Broadridge Financial Solutions, Inc. (BR) Q1 2014 Earnings Report, Transcript and Summary

Good morning. My name is Shannon, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Broadridge Financial Solutions' First Quarter Fiscal Year 2014 Earnings Conference call. I would like to inform you that this call is being recorded. [Operator Instructions] I will now turn the conference over to David Ng, Managing Director, Investor Relations. Please go ahead, sir.

Thank you, Shannon. Good morning, everyone, and welcome to the Broadridge quarterly earnings call and webcast for the first quarter of fiscal 2014. This morning, I'm here with Rich Daly, our Chief Executive Officer; and Dan Sheldon, our Chief Financial Officer. I trust that by now, everyone has had the opportunity to review the earnings release we issued this morning. The news release and slide presentation that accompany today's earnings call and webcast can be found on the Investor Relations page at broadridge.com. During today's conference call, we'll discuss some forward-looking statements regarding Broadridge that involves risk. These risks are summarized on Slide #1. We encourage participants to refer to our SEC filings, including our annual report on Form 10-K, for a complete discussion of forward-looking statements and the risk factors faced by our business. Our non-GAAP fiscal year 2014 earnings results excludes the impact of acquisition amortization and other costs. These costs are significant and we believe that non-GAAP information provides investors with a more complete understanding of Broadridge's underlying operating results. A description of these non-GAAP adjustments and reconciliation to the comparable GAAP measures can be found in the earnings release. Now let's turn to Slide #2 and review today's agenda. Rich Daly will start today's call with his opening remarks and will provide you with a summary of the financial highlights for the first quarter of fiscal year 2014, followed by a discussion of a few key topics. Dan Sheldon will then review the first quarter financial results in further detail. Rich will then return and provide his overall summary and some closing thoughts before we head into the Q&A part of the call. Now let's turn to Slide #3, and I'll turn the call over to Rich Daly. Rich?

Thanks, David, and good morning, everyone. This morning, as part of my opening remarks, I'll talk about the following topics. First, I'll start with an overview of our first quarter fiscal year 2014 financial highlights and guidance. Then, I'll discuss our closed sales performance, followed by a few key updates, including the SEC's approval of the New York Stock Exchange's proposal on proxy distribution fees and EBIP. After Dan provides you more of the financial details, I'll wrap it up with my closing comments. Let's start on Slide 4, our first quarter fiscal year 2014 financial highlights. I am very pleased with our first quarter financial results. We had very strong revenue growth. Recurring and total revenues were up 11% and 10%, respectively, versus the comparable period in fiscal year 2013. Recurring revenue increases were primarily the result of net new business, as expected, and an increase in market-based activities which created internal growth across both segments. Positive market trends increased most activities, including trade processing, prospectus fulfillment and mutual fund interim volumes, while also supporting underlying proxy position growth. Event-driven fee activity was higher by approximately $8 million, primarily due to a pickup in Mutual Fund Proxy activities. We had record first quarter earnings per share. Our non-GAAP diluted earnings per share increased over fiscal year 2013 by approximately 117% to $0.39. This earnings growth was primarily due to higher revenues and improved productivity from our strategic initiatives. We're off to a great start to the fiscal year. While our market-based activities were trending positively across both segments, due to the seasonal nature of our business, our first 2 quarters' earnings results historically make the least significant contribution to our full year results. We will have a clearer view of any ongoing full year impact of increased market-based activities after the end of our second quarter. We are now reaffirming our full year guidance at this time, including recurring revenue growth of 5% to 7%; non-GAAP diluted earnings per share of $2 to $2.10; and free cash flow of approximately $275 million at the midpoint of our guidance range. Please turn to Slide 5, our closed sales performance. Recurring revenue closed sales were up 10% to $15 million from approximately $14 million last year. We did not close any transactions with revenues of $5 million or greater this quarter. Usually, our first quarter closed sales of less than $5 million contribute the smallest amount to the full year results. Generally, it is more difficult to schedule meetings and close new business during the summer months. Our pipeline remains robust, with very good momentum. We continue to make good progress on our emerging and acquired products portfolio and our jointly launched Accenture Post-Trade Processing platform. We were pleased to hear Accenture's view of the importance and potential of our alliance during Accenture's Investor and Analyst Conference on October 8. We are reaffirming our fiscal year 2014 recurring revenue closed sales in the range of $110 million to $150 million, which includes closed sales with revenues of $5 million or greater in the range of $20 million to $40 million. Let's go to Slide 6, some key updates. The SEC has approved the New York Stock Exchange's proposed fee changes on the distribution of proxy materials to beneficial shareholders. Included in the approval, the adoption of and fees for, an Enhanced Broker Internet Platform, or EBIP. As you heard me say, EBIP is in essence the same as our Investor Mailbox product, which we have successfully rolled out to 16 firms with an additional 8 firms in the process of implementation. We were pleased the New York Stock Exchange's proposal has been approved. We believe this is a win for all constituents, including corporate issuers, broker-dealers, regulators, investors and Broadridge. We are especially excited by the potential of EBIP. As we have discussed in the past, we believe the industry's use of innovative digital technologies will result in greater transparency, cost savings and higher participation in voting and in the corporate governance process by investors. In addition, we believe the approval of EBIP will drive accelerated adoption of our Investor Mailbox product and will also add to our growing digital solutions. Over the next several years, we anticipate that our full suite of Fluent digital solutions will move the needle in reducing the $20 billion of paper and postage spend our industry still spends on communications with investors. Broadridge will implement all the approved changes in an expeditious manner, as the fee changes go into effect during fiscal year 2014. We continue to believe the net financial impact of these approved fee changes will be neutral to slightly positive on Broadridge. We are very pleased that this long, complex industry initiative has successfully concluded. In August, we completed an offering of $400 million senior fixed-rate notes at 3.9% per annum. We used the proceeds of the offering to pay the remaining $400 million outstanding under our 5-year term loan. Given the market's outlook and our expectations, we believe it was advantageous to lock in a fixed rate at the time before the inevitable rise in interest rates. The resulting increase in annual interest rate expense is already reflected in our guidance. We are pleased to share that The Walt Disney Company is now live as a Broadridge transfer agency client. We are not only excited because of the iconic Disney brand, but also because of our ability to close a deal with arguably the largest in-house corporate stock transfer operation. As you may recall, we entered the stock transfer agency business primarily as a servicer of companies with a smaller number of shareholders. Over the last 3 years, we have been upgrading the technology platform to be in a position to service clients, such as Disney, which has one of the largest and most diverse global shareholder bases. Our differentiated and disruptive transfer agency strategy enables full communications between companies and all of their shareholders. I'll now turn the call over to Dan, who'll go into more detail about the quarterly financial results.

