Good morning, and welcome to the Broadridge Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the floor over to Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Jamie. Good morning, everybody, and welcome to Broadridge's Fourth Quarter and Fiscal Year 2023 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. 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 presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you Edings and good morning. It's great to be here this morning to review our strong fiscal 2023 results. I'm particularly proud of what b Broadridge has been able to accomplish over the past year and where we stand now as we look forward. In Fiscal 2023, we finalized the rollout of our new wealth platform suite, completed the product integration of our front office trading capabilities, and brought new innovation and digitization to our governance clients. At the same time, we delivered strong financial results and record-free cash flow. We met our leverage target, and we delivered at or above the high end of our three-year financial objectives. The net result is that Broadridge is exiting 2023 poised to deliver another strong year in Fiscal 2024 and well-positioned for continued long-term growth. I'm especially proud of our execution given the uncertain market environment. Our financial services clients are dealing with fallout from the steepest rate increases in decades, a sharp slowdown in investment banking activity, fund outflows, banking crises, and increased regulation. They are reducing headcount and delaying purchasing decisions. Those pressures have had an impact on our sales, as I'll touch on later in this call. On the other hand, recent data points suggest an economy has proven to be more resilient than anticipated, contributing to the clear sense of urgency our clients feel around next-generation technology. They know they need to streamline their operations, increase their digital capabilities, and drive innovation. They want partners’ who can help them accomplish these goals, and they recognize that Broadridge is one of only a handful of scale technology players investing to deliver new solutions built on modern technology. That's great for our business and is driving our record pipeline. So it is an uneven environment. But for Broadridge, it's…

Thank you, Tim and good morning everyone. I'm pleased to be here to discuss the results from yet another strong quarter and the strong full year fiscal 2023. Today I'll also provide you with some additional color into our guidance for fiscal 2024 which continues to be in line with our historical three year financial objectives. Before jumping into a review of our strong results and guidance, I want to emphasize some of the significance of some key milestones bones that we achieved in fiscal 2023. First, we completed the investment in our wealth management platform, reduced our client platform spend, and are now going live with our anchor client recognizing revenue in July. Second, free cash flow conversion improved to 90%. Third, we paid down debt and reached our leverage objective, in line with our commitment during the activity acquisition. And fourth, we positioned ourselves to return more capital to shareholders, via higher dividend and the resumption of share repurchases in fiscal 2024. And finally, as Tim noted, we kept our current three year cycle where we delivered at or above the high end of our three year objectives. Those milestones were a direct outcome of our strong fiscal 2023 results. And as you can see from the financial summary, on slide 9 Broadridge’s full year recurring revenue growth was at the higher end of our fiscal 2023 guidance. And with operating leverage in our business and continued disciplined expense management, high single digit adjusted EPS growth was right in line with our full year guidance, despite the lower event driven revenue. On a full year basis, recurring revenue rose to approximately $4 billion, up 9% year-over-year on a constant currency basis, all organic. Adjusted operating income increased 12% and margin expanded 110 basis points to 19.8%, outpacing our…

[Operator Instructions] And our first question today comes from Peter Heckmann from D.A. Davidson.

Hey good morning everyone. Really complete call. You checked off a number of my questions as we went. I didn't hear -- I think I heard the equity position growth embedded in guidance was about mid-single digits. Would you assume funds would continue kind of mid- to high?

Yes, I'll start off with that, Peter, and thanks for the question. Thanks for joining this morning. Yes, that is exactly what we're expecting for fiscal 2024. We've continued to see strong growth in both equities and funds. They are at a more normalized level relative to fiscal 2021 and fiscal 2022. So in our testing for the first half of this year is as I said in my prepared remarks, showing mid-single-digit growth, which gives us confidence in our outlook for mid-to-high single-digit growth in both equities and we expect the same thing in funds ending the year 8% with continued growth in passive funds there, we expect mid-to-high single-digit growth.

