Good day! Welcome to the Broadridge Financial Solutions Fourth 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 to Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Andrea. Good morning, everybody. And welcome to Broadridge's fourth quarter and fiscal year 2024 earnings call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO; and our Interim Chief Financial Officer, Ashima Ghei. Before I turn the call over to Tim, a few standard reminders. 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 in 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 discuss our strong fiscal ‘24 financial and operating results. I'm also pleased to be joined by Interim CFO, Ashima Ghei. Ashima took over on July 1 from Edmund and we continued to wish good luck in his next endeavor. Importantly, I've had the opportunity to work closely with Ashima over the past two and a half years as she played a leading role in driving the strong results of her ICS business. Previously, she was in American Express for 18 years, and she has brought a strong combination of deep insight and experience to her role as CFO of ICS here at Broadridge. Ashima, welcome.

Thank you, Tim. Great to be here.

I'll start my review this morning with a quick comment on what we're seeing in the market. Over the past six months, the market has been stable to improving. Our clients have been moving proactively to digitize communications, simplify and modernize their technology infrastructure, and enhance investor engagement. These trends played to Broadridge’s strengths, and they drove record closed sales for the quarter and for the year. This past week has seen much higher volatility, with questions about the pace of rate easing and sustainability of growth. It's too early to know if this represents a market turn, but if it does, these kinds of environments are where Broadridge's resilient recurring revenue business model really stands out. I'm confident that Broadridge is going into fiscal ‘25, poised to deliver another year of sustainable growth backed by a record backlog of sales already closed, a strong pipeline, and resilient volume trends. We're executing on our growth strategy and investing in our products and capabilities. So in any scenario, I feel very good about how we're positioned. With that as context, let's review our strong results and strategic progress. I'm happy to report that Broadridge is executing on our strategy to democratize and digitize Governance, to simplify and innovate in capital markets, and to modernize wealth management. Our clients look to us as trusted and transformative partner to help them adapt to regulatory change, reduce cost and complexity, and drive innovation. That trusted and transformative position, along with strong execution, is driving record closed sales. For the year, Broadridge reported 39% growth in closed sales to $342 million. That's both record sales and record sales growth. It's also enabling Broadridge to continue to deliver strong and sustainable growth. For the full year, adjusted EPS rose 10% on 6% organic growth in recurring…

Thank you, Tim. It's great to join all of you to discuss the strong results and to review our guidance for fiscal ‘25. Broadridge has a long track record of delivering strong and sustainable top and bottom line growth with strong shareholder returns, and this year was no different. Fiscal ‘24 recurring revenue grew 6% constant currency, and adjusted EPS grew 10%. Before I go through the results, I want to call out the key items that give me confidence that we are on track to deliver on our fiscal ‘25 guidance and our three-year growth objectives. First; sales and backlog. Record closed sales of $342 million drove a 13% increase in revenue backlog, giving us strong visibility into our revenue growth in fiscal ‘25 and ‘26. Second, position growth. Equity position growth was 6% in ‘24, and fund position growth was 3%. Our current testing shows a modest improvement in those trends with continued mid-to-high single-digit growth in equities and mid-single-digit growth in funds. Third; expenses, investments and margins. We have a long history of driving operating leverage. This quarter, we completed a restructuring initiative that will position us to continue to fund long-term growth investments, grow core margin and deliver earnings growth. Fourth and last, capital allocation. In fiscal ‘24, we repurchased 2.3 million shares for $450 million and have recently announced three tuck-in M&A investments. That capital will contribute directly to our top and bottom line growth. These four areas position us well to deliver our three-year financial objectives and our fiscal ‘25 guidance which calls for 5% to 7% recurring revenue, constant currency growth, almost all organic and 8% to 12% adjusted EPS growth. With that let's go through the numbers on Slide 8. Fiscal ‘24 recurring revenues grew to $4.2 billion up 6% on an…

We will now begin the question-and-answer session. [Operator Instructions]. And our first question will come from Dan Perlin of RBC Capital Markets. Please go ahead.

Thanks. Good morning. Tim, I just wanted to ask you, and you touched on this a little bit in the prepared remarks, but we are seeing a pretty material uplift in volatility here, and I appreciate the recurring revenue model. The question is really, in times where we’ve seen this kind of volatility in the past. What have kind of the client behaviors been, and how has the business kind of performed, and are there things structurally different about the business today that you think if we look at other historical periods where we had this heightened volatility, we might have more stable hands, so to speak, this quarter around? Thank you.

