Good morning. My name is Anne, and I will be your conference operator for today. At this time, I'd like to welcome everyone to the Broadridge Third Quarter Fiscal Year 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to your first speaker for today Mr. Edings Thibault. Thank you. You may begin your conference.

Thank you, Anne. Good morning, everyone and welcome to Broadridge's third quarter 2019 earnings call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO and President; and our CFO, Jim Young. Before I turn the call over to Jim, a few standard reminders. We will be making forward-looking statements on today's call regarding Broadridge that involve risks. A summary of these risks can be found on the second page of the slides and a more complete description on our Annual Report on Form 10-K. We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results. And an explanation of these non-GAAP measures and reconciliations to their comparable GAAP measures can be found in the earnings release and presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings, and good morning, everyone. Broadridge reported solid third quarter results and is poised to deliver another strong year of recurring revenue growth double-digit EPS growth and strong closed sales. We also continue to make excellent progress against key growth initiatives across governance, capital markets and wealth management. And we announced two tuck-in acquisitions that enhance our capabilities in key strategic areas as well as our ability to hit our three year objectives and to deliver long-term growth. This morning, I will review our key guidance points, walk through our business results and share our progress against these important growth initiatives. Then I will hand over to Jim to walk through our financial results in more detail. As you know the ASC 606 accounting change has had a big impact on our quarterly results. Jim will help you bridge between our reported figures and our underlying results. He will also provide further insights on our fiscal 2019 guidance. So let's get started on page 4. Broadridge reported solid third quarter results. Recurring fee revenues rose 20% to $767 million and total revenues rose 14% to $1.95 billion in line with the guidance we gave last quarter. Excluding the impact of the accounting change recurring revenues grew 4% and total revenues were up 1%. During the quarter adjusted EPS was $1.59 ahead of our outlook. Event-driven revenues were a healthy $68 million contributing to the strength of our quarterly EPS. With nine months of the year now complete and with visibility on more than 80% of the proxy season Broadridge is very well-positioned to deliver another strong year with recurring revenue growth in the mid single-digits and double-digit adjusted EPS growth. Looking ahead to the end of the year, we are reaffirming or raising our outlook across all three…

Thanks Tim and good morning everyone. Before reviewing our results, I'll make a few callouts. First, Broadridge had a solid third quarter. We delivered on our third quarter recurring revenue and total revenue guidance and exceeded the high end of our EPS range on healthy event fees, and continued cost discipline. Second, as discussed previously, the ongoing implementation of the new ASC 606 accounting standard, has the effect of shifting a large chunk of recurring fee proxy, and associated distribution revenues into the third quarter that previously under ASC 605 would have been reported in the fourth quarter. Accordingly reported growth rates comparing the third quarter last year under, 605 to the third quarter this year under, 606 are not indicative of the underlying performance of this business. Therefore, in addition to on an as-reported basis, we are providing on today's presentation recurring and total revenue growth rates where revenue for Q3 in the year-to-date fiscal 2018 are under 606 to provide a more meaningful view of our top line performance. And before I move onto my final call-out, I'll remind you that while the impact of the accounting change is material to the third and fourth quarter of growth rates on a reported basis the expected full-year impact on results and growth rates is immaterial. Third and final guidance, with three quarters of the year behind us and our visibility into full-year proxy revenues we are reaffirming or raising our FY 2019 guidance for the three most important guidance points. One, we are reaffirming our outlook for recurring fee revenue growth. Two, we are reaffirming our adjusted EPS growth guidance range. And three we are raising our closed sales guidance. Additionally, we are lowering our total revenue growth guidance to reflect our outlook for reduced, low to no margin…

Thank you. Good morning.

Good morning.

Does the reacceleration Jim in GTO organic revenue growth for Q4 to 4% to 6% include the onboarding of the Tier 1 investment bank in equity in fixed income trade processing?

Hey, David it is Tim. And I'll just jump in on that. It really includes very little from that onboarding to achieve that. And look we continue to feel really good about the prospects for GTO. The long-term growth what we're seeing in backlog, what we're seeing in sales, what we're seeing in client discussions and this temporary lull due to trading comps and some items last year and our implementation mix service is temporary. And I just wanted to make a comment on the implementations mix because as we move to these longer and larger projects it is actually a positive because of the notion of that is the projects when they are implemented are larger and that is what is fueling our long-term growth. So irrespective of that onboarding we do expect a mid-single digits in Q4 and we also expect a solid 2020 and feel good about it.