Thanks, Rich. Let's move to Page 7, our key financial drivers. The page, by the way, is broken into 2 sections. The top section shows our revenue drivers and their contributions to recurring revenues; and the bottom section has total revenues, as well as margins and earnings per share. So let's focus on the top section and the drivers. The yellow bar shows that our recurring revenues, as Rich mentioned, grew 11% this quarter and our recurring revenue growth guidance for the year of the 5% to 7%. At the top of this chart, you can see revenues from closed sales, that is 8 points of growth primarily from expected prior-period sales. And as for the fiscal year, we're expecting 7 to 8 points of recurring revenue growth from closed sales. The next line, the client revenue loss rate is at our expected 2% or, by the way, a 98% retention rate for the quarter. For the full year, we still expect a loss rate of about 3%. And as we pointed out in August, about 1 point of that loss and slightly above, for the year, is directly attributable to a business we're restructuring in the SPS segment. So be thinking much more than 98% on an ongoing basis. Internal growth, which is the next line, from trade volumes and stock record positions, was very favorable in Q1, adding 4 points of growth. Our full year outlook was and remains at flat to slightly up, as no 1 quarter is indicative of the full year. But we do like the trend in volumes that have been positive for the last 2 quarters. The next line, our acquisition of Bonaire in the ICS segment added 1 point of growth to the quarter and we expect this business to add about a point to the full year as well. Our guidance, by the way, does not take into consideration the effect of any future acquisitions. Now let's move down to the next section that shows on a total revenue basis, are what I just shared with you 11% recurring revenue growth translates to 7 points of growth to total revenues. Then adding in event-driven and distribution revenues, which were both up due to improved activity in Mutual Fund Proxies, you can see that our overall total revenues grew about 10%. A very nice start, by the way, to the fiscal year. Moving on to both margins and EPS for the quarter, more than doubled from a year ago and were above our expectations. To put the EPS growth of $0.21 for the quarter into perspective, let me share with you the following 2 points. About 1/2 or just under $0.10 came from expected net new business and gains in efficiencies, including the remaining benefit from our IBM data center migration. And the other half, from market-driven activities, related to trades and mutual funds which came in above our expectation. As we typically do, we'll monitor the market-based activities, as Rich already mentioned, during the next quarter to see what the trends suggest as we move forward. But this is what I'd like you to take away from this page and the next 2 pages, as you review them. Both businesses are contributing to a net new business growth, with ICS continuing to contribute, as historically the case. And by the way, very important, SPS is adding to its revenue base 8 points of growth due to net new business. When you look at it, 11 points coming from sales and then, as we said, the loss rate of about 3 points. Next point, both businesses are positioned for growth, given the new recurring sales activities Rich just shared with you on Page 5 of the closed sales performance. And of course, finally, both businesses, of course, are benefiting from the upmarket activities we've discussed. So Rich, I'm going to skip the next 2 pages and move on to Page 10, and turn it back to you.

