.

Closed sales for the quarter were $20 million and year-to-date closed sales were $92 million.

Our year-to-date recurring revenue closed sales of $72 million have been solid during the first nine months of the fiscal year.

While our closed sales are lower than they were for fiscal year 2010, we are still very pleased with our sales results given the quality of the sales that have already taken place.

Full year closed sales guidance is $135 million to $180 million and our recurring revenue closed sales guidance remains at $110 million to $150 million.

With less than two months left in the year, we will need to close almost all of the large deals that we have the potential to close to get to the high-end of the range.

However, we still expect to be within the recurring revenue closed sales guidance range.

Recurring revenue closed sales in the range of $110 million to $150 million should contribute 5 to 7 percentage points of future revenue growth.

Our confidence in recurring revenue today and in the future is being enhanced by the positive marketplace reaction to our acquisitions of Matrix, Access Data, NewRiver, City Networks and Forefield.

The pipeline for all of these products is the fastest growing part of our already robust pipeline.

We have added more sales resources to support these entities and I strongly believe our future sales results will show the impact of this investment.

For many of you that have followed us, you may recall that two years ago we identified that breaking out the mutual fund specific pieces within our invested communication business would provide a unique opportunity for growth.

The first transaction added was Access Data and we are particularly pleased that this model is now being fully leveraged with a household name and leader like Charles Schwab.

I will discuss the details of this transaction in a minute or two.

The Matrix and New River transactions both significantly enhance our opportunities with mutual funds.

We have numerous meaningful proposals going on in Matrix right now.

All of which have been a delight for us to present, because as much as we enjoy making our clients more efficient, we really enjoy helping them generate more revenues, profits and a stronger market position.

The reaction to both our ownership of Matrix and NewRiver has exceeded our expectations.

We remain very confident of achieving or exceeding these business plans.

The other transactions we recently completed, City Networks and Forefield, are both on plan.

We believe all of our acquisitions to date will provide our shareholders with a very good return.

As I just said a minute ago, we recently entered into a agreement with Charles Schwab to expand the sales reporting and data delivery capabilities now offered to Schwab's mutual fund partners.

By providing the industry a centralized data hub, Broadridge Access Data is greatly simplifying and enhancing the exchange of information between manufacturers and intermediaries.

Let's turn to slide 6 to illustrate the Schwab transaction.

Historically, the industry has been challenged by the many to many relationships that exist between intermediaries and funds that all are required to share data with one another.

Before Access Data was part of Broadridge you had the old process, which is to the upper far left side of this chart.

To the right is the new Access Data Broadridge hub.

Our goal is to make it simple for funds and distributors to easily access all of their data by leveraging our unique Investor Communications Solution Data Hub, with data connections to virtually every street fund account.

Prior to its acquisition by Broadridge, Access Data was processing data from Schwab for their mutual fund clients, which was a small subset of Schwab's mutual fund partners.

This old process required that data files be processed individually to each fund.

After the acquisition, we quickly recognize that because of the links Broadridge already had with intermediaries, we could make this process far more efficient for the industry.

On behalf of Charles Schwab, we will now provide the centralized and efficient solution for approximately 600 mutual fund partners.

To get access to selling to 600 fund families directly, we entered into this relationship with Schwab on a revenue neutral basis for the first year and revenue will grow as fund families add new analytical data mining modules.

Of the 12 modules and services that Access Data offers today, Schwab's mutual fund partners will initially be getting only one sales reporting.

If these funds reach the average of 2.5 modules that other Access Data clients use, we expect that would be an additional $8 million to $10 million in annual recurring revenue.

While we see revenue opportunities by providing Schwab's fund partners these additional modules and services, this is not our end-game.

As funds experience the benefits of our centralized industry approach for Schwab, we expect them to have great interest in seeing this approach taken with all of their broker distribution partners.

Due to the Schwab relationship, we will be able to tangibly prove to 600 fund families that for the Schwab piece of their business, Broadridge can provide SAS 70 verified, 12B1 and break-point reviews with extensive market distribution analysis beyond anything they can create internally today at a lower cost and absolute accuracy levels unquestionably better than previously attainable.