Understood. Just as a quick follow-up any update on the SEC review of the U.S. proxy system in terms of how you expect the SEC to conclude?

Absolutely. We feel really good about the progress specifically on end-to-end confirmation. This letter that I mentioned in the call in getting the Council of Institutional Investors the Society of Corporate Secretaries and the broker-dealers as represented by Sigma to all agree is very unusual. And we have done – been getting really strong positive feedback from regulators who would really like to see an industry solution here. And so the technology exists for this it has already been piloted and it is – it will really enhance what is already a world leading process. So we feel good about that. And we would just see it as a part of a pattern of creating continuing more value for all constituents.

Understood. Thank you.

Thank you. Your next question comes from the line of Patrick O'Shaughnessy of Raymond James. Please ask your question.

So to follow-up on that last question, what are your expectations in terms of the process that the SEC might follow to work on the proxy plumbing? And then I guess along with that any thoughts you might have in terms of potential pricing review on fund interims that they put out for request for comments last year and things seem to be pretty quiet on that front?

Sure Patrick. First of all, just on the plumbing, I think that the main focus is on this question of end-to-end confirmation. And I think there will be further consultations around that. And we do expect that there will be some guidance there that will enable the industry to move forward on that. And that's something that we see as a positive. On the fees, we don't have a specific update on the fees since that submission in October and there is no real time line for what it would be if it did happen although as we said before we think it would be likely to be lengthy. What we think is most notable here is the work that we're doing with the funds to help them prepare for 30e-3. Almost 10 years ago, when Notice and Access was implemented for corporate issuers, it really changed our position with public companies as they consulted with us on how to maximize the benefit from Notice and Access then. And we're seeing the same opportunity here as we're working with -- as we said more than 100 funds to help them drive savings through 30e-3, but also continued digitization. And now we are saving the industry as we said before relative to 10 years ago $400 million a year, we see the opportunities for next $400 million in savings and again as part of the theme of continually to drive -- continue to drive value to all the constituents. So I think as all that takes place, we feel good about how we're positioned in the industry and with our clients.

Got it. Thank you. And then, as we look at the ICS segment, obviously the North American Communication business continues to struggle and you spoke about some of those known customer rolloffs. What steps can you guys take to kind of turn that business around and to prevent it from being the growth headwind in fiscal 2020?

Sure. I think the things that we are continuing to execute on there are, first of all continuing to drive new sales and we do have a nice backlog in that business and we're working to onboard that. And that will help ameliorate this ongoing rolloff of that client. We are continuing to drive pretty strong synergies and I think we have commented that we've achieved nearly $50 million to-date. And creating that cost position, which by the way has really neutralized any earnings impact of the revenue -- revenues we've been talking about. So continue to drive cost which both neutralized any decline, but also gives us a stronger position for driving future growth. And then last is really continuing to drive digitization because, remember that the ultimate goal here is to help all of those clients get to a digital future. And that is -- that trend in the industry has taken longer than we expected, but we think we're really well positioned to help clients in the future as they make that transition and that will put us really on the right path and maybe a smaller business, but a higher margin business of that type.

Okay, great. Thank you.

Thank you. Your next question comes from the line of Oscar Turner of SunTrust. Please ask your question.

Hey guys, good morning. So first question is on event driven. It looks like that segment or subsequent will again be a growth headwind in the fourth quarter as you guys had already forecast. I was wondering if you can provide some color into how the mutual fund calendar is shaping up for next year.

Sure. Oscar this is Jim. Obviously, just as a context, event has contributed nicely over the last few years, obviously a record year last year even down 10% to 20% this year is a really strong good contributions for us. Also put into your context, this is you're talking about 5%, 6% of our total revenue, so as we think ahead to next year, we are obviously in the midst of developing of our operating plans, too early to give you an event-driven outlook. That said, we take into account just as you said the calendars of major institutions, complexes many of whom have gone out over the last couple of years, look at activist activity, we look at mutual fund merger activity, activists and contests announcements et cetera. And obviously in August, we'll give you a full view of where -- of our best thinking recognizing, we're very good kind of 90 plus days out, but we have enough underlying trends in analytics that we are able to triangulate around our outlook. And then just as a final reminder when we look long-term over event driven, it continues to be a really nice grower, growing in line with position. So independent of any one year, this has continued to be a nice contributor to Broadridge.

Okay. Thanks. And then a second question on M&A, can you speak to your appetite for larger M&A deals? How much incremental leverage would you be willing to take on? And which areas would you be most likely to do such a deal?

Sure. Oscar, this is Tim. Good morning.

Good morning.

