Good morning, and welcome to the Broadridge Second Quarter and Fiscal Year 2024 Earnings Conference Call. [Operator Instructions]. Also note, today's event is being recorded. At this time, I'd like to turn the floor over to Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Jamie, and good morning, everybody, and welcome to Broadridge's second quarter fiscal year 2024 earnings conference 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 Chief Financial Officer, Edmund Reese. Before I turn the call over to Tim, a few standard call-outs. 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. With that, let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings. Good morning, and it was great reconnecting with so many of you at our Investor Day in December. As you heard, we are more optimistic than ever about the near- and long-term growth opportunity that lies ahead. You'll hear many of those same themes today as I discuss our positive second quarter results and fiscal year outlook. Before I do, let me comment on the unique and complex moment in which we find ourselves. At Davos 2 weeks ago, it was energizing to talk with our senior clients about the opportunities and challenges they see ahead. A lot of the discussion was on the promise of AI and how we move our industry forward. Broadridge's recent announcement of OpsGPT to leverage generative AI to transform Capital Markets operations was particularly timely. At the same time, the geopolitical challenges and uncertainties in the environment are clear which makes our highly recurring and resilient business model, all the more attractive. Against this backdrop, it was rewarding to hear our clients continues to think of Broadridge as an important partner for innovation and growth as well as for efficiency and resilience. And with that, let me turn to the quarter. First, Broadridge's second quarter results marked another step toward our growth plans for both fiscal '24 and the next 3 years with healthy organic growth across both segments that was in line with our long-term goals. Second, physician growth trends remained positive, with stronger fund position growth and mid-single-digit equity position growth. Third, we are executing against the growth plan we shared last month at our Investor Day by driving the democratization and digitization of investing, simplifying and innovating trading and modernizing wealth management. Fourth, we generated strong free cash flow in the quarter, keeping us on track to achieve…

Thank you, Tim, and good morning, everyone. I'm really pleased to be here to discuss the results for the second quarter. But before moving into the detailed review, it's important to highlight with the first half signals. For the seasonally larger second half and full year fiscal '24. First, we continue to execute the Broadridge Financial model in the second quarter results have us right on track to deliver another strong year of recurring revenue growth, margin expansion and adjusted EPS growth, right in line with our guidance. Second, strong free cash flow of positive $91 million through 2 quarters highlights the capital-light nature of our business and increases our confidence and our 100% free cash flow conversion objective in fiscal '24. Third, the combination of strong free cash flow and modest M&A in fiscal '24, means that we expect higher capital return to shareholders through increased share repurchases in the second half of fiscal '24. And finally, the demand for our products is strong. First half sales were up 12% over last year, and our pipeline and current client discussions reinforce our conviction that we will meet our full year objectives. Additionally, our equity position testing shows mid-single-digit growth for the full year. So we continue to be encouraged by expanding investor participation in the financial markets, serving as a long-term tailwind for our business. These 4 items are the meaningful and significant signals from our results and the performance through the first half. So now turning to the financial summary on Slide 6, you see the performance for the second quarter. Recurring revenues rose to $899 million, up 6% on a constant currency basis, all organic. Adjusted operating income increased 1% as we modestly increased growth investments given above-trend event-driven revenue. AOI margin declined 100 basis points to…

[Operator Instructions]. Our first question today comes from James Faucette from Morgan Stanley.

Great. I just want to check some quick math on the Wealth segment. It looks like client losses were about a 3-point drag to constant currency recurring revenue growth. And if I presume that those losses were concentrated in the wealth business, without them that business probably would have grown about 6% to 7%. Are we kind of looking at that arithmetic about right?

So James, first, and thanks for the question on wealth. I think there's a couple of points to make in your question there. First, just generally for Broadridge. As I talked about during Investor Day, and as you see here, we just have a long history of retaining 97% to 98% of our existing recurring revenue. And when I set aside transitioning E-Trade to Morgan Stanley, I think we're right in line with that. And even with it, we're 3 points of contribution. So that's sort of the first point. I think that you can do the math on the wealth segment, we gave a good sense about exactly what the incremental wealth revenue would be for the year, just over $75 million. We said that would largely be offset by transitioning E-Trade. And so it gives you some sense about what the losses would be with -- knowing those 2 components.

