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Broadridge Financial Solutions, Inc. (NYSE:BR)

F4Q08 (Qtr End 06/30/08) Earnings Call Transcript

August 14, 2008 8:30 am ET

Executives

Marvin Sims – VP, IR

Rich Daly – CEO

Dan Sheldon – VP and CFO

Analysts

Ian Zaffino – Oppenheimer

Anurag Rana – KeyBanc Capital

Stefan Mykytiuk -- Pike Place Capital

Vivian Memelak – US Steel Pension Fund

Tien-Tsin Huang – JPMorgan

Milan Gupta – South Point Capital

Leo Schmidt -- Chubb Corp

Charlie Park [ph] - Finlink Park [ph]

Operator

Good morning. My name is Carol, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Broadridge Financial Solutions fourth quarter and fiscal year 2008 earnings conference call.

I would now 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. Please try to limit your question to one per participant.

I will now turn the conference over to Marvin Sims, Vice President of Investor Relations. Please go ahead, sir.

Marvin Sims

Thank you, Carol. Good morning everyone, and welcome to the Broadridge quarterly earnings call and webcast for the fourth quarter and fiscal year 2008. I am Marvin Sims, Vice President of Investor Relations. This morning I am here with Rich Daly, Chief Executive Officer for Broadridge; and Dan Sheldon, Chief Financial Officer for Broadridge.

I am sure by now everyone has had the opportunity to review the earnings release we issued earlier this morning. The news release and the slide presentation that will accompany today's earnings call and webcast can be found on the Investor Relations homepage of our Web site at Broadridge.com.

Before we begin, I would like to remind everyone that during today's conference call, we will discuss some forward-looking statements that involve risks, and these risks are discussed here on Slide 1 and in our periodic filings with the SEC.

During the review of our financial results, to provide the appropriate point-to-point comparison between fiscal '08 and fiscal '07, all pretax and net earnings numbers discussed throughout the presentation are non-GAAP, and exclude one-time transition expenses and interest on new debt unless otherwise disclosed. For fiscal year 2009 GAAP earnings, the appropriate point-to-point comparison to fiscal year 2008 pretax and net earnings is to exclude one time transition expenses from fiscal 2008 earnings numbers. The actual GAAP reported numbers in comparison are also listed.

During review of the segment results, again for the appropriate point-to-point comparison for full year revenue and operating profits, we'll discuss adjusted numbers that reflect a change in the methodology that occurred in the third quarter of fiscal 2007 for intersegment allocations between the Clearing and Outsourcing segment and the other two Broadridge segments. I am happy to say that this is the last time you have to hear this statement as in fiscal year 2009, the actual segment results for each year will be the appropriate comparison. As always, a reconciliation to GAAP numbers is available in the presentation appendix as well as in the press release.

Now let's turn to the next slide and review today's agenda. Rich Daly will start today's meeting with his opening remarks and provide you with a summary of the financial results for the quarter and full year as well as guidance for fiscal year 2009 and a discussion on a few key topics. Dan will then review the financial results in further detail for the fourth quarter and 2008 fiscal year as well as summarize the outlook for fiscal year 2009. Rich will then return and provide his summary and some closing thoughts before we head into Q&A part of the call.

Now please turn to the next slide, and I will turn the call over to Rich Daly. Rich?

Rich Daly

Thanks Marvin. Good morning. Well, I hope you're all doing well. While I feel terrific about the business, as you'll probably hear, I seem to have picked up a summer cold this week, so my already raspy voice will probably be even raspier, so I will try to minimize the throat clearings, but I do appreciate you all bearing with me.

As part of my opening remarks, I will discuss the following topics. First, a summary of the financial results for the full year and fourth quarter of the 2008 fiscal year, then a review of the financial guidance for fiscal year 2009 where I will touch on business segment performance, initiatives and how the world around us is affecting the key business drivers for each segment. Finally, I'll provide an update on some cash policies and the credit rating agencies.

Let me start by saying that overall I'm pleased with our fourth quarter and full year results, as the business fundamentals in our operating units continued to be solid. This has been a good year especially when you consider the economic conditions in which we achieved these results.

For the fourth quarter, we had revenue growth of 2% and 3% growth for the full year, both negatively impacted by reduced distribution fees related to Notice & Access. More importantly though, fee only revenue growth was 7% for the quarter and 6% for the fiscal year.

Our fourth quarter non-GAAP EPS excluding one-time transition expenses of $0.71 puts us at $1.42 for fiscal year 2008, which is within our latest full year guidance range of $1.35 to $1.45.

When we started the 2008 fiscal year, I had anticipated this being the second down-year in my career. But I am pleased to report that this has turned out not to be the case as we exceeded last year's GAAP and non-GAAP pretax earnings. This year, we exceeded the financial guidance we had set at the beginning of the year and we were even able to grow over the two large client losses from fiscal year 2007. We also improved operating margins by 60 basis points. We generated strong cash flow and we paid down $170 million in debt, putting us at our debt to EBITDA ratio target of 1 to 1, a full year ahead of schedule. EPS at $1.42 is $0.21 per share, ahead of the midpoint of our original guidance.

Let me try to put that into context for you. Our first half performance was driven by higher than expected trading volumes, which drove results an additional $0.09 per share. We also benefited from termination fees and one-time items related to the timing of our public company infrastructure and investment-spend ramp ups. This gave us another $0.10 per share.

Our second half performance for revenues and earnings was slightly better than our original guidance and were driven by strong recurring revenues in the fourth quarter from our core investor communications business. This provided the remaining EPS benefit. The fourth quarter is the biggest quarter for the communications business segment, driven primarily by the proxy season.

Our proxy season was solid and in line with our expectations due to higher equity stock record growth. This resulted in strong growth and recurring revenues, a slightly higher than anticipated adoption rate for Notice & Access, and higher traditional electronic delivery rates driven by our new Investor Mailbox product.

The core business isn't only performing well, but it's extending its market leadership. I will talk more about Notice & Access, our Investor Mailbox product, and other new opportunities later in my fiscal year 2009 business segment discussion.

Event-driven revenues were down slightly in the fourth quarter and were basically flat to the year. Contributions from mutual fund proxy specifically one large job were offset by drops in proxy contest, M&A and other event-driven activities.

One note regarding the recent Yahoo! annual meeting, we failed to report all director-withheld votes for two bank nominees due to an isolated systems error. We take this very seriously. We fixed the problem and are in the process of expanding the extensive internal and big four audit firm external reviews we already performed.

Moving on to the transaction reporting which is our statement income from [ph] business. We had a solid quarter due to the traditional business drivers related to products, volumes and new sales. As previously disclosed, lost clients grow-over finally hit its anniversary date in March and therefore is no longer relevant.

The communications segment is responsible for approximately 70% of our revenue and operating profit for the year. This is a rock solid business that has performed consistently, steadily and reliably in a market that has none of those traits.

The fourth quarter results in our Securities Processing segment and Clearing and Outsourcing segments are in line with our expectations. Overall, the combined Securities Processing businesses are performing at acceptable levels and better than we would have forecasted in the current market environment.

