Broadridge Financial Solutions, Inc.

Good morning and welcome to the Broadridge Financial Solutions first quarter and fiscal year 2024 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 touch-tone 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 Thiebaud, Head of Investor Relations. Please go ahead.

Thank you, Kate. And good morning, everybody, and welcome to Broadridge's first quarter 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 CFO, Edmund Rees. Before I turn the call over to Tim, a few standard reminders. 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 gap measures can be found in the earnings release and presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Eddings, and good morning. I'm pleased to be here to discuss our strong start to fiscal 24. Clearly, the economy and our world remain in a volatile and difficult place. Despite the uncertain economic environment, our business continued to perform well in the first quarter, which speaks to the long-term trends and needs driving our growth, as well as the strength of our business model and the execution of our team. I'll start with the headlines. First, Broadwood reported strong financial results. Recurring revenue grew 8%, all organic, with strong growth across governance, capital markets, and wealth. Adjusted EPS rose 30%. driven by strong recurring revenue growth, timing of event-driven fees, and continued expense discipline. After a slower finish to last fiscal year, closed sales rose $19 million to a first-quarter record of $48 million. Second, while markets have remained uneven, continued growth in investor participation drove equity and fund position growth of 8% and 3%, respectively. Third, we continue to execute our strategy to enable our clients to democratize investing, simplify and innovate trading, and modernize wealth management. That execution is driving our results in the form of strong sales in our government solutions, the strong performance of BTCS, and a growing pipeline in our wealth management business, among many examples. Fourth, Our commitment to balanced capital allocation has always been a key part of our value creation strategy. In recent years, we've invested heavily to build out our wealth and capital markets platform capabilities. That investment is moderating, and in fiscal 23, we repaid a portion of the debt from our BTCS acquisition and ended the year at our target leverage. Now, we're returning to our more historical mix of investment and capital allocation. Type 4 investments declined significantly from last year's level, and we repurchased $150 million of our shares in Q1, our first share repurchase since fiscal 2020. Finally, with a strong start to the year, we are reaffirming our full-year fiscal 24 guidance. We expect recurring revenue growth of 6% to 9%, continued margin expansion, and another year of 8% to 12% adjusted EPS growth. and closed sales of $280 to $320 million. Those are the headlines for the quarter. Now, let's turn to slide four to review how we drove these strong results, starting with our governance franchise. Our ICS recurring revenue grew 6 percent, driven by a combination of revenue from sales, increased investor participation, and higher interest income. Looking across our product lines, Solid growth in our regulatory solutions was complemented by strong results in data-driven fund and issuer solutions. In customer communications, double-digit growth in our digital communications revenues more than offset a temporary slowing in print growth. The biggest driver of our growth remained revenue from new sales as we developed new solutions like our digital products and enhanced our existing products. we're winning with both new clients and expanding our relationships with existing clients. Increasing investor participation also remains a positive driver for our regulatory business, despite headwinds from a choppy market and rising interest rates. In what is the smallest quarter of the year, equity record growth remains strong at 8%. Growth within managed accounts remained in the mid-teens, more than offsetting low single-digit growth in self-directed accounts. Fund and ETF position growth was 3%. The underlying trends remain solid, with double-digit growth in passive fund positions offsetting weaker trends in actively managed vehicles. Our forward testing continues to indicate a mid-to-high single-digit outlook for equity positions and mid-single-digit growth for fund positions. Equity-driven activity also picked up in the quarter. Event-driven activity also picked up in the quarter. I'm especially proud of the work done by our issuer business as part of a recent large-cap spin-off. Not only did we seamlessly process critical communications for more than 5 million beneficial and employee shareholders, we also provided the digital composition and print work for the required filings. It's a great example of how Broadridge can bring the full power of its network together to help public companies execute critical transactions. We also appointed new leadership for our ICS business, elevating Doug DeShutter and Mike Tay to the role of co-presidents as part of a long-planned transition. Mike and Doug are proven