Okay. That's helpful. And then in terms of the -- so it sounds as if the first quarter might have a little bit more event driven as well as a relatively easy comparison on the margins. So first quarter looks like a little bit larger than historical, so certainly, the current consensus appears to be appropriate, if not a little low on the adjusted EPS side.

Well, look, we're certainly focused on our business and what's driving the economics here. I do think there was -- as we've been talking about throughout last year, delayed mutual fund proxy activity. And I don't think that's a choice that the business has to come back at some point. As I said in my remarks, we're not predicting any major fund to go to proxy, but the early signs as we begin to look at the jobs that we have for Q1 suggests that we are seeing some of those delays come into Q1. So I do expect Q1 to be slightly higher than Q2, but overall, the first half in line with what we've historically seen, which is just under a quarter of our earnings in the first half.

Okay. And if I could just sneak in one more. Just on the bookings side in the second half of fiscal 2023, any other characteristics that you would say in terms of U.S. being pretty much on target, Europe a little weaker? Any way you can talk about maybe individual solution sets or any particular thing, big projects, small projects, any other color in terms of the delays that would be helpful.

Yes. Peter, it's Tim. I'll take that. And clearly, our sales ended lower than we expected even just three months ago. And as you said, that was really continued nice growth in the U.S. and then challenges in Europe. We are -- really the complex environment, whether that be war, whether that be the failure of one of the largest European institutions led to delayed decision-making. And as Edmund said, I just have to repeat it, that we think the impact of this is modest as included in our outlook 2024 is driven by the $400 million backlog. The color on drilling down further it's really across many of the solutions we saw slowdowns, and remember, our international business has driven a bit more on the GTO side than the ICS side. And there was really just decisional weakness both in post trade and on the Itiviti side. That is feeding in too because as we look at those opportunities, they haven't gone away. They haven't gone to a competitor, and that is what is leading to really a record pipeline as we enter the year. So we are -- that's why we feel good about the $280 million to $320 million guide for this year, which is obviously a strong recovery. We are anticipating continued nice growth in the U.S., and we're positioning ourselves in Europe so that as decision-making there unlocks, we can really let those things flow through.

And ladies and gentlemen, our next question comes from Dan Perlin from RBC Capital. Please go ahead with your question.

Thanks, good morning. I wanted to kind of follow back up on kind of backlog here a little bit. So the $400 million, is there a way to kind of talk about I guess, the nature of the work that's embedded in that and timing expectations that you might have in terms of conversions into revenue? Is it any different than what you historically would have seen in patterns? Are there types of businesses that are embedded in that just could be prolonged for longer than you anticipate? And then I did want to just revisit again to close sales in the quarter. I mean it did kind of surprise us. And obviously, it was surprising to you guys how quickly it kind of turned down. So here again, I guess the question is just really on visibility, which I guess is just kind of an extension of the way Peter asked the last question.

Tim, let me maybe just start off and give a little bit -- I'll talk about the first day and thanks for the questions, and I'll talk a little bit about the backlog, but I want to put it in the context of our overall 2024 guidance. And then maybe I'll turn it over to Tim to talk a little bit more about the closed sales. When you think about our guidance for fiscal 2024, there's a high level of confidence. And keep in mind, we're operating in this very volatile macroeconomic environment and continue to deliver the results that we just talked about for a moment. And as I think about our fiscal 2024 guidance, your point on the backlog is the first thing that comes to mind. Our continued conversion of the backlog to revenue, I don't think that there's anything in that backlog that's unique. We've said before that we see anywhere from a 12 to 18-month conversion cycle. Clearly, we are going to have the wealth management revenue come across earlier in this year from the backlog. But continuing to execute on that is what we expect and the cycle continues to be the same. Further, I think about the position growth that we have, and as I said, the testing that we're seeing now suggests that our outlook for mid-to-high single-digit position growth continues to be in line. That continues to give us confidence in our recurring revenue guidance. And again, we have a 6-month window insight upfront to look at that. And so if something changes, we have the time to react on that. And then our continued execution on margin expansion in our business to be able to drive the guidance that we have and coming off of 77 basis points for the last three years, we continue to feel good about that guidance. So nothing specific that's different about the conversion to revenue cycle. And those are the factors that I take in mind as I think about the overall guidance. And Tim, you might want to give some other comment on sales, if anything.