Got it. Got it. Okay. That's helpful. And then more broadly, I guess, obviously, constructive to see the year-to-date closed sales number. And I think you had previously spoken about some of that being adversely impacted by European tech discretionary weakness. But you've now reiterated the closed sales outlook. Your tone seems particularly bullish on that. So can you give a little more insight into maybe if there is an improvement in the overall demand environment, what you think is motivating that? And how Broadridge is -- are there incremental opportunities for Broadridge to take advantage of?

Yes, James, it's Tim. I'll take that one. And first of all, thanks for the question because I think we do feel really good about where we are on this. And as a reminder, obviously, closed sales don't have much impact on this year. This year is really supported by the conversion of our strong backlog, the $400 million we talked about at the beginning of the year. So this is all a question about future growth. And we saw a strong first half. January was strong. The -- and the one thing I just want to point out for you and our listeners is that, that growth that we've seen so far really came from the areas that we've been investing in, like the front office and like wealth management, which is really nice to see. And as we look at the second half, we're having really good conversations around tailored shareholder reports, around digital communications, continued front-office discussions, continued wealth discussions. And it's true that we've heard caution from other tech companies and that we have been seeing weakness in Europe previously and that sales cycles remain extended. I think partly what we're seeing now is, as we said, those conversations were extended, but they didn't go away and some of those are now coming through. And we're seeing that clients really are willing to spend on areas that drive revenue, that lower costs, that have specific regulatory needs, all of those really fit very well. So we are seeing that conversion of that strong pipeline improving. And you should have heard in the tone, and we do feel a lot -- some very good confidence in achieving our sales guidance of $280 million to $320 million, which is obviously a nice uptick on last year and really returns us to the long-term growth trend there.

Our next question comes from David Togut from Evercore ISI.

Tim and Edmund. I'll combine my 2 questions upfront. The first is really on headwinds and tailwinds. The first part is really on revenue. Edmund, you talked about event-driven revenue likely coming in above the historical trend line average of $230 million to $250 million. So that seems like a nice tailwind and then the other, you seem to be guiding more toward the bottom half of your range on record growth mid-single digit versus the 6% to 9%. So maybe you could just walk through those walk through those 2 dynamics and how they might balance out in the guide? And then the second is really on expenses. SG&A, as you called out in your remarks, was up more than revenue in support of the ramp in event driven. Can you talk about the evolution of operating expenses in the back half of the year?

Yes, thanks for the question. I think it's an important one and gives us an opportunity to emphasize our confidence in being in line with the full year guidance that we have. Your first question is really on headwinds and tailwinds relative to the overall guidance and how we think about event as part of that. Let me first maybe make a comment on the event and then talk about the overall recurring revenue guidance itself and the headwinds and the tailwinds. On event, thus far, as we talked about in the prepared remarks, through the first half of the year, we have seen strong event. And while headlines might suggest sort of higher contest activity, it was really driven by a recovery in the mutual fund proxy activity given the low levels that we saw in Q4 '23, we expect that to continue in the back half of the year. And there could likely be some more contest activity. But I did mention that we started increasing investments in Q2 in this current quarter because of the outlook on the full year, including the outlook on the event-driven revenue. And it's good when we have these types of transparency earlier in the year, because, as you know, we have a number of unfunded investments that when we are performing above our expectations. We go deeper in that list and increase those investments. We're able to do that because it drives long-term growth and still allows us to be within our overall guidance of 8% to 12%. And so I think as we think about strength and event being above those levels, we'll continue to look for opportunities to invest while we have the opportunity to do it. Overall, on the recurring revenue guidance, as I've said before, I think…

Our next question comes from Dan Perlin from RBC Capital.

I just wanted to maybe revisit the wealth expectation as we just go into kind of the third and fourth quarters here. So you said that E-Trade kind of came off, I think you said late in the quarter. And so I don't want to get over our skis kind of jumping into the March quarter. So the expectation is that the 143 that you printed, it could step down from there despite the fact that new sales look pretty robust in that area? Is that a fair assumption? As we think about modeling that second half?