This is why we thought Access Data was the perfect transaction for us, because one thing we brought to this party was access to all the data.

We estimate the market for coordinating all data management, including the applications that use this data, is approximately $400 million to $500 million.

Broadridge is a world-class processor sitting on extraordinary content across all of our businesses.

We're now looking to the owners of that content and their needs to make their businesses more efficient.

Additionally, while leveraging the many business and operational capabilities we offer to connect issuers, funds, investors and intermediaries, including shareholder forms, virtual online meetings and investor and advisor mailboxes, all of which should longer term enable our vision of a unique secure investor social network with only validated participants.

Schwab has consistently demonstrated innovative business practices and is the inventor of the mutual fund supermarket.

We have been working with Schwab on crafting this solution since the Access Data acquisition two years ago and Schwab is one of the first to recognize the power and benefit of our centralized industry approach.

We anticipate that you will see our revenue grow from increased application adoption by funds and overall fund BPO activity.

We expect, because we are leveraging our systems and data infrastructure, that this data management work will generate very high incremental margins.

Now I'll turn the call over to Dan, who will go into more detail about the third quarter financial results, as well as our full year guidance.

Dan?

Thanks, Rich.

I'm now on slide 7, revenue growth from growth drivers.

In Q3 we were pleased to see that contributions from sales are starting to pickup and contributed around 3% to overall revenues.

Retention is continuing at 99% and, again, not aware of any potential large losses at this time.

Internal growth from trades per day improved in the quarter and I'll speak more on internal growth when I go through the segment update.

Acquisitions in the last 12 months are tracking at or above expectations.

We are pleased with both sales results and, as Rich mentioned, sales opportunities looking forward.

So recurring revenues contributed 12 percentage points to total revenue growth for the quarter and tracking to 6% to 7% for the year.

On slide 21 in the appendix, we show that this year we are up approximately 15% in recurring revenues, where a third is coming from organic growth and two-thirds from acquisitions.

Our challenge remains with event driven and the related distribution revenues, which as projected remain down year-over-year.

Margins across the business will be down for the year due primarily to the falloff in event driven revenues and the Penson integration.

Acquisitions on a consolidated basis have had minimal impact to margins year-to-date.

And amortization of intangibles related to acquisitions is running at about $4.5 million a quarter and expected to impact full year earnings before taxes by just under $13 million.

I'd also point out that the earnings per share at $0.25 for the quarter was a few cents higher than we expected, but all due to timing.

So it's offset in the fourth quarter, so that's why we said earnings were as expected for this quarter.

Let's move to slide 8, investor communications.

The only thing that has changed here from our February discussion is that distribution revenues and EBIT are down slightly due primarily to postage mix.

Recurring revenues are tracking to prior forecast for sales and above 99% retention rate.

As mentioned earlier, the recent acquisitions are tracking at or slightly above plan for sales, revenues and EBITDA.

Mutual fund interim stock record growth is still strong at 9%, but offset by lower volumes in transaction reporting statements and fulfillment activities.

And at this time it looks like our equity stock record growth will be flat for the year, but that's an improvement from the last two years where it was running slightly negative.

And as for event driven activity, it is tracking to around the $175 million level we discussed last quarter.

We still don't believe there's been a secular change here.

However, we are moving into the summer months and activity is usually very slow.

So we'll get back to you in August, when we discuss our fiscal year '12 plans as to where we think it's headed.

Margins are up 30 basis points for the quarter coming from recurring revenues, but offset by 170 basis points fall off in the event driven activity.

Year-to-date event driven is costing us 560 basis points and full year expected to negatively impacted margins by just over 350 basis points.

So, without the impact of event driven on a full year basis, this business is expected to have between 70 to 120 basis points pickup in margins from our recurring revenue.

Let's move to slide 9, Security Processing Solutions.

Q3 had 15% growth, of which two-thirds came from the Penson and City Networks acquisition.

Sales added another 3 points and are expected to add 3 to 4 points for the year.

Losses have dropped down to a run rate up 2 points versus the 4 point year-to-date, as we hit the anniversary date for the larger losses.

Strong trade volumes in Q3 for both equity and fixed income, but primarily were in January and February, as in March the volumes fell back down to just over 1.6 million a day.

