Good day, and welcome to the Broadridge Fiscal First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Edings Thibault, Head of Investor Relations. Please go ahead, sir.

Thank you, Chuck. Good morning, everybody, and welcome to Broadridge's first quarter fiscal year 2025 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 our Interim CFO, Ashima Ghei. Before I turn the call over to Tim, a few standard reminders. One, 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. Two, we'll also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results. An explanation of these non-GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and the presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings, and good morning. I'm pleased to be here with you today to discuss our first quarter results. I want to thank you all for joining, especially on Election Day, which reminds us all of the incredible privilege and power of voting. Stepping back, global financial markets remain robust and the demand for what we do remains healthy, driven by long-term trends, including the democratization of investing, digitization of communications, acceleration of trading, growing importance of AI and the data that powers it and ever present regulatory change. At the same time, uncertainty remains high given the U.S. Election and other geopolitical events. It's an environment in which the Broadridge business model stands out, and I'm pleased to report that we are very much on-track to deliver another strong year with consistent top and bottom-line growth, powered by a strong backlog of revenue from sales, continued healthy position growth and resilient trading volumes. So let's dive into the headlines. First, Broadridge reported solid first quarter results. After absorbing the impact of the E-Trade deconversion, recurring revenue grew 4% in constant currency, driven by our governance and capital markets franchises. Adjusted EPS was $1, as we cycled through the E-Trade impact and lower event driven revenues for the quarter. Second, we continue to execute on our strategy to enable our clients to democratize and digitize investing, simplify and innovate trading and modernize wealth management. That execution is driving our results in the form of continued product innovation, a growing pipeline and strong sales. Third, we're strengthening our business with targeted investments, including the acquisition of SIS, which closed last week. SIS will grow our Canadian business and accelerate our ability to bring wealth innovation to that market. Fourth, as I said a moment ago, Broadridge is on-track to deliver…

Thank you, Tim. Good morning, everyone. I'll begin my discussion this morning with four key callouts. First, Broadridge delivered solid first quarter results. Recurring revenue growth, constant currency of 4% included 170 basis points headwind from the E-Trade deconversion. That impact will subside in the second quarter, and we expect organic recurring revenue growth to strengthen over the balance of the year. Second, our key revenue growth drivers remain strong. Closed sales rose 21% over a very healthy Q1 ‘24. And our forward position growth testing, which now includes the second half of the year, continues to support our mid to high single-digit outlook. Third, we are raising our recurring revenue growth outlook for the year to 6% to 8% from 5% to 7%. Our increased guidance reflects both the acquisition of SIS, which closed on November 1 and is expected to add 1 point to our growth and strengthening organic growth for the balance of the year, as I noted earlier. We expect organic recurring revenue growth of 6% to 7% over the next three quarters, driven by our $450 million sales backlog, mid to high single-digit position growth and the lapping of the E-Trade deconversion. Fourth, as a result, we continue to expect to deliver strong fiscal year ‘25 results, including 50 basis points plus of underlying core margin expansion, 8% to 12% adjusted EPS growth and $290 million to $330 million of closed sales. With that, let's get to the numbers on Slide 6. Recurring revenues rose 4% on a constant currency basis, virtually all organic. Adjusted operating income decreased 7%, driven by lower event driven and the impact of the E-Trade deconversion. AOI margins were 13% and adjusted EPS was $1 per share, both modestly above our expectations, driven by timing of investment spend. Finally, as…

[Operator Instructions] And the first question will come from Dan Perlin with RBC Capital.

Thanks. Good morning. I just wanted to revisit the guidance there for a second. I think it's pretty clear on the raising of the recurring numbers around the acquisition and then E-Trades, I guess, headwind kind of abating. But not raising the EPS again kind of suggests that the incremental margins associated with what's being brought on are lower or there's something else that's offsetting it? I think you mentioned a couple. But maybe if you could talk about some of those puts and takes to kind of reconcile why we did a top line raise but not something else in earnings?

Sure. I'll take that, Dan. Thanks for your question. Happy to provide some color on the guidance. You're absolutely right. We are raising our recurring revenue growth guidance to 6% to 8%, right, like you pointed out. It reflects the acquisition of SIS, and it also reflects our additional comfort and confidence sitting where we are at the end of Q1 given the sales activity, given the position growth that we're specifically now targeting 6% to 7% organic growth over the balance of the year. We are also feeling good about our event activity. Having said that, we think about high level of high margin event activity as a means to create investment capacity. So what we're really targeting is in-line with our guidance, 8% to 12% EPS growth and seeking the opportunity to reinvest for further growth opportunities.

And I would just add to that. I think the obviously, a key part of the rise is the SIS acquisition. And in the first year, we expect that to be neutral to EPS. So it's really the other factors that Ashima was talking about in terms of the reinvestment on event and doing good about organic really leaves us right in that same range.