Yes. Dan, it's Tim. No, we don't see it stepping down. It is -- E-Trade was off for pretty much the entire quarter. And so I think the balance you saw in this quarter will be similar going forward. There may be some other factors up and down, but the net of those 2 is positive.

Okay. Got it. That's super helpful.

And I'll just add to Tim's point, then you heard me mention that we do expect both the capital markets and the wealth management for the full year to be within that 5% to 8% sort of longer-term 3-year objectives. We feel good about that. And I think that will be more weighted for both of those businesses, again, to the third quarter relative to the fourth quarter.

Got it. That's super helpful. Tim, this is kind of a bigger picture question. You alluded to it a little bit, but you said you talked to a bunch of clients at Davos, we turned the page on the calendar here. So just the operating environment, the expectations, the pace of commitment from clients. I'm just trying to figure out where the pockets of, I guess, incremental demand in your view, will come from? And then maybe the speed with which you think clients are willing to put capital back into their business.

Yes. Thanks, Dan. And I -- these days, it's a little bit embarrassing to talk about Davos, I guess, but it is a great opportunity to connect with a bunch of clients all at the same time. So it was a really useful set of discussions. And I think the nice demand that we're seeing for the second half, it really is those 2 factors I talked about before, which is it's a little bit of catch-up of discussions that were already taking place. And then it is -- then is new discussions. And we are seeing -- and it is -- people are being cautious. So they're really looking at areas where they see very tangible returns or they have very specific needs that they need to address. And many of our products fit into that arena. But we're -- as we look at incremental demand going forward, there is a big industry change around tailored shareholder reports. We have a great solution for that, that really saves our clients' money over any other way they could implement it. That is not only going to be a nice driver of sales in the second half, but it's really improving our whole relationship with the fund industry as being part of the solution. The digital communications, those conversations continue to be very robust really across all of our wealth management firms as they are looking to how do they better engage their clients and do so at lower cost. And with the conversion of one of the large wealth management players and the success of that, that I think is a great proof point on that. The -- and while we're just talking about communications, I don't want to actually skip over the fact that the -- when you look at our omnichannel communication strategy, it had the 2 parts that had the long-term conversion to digital, but had a pretty extended midterm period of that market is still 50% unvended. And there are a lot of in-house players that are basically losing scale as the world goes more digital and are, therefore, choosing to outsource. And we have some of those conversations going as well. So I think all sides of the communications will have some nice sales in the second half. Continued strength in front office. A lot of discussions there. As you know, we're sort of but number three, but numbers one and numbers two are really not investing in their business, and our clients are looking for long-term partners and so having a lot of great discussions there. And then the wealth side, double sales in the first half, and I said a really good discussions around the components that we have -- that we've talked about with clients having those components in their hands to trial them in a sandbox environment, seeing how they play out. And so we see really some really nice strength across multiple dimensions of the strategy.

Our next question comes from Darrin Peller from Wolfe Research.

Just maybe a quick follow-up on the wealth side. When you think about the cross-selling opportunities and what you -- what kind of progress you've been making that either is embedded in the closed sales now or obviously could be embedded in the year ahead. Maybe just comment again on how that's been progressing after UBS is now more --

Darrin, it's Tim. Thank you because it's a -- we think it's a great topic for us. We talked at our Investor Day about how the pipeline has really accelerated over the past year is now at over $200 million. And so then the question has really been about how to begin to convert that pipeline into sales. And what I just talked about is as we have live software and it makes a huge difference for our clients to be able to demo, hands-on keys, have a sandbox, see the software with their own data inside. And so I think that is one of the things that has really led to the strong first half and why we feel like we have a good traction in the second half. And it is across a pretty broad set of components. Remember that for UBS, there were 29 different components that we invested in and modernized and brought to the cloud. And so whether that's tax or it's client onboarding or its corporate actions, many clients see a little bit different path in terms of what their immediate need is and sort of their -- on their transition to sort of a north star. And so we're having just lots of good conversations both in the U.S. and in Canada. So it's -- we feel good about where we are.

And just one point to add to Tim. We quantified what we expect in terms of incrementality from wealth at $28 million to $30 million in incremental sales, and we still, as Tim just said, we feel very good about that number.

