The Broadridge Second Quarter and Fiscal Year 2024 Earnings Conference Call began with the operator introducing the speakers and mentioning that the call is being recorded. The Head of Investor Relations, Edings Thibault, then welcomed everyone and introduced the CEO, Tim Gokey, and the CFO, Edmund Reese. Thibault also mentioned that forward-looking statements and non-GAAP measures would be discussed during the call. Gokey then expressed optimism about the company's growth opportunities and addressed the current complex environment. He also mentioned discussing these opportunities and challenges with clients at Davos.

The second quarter results for Broadridge showed healthy organic growth, with a focus on innovation and growth in both segments. There was also a strong emphasis on the promise of AI and the company's ability to adapt to geopolitical challenges. The company is on track to achieve its long-term goals and reaffirmed its guidance for the rest of the fiscal year. The governance franchise saw a 6% increase in recurring revenue, driven by new sales and a focus on delivering innovation.

The company is experiencing growth in various areas, such as adding new clients and selling global insights data to asset managers. Regulatory revenues have increased due to investor participation, particularly in managed accounts. The company expects mid-single-digit growth in equities and funds in the second half. Other product lines, such as issuer and data-driven fund solutions, also saw strong growth. The company's digital transition strategy is paying off, as evidenced by the successful onboarding of a large wealth manager to their digital platform. This has resulted in lower costs and increased investor engagement for the client.

In the fourth paragraph, the company reports a 10% increase in capital markets revenues and highlights their focus on optimizing trading and connectivity, as well as simplifying clients' back-office technology. They also mention a new win at a regional bank and their efforts in driving innovation with distributed ledger and AI capabilities. In the wealth and investment management sector, revenues rose 4% due to strong growth from UBS, but were partially offset by the E-Trade transition. The company also mentions their success in closed sales, which have risen 12% in the first half and have a record pipeline for the second half of the year.

Broadridge is seeing positive movement within their pipeline, leading to increased confidence in the second half of the year. Clients are investing in products that drive revenue and meet regulatory requirements, which aligns with the company's strengths. They have a strong pipeline in governance, with demand for digital and print solutions for tailored shareholder reports. There is also increasing demand for global insight data products and opportunities in customer communications. The company is on track to meet their guidance for strong closed sales for the year. Broadridge has made investments to align with long-term growth trends, enabling them to help clients and deliver consistent growth for investors. This quarter shows how they are executing against these priorities in governance, capital markets, and wealth and investment management.

The company is committed to being a leader in AI and incorporating it into all of their products. They believe their unique position in the financial services industry gives them an advantage to provide solutions for clients. The company is on track to meet their financial objectives and deliver strong returns for shareholders. The CEO thanks the company's employees for their hard work and mentions their recent recognition as one of Fortune's most admired companies.

The article discusses the tenth time Broadridge Financial Solutions has been recognized for their commitment to delivering great service, resiliency, and innovation. The first half of the fiscal year has shown strong results, with recurring revenue growth, margin expansion, and positive free cash flow. The company plans to increase capital return to shareholders through share repurchases and expects to meet their full year objectives. The demand for their products is strong, with sales up 12% and mid-single-digit growth expected for the full year. The financial summary on Slide 6 highlights the performance for the second quarter.

In the second quarter of fiscal year 2024, recurring revenues for the company increased by 6% to $899 million, driven by converting backlog to revenue, fund position growth, and trade volume growth. The company also saw growth in its ICS and GTO segments, with ICS recurring revenue growing by 6% to $493 million. Regulatory revenue, data-driven fund solutions, and issuer revenue all saw increases, while customer communications revenue remained flat due to a decline in print revenues, which the company is working to replace with higher-margin digital revenues.

The combination of the company is expected to result in low single-digit top line growth and expanding margins. GTO saw 8% growth in recurring revenue, with strong performance in front office BTCS solutions. Wealth and investment management revenue grew 4%, with expected full year growth in line with the company's 5% to 8% organic growth objective. Equity and fund position growth remained healthy, driven by increased investor participation and positions per investor. Testing for equity position growth shows mid-single-digit growth for the second half of the year, leading to an expected full year growth of 6% to 9% in recurring revenue.

In the second quarter of the year, there was a 5% growth in mutual fund and ETF positions, driven by passive funds. Trade volumes also increased by 12%, with strong growth in fixed income trading. Recurring revenue grew by 6% organically, in line with the company's 5-8% growth objective. Net new business and internal growth contributed to this, along with a boost from wealth management. Total revenue grew by 9%, with recurring revenue being the largest contributor. Distribution revenue and event-driven revenue also contributed to this growth.

The company expects to see increased mutual fund proxy and contest activity in the second half of the year, leading to a higher revenue range than previous years. They have the flexibility to adjust investments based on performance and have increased growth investments in Q2. Adjusted operating income margin was down from the previous year due to timing of expenses and investments in product enhancements. The company expects adjusted operating income margin to increase year-over-year to 20% and will complete a restructuring initiative by the end of the fiscal year. This charge will not be included in their calculation of adjusted operating income and EPS.

In summary, the company has had a strong start to the year with increased sales and a positive outlook for the rest of the year. Free cash flow has also improved significantly, leading to a balanced capital allocation policy and the potential for additional returns to shareholders. The company is on track to meet its full year guidance and is successfully executing its financial model.

Broadridge expects 6-9% recurring revenue growth, 20% adjusted operating income margin, and 8-12% adjusted EPS growth for fiscal year 2024. They also anticipate closed sales of $280-320 million and high single-digit EPS growth for Q3 and Q4. The company has a high free cash flow business model and plans to invest for the long term. They are confident in their ability to consistently generate 100% free cash flow conversion and plan to return $700-800 million in capital through dividends and share repurchases in fiscal year 2024. Broadridge is optimistic about their growth potential and believes they can meet their objectives for 2024-2026. The first question in the Q&A session asks about the Wealth segment, and the company clarifies that client losses were a 3-point drag on recurring revenue growth. They believe that without these losses, the Wealth business would have grown about 6-7%.