Got it. That's great. Thank you. Just a quick follow-up on M&A and your appetite here. I mean, you have done a couple of deals, relatively small tuck-ins. You clearly have a lot more capacity. And I think in the past couple of quarters, you kind of alluded to maybe environment getting a little bit better, in terms of maybe prices and opportunities that you see out in the market, that pipeline getting bigger. So just as we sit here today, I'm just curious where you are thinking you might want to place some incremental dollars this year?

Yes. Thanks, Dan. Just starting with the principles that you well know, which is we're an organic growth company. Our growth is primarily there and we have a long runway given the addressable market we have. But M&A has been an attractive way to meet the needs of our clients. And over three years, we're expecting sort of 1 to 2 points contribution to recurring revenue from M&A. If you look at where the market is right now, first of all, we're excited that we've been able to make some compelling purchases, including SIS. And certainly, we're seeing many PEs bringing things to market. We're tracking a pretty strong pipeline of opportunities. And I think as always, the art is in finding those deals that meet the combination of our financial criteria and where we think we are really the right or the best owner. And that's obviously all in the context of balanced capital allocation, mid to high-teens ROIC. So we're definitely looking at things. We're definitely keeping that financial framework in mind. And so if you do see us execute, it will be because we see something that we think is compelling. And if we don't see the right opportunities, we remain very comfortable with repurchasing broader shares.

The next question will come from James Faucette with Morgan Stanley.

Great. Thank you for those clarifications on the outlook, etcetera. Wanted to touch really quickly on digital and then some developments in the market generally. You've got digital revenue growing double-digits in fiscal year ‘24 and digital revenue on average is converting faster and the better onboarding efficacy you referred to last call. I was surprised to see customer communications growth in the quarter consistent with fiscal fourth quarter. What's the driver there? And is there still line of sight to that business accelerating to mid-single-digit or even high single digit growth in this coming fiscal year?

Yes, James, thanks very much for that question. It's a good one, and I do want to reiterate that we really do see our BRCC revenues on-track to pick up from the FY’24 levels, in the remainder of the year. And really that is driven by new sales and it's driven by growth in digital. We had a quite significant sale in the fourth quarter that was -- we call it, center of excellence, but it's a full lift out of all of the print and digital capabilities of significant financial services provider. That revenue was onboarded late in the first quarter, so it didn't really impact the first quarter, but it will impact the rest of the year and it really shows the value proposition of that print to digital conversion. Also, we talked -- I mentioned in the script around wealth and focus, which we featured at our Investor Day last year, generating very positive feedback and pipeline. So we're pretty confident in the outlook for higher growth over the balance of ‘25 driven by that onboarding of recent sales wins, which as I say are already onboard. So we feel pretty confident in mid to high single-digit growth in BRCC for the full year.

Got it. Appreciate that. And then just more on a high level and longer-term question. We saw an article during the quarter with one of the heads of international post-trade, which effectively from an at least I took that there while it's not really an acute issue right now, [he] was starting to see T+1 lead to increased costs for brokers, particularly as it relates to securities, lending and FX. What is Broadridge or how is Broadridge helping to mitigate this dynamic? And what are some of the takeaways the industry is focused on before that rollout in Europe and the rest of the world?

Yes, James, very interesting question. And it's interesting because I think there's a bit of a dichotomy here between the U.S. and Europe. The T+1 implementation went very smoothly here in the U.S, the sale rates and straight through processing rates and same day confirmation rates all went up quite a bit. And I think people were expecting there to be some issues and there weren't. Now Europe has yet to do T+1, and they're looking at when to do that. And -- but what they're seeing is just some of the tension between T+1 in the U. S. Is not in Europe and how is that causing sort of disconnect in some of those ancillary services and it's being tapered over at this point with people. And so I think we are hearing the same thing that that's causing some challenges for people. I think in terms of how we can help, it's a little bit of a question of how quickly they'll move to T+1 and sort of eliminate that disparity in the dates between here and there. And in the meantime, we obviously we have a managed service for so for our clients who are where we're doing that for them on both sides, we can help them with our BPO. And if there's going to be a significant timing gap, then it would be creating some technology to help.

The next question will come from Puneet Jain with JPMorgan.

Hi, thanks for taking my question. So some of like the consulting companies have definitely gotten more positive on outlook for financial services in the U.S., like the large banks, capital market clients. Are you also seeing any changes in backlog conversion into revenue or the flow of deals from pipeline into backlog? Are you seeing any change in clients' behavior as it relates to how they take decisions?

