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Broadridge Financial Solutions (NYSE:BR)

Q3 2012 Earnings Call

May 08, 2012 8:30 am ET

Executives

Richard G. Rodick - Former Vice President of Investor Relations and Treasurer

Richard J. Daly - Chief Executive Officer and Director

Dan Sheldon - Chief Financial Officer, Principal Accounting Officer and Vice President

Analysts

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Rayna Kumar - Evercore Partners Inc., Research Division

James F. Kissane - Crédit Suisse AG, Research Division

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Operator

Good morning. My name is Marcus, and I'll be your conference facilitator. At this time, I'd like to welcome everyone to the Broadridge Financial Solutions Third Quarter Fiscal Year 2012 Earnings Conference Call. I would like to inform you that the call is being recorded. [Operator Instructions]

I would now like to turn the conference over to Rick Rodick, Vice President of Investor Relations. Please go ahead, sir.

Richard G. Rodick

Thank you. Good morning, everyone, and welcome to the Broadridge Quarterly Earnings Call and Webcast for the Third Quarter of Fiscal Year 2012. This morning, I'm 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 an opportunity to read the earnings release we issued this morning. That news release and slide presentation that accompanies today's earnings call and webcast can be found on Investor Relations homepage of our website at broadridge.com.

During today's conference call, we'll discuss some forward-looking statements regarding Broadridge that involve risks. These risks are summarized here on Slide #1, and we encourage participants to refer to our SEC filings, including our annual report on Form 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 we closed in the fourth quarter of fiscal year 2010, the Clearing business is now showed as discontinued operations and our remaining Outsourcing business is now part of the Security Processing Solutions segment. Also as a result of the reporting treatment of the Penson transaction, the financial results discussed today will address continuing operations unless otherwise stated.

Our non-GAAP results exclude the impact of the Penson impairment charges and IBM migration costs. These one-time costs are significant, and we believe the non-GAAP information provides a better representation of our actual performance.

Now let's turn to Slide #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 highlights for the third quarter of fiscal year 2012, followed by a discussion of a few key topics. Dan Sheldon will then review the third quarter of fiscal year 2012 financial results in further detail. Rich will then return and provide his overall summary and some closing thoughts before we head into the question-and-answering part of the call.

Now please turn to Slide #3, and I'll turn the call over to Rich Daly. Rich?

Richard J. Daly

Thanks, Rick. Good morning, everyone. This morning, as part of my opening remarks, I'll talk about the following topics: first, I'll start with an overview of our third quarter fiscal year 2012 financial highlights and guidance; then I'll discuss our closed sales performance. After Dan provides you more of the financial details, I'll wrap it up, as usual, with my closing comments.

Let's start on Slide 4, our third quarter fiscal year 2012 financial highlights. Overall, I'm satisfied with our third quarter financial results. While total revenues were up 4% for the quarter versus fiscal year 2011, recurring revenues were up 9%. The recurring revenue increase was a result of net new business, internal growth and acquisitions. Approximately 50% of the growth was organic and 50% was related to our recent acquisitions. Client revenue retention remained very strong at 99%. However, event-driven revenues declined slightly. Year-to-date revenues were up 8%, while recurring revenues were up 13%. The year-to-date revenue growth was attributable to the same factors that impacted the quarter.

I am pleased with our non-GAAP diluted earnings per share results. They were up 12% to $0.28 per share for the third quarter and 25% to $0.55 per share year-to-date as compared to the comparable periods in fiscal year 2011. This increase was driven primarily by the higher revenues and our focus on cost containment.

In the first quarter, we completed the balance of the Penson conversion such that 100% of Penson's accounts are now fully processing on our platform. Annual revenues under the original terms of the outsourcing services agreement are approximately $50 million.

The low interest rate environment continues to be a financial challenge to clearing firms. Penson announced on March 13, 2012, that it had entered into a Restructuring Support Agreement, or RSA, with Broadridge and several other debt holders. The RSA provides for proposed transactions related to the restructuring of Penson's debt, including the selling note held by Broadridge. Specifically, the RSA provides that Penson will launch an exchange offer by May 14, pursuant to which it will offer to exchange our seller note for newly issued shares of Penson. Careful analysis of this situation led to Broadridge recording a $21 million impairment charge in our other segment and other expenses in the consolidated statements of earnings at March 31, 2012. We will continue to monitor all of Penson's restructuring efforts with great interest.