The speaker discusses the company's history of retaining recurring revenue and their strong performance in transitioning E-Trade. They also mention the expected revenue from the wealth segment and the potential losses from transitioning E-Trade. The speaker then addresses the company's closed sales outlook and their bullish tone, attributing it to a strong first half and a supportive backlog.

The company has seen growth in the areas it has been investing in, such as the front office and wealth management. They are having good conversations about tailored shareholder reports, digital communications, and front-office and wealth discussions. While other tech companies have expressed caution and sales cycles remain extended, the company is seeing a conversion of its strong pipeline and is confident in achieving its sales guidance. One analyst asks about headwinds and tailwinds, specifically regarding revenue and expenses. The company expects event-driven revenue to be above historical averages, but is guiding towards the lower end of its record growth range. They will balance out these dynamics in their guide.

The speaker is responding to a question about the increase in SG&A expenses compared to revenue in the previous quarter. They mention that this was due to a ramp in event-driven revenue and that they are confident in meeting their full-year guidance. They also discuss the increase in investments made in the current quarter due to the strong event-driven revenue, which will drive long-term growth while still staying within their overall guidance range.

The company is confident in meeting its recurring revenue guidance, with strong conversion of backlog to revenue and mid-single-digit growth in testing. Float income is expected to remain consistent. The company has a history of margin expansion and expects to reach a 20% AOI margin for the full year. They are creating investment capacity for future initiatives. The company is also confident in meeting their wealth expectations for the third and fourth quarters.

During a conference call, a representative from E-Trade discusses the company's performance in the previous quarter and expectations for the upcoming quarter. They mention that E-Trade was off for most of the previous quarter but do not anticipate a decrease in performance going forward. The company also expects both the capital markets and wealth management sectors to meet their long-term objectives. The representative also discusses their recent conversations with clients at Davos and their expectations for demand and capital investment in the current operating environment.

The demand for the second half of the year is driven by a combination of catch-up discussions and new discussions. Customers are being cautious and looking for tangible returns and specific needs. The company has a solution for tailored shareholder reports which is expected to drive sales and improve their relationship with the fund industry. There is also a demand for digital communications and the company has successfully converted one of the large wealth management players. The omnichannel communication strategy has a long-term conversion to digital and a midterm period for unvended markets. The company also has discussions in the front office.

The speaker discusses the company's position as number three in the market, with numbers one and two not investing in their business. They mention strong discussions with clients and a doubling of sales in the wealth side. The company has been making progress in cross-selling opportunities, with a pipeline of over $200 million. The use of live software and demos has helped to convert this pipeline into sales. The company has invested in and modernized 29 different components for UBS.

The company is seeing different paths for immediate needs and a transition to a "north star" in areas such as taxes, client onboarding, and corporate actions. They are having good conversations in the US and Canada and expect $28 million to $30 million in incremental sales from wealth. The BRCC business has shown strong growth after initial challenges and the company is focused on their omnichannel communication strategy to leverage scale, technology, and drive from print to high-margin digital.

Broadridge expects to see low single-digit top line growth with expanding margins and low double-digit earnings growth over many quarters. The move away from 30e-3 will result in a $30 million headwind, but the company is confident that this revenue will be more than replaced due to the demand for tailored shareholder reports. These reports condense the 150-page annual and semiannual reports into a 2-3 page summary, making it easier for investors to digest. However, this creates a challenge for clients as the reports must be tailored to the specific share class.

In the past, reports had to be manually looked up and customized for each individual, resulting in a large number of SKUs and making it difficult to print and keep inventory. However, the company's investment in digitizing regulatory reports allows for the consolidation of multiple reports into a single envelope, resulting in significant savings for clients. Additionally, the company has also moved into the composition side of things, previously done by other companies, and is now able to tag reports with XBRL for easier digital delivery and data extraction.

The composition engine used by the company is unique and easy to use, with XBRL tagging embedded. The company has seen a lot of client interest in this and is moving upstream to have a deeper relationship with asset managers. The company has changed its growth objectives for GTO from 5-7% to 5-8%, with strong growth expected in fiscal '24. The investments made in front office capital markets and wealth management are expected to contribute to GTO's growth. Both capital markets and wealth management are expected to perform in line with the company's growth objectives.

The speaker is responding to a question about the company's ability to modulate investment spend due to higher event-driven revenue. They clarify that the investments are one-time and mainly involve leveraging third-party providers. The next question is about updates on wealth and the impact on free cash flow. The speaker also briefly discusses the strong quarter in capital markets and the state of the market. They also clarify that the company has access to a lot of data for their AI products, but it is not specified if they own the data or just have custody of it.

The speaker talks about their investment in AI and how it can be beneficial for their clients through mutualization. They also mention being careful with client data and potentially using it with permission in the future. AI can also be used to automate processes and save time for ops professionals.

The company is excited about the potential of AI and how it will drive efficiency for their clients. They also see growth potential in their front office capabilities, converting revenue backlog into revenue, and trading volumes. The company is confident in their capital markets and wealth business, expecting it to meet their 5% to 8% growth objective.

Tim Gokey, CEO of Broadridge Financial Solutions, speaks about the company's capital markets team and their impressive innovation and thought leadership in areas such as digital ledger repo, LTX, and AI. He also mentions the company's strong conversations with clients and their focus on growth. The company is on track to have a strong year and make a difference for investors, clients, associates, and shareholders. The conference call has now concluded.

This summary was generated with AI and may contain some inaccuracies.