Let me gives a little broader context and then sort of jump into specific question. So, M&A really -- it does continue to be a core strategy for us. And I said before on other occasions, in Fintech is sort of Evergreen for M&A, because there are always new problems cropping up. And we have the opportunity to look across the landscape and find a really good pieces of technology and to bring those into our ecosystem for clients. And we also know that the M&A market is very expensive right now. And so we need to work harder than ever on proprietary -- some of the proprietary transactions where we bring the value and we think that TD and Rockall are both great examples of that. We have a very robust pipeline going forward and that represents a mix of size deals, some ones that are traditional tuck-ins to ones that are somewhat larger. And we would -- we really feel that the constraint right now. If you think about going back to the Matrix transaction. At that time, relative to our market cap, that would be a $1 billion transaction today. So, we don't feel constrained on this size. What we really are focused on is what are the things that are uniquely additive to our capabilities where we can create strong value for our shareholders. And Jim is just going to add on here a little bit.

And Oscar, just on the capacity question. Obviously, we ended the quarter at 1.5 times leverage, well below our 2.0 target leverage. As Tim just said, we don't feel constrained. We obviously have room within that. As we have said before, if there was such a transaction, certainly there's an opportunity to go a little bit over and come back down in a short period, but again that is not a driver, but it does give us a lot of flexibility in this market.

Okay. Thanks for that color.

Thank you. And your next question comes from the line of Peter Heckmann of Davidson. Please ask your question.

Hey, good morning. Just wanted to follow-up. Could you put maybe a little bit finer points on the acquired revenue? I know it's not terribly material to forecast, but looking to me like four, five, six deals on combined, should we expect that to add, let's say, $20 million at this point -- $20 million to $30 million in acquired revenue to next year?

Hey, Pete, it is Jim. On the -- really we're just at the moment just focused on the two deals we announced, the TD assets and Rockall, which combined are in around less than 1% of our recurring revenue which gets you pretty close to, I think, the estimates you just made. So, not massive, but nice contributors.

Okay. Okay. And then that you're -- really just trailing deals that were pretty small, I believe. Okay. And then just any update -- I didn't hear I apologize if I missed it, any update to your thoughts on the timeline for the creation and implementation of the wealth management platform for UBS?

Hey, Pete, it's Tim Gokey. That is something that we think will happen in mid-calendar 2021. So, it is a ways out, but remember we have an existing wealth business with a lot of existing wealth solutions and we continue to sell those and to grow that business. So, we think that this platform will intersect with that existing business and create something that's even stronger, without speaking any names. We're certainly having some very good client conversations around our future wealth ecosystem and obviously as we gets closer to coming live, it will be a time to -- where those could come to fruition.

Okay. And then just in terms of the expenses related to it, I don't think you've really called out any material uptick in expenses over the next six quarters that we should be just thinking about as we start to model 2020?

That's right. Pete remember, as we develop in this particular case the wealth solution for UBS, those costs are all capitalized, and then we'll begin recognition when the revenue goes live. So they are very much in our cash flows recognizing that with any of our client deals, we're also taking in cash during that period that all goes to the balance sheet. So from a P&L standpoint, over the next year or so, really nothing of note.

Got it. Thank you.

Thank you. And your next question comes from the line of Puneet Jain from JPMorgan. Please ask your question.

Hi. This is Connor on for Puneet. I was wondering if you guys could give us some more detail around the incremental distribution softness you're seeing. How much of it was maybe driven by customer communications versus mix or anything else you'd call out?

Connor, this is Jim. The majority is certainly coming from customer communication, and clearly those types of communication have a high ratio of post distribution cost to the fees themselves. And then within that, you can get various mailings that could be even above that ratio. So it's really customer communication, no specific callout as Tim said, the distribution revenue could be a bit of a red herring, because it will move around obviously a bit of a pebble in our shoe this year. But nothing that is material at all to our earnings, and as you saw, in fact, we're taking up our operating income margin as that -- no margin revenue comes out of our -- out of the P&L.

Great, thanks. And maybe a related question kind of around the margin impact, but you guys have been running pretty solidly ahead of the outlook you gave us the last Analyst Day. And as we head into the final year of that outlook, around the margin specifically, should we be looking for potentially a slowdown given the strength in the first two years? I know we will get guidance next quarter, but any early thoughts would be helpful. Thank you.

