Broadridge Financial Solutions, Inc. (BR) Earnings

Management highlights

- Overall Financial and Shareholder Performance * Delivered 8% constant currency full-year 2026 revenue growth and 12% adjusted EPS growth, with a record Q4 closed sales performance that exceeded management expectations. * Returned ~$1 billion to shareholders in fiscal 26 via dividends ($443 million) and a record $600 million in share repurchases; the board approved a 12% dividend increase (to $4.36 per share) marking 20 consecutive years of dividend growth, and increased share repurchase authorization to $1.5 billion. * Generated $1.2 billion in free cash flow (17% year-over-year growth) with 110% free cash flow conversion; ended the period with a leverage ratio of 1.9x, well below the 2.5x target. - Core Segment Operational Progress * Governance (ICS): Achieved 16% total equity record growth and 12% equity revenue position growth, with 6% fund position growth. Digitization rates for proxy communications near 95%, and digital customer communications grew more than 10% for the fourth consecutive year. Passive Voting Choice capability now serves 900+ funds with $8 trillion AUM (up from 600 funds / $4 trillion AUM last year), and gained new sales in Europe and Japan for U.S. equity voting solutions. The SEC's proposed eDelivery rule for default digital communications is expected to be a long-term demand catalyst for Broadridge's digital communications platforms. * Capital Markets (GTO): The distributed ledger repo platform (DLR) now processes $360 billion in daily tokenized repo transaction volume (up 3x from May 2025), with multiple Tier 1 banks currently onboarding and 50% volume growth expected by December 2025. Agentic AI managed service offerings are delivering up to 30% day-one operational cost reduction for clients. The acquisition of CQG strengthened futures and options capabilities and secured a major new competitive win in Q4. * Wealth Management: Grew full-year recurring revenue 10%, with new client wins in Canada (including Avizo and a leading Canadian bank) following the SIS acquisition. Launched a unified digital asset capability that integrates traditional and tokenized assets on a single platform, with Canadian deployment expected by end of calendar 2025 and U.S. deployment announced for wealth clients. - Strategic Growth Initiatives * AI: Deployed agentic AI across product development, client onboarding, and operational workflows, with $25 million in productivity gains expected for fiscal 27. Existing AI products (Custom Policy Voting Engine, BondGPT, Trading Algorithms) are already gaining market traction. * Tokenization: Is building comprehensive, trusted tokenized market infrastructure across all three business segments, supporting all three current tokenized equity models (synthetic, custodial, native). Announced new partnerships with Ondo, Ando, Alpaca, and Galaxy to deliver governance services for tokenized equities. DLR is being expanded globally to support G7 securities and cross-border repo, and the new DLX multi-asset tokenization platform (built on the DLR architecture) will extend tokenization capabilities to additional asset classes by end of 2025. Management expects tokenization to be a significant long-term tailwind for the firm.

Guidance

- Revenue: Expects 6% to 8% constant currency recurring revenue growth for fiscal 27, with 5% to 7% organic growth plus a 1 percentage point contribution from 2026 acquisitions; growth is expected to be balanced across ICS and GTO, with GTO growing at the higher end of the range. - Event-driven revenues are expected to moderate to a $250 million to $300 million range after a record fiscal 26; distribution revenues are expected to grow mid-single digits, driven by higher postage rates. - Adjusted operating income margin is expected to reach ~21% (up from 20.5% in fiscal 26), with operating leverage and $25 million in AI-driven productivity gains offsetting lower event-driven revenues and continued growth investment. - Expects adjusted EPS growth of 8% to 12% for fiscal 27, based on an expected 22% tax rate. - Guides for full-year 2027 closed sales of $290 million to $330 million. - For Q1 fiscal 27: Expects a 400 bps license revenue tailwind (evenly split between capital markets and wealth) from a large license renewal, which will offset the tough comparison to the prior-year quarter's record $114 million in event-driven revenues. Q1 adjusted EPS is expected to represent 11% to 13% of full-year fiscal 27 earnings. - Expects no financial impact from the SEC's eDelivery rule proposal in fiscal 27; over the 2-3 year implementation period, a modest recurring revenue headwind is expected to be largely offset by new digital solution sales, with no material impact on long-term adjusted earnings growth. Guidance excludes the impact of any unannounced acquisitions.

