Broadridge Financial Solutions, Inc.

Good morning and welcome to the Broadridge Fiscal Third Quarter 2022 Earnings Conference 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 from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Eddings Tebow, head of investor relations. Please go ahead.

Thank you, Kate. Good morning and welcome to Broderidge's third quarter fiscal year 2022 earnings call. Our earnings release and the slides of the company this call may be found on the investor relations section of Broderidge.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 on today's call regarding Broadridge that involve risks. A summary of these risks can be found in 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? Thanks, Eric.

Good morning. I'm pleased to be here to discuss our strong results, record sales, and outlook for another really good year. I'll start with the highlights for the quarter. First, Broad was reported another quarter of strong results. Recurring revenues rose 16%, and adjusted EPS rose 10%. More importantly, we're entering our seasonally largest quarter with continued momentum, and we are well positioned to close out another year of strong top and bottom line growth. Second, our growth continues to be powered by long-term trends. In an uncertain market, we're benefiting from increased investor participation, the need to modernize and digitize financial systems technology, and the ever-present focus on efficiency. Thanks to our investments and multi-year focus, Broadridge is taking advantage of these trends, and you see that in our growth and in our close sales. We're also benefiting from strong performance in our acquisition of activity. Third, the convergence of long-term trends is making what we do increasingly important, especially in governance. In a few moments, I'll discuss those trends and their positive implications. Brodridge is on track to deliver another strong year. As a result of our year-to-date performance and visibility into the fourth quarter, we are raising our adjusted EPS forecast to 13% to 15% from 11% to 15%. With only a few months to go, we expect to deliver mid-teens recurring revenue and mid-teens adjusted EPS growth along with another year of margin expansion. That, in turn, positions us to deliver at the higher end of our three-year growth objectives. Let's turn now to our business update on slide four, starting with governance. Our governance business continues to drive our growth. ICS recurring revenues rose 9% to $630 million in the third quarter, driven by new sales and strong position growth. We are now well into the peak of proxy season, and record growth remains strong. Equity stock record growth was 17% in the third quarter, with overall positions increasing throughout the quarter, despite volatility in the market. We see this momentum continuing into the fourth quarter, as Edmund will share with you. Looking at the drivers of that growth, our data shows the largest increase from online brokers, complemented by substantial double-digit growth from more traditional players. And we continue to see very good growth across both managed and individually directed accounts. We're also seeing investor participation increasing on the fund side, with mutual fund and ETF record growth of 10% for the quarter. ETFs are continuing to gain ground with investors, but we also saw strong growth at a number of active complexes. The continuing strength and breadth of equity and fund position growth reflects the continued breadth of retail investor participation and the power of technology to increase access to markets. Outside of regulatory, we saw solid, mid-single-digit growth across our other businesses, including data-driven solutions, issuer, and customer communications. Moving to capital markets, recurring revenues rose 56% to $247 million. Itivity was the biggest driver, and it's also contributing nicely to our closed sales growth. The combination of Itivity's modular technology architecture, our commitment to client service, and our long-term product roadmap is resonating with clients and driving market share gains. We're also making good strides on the integration itself, including rebranding the business as Broadridge Trading and Connectivity Solutions, or BTCS. With three quarters under our belt, we forecast the rebranded activity is on track to meet our expectations. I'm also pleased to see continued progress in our distributed ledger and AI initiatives, On distributed ledger repo, we're on pace to go live with our third significant market participant in the next few weeks, which will take our daily average trading volume up over time to $50 billion per day from $35 billion now, with a strong pipeline behind that. Our AI-powered fixed income trading platform also continues to make steady progress. During the quarter, we completed our integration with Charles River, And last week, we announced our buy-side advisory forum with many of the world's largest asset management firms, including BlackRock and PIMCO. Turning to wealth and investment management, revenues declined 2% to $134 million as we lapped the elevated trading volumes triggered by the mean stock phenomenon a year ago. More importantly, our wealth sales remained strong in the quarter and are up more than 50% year-to-date, building the base for future growth. Finally, we successfully rolled out our next-generation client workstation to more than 15,000 UBS advisors and others, and feedback from those users has remained exceptionally positive. Last, we reported another strong quarter for closed sales, which are up more than 40% year-to-date, and set a new record for third quarter and for year-to-date. These