leaders, and they bring a long track record of execution to their new roles. Our governance business is in strong hands. Turning to capital markets, our sell-side clients are seeking to expand their agency and principal trading capabilities, and they're turning to Broadridge for our help. Capital markets revenues rose 9%, 249 million, driven by strong growth in BTCS and higher trading volumes. We also help our clients simplify their back office operations. And during the quarter, we completed the rollout of our global post-trade platform for a large global bank. Step by step, we've worked with that client over the past few years to transition away from seven different disparate platforms covering 75 separate markets around the world each with its own operation support and settlement structure, into a single, unified Broadridge platform. This is a strong example of how we are helping our clients simplify their operations, reduce expenses, and optimize capital utilization by modernizing their infrastructure. Wealth management revenues grew 14% to $154 million. As we highlighted on our last call, we began recognizing revenue from UBS at the beginning of the first quarter. For some time, we've been discussing our move to a component-based approach, which we're calling transformation on your terms. I'm pleased that we are seeing success with this approach. Our pipeline continues to grow, and we have now sold one or more components to seven additional clients beyond UBS and RBC. These component sales give us confidence in our progress and the opportunity to expand for these clients over time. Finally, we reported strong closed sales in the first quarter, driven by a combination of underlying demand and sales that moved from fiscal 23. I was especially pleased to see sales growth across all of our franchises, including higher wealth sales and strong growth to BTCS. In an uncertain market, clients remain willing to invest in new capabilities, especially those that can deliver nearer-term benefits, or then enhance their go-to-market strategies, including governance tools, enhanced trading capabilities, and advisor productivity tools. As a result, while time to close is sometimes longer, our conversations with clients remain strong, and our pipeline continues to grow. Let's move to slide five for some closing thoughts from the quarter. First, broadening is off to a strong start to fiscal 24. We reported strong first quarter results, including 8% recurring revenue growth and 30% adjusted EPS growth. We're executing against our strategy to enable the democratization of investing, simplify and innovate trading, and modernize wealth management. Second, our growth is being driven by long-term trends and strong execution. We continue to benefit from increasing investor participation and clients investing in new regulatory solutions, faster and more efficient trading, and the modernization of wealth management. We have invested to ensure that we can help our clients benefit from these trends. That combination of long-term drivers matched with a clear investment and growth strategy is driving real value for clients and strong results for our shareholders. Third, we remain committed to balanced capital allocation with our core priorities of retaining our investment-grade credit rating funding internal investment, growing our dividend in line with earnings, completing tuck-in M&A, and returning excess capital to shareholders. With our wealth platform investment now complete and target leverage achieved, we are confident that we will be able to return additional capital to shareholders going forward and return to mid- to high-teens ROIC. The $150 million share buyback we completed in the first quarter highlights that confidence. Fourth and last, we are reaffirming our guidance for fiscal 24, and we remain well positioned for long-term growth. Our business has a long track record of delivering consistent top and bottom line growth and strong shareholder returns. Today, we are better positioned than ever to continue delivering even more value to our clients, and we're looking forward to sharing our newest set of three-year objectives at our upcoming Investor Day this December in New York. Normally, I close my remarks with a thank you to Broadridge Associates around the world. It's an acknowledgment of their work and focus on driving positive client outcomes. But today, I first want to thank and remember one associate in particular. Bob Schiffaletti passed away in September after a brief illness. while in the process of a long-planned transition away from his role as president of our ICS business. He joined our governance business almost 40 years ago, and he was a principal architect in building the strong governance franchise we know today. He was a passionate advocate for our clients, a champion of our culture, and most of all, a good friend and mentor to me and so many others at Broadridge. So I want to thank And remember Bob for his work in building our company. And I want to thank all of our associates for the work they do every day to serve our clients, drive the transformation of our industry, and enable better financial lives for millions. Edmund, over to you.