Good day, and welcome to the Broadridge Financial Solutions Third Quarter and Fiscal Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to hand the call over to Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Andrea. Good morning, everybody, and welcome to Broadridge's third 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 Chief Executive Officer; and our Chief Financial Officer, Edmund Reese. Before I turn the call over to Tim, a few standard callouts. One, we'll 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 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. It's great to be here to review our third quarter results and update you on our full year outlook. Overall, I'm pleased with the performance of our business in a complex environment. We see a market in which the underlying fundamentals are solid, where capital markets and retail investor activity are beginning to strengthen, and where our clients are highlighting the need for continued technology investment. While all that is going on, those same clients are being careful with their spending as they weigh the new higher for longer scenario as well as other tail risks. These trends play to Broadridge's strength. Our testing is indicating that healthy markets are driving a pickup in investor participation and position growth, and are delivering innovative solutions across governance, capital markets and wealth. Sales continue to be strong, highlighting our clients' willingness to move ahead with solutions that address revenue, cost or regulatory needs. My conversations with clients make it clear that they see Broadridge as a partner in helping them grow their business and adapt to change. It's a strong position, and it will be further enhanced as we put our cash flow to work with a balance of capital returns and targeted M&A. So, let's dig into the quarter. First, Broadridge reported 4% recurring revenue growth and 9% adjusted EPS growth. Those results were modestly impacted by the timing of annual meetings, which pushed some governance revenues into the fourth quarter. Second, we continue to execute against our strategy to drive the democratization and digitization of investing, simplify and innovate trading, and modernize wealth management. Our strategy is supported by long-term trends, including position growth, which we continue to see in the mid to high single digit range. Third, that execution is coming through in…

Thank you, Tim, and good morning, everyone. Let me start by saying that I'm pleased with the third quarter results relative to our full year guidance. While third quarter recurring revenue growth was impacted by the timing of annual meetings, we are entering the seasonally larger fourth quarter in a strong position. Through three quarters, we reported 6% recurring revenue growth, 11% adjusted EPS growth, and have received 98% of proxy records through April. That gives us a high confidence interval in our ability to deliver 6% recurring revenue growth, approximately 20% adjusted operating income margin and adjusted EPS growth of approximately 10%. Of equal importance is our cash flow performance for the year. We are on track for 100% free cash flow conversion, which will allow us to return a total of $700 million to $800 million to shareholders through the dividend and with share repurchases of $350 million to $450 million. So, with clarity on fiscal 2024, in my view, what matters most to achieving our three-year financial objectives are the wins that we have at our back, which are driving positive momentum in the business. First, closed sales through the first three quarters are up 19% over last year. And our healthy pipeline reinforces our conviction that we will achieve 15% to 30% sales growth in our full year '24 guidance. Second, while our testing shows 6% equity and 3% fund and ETF position growth for full year '24, the early testing for Q1 '25 is consistent with more recent increased retail market activity and our long-term outlook of mid to high single digit growth. Third, we continue to focus on actively managing our expenses and finalizing our restructuring effort in the fourth quarter to create investment capacity for organic growth in fiscal '25 and '26, while…

Thank you. Good morning. I'll ask my question and the follow-up both upfront. So first, given the solid early demand for OpsGPT and BondGPT, where do you see the biggest opportunity to increase Gen AI-related product development? And then the follow-up, since you've deleveraged the balance sheet, now we're a few years post the Itiviti acquisition, where do you see the greatest white space for your acquisition opportunities?

David, thank you very much. It's Tim and thank you for the question on AI. It's an area that we're pretty excited about, as you know and we have talked about being a leader in AI in our space. We've talked about how we're bringing that to -- really into all of our products. We think in the future, every product will be part -- will have AI as part of it and then to introduce commercial products as well and use it for internal efficiency, and do all that in a safe way. We are really pleased by the progress of OpsGPT and BondGPT. With OpsGPT, we're in production with our first client and we're actively engaged with another five. BondGPT, we have three proofs-of-concepts underway, eight additional discussions. So there's lots of good activity around those. We're also doing things in the asset management side with our global demand model, where we have six of the largest 50 asset managers already signed up and an additional 10 of the largest 100 in contracting. So, I think people are really attracted to these use cases. When we see sort of the biggest areas going forward, I think it's really deepening in these sort of unique areas that -- where it really makes sense for us to be the one to invest. It doesn't make sense for others to invest in the sort of depth of capital markets or in some of these marketing areas in asset management and we think there's real opportunity for us there. We're excited about how it's going to drive things in the fixed income world. When you think about this in the future, it's really there will be a commodity part of it where it's part of just having a good product, and then…

And I'll just add, Tim, the opportunities are out there. David, we have two months left in this fiscal year, which is why I highlight the fact that the majority of our capital will be allocated towards share repurchases in this fiscal year, but as I said a number of times in my prepared remarks, we're in a really, really strong position because of the point that you made on being at the right leverage ratio and the capital we're generating through our free cash flow. So as Tim said, there are very attractive opportunities out there as we go into our next fiscal year and I think we'll be in a great capital position to be able to supplement our organic growth with M&A.

Understood. Thanks so much, Tim and Edmund.

The next question comes from Will Vu of Wolfe Research. Please go ahead.