While we're exiting the year as expected in the Securities Processing segment, we're behind our expectations in the clearing segment due to the decreases in the fed funds rate which primarily impacted us in the second half of the fiscal year. However, the interest income shortfall that's created in the Clearing and Outsourcing business was the largely offset by lower corporate interest expense.

We generated new business growth for both the quarter and the full year and we were able to grow over the previously disclosed lost revenue from TD Waterhouse. We signed one outsourcing client in Q4 which brings us to 5 clients on outsourcing with annualized revenue now over $20 million. We added 10 new clearing clients during the year. Given our strong value proposition, we're disappointed we didn't land a large deal in this space, but we continue to work several opportunities.

Our consolidated closed sales for the quarter were in line with our expectations as we ended the year with total sales of $149 million, 60% of which were recurring and 40% event-driven. This was a great year for sales. We had a 19% growth over last year and we were 6% ahead of our annual sales plan.

We have a strong high-quality pipeline that continues to improve. In market like this, there's a significant need for firms to take cost out and through virtually all of our products, we raise quality and reduce costs.

Now that fiscal year 2008 is in context, let's move on to the overview of our guidance for fiscal year 2009. Despite a tough economic backdrop, our sales plan for fiscal year 2009 will increase to a range of $160 million to $180 million. This represents approximately a 7% to 21% growth rate over our strong 2008 sales achievement. I will talk a little bit more about sales in my fiscal year 2009 business segment discussions.

Overall, we expect fiscal year 2009 to be a solid year with the operating units continuing to perform well in a challenging market led by the core investor communication business. We anticipate revenue growth for the fiscal year in the range of 2% to 4%, with 3% to 7% growth in fee only revenue. We expect revenue growth in every quarter for the year and in every segment for the year

We are expecting fiscal year 2009 EPS in a range of $1.45 to $1.55. This puts GAAP EPS growth in a range of 7% to 14%, or numerically, $1.36 versus this new range of $1.45 to $1.55. However, the appropriate point-to-point EPS comparison would probably be to compare fiscal year 2009 GAAP earnings with fiscal year 2008 non-GAAP EPS excluding transition expenses. This results in EPS growth in a range of 2% to 9% from $1.42 to a range of $1.45 to $1.55.

The first half of fiscal year 2009 will be a tough EPS comparison as a result of the 10% EPS benefit in fiscal year 2008 from one-time items related to termination fees and the timing of our spending for our public company infrastructure build that I just spoke about before. This creates a first half grow-over in fiscal year 2009.

The second half of fiscal year 2009 will not be impacted by these grow-over items and will show stronger EPS contribution from revenue more characteristic of the ongoing businesses, driven by the core communications business. I'm satisfied with the business unit growth of our 2008 plan as we're expecting revenue and margin improvement in our consolidated core business segments.

Now, let's move on to the business segment overview. I'll start with our largest segment, Investor Communication Solutions. As I mentioned earlier, the ICS segment represents over 70% of Broadridge's revenue and operating profits. We anticipate fee revenue growth for this segment in a range of 5% to 9% which feels great. Overall revenue growth will be in a range of 2% to 4%, but that's just given the decline in postage.

We are anticipating close sales in a range of $100 million to $110 million, of which 50% is expected to be recurring and 50% is expected to be event-driven. Event-driven sales will primarily be related to mutual fund proxies. For the second year in a row, we're expecting solid sales for both registered equity proxy and transaction reporting, which we expect will drive our recurring sales activity.

Our strategic leadership around Notice & Access in the core communications business has increased the chasm between Broadridge and our competitors. Our leadership in Notice & Access has resulted in industry-wide savings of an additional $140 million. The 600 or so companies that took advantage of the program realized significant savings in postage and print costs. Our industry leading Notice & Access solution gave us entre to sell our registered proxy services to over 350 new companies increasing our client count by 45% to approximately 1,200 public companies.

Despite the industry's financial success from Notice & Access, the reduced rate of voter participation by retail shareholders that resulted remains an industry challenge, but it's an opportunity for Broadridge to once again provide industry leadership. Notice & Access has had a slightly better financial impact on Broadridge than we originally anticipated. This was primarily due to winning new clients for our registered proxy services as well as selling a greater percentage of the ancillary services that are required to support Notice & Access.

Although other vendors offer these ancillary services, we believe we had a higher win ratio because of our strong one-stop shop value proposition and our subject matter expertise. In fiscal year 2009, we're anticipating a 40% adoption rate for Notice & Access. The fact that we ended a full year with an adoption rate of 28% and we had an adoption rate during our fourth quarter proxy season of 31%, lead us to believe that 40% is a reasonable estimate.

Event-driven revenues are anticipated to be virtually flat to slightly down this year given the current economic environment we're still in. Although we're in a down market, we don't expect to see the fall off in event-driven revenues that we experienced in fiscal year 2003, when it was down 30%. In fiscal year 2008, we did see a decline in proxy contest and M&A activity. However, the changes in mutual fund regulatory focus requiring more activity, our market share gains and our new products in the mutual fund space lead us to believe that there will be less volatility than we experienced in the past. As we exit this down market, we anticipate we'll get back to realizing the greater than 10% CAGRs and event-driven revenue we experienced before in the past.

Now, I'll talk about a few other product opportunities in this segment. Summary prospectus is a pending regulatory change related to how investment companies communicate with investors. It could result in mutual fund prospectuses going from 20 plus pages today down to, say, five or so pages. Although the regulatory change would most likely have a negative impact on our pick-and-pack fulfillment business, the change could drive opportunities for our print-on-demand business. Directionally, we view it similarly to the way we saw the Notice & Access regulatory change.

Our Investor Mailbox product which is part of our e-delivery solution is designed to streamline multiple delivery channels into a single visit financial portal that investors find on their broker's Web site. This product is having a positive impact by converting investors from traditional hard copy delivery to electronic delivery. Investor Mailbox has been the primary driver for increasing our electronic delivery rate for proxies from 47% to 52% this fiscal year.

I believe one of the new and exciting opportunities is around what we're calling the Investor Network. It's really unusual for us to be talking about something so early in its development, but the range of this opportunity could be anything from negligible to a unique and meaningful financial social network which could be really big. The Investor Network is an online electronic form that will facilitate shareholder to shareholder communications with a unique feature that will differentiate it from the chat rooms in existence today. Investors who use our Investor Network will be validated as real shareholders. This feature will not only enhance shareholder to shareholder communications, but it will provide a new channel of communication between shareholders and companies.

When the SEC expressed a desire to enable better communications between shareholders using today's online technology, Broadridge stepped up to help provide a workable solution by leveraging our unique capabilities. The Investor Network will validate shareholders through the core plumbing [ph] of the Investor Communications segment while allowing institutional, retail and professional investors to remain anonymous. We are uniquely positioned to create a vibrant social network that validates real shareholders while allowing both anonymity and accountability for any statements made online.

Through providing industry-wide technology-based solutions for Notice & Access, summary prospectus and the new Investor Networks, we continue to demonstrate that we are in the communications solution business and it's so much more than merely an ink on paper or physical distribution business.

Another recent focus in the ICS segment is the realignment of our organizational structure from a product structure to a market facing structure. We assigned the responsibility for servicing the mutual fund market to an executive committee corporate officer executive. The focus of this new alignment is that it will create an increased focus on the market penetration that we believe we can achieve in the mutual fund space and to continue our efforts to become more client-centric in creating new revenue opportunities.