We're hoping to see an end to the ups and downs, but April also came in at just over 1.6 million trades a day.

So high and low end of our range is still dependent on what trade volumes do over the next two months.

Margins, negatively impacted by the acquisition of City Networks and Penson, but as we move into fiscal year '12 we should begin to see improvements as we finish implementation of Penson Phase 2, the additional accretion from City Network and also continue the implementation on other larger deals, especially those larger deals towards the end of the fiscal year next year.

There is record implementation activity across this segment and in slide 21 there is the closed sales to revenue, which will give you a directional view of how our fiscal year '10 and '11 closed sales will contribute to future years revenue.

Moving to slide 10, this is our financial guidance.

We expect total revenue growth of negative 3% to 2%.

And on slide 21 in the appendix you can see that recurring on its own is expected to be up for the year by approximately 15% and event driven on its own down approximately 40%.

Closed sales, as Rich mentioned, $135 million to $180 million, of which recurring between $110 million and $150 million.

Diluted earnings per share of $1.30 to $1.40, with the high and the low end of the range primarily impacted by internal growth from trade and event driven activity in Q4.

Free cash flow in the range of approximately $140 million to $200 million and you'll note from the balance sheet that our short-term borrowing are now at $440 million.

$200 million is related to our term loan, which is now less than 12 months from maturity and therefore long-term debt decreased by the same amount and the other $240 million is primarily related to financing the Matrix acquisition and some working capital in the quarter.

We plan during fiscal year '12 to refinance our revolving credit facility and term loan, which both mature in March of 2012.

We expect this refinancing to increase our annualized interest expense by $12 million to $15 million and also expect to maintain around a 1.8 to 1 debt to EBITDA ratio, which is in line with our goal to remain an investment grade Company.

Rich, I will turn it back to you.

Thanks, Dan.

Please turn to page 11 for my summary wrap up.

Broadridge is staying the course.

Our third quarter fiscal year results were solid, as we anticipated they would be.

Our core recurring revenue is strong and performed as expected.

While I am pleased with the direction of our recurring revenues, event driven revenues remain weak, as expected.

We continue to make very good progress on our three strategic initiatives.

The IBM information technology services agreement, the Penson outsourcing services agreement, and the Morgan Stanley Smith Barney transaction reporting services agreement.

These transactions will have a negative earnings impact on fiscal year 2011 results.

However, we anticipate that they will add value in fiscal years 2012, more in 2013, and beyond.

In addition to our strategic initiatives, we currently have more than 20 implementations going on in our securities processing segment, seven of which are very meaningful.

We expect the seven significant implementations will generate approximately $75 million in high margin recurring revenue.

We continue to have excellent client revenue retention.

Our client revenue retention of 99% has never been higher.

Our year-to-date closed sales results have been solid and more profitable than our closed sales in recent years.

While we anticipate that our full year closed sales results will be slightly lower than in the previous year, I am still very satisfied with our results.

We have significantly increased our acquisition activity during the last 12 months.

All of our acquisitions are performing above or near their original business plans and contributing meaningful revenue.

The sales momentum and pipeline for these acquisitions has become very exciting, as I discussed earlier on slide 5.

One of the key objectives of this call was to help you appreciate the growing momentum that our initiatives and acquisitions are providing us for future growth.

I believe what we have presented today should enable you to recognize that even after we achieve the full benefit of IBM, Penson and the Morgan Stanley Smith Barney strategic initiatives, the best is yet to come.

I believe our future beyond fiscal years 2012 and 2013 is even brighter.

Finally, there have not been any significant changes in the regulatory environment since our last call.

We have not heard anything in the pricing environment that would lead us to anticipate a decline in pricing for Broadridge .

The value we bring to the proxy process continues to significantly exceed the benefit our shareholders receive.

We are currently in the process of planning our first investor day.

We anticipate it incurring on June 22 this year and we look forward to providing additional information on Broadridge's business segments and introducing additional members of our senior management team.

Before I take your questions, I would like to acknowledge the contributions of our Associates.

In the past 12 months we have made four acquisitions, worked on our strategic initiatives and we are in the process of implementing dozens of meaningful transactions.

Our Associates have never worked harder or performed better.

