Good morning, and welcome to the Broadridge Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I'd now like to turn the conference over to Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to Broadridge's fourth quarter fiscal year 2022 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 CFO, Edmund Reese. Before I turn the call over to Tim, 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. 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 to everyone joining us. I'm pleased to update you on Broadridge's strong fourth quarter and full year performance for fiscal '22 as well as our positive outlook for fiscal '23. This performance is driven by strong execution, positive underlying trends and our acquisition of Itiviti, which exceeded our expectations in year one. We expect this strong performance to continue into fiscal '23 and beyond. I'll provide an overview, and Edmund will take us through the key details. Before turning to our results, a note about what we are seeing from our unique position at the center of the equities, fixed income and fund markets. Despite the uncertainty and market pullback in the quarter ending in June, investors continue to be engaged and position growth remains robust. Our broker and asset management clients continue to face the imperative for digitizing their business. At the same time, they face regulatory change greater than any time since the global financial crisis. Our conversations with clients, both in North America and globally remain very active as they pursue industry solutions for common needs and digital innovation for areas where they seek to differentiate. With that background, let's move to an overview of our results, which highlight the strength and resilience of our business model. First, Broadridge closed the year on a very strong note. Fourth quarter recurring revenues rose 15%, driven by exceptional 12% organic growth. Adjusted EPS rose 21% to $2.65. Second, these results were the capstone on a very strong year. For the full year, recurring revenues rose 16%, driving higher margins and after accounting for higher interest expense, adjusted EPS growth of 14%. We also delivered an 11th consecutive year of record closed sales, up more than 20%. Third, our growth is powered by execution…

Thank you, Tim, and good morning, everyone. I'm really pleased to be here to discuss the results from yet another strong quarter and strong year. I'll also provide you with some additional insights into our guidance for fiscal '23, which will position Broadridge to deliver at or above the higher end of our three-year financial objectives. As you can see from the financial summary on Slide 9, Broadridge's full year results came in at or ahead of both our fiscal year '22 guidance and our three-year objectives across all metrics. Recurring revenue rose to $3.7 billion, up 16% year-over-year. Organic growth was 9%. Adjusted operating income margin expanded 60 basis points, outpacing our annual margin expansion objective despite the drag from increased low to no margin distribution revenue and adjusted EPS grew 14% to $6.46. Finally, and as Tim noted earlier, we delivered record closed sales of $282 million, a strong year across all metrics. Turning to the fourth quarter. Recurring revenue grew 15% to $1. 2 billion, driven by organic growth of 12%. Adjusted operating income grew 25% and AOI margins expanded 250 basis points as we lap Q4 '21 elevated investment spend, and adjusted EPS increased 21% to $2.65. Again, operating income growth was partially offset by higher interest expense related to the acquisition of Itiviti. Our fourth quarter results benefited from continued position growth, strong execution across our product lines and the ongoing strong performance of Itiviti. Let's get into the details of these results, starting with recurring revenue on Slide 10. Recurring revenue grew by 15% to $1.2 billion in Q4 '22. Organic growth was 12%, driven by strong volume growth in new sales. Acquisitions contributed 3 points of growth in the quarter as we passed the one year anniversary of the Itiviti acquisition in May.…

Our first question comes from David Togut from Evercore ISI. Please go ahead.

I appreciate the call outs on the fiscal '23 guidance, Edmund. Can you talk to your expectations, though for Itiviti, which is clearly growing solid double digit and has margin well above your corporate average. And any expectation we should be incorporating from the UBS contract?

Let me maybe say one to Itiviti, and then turn it over to Tim to talk about long-term view on Itiviti in the UBS contract. First, David, I was very pleased. We said at the beginning of the fiscal '22 guidance that we'd expect Itiviti to contribute 7 to 8 points. And that revenue performance that Tim mentioned, we're very pleased about that. We expect to see mid- to high single-digit growth in Itiviti, as we said when we made the acquisition, and we feel very good about the profit outlook on it as well. So I feel good going into fiscal '23 and the contribution that we expect from Itiviti. And Tim can give further view on what we think going forward.