new sales are being paced by our investments in enhancing investor engagement, adding and growing activity, building out our DLT and AI-powered solutions, and in our wealth product suite, among others. Our strong sales results have us on track to achieve another year of record-closed sales and to set the stage for continued growth. As I noted earlier, we are now well into proxy season, as more than 80% of annual meetings take place in April through June. Equity position growth remains strong, which speaks to the continued increase in participation in our markets, And that's clearly a strong tailwind for our business. Beyond that growth, however, we see a confluence of long-term trends that are making our role powering corporate governance even more critical and valuable to the investment process. So let's turn to slide five for a deeper dive. The first of those trends is one I've already discussed, which is growing participation in our markets or the democratization of investing. And that really is a function of falling trading costs, enabling a much wider set of products for investors. If you think back over the past two decades, we've seen the rise of ETFs, managed accounts, and more recently, app-based investing and zero commission trading. As we look forward, we see more changes, including pass-through voting and direct indexing. Taken together, these trends are bringing more investors, especially younger ones, into the market and giving them access to more diversified and sophisticated investment strategies. At the same time, the importance of environmental, social, and government factors is also growing, driven especially by climate and social issues. Investors are voting with their assets, as shown by the strong inflows into ESG funds, and increasingly, they are voting with their shares. Not only are we seeing a rising number of ESG proposals on the ballot for annual meetings, Those proposals are getting more support over time, and we've all seen the SEC's proposed rules for further ESG disclosures. It's clear that ESG issues are increasing the engagement of all investors, both retail and institutional. As a result, engagement between retail investors, institutional investors, wealth managers, fund companies, and issuers is more important than ever. Facilitating this engagement is what we do, and we're innovating to meet that challenge. We're enabling fund companies to drive pass-through voting to their investors. We've instituted end-to-end vote confirmation for 2,500 public companies, including all the Fortune 500, so that investors can confirm their vote to be counted. And we're implementing universal proxy to simplify contests. At the same time, we're making it easier than ever for voters and issuers to engage with each other with our enhanced proxy vote app, and an upgraded virtual shareholder meeting platform. In short, we're using our place at the center of a network linking broker-dealers, institutional investors, tens of millions of retail investors, and thousands of funds in public companies to make it easier than ever for every investor to vote and to have a voice in the policies of the companies that they own. And we're making it more efficient than ever for public companies and funds to engage with their shareholders. These investments are paying off in the form of higher growth and higher value for all of our stakeholders. I'll wrap up with some final thoughts on slide six and then turn it over to Edmund. Broadridge continues to execute and deliver on our growth strategy. We're extending our governor's franchise and enhancing investor engagement. We're growing capital markets by driving efficiency and enabling trading innovation. and we're building a wealth and investment management business with next-generation technology. Our performance in the quarter and over this year has been driven by the onboarding of new sales and strong underlying volume trends. Looking ahead, we see another strong quarter despite increased volatility as the world copes with rising inflation, higher rates, the slowdown in China, and unfortunately, the Russian invasion of Ukraine. Our ability to execute in these choppy markets reflects the strength of a recurring revenue business model and the long-term trends that power our growth. Whether it's the increased investor participation driven by falling trading costs, digitization, or the relentless pace of technology innovation, these trends have proven durable in both strong and weak markets and give us the confidence to make investments to drive long-term growth. So even in the face of increased volatility, our business is poised to grow. Brodridge is on track to deliver a strong fourth quarter to close out another very good year with FY22 recurring revenue at the high end of our guidance range with continued margin expansion and with adjusted EPS growth of 13% to 15%. That strong performance in 22 comes on the back of a fiscal year 2021 in which Brodridge delivered 10% recurring revenue growth, 60 basis points of margin expansion, and 13% adjusted EPS growth. As a result, we remain well positioned to deliver at the higher end of the three-year growth objectives we laid out at our last investor day. Before I turn it over to Edmund, I want to thank our 14,000 associates around the world for their hard work in delivering the results we're announcing today. The work we do is important, enabling better financial lives for millions of investors around the globe. Our associates' high engagement, still 10% above pre-pandemic levels, makes a difference every day for those investors, for our clients, and for our shareholders. Thank you. With that, let me turn the call over to Edmund.