Yes. I just think, Dan, on sales visibility, these things are always hard to judge. It is -- and I'll reiterate that whether a sale finishes in June or it finishes in September or October for that matter, it really doesn't make much difference to our results. And I really go to the quality of the conversations, the need that our client institutions continue to express and their intent. And then beyond that, it just gets -- it gets bogged down in contracting in final lots of final details. And since the weakness was in Europe and Europe in the summer is not exactly a hot bed of activity, I'm not here promising that oh it just is going to happen in the next few weeks either. But I do have good confidence that it will happen in this fiscal year.

Okay. No, that's great. And then just a quick follow-up on margins. A couple of just, I guess, moving parts here. I just want to make sure I heard everything right. So if we look at 2023 kind of ex-distribution in some of these things or traded revenues, I think you said it increased 60 basis points versus the 110. So that's kind of the pure number that we should be focused on. And I think embedded in your guidance, I think you also said as you kind of remove some of these obstipated [Ph] things around higher distribution and then maybe flow going against it, also absorbing amortization that you'd be able to do 50 basis points of margin expansion. So I guess one is that I characterize both those correctly. And then secondly, anything you call out in terms of underlying momentum that you have in the margin structure?

Dan, you called it out exactly right. I mean, that's exactly right. Again, 77 basis points over the last three years, 110 basis points this year. You exclude distribution and to be very specific the float income and that was over 60 basis points in fiscal 2023, which is what you called out. So those are the two items that really impact the reported margins, but had no impact on the overall earnings. And when you think about fiscal 2024, the same things are happening again. You have float income, which is a benefit to the reported margins, but have no impact to our earnings because we have the interest expense on the variable debt then you have distribution that's growing primarily because of postal rates that is a negative on the margins, but again, has no impact on earnings because it's passed through. So let's put those two items aside, and what you focus on is in the core operations of our business. Number one, we're absorbing the large amortization that's coming in for the wealth management platform, and that core business is again expanding by we said at least 50 basis points, right in line with our historical objectives and very much like what we saw in fiscal 2023 as well. And just the final point to answer to your question, what's driving that. It is the scale, the operating leverage that we have in our business as we bring on new clients; we do it at very accretive margins. And then you also heard us talk both in 2022 and again on this call about the continued disciplined expense management that allows us to create the capacity to invest and continue to deliver those earnings. So those are the right items, and I appreciate the opportunity to clarify that some.

Our next question comes from Puneet Jain from JPMorgan. Please go ahead with your question.

Hi, thanks for taking my question. I also want to ask about closed sales. So given like the period of weakness near term, should we expect fiscal 2024 sales to be more back-end loaded? And it was good to know that you like fiscal 2023 sales, the impact from that is included in this year's guidance. But can it impact growth beyond this year, beyond fiscal 2024?

Yes, Puneet, thank you very much for that. So first of all, just on the -- will it be back-end loaded. I think it is. As you know, our sales are always back-end loaded. It would certainly be my ambition that it might be a little less back-end loaded this coming year, but it's really no promise. It's very hard to judge these because there are large deals in there and the timing of those can just be hard to judge. What we will always do is each call based on where we are, we'll give you an update on where we think we're going to end up for the year. And then with respect to 2024, but what about beyond, that's a great question. As I said, we feel very good about 2024 based on the backlog we have and everything is baked into our guidance. When we look beyond that, as we think about the recovery we anticipate in our sales this year that really refills our backlog nicely. And we don't anticipate there will be any time where our on-boarding teams would end up with sort of lack of work to do. So it's really about the pace of on-boarding and we think we'll be in good shape for the midterm.