I am confident that we will finish strong in fiscal year 2011 and I'm looking forward to fiscal years 2012, '13 and beyond, when we believe our shareholders and Associates will both receive the respective returns and rewards they deserve.

I'll now turn the call back over to the operator and we welcome your

Jim Kissane with Merrill Lynch.

Rich, is it possible to break out what portion of your closed sales is coming from your recent acquisitions, maybe going back just to Access Data.

And then also give us a sense from the traditional core business, thanks.

I'm going to have Dan start and then I'm going to comment.

Yes.

So on the most recent acquisitions you should be thinking $7 million to $10 million that is in the $110 million to $150 million.

And Access Data, by the way, is anywhere between we will call it, on is own, so I'm just giving you the recent ones and then Access Data on its own could be anywhere between $5 million and $10 million for the year.

Jim, the real thing here is that we expect all of these to be near plan or above plan, as I said in the call.

But the momentum of going out and offering solutions that are so tangibly better than any solutions funds can achieve on their own or in the 401(k) space with Matrix, things that are so much more efficient than the high fee insurance products that are out there, it's really exciting to make these proposals and speak with our existing clients about what I will call just a terrific value proposition.

So we are very, very excited about where we are.

If I can get one last question.

The source of the equity trade volume improvement in January, February, was that skewed towards institutional, retail and what is your sense on that?

So let me address that piece of it for you, Jim.

It was actually a combination of both.

But when it fell off, when we saw it fall back down in the April and March timeframe, it was pretty much falling off across the board, both on the institutional, as well as in the retail.

But when I say fall off just remind you that a year ago we are at about call it 1.5 million plus trades per day.

We are still at 1.6 million, even though it is lower then what I was really liking what I saw in the February timeframe about 1.8 million.

But we're back down to that run rate of about 1.6 million trades per day.

Thank you.

(Operator Instructions) Tien-Tsin Huang with JPMorgan.

As usual thanks for all the disclosure.

I had a couple questions on the EPS.

It sounds like the revenue was in line, but I am curious how the second half is shaping up relative to what you thought at this point in the quarter.

Dan, I think last quarter you said something like midpoint second half addition EPS would be $0.11.

This quarter was up $0.03.

So are things tracking pretty much as planned from the earnings perspective?

Yes.

So $0.10 -- let me help you with that piece of it.

I had mentioned in my talk track that said we were a few cents higher this quarter, that also met revenue and EBIT was higher.

But it was all timing because we had a couple of proxy jobs, equity proxy jobs that came in earlier in the quarter.

But you are correct, I am letting you know that it is as we are tracking to that what we'll call mid-point you would say the guidance, but you know what, it is heavily dependent upon how the remainder of the year happens for event driven and very specifically to where the trade is going to stay down at 1.6 million trades per day or are they going to jump back up to 1.7 million to 1.8 million.

Right, no, that was very clear.

And then I guess the SPS implementations, I wrote down you said, I think, seven large conversions.

I'm curious are those competitive takeaways or in-house conversions and also from a modeling standpoint trying to understand when the [Av-get] revenue will start coming in and will cross over the implementation cost and we start seeing some of that incremental, high incremental margin come through.

Do you follow my question?

Yes.

So I am going to answer it in the 2 pieces.

In terms of the marketplace wins, it's both in-house and competitive wins.

So we are very pleased with the performance there.

We think it's directly tied to the strong value proposition.

And in particularly the fact that Broadridge uniquely is able to offer on one platform both domestic or US or North American and international capabilities with all the multi-currency capabilities that go along with that.

And as the world continues to shrink, we find this to be a very compelling value proposition and we're not aware of anyone else in the marketplace offering that.

As the revenue comes in it is the conversion cycle for these transactions.

So, we can see some revenue come in pretty quickly on some of the smaller pieces, but generally should be thinking it's 12 plus months for us to see the bulk of it and it can even get to 18 months.

Yes, Rich.

I would just add to that.

For instance, when we talk about the $22 million very large account that we got that with in house, that is absolutely an 18 month to 24 month, even though, as Rich just mentioned, we might see a few million dollars in the early stages.

Really be thinking that we are not going to see a lot of that until the end of the fourth quarter fiscal year '12 moving into '13.