Our core communication business plays a mission critical role in assisting broker-dealers, corporate issuers and mutual funds to comply with corporate governance requirements. As those requirements continue to evolve, they will create new product and servicing opportunities for Broadridge.

I made it this far, so I'm going to take a sip of my tea.

Now, I want to talk about our Securities Processing solutions and Clearing and Outsourcing segments. For the Securities Processing segment, in fiscal 2009, we anticipate revenue growth in a range 2% to 4%, and in the Clearing and Outsourcing segment, we anticipate revenue growth in a range of 8% to 16%.

For the combined Securities Processing businesses, we're anticipating closed sales in a range of $60 million to $70 million. We expect $25 million to $35 million of these closed sales to be related to outsourcing. We still expect we can generate $100 million in Broadridge revenues over the next three years through outsourcing.

The current sales plan represents about a third of that goal and we expect that number to build each year. The outsourcing offering typically has an implementation cycle of six to nine months. Therefore, we'll see little revenue this year coming from sales closed in fiscal year 2009. New revenue in fiscal year 2009 will come primarily from closed sales from fiscal year 2008. This, though, is typical of our sales to revenue creation cycle.

On the acquisition front, we recently completed the acquisition of Investigo. This was a tuck-in transaction with an upfront purchase price of less than $15 million and an earn-out potential of about the same amount. With this transaction, we continue to execute our plan to expand and deepen our wealth management offering as part of a strategy to enhance our retail processing platform and transaction reporting capabilities. Additionally, we see a cross-selling opportunity as the Investigo acquisition provides us access to its insurance broker-dealer clients and other similar firms which haven't traditionally been part of Broadridge's customer base.

As I mentioned during our last earnings call and earlier in my comments, the current market condition should continue to provide new client opportunity. However, there has been a much higher than normal senior executive turnover on our industry, which seems to have slowed our progress in closing large deals.

Finally, we're not aware of any large clients leaving us in these two segments. We continue to work with our clients JP Morgan and the former Bear Stearns to provide solution that will benefit both organizations. Both the SPS and Clearing and Outsourcing businesses are well positioned and to our outsourcing offering, I believe our prospects are good. I viewed fiscal '08 as a tough market and we're planning for fiscal '09 to be about the same. I don't know when it will turn, but I've been around long enough to know all bad markets do come to an end.

Now, let's move on and talk about some policy updates related to cash and our use of free cash flows. In fiscal year 2009, we anticipate generating free cash flow in the range of $180 million to $215 million. Dan will go on to components and drivers later. I want to focus on three particular uses of free cash flow. First, as most of you know by now, we recently initiated a self tender offer to repurchase some our outstanding notes. We believe the current price of the notes and the related interest rate makes us a good opportunity.

The second item relates to returning cash to our shareholders. We'll continue to pay a dividend, which our Board has recently increased from $0.24 to $0.28 per share annually, representing a 17% increase. Our Board has also approved a share repurchase program that authorizes the open market purchase of up to 2 million shares to cover the dilution created from our equity compensation programs.

The third item is we would like to be more acquisitive in fiscal 2009 which includes a focus on international as well. So, as we proceed with our note self tender initiative, our increased dividend payout and our share repurchase program, we still have sufficient free cash flows to pursue our acquisition strategy.

Now, I'll provide you with a brief credit rating update. Fitch has recently initiated coverage of Broadridge with a solid investment grade credit rating of BBB flat with a stable outlook. We believe this rating reflects the solid business we have. That's my opening.

I will now turn it over to Dan for his review of the financials.

Dan Sheldon

Thanks Rich. I'm on slide 8. On slide 8, we're going to review Q4 and FY '08. First thing I'd like to point out is remind everyone that Q4 is our largest quarter and represents 35% of our revenues and over 50% of our earnings for any fiscal year and this is due to the proxy season in our ICS segment.

Our revenue growth, as Rich mentioned, was in line with our forecast at 2% for the quarter bringing in the year at 3%. A couple of comments I'd like to make here. First of all, it's important to focus on fee revenue growth, which for the quarter and the year were 7% and 6%, respectively, and represents 60% of our revenue today and in the future will continue to grow and have the highest margins.

The other 40% of our revenues are related to distribution or postage and this revenue is down year-over-year primarily due to Notice & Access and increased electronic distribution, which I'll go into more detail when discussing the ICS segment.

The takeaway is that incremental increases in service fee revenues contribute higher margin dollars than those margin dollars lost due to any distribution revenue drop. I'll also address in more detail the other revenue drivers when I review the segments.

Focusing now on our pretax earnings before transition expenses and interests, it's down 100 basis points for the quarter but up 60 basis points for the year. Let me recap the quarter for you.

The quarter was positively impacted from solid Investor Communications services performance and negatively impacted from our Securities Processing and Other category. More details when I go through the segments in Other.

The full year positive impact is primarily due to the Investor Communications mix in the business. I'd also point out that FY '08 was going to be a down-year given the negative impact from the two large clients we lost in FY '07. Both have reached their anniversary dates and showed us some small grow-over in Q1 related to our clearing segment. They will no longer have any negative impact to our businesses.

With respect to earnings per share, before transition expenses down for both the quarter and the year due to what I just previously discussed for pretax, as well as interest expense was up $19 million to $31 million, as in FY '07, we only had one quarter of interest.

For our effective tax rate, it is up to 41% for the year versus a forecast of 39% and this is due to final one-time adjustments from our spin. You'll see our FY '09 guidance that we expect the effective tax rate to be back around 39%. We will hopefully see opportunities to reduce this rate further with respect to state taxes as we continue to work with the states on tax credits.

All spin-related expenses, whether one-time or tax, should now be behind us as we move into fiscal year '09. Earnings per share is at the higher end of our guidance for both quarter and the year primarily due to the solid performance as Rich mentioned in our Investor Communications segment in the fourth quarter.

Let's move on to the segments and I'm now on slide 9. This is our Investor Communications segment. You'll see at the top of the page, we break total revenue into the various components. First, we split between fee and distribution revenue, which is about a 50/50 split, and again our distribution revenues are primarily postage. Then we further split fee revenues between recurring and event driven.

The revenue growth 2% for the quarter and 1% for the year translate into the following. Fee is up 9% and 5% respectively and all growth coming from recurring as event driven is down for the quarter and flat for the year. With respect to recurring revenue for the quarter, which also drives the year, as contributions from net new business which is sales less losses, internal growth from proxy and mutual funds additional positions, which we call stock record growth, and the Notice & Access activity primarily in the fourth quarter. Our event driven is virtually flat for the quarter and the year.

Sales in our mutual fund proxy were up over 15% for the year from $79 million to $92 million, but offset by the fall off in the equity proxy contest, merges and acquisitions, and other activity went from $78 million to $64 million and this is not surprising given the economic environment we're in.

With respect to distribution revenues, they are down for both the quarter and the year and all primarily due to Notice & Access and an increase in our equity proxy electronic suppression rate, which were partially offset by increases in the US post office and normal business growth. With respect to margins for both the quarter and the year, they are up due to a combination of scale in the business, Notice & Access, and the mix in distribution margins especially in the first half of the year.