While I'm disappointed that we had to record an impairment charge, Penson has fully converted onto our platform, which adds Penson to the long list of clients with the scope of responsibilities, including the protection of customer assets is dependent on the ongoing processing of books and records by Broadridge. We are reaffirming our non-GAAP full year earnings per share guidance of $1.50 to $1.60. Our revenue guidance is now 7% to 8% growth, down slightly from last quarter, primarily due to lower distribution and event-driven revenues. We have been able to offset the earnings related to the revenue shortfall with cost management.

Now let's turn to Slide 5. I am pleased with our recurring revenue closed sales results. We believe recurring revenue closed sales is our most important sales metric to monitor, as it is a good indicator of future revenue growth. In addition, we anticipate that approximately 50% of our full year revenue growth will be generated by closed sales. Year-to-date recurring revenue closed sales of $79 million increased 10% versus $72 million for the first 9 months of fiscal year 2011.

Our Investor Communications segment continues to have very strong recurring revenue closed sales this fiscal year. Year-to-date sales of $44 million were up more than 50% as compared with the first 9 months of fiscal year 2011.

Our sales results have also been solid in our SPS segment. Year-to-date recurring revenue closed sales were $35 million. And although they were down from fiscal year 2011, last year's closed sales included a very large $20 million strategic sale. Even though excluding that large transaction, SPS recurring revenue closed sales were up. We would prefer both traditional recurring revenue deals and large deals to be up year-over-year.

I'm also very pleased with our sales pipeline. Our sales pipeline is across all of our businesses and is strong and growing. To be in our pipeline, there needs to be a meeting with the client and a level of interest. There can be a long way between being in the pipeline and closing the deal. However, we have more opportunity today than we've ever had. We have a lot of products in the pipeline, and some have the potential to become hot products, as I like to call them.

The overall breadth of our product activity includes data management capabilities through Access Data, asset growth through Matrix, digital communications through Volly, growing issuer services, expanding buy-side activities through Paladyne and reengineering the back office with our outsourcing capabilities. All of this provides us with multiple paths to strong incremental sales which will lead to solid revenue growth. We have worked very hard to get ourselves positioned with products to enable growth every year. Therefore, we are reaffirming our full year recurring revenue closed sales guidance of $110 million to $150 million.

Now I'll turn the call over to Dan, who will go into more detail about the third quarter's financial results. Dan?

Dan Sheldon

Thanks, Rich. I'm on Slide 6, the revenue growth drivers, EBIT and free cash flow. I'll be focused on the 3 columns to the right side of the page. As Rich already mentioned, we have revenue growth of 4% and 8% for the quarter and year-to-date, respectively, and we're expecting 7% to 8% for the year. Focusing on the individual drivers as we move into the final quarter of this fiscal year, the recurring closed sales will contribute approximately 4% to consolidated revenues this year. We also expect, as Rich mentioned just now, $110 million to $150 million in closed sales this year. In order to achieve the high end of the range, we'll need to have some of the larger deals we're working on closed in the fourth quarter. Our client losses have been running at approximately 1% for the year, or more appropriately, we're running at a 99% retention rate.

Our internal growth, which comes primarily from stock record positions and trade volume, contributed 1% for the quarter and are expected to contribute approximately 1% for the year. We were pleased that stock record positions for mutual funds were still growing in the high mid-single digits, and we are also expecting equity stock record growth to be positive this year.

Trade volumes continued to be the challenge at least in Q3, although year-to-date, equity trade volumes are flat to last year. For Q3, we're down approximately 11%, primarily driven by lower international trading activity. Fixed income volumes were up slightly for the quarter but not at the double-digit levels we had previously seen.

In April, equity trade volumes were down 9%; and for the first few days in May, about flat to last year. So when you look at it, the guidance we're giving for the SPS segment at the low end would be that we continue to see some deterioration in trade volumes and at the high end, at least, may see some kind of recovery.