And that's why, Tien-Tsin, on that slide we show in the appendix, it is going to be very important that you guys are able to focus.

You know how we always show you the sales for this year, the sales for the prior year and, by the way, how they will fall into revenue over the next 3 plus years.

So the way to think about it is a lot of those larger deals will hit us very late in the '12, in fiscal year '12, and mainly in '13 and going into '14.

Tien-Tsin, I want to make one additional comment, though, because I am really pleased that you raise this.

One of my key objectives in this call was to see the momentum across Broadridge overall, but in particular the momentum in our Securities Processing segment.

The wins and the number of wins there, I believe are very impressive and certainly stronger than anything we've had in our history.

Sounds good and appreciate the details.

Peter Heckmann with Avondale Partners.

Tell us what the dollar value of the acquired revenue was in the period.

So it was for the third quarter it was $35 million.

That's great.

And then last quarter you talked about potentially taking a charge, I did not see any of that in this quarter.

Is that correct and then do we still expect it in the fiscal fourth?

Right.

So you would've seen about, call it, $3 million to $4 million.

If you went to the SG&A you would have already seen where that had spiked up.

Okay, so, that was a little bit of it and the primary, the rest of it, comes in the fourth quarter.

Then could you update us on the timing of the Penson rollout as we go throughout calendar 2011 and how does the pipeline look for additional BPO deals?

So the first piece was Penson .

We continue to make good progress with Penson.

The Canadian piece is completed.

The US piece will be just after the fourth quarter, the very beginning of the fourth quarter into the fourth quarter.

And we expect that to stay relatively on schedule.

In terms of the pipeline for other transactions, the fact that we have a number of deals we closed and certainly the number of deals we recently closed, one of the benefits in being able to close these deals is we really can offer the client it any way they want it .

So you can do an outsourcing or a BPO of the system and the people for everything .

You can do the system and the people for global, but only do the system for domestic, et cetera.

So we find that flexibility has really enabled us to go out there and offer a far more compelling value proposition.

We expect that to be the case going forward.

So we are very pleased, particularly with the scale that Penson brought us, that we -- after the Penson transaction is closed and beyond breakeven in terms of being able to offer both our traditional ASP and now BPO outsourcing capabilities across the

All right, thank you very much.

(Operator Instructions).

Stefan Mykytiuk with Pike Place Capital.

A couple of questions.

I guess, first off when I am looking at slide 15.

The EPS benefit that you have coming back in fiscal '12 and '13 there.

Is that -- is the runoff of the expenses related to the implementation?

It doesn't include the $75 million of revenues that you are going to pick up as you go into fiscal '13?

Is that correct?

It is absolutely correct.

The way to look at it, Stefan, is if I brought you back up to the recurring line, see that at the very top where is shows sales, that's where that revenue would fall in into the years of '12, '13 and into '14.

And Stefan, again that was a key point that we wanted to make in this call.

Right, right, that's why I'm asking it, because this is just the expense is running off, but we're not showing -- you are not showing here that you're picking up that revenue at good margins?

No.

The other thing, when does -- I guess, going to the Schwab deal via Access Data.

Rich, you are saying it's -- I think you said could be potentially $7 million to $10 million or something in revenues, but now you're going to go try sell a similar solution to other intermediaries, is that the takeaway?

Let me clarify it.

So, Access Data's fund clients today that have approached them to better analyze the transactions on the street side on average buy 2.5 of the modules that of the 12 modules that Access Data has.

As part of the Schwab transaction and Schwab's relationship with their fund partners, they will all be getting the sales reporting module as part of this transaction.

That is revenue neutral, what I just described.

If these fund partners say, wow, you mean we can get all this other analytical data, well, everything they get beyond that is on a buy it as you go module.

By the way, and they can go live almost immediately with that.

If they reach the average of 2.5 modules, that would be an additional $8 million to $10 million.

Right?

What I said, though, was that's not our end game, because the funds have these significant responsibilities with their brokerage distribution partners.

And this is something that we can do very, very cost effectively.

All these funds are running a pretty expensive internal operation, but the problem is they don't have all the data links we have and they don't have the ability to draw down the data on the same basis we do.