Thanks, Dan. Please turn to Page 10 for my summary wrap-up. I am very pleased with the great first quarter start in fiscal year 2014. Recurring revenues continue to be strong. Closed sales are growing and we have a robust and growing pipeline. Favorable market-based activities in the first quarter, such as equity trading and mutual fund volumes, continue to be encouraging. We will have a clearer view of any ongoing full year impact of increased market-based activities after the end of our second quarter. Our client revenue retention rate was a strong 98%. We have a clear strategy for our journey ahead to drive top quartile returns to stockholders. With strong performance of top and bottom line growth in both our ICS and SPS segments, we believe our industry recognizes Broadridge's unique value proposition to its clients. The service profit chain is the foundation of our success. We continue to invest in our Associates worldwide, knowing that they will produce outstanding results for our clients. Our extraordinary client revenue retention rate reflects the value that they deliver. And that achievement, in turn, translates into great returns for our stockholders. Significant changes continue at financial services firms globally, and our product solutions are aligned to the growing needs of this complex industry. Looking ahead, we have a clear and executable strategy, focused on 3 major macro trends. They are: The digital transformation of investor communications; mutualization of duplicative non-differentiating industry costs; and the third trend, providing our clients with intelligence from data by structuring and analyzing the enormous amount of data that we process across our businesses. We continue to make progress and investments in the execution of our strategy to take advantage of the potential presented by these 3 key macro trends. To our digital strategy, our Fluent suite of solutions is already creating significant efficiencies in communications to investors by reducing unnecessary fixed costs while also increasing investor engagement. With a large client signed last quarter, our digital solutions will only gain more momentum, the stage now set for the wide adoption of EBIP, our industry, our Investor Mailbox or our Investor Mailbox solution, one and the same. In cost mutualization, we have already signed a significant client, Société Générale Corporate & Investment Banking, on the Post-Trade Processing platform we jointly launched with Accenture. Our solution is designed to help the bank improve competitiveness, adopt the changes in regulation and market infrastructure and reduce cost. We were pleased that on October 14, the first phase of the transformation has been completed, with SocGen transferring its securities processing back-office operations to Accenture. Moving to the second phase, we are now working to convert the securities processing onto Broadridge's technology platform. With respect to our data solutions. Broadridge processes a wealth of data to our platforms and networks. Our Access Data, Bonaire, Investago and both analytics products are approaching $50 million per year in data solution revenues. We recently created the ProxyPulse report in collaboration with PwC's Center for Board Governance to provide important insight to directors, company officers and large investors regarding voting trends, benchmarks and other key governance issues. These 3 macro trends create promising new growth opportunities for our associates, unique value for our clients and attractive, long-term total stockholder returns. Our journey going forward will be focused on the activities that will enable our industry to benefit from the enhanced customer experience and cost savings to our digital mutualization and data analytics solutions. We expect our journey will enable us to create top quartile stockholder returns. We remain confident in our fiscal year 2014 guidance. We anticipate solid recurring revenue growth, driven primarily from closed sales. We expect non-GAAP diluted earnings per share from continuing operations to be in the range of $2 to $2.10, which excludes the impact of acquisition amortization cost. GAAP earnings per share from continuing operations are anticipated to be in the range of $1.89 to $1.99. Free cash flow is expected to be approximately $275 million at the midpoint of our guidance range. Finally, I'd like to take this opportunity to personally acknowledge our extraordinary associates. Our highly engaged associates have enabled us to deliver record performance to close out the last fiscal year and to continue that momentum into this fiscal year. It's their commitment that enabled the high client satisfaction and resilient performance we maintained throughout the financial crisis. It is our associates who will create the ability for Broadridge to take advantage of the many market opportunities that are now appearing, as we head towards more normal market activities. I'll now turn the call over to Shannon, the operator, and we really look forward to taking your questions.

[Operator Instructions] Your first question comes from the line of David Togut of Evercore Partners.

About half of the earnings growth that you both addressed in the quarter came from market-driven activity, equity trade volumes, mutual fund event-driven activity and stock record growth. Could you talk about the growth you saw in each one of those 3 drivers? And to what extent do you think the growth you saw in the September quarter is sustainable for the next 12 to 18 months?

Sure. The market activity -- what's terrific about Broadridge and the linkage between both of our segments is that it's not just trading volume. But trading volume drives more communication volume, okay? Positive markets generally drive more mutual fund activity, with retail investors getting into the market both through individual positions and mutual fund positions. So the positive market activity that we've seen going on right now affects most of the products that we have in a positive way. I also added in my comments that it also helps support the underlying stock record positions, which is record date start to take place in January and February for proxy season. Right now, one would anticipate that being a slightly positive trend as well in terms of supporting the growth of those positions. David, I specifically said that we were going to wait, and I said it multiple times because I wanted everyone to hear clearly, we feel great about where we are, we feel great about the trend. It's the first quarter, and the first half overall is not what makes our year or breaks our year. It's certainly starting off great like this and better than we ever have, feels terrific but it's way too early to say that we're going to be looking at guidance or other activities and say that we are confident that we can raise those activities. But it certainly puts us in a position, when I say we're reaffirming it, I'll be reaffirming it with a higher level of confidence than I've ever done before.

