The Broadridge Financial Solutions Third Quarter and Fiscal Year 2024 Earnings Conference Call began with the operator welcoming participants and outlining the call's format. Edings Thibault, Head of Investor Relations, then introduced the CEO, Tim Gokey, and CFO, Edmund Reese. Tim Gokey expressed satisfaction with the company's performance in a challenging market and highlighted the importance of technology investment for their clients. He also mentioned the positive trends in capital markets and retail investor activity. The call will include forward-looking statements and reference non-GAAP measures, with more information available in the earnings release and presentation.

Broadridge is benefiting from clients' cautious spending and their willingness to invest in solutions that address revenue, cost, and regulatory needs. The company reported 4% recurring revenue growth and 9% adjusted EPS growth, with a focus on driving democratization and digitization of investing, simplifying and innovating trading, and modernizing wealth management. Closed sales rose 29% in the quarter and are up 19% year-to-date. The company expects to achieve 100% free cash flow conversion for the full year and plans to use capital for share repurchases and strategic M&A. Broadridge is on track to deliver steady and consistent growth in line with its long-term financial objectives.

The company is reaffirming their outlook for fiscal '24, with expected adjusted EPS and recurring revenue growth. They also had strong year-to-date sales and expect record closed sales. The company's governance franchise saw a 1% increase in recurring revenue, but flat revenues in regulatory communications due to a shift in the annual meeting schedule. Position growth trends were mixed, with equity positions increasing by 5% and fund and ETF record growth declining by 1%. This is primarily due to lower fund flows and a shift to money market funds. The company expects a modest pickup in the fourth quarter and overall growth of 6% for stock records and 3% for fund records for the year.

Broadridge's democratization of investing is a key part of their long-term growth strategy, demonstrated through their handling of the Disney proxy fight. They processed and distributed communications to millions of shareholders and ensured accuracy through multiple reviews and an independent accounting firm. Broadridge's investments in technology and digital communications enhance investor confidence in the markets. They are also expanding their services to support voting choice across funds and are continuing to roll out a tailored shareholder report solution. In the capital markets, revenues increased by 8% due to strong growth in BTCS, which aligns with their original acquisition case. They also signed a leading U.S. client during the quarter.

BTCS, a global financial technology company, has secured a major global bank as the first client for its new global futures and options SaaS platform. This expands their derivatives trading solutions and aligns with their long-term growth plan. They have also successfully implemented a global post-trade platform for a leading Nordic bank, consolidating their legacy systems and streamlining operations. In their Wealth and Investment Management sector, revenues rose 11% and sales are up 75% year-to-date. They are seeing strong interest in their wealth capabilities, particularly in Canada. Sales have also increased by 29% in the third quarter and 19% year-to-date, driven by strong demand for their digital and print solutions.

The company has a record pipeline and strong sales, giving them confidence in achieving their full year guidance. They are on track for mid single digit organic recurring revenue growth and double-digit earnings growth. The growth is driven by long-term trends and they have high visibility for the remaining volumes. The outlook for financial services firms is improving, with increasing capital markets activity and innovation driving sales growth.

Broadridge is experiencing strong growth thanks to a combination of factors such as equity markets, investor engagement, and execution of their growth strategy. They are on track to achieve their 100% free cash flow conversion objective and are well-positioned to return capital to shareholders. The company remains focused on long-term growth and is expected to meet their three-year growth objectives. The CEO thanks the company's associates for their efforts in serving clients and driving success.

Broadridge is entering the fourth quarter with strong momentum, reporting 6% recurring revenue growth, 11% adjusted EPS growth, and a high confidence interval in their ability to deliver on their financial objectives. They are also on track for 100% free cash flow conversion and plan to return a total of $700 million to $800 million to shareholders through dividends and share repurchases. The company's wins, including increased closed sales and a healthy pipeline, are driving positive momentum and they are focusing on managing expenses and restructuring to create investment capacity for organic growth. Their free cash flow conversion is back at historical levels, allowing them to supplement growth with M&A or return capital to shareholders. Overall, the future looks promising for Broadridge.

Broadridge had a strong third quarter with recurring revenue increasing by 4% on a constant currency basis, all organic. Adjusted operating income also increased by 7% and adjusted EPS rose by 9%. The company remains on track to deliver on its three-year financial objectives and expects mid- to high-teens return on invested capital. Despite a delay in proxy communications, the company expects to see growth in the fourth quarter. Recurring revenue grew in both the ICS and GTO segments, with regulatory revenue being flat due to timing of annual meetings.

In the third quarter, timing variances did not significantly impact full year revenues, but did result in varying quarterly position growth. Data driven fund solutions revenue increased by 4%, issuer revenue was up 3%, and customer communications revenue rose 1%. For the full year, they expect low single digit top line growth driven by double-digit growth in digital revenue and low single digit print growth. In the fourth quarter, they expect high-end organic growth in ICS and recurring revenue growth of 7-9%. In GTO, recurring revenue grew 9%, with capital markets revenue increasing by 8% and strong performance in front office BTCS solutions.