With respect to '09, we'll give some guidance here looking at revenue growth consolidated 2% to 4% and fee revenue growth of 5% to 9%. Our distribution fee is virtually flat again due to increased participation we are expecting in Notice & Access and continued increases in suppression, again offset by additional net new business and expected postage rate increases.

With respect to the fee revenue growth at the high of the guidance, event driven revenues pick up per M&A activity and mutual fund proxies, with an additional point from increase stock record growth related to equity in interim. At the low end, if a continued falloff in event driven revenues and flat stock record growth. Our margins, we are expecting to be up 40 basis points to 80 basis points, given the revenues and the mix in those revenues.

Let's turn to slide 10 for a review of our Securities Processing Solutions segment. With respect to revenue growth, about 2% for both the quarter and the year, our net new business was down for both the quarter and the year but less so in the quarter as we benefit from increased sales contribution to revenue, primarily from our RBC client which went live at the end of February. Our internal growth for the quarter benefited from fixed income trade volume increases in equity client trade mix. Our equity trades per day were virtually flat.

The contribution for the year came primarily from Q1 increases in trade volumes over the prior year. Equity trades per day continue to be in the 2 million to 5 million range per day and we've not seen any growth in these trades per day in the second half of this year. With respect to margins, they are down to 21% for the quarter as we had forecasted. The decrease primarily related to no longer capitalizing RND implementation costs related to the RBC and those expenses are returning to our expense run rate.

As we've discussed before on major implementations, we have internal R&D expenses that are capitalized and then amortized over the term of the contracts. When these large implementations are completed, the expenses that were being capitalized return to the expense run rate and the people are assigned to projects related to system enhancements and maintenance that are not capitalizable.

With respect to guidance for FY '09, our revenue growth will be in the 2% to 4% range, the low-end reflective a virtually flat trade volumes and potential delay in sales implementation, and at the high end, increased trade volume growth. The 21% Q4 margin is the new step off for this business as we move into FY '09. However, we expect improvements to margins from 21% as you can see on the sheet to 25.3% to 26% as we go throughout next year and add new additional businesses. Again, this shows the scalability in this business. If you lose a client or you have any cost coming back in, it negatively impacts the margin, but as you add new business on, it significantly and quickly brings the margins back up.

Let's go slide 11. We're in the Clearing and Outsourcing at this point. So with respect to revenue growth for the quarter and the year, it's down 8% for the quarter and up 2% for the year. As we discussed before, the drop in the fed fund rate negatively impacted revenue margin by $2 million this quarter and $4 million for the fiscal year primarily in the second half, and that's what drives the negative 8% revenue growth for the quarter.

As Rich mentioned, the negative impact, however, was for the most part offset by our corporate interest expense on our long term debt due to the LIBOR rate coming down as well.

Sales contributions are very good, but not enough to offset yet the loss of the TD outsourcing business. The anniversary date for TD loss is August as of this year. We did sign one new outsourcing deal in Q4 and that brings total sales in FY '08 to three new clients. As we mentioned, the outsourcing pipeline is strong, and with respect to margin improvement, it is an improvement of $2 million year-over-year and in line with the last guidance we gave in May.

Let's turn to slide 12 which is Other and foreign exchange. With respect to slide 12, for both revenues and margins, we've broken Other into its major categories. Termination fees read an all-time high this year at $9 million and in most years, are $0 million to S1 million contributions.

FX, the US dollar continued to decline especially against the Canadian dollar and contributed for the fiscal year $27 million of revenue growth from a negative $13 million to a positive $14 million, and $12 million of margin growth from a negative $6 million to a positive $6 million.

As for FY '09, we are holding the US dollar constant to the other currencies at the high end of our guidance and assuming there could be an improvement in the US dollar at the low end of the guidance. Corporate and investments in FY '09 will increase between $7 million and $9 million due to the first half of FY '08 where we're still building our corporate departments and haven't really started our incremental investments spend we have previously talked about.

On the next slide, I'll go into more details on that. Finally, with respect to interest expense, our June 30th long term debt is at $447 million and we plan to take that down another $100 million to $150 million by the end of FY '09. We'll pay down at least $75 million in this quarter by repurchasing some our 10-year bond which we incurred interest expense of just over 6% per annum today.

Although we have achieved our 1 to 1 debt to EBITDA ratio at the end of June of '08, our clearing business had no debt and currently averages about $50 million a day in short term debt. The rating agencies are very focused on us maintaining a 1 to 1 ratio and include short term borrowing in their calculations of debt to EBITDA. Therefore, we'll drive long term debt down to $300 million to $350 million in FY '09 so as to cover anywhere between $100 million to $150 million in short term debt needs related to the clearing and still maintain our 1 to 1 ratio.

Turning to slide 13, this is where I will review with you our grow-over issues. This slide highlights the grow-over items from FY '08 into FY '09, which negatively impact the first two quarters of FY '09. The combination of termination fees falling off by $7 million in the first two quarters and our corporate and investment build of $17 million creates a $0.10 negative impact to earnings per share in the first half of FY '09. As well, in the second quarter, we have found a grants carryover of $5 million which is both a negative to the first half but a positive to the second half given the timing of last year's grant expense recognition.

I've also included the impact due to our Securities Processing RBC return to run rate expenses where we no longer capitalize the R&D implementation. So, with respect to the $17 million in corporate and interest increases, these were planned by the way to start in the first quarter of FY '08, but didn't ramp up until the end of the second quarter in '08 and this timing creates the grow-over. Net-net, we have almost $40 million in grow-overs in the first half. Q4 will always, by the way, be our largest quarter in any given year given the proxy season and quarters one through three as far as compares year-over-year can be positively or negatively impacted due to the timing of event-driven revenues as they don't repeat in the same quarters each year as well as fluctuations in distribution fee revenues and related margins.

Let's move on to slide 14 which is the cash flows. As discussed before, we look at our cash flows with and without the clearing business, as clearing is self funding and doesn't require any of the cash generated from our core operations to fund the business. Clearing does usually require short term borrowings which I discussed on the earlier page and at June 30th, FY '08, clearing had no short term borrowing, and at June 30th, FY '07 had 109, so you can kind of see how it fluctuates there. So, focus will always be on what we define as our all other processing activities which for fiscal year '08 was in the middle column and fiscal year '09 is to the far right, and that's what I am going to focus on in the rest of the conversation.

Our fiscal year '08 net cash flows provided by operating activities of $ 336 million in the middle of the page generated $144 million above earnings. Let me put that into perspective. Half of it is coming from non-cash P&L items and the other half coming from improved working capital specifically related to receivable collections. We put a lot of effort this year behind speeding up receivables and expect to maintain our current improved days outstanding so I expect in the future working capital will be more of a use, but a small use of cash approximately equal to the revenue growth as related to growth in net receivables.

Cash flows from investing, CapEx and intangibles for both FY '08 and '09 is still about at our 2% to 2.5% of revenue and this is in line with our long term objectives. Free cash flows should usually be above net earnings due to stock compensation benefit as depreciation and amortization should be about the same over the long term as CapEx.