Yes, Dave, from a modeling perspective, it's really incorporated in the guidance that Edmund gave. But just stepping back from it a little bit, obviously, we're pleased with the integration. What we were really pleased by is the confirmation around our strategic thesis with our clients and the conversations that we've been having with them about how we fit into their road map. And really as we look at our -- the way our technology architecture, the way our product roadmap overlaps with what our client needs as well as the real commitment to service that both Itiviti and Broadridge have and how that is resonating, so we really are seeing market share gains, and that's delivering the financial benefits that we talked about. And just to expand a little bit of the outlook I gave when I was talking is as you think about that as you think about that short-, medium- and long-term goals in terms of how we see this unfolding, we think there is a real opportunity over the next few years to take share in the front office. There is a real need out there for a next-generation solution, and people are really looking to us as the right partner for that. And we saw that with multiple competitive wins in this last year, which drove more than $3 million in sales, which we see continuing to grow. In medium term, we think there is opportunity around geographic and asset class expansion. And we're seeing the pipeline grow in North America. We saw some good sales in North America. So we're really having the opportunity to bring Itiviti to North America where it traditionally hasn't been as strong. We're getting introduced by Itiviti in Europe to their clients, and there's also a lot of opportunity…

And just as a quick follow-up, Edmund, you called out some impact of carryover expenses from Q4 into Q1. Can you kind of walk us through the cadence of investment spending throughout FY '23? You said you were being increasingly disciplined in your planning process.

Yes. I mean, David, where I'd start there is we have seen volatility over the past two years and we've continued to see Broadridge continue to expand adjusted operating income margins. Over the last three years, it's been over 50 basis points. You know that we set as an objective 50 basis points, and we did 60 in fiscal '22, despite the inflation impact, despite the distribution impact that we've had and 60 basis points in fiscal '21 as well. Inherent in our business model is operating leverage that we get from bringing on new revenue onto our fixed infrastructure without seeing additional costs that we get from moving from -- as we continue to become more of a digital business and then the efficiencies that we see in the business as well, from things like moving to the cloud and in our technology expense. That, I think, allows us to continue to expand margins each year and create capacity for investment. Now like many other companies going into an uncertain economic environment, I thought it was prudent for us to take -- to be proactive and take actions to drive down the cost and create more capacity for us. And so we have started those actions as we went into our fiscal '23 planning process. They're underway, which is why I felt confident in giving a number today in terms of the annualized savings associated with that. That is going to allow us to mitigate the inflation impact, continue to create capacity for investment, which is our objective to have ongoing investment in our revenue initiatives and continue to deliver these kind of -- the earnings that's in line with our objectives and with the guidance that we gave. So ongoing investments are going to be a part of our business model. And I think we have the operating leverage in our business and the proactive actions that allow us to continue that.

Our next question comes from Peter Heckmann from D.A. Davidson. Please go ahead.

I wanted to ask customer reimbursables are growing quite a bit faster than I would have expected given some of the secular decline in paper and going to electronic, it was about 11% last year, about 10% to 15% this year. How would you break down the contribution from the increase in postage? And then kind of that core growth rate, would you attribute that to just additional customer communications wins?

Peter, we didn't quite hear the very first part of your question. Growth in what?

Customer reimbursables.

Let me just -- I'll take a little bit of an overview, and let Edmund add on to that. But we are seeing good growth -- well, first of all, it's the factors you mentioned. So postage was a significant factor, and there's going to be another postage increase in this coming year. And the customer communications business, which has a lower digital percentage than our regulatory business, had some very nice growth as you saw this year. And that's growth both from bringing on new clients and from increased -- some increased volume inside existing clients. So good growth in both those things. I will -- I know it's not your question, but I just have to point out the increased digitization rates that we've seen over the past couple of years are now at 86% for proxy, 78% for funds. And so we continue to think that the long-term piece, as we get to digitization, is that the distribution revenue should be a smaller piece of our business. We were a bit surprised by that this year. And -- but it looks like with the postage increase, it will be significant again next year. And just I'll ask Edmund to...