Got it. And I guess, like you will share like your medium-term goals like in December this year. So maybe if you can review like the margin drivers that you expect over next few years beyond like the near-term benefit from the restructuring?

Well, I think, Puneet, what you're going to see is a repeat of what I just said because I think it is -- I think you're going to continue -- I think we have a long runway for continued margin expansion. Let's put it in the context a little bit. I've now said 77 basis points over 50 basis points per year for the fiscal ‘20 to ‘23 time period. If you look back at the 3-year cycle before that, it was over 80 basis points per year and ‘14 to ‘17 over 50 basis points, I think 53 basis points sort of ‘14 to ‘17 period and look at what the drivers are of that margin expansion. One is the operating leverage. So scale, bringing on new sales without adding new expenses to drive that, our continued move to digital that is at a higher margin product. I talked on the call about the growth in the digital business and our customer communications business, and we continue to be more digital in our regulatory business as well and then the operating efficiencies. And since I've come on board over the past three years, I can tell you that the focus from the company on continuing to have that disciplined expense management really setting ourselves up to have investment capacity is what we've been focused on. So I do think that there's a continued long runway for margin expansion to be able to drive earnings and create room for investment capacity. And I don't think that's going to change anytime soon.

And our next question comes from Darrin Peller from Wolfe Research. Please go ahead with your question.

Guys, thanks. Let me just start off with the components of margin. It looked like the gross margin improvement was fairly notable. I saw COGS changed quite a bit. I think it was over 300 basis points. Maybe, if you could just help us understand the dynamics there and maybe the sustainability or what's the recurring dynamics there for a moment would be helpful.

Yes. So we talked earlier Dan about initiatives that we took at the end of Q4 ‘22. So we're seeing the impact of that in our Q4, right in line with what we expected in growing over some of the investments that we have in two as well. I think those were the two sort of unique items that right in line with our expectations drove up the margin expansion in Q4 ‘23, just as we expected.

And that sounds like the new baseline should be reasonable.

I think full year -- sorry, full year baseline, I think, is what you want to focus on. And I think the guidance that we put against that with the components that I talked about a moment ago is off of that full year baseline. In any particular quarter, particularly when you look at our first and second quarter, small dollar amounts can swing that margin. So I really don't look at the quarterly view of margin, but the overall full year number.

Okay. And then just very quickly to follow up on [indiscernible] for the sales. I know there's been a couple of questions already, but I know the volatility can come timing-wise. So maybe just help us understand a little bit more over what was actually any type of surprise in the current quarter, just given again that it was a little below the initially or the recently lower number for the year for this quarter. But again, going back to the conviction, I understand you feel strongly about your confidence on bookings or closed sales for the year ahead. So I guess, Tim, maybe just give us a sense of where you're seeing the strength, that gives you that much conviction in terms of what business lines would be helpful.

Yes. Thanks, Darrin. We are seeing, first of all, everything largely, when you look at the ICS side of things, the communication side of things, the regulatory solutions, we're doing issuer what we're doing with funds. There's very, very good strength there in the U.S. We've seen that, and we have new things coming down the pipe that we think will add to that strength in ‘24. So that side really feels very solid. And then on the European side, the business mix, as I said, is more around GTO. So there's more technology solutions. That is more susceptible to decisions that firms make about I mean are they going to make this modernization now or they make it in the next quarter. It tends to be a little bit more driven by their budgets and their priorities. And those firms though are also under more stress. They have higher need, and that does create some volatility in terms of timing of decision-making. But we have, as I've said, a record pipeline, including the things that didn't get done in the last quarter of this year was just added to that pipeline. And so we feel very good about those conversations and the fact they will ultimately get done.

Our next question comes from David Togut from Evercore ISI. Please go ahead with your question.

Thank you, good morning. Could you drill down a little deeper into the kind of underlying drivers of mid-single-digit stock record growth expected for Q1 FY ‘24 and mid- to high single digit for the year?