With respect to cash flows from other investing and financing activities, acquisitions show as currently not in guidance. Now, what that does mean? It means that cash used for acquisitions as well as any impact to our revenues and earnings from future acquisitions are not in our guidance. However, as Rich mentioned, we do expect to be more acquisitive in the future.

As for cash flows from financing activities, I mentioned when discussing interest that we would most likely pay down an additional $100 million to $150 million in long term debt. We did not pay down any debt in Q4 of FY '08 as we're waiting to take advantage of the bond repurchases in Q1 of FY '09. Therefore, part of the $172 million that you see as cash and cash equivalents at the end of the year in that second column will be used to take advantage and used for the bond repurchases and any other debt pay down we make.

And by the way, we increased our dividend and expect to buy back shares to the extent of stock compensation dilution up to 2 million shares. So before acquisitions, we expect to have $128 million to $250 million in cash and cash equivalents in 2009.

Let us move on to page -- or slide 15. Here is where we review the 2009 fiscal guidance summary. First bullet is very important. As you look at our history, we're impacted by up and down markets. In our up markets like fiscal year '05 through '07, expect high single double digit revenue growth and in down-market expect negative to low single digit revenue growth. We are definitely in the down market and that's how we see '09.

However, at this point, we've not been made aware of any significant losses due to consolidations or reductions in event-driven revenue and trade volumes are flat, but not significantly down. So FY '09 with the 3% to 7% fee revenue growth looks pretty good to us given the current state of the environment and compared to what we did experience in fiscal '03 in our last down-market.

Other statistics on here, sales plan for the year $160 million to $180 million, a split thinking about 60/40, 60% going to recurring and 40% going to the event. Earnings before interest and taxes, margins 15.9 to 16.6, diluted earnings per share of $1.45 to $1.55, interest expense of approximately $19 million, our effective tax rate coming back to 39%, no additional one-time transition expenses, free cash flows in a range again of $180 million to $250 million, and again that's free cash flow. As I described on the other page, we expect our cash or cash equivalents at the end of year before acquisitions be at $128 million to $250 million. We recently completed the Investigo acquisition and that is contemplated in our guidance and diluted weighted average shares of approximately 143 million.

With that said, I will now turn the meeting back over to Rich.

Rich Daly

Thanks Dan. I want to just clarify one of the stats Dan gave you back in the Securities Processing. The number is -- that trades per day continue to be in the 2.5 million range and that we haven't seen any growth in trades per day in the second half of the year.

What I love about Dan is that I can ask him any of these stats all day long and he gives me instant answers. So, let me summarize and give you a few thoughts on how I feel about the business before we go on to the Q&A part of the call.

As you have just heard, fiscal year 2008 was a good year. We exceeded our original financial objectives, we improve margins, and we grew our revenues over the previously announced two large client losses. We've taken the uncertainty of Notice & Access and turned it into a positive for both public companies and Broadridge.

Through our industry leadership, Notice & Access was successfully implemented and the industry realized a $140 million in savings. We gained more market share and improved earnings. And companies as well as the SEC see us as the experts and innovators when it comes to corporate governance process evolution.

We generated strong cash flows allowing us to pay down $170 million in debt and we will continue to use our strong cash flows to maintain our debt to EBITDA ratio of 1 to 1, as well as continue to invest in the business including being more acquisitive. We've also increased our annual dividend by 17% to $0.28 per share and we've implemented a share buyback program to offset the dilution from our equity compensation plans.

In fiscal year 2009, we're expecting to have revenue growth in every quarter, and despite the current challenging economic backdrop, we anticipate fiscal year 2009 being another solid year as the business units are expected to continue to do well in this down-market lead by the core communication business.

The first half of fiscal year of 2009 will be impacted by grow-overs, which will not impact the second half of fiscal year 2009. The biggest piece of our business, the Investor Communications segment is growing with better recurring revenues and is better off today than it was a year ago. We believe with potential new opportunities like Investor Network, Investor Mailbox and summary prospectus that our core communications business will continue to be a great business.

In the 2008 fiscal year, a large part of our focus was on developing the financial results that we said we could deliver as well as getting our feet on the ground as a new public company after the spin off from AVP. We accomplished these two objectives and now in the 2009 fiscal year and beyond, our effort and attention are solely focused on growing the business at a higher growth rate.

To do this, we will need to focus on a few key strategies. We have to continue strengthening our value proposition in order to raise our sales growth. Drive new solutions that differentiate us in the market and identify acquisitions that can leverage our mission critical processing expertise and our distribution channel capabilities.

By successfully executing these strategies, we believe we can create a tipping point for our core products. We believe the incremental functionality that will be derived from the higher levels of investments we've made in the business will create this tipping point and will push the key decision makers to outsource more mission critical functions to us.

Overall, the business is well positioned in managing through tough economic times better than it has historically and I feel good about prospects for the upcoming fiscal year. I am confident that our improved business fundamentals will enable us to achieve even better result in normal markets in the future. As you've heard me say in the past, Broadridge is not in control of the markets, but we are in control of our business.

With that I would like to use this opportunity to again thank all of our highly-engaged associates for being in control of our business, a real part of their lives.

With that, I am going now to turn it back over to Carol, the operator, for the Q&A part of the call.

Question-and-Answer Session

Operator

Thank you, sir. (Operator instructions) Our first question will come from the line of Ian Zaffino with Oppenheimer & Company.

Ian Zaffino – Oppenheimer

Thank you. A very good quarter. My question is just focus on the free cash flow. You talked about 180 to 250, why not get more aggressive as far as your share buyback program, unless you have another acquisition up your sleeve or my understanding is you probably don’t have a large one so you probably -- it would make sense buying more shares but I would love to hear what you guys have to say. Thanks.

Rich Daly

Ian, first of all, thanks for the comments, and we believe the best opportunity for us is to create value by creating top line revenue growth. So, our focus is going to be to invest in the business by improving our value propositions which we have been doing to accelerate our sales rate, creating new products, things like the Investor Network which we've already invested pretty well into, to take advantage of leveraging our market position and we believe that both our process capabilities, the reputation we have in the market and our distribution channel capabilities really should enable to us to identify more acquisitions with the start we've done. Where we can take those products and by adding our process skills and our reputational skills accelerate the growth rate of those entities under our umbrella than they otherwise they had on their own. So, that's the way we believe top line growth will ultimately create the greater shareholder value and that's what we are committed to do.

Ian Zaffino – Oppenheimer

Okay. And then the other question would be, I am just comparing some of the guidance you had given to what you gave a while ago and you talked about revenue growth 4% to 6% (inaudible) 2% to 4%, is that just you guys being conservative once again or is it related to the downturn in the market, what are your thoughts behind that too, thanks?

Dan Sheldon

Ian, the way to think about that is, when we gave that guidance out and we're still behind that guidance, we're thinking that Notice & Access had not been understood what it would do to postage revenue. So, when you kind of think about it and that's why we brought up to the point to have look at our service fee revenue growth and when you look at next year when we've gone out with the guidance there and said that you will now see in that, what we call, anywhere between 3% and 7% range. When you look at that, that brings us into even in a down-market that we should be coming close to our 4% to 6% and the margins obviously improve because we're pushing more of a service than we are of the distribution.