Yes, I'll just add to what you just said because your comments were spot on, Tim. On an ongoing business as usual basis, I'd expect the distribution revenue to be in sort of mid-single-digit growth levels. But because of what the strength that we've had in our customer communications business with strong wins there, we have seen an uptick in and that moves us to these low double-digit rates plus the postage increase that Tim has seen. And as a result of that, you're seeing top line growth, by the way, in our customer communications business in line with the strong earnings that we've put in there. I think the important point on that is that both of those components, the customer communications distribution plus the postage, is that no margin -- very low to no margins for us and that doesn't have whether the growth rates are higher -- when the growth rates are higher because of that it's not having a big impact on our overall earnings. It is having an impact on our reported margins, but we are still able to be able to drive the margin expansion despite that. I think that's the key thing to keep in mind as you think about the distribution revenue.

That's a great point, Edmund. I just -- again, I know you all know this, but you obviously hear me say, it is you really -- when you think about Broadridge, we're thinking about fee revenue. And both in terms of growth and in terms of margin, when you look at fee revenue, that is really what is our economic driver.

And then just thinking about M&A, Broadridge's has been an active acquirer over the years. But should we expect that the M&A activity might be a little less frequent and maybe smaller deals for the next two or three quarters as you get down towards your target leverage ratio?

Yes, thanks, Pete. That is -- as we look at the environment, first of all, in terms of the attractiveness of the price of assets, which even though the market has come down, is still not amazingly attractive. And then as we look at really prioritizing paying down the debt from Itiviti and getting to more normal levels of leverage. So I think it's never say never for the right thing. But really our emphasis is on paying down the debt at this time.

The next question comes from Puneet Jain from JPMorgan. Please go ahead.

So it looks like ICS internal growth trends inflected higher in the quarter. Even related to the last quarter, it seemed like year-on-year trends improved a lot, adjusted for comps and seasonality. Is that right? And what would you attribute that, Tim?

Yes, it is a -- I don't know if I would say it was necessarily stronger than the year before because we had exceptional position growth in the prior year. But when you look across the business, and obviously, we had really strong performance in customer communications on top of everything else this year. So it was a really good strong quarter for ICS. And the interesting thing, Puneet, that I want to make sure we call people's attention to is the revenue from new sales that we saw in ICS as well. So we do a lot of talk about position growth. And in the past, there was a time when ICS was largely just about position growth. But when you look at the revenue from new sales, it's a very significant portion of the growth this year, which is something that we think can be a long-term trend as we've really done so much innovation and new product launch there that is a much bigger component of the whole growth mix.

And let me just add, and I think it's a good observation, Puneet. In Tim's point, let me just maybe add 1 or 2 points. You're right, you did see sort of elevated growth in the issuer business and then the customer communications business. Remember, issuer last year on the full year grew at 21%. We're now seeing 14% this year. In the quarter, we continued to have strong retention of our virtual shareholder meetings platform. That wasn't a big growth driver. There was some incrementality there, but that retention is very important. And then our disclosure products had very high growth -- as well, some of that, the disclosure business has been growing very healthy over the past couple of quarters. We got a little bit of an uptick as companies look to revamp their proxies and annual reports. We do a good job of winning that business. And I don't know to expect that kind of growth on an ongoing basis. And then in the customer communications business, just onboarding a bunch of the large sales that we've had over the past year print and digital sales that we've had drove growth there. I think the big point that I've asked you to take away, Puneet, is we still very -- feel very comfortable with our long-term objectives of 5% to 7% organic growth from these businesses. And I think that's what you can expect as we look at them moving forward.

And then for VSM within issuer solutions, how should we think about penetration rate for that market? You've been offering that for a couple of years. How -- is there a way to think about like you are at X percent penetrated of the addressable market or of total number of issuers that are out there within the VSM solutions?