So we can offer them for their overall fund responsibilities the ability to outsource or significantly enhance the internal units they have today.

We can make their 12B1 and their break point calculations independently verified with a SAS 70 Level II capability.

And so between the modules and that piece which we think is the more meaningful piece, which is the part that the funds are required to do right now, we think that is overall a $400 million to $500 million marketplace.

And we are not aware of anyone who has the product we have or the ability to execute the way we have it.

I think, did you say somewhere -- I think you said that you are adding sales people to try to attack that opportunity then?

It was across the, a combination of the acquisitions overall, including that product set as well.

We think the opportunity -- the opportunity is in Matrix.

We have not had one conversation I am aware of with any meaningful broker-dealer where there wasn't interest and serious interest in the next conversation.

In City Networks we've added resources as well.

And in Access Data we had added resources previously, which had led to the Schwab activity.

I guess last question two things on free cash flow.

Did you lower the CapEx guidance a little bit?

It looks like free cash flow guidance went up both ends of the range went up about $10 million, did I get that right?

Yes, you did.

Less capital and part of it is also related to the what we will call IBM deal.

But primarily internal.

And is that a timing issue or is it just a -- in other words is something getting pushed into fiscal '12 or is it just less spent?

The way to think about it is get pushed in '12.

The way I would like everybody still to think about our CapEx has been pretty standard.

Unless we give you like a deal like IBM like we did here, you should be thinking in the 2% to 2.5% of revenue every single year.

Okay?

Okay.

Lastly, Dan, what were the shares outstanding after the -- like the 128, the shares outstanding didn't really go down much on an average basis for the quarter, is the ending a little bit lower because of the buyback during the quarter?

Yes.

So let me put it into perspective for you.

When you look at the balance sheet you will see outstanding shares at 122 million.

And by the way, to think about that is always in our fourth quarter we have the vesting of our restricted stock units, so add on another, call it, 1.5 million and then we always have options that are exercised.

And then we also have the dilution aspect of about 4 million shares and you put it all together you still end up at about 128 million.

So there was some more that came through options during the quarter that is effecting the share count.

That will come through in the fourth quarter.

I think it is important for everyone -- everybody understand that in our fourth quarter we always have the vesting of our restricted shares and that's about, call it, 1.3 million to 1.5 million shares.

Thanks very much.

Stefan, I wanted to come back to a point you raised and that's bringing everybody back to slide 15, the financial guidance.

We purposely, as you will all see there, we kind of really only talk about our key initiative and then the restructuring, because that we have pretty much set.

We've been out there, we've communicated it to everyone.

But again, as we go forward on our June 22 Investor Day, I am encouraging everyone to attend that, because we are going to go and talk about what our next, call it, three to four years forward-looking looks like from a strategic standpoint, as well as putting some numbers around that.

So won't we just wait till our guidance in August to talking about '12.

I think is very important, actually hugely important, that people are able to come there.

Besides just hearing and visiting and meeting some of our new management, it is absolute going to be sharing with you where we are driving the business over the next few years.

Peter Heckmann with Avondale Partners.

This is a follow-up on the debt levels.

Did you say that with the refinance you are looking at additional interest expense.

I assume that means in anticipation of carrying a higher level debt as well?

Yes, that's the right way to look at it.

You should looking at that -- if I said, which we did, a 1.8 to 1, that's EBITDA ratio, that we would be holding on to about $400 million plus for that term piece and then, of course, we have the $125 million that is currently out there in the form of a bond.

Okay, that's fair.

The way to also think about that is we are not going to, of course, do everything, at least we don't believe we're going to do everything, effective let's call it July 1, so I gave you an annualized number and the way you should think about that is at least half of that interest I gave you of 12 to 15 will hit us in fiscal year '12 and the other half in fiscal year '13.

All right, any thoughts that you could share at this point with Computer Shares' announced intention to acquire the stock transfer agency business of Mellon?

I still believe our opportunity in the TA space to leverage the about 2000 registered clients we have and gain market share with what I think is a descriptive model remains a very attractive opportunity for us.

We are still in the process of adding the code required to handle higher scale and larger equity issuers on our platform.