Ian Zaffino – Oppenheimer

All right, thank you very much and good quarter.

Rich Daly

Thank you.

Operator

Our next question comes from the line of Anurag Rana with KeyBanc.

Anurag Rana – KeyBanc Capital

Good morning gentleman, good quarter. Could we get a little more color on your acquisition strategy as to what areas are you going to focus on and how large can we expect an acquisition to be?

Dan Sheldon

I would like to be able give more specific color than actually I’m going to be able to give. We have significantly intensified our search efforts to identify transactions that we think that we think would be enhanced under our umbrella. We've added people. We have outsiders working on this as well. We're not going to do a deal for the sake of doing a deal but we're going to look at things in the management space, we are going to look at things in the processing space and we're going to look at things in the communications space. And I believe based on our initial efforts that we should at the minimum to be able to identify a larger number of tuck-ins than we have historically done. If there was to be a more meaningful size transaction, we would look to do that as well. That is certainly something where I have no ability to project whether or not that will or won't successfully happen, but I would be very disappointed if in our tuck-in space we weren’t more successful than we have historically been in the past given the increased effort that we've put into this.

Anurag Rana – KeyBanc Capital

Thank you. And just one follow up on the Clearing and Outsourcing business, how far should we look in terms of when we can expect the business to break even?

Dan Sheldon

We’re looking for the second half of '09.

Anurag Rana – KeyBanc Capital

Thank you.

Operator

Our next question will come from the line of Stefan Mykytiuk with Pike Place Capital.

Stefan Mykytiuk -- Pike Place Capital

Good morning. A couple of questions, I guess before I even mention the questions, its seems, Dan, when your looking at this leverage goal of 1 to 1, you’re not even giving yourself credit for the cash. So, am I missing something here, or why not look at net debt rather than just the actual debt?

Dan Sheldon

Well, I mean, internally -- by the way, you're actually right. When we look at -- we usually take just long term debt and we look at return on invest capital, all those things. What I am pointing out to everyone is that our rating agencies have made it very clear. They have given us the formula of long term and short term debt against EBITDA. So, that's the only reason we really reference that, but it's an excellent point and I am glad you raise it of what we should be giving ourselves credit for more. And we will do those kind of things as we do calls, but I did want to bring everybody back to understanding what the rating agencies are telling us because we said the investment grade is very important to us.

Stefan Mykytiuk -- Pike Place Capital

Okay, well, maybe they're listening to this call I mean. And just along those lines, I'll just point out, as a shareholder, it looks like, using your guidance, your stock is trading at about 8.5% free cash flow yield, maybe 7% at the low end and you're buying back bonds that yield 6% pretax. So, it just seems like as a shareholder, I'd rather you buy back the stock at a much higher after tax free cash flow yield than buy back bonds at a lower pretax yield. But that's more of a statement obviously than a question. In terms of guidance, is the actual -- how much did you actually spend this year in terms of product development, or R&D or things like that, and you have the slide here with the grow-over rates and I am wondering is that the change or is that absolute numbers because I am trying to figure out whether your kind of product development spend is actually going up in absolute dollars in fiscal '09 or it's just got the timing of when it is going to be spent?

Dan Sheldon

Excellent point. So, let me put it in perspective. Last year, we said to ourselves we wanted the increase, so the important point is what you just mentioned which was increase our product development spend in our systems and programming to the tune of $15 million to $20 million. We've got about $10 million of it in, and as of the end of Q2, we are at a run rate for that full $20 million, and that's what carries over in the first two quarters next year of the $10 million carry-over. And on an overall spend, we have systems and programming spend of just over $100 million and we moved our product spend up to call it $40 million run rate, which is both our corporate piece which I just went through as well as investments that we have in the field, and we plan on keeping it now at that level as we move forward.

Stefan Mykytiuk -- Pike Place Capital

Okay, so I am still a little confused. What was the total for FY '08 of corporate and kind of the systems?

Dan Sheldon

It would have been $30 million and now if you move into next year, we're thinking about incremental $10 million, which is a carry-over from this year run rate and that will bring in to the $40 million.

Stefan Mykytiuk -- Pike Place Capital

Okay, so it's the step up in $10 million, okay, I got it. Was there option grant expense in the fourth quarter?

Dan Sheldon

Yes, remember, the founder grants we had talked about before, there was an incremental $5 million in that quarter.

Stefan Mykytiuk -- Pike Place Capital

Okay, so there's $5 million in Q4 of that. There was the transition expense of the $4.9 million?

Dan Sheldon

Yes.

Stefan Mykytiuk -- Pike Place Capital

And then the tax rate by my calculation, the 42.8% tax rate versus the 39% was another $0.04 or $0.05 a share, I think.

Dan Sheldon

Yes, that is correct and again those are all due to what I call the final spin related ones in our contracts with AVP.

Stefan Mykytiuk -- Pike Place Capital

Okay. And so, that tag -- that thing that came up with the tax rate is, that's not going to recur?

Dan Sheldon

No, it's not going to recur.

Stefan Mykytiuk -- Pike Place Capital

Okay, terrific. All right, thanks very much.

Operator

Our next question will come from the line of Vivian Memelak with US Steel Pension Fund.

Vivian Memelak – US Steel Pension Fund

I have a couple of questions for you, Rich. First of all, you made a statement, you said you were disappointed that you didn’t land a large deal in Clearing and Outsourcing in the quarter. Can you just be more specific, are you disappointed that a specific deal went elsewhere or just in general that the environment didn’t allow you to close?

Rich Daly

I am disappointed that the environment didn’t allow us to close. I would think -- but my opinion is in most of the transactions, we were having dialogs, the choices to stay in-house or to utilize us, I don’t believe there's another vendor solution at the same breadth of capabilities we have out there.

Vivian Memelak – US Steel Pension Fund

And then the second question I had was in terms of international, so it's a follow up on your acquisition strategy. If I am not mistaken, most of what you do internationally is on the fixed income processing side, so could you just provide a little bit of color as to what you're thinking about for international markets?

Rich Daly

Well, first of all on the international side, we do equity processing internationally, we're in 15 markets, we do proxies in 90 markets, now that includes fixed income as well. About 12% of our revenue is international, but if you take Canada out, it's only about 4%. I have done international traveling, I have visited our international sites over this past year and we feel very, very good about the expansion of our strategy across the business as it is and the primary goal for this year is to feel the same way about that strategy worldwide as we feel about it as it relates to North American clients. And we believe that given the reputation we have, the strong reputation we have in North America, at the minimum, we should be able to service more of those entities' needs internationally than we are today.

Dan Sheldon

Yes, Rich, just let me add on one thing. You had mentioned that fixed income was primarily the revenue there. The way I would frame that is our equity business, trade equity business, and very importantly our Investor Communications business are the primary drivers of what we'll call that 12% or over $200 million. And yes, fixed income is a piece of it, but predominantly it's the other two I just mentioned.

Vivian Memelak – US Steel Pension Fund

Okay.

Rich Daly

Sorry, I thought I made that clear. Thanks.