Yeah Dan, thank you. Thank you very much for that. And obviously, we have no special knowledge about whether what we're seeing is just a moment or is something more significant. But I do think, and I highlighted this in my prepared remarks, that one of the most attractive features of our business model is its resiliency. And when you look at our fee revenues, they are 94% recurring, and the highest driver there is revenue from sales, and we have a $450 million backlog of things that are already contracted. And, when you look at position growth, it's been pretty resilient through a variety of economic cycles. It has sometimes gone down. In global financial crisis, it went down, it didn't go below zero, but it still stayed positive. We're hedged on interest rates, and volatility benefits us on trading. So, I think if you compare where we are now to where we've been in past periods of volatility, it's really not a lot different. The fundamental components around resilient business model, high recurring revenue, revenue from sales, all of those really remain intact. High trading, that volatility debt is a little bit of a plus in the near term. Sometimes when it's volatile, that causes position growth to slow a little bit, but that's all very speculative at this point, and those things really don't move our broad numbers. So that's why we were pretty confident today around our guidance on 5% to 7% recurring revenue growth, 8% to 12% earnings.

That's great. Thank you so much.

The next question comes from Darrin Peller of Wolf Research. Please go ahead.

Guys, thanks. And Ashima, congrats, and welcome to the call. I just want to touch base on the strength in bookings trends. I think you hit $340 million in closed sales for fiscal ‘24, which was above the range. I think the midpoint you had said was $300 million for the year. So just, maybe just revisit what – if you take it a step back and revisit the key drivers and the strength, and then really where you are seeing in demand right now, going forward in terms of drivers and areas of real demand for the new bookings and new closed sales.

Yeah Darrin, thank you. Thank you very much. Look, we are really proud of the ‘24 sales results with the $342 million. Really driven in ‘24 by four drivers, tailored shareholder reports, digital solutions, strong growth in both capital markets and wealth and investment management. And tailored shareholder reports were an important part of that story, but we like the other stories too. And if you pull out the one-time impact of tailored shareholder reports, sales were at record levels, and we expect that to grow off of those sales, excluding TSR. You know, what we really like is that the sales that we're seeing are aligned with the investments that we have been making, investments in regulatory, investments in digital, investments in capital markets, especially on the front office side, and in wealth. And each of those areas saw strong growth this year. Each of those areas has a nice pipeline for next year. So as we think about where we're seeing that demand that you mentioned, you know we've talked about the bigger themes of helping our clients grow their revenue or helping our clients reduce cost, and the sub-solutions in each of those areas really hit on those. So looking ahead, we're expecting these trends to continue to be very positive, excluding the impact of tailored shareholder reports. We expect to continue to grow our sales in FY ‘25, and we feel good about the 290 to 330 based on our strong pipeline.

All right. Very good. Thanks guys.

The next question comes from James Faucette of Morgan Stanley. Please go ahead.

Great. Thank you very much. I wanted to ask on wealth. It seems like on the wealth front, you alluded to strong pipeline growth for some of the new wealth management solutions. Are you still on track to deliver the $20 million to $30 million of incremental module sales, and how should we be thinking about incremental opportunities down the road there?

Yeah James, thank you very much. We were really happy with how our wealth business continued to perform, obviously 7% up for the past year as we benefited from the onboarding of UBS, partially offset by E-Trade. We do see continued momentum in ‘25 with really being at the high end of that 5% to 7% if we pulled out the E-Trade impact. Remember, E-Trade happened sort of a little bit after the end of the first quarter last year, so the first quarter this year will be impacted. Look, it is strong sales, and it is with clients who want to, we always call it ‘transform on their own terms,’ which is to be able to use a modular approach as a way to long-term transformation. And obviously, the sales are up 40% year-on-year. That was right near that sort of $20 million goal, so not at the 30, but near the 20. We really like though the pipeline of opportunities, and our pipeline right now is 30% higher than it was 12 months ago. And if you remember, that pipeline was up quite a bit over the pipeline the year before. So I think we're continuing to see that nice build. Then really, as we get into SIS in Canada, that's going to really add to the long-term opportunity. We're looking forward to being able to bring our investment on the wealth platform with SIS to accelerate and bring that to the Canadian market as well.

That's great. Thanks.

The next question comes from Puneet Jain of J.P. Morgan. Please go ahead.

Yeah, hi. Thanks for taking my question. It seems like the advisor target and CompSci deals are different from your prior or typical deals. As you noted, they are both small tuck-in in nature, as well as both of them are in digital areas. Should we expect more deals like this as your M&A priority over the near term?