Yes, Rich, let me just add on that piece. David, part of your question was also, think about it this way, it's a 50-50 mix. And the way I like to put it in perspective is, if you think about that achievement, calling the market-driven ones on trade volumes, because of the up 14%, it also moved this into some of what we call the higher tiers, so we're able to get additional benefit from that. The other side of it was, it was primarily driven by the mutual fund activities. So by giving you the 50-50, we're thinking the other side of it was primarily on the mutual fund side. And by the way, we've gone back and looked at this for many years. I wish I could tell you everything was going to repeat itself from 2007, '08 and '09. But the most important thing is we've seen no definitive trend except it's been slightly up. But if I were to go back and look at anything over the last few years, it's been spiking up, spiking down; spiking up, spiking down. We just have happened to have a nice trend, positive, and we'll take that. That's the other reason we're not ready to come out with anything more definitive than what we've said.

So in other words, you don't quite think you've turned the corner yet in mutual fund event-driven activity or you're just being conservative given the tough few years that we just saw?

Well, let's break the matter into 2 pieces. The term event-driven activity is just that. We have remained confident that funds need to do business, which includes reelecting their boards. And so, over a point in time, we believe that the low-volume trend that we experienced, had as much to do with cost management as anything else when the markets were weak. So we remain clear on our view that the low averages we experienced we don't think were sustainable. However, we don't have the ability, and I don't know anyone who has the ability, to tell us where that turn is. We certainly feel good about where we are right now, but we can only look out about 60 days. So that's another reason why as we get through the first half, we'll have a clearer view to discuss this, at least for this fiscal year, with a little more clarity. In terms of the other market activity, whether you want to use the word conservative or not, we are very confident in the guidance we just reaffirmed. We feel great about the trend. We don't have any reason to see why this trend will or will not continue, but it's certainly a positive position we're in. If we were ever going to consider something like raising guidance, it would be when we're equally confident in the ability to raise guidance as we were in just saying we were reaffirming our guidance. And given that there are variables in this business outside of our control, particularly tied to the market activity that we're referring to, we don't think we have any better ability than you do to say that market activity will continue. And so, until we have the numbers and we can bank on those numbers, because we've actually achieved it, that's the position we're going to take. We'd love to hear your views at a separate point in time in terms of what you think this market activity is, and is it going to continue on this path. On with one last comment. I'm not feeling, though, any headwinds at this point in time. And so when the volume spikes up and down that Dan discussed, it's been a while since we have felt headwinds.

Yes, and by the way Rich, I will totally confirm that piece. As we both said, though, we'll look forward to what the future brings us, but we're not looking at what we did a year ago of a 19% drop in volume when we talk about trades, okay?

Quick final question for me, if I could. Can you give us a sense of what you saw in terms of market-driven activity in October in terms of trades, mutual fund and proxy record growth?

So let me give you -- so I'm going to give you, by the way, also September and October. Because I'm going to tell you, you saw the quarter-end trade volumes and said, "Wow, up 14%." Well, you know what, I was thrilled when I saw July and August, and then all of a sudden, September dropped down about 4% growth. And then October picked back up to above 10%. That's our whole reason for sitting back and saying, "Let's be cautious and smart here because we're not seeing a trend every single month in a direction meaning very positive up." I just shared with you, it is positive in all those 4 months we just discussed. Does that help you?

Hey, Dave, I'm going to add 2 additional comments here. The 4% is still not a headwind, although it's not a strong wind at the back. 10% feels very, very good. Here's the thing, though, and the key message that both Dan and I said in the call. Whether it be 4% or 10%, we believe that a fairly normal market, we are now positioned because of the investments we made in the products, because of the discipline that we put in both segments to grow both top and bottom lines, positions us to grow both segments going forward in a meaningful way, and that's what is the foundation of our statements and our goal to create top quartile shareholder returns.

Yes. We both totally agree with that.

Your next question comes from the line of Niamh Alexander of KBW. Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division: The SEC approval a couple of weeks ago or a few weeks ago, what is next? As I know you've already been rolling Fluent out, too. Did you say 16 firms already, said another 8 to go, but walk me through what is actually next now that you've gotten the final blessing? What deals have changed? If it's not changing nothing, it's kind of given as official blessing, what does it change and what should we look for, maybe, in terms of the revenue to flow through as you kind of push through some of these advances in the technology?

