Broadridge Financial Solutions, Inc.

Good morning and welcome to the Broadridge fourth quarter and full year 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Eddings Thiebaud, Head of Investor Relations. Please go ahead.

Thank you, Eileen. Good morning, and welcome to Broadridge's fourth quarter and fiscal year 2021 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 regarding Broadridge on today's call 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, Ed.

Good morning, everyone, and thank you for joining us today. I'll begin with our key messages and then provide an overview of our performance against our strategic objectives across governance, capital markets, and wealth and investment management. Then I'll close with some thoughts about our future before Edmund reviews the financials. Let's get started. I have four headlines. First, Broadridge delivered a strong fiscal year 21. Recurring revenues rose 10%. Adjusted EPS rose 13%. and our sales teams delivered a 10th consecutive year of record sales. Our results demonstrate how well-positioned Broadridge is to take advantage of increasing investor participation and the growing need to digitize and mutualize financial services. Second, we're executing against the strategic growth plan we laid out at our investor day in December. We're building the next generation of governance products, growing the scope of our capital markets business across the trade lifecycle and building our wealth management franchise. Third, we remain committed to balanced capital allocation. In fiscal 21, we increased our level of investment on our internal platforms, completed the largest acquisition in our history, and returned nearly $250 million in capital to shareholders. Yesterday, our board approved an 11% increase in our annual dividend per share. Broadridge has now increased its annual dividend every year since becoming a public company, with double-digit increases in eight of the last nine years. Fourth and last, we expect another strong year in fiscal 22. Our guidance calls for 12% to 15% recurring revenue growth, further margin expansion, 11 to 15% adjusted EPS growth, and another year of record sales. A combination of strong fiscal year 21 results and our guidance for fiscal 22 leaves Broadridge extremely well positioned to achieve the higher end of our three-year growth objectives. As we close out the first year of our current three-year cycle, I want to give you an update on our progress against our strategic growth plans for each of our three franchise businesses, starting with governance, or ICS, on slide four. ICS recurring revenue rose 11% in fiscal 21 to $2.1 billion, driven by both new sales and internal growth. The strength of our governance franchise comes from its position at the heart of a network linking broker-dealers, corporate issuers, asset managers, and tens of millions of individual and institutional investors. Our fiscal 21 results highlight how our strategy of innovating at the core while providing incremental value to all network participants drives incremental and sustainable growth for Broadridge. I'll start with our core regulatory business. The big story here is the very strong position growth we're seeing across equities. Equity stock record growth which is our measure of the number of positions held by shareholders, grew 26% in fiscal 21, including 33% in the seasonally strongest fourth quarter. We continue to be struck by the broad-based nature of this growth. We're seeing growth across large and small issuers, not simply a handful of mega-cap tech or meme stocks. Looking at industry sectors today, Tech and consumer cyclical stocks are leading the growth with 42% and 37% growth, respectively. We're also seeing double-digit growth across virtually other sectors, including 33% growth in healthcare names and 20% plus in basic materials and industrials. This broad-based participation is a key reason why we believe that fiscal year 21's strong growth is an extension of the long-term trend that's been driving higher equity and fund position growth over the past decade and why we're forecasting continued growth in fiscal 22. At Broadridge, we're able to meet this increased demand because we've invested in scaling our capacity. After the initial COVID surge last spring, we invested in new distribution capacity to build incremental flexibility across our network, enabling us to seamlessly ensure that holders of more than 500 million positions got the communications they needed to participate in corporate governance. We've also invested in new digital capabilities, including QR codes, that make voting on your mobile device easier than ever. Our governance franchise is also increasingly global, with gains from our Shareholder Rights Directive 2 solution and a continued expansion of our European fund communications business. We're also expanding the suite of data-driven solutions we provide for fund clients, driven in part by another year of double-digit growth across our data and intelligence products. We're growing our relationships with corporate issuers. We conducted almost 2,400 virtual shareholder meetings in fiscal 21, up from 1,500 a year ago. We've become the clear choice for America's leading companies, with more than three quarters of S&P 100 companies using Broadridge to host their annual meetings in 2021. In turn, increased demand for our BSM capabilities has enabled us to deepen our client relationships, leading to strong growth in our suite of other annual meeting services and disclosure solutions products. Finally, in customer communications, our strategy is focused on using our print capability as a door opener for growing our digital business, so it was encouraging to see strong double-digit growth in digital revenues, which offset lower print revenues and helped drive higher earnings. All in all, it was a very strong year for our governance franchise. Now let's turn to capital markets on slide five. In capital markets, we're driving trading innovation across the front office, enabling our clients to simplify and improve their global post-trade technology. providing strong enterprise and data component solutions, and building new network-enabled solutions using AI, digital ledger, and other innovative technologies. Capital markets revenue grew 8% to $701 million, driven by new client additions and the acquisition