Vivian Memelak – US Steel Pension Fund

Okay. Thank you. And the very last question I have is just in terms of -- you used the term meaningful for the size of acquisitions. I think you originally said something over $100 million. Where are you now in terms of thinking about meaningful?

Rich Daly

Without having transactions that are more tangible, and even if candidly we had something more tangible, we wouldn't be discussing it until it was closed. We believe that the organization we have can create value through revenue growth. And even though when we talked about the cash earlier in some of the Q&A here, if there was an opportunity out there beyond the $100 million that we thought would create meaningful shareholder value, we would go out and borrow to close that transaction. So I don't want to leave anyone with the impression we have a deal and we're about to announce it, but I certainly want to leave you with the impression that at every level in the organization including our Board, we strongly believe that we can create top line growth through new sales, through new products and through acquisitions, and we have a stronger focus than ever on the acquisition side. That's really where I need to leave it.

Vivian Memelak – US Steel Pension Fund

Okay. Thank you very much.

Operator

Our next question will come from the line of Tien-Tsin Huang with JP Morgan.

Tien-Tsin Huang – JPMorgan

Thank you. Appreciate all the disclosure here as well. I guess just a follow-up on the acquisition question. What is the criteria in terms of accretion or dilution as you consider doing deals?

Rich Daly

The criteria is that it will ultimately create profitable revenue growth. For most acquisitions, there is some initial dilution and our numbers do not consider any acquisitions in them, so we will be sensitive to this, but we're ultimately looking to create long-term shareholder value growth.

Tien-Tsin Huang – JPMorgan

Got it. And then I guess just a few follow-on questions. How critical is your leverage and credit rating in the eyes of your clients with respect to, I guess, securing any new deals particularly in C&O and as well as in Securities Processing?

Rich Daly

It really can vary from client to client, but the way I look at it is, we don't want a reason and a large deal why someone could say, well, it meets all the criteria but we're concerned about what happens if the economy hits a rough patch. So, we think where we are right now and what we've proven with our strong cash flows and our ability to successfully run the business since the spin, we believe right now we're positioned where we need to be. That will not be an item that will block any transactions as we go forward and that's where we wanted it to be. So, having a solid investment grade rating is in line with the quality of our business and we think it delivers the right message. We are not --I'm not committed to taking that rating to higher levels. We want to maintain a solid investment grade rating.

Dan Sheldon

Right. And let me also say to that too, it's not just the rating agency, as we move out years to come now having that investment grade and as Rich mentioned, solid investment grade, not necessarily higher, it allows for our ability to get what we call debt when we want to get debt. So currently we have a revolver, what we want to go is make sure that we can maintain and continue to have a revolver at decent rates if we ever needed to borrow.

Tien-Tsin Huang – JPMorgan

Understood, that's helpful. Then the sales plan at $160 million to $180 million that you mentioned, Dan, how much of that is subject to client delays or postponements? I appreciate the commentary around some of the delayed outsourcing decisions, but I am curious how much of that could influence the $160 million to $180 million, how much of that did you factor in, and I guess just generally in outsourcing, I guess the upfront cost of doing deals, is that currently being overshadowed by the cost savings potential behind some of these deals? I have another question.

Rich Daly

When we (inaudible) our sales plan, we don't include our pull at mega deals. So, we're anticipating in our increased product breadth that we can successfully increase our sales close rate in the range that we gave you.

Dan Sheldon

Let me add, I kind of know where you're going, so it's a great question and we're going to prepare ourselves this time to answer it, but it looks like we have so much to cover, we're going to move it off to the next one, but let me answer it now which is timing. When we gave you the $160 million to $180 million, that is what our sales force we expect to have signed contracts as we call closed deals. When you look at that, we also said that about 60%, 65% of that was going to be recurring and the other half being event-driven. When you look at event-driven, 85% of event driven revenue that we call sales will become revenue in that fiscal year. When we talk about recurring and primarily if we talk to you about transaction reporting or fulfillment and that's been about $30 million, $20 million range kind of business for sales, that takes about half a year to convert. And finally, when we're talking about our Securities Processing or in our outsourcing, that's where we have said that you need to be thinking more of a six-month to as far out as a year for any kind of conversion. So hopefully that helps with our modeling both from our sales plan to our revenue plan.

Tien-Tsin Huang – JPMorgan

Good, that does help. Let me just ask one last one, if you don't mind, just detail on the issue with Yahoo! Was the potential fallout from the negative news [ph] folks was running that proxy issue?

Rich Daly

We have extensive activities. We have 19 full-time people who check votes. We have extensive SAS 70 [ph] external reviews, a half dozen or so. We spend more on vote verification alone in my opinion than everyone else combined spends on processing votes. So this is a very, very detailed process. The nature of this was very serious and unfortunate in that it was such an isolated activity. The system verification process worked perfectly. It was on this particular tabulator doesn't take an electronic vote and the paper ballot truncated at 8 digits, so we -- every time anything of any nature has come up, we are extremely transparent here. And so the entities that matter the most call it the NYSE, the SEC, et cetera, are very well versed on how detailed our procedures and systems are here, and recognize that the chasm between us and any other alternative is just huge. So, my concern here is related to the occurrence of this. I didn't mean to imply a concern that the mission critical role we provide could be replaced or if even replaceable by any other entity out there given how dramatically ahead we are of anyone else who even represents they can provide these services.

Operator

Our next question will come from the line of Milan Gupta with South Point Capital.

Milan Gupta – South Point Capital

Hey guys, congratulations on a good quarter. Could you talk about the trades per day outlook in '09 and what your expectations are both on a fixed income and equity side and what you’re hoping for the guidance, and also just help me reconcile some of the volume growth we see at the major exchanges with you guys' trades per day as being flat?

Dan Sheldon

Okay. When you think about next year -- I’ll split it like you’ve done between the equity and the fixed income. When you think about the equity and what we’re going out with our plan, I said, if you’re thinking about the low-end guidance, we’re thinking it’s virtually flat, it stays flat to maybe a couple of points of trades per day growth. So, that $2.5 million would either stay at $2.5 million or move up slightly a couple of points. If you’re thinking at our higher-end of the guidance, that’s where we say high single digits to as high as 10% or 11% that is the equity side. On the fixed income side, we’re pretty much in the same plate. Even though we have seen a lot of activity and you can see that on the charts we’ve given you, in the high 20s right now of trades per day, that we believe is being generated by a lot of what’s going in the mortgage space in that business, and we’re not sure that’s really going to continue as we really move into next year. So, that’s why we’ve discounted that a little bit. And as far as thinking about the industry out there or the New York Stock Exchange and the kind of statistics you’re seeing of growth coming from there, our clients aren’t behaving the same why. That’s what I can just generally say. We said that same thing back at Q3 because usually we have said we had a pretty good alignment at least as far as they’re growing, we’re growing, and at about the same rate, but we haven’t seen that for the last two quarters.

Milan Gupta – South Point Capital

Got it. That’s helpful. And then one other follow-up, could you talk a little bit more about this Investigo acquisition that you guys did, what it allows you to do as you go to the marketplace and what sort of returns or EBITDA or cash flow you expect to get out of this?