Perfect. And I'm delighted you asked the question, Naimh. I want to clarify some wording here. So as we go forward it will be easier for people to follow. What we have decided to do when we went and branded it and trademarked it, et cetera, Fluent is going to be the overall umbrella -- the name Fluent is the overall umbrella for our digital solutions. We took one of our strongest leaders, Douglas DeSchutter, and that's his reason to exist, right? Now when we talk about the Investor Mailbox, the Investor Mailbox is part of the digital solutions which is now part of what we're trying to create the blend of Fluent solutions out there, right? So we actually have 16 brokers live on the Investor Mailbox and 8 in the process of implementation. In all of those, the 16 that are live, we've seen a dramatic increase when the activities that we perform for them digitally are available directly on the broker's website. The EBIP, which is really a simile for Investor Mailbox, will enable us now that there's a regulation out there and a clear indication from the regulators that they believe that this is the right thing for the industry to do, we believe the adoption rate of Investor Mailbox, or EBIP, should go up significantly. So we expect an increase in digital activities as that takes place. Fluent, when we talked about last quarter, closing a major client on Fluent, it's not only a commitment to using Investor Mailbox, but it's the other digital solutions that we are taking to market right now, such as a channel strategy, not only allowing the investor to use our digital proxy solutions, not only enabling that investor to use Broadridge's Investor Mailbox solution, private-labeled on that broker's website, but then going outside of that broker's website to other channels where investors can get information about their brokerage account or about statements, conference or proxies through independent channels, call it things like Amazon, Google, Facebook, et cetera. And we're still building out that technology to enable that seamless transition which is the core of the Fluent product right now under the Fluent suite of products. It's the most important new initiative where you could go and get brokerage information seamlessly through the way you live your life every day, whether that be Amazon Web Services, Google, Facebook, et cetera. And it would be a seamless integration to Broadridge with the broker's branding there, and you could seamlessly move back and forth between what you do in those other channels and what you want to do with your broker in a very convenient way. The key to all that is we don't think the strategy of asking people to live their lives by living -- by memorizing 50 to 100 passwords, go to 50 to 100 different places, to live their life in a normal way, is going to be the winning strategy. We think providing information where people want to go will be the ultimate winning strategy. One last comment, when we sign a Fluent client, we recognize very little in terms of closed sales value. Because at the time they go live, is in essence, no new revenue. What we're basing the revenue on right now is the increases of digital proxy activity that we've historically seen. What we're intending to do is to make this an increase of all communications activity for that broker. And that's how we're going to attack the $2 billion to $3 billion in our sights right now and ultimately the $20 billion at the brokerage, mutual fund and annuity community spends. Sorry for the long answer. Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division: No, that's helpful, Rich. Especially at the end of it, because I think where we can start to see it come through in the numbers as it were, because there's a lot of work going on behind it. So as you say initially, when you're signing these clients, we shouldn't be looking for a big jump in the pipeline either or anything like that, but the target is to kind of bring on more customers and less of the postage, as it were. And that's helpful. And then -- and I guess just back to kind of the market growth in the comments, because it is like second quarter in a row of nice double-digit mutual fund activity. But you're not really raising your guidance. And it's just -- you talk about better market activity. I mean, trading volume in the U.S. is actually down last quarter versus the prior quarter. I know you're not just in the U.S. So what else is it? Is it people getting into -- what we are seeing is covering financial services, is it just a lot of people going back into mutual funds and to active domestic mutual funds and equities and they've been in bond funds for a long time. So is that trend kind of particularly helping you? Like many more people just getting into equity mutual funds and -- or is it kind of continued growth of the ETF? What specifically should we be looking for there?

Sure. Trading activity, Neve, is a really complex topic. Because of what's going on around the globe with our major institutional global clients and the pressure on them as it relates to risk and capital requirements, we are anticipating that because of capital requirements, our institutional volumes could go down slightly, all right? And I think we're already experiencing some of that. Because we've done a strong job, not particularly on the institutional side, not focusing on cost per trade, but the total value, with the last trades having very little incremental revenue to us, that activity coming down, we do not expect to be materially negative, all right? Unless something was to dramatically change even beyond what people are predicting right now because of capital requirements around the globe. Positive markets, we will always have some wind at the back, because it's going to be more investors and, critically important, more positions. The IPO activity that's going on, and I know everyone is going to want to be watching Facebook -- I'm sorry, Twitter at 9:30, okay? Well, I don't care what you think in terms of Twitter going up and down. I can tell you, Twitter is a net positive for Broadridge. These are new investor positions, new trades, new confirmations. And without them doing an IPO, none of that would take place. And these things generally happen more in positive market activities. So looking at trading volumes and saying, "Wow, trading volumes are really up. It's good for Broadridge." Depending on what the mix is, may not necessarily be the case. Looking at overall trading volumes and saying "Um, I don't think this is going to be good for Broadridge," may also not necessarily be the case. That's why, as complicated as it is, Dan and I try to give you the overall pieces and what those pieces actually mean to us. But the trade on the institutional side versus the trade in the retail side are not one and the same.

Yes, I understand, too. Okay, and I was going to give you one thing more. And you asked about the ETFs, absolutely ETFs are helping drive this. And then also, the one other thing we've always talked about is, we used to be able to look at ourselves on various exchanges, like New York Stock Exchange, NASDAQ, but think about our clients being across all exchanges, all exchanges, and the activity going on there, okay?

Your next question comes from the line of Peter Heckmann of Avondale Partners.