of Itivity, which has given us a new capability to drive innovation across the trade lifecycle. While the Itivity integration is only just beginning, I'm excited by the progress we've made. Activity recently closed its largest ever sale, and we're on track to leverage Broadridge's relationships to drive more meaningful sales in the quarters ahead. Client feedback has continued to be positive, and the sales pipeline, especially in EMEA and APAC, is strong. A key driver of our revenue growth is our continued success at bringing clients onto our global platforms enabling them to simplify their global technology. We're also enhancing those platform capabilities. A great example is the exchange-traded derivatives platform, onto which we're onboarding, RJ O'Brien. I'm also tremendously excited by the continued progress in developing new capabilities based on next-gen AI and DLT technology. Our LTX fixed income platform continues to progress well, We have more than 70 buy and sell side users on the platform, and we're adding more every week. And the average initiated trade is north of 3.5 million, indicating demand for increased liquidity in fixed income markets. We also recently launched our digital ledger repo platform and are averaging $35 billion worth of transactions daily, a number which will grow as more clients, including UBS, come onto the platform. While both of these products are small today, each is bringing an innovative and differentiated solution to a multi-billion dollar market. Now let's turn to our wealth and investment management franchise on slide six. In wealth, we're extending our services around our core back office capabilities, growing our suite of component solutions, and building a modular platform that will link our individual capabilities across a modern technology architecture. The biggest driver behind our 6% growth in wealth and investment management revenues was revenue from new sales. During the year, we added new clients to both our core back-office platform and saw strong demand for a digital solution suite. Our work with UBS on the digital transformation of the wealth management industry remains one of our most exciting initiatives. The Broadridge Wealth Management Platform is an important part of UBS's own multi-year transformation plan for its North American wealth business. As we line around UBS's goals and its sequencing, we've already rolled out select components, and we expect to roll out the additional platform components over the next 18 to 24 months. Based on the terms of our contract, we'll begin recognizing revenue when we complete the delivery of the full suite. Meanwhile, this platform continues to draw attention from other clients. We were pleased to announce last month that RBC Wealth Management will become our second client on the Broadridge Wealth Platform. RBC is pursuing its own digital transformation journey, and our platform will accelerate their ability to enhance the client experience, optimize advisor productivity, and digitize its back office. We're excited to be a key technology partner in that journey. Beyond our work on the Wealth Platform, we continue to make progress in expanding our digital solutions, with the AdvisorStream tuck-in acquisition and by extending our partner network. Lastly, I was pleased to see strong growth in our investment management technology revenues, which grew by 12%. Strong revenue from sales of existing solutions, continued platform development, and new product additions. We're making solid progress on our wealth and investment management growth strategy. As I wrap up my strategy update, I want to highlight the common denominator behind our execution across governance, capital markets, and wealth and investment management. Broadridge is investing in driving near, medium, and long-term growth. We've invested to process higher position counts, more virtual shareholder meetings, and handle surges in trading volumes, which are critical in fiscal 21 and will remain important in fiscal 22 and 23. At the same time, we're investing in initiatives that will carry our growth momentum forward, including our data intelligence products, the emergence of a European governance hub, activity, and our wealth platform. And finally, I see tangible signs of products that have the potential to extend our growth runway well into the next decade, like digital communications, digital ledger repo, and fixed income AI. These are solutions that our clients value as evidenced by the traction that we're gaining in the market for each of them. This mix of near, medium, and long-term growth businesses across the company is exciting. What does that mean for Broadridge? Let's turn to slide seven. As we enter fiscal 22, I've never been more optimistic about Broadridge's long-term growth prospects. When I look across our company, I see a leadership team that's stronger than ever, focused on how we engage our associates, better serve our clients, and create value for our shareholders. That team is executing against our growth plans across governance, capital markets, and wealth and investment management. We're finding ways to help our clients accelerate digitization, drive mutualization benefits, and enable the increasing democratization of investing. Even more tangibly, we are on track to deliver another strong year. Our strong backlog gives us visibility into new revenue over the next 12 to 24 months, and we see continued position growth as new investors enter the market and current investors continue to diversify their portfolios. In short, we see another year ahead of low-teens revenue and adjusted EPS growth. The net result of strong fiscal year 21 results continued execution against our growth strategy, and an outlook for continued growth in 2022. It means that Broadridge is well positioned to deliver at the higher end of our three-year growth objectives, including 79% recurring revenue growth and 8% to 12% adjusted EPS growth. Before I conclude, I want to thank all Broadridge associates for their work over the past year. Little in the past 12 months has been easy, but they have found a way to adapt to the new virtual environment. They stayed focused on our clients, and they are helping drive the transformation of the financial services industry that is enabling better financial lives for millions. Thank you. Let me now turn it over to Edmund.