Yeah, Puneet. Thank you very much. It is -- if you think about project execution, we didn't see the slowdown that some other people have reported in project execution. We definitely saw, this is going back a ways now a lengthening of sales pipeline and it taking longer to get to closure. This may be because more of the mix of the things that we do are around regulatory and cost and things that are, that our clients feel like they really need to get done. And so once they sign, they sort of maybe were more at the top of the list for implementation. So we didn't see the same implementation delays that others are seeing. I think, more broadly though, if we just talk about the business environment out there. We are really pleased by the -- by what we’re seeing in terms of sales closes. And that strong start to the year on the sales side increases our comp for the full year. We're seeing that in governance and communication solutions. We're seeing it in select areas in capital markets and wealth. And just while I'm on sales, a couple of things that I think are worth noting is just that we're seeing those sales in the areas where we're investing digital communications, class actions in the front office and wealth. And the pipeline is really good. And if we compare our pipeline multiplier now to where we were last year at the same time, it's just as strong. And then with the backlog, $450 million as of August, that really gives us confidence in our outlook and provides good visibility into our recurring revenue over the medium term, giving us confidence in our three year outlook. And I just one final comment just on that revenue to sales to revenue conversion. It is an area that we're really focused on, and I think we're actually seeing improvements this year over last year. Part of that is on the client side, part of that is on our side.

Got it. And then, on the other side, ICS side within regulatory business, like the stock record growth came at 3%. You expect that to improve. How much visibility you have? Or what confidence you have that stock record growth improves from here to mid-single-digits?

Yeah. So Puneet, I'll start by just reminding you. I know you know this, but I'll just start off by reminding that the stock record growth that you saw for Q1 reflects the growth for those specific issuers that set out their proxies in the July to September time period, right? They typically end up being very small companies and 1 or 2 large issuers really make a swing in the growth rates. The 3% was actually in line with what we'd expected at the end of last year, given the mix of companies that we were aware of. Just like we're expecting Q2 now to be at the high single-digit growth rate, which together across the first half of the year, we're expecting to be solidly in the mid to high single-digit growth rate. Our testing for equity has proven to be reliable, especially when we're looking at 2, 3 quarters out, we have a fairly good idea because we do it at an issuer level. We have a fairly good idea of how it's going to trend out. As we sit here right now, we've started testing a much more material second half of the year as well, and it's showing mid to high single-digit growth. So I feel pretty good about it.

And Puneet, I'd just add that I think the bigger picture here is about the broad drivers that remain very positive, especially the momentum in managed accounts. The overall market environment as Ashima said, the testing has been pretty accurate showing a strong full year. We're also seeing this on the fund side, where it's more mid-single to high single-digit. And then beyond that, we have all the innovation that we've talked about with voting choice and direct indexing. And so I think overall, I think the thing we want people to take away is that the positive trends are giving us confidence in the year, but also in the longer-term duration.

The next question will come from Patrick O'Shaughnessy with Raymond James.

A follow-up question on SIS. Can you provide the specific revenue contribution that you expect from that business this year? And -- SIS, would you have still raised your constant currency recurring revenue guide for the year?

Yes. I'll start on this and let Ashima add in anything. I think first of all, just since you -- the number for SIS is just a little shy of $60 million for this year in this full year. But when we look more broadly, when you look at our overall wealth and investment management business, we really like the position we have in Canada, it's an attractive market. We serve many of the leading institutions, lots of small ones, too. We're excited to add these important new clients, but we're also excited about the opportunity to leverage our wealth platform investment into the Canadian market. And we're bringing that technology that's already built. We have a bigger base of clients to provide it to. And this really underscores our commitment to our wealth business to being a leading technology provider to Canada. On the -- would we have increased guidance without this. I think what we're signaling is increased confidence on the organic side. I'm not sure that it would have been so much that we would have changed our guidance. So the increase that you're seeing here is largely related specifically to SIS. And -- but we feel -- what we want to make sure is that none came away feeling looking doing all the math and saying that we think like we're weakening on the organic side, that's sort of the answer of the method you're trying to convey because we're really seeing nice trends for the rest of the year.

Yes. And Patrick, I'll also add a bit more specifics about SIS, like you heard, we expect -- it's about $185 million purchase price. We expect it to add a little over a percentage point to Broadridge growth overall. To the question earlier, we do expect it to be slightly dilutive to Broadridge margin, but are not expecting any material impact to earnings as a result of this. Of course, it will be accretive to wealth growth, leading to low double-digit growth for the wealth business and GTO growth coming in at the high end of the 5% to 8%. But just SIS itself, the guide is over -- a little over 1 percentage point to Broadridge growth, slight dilution to margins and no impact to earnings.

Terrific. That's very helpful. And then looking at your core sales number, typically, your fiscal first quarter represents less than 15% of your full year sales activity. But this past quarter, close sales was closer to 20% to the midpoint of your full year fiscal '25 outlook. Was there any unusual pull forward this quarter? Or are things perhaps just trending maybe a little bit better than what you would have expected?

Yes, Patrick, it's always good to get a strong start on the year. I don't think I want to signal any increase in our expectation. I think the $290 million to $330 million is a really good range for us. I wouldn't call it pull forward, but there's always the timing of sort of the medium-sized deals that can fall in 1 quarter versus another. And so I just want you to take away that we feel like we have a good start to the quarter. We feel we have a good first half, and we're feeling good about the full year.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.

Thank you, Chuck. I just want to thank everyone on the call for your interest in Broadridge, especially so on Election Day. Have a great morning.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.