Thanks Connor. Yeah. We're really pleased with where we are. If you remember, we set out an EPS CAGR of 14% to 18% inclusive of the Tax Act benefit we picked up, and recurring organic growth of about 5% to 7% all in with M&A 7% to 9%. So we feel like we're really tracking well against all those a little less on the inorganic piece, although too early to rule out anything at this point. The margin, specifically to your question, obviously we called for 50 basis points of margin expansion per year. I think if you take our guidance for this year plus what we delivered last year north of that 50 basis points, we're essentially there. But no, we are not done. And we obviously are ramping up our planning now for next year. As you say we will be back in August, but we feel really good with where we are, what we’ve done against those targets, and we'll be excited in August to share our guidance for next year.

Great, thanks.

Thank you. And your next question comes from the line of Andrew Bauch of Wolfe Research. Please ask your question.

Hey, guys. This is Andrew on behalf of Darrin Peller.

Hey.

I just wanted to – hey, how is it going? I just wanted to touch on the closed sales number. Look, it's another strong number here, particularly given the $100 million we saw last quarter. Could you provide us some color on the mix here? Is it primarily across capital markets wealth or governance? And then my follow-up is looking at this growing backlog, do you have any need to kind of ramp your implementations teams? And then, is there a possibility over time you can kind of build the playbook in order to convert some of these deals faster than historically?

Yeah. Andrew, this is Tim. First of all on the closed sale, it really is a very well-balanced mix. There was not any major single deal that was a driver, and so it's a really nice balance that we saw. And as we think about the implementation, it is -- we clearly are increasing our capacity to onboard these clients. And as we talked about in the conversation with Peter, as we do that we are adding resources. That is something that really flows through the balance sheet until those implementations go live. And then we see the amortized cost and revenue from these begin to flow at that time. So, during the implementation phase, in many cases we are receiving revenue but we're also building a gross that goes in the balance sheet. But we're definitely are expanding capacity. And looking at how do we make these as fast and as efficient and effective as possible and because we see a lot of activity down the pike and so that is a real under lever for us.

Got it, thank you so much guys.

Thank you. And your next question comes from the line of Chris Donat of Sandler O'Neill. Please ask your question.

Hi. Good morning. Thanks for taking my question. Wanted to ask one on the equity proxy record growth, which in this quarter came in at 3% and last quarter was 15% year-on-year. And I thought that Tim's comment that, it's I guess mid-single digits for your fourth fiscal quarter. As we think about the different quarters should we really be focused on the fourth quarter just because there's much more proxy activity in that quarter? And then kind of as a related question has any of the account or the revenue recognition affected the timing of when you calculate the proxy growth?

Yeah, Chris its Tim on that first of all just starting with the very lasting perspective of revenue recognition does not affect the calculation. It's all sort of an apples-to-apples basis. I think that remember we did have a very strong Q2, but remember that whole first half is less than 20%. And so it's really -- it doesn't create that productive a comparison. When we were here in February, we said at that time that we've done tests. And we expected mid-single digits. And its true Q2 was a little below that sort of just based on the prior-year comp. But I think we feel pretty good about mid-single digits for the entire year. And the entire year is really the best place to look at. Overall just the other thing I'd say overall is that both stock record growth and interims over the long term they are driven by underlying account growth, they are driven by growth in managed accounts, and they are driven by growth in model-based investing which includes robos. And so we think that mid-single digit it flows a little bit up and down through the year, but we think that's a really good long-term trend.

Okay. And then, just to follow-up on the comment on robos. Are you seeing any signs of I guess, there's on the position side a notion with them some robo advisers said there is more direct ownership of an index. In other words someone is owning 500 stocks within a portfolio and of course you need a certain dollar amount in that account do that. Are you seeing signs of that as the driver of robos? Or is it somewhere else? Or do you not have a strong sense?

Yeah we're not -- Chris we're not seeing that. We're just seeing that when someone goes into a robo model what might have been four positions in an account now becomes 13 to 30. And but we're not seeing people creating sort of full indexes.

Okay, thanks very much Tim.

Okay. I'm looking here. Are we taking another question or are we wrapping up?

So I think we've concluded here.

Okay. So let me just thank everyone for joining in today. And we continue to believe that we have the strong market positions across governance capital markets and wealth management. And our platform-based business model really creates unique value for both clients and shareholders, that we have a significant long-term growth opportunity that is supported by clear long-term trends. And we think that that model and that opportunity, long-term focus will provide sustained growth and shareholder value for a long time to come. We think this quarter and the outlook for the year that we shared are just further confirmation of that long-term perspective. And so we look forward to talking to you again in August.

Thank you, presenters. This concludes today's conference call. Thank you all for joining. And you may now disconnect.