With respect to acquisitions this year, we will contribute 3 points of growth, and as discussed last quarter, have been successfully integrated into the business.

So recurring revenue drivers are expected to contribute approximately 7% to consolidated revenue growth for the year. As Rich mentioned, event-driven fee revenues are not rebounding at this point. However, at least in Q3, we were up from Q2, and we expect Q3 levels of approximately $35 million to continue into Q4.

Distribution revenues expected to have little positive impact to the consolidated revenues for this year, and that's primarily driven by the lower event-driven. So we're pleased with sales, our retention and acquisition contribution, as well as some of our cost-saving measures, as they are all driving the expected full year EBIT growth from last year's 13.1% to at least 13.6%.

The last bullet on the page shows free cash flow between $136 million and $188 million. And without the one-time impact of the IBM and Penson activity, the range would approximate $230 million to $280 million in free cash flow.

Let's move to Slide 7, the Penson impairment analysis. Over the last 9 months, we've taken approximately $32 million in noncash P&L charges related to Penson. The $11 million charge year-to-date are an investment in Penson stock relates to the eroded value of the stock price, which we believe is other than temporary, as we've discussed before. The $22 million charge related to the note receivable relates to assumptions we've made related to the Restructuring Support Agreement Rich discussed earlier.

There remains $47 million in deferred client conversion costs on our balance sheet that represents cash already deployed for expenditures related to converting the Penson business in the U.S. and Canada which we capitalized. In reviewing these assets for impairment, we considered our terms and conditions of the Penson outsourcing agreement, the significant regulatory capital and the broker-dealer as of December to operate that business during the restructuring activity, the payment status to Broadridge from Penson, and in addition, we go through a weighted average calculation of cash flows related to the $50 million, our revenue.

Our conclusion is that these assets are not impaired at this time, and we'll continue to monitor these assets for impairment in future periods, as we have in the past related to Penson. Our Q, which will be filed shortly, has disclosures on what I've just reviewed above in Note 7 and 8. And the next 2 slides and the appendix material address this segment and other materials some of you have asked for. But in the interest of time, I'm not going to review them during this call.

Rich, I'll turn it back to you.

Richard J. Daly

Okay. Thanks, Dan. Please turn to Page 10, as usual, for my summary wrap up.

I'm satisfied with our operating results for the 9 months of fiscal year 2012. Recurring revenues were up 13%, and total revenues were up 8% as a result of strong recurring revenues, driven by net new business, internal growth, acquisitions and excellent client retention. However, event-driven revenues have fallen to a new historic low.

Our non-GAAP earnings per share were up 25% versus the first 9 months of fiscal year 2011 through our strong recurring revenue growth and cost containment. Non-GAAP earnings were up $14 million year-to-date, and our non-GAAP earnings per share were up $0.11 to $0.55.

We are on target this year for our sales guidance, and we anticipate achieving this without closing a large $10 million-or-greater deal. As I said earlier, we are really pleased with our sales pipeline. We have more product and more potential right now than we've ever had. We have a sales plan that gives us multiple ways to succeed and multiple paths to take because of expanding product. It's almost like Broadridge's version of a money ball approach, where a contribution from many ordinary sources can yield strong results without a reliance on a home run-type source.

The business that was spun off 5 years ago is very different from our business today. In the past, we would generally rely on stock record growth and trade growth. But today, the driver that has enabled us to perform through the market downturn has primary been product and a lot more of them. Therefore we maintain our confidence in the future, but it's not because we are banking on stock record growth and trade growth returning. It's all about new and enhanced products, increasing brand strength and Broadridge's ability to sell and execute to the new needs of our marketplace.

There is more upside than downside in trades, positions and event-driven revenues in the long term. In the near term, could those things go down? Sure. But given how long this difficult market has been, it doesn't seem likely that it could get much worse without another severe market issue. Everything you were hearing about our future and revenue earnings growth opportunity is tied to our expanding product breadth.

Now the IBM data center migration continues to progress as planned, and we anticipate the conversion will be substantially completed by the end of our fiscal year.