Yeah, thanks Puneet. It's a great question. Just stepping back, I like talking about M&A, but let's just remember we're an organic growth company. Our growth is primarily organic. There's a long runway given the $60 billion TAM. But that said, as you pointed out, M&A has been an attractive way for us to meet new needs for clients. Remember, for context, we're calling for sort of 1 to 2 points from M&A over the long term. When you look at advisor target and CompSci, they are perfect examples of a buy versus build philosophy. When we look at an area where there's a client need that we think we're the right person to meet, then we look, do we have a platform that's really one that we can build on? Or is there, a really good set of entrepreneurs in the market who've taken something and gotten it to a place where then combining it with us would help them accelerate and help us fill out our product line. It's faster to buy it than it is to build it. So, that's been very successful for us in the past. When you think about sort of the mix of M&A going forward, it's interesting this year because you had AdvisorTarget and CompSci, but you also had SAS, which is a real company with real revenue, nice margins, and it's that sort of portfolio mix, and you've seen that over time. So we've been – we were really proud of our track record over time with M&A. We've done 40-some transactions, but it's always been disciplined in terms of the financial returns. It's always been very strategic in terms of the areas and how – why we're the best owner and those are the things that won't change.

Okay. Thank you. Then quickly if I can ask, like, is the duration of backlog, $450 million, any different from what it generally is and that has been in the past?

Yeah. So Puneet, I'll take that. Our backlog includes a backlog in our ICS business and our GTO business. As you know, typically ICS sales convert a lot faster than on the GTO side. As we've looked at our revenue guidance for fiscal ‘25, we've taken some of that into account and the accounting on conversion from that sales backlog.

And Puneet, I'd just add that when you look at the revenue, and this is part of the prepared remarks, but the backlog as a share of recurring revenue, it's 11% this year. If you look back last year, it was 10%. So it's not dramatically different but incrementally better.

Thank you.

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

Hey, good morning. A question on margins. I'm just kind of curious about the lack of margin expansion embedded within the fiscal ‘25 guide, given that the $1 million savings from restructuring I think would boost margins by 1.5%, all else equal. So maybe can you talk about or quantify the margin headwinds from distribution revenues and float income in fiscal ‘25, and then maybe bigger picture, how confident are you still in your kind of three-year, 50 basis points per year margin outlook?

Thanks Patrick. I'll take that one. So you know this, Broadridge has a long history of being able to fund long-term investments, while delivering on our earnings objectives, and margin expansion is a super important part of that story. We've delivered on average 80 basis points of annual margin expansion over the last 10 years. Having said that, we do see margin expansion as a means to an end. What we are really focused on, is on delivering sustainable double-digit earnings growth, while investing in our long-term growth opportunities, both of which we effectively achieved in fiscal ‘24 and is what we are guiding towards for fiscal ‘25. So as we think about fiscal ‘25, you are right in pointing out, we're guiding to 20%. We do expect to see the impact of float income coming in lower. We've factored in a couple of rate cuts into our estimate. We expect the impact of distribution. But we do expect the benefits from the restructuring program that we just did and core margin expansion to allow us to fund our long-term growth investments, still getting us right on track with the 8% to 12% sustainable earnings growth.

And Patrick, I'll just add in that, and actually that was great. I think as you pointed out, we have overcome a number of, when you think about the three-year number of one-off impacts with VMAP [ph], with E-Trade, with rates coming down now. So there are a number of things. At the same time, we feel really good about the core margin expansion next year and no reason to see why that wouldn't continue to be the case in the future. I just step back to say we're an organic growth company. We think of every client as a 1990-year client, and part of that promise is always to be investing in what's next. That's a great formula for our clients, associates, and shareholders. So we are making investments in governance, in digital, voting choice, in the front office. We have the ability to flex those up and down. That's one of the ways we've been able to be really resilient over time.

Perfect. Thank you. And then just a quick clarifying question. So the 5% to 7% recurring revenue growth outlook for the year, that embeds 0.2% contribution from the two smaller tuck-ins and nothing from the SIS deal. Do I have that correct?

That's correct.

Thank you.

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

Yeah, thank you operator. As you can tell, we believe that the Broadridge business model is resilient. That resulted in strong fiscal ‘24 results with outlook for another strong year in fiscal ‘25 and for a three-year period. We believe we're executing on a growth strategy. We have long-term trends behind us that we're very well positioned in a $60 billion and growing market. Thank you very much for your interest in our company. We look forward to reporting our next set of results to you later this fall.

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