The Wealth and Investment Management revenue grew by 11% in the third quarter, driven by the UBS contract and higher license revenue. However, there was a negative impact from the E-Trade transition. The company expects capital markets growth to be affected in the fourth quarter due to high license revenue and the E-Trade transition. Despite this, there is a 9% growth in recurring revenue and the company is confident that it will meet its 5% to 8% organic growth objectives for the full year. Equity position growth was in line with expectations, driven by double-digit growth in managed accounts. The company has received record data for proxies and is expecting a 6% growth in equity positions for the full year. Trade volumes increased by 11%, with fixed income volumes seeing double-digit growth and equity volumes seeing more modest growth.

In Q3, recurring revenue grew 4% with net new business contributing three points of growth and internal growth contributing one point. Foreign exchange had a positive impact on recurring revenue growth and is expected to continue in the full year. Total revenue grew 5%, with recurring revenue being the largest contributor. Distribution revenue grew 4% due to postal rate increases, while event driven revenue was up 29% and is expected to reach $260 million to $280 million for the full year. The company is making investments in growth while still delivering on short-term financial goals.

In the third quarter, the adjusted operating income margin increased by 40 basis points to 21.4%, with the net impact of higher distribution revenue and float income contributing 20 basis points. This was aided by the restructuring initiative that began in Q4 '23, with a small non-core GTO business being exited in Q3 '24. The company remains on track to complete the restructuring initiative by the end of the fiscal year. The disciplined expense management and operating leverage of the business model allows for investments in long-term growth. Closed sales in the third quarter were $80 million, a 29% increase from Q3 2023, and bringing the year-to-date total to $185 million, a 19% increase from the same period in 2023. This growth is attributed to investments and innovation in product areas such as tailored shareholder reports, BTCS, and wealth, as clients are willing to invest in areas that drive revenue, lower costs, or address regulatory requirements.

The company is confident in meeting its full year guidance and expects to have a strong fourth quarter. Free cash flow has increased compared to last year and the company plans to invest in technology and return capital to shareholders. The company is on track to generate $3 billion in free cash flow and maintain a 2.5 times leverage objective.

The company has had a strong start to the year, balancing investment for growth with capital return to shareholders. They expect to reach $700 million to $800 million in capital return and are well-positioned for accretive M&A. They anticipate a 6% growth in recurring revenue and 20% expansion in AOI margin for the full year. They also expect to drive 100% free cash flow conversion and have capital return of $700 million to $800 million through dividends and share repurchases in fiscal 2024. The company is confident in delivering a fiscal 2024 in line with their guidance and has positive momentum in their business, including strong sales demand and growing investor participation. They also have the capital capacity for accretive tuck-in M&A. This positions them to deliver on their three-year financial objective.

Tim Gokey, the speaker, is excited about the progress of OpsGPT and BondGPT, two AI products that the company has developed. They have already signed up clients and are in discussions with others. The company is also using AI in their asset management side, with several major asset managers already signed up. The company sees a lot of potential in deepening their use of AI in these unique areas, as it makes sense for them to invest in these markets. They are particularly excited about the potential for AI to drive growth in the fixed income world.

The company is excited about the potential of AI in the future and believes it will bring both commodity and exclusive aspects to their products. They have a strong organic growth plan but are now open to M&A opportunities due to reaching their financial goals. They are looking for opportunities that align with their strategy and have a high return on investment. They believe there will be a stream of opportunities in the areas of wealth management and data analytics, as private equity firms are making their properties more attractive to potential buyers.

The company will be very selective in its investments, only choosing attractive opportunities that will have good returns for shareholders. They are currently in a strong position to allocate capital towards share repurchases and supplement organic growth with M&A. Recent bookings have been less transformative, but the company is seeing potential for larger deals. In terms of wealth management, the company is seeing opportunities that are resonating with prospective customers.

The company is seeing a trend in smaller, manageable opportunities for bookings. They are seeing demand in areas that will drive revenue and costs, such as BTCS, adviser tools, and print to digital. This aligns with the investments they have made and they are expecting a good return on these investments. The wealth management sector is also seeing good traction, with a 75% increase in sales and a current pipeline of over $200 million. Clients are looking for solutions to specific pain points and are interested in the company's open API framework and enterprise integration service layer as a long-term digital roadmap.

The company is experiencing good conversations in both the US and Canada, particularly in areas like tax, client onboarding, and corporate actions. They are tracking 6% recurring revenue growth, which is at the low end of their range, due to lower position growth and revenue in their customer communications business. However, they have positive momentum going into the next fiscal year with estimated sales growth of 15% to 30% and an increase in position growth.

The speaker mentions that Q1 '25 testing data shows mid single digit growth, which is a good trend. They are on track to meet their three-year objectives, with 6% recurring revenue growth and 10% adjusted EPS growth. They will discuss fiscal year '25 in more detail on their Q4 call. The shareholder meetings being pushed into April will impact the regulatory and issuer revenues, but not data driven fund solutions or customer communications.

The operator thanks everyone for their participation and turns the call over to management for closing remarks. Tim Gokey thanks everyone for their interest in Broadridge and mentions their expected results for the year. He also mentions that they are looking forward to their next conference in August. The operator then concludes the call.

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