Yes, Dave. So for Q1, we are -- what we see in our testing is I’m going to say on the high side of mid-single digit is what we're seeing right now, and that does tend to float up a little bit as time goes on because what the testing is we're making a poll right now. And so each week, it ticks up just a little bit. So it's really based on our testing. And as you know, it's a small portion of the year. And so it's hard to say it's fully predictive of the entire year, but it certainly gives us nice confidence. I can't really drill down by sector or other things.

The only thing I'd add, Tim, to what you just said is a year ago, David we were talking about broad-based growth when you look at this. I think when we look now, we're seeing, again, continued large issuers and midsize issuer is showing the growth. We continue to see the strong growth on managed accounts. We continue to see the strong number of accounts increasing relative to -- versus the positions per account increasing. So as Tim just said, it is in a small quarter, so it's hard to get any specific insight at this point. But the trends are very much in line with what we've seen over the past year.

Understood. Then just as a follow-up, could you kind of walk through the wealth management platform now that the UBS platform is completed and being marketed to a broader audience in terms of -- is the demand continuing to be mostly on modules or APIs? Or are you seeing it broaden out a little bit to transformational deals.

Yes. Thanks, Dave. And just as a reminder, which I know you know is that this is part of a very significant $16 billion market which has continued to grow. And we're really excited that we have exited the build mode and that we're into the selling mode with a good targeted sales plan. And as I said -- and I go on to say is our competitors are talking about what they will have, and we have that now. When we drill down into the specific nature when you look into our pipeline, we are seeing right now more demand on the component type side. It is, and that can be part of a bigger transformation but it is -- I think people are feeling much more step-by-step versus taking on large programs to work. And -- but that adds up across institutions. So we're seeing, as I said, good near-term demand around things related to adviser experience, progressions [Ph], alternatives. And then we are seeing longer-term demand on more foundational chunks that would be part of a longer-term transformation. But again, in a step-by-step kind of way.

Our next question comes from Michael Infante from Morgan Stanley. Please go ahead with your question.

Hi, everyone thanks for taking our questions. Apologies if this was asked earlier. I joined a couple of minutes late. But maybe just on the mutual fund and ETF position growth, Interesting to see the divergence between equity position growth, which accelerated and mutual fund position growth, which decelerated. I was hoping you could provide some color on that dichotomy?

Thanks Michael. I'll start off with a few comments. I think it's actually -- the equity positions decelerated down to 6%. And we've seen over the last 10 years, 6% to 8% growth in line with the outlook that we have now from mid-to-single digits. So it was the equity positions that came down. Mutual funds continue -- they've been stable throughout the year, and they actually uptick in Q4 to 8% and ended for the full year at 8%. So again, I think all that just sort of boils down to the confidence that we have in the full year guidance in that mid- to single-digit range for both equity positions and mutual funds.

And our next question comes from Patrick O'Shaughnessy from Raymond James. Please go ahead with your question.

Hey good morning. I apologize if I missed this, but did you provide an outlook for your CapEx and capitalized software development in fiscal ‘24?

You've -- Patrick, you broke up a little bit.

Sorry if I missed this earlier, but did you guys provide an outlook for your CapEx and capitalized software development for fiscal ‘24?

Patrick. I think what we said is that we expect our free cash flow conversion to be at approximately 100%. And that is -- we feel very good about that coming off of where we were in fiscal 2022 when it was at 48% because the client platform spend was elevated primarily driven by Wealth Management and the GPT in our platforms in the capital market space. We've now sort of completed that elevated investment level. So I think you're going to see more normalized client platform spend that allows us to get to that 100% free cash flow level, and we feel real good about that.

Ladies and gentlemen, this will conclude our question-and-answer session for this morning. I'd now like to turn the floor back over to management for any closing remarks.

Thank you, operator. I hope you can tell how excited we are about our strong fiscal 2023, our outlook for 2024 and how well positioned we are for long-term growth. Speaking of long-term growth, please save the date for our 2023 Investor Day, which will take place in New York City on December 7. Thank you again for your interest in Broadridge, and we look forward to seeing you in December.

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.