The great thing is, is that our SPS segment already does more transfers than any transfer agent does today.

And by adding the registered functionality to that platform, it's a relatively modest build, view it $8 million to $10 million.

And with that we are going to have a full-blown system capability of scale beyond what I think anyone in the industry will have.

Plus combining that with our street processes, we think we will be a very attractive value proposition for future growth.

That is something that you will hear more about at our investor day, when Bob Schifellite, the President of that business unit, will be covering the exciting opportunities he has, including our TA opportunity.

Okay, thank you.

David Togut with Evercore Partners

David, good morning.

I think we may have a technical difficulty, here.

If the operator could come back on?

Yes, he is here, he is about to press star one again.

Can you hear me now, Rich?

Yes, David, good morning.

With your announcement with Schwab, you seem to be increasing your focus on mutual funds and their broker dealers, do you expect any competitive response from either DST or PNC Global Services recognizing that you are serving a different market niche?

What we are focusing on here, David, is the street side.

And so for example, PNC, which is now part of BNY Mellon, has the surpassed product, which is a very strong product and we actually on behalf of our clients utilize that product.

This really ties to Broadridge's unique position of connecting all street participants and making the street distribution channel for funds through the broker-dealer network, which is now the largest piece of fund positions and certainly the fastest growing piece.

I believe it is about 85% of all new dollars go through the street channel.

So I don't really view this as being a toe to toe competitive play with those parties, I think it is clearly us leveraging our unique position of connecting virtually every broker-dealer in the process today and doing that to the advantage of funds for both their compliant and their analytical needs.

I see.

Going forward do you expect capital allocation to remain as heavily weighted towards share repurchase, if the stock remains at its current price?

So let me take a step back here.

Up to date I am very pleased with our stewardship of our shareholders cash.

We absolutely recognize that this cash needs to be used to create shareholder value.

So, our confidence in our future has been there from day one and that is why we established the dividend.

And that is why we doubled the dividend, I guess we are getting close to two years now.

We said that our primary desire would be to create value and if we could find things that could meet, a tuck-ins that could meet our high hurdle rate, we would absolutely look to do that and I have told you before that hurdle rate internally is a 20% IRR.

When we did the Penson transaction, it was clear with the type of work we would be doing to make sense out of all of our assets, that as part of the transaction and recognizing that there would be some short-term blips related to that transaction, we stated up front that we would look to reduce the share count.

Okay?

And use the cash freed up from that transaction to the benefit of our shareholders.

All of those -- and I said we would only do that if we believe we were buying back shares opportunistically.

I feel very good about all the prices that we paid given how strong and bright our future is.

So, to date I feel very, very good about that cash at usage.

As we go forward, it is going to remain exactly the same.

We are confident in our cash flow, we expect to pay a dividend, and over time we expect that dividend to increase.

We absolutely are looking for strategic tuck-ins with our high hurdle rate, there's not a lot out there.

Okay?

We did have a run with things like Matrix in particular.

But we really do believe that was somewhat unique and as I said when we bought Matrix, it wasn't that this year we said we would do a larger tuck-in.

It took us four years to find a tuck-in of that quality.

And we will look to use cash to create returns and the third piece of the third leg of that stool is if there weren't the opportunities out there to do strategic tuck-ins that we believe would generate higher returns, okay?

We would always be looking to buyback opportunistically if we had the cash on hand to do it.

But we are going to always look at it with those three points of view, in the order I just gave you.

Thank you Very much.

I'm showing we have no further questions at this time.

I will turn the call back over to Mr.

Daly.

Well, we certainly want to thank all of you who participated today.

We certainly hope that all of you and a lot more will come visit us in New York on June 22 for our investor day.

I really do feel particularly good about today's call, because we have spent so much time talking about the three initiatives.

But all of us here believe that beyond those initiatives, which we are all very proud of, the momentum we are building and the opportunities we have in the future are even greater.

With that Dan, Rick and I look forward to meeting with you in the future and we are certainly going to choose to have a great day, we hope you do too.

Thanks.

This concludes today's Broadridge Financial Solutions, Inc.

Third Quarter Fiscal Year 2011 Earnings Conference Call.

Thank you for your participation, you may now disconnect.