When I look at the mutual fund event-driven revenue, I can see the strength there, with total event driven up maybe 26% and mutual fund up 32%. But can you talk about the interims, and maybe you addressed that on the last question, but with interims up 12%, is that more positions? It doesn't -- that number seems much larger than what I would have expected and that's the only piece of, I think, the market activity comments that you made that I'm not 100% clear on.

Okay, so, look, it's clearly more positions. And when I talk about market activity, that's clearly part of that positive market activity. And retail continues to view the mutual fund channel as a strong preference in terms of the way they participate in the markets.

Yes, let me just add. By the way, if you -- Pete, if you look back to last year, we even had 9% growth out of that space, and what we share with everybody, a lot of that was being heavily dependent upon what ETFs were doing. And this year, it's 12%. So it's not like it's a dramatic change, it's just continuing to be a momentum in that space.

Okay, okay. And then, when I think about the changes in the proxy fee schedule and the EBIP, I guess the way that I think about that is maybe some moderation of mainly distribution revenue. Not mainly distribution revenue, but I guess some moderation of proxy revenue, but also moderation of proxy cost of goods sold. So you were talking about the net benefit or the slight benefit from this change, you're talking about mainly on the operating income line?

Peter, think about this as just another opportunity to increase digital activity. So in all of our digital activity, our fees have gone up, our profit has gone up and our total revenue will be slightly down, right? But recurring fee revenue certainly goes up and that as well. So we're focused on recurring fee revenue and we're focused on, obviously, profit and margins.

Okay, okay. And then as regards to your guidance for the full year, 5% to 7% growth in recurring revenue but 2% to 4% growth in total revenue. And I believe that your event-driven revenue is -- the guidance is flat for the year. So is the delta all in distribution revenue?

No, no. The delta is in the -- meaning, right now, we're calling both flat for the year, primarily. And so put them as one equals the other. If event-driven is up, distribution's going to be up. If one is down, the other one is going to be down. But the way to think about it right now on our guidance was, we'll wait and evaluate as we see the next couple of quarters, because we can look 60 days out, on the event-driven especially mutual fund proxy's large deals and say whether or not we think that number is going to move or not.

Okay, okay. And then, last question. And I don't know if you mentioned it. How many TA clients do you have now on the registered side?

We have several hundred. But the key that you needed to hear here, is that the Disney position, okay, along with one of -- well, actually, along with a good number of other large clients that we've shared with you in the past, really moves this to, I believe, our model now, with both its differentiation and disruptive communication capabilities, has been recognized by what many people in the industry believed was an issuer with the highest standard and who was unwilling to outsource us in the past because of their view of their shareholders being their critical customers, as well, looking at this and saying, "Our technology play, including, by the way, Fluent, is the way that the world is going to be going." And that was the key to us being able to win this account, but it's not about doing the same old thing. It's about what are you going to do going forward to engage all shareholders into a dialogue, not only about the company, but about the products of the company.

Okay, okay. And then, last question and I'll get back in the queue. But -- and I think you've generally answered this, but in terms of significant upside in the first quarter, essentially did almost what we thought you'd do in the first half. But beyond writing down a small business within securities processing, there is no other offset beyond conservatism for the reason why you're not raising your total guidance today.

Yes. And so, Peter, when I put those comments in there about we're going to wait until after the end of the first quarter, we debated it here, we're going to rely on the fact that the first half is not an equal contributor to Broadridge as the second half. And so we're going to use that situation to take advantage of the fact that we're, in essence, kicking the can down the road to have more data. So if we do decide to change anything, we're doing it with a higher level of confidence and far less time left on the calendar before we could have anything alter that enhanced view. So when I said that I've never been this confident in reaffirming guidance, why don't we leave it at that for now.

Your next question comes from the line of George Mihalos of Crédit Suisse. Georgios Mihalos - Crédit Suisse AG, Research Division: Wanted to start off on the recurring closed sales side. You guys continue to express a lot of optimism or confidence, I should say, in achieving your targets. Is there anything to call out in terms of North American demand trends versus what you may be seeing internationally? Any change there over the last quarter or is it fairly consistent?

Well, it's been consistent going back to what I said after the Accenture initial transaction with SocGen. We see the North American markets having needs. We are continuing to look to expand our product set to meet those needs. And so without, call it, growing opportunity for proven vendors like Broadridge, I would call it about the same as it's been and generally positive momentum. In the last quarter, when we discussed the Accenture transaction, I represented, which is clearly the case in Europe, Asia, the Middle East and Australia, we covered those markets with very limited resources and it's a challenge to do that when you're selling a service as mission-critical as securities processing platforms. Now with Accenture and the Accenture army being assigned to bring this to the top 50 banks in those regions, but because of the partners who are signed, the coverage to the top couple of hundred banks in those regions, I would argue right now in terms of that activity, we have better coverage in Europe, Asia, the Middle East and Australia than we have anywhere else in the globe right now because of the Accenture army and because of the investment Accenture is making. That's why I specifically referred you so you could look at it yourself to their October 8 Analyst Day, where they specifically spoke about this transaction and their view of the strategic significance of it. Georgios Mihalos - Crédit Suisse AG, Research Division: Okay, that's great to hear. And then just to go back to the digital opportunity. Is there a way -- any target or some way to benchmark your success of Fluent, whether it's a target number of clients, say, 3 years out or a target number of revenues 3 years out? And should we be thinking about the EBIP opportunity really ramping more aggressively, starting in fiscal '15?