We have solid activity integrating our acquisitions. We anticipate they will contribute meaningful revenue and earnings to our fiscal year 2012 and 2013 results. As previously stated, for fiscal year 2012, we expect our acquisitions to generate over $200 million in revenue and approximately $40 million in EBITDA. Because of our strong culture and highly engaged associates, Broadridge's brand and reputation of being a world class service processor appropriately continues to grow. Recent studies indicate that 89% of the decision makers of our services are aware of Broadridge and 71% would consider buying. Once a sale is closed, once an acquisition is complete, once an initiative is committed to, the Broadridge machine executes extraordinarily well. That success and corresponding brand is a critical component of our confidence in fiscal year 2013 and beyond.

While we have cost containment, let me emphasize that we are surgically managing this process with an unconditional commitment to continuing to invest in the business to increase product and growth opportunities.

Our full year revenue guidance for this year is 7% to 8% growth, and we are reaffirming our full year non-GAAP diluted earnings per share guidance of $1.50 to $1.60 per share.

I'm satisfied about how we are ending fiscal year 2012. As Dan and I have discussed, our recurring revenues continue to grow due to a high client revenue retention, strong sales and acquisitions. Our ability to provide guidance in August of $1.80 earnings per share for fiscal year 2013 remains contingent on continuing to experience 99% client revenue retention and strong sales. And although we have not seen an improvement in event-driven revenues, if they were to return to historical levels, that would be worth an additional $0.20 in earnings per share.

Nothing would be possible without our engaged associates. The investment we're making in the business, the commitment to product, the benefits to our clients, which is being executed whether it be through integration or implementation via highly engaged associates, will ultimately lead to the greatest value-creation opportunities for our shareholders in fiscal year 2012 and beyond.

I'll now turn the call over to Marcus, the operator, and as always, we welcome your questions.

Question-and-Answer Session

Operator

[Operator Instructions] We have a question from the line of Chris Donat.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

My question has -- I guess, there might be really 2 parts to it. On the Securities Processing side, just on the first, as we consider the environment we're in, it seems like a lot of brokers and exchanges are concerned about the volume activity we have out there now. And I'm wondering if that affects the conversations you have with potential outsourcing clients either to accelerate their decision-making process and get some of those costs off their books, or does it slow it down as they're not just dealing with what's looking like a lackluster trading environment, but also continued uncertainty about some regulations. Anyhow, just wondering if there's any change in the pace to your conversations with potential outsourcers.

Richard J. Daly

Sure. I talked about the pipeline. I talked about in a number of things that I'm particularly excited about to be on the issuer side, communication side, et cetera, et cetera, I won't repeat all that, but it's certainly the reengineering at the back office with our outsourcing capabilities. There are more people in dialogues, willing to have dialogues, willing to consider alternatives than ever before. I would guess that volumes, although no one has specifically that I can recall in the conversation I've been in, related their interest to that alone. But I would say that would be one of the factors that certainly has influence.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then...

Richard J. Daly

Part 2.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Yes, part 2 is getting to Penson specifically. I just want to make sure I got some of this right. So it's annual roughly $50 million of revenue from Penson, and I know that Penson has been selling off parts of their business, and I think the Canadian business is up. Do you have a split of what's U.S. and Canadian from Penson, and then if there's anything like a change of control provision or something like that, if in the Canadian operation, if that were to be sold by Penson?

Dan Sheldon

Yes, Chris. It's Dan. So the way to be thinking about it, U.S. and Canada is approximately $13 million to $15 million in Canada, and the rest is made up of the United States. Rich, do you want to handle the second piece of that question?

Richard J. Daly

Sure. The -- Penson is completely on our platform. And so regardless of what would happen with that business, there is 2 aspects: one, our desire would be to continue processing for the long term. The short term in a transaction like that is normally measured in year or years, not months, and certainly not days, all right? And we have the relationship with Penson, recognizes that there are different parts of the business, and our contractual commitments tie to the different parts of the business. So if for some reason, someone -- if they were to sell that business, someone wants them to assume our contract, we went into a new relationship, there would be obligations from Penson that we will pursue.

Operator

Your next question comes from the line of Rayna Kumar.

Rayna Kumar - Evercore Partners Inc., Research Division

I'm calling in for David Togut. Can you please quantify any unit prices -- pricing changes ever made in SPS and IPS during the quarter and maybe break it down between equity and fixed income processing?