Rich Daly

The Investigo acquisition, the data [ph] aggregation, is in the wealth management space. Somewhat of a holy grail out there where if you can, if you’re advising a client and you can get access to all of their investments regardless of who the custodian is, who the broker, or bank trustee is and then provide them a complete view, this gives you an advantage in servicing them and ultimately attracting more assets and managing more of those assets as you go forward. So, this is something we’re committed to be a leader and all processing including wealth and retail processing, and it’s something what we believe this will differentiate even further as we go forward. In our transaction reporting business, we believe that this will also generate opportunities because we’re aggregating this data. We certainly should be able to create opportunities to do the actual reporting of the data whether it be in paper or electronic as well.

Dan Sheldon

Just let me add to there. If you remember, we did an acquisition called Interflex [ph], again a smaller acquisition in the beginning of the year. We just did the Investigo and as Rich mentioned, this was a data aggregation on the Investigo, and think about Interflex more as a wealth management content. We aren’t going to look at those as standalone. Those are absolutely going to be merged into our businesses as we develop the product and look more perhaps we are talking about wealth management products as Rich said for an overall return, meaning increased sales and revenue for a combination of those things.

Milan Gupta – South Point Capital

Right.

Dan Sheldon

Let me add one other thing here. We talk about the large deals and for that matter old transactions. There’s always going to be a tipping point where the client will have to acknowledge that our capabilities are better than their in-house capabilities. So, these activities are driven by looking at our value propositions, looking for ways that we can increase those value propositions, and not through just desire, but through real market study, understand what we believe a real tipping point is to increase sales activity and to create profitable top line growth. That’s what our focus is on, profitable top line growth, and all of these transactions are tied to that.

Milan Gupta – South Point Capital

Thank you.

Operator

Our next question will come from Leo Schmidt with the Chubb Corp.

Leo Schmidt -- Chubb Corp

First of all, very good quarter gentlemen. Could you give us a little more insight into this new product you’ve been talking about? I know you’ve been talking about growing sales through acquisitions and then through products you invest to networks. Could you give us some insight how big that you think you could grow that? Could you explain a little bit how that works? Would that be something that investors would pay for, companies would pay for, would this be mandated by the SEC? Would you page your goal or could you give us a little sense of how that works and I’m assuming the incremental cost would not be that much bigger additive to revenues? Could you give us some sense to that?

Rich Daly

Okay. Well, the first thing I’m going to give you the sense of, is really hard to say this early. I took the unusual step and we actually talked about it internally here, but I took the step of talking about it now since we will be meeting with so many new entities out there on this topic. I really had a need to make it public completely. So far, the experts we are working with view it as on a range as – some of them think, well, maybe it will work, maybe it won't, maybe it will just be another social network. To some of them, their eyes bulge open and say, wow, this could really be a game changer.

The activity here is really going to be driven by, is the SEC going to deem that this is something that shareholders need to have the right to. And if that was the case, then I can't imagine at getting done any other way than through the plumbing we have in place, and again that's a chasm between us and any one else, no one else is close to connecting every investor to every public company.

If this is going to be something where it's on a shareholder opt-in basis only, then the validation process becomes a little more complicated, but again we are uniquely positioned to create that validation. And that would be, I'll called it, a more evolutionary process where we take longer for the network to gain hold.

Now, depending on which way it happens is depending on who will pay and what the model will be. If it's an opt-in model, I expect it's going to be probably similar to an eyeball model where there is going to be advertising, et cetera. If it’s a right of shareholders, then it could be a combination of fees and banner advertising or other related activities. We have a significant number of people internally and externally working on this. We are looking to use the best mind on this activity outside of here. But let me be very clear. I think it's upside, I think there's very little downside, but we're certainly not putting anything in any numbers we are representing to you to related to the future as it relates to this activity. But it is meaningful enough that if it was to become a real deal, we would be uniquely positioned with a high quality social network with real investors who are validated accountable and have an amenity, and I will call it a place where serious people could have serious conversations about their investments.

Leo Schmidt -- Chubb Corp

I am assuming that some regulator somewhere has made noise about how making this happen and this is part of the reason why you have interest in this. This is not -- is that a fair assumption?

Rich Daly

I have had meetings with the SEC staff and the chairman of the SEC on this topic.

Leo Schmidt -- Chubb Corp

Okay, that's terrific. And then, I guess if you could give us some more insight to what -- for your tending of debt, what would be the range of cash you would put to use for that?

Dan Sheldon

I think I understand the question on how we put that to use, I mean.

Leo Schmidt -- Chubb Corp

I mean, well, how much money you think you're going to use to tend to buy back your debt?

Rich Daly

Well, right now, we've put out the 75 for the bond, okay, depending upon how many people go for it, it could be a little bit higher or whatever. But overall, we are thinking at somewhere between 100 to 150 for overall debt, whether it be related to the bonds or related to our term debt, we will be paying down to get us a debt of 300 to 350 level.

Leo Schmidt -- Chubb Corp

Great thank you very much, good quarter.

Dan Sheldon

Thank you.

Operator

And our final question will come from the line of Charlie Park [ph] with Finlink Park [ph].

Charlie Park - Finlink Park

Yes, good morning. If you were to have signed one of your (inaudible) Securities Processing side, if you're doing over 500 million there, given the time of 36 months to get them converted, would that meaningfully change the margin assumptions that you've put out on slide 10?

Rich Daly

All right, let me put things in perspective here. If you’re talking about a really large transaction, you really need to be thinking of the conversion taking a year plus. On our outsourcing activity, we have had something we referred to in the past as what we call Project 57, where we had identified, it's now over 100 entities that are clearing through someone else that we believe could be in a self clearing environment through our combined ridge and SPS offering. And we actually have done meaningful transactions, now meaningful meaning call it $3 million to $5 million in revenue. And from signing to conversion has been 6 months, but that's where we’re taking somebody who is clearing through another entity and going self clearing using both our system capabilities and then outsourcing the people to us, but putting themselves in a legal position of self clearing. The very large deal that we aspire for and the word aspire is probably the right word here, we believe any of those transactions would more than likely take a year plus to convert. And there are no announced deals there, so we're not anticipating from a large transaction, any revenue in '09.

Dan Sheldon

Right, just to add on to that, because you asked this specific question on margins, in that space, whether we are talking about Clearing and Outsourcing or Securities Processing, we've said that if you think about new business coming on, which would be those sales, Rich very clearly pointed out the conversion time, but we've always said that those we would expect to have at least a 50% margin. On the outsourcing side, what we've said is we think in anything we're talking about there to have about 20% margin.

Charlie Park - Finlink Park

Okay, thanks.

Operator

I am showing that we have no further questions. I will now turn the call back to Mr. Daly.

Rich Daly

Carol thanks. Well, I really do want to thank everyone for their participation. We seem to have an increased number of questions, which also feels good. I am also delighted my voice held up pretty well from most of the meeting. With all that said, Dan, Marvin and I look forward to meeting and speaking with you in the near future. Thanks so much.

Operator

This concludes today's Broadridge Financial Solutions Inc. fourth quarter fiscal 2008 earnings conference call. Thank you for your participation. You may now disconnect.

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Source: Broadridge Financial Solutions, Inc. F4Q08 (Qtr End 06/30/08) Earnings Call Transcript
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