And then just one quick follow-up. Just to revisit the BRCC, the customer communications business. I know you talked about the obvious digital transformation from print. I mean, maybe just help us understand how to think about the growth profile of that business. I know it's -- it had been challenged a little bit after you first closed the deal and then it went to pretty strong positive growth rates pretty consistently. I think it was flat right now. Just remind us again what your expectations are for that?

Yes.And I just have to put in one more time in plug that we really think this quarter was a great demonstration of how our broader omnichannel communication strategy is working. And the growth rates will be ticked up and down, as you just said, Darrin, in any particular quarter. But longer term, what we are -- that strategy is really the one we talked about from before, which is to leverage our scale, our synergies and technology to be the low-cost provider in the industry. To consolidate print, which is still 50% unvended as in-house operations lose scale and then to drive print to high digital footprint -- drive from print to high-margin digital. So that remains the strategy. As we think about how all that plays into sort of long-term growth expectations, we continue to see not any given quarter, but over many quarters, we expect sort of low single-digit top line growth with expanding margins and low double-digit earnings growth. So that's really sort of the profile you should expect from that business.

Our next question comes from Peter Heckmann from D.A. Davidson.

Going back to tailored shareholder reports and some of the compliance market there. Can you talk about how you're thinking about the opportunity around tailored shareholder reports for Broadridge? I'm sure it's dependent upon the wins, but I guess, how do you feel your position there?

Yes. Peter, thank you. And remember that when the industry moved to 30e-3, we got a sort of an uptick. We argued against it, but we got a sort of a $30 million uptick. And we had commented that when the -- when the world moved away from 30e-3 that we would have a headwind of about $30 million in revenue. And what I'm really pleased about is as we look at the -- now is the help our clients solve the issues that tailored shareholders, and I'll come back to this in a second, the issues that it creates. I think we're going to see that revenue more than replaced, which is very nice. The challenge that clients face with tailored shareholder reports, just to remind people what it is. It's taking the 150-page or so annual and semiannual reports that people receive and it is saying, what are the key data points that are inside there that people really care about and creating a condensed, much more readable sort of 2- to 3-page summary that is much more digestible for investors. So that's good. The challenge it creates for our clients is that those reports, the new regulation has them the wires tailored. It has to be specific to the share class that, that client has. So in the past, you would have gotten a report and you have a table and you said, we'll have to look up your share class and try to figure out for you what it means now has to be specific to you. That dramatically increases the number of SKUs. We talked in an earlier call about a fund we talked to you that had something like 120 to 150 different reports and now that's going to be 1,200 different reports. That…

And our next question comes from Patrick O'Shaughnessy from Raymond James.

So for GTO, in past quarters, I seem to recall you guys speaking to a 5% to 7% growth outlook for that business both in, I think, fiscal '24 as well as the medium term. And today, I heard you speak to 5% to 8% growth. So I'm curious if anything has changed in terms of your outlook for that business? And then I think specific to this year, is faster or higher trading volumes may be a bigger contributor to growth than you had previously anticipated?

Patrick, thanks for that question. We did. I'll emphasize that we did come out at an Investor Day and one of the big changes and an important change for us is moving our growth objectives, our 3-year growth objectives for organic growth from 5% to 7% to 5% to 8%. Now the strong growth that we expected in fiscal '24 has a lot to do with that. But the investments that we've been making in the strength that we've been saying, Tim said earlier, our front office capital markets business and even the strength in wealth management, given the incremental sales that we have, we think that GTO will be a contributor there as well. Those are our objectives of 5% to 8% over the next 3 years. And I think you're going to see each of the GTO businesses playing -- performing right in line with that, both capital markets and wealth management here.

All right. And as you guys are to being able to modulate your investment spend due to higher event-driven revenue. Can you maybe give a little bit more detail on kind of the type of spending that represents? Are you bringing on more consultants? Are there other kind of very short-term expenditures that you're able to ramp up?

Yes, Patrick, it's a great question. It is one of the things that we're very clear with all of our businesses on is that the investments we're making are our onetime investment. So we have -- we, as do many firms have a whole set of relationships with external providers for building technology consulting, other kinds of things. And so when we have the ability to incrementally invest, it is not adding associates that are going to be here for the long run, but it is really going deeper into projects that may be already underway and accelerating those, but leveraging largely third parties for things that are already in motion that we can accelerate.