Dan Sheldon

On the unit pricing, I'm not quite sure I understand the question. Are you talking about -- obviously, you're not talking about trade volumes, or you are talking about trade volumes?

Rayna Kumar - Evercore Partners Inc., Research Division

I'm talking if there was any, say -- I'm asking if there's any -- if there are any pricing changes made during the quarter.

Richard J. Daly

There is nothing of any material nature that we're aware of, and I would suspect there was very little, if any change is made.

Dan Sheldon

Yes, just to bring you up to speed, which was if you go to the key statistics page, where we talked about where we are year-to-date, there's about the 2% kind of that concession rate that we already planned for, and we've been running slightly better than even that. So...

Rayna Kumar - Evercore Partners Inc., Research Division

Okay. And if you could just comment on how Matrix and Paladyne had performed relative to your acquisition pro forma?

Richard J. Daly

Sure. Matrix, which was our largest transaction ever, we are very pleased with the pipeline of activity related to that. We have broadened significantly better access to the buy side -- I'm sorry, we have broadened significantly better access to the sell side than they had on their own. There is some discussions with the sell-side product opportunity beyond what Matrix was originally considering and pursuing. On top of that, this low-return market and fee disclosure requirements really make Matrix's low-cost model extraordinarily attractive for anyone considering that need. You combine that with fee disclosure and fiduciary responsibilities to achieve better returns, we believe there are a lot of products out there and K solutions out there right now that are going to be under strong pressure to find a lower-cost, more-complete open architecture processor like Matrix. Paladyne, we are pleased with the way the integration process is going. We are excited that we retained the senior management. We have aligned it with the senior management going forward, and we are actively aligning the prior sales opportunities they have and seeing if there's any way we can help with that and also expanding them because of the stronger brand and credibility we have on both the sell side and buy side. So we're pleased with those acquisitions and generally with every acquisition of any size.

Rayna Kumar - Evercore Partners Inc., Research Division

Great. And lastly, could you just tell us your profit expectations in 2013 for IBM, Penson and MSSB contracts?

Dan Sheldon

Yes. So the way we had discussed before and nothing has changed as IBM should be worth $15 million to us; Morgan Stanley Smith Barney, approximately $6 million to us, incrementally.

Rayna Kumar - Evercore Partners Inc., Research Division

And Penson?

Dan Sheldon

And Penson really is about -- I’ll call it $3 million to $4 million because majority of the Penson pickup was this year.

Richard J. Daly

And -- but as I said in the call, we're watching the restructuring efforts with great interest.

Operator

Your next question comes from the line of Jim Kissane.

James F. Kissane - Crédit Suisse AG, Research Division

What -- Richard, again, what push on the equity trades process today are now in the fixed price contracts or non-transaction-based pricing?

Dan Sheldon

Yes. So Jim, approximately 60% are under what we call fixed. Okay, if they're talking -- if we're talking about trade volumes or what we call the other things, like we have other products that we're selling out there, so it's 60% of all our revenue from that business comes from some form of monthly fee, okay, or a what we call step function, whereby you'd have to get up to like 20% kind of volume growth to get any uptick. So the remaining 40% is still trade volume growth.

Richard J. Daly

And Jim, you’ve followed us for a long time, so you know that we have stabilized this revenue as it relates to market activity, pretty dramatically from where we historically were.

Dan Sheldon

Yes, so for instance, by the way, this last quarter, when we're talking about 11% drop in trade volumes, we used to be talking about significant dollars bode to out our bottom line, either positively or negatively. Today we're talking about approximately $3 million the $4 million.

Richard J. Daly

That's the whole point, Jim.

James F. Kissane - Crédit Suisse AG, Research Division

Yes, exactly. So where do you see it going? I mean, is there going to be a continued shift? Will that be 70% a year from now?

Dan Sheldon

I expect there'll be a shift for 2 reasons. One is as you can see from the acquisitions and our new products are primarily based upon some kind of variable other than trade or a monthly fee, and that will be the primary driver versus just changes in contracts.