Segment performance

The firm reports results across two core segments: Investor Communication Solutions (ICS) and Global Technology and Operations (GTO): 1. **Investor Communication Solutions (ICS)**: Full-year 2026 recurring revenue grew 8% year-over-year, with 10% growth in the fourth quarter. Sub-segment performance: - Regulatory revenues: 12% full-year growth (14% Q4 growth), driven by double-digit position growth across equities and funds. - Data-driven fund solutions: 4% full-year growth (7% Q4 growth), with 200 bps organic growth headwind from lower interest rates. - Issuer revenues: 8% full-year and Q4 growth, offsetting a 100 bps headwind from lower rates. - Customer communications: 5% full-year growth, with 14% growth for digital revenues and 1% Q4 growth. ICS contributed approximately 63% of total full-year 2026 recurring revenue. 2. **Global Technology and Operations (GTO)**: Full-year 2026 revenues grew 7% year-over-year, with 5% growth in the fourth quarter. Sub-segment performance: - Capital markets: 5% full-year growth (7% Q4 growth), with the CQG acquisition contributing 300 bps of Q4 growth and digital assets (including DLR platform revenues) contributing 100 bps of Q4 growth. Full-year 2026 capital markets total revenue reached $1.2 billion. - Wealth and Investment Management: 10% full-year growth (1% Q4 growth); excluding lower-term license headwinds, Q4 revenue grew 5%, driven by new sales and strong retail trading volumes. SIS acquisition drove new momentum in the Canadian market. GTO contributed approximately 37% of total full-year 2026 recurring revenue. Full-year 2026 total recurring revenue grew 8% constant currency to $4.9 billion, with 6% organic growth. Adjusted full-year EPS grew 12% to $9.60; full-year closed sales totaled $305 million, with a record $158 million in Q4 closed sales. Q4 total revenue grew 7% to $2.2 billion, with adjusted EPS of $3.82 (8% year-over-year growth).

Risks & headwinds

- Forward-looking statements related to tokenization growth, AI productivity gains, and eDelivery rule impacts are inherently subject to market uncertainty and regulatory change that could delay or alter expected outcomes. - Large, complex enterprise deals were delayed earlier in fiscal 26 by client-side uncertainty around business case approval and legal processes, which could impact future closed sales performance. - Lower interest rates create a persistent headwind for float income and organic growth across multiple segments, which pressured full-year 2026 adjusted operating margin by 40 basis points. - The scaling of tokenized assets and AI solutions requires continued large upfront investment, and there is no guarantee these investments will generate expected revenue or cost savings returns in the projected timeframes. - The timing and final terms of the SEC's eDelivery rule are still uncertain, and the impact on Broadridge's business could differ from current projections.

Analyst Q&A

• Q: The Q4 closed sales result was much stronger than prior quarters, with many large deals closing after delays earlier in the year. Why did these deals close now, and what does the current pipeline indicate for fiscal 27? /

  A: Earlier delays stemmed from broad market uncertainty that slowed client internal approval of large deals' business cases and complex legal work. In Q4, this uncertainty cleared as clients began moving forward with required strategic investments, leading to the strong close, with both large and mid-sized deals accelerating. The total sales pipeline is now more than one-third larger than it was one year ago, driven by consistent strong origination throughout the year, positioning the firm to deliver 300+ million in closed sales for fiscal 27. Platform-enabled solutions (the firm's key investment focus) now make up half of the pipeline, supporting long-term growth. (316 words)

• Q: New tokenized governance partnerships with Ondo, Alpaca, and Galaxy have been announced. How do the unit economics for these services work relative to existing proxy services? /

  A: The firm uses its existing standard rate schedule for all tokenized asset services: natively issued tokenized equities use the higher registered share rate schedule, while beneficial and synthetic tokens use the existing beneficial share rate schedule. Leading tokenization players do not have the in-house expertise, regulatory compliance capability, or scale to offer these governance services independently, so they outsource to Broadridge. Most early demand is coming from global investors, and this new business will drive incremental position growth rather than re-pricing existing positions. (223 words)

• Q: With the stock trading at low long-term P/E multiples, how aggressive will the firm be with share repurchases relative to M&A and internal tech investment going forward? /

  A: Broadridge maintains its long-standing balanced capital allocation framework: prioritize investment-grade credit ratings, fund internal organic growth investments, pay the growing dividend, pursue attractive tuck-in M&A, and allocate residual capital to buybacks. At current share prices, management views Broadridge stock as compelling value, so after elevated repurchase activity in the second half of fiscal 26, continued healthy repurchase levels are expected for fiscal 27. With leverage at only 1.9x, the firm has ample capacity to support both buybacks and strategic opportunistic M&A if attractive targets emerge. (207 words)

• Q: How should we think about the growth trajectory of the DLR tokenized repo platform, and how does the new DLX multi-asset platform relate to DLR? /

  A: DLX is not a replacement for DLR; it is an expansion of the existing DLR platform, which was always designed to support multiple asset classes. No re-architecture or client conversion is required. Multiple DLR clients are already in onboarding, so 50% volume growth is expected by December 2025, with further scaling after that. Additional growth vectors include global expansion to add G7 securities for cross-border repo, and new intraday collateral functionality that could drive significant additional volume. DLR will be extended to support additional asset classes (equities, funds, money markets, alternatives) via DLX by the end of the year. (198 words)