Yes, it's Tim. On that, in terms of penetration, I think that we saw, obviously, a very big jump up in that over the past few years. I think in 2019, we did 300 meetings. And then -- and we're 2,500 now. It is, I think, from here -- so then the first question is, will it go back? And I think what we're definitively seeing there is no. What we hear from our clients is once they have moved to this, they see the benefits. They see the increased investor participation. They see the convenience not needing to have people travel. All those things is obviously really the benefit. So we haven't seen people going back. So that's step one, which is very important. I think the growth from here will be much more incremental. It is -- many of the people who are going to make a decision have made it over the past few years. And do you think it will be a very solid offer in the future? But I don't think we expect to see the kinds of growth that we've seen in the past, with just very solid one at a time kind of growth.

Our next question comes from Patrick O'Shaughnessy from Raymond James. Please go ahead. Patrick O’Shaughnessy: I'm trying to square your positive comments about Itiviti with the actual revenue trends. So it sounds like it performed relative -- or in line with your plan for the year. You just seem pretty happy with it. But it was a $250 million revenue business when you bought it in early 2021, it did $256 million of revenue this past fiscal year. So it doesn't seem to be exhibiting a lot of revenue growth, at least over the past year. So why square your positive tone with those numbers?

Yes, sure, Patrick. There is a -- there's a sort of a revenue here cut that takes place as part of sort of the accounting of software businesses. And so when you look at the revenue that there was previously, there's a bit of a sort of downtick built in, in the first year, which we grew over and more. We'll get some of that back in this coming year. And so we'll have a nice continued growth this coming year that will be sort of above that high single-digit trend that Edmund talked about, which we see as a long-term trend. And so really, we have to measure it relative to our objectives, which was sort of on a like-to-like basis, it was double digit this year. And so we feel very good about that as well as the sales goals, which were -- when you think about $30-plus million on a $256 million business, that's a really nice percentage of sales relative to the base. And then the earnings was quite a bit above our expectations as well. So across all three of those metrics, it performed well. And then just the outlook feels really good, too, in terms of meeting our acquisition case and more. Patrick O’Shaughnessy: And then Edmund, you kind of mentioned this in your prepared remarks, but there is the interest income upside within the data-driven fund solutions business. Can you help us think about quantifying that? Is there a certain amount of float times in interest rate that we should be thinking about? Or kind of what is the upside to that in a further rising rate environment?

Well, the short important point on it is that it really offsets and makes our overall rate impact neutral or slightly positive as I think about the interest expense line. And then the prepared remarks, I talked about interest expense for the $1.6 billion in variable debt that we have, having about a $35 million to $40 million impact. Our treasury teams and our business teams worked very hard to be able to recognize the rate increases that we see in the asset side as well as mutual funds. So you can expect the impact to be roughly the same amount on the asset off balance sheet side of the ledger. So it's about a neutral impact as we think about those two impacts, both on the interest expense side and on the balances.

The next question is the follow-up from David Togut from Evercore ISI. Please go ahead.

Just a quick follow-up. You gave some kind of guide rails, Edmund, around Q1 FY '23 EPS as a percentage of total annual EPS kind of characterizing it as toward the lower end of the 10% to 17% range historically. Can you put some guide rails around your revenue growth expectations as well? We're getting some incoming questions on that.

Yes, I think we've seen -- on the Q1 overall, you're right, I think the -- when you think about total revenue, I'd expect the recurring revenue to be in the strong position growth. We continue to feel very good, as Tim mentioned earlier, about onboarding our sales from the revenue backlog of $440 million. That is the key driver of our growth, and those things are healthy going into each of the quarters, including Q1. When you think about total revenues, where you start to see the impact being lower, if you think about Q1 of '22, where we saw almost record levels of event-driven revenue, it was over $76 million in Q1, and we're going to be lower than that. And then the incremental expenses is what drives -- or the full year impact of expenses that were in fiscal year '22 is what drives Q1 to be at the lower end of that 10% to 17% range.

This concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

This is Tim. I just want to thank everyone for joining us. We are really pleased with the performance we had this past year. We're really excited about the upcoming year and about the future for our company, our ability to help our clients and improve the lives of millions of investors. So thank you very much for joining, and we look forward to talking to you next quarter.

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