It's a great question. And I can tell you that it is a very significant priority within Broadridge. Every product we have, we look at not only where it is today, but what is the opportunity to disrupt that product. Because as I've said many times over the years going back to the spin roadshow, we're going to disrupt ourselves before we allow someone to disrupt us. That's how I started the business in communications and that's how we're going to continue to drive the business. We believe that if you provide people information in a convenient way versus asking them again, to remember 50 to 100 passwords to live their lives. Most importantly, if you provide them better content digitally than they're getting in paper, right? If you can achieve those 2 things, right, you will raise adoption rates dramatically. We've seen the Mailbox raise adoption rates for the investors who regularly use the broker website. So we are encouraged by the potential opportunity here to drive digital. We've already eliminated a high percentage of proxy, over 60% of the paper in that process, because we're really going now and attacking all financial communications across brokerage, mutual fund and annuities, it's way too early to declare, here's where we think we can be. We are confident, though, that we are investing and we are discussing products, we believe, beyond what any other provider is discussing at this point in time. And we believe that this evolution, both in terms of attacking digital and our product set, will ultimately enable us to create meaningful value. I would love to see it start sometime in '15, but I can't say with confidence that I'll be here talking about this new wind at the back because of what we've done -- what we have achieved in digital. Georgios Mihalos - Crédit Suisse AG, Research Division: Okay. And then just last question for me, just maybe some sense on the sales cycle for Fluent amongst the 16 brokers that you already have signed up there.

Okay. So again, the 16 brokers are live on Investor Mailbox, or what's now EBIP. We've had probably 100-plus meaningful conversations regarding Fluent, right? And I'm sure that some of our associates are listening to this, they're saying, "I can't believe he only thinks it's 100-plus, right?" This is something that we want to talk about in every C-suite because this is the ultimate win-win. The firm wins by saving meaningful cost and creating a better customer experience. The investor wins by having easier access, which means they will look at it more and have better knowledge about their investments. And we're going to win and create an even stronger relationship with the client beyond the remarkably strong relationships we have today, which enables our 98% client retention rate.

Your next question comes from the line of Chris Donat of Sandler O'Neill. Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division: My one question isn't so much about the quarter or the fiscal year, it's really about maybe the next decade. So, Rich, calling on your experience with various NYSE committees and the SEC, when do you think it's likely that we'll have another revisitation of proxy distribution rules? Is it something like a decade away, 5 years away, 15 years away? And I realize this is a very forward-looking statement I'm asking of you.

Chris, the only appropriate way to discuss something of that significance is let's talk about the past. I've been involved with this process since 1978, 1979. And the -- let's go over the most recent process. When we were spinning from ADP and when we're in the roadshow, the cloud that your side of the table viewed over us was called Notice and Access. And I was arguing that, that wasn't a cloud. But in those notice and access discussions, there was an initial dialogue about, we should probably include fees in that discussion. I remember specifically, in the largest luncheon we had, previous spin, saying, "Gee, when people who pay bills generally raise the topic of fees, they're generally raising it because they don't -- they're not thinking they want them to go up, right?" I also pointed out, though, that our value proposition is that we believe corporate issuers, broker dealers, mutual funds and everybody who's part of the process, costs should go down. We just don't think it should be the part that they pay us, we have an opportunity to add value. Most important thing, Chris, I just said is that it was over 7 years from the first time in the Notice and Access dialogue I heard someone say, a position of authority, whether it be the stock exchange or the SEC, we should probably be talking about fees, though it took 7 years to conclude that dialogue, all right? It's a long process. It's a very complex process. It involves far more pieces and far more activities. And remember, the end activity that always has to be recognized is protecting investors. What was achieved here in this new fee schedule, okay? The most important thing from a regulatory point of view is that they have every reason to believe based on the beta model we showed them with our Investor Mailbox that be we will raise the eyeballs, the number of eyeballs, when we convert them to digital that actually look at material and having knowledge is what investor protection is all about. So the last fee dialogue, from my point of view, took over 7 years start to finish, right? and I can't imagine a fee dialogue coming about that would not be a long, laborious process, just because of all the moving pieces, all the people that have to opine and the ultimate process of approval, which has to be done in a very careful and thoughtful way by both SROs and regulators.