Hey guys. Thanks for taking my questions. This is Will on for Darrin here. I had two related to some of the bookings trends. First and foremost, you guys in the past have talked about some of the underlying bookings being more -- or being less transformative. And I was curious as to if you guys can comment on some of the more recent characteristics within your pipeline. Are you seeing any deal sizes expanding or any of that. And then my second question being, as we look on the wealth management side, kind of curious how -- what opportunities are really resonating with some of your prospective customers that you're seeing on this end? Thanks.

Will, thanks. It's Tim. I'll take those. I think on the booking trends, we are -- I do think that the main thrust continues to be lots of, I don't want to say exactly bite-sized opportunities, but very manageably-sized opportunities. And so we do have some that are, call it, more than $5 million, but we don't have any of these sort of mega things that will take many years to influence. So we really feel good about sort of that flow that we're seeing. We are seeing in areas of demand, and I mentioned this a little bit in the script, but we're seeing it around things that will drive revenue, certainly on the BTCS side, certainly around adviser tools, securities class action, other things that really drive revenue nicely. We're seeing things that drive costs, lots of activity around print to digital and of course, regulatory with tailored shareholder report. So all areas that really align with the investments that we've been making and so that really makes us feel good about the return on the investments that we're going to see. And I think that, that really -- your sort of second part of the question was about wealth management and I think that is just emblematic of getting return on areas where we've made significant investments. As you know, a very attractive market, we've talked about the $16 billion market, how it's growing, and we're getting really good traction with a whole series of component sales. Our sales were up 75% for the year. Our current pipeline is over $200 million. And when you say sort of what opportunities are people looking for, I think that it's a combination of each has sort of a different specific pain point and want to address it, but at the same time, they're looking to sort of say, how do I begin to put in place a digital road map and sort of a North Star that they can build to over time? So, I think the open API framework, the enterprise integration service layer, all of those things in terms of how we can bring things together, they really like that as a vision. Meanwhile, they tend to say, let me start with an existing pain point like tax, like client onboarding, like corporate actions, some things that are very tangible. And so we have great conversations going on both here in the US, but also lots of good conversations in Canada. So we feel really good about the outlook there.

That's great. Thanks.

The next question comes from Patrick O'Shaughnessy of Raymond James. Please go ahead.

Hey. Good morning, guys. When you kind of think about the factors that are driving 6% recurring revenue growth this fiscal year as compared to the high end of your range of 9%, what are the factors that are kind of resulting in revenue coming towards the lower end of the range and then how does that inform your outlook point for next year?

Good morning, Patrick. Thanks for that question. I did want an opportunity to dive deeper into that. So, thanks for the question. We are tracking, to your point, 6% at the low end of what I would highlight is a strong organic recurring revenue range and there are two items that are really impacting that. First, I would say, is position growth. You know that our outlook was mid to high single digit position growth, and you just heard both Tim and I talk about 6% equity position growth and fund growth at about 3% for the full year. So that's one thing relative to the outlook that we had. The second, as you know, a strong component of our recurring revenue growth is converting sales to revenue and there I'd highlight lower revenue in our customer communications business. But again, you heard me talk about starting to see that tick up in the fourth quarter as we onboard new clients. So, I think the key point for me is that we do have positive momentum going into fiscal '25 and '26 with sales, which impacts next year revenue, estimated to be up 15% to 30%, and position growth starting to tick up. I was very deliberate about mentioning Q1 '25 testing data showing mid single digit at this point. I think that's a good trend, because as we know, it normally ticks up. So, look, delivering 6% in fiscal '24 and momentum going into fiscal '25, I think has us in a pretty good place relative to the three-year objectives. The second part of your question is like would it -- it's all focused on the go forward and what it means for the outlook. And for me, as you know, I like to put that in terms of our three-year objectives. And as I just mentioned, we have great line of sight into fiscal year '24. And I would say that's a strong start on the three-year cycle. And I'll just remind you, we're coming off a year of 7% recurring revenue growth and 9% adjusted EPS growth, and now sort of on track to deliver approximately 6% and 10%, respectively. And so, those numbers are right in line with our guidance, right in line with the growth algorithm as we think about the long-term objective. And I just talked about the drivers of growth being stable and the momentum that we have moving forward. So, we feel good about where we are relative to the three-year objectives. And as our usual practice, we'll come back and talk more specifically about '25 in a more robust way on our Q4 call.

Yeah. I appreciate that. A quick follow-up. Just to make sure I'm understanding your commentary on timing and shareholder meetings getting pushed into April from March. So that would show up in the regulatory revenues line and the issuer revenues line, but no impact to data driven fund solutions or customer communications. Am I understanding that correctly?

That's primarily right. You're very astute in picking it up. Those are the two areas that we called out. So, you'll see it in both of those businesses in the registered shareholder solutions and issuer, and then obviously, the regulatory business.

All right. terrific. Thank you.

[Operator Instructions] There are no further questions at this time. I'd like to turn the call over to management for any closing remarks. End of Q&A:

Thank you very much, Andrea. Thank you to everyone on the call. Thank you for your interest in Broadridge. As I said earlier, we're now well into our seasonally largest quarter. We're looking to delivering full year results, as Edmund just said, of 6% recurring revenue growth, double-digit EPS growth. That's going to mark a strong start to our three-year objectives. And we will look forward to seeing you in August.

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