James F. Kissane - Crédit Suisse AG, Research Division

Okay. And Rich, just a clarification, you said 50% of the growth in recurring revenue was from acquisitions. My sense is that's all of your recent acquisitions, right, as opposed to just Paladyne. Maybe you can break out the Paladyne.

Richard J. Daly

Oh, absolutely. That's the all of the acquisitions recently completed.

Dan Sheldon

Yes. Jim, let me help you. If you'd look at the overall growth for year-to-date of 8%, okay, and you take the recurring piece alone, that's grown at about 13%. And it's 50/50 when we talk about what we say is going to be acquisitions versus what we'll call core in acquisition, meaning the acquisition number we're giving to you, which is half the revenue growth, is coming from what I'll call purchased revenue. The other half...

James F. Kissane - Crédit Suisse AG, Research Division

Over a pair of years.

Dan Sheldon

Yes, okay, the other half is coming from a combination of what we call core -- our core business, as well as what the acquisitions are contributing as far as new sales.

James F. Kissane - Crédit Suisse AG, Research Division

Got you, and that's helpful. And then, Rich, based on your discussions with the mutual funds, when do they expect some more normalized event-driven activity? When -- is it over the next couple of years or is there -- at what point do you think there's something structurally changed here?

Richard J. Daly

Jim, I, as you know, spend a lot of time with clients, including mutual funds clients. They have a high level of frustration at the current economic environment. They recognize that they have needs that they're going to have to address in the future. But until they have either a black-and-white regulatory requirement to meet, they're going to look to defer those needs until they get some benefit from the current economic environment or some change and improvement in the current economic environment. That's pretty much the status quo. Now the reality is as time marches on, those black-and-white regulatory reasons that they would go-to market continue to evolve and become more fixed and more definite.

Operator

Your next question comes from the line of Tien-Tsin Huang.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Just a follow-up to Jim's question there. I'm curious with the event-driven fee still being needed here and in the low, is that causing you to second guess the whole cycle of growth versus secular debate? And it sounds like there's some chance that you maybe get more creative on pricing.

Richard J. Daly

Tien-Tsin, the dialogue that we had in the past, I'm not going to repeat it all, but in the last call, I believe it was, I went into pretty significant detail. That when we look at all of the changes, for example, Massachusetts incorporated funds, reincorporating to Delaware, we took the range of 21% to 24% of positions that should go to market, and we drove that down to 16% to 19% going forward. Being that we're at 10% or less right now, all right, it's not changing the view that we expressed in the last call. Now one of the things that our team here continues to point out is that 2 years ago, when it was event-driven that really offset all of the other weaknesses in the business, right, I'm going back to fiscal '10, we had over 50% of the positions. So one could say that back then, a number of funds also went out and cleaned up their needs for a while. So we're going to remain -- I can't see anything that we're aware of, and we spent a lot of time internally and with quality groups like BCG studying this. We expect over Broadridge's future, event-driven has more upside than downside. But one of the things that we have done is we've -- and part of the cost-containment activities I've talked about, we've absolutely made plans to move some of the functions that used to be on a stand-alone basis and incorporate them into other operations that we have to make the situation less of a concern from a ongoing cost basis.

Dan Sheldon

So -- and since that I know you've asked these questions before, as well as even leading back from what Jim was been talking about, what we've talked about is, is that, you know what, we used to have a very nice kind of steady state of 20% to 25% of all positions. That was nice because you only have a variable of about 5 points between the high and the low. What we're saying though now is, as this has been building up, is that as we've talked about, it could come back much more erratic. And that's the whole reason everything we've been sharing, including when we've talked about $1.80 going into next year, was that we're going to separate out as we talked about event-driven because it could come back very erratic.

Richard J. Daly

Tien-Tsin, last comment, what you are hearing, though, is that our traditional variables in trades, stock record growth, what's with event-driven into which went the wrong way, so trade and stock record growth, I would put, are our historical weak levels, all right? And event-driven is at the historical low level. And it's the efforts to reposition this business with the products we've built and acquired that give us the confidence to manage through what still is a weak economic environment and be in a position to create long-term value as we go forward because we still intend to grow through this weak economic environment.