[Operator Instructions] Your next question comes from the line of Tien-tsin Huang. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Nice results and I appreciate the constraint to not raise guidance here 1 quarter in. Just building, I think, on George's question around pipeline and backlog and trends. Just been hearing a lot about delays in deal implementation and longer sales cycles from some of your, I guess, spin tech peers. Spin doesn't sound like that's the case here. Is that fair to say, Rich? And I'm curious why that could be the case, is it simply a bigger shift towards outsourcing and the need for data and things that you call them?

Okay, so Tien-tsin, our product set doesn't perfectly align with anyone else out there. Our commitment to the service profit chain and recognition of our industry, and everyone on this call is part of this industry and knows very directly the cost pressure that the industry is under. We believe that our products align very well with helping our industry achieve what they need to achieve to lower the cost run rate, to, I'll call it, create the new normal and then our industry can continue to grow to the next great level that it's always grown too. So I feel very, very good about, throughout the crisis, our focus on recognizing, without product, we're going to have a problem. Without the ability to grow, we're going to have a problem. I am still driving everyone on our executive committee relentlessly on we have to focus on revenue, we have to focus on controlling our growth and we should never rely on the old normal market activity to get us to where we want to get to. If we get close to normal market activity, that becomes wind at the back, not we're getting back to normal. So we're going to continue to look for ways to build and buy product, we're going to have very, very high standards on our acquisitions, strategically and financially, but we're going to continue what we've done throughout the crisis. And given where both segments are right now, irrespective of what our peers are thinking, we believe we have the ability to grow top and bottom line in both those segments primarily within our control, but, by the way, the markets want to help us, we'll be glad to take it.

Yes, Rich, I think you made a great point about acquisition. Look, we will always love the big, big deal. Our acquisitions are going to add $35 million to this year's revenue, okay? That is also where we put our time and attention. So what our peers might be doing or whatever in a big outsourcing type of deal, yes, we haven't heard us announce anything of that nature in this quarter, but you are certainly hearing us talk about the momentum we have in our products that are, what I call, our bread-and-butter, including acquisitions of additional $35 million this year to revenue. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Fair enough. Understood. Just switching over to the -- I guess some of the regulatory changes, getting the fees approved and whatnot. I totally understand the confidence that you have that the fee changes should be neutral or positive. Just what's been the feedback then from the client brokers, et cetera? I'm just curious what's driving that level of confidence to seek in the library?

Well, the confidence comes from 2 things. Our fee schedule is math, so we know how our model works really well. So we know how the math works really well. We know what part of that fee change impacts Broadridge, what part of that fee change impacts our clients, right? The part in there where we say neutral to slightly positive is we can't determine with digital accuracy or very clear accuracy, when the EBIP new revenue will be benefiting us and our clients. But we've made certain assumptions there, all right? We're going to be working very hard with a lot of focus to roll this out and at a point in time, this, we believe, can only be positive because anything that leads to more digital revenue, whether it be under the old fee schedule or under the new fee schedule, still creates that win for everyone, with the exception of printers and the post office. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Understood. Let me just ask one more. Stock's obviously up nicely now, 8% if you haven't seen it. Didn't see as much in the way of share repurchases this quarter. Anything to read into there?

We have been consistent in our capital stewardship priorities. So this year, we again raised the dividend. I think we've got a pretty nice and consistent trend there. We think growing earnings and giving cash back to shareholders in the form of a dividend is a very good model. We believe that keeping our investment grade because of the mission-critical services we perform and because of our ambitions to add many more clients to a list of clients on mission-critical services across everything we do, is important in giving them confidence in our were very, very strong proven financial stability. We stated again in this call that adding product is a high priority. I've stated in the past, I was disappointed in that we didn't do more tuck-ins, and when those tuck-in opportunities were not there, because it didn't meet our criteria. There were plenty of deals -- they weren't deals we were willing to do, okay? And so when those tuck ins didn't happen, we're not also looking to hoard or build cash, and we saw a terrific opportunistic times to buy back stock because we were highly confident in being undervalued. Even our confidence in the future, okay, we believe those opportunistic times will be there as we go forward. But my priority would be to do strategic tuck-ins that made strategic and financial sense. And so, there's really nothing new here. And I recognize that because I can't tell you when a deal will be put in front of me, that makes sense. I can't tell you when we're going to be doing more tuck-ins versus more buybacks, but we're committed to use our wonderful free cash flow to enhance our value, as well.

I am showing that we have no further questions at this time. I would now turn the call back to Mr. Daly.

Okay. Well, we really were hoping to get everyone off the call before the Twitter kick off. But we really, really do appreciate the time that you put into the call and the thoughtful questions and your participation today. Dan, David and I look forward to meeting with you in the near future, we have a luncheon coming up. It's a little cloudy today at our headquarters in Lake Success, but it is clear that it's pretty sunny at Broadridge. I'd encourage all of you to choose to have a great day. We certainly will here. Thanks so much.

This concludes today's Broadridge Financial Solutions, Inc. First Quarter Fiscal Year 2014 Earnings Conference Call. Thank you for your participation. You may now disconnect.