And our next question comes from Brendan Miles from JP Morgan. Q – Unidentified Analyst: I'm on for Puneet. Jane, by the way, of course, from JP Morgan. So can for all the updates on wealth, it's been really cool, I've been following the stock to wash so like the J curve on your investments in the platform unfold on the free cash flow generation. So that's exciting to see. Quickly on cap markets kind of bouncing off this last question. It seems like it was a great quarter in capital markets. Could you just give us a quick update on the state of the market in that business? And then maybe like a technical question quickly on AI, I -- can I ask a question. For the OpsGPT and BondGPT's are products that you guys are rolling out, I understand you have access to like tons of incredible data. Is that data just kind of data that's in your custody? Or is it data that you own?

Yes. So let me just start with the last one and then come back to the broader capital market because I'm pleased to be able to talk about AI. It is an area that we're investing in, as I talked about earlier, we expect to be a leader in our space, and it is a real natural place for mutualization where -- because we're doing this for many clients, a particular activity and because really getting value out of this often depends on the nuances of a specific activity. we can invest more than it makes sense for any one client to invest, and we can have better data than any one client would have. So it's a really nice opportunity for a mutualized benefit and to -- and for the benefit of our clients. Now in terms specifically of the data, we obviously -- we do house lots of data across clients. We are being very careful on this in terms of how we leverage our models that we are at this point, doing that client by client. It is -- we are -- it is -- that data is owned by our clients and we're extremely careful about that. Could there be a longer opportunity with client permission to have across those pools, that could be possible in the future, but it is would be specifically with our clients' permission. When we look at things like OpsGPT, today, when there's, say, a fail, there's a whole research process that it kicks off and you have knowledgeable and fairly expensive ops people looking up in this database and then that database and then cross referencing it. And by working out what's the reason for the fail and then contacting the other party about it? That sort of research process can be easily automated here. And it is not that sort of looking at the Internet of things like that, it's using AI to write SQL queries to real databases to get real data to put that together and join it and be able to present an answer to an ops professional who can quickly validate it and really cut out tons of time. And this is just -- we're just scratching the surface in terms of what will be possible. But I think our clients are very excited about it and very excited about the idea that we'd be taking on this investment really on behalf of the industry to really help drive a lot of efficiency. And remember, we're a technology company, not so much a people company. So as we make things more efficient, that's not coming out of our personnel that's really helping our clients save money. So that's AI, and I'm sure we'll be talking about it a lot more. The other part was just the state of the market on capital markets?

For the drivers of growth in capital markets, and I'd probably hit 3 things, and thanks for asking the question, Brendan, because it does allow me to come back to an item that Patrick mentioned. But there are probably 3 things that I'd point out there. One is the continued double-digit growth in our front office capabilities as we brought on BTCS, we just continue, as Tim talked about earlier, to see strength in that business. Two, and this is the case across each of our different business units is our ability to be able to convert the revenue backlog into revenue, particularly given the investments that we have been making in our post-trade solutions. We continue to see strength in our capital markets post-trade solutions converting new clients into revenue. That is a strong boost for that business. And the third, and this is a point that Patrick mentioned, we did see strength in some of the trading volumes in the quarter. We go into our planning cycles not expecting significant growth from trading volumes almost assuming flat. But as I mentioned, the fixed income trading, in particular, has continued to have strong growth over the past couple of quarters, and that is also driving a boost in capital markets. And again, most importantly, having us very confident that, that business, along with wealth will be within our 5% to 8% objective here.

And I'm sorry, I have to just add one other thing, which is -- when you take our capital markets -- capital margin is a very esoteric business. You take our capital markets team put in front of any even very top tier client. And it is a very impressive team. And the -- you see that in the innovation with digital ledger repo, with LTX, with AI across all those areas that are at the leading edge of where capital markets are going, front to back, we are showing real thought leadership and having great conversations with clients.

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Jamie, thank you very much, and thank all of you for joining us this morning. As I hope you heard, we see a long runway for growth ahead. And as we enter our seasonally larger second half, we are on track to deliver another strong year and to continue to make a difference for investors everywhere and for our clients, our associates and our shareholders. Thank you very much for your interest this morning.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.