Dan Sheldon

Yes, just adding one last piece in that, even though we're talking about the equity trade volumes and they're down, but stock record growth looks to be positive this year, and it was down last year, the good news out of all this event-driven is the mutual fund proxy positions are still growing at an 8% clip. So it's just as a factor of saying when did it come back.

Richard J. Daly

And let me add one other clarification to that. Because it's counterintuitive because everyone knows that these funds are experiencing weak revenue, to some it will be counterintuitive that the positions continue to go up. But remember, positions and assets are 2 entirely different items. We are very focused on positions as it relates to our mutual fund asset servicing. And positions can go up because people continue to open up 401ks, they continue to diversify their portfolios, that doesn't mean their total assets, and certainly, it does not mean, because it's not the case, that the total assets in the fund industry are going up at near the percentage or any percentage like this.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Understood all that. So just to clarify then, Dan, you said 8%. Is that what the difference between the $0.15 and $0.20 to normalized event-driven fees? Is that just the compounding of the positions growing?

Dan Sheldon

Yes, but that was -- to say that was if we said we are to come back to historical levels and that would add back on $0.20, about $0.18 of that is fee and $0.02 from post, as what we'd be saying is that compounded continued growth of 8% should even help move that number forward above the $0.20.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Okay, understood, understood. Sorry to -- just want to get the clarification. And then just a money ball question, Rich, I guess the -- which new assets here -- I've heard you talk about that a little bit -- which new assets should we be paying most attention to that could be bigger needle movers in the midterm or even the long term?

Richard J. Daly

Matrix -- I covered Matrix in an earlier question, and we expect Matrix to continue to grow. The reengineering at the back office, we continue in many large dialogues, which ties directly to 2 items: one, weak economic environment; and two, as the world continues to get more complex people have to pick and choose where to spend their IT dollars, we really have a very strong brand in terms of the quality of our product. And even as I think about the consulting firms out there and a number of them which are now viewing Broadridge as the right entity to recommend to their clients when they consider these activities, that feels very, very good. In the communications side, we have lots of activities going on in the issuer services. We're about to have 100 virtual annual meeting. We are adding new ETA clients. Still I believe it will pace of about one a week. We are adding more registered proxy processing clients. And so as you listen to this call, go back to the last call where I went into more details on these activities, as you think about the revenue growth coming from organic and acquisitions, but the organic is clearly our product -- or our expanding products, of course, Broadridge is both -- both of Broadridge's segments, there are a number of activities. And Tien-Tsin, the great thing is that, as I look at any one of them right now, I'm not saying -- and look at this huge number that's driving to the bottom line, but when you add them all up together, that's really where the money ball concept comes into place. You just combine the numbers we reported here and that value going forward is meaningful and can drive good performance. If 1 or 2 of them turn into a hot product, of course, it will even be better performance.

Dan Sheldon

Yes, and I'd also point out that when we talked about what the contribution from sales was, as we've said the forecast of 4%, you should absolutely understand that our acquisitions are a full point to that, and our emerging products make up another 0.5 to 1 point. So investments we've made in those areas are pushing in our overall revenue growth up.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Okay. Maybe if I can just sneak in one more, I just -- on the pension side, I know you're taking in more stock, I mean, in your diligence with that partner. How much confidence do you have that the $50 million contract itself will stay? Is there a chance for that getting scoped down and potentially reworked as well? Or did that not even come up in the discussions?

Richard J. Daly

Well, there are really 2 questions here. So as Dan articulated, I think so accurately and in detail, virtually, everything was considered through an impairment analysis. Now in terms of Penson, I'm really not in the business of speculating. So I'm going to go back to my comment. We're going to continue to monitor restructuring efforts with great interest.

Operator

[Operator Instructions] I'm showing we have no further questions at this time. I would like to turn the call back over to Mr. Daly.

Richard J. Daly

Okay. Well, again, Dan, Rick and I want to thank everyone for your participation today. We will look forward to our luncheon next week, and we look forward to chatting with you as we go through the fourth quarter and into our fiscal year '13. Thanks again for your time, and choose to have a great day.

Operator

This concludes today's Broadridge Financial Solutions, Inc. Third Quarter Fiscal Year 2012 Earnings Conference Call. Thank you for your participation. You may now disconnect.

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