BROADRIDGE FINANCIAL SOLUTIONS, INC. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Tim Gokey highlighted strong second quarter results with 9% recurring revenue growth and 70% adjusted EPS. Market backdrop includes strong financial markets and client activity. Governance business drives democratization and digitization, Capital Markets simplifies trading, and Wealth and Investment Management benefits from the SIS acquisition.
• Ashima Ghei noted 9% recurring revenue growth, 70% adjusted EPS, strong revenue growth drivers, record event-driven revenues, and reaffirmed guidance. Key callouts include 9% recurring revenue growth, strong revenue growth drivers, record event-driven revenues, and reaffirmation of fiscal 2025 guidance.

Segment Performance

• Governance (ICS): Recurring revenues rose 9% to $540 million. Regulatory revenues grew 8% due to low double-digit equity position growth and mid-single digit fund position growth. Data-driven fund solutions revenue increased 8%, issuer revenue grew 18%, and customer communications revenue rose 10% driven by digital growth. For the second half, total ICS recurring revenue growth is expected to be in line with the 6%-8% full-year recurring revenue growth outlook.
• Capital Markets (GTO): Recurring revenue grew 6%. Front office solutions for speed trading and structured products, back-office post-trade platforms with GenAI enhancements, and Distributed Ledger Repo product added 3 new clients. GTO revenue growth expected to be low double-digits in the second half, driven by high teens growth in Wealth Management and mid to high single-digit growth in Capital Markets.
• Wealth and Investment Management: Revenues grew 12% largely due to the SIS acquisition, extending the Canadian wealth business and with Advisor Marketing Solutions adopted by a leading Canadian bank. Organic growth in Wealth Management excluding E-Trade deconversion was 6%.

Guidance

• Reaffirmed 6%-8% recurring revenue growth constant currency, 8%-12% adjusted EPS growth, and closed sales of $290 million to $330 million. Q3 EPS expected in mid to high single digits. Capital Markets to have low double-digit growth, Wealth Management to have low single-digit organic growth. FX to be a 50 basis points headwind for remaining fiscal year.

Risks

• Heightened global uncertainty impacting business operations. Variable event-driven revenues due to market fluctuations. Impact of FX fluctuations on financial results. Potential changes in regulatory environment affecting business operations and client behavior.

Question and Answer

Q: On guidance and underlying results, how is Broadridge tracking?

A: Ashima Ghei and Tim Gokey discussed tracking in the midpoint of the target range, event-driven revenues expected to be lower in the second half, and strong future opportunities across the business.

Q: On sales and market optimism, any pickup?

A: Tim Gokey mentioned sales grew 8% in the first half, pipeline is at a record with investments in key areas like omni-channel communications and data analytics.

Q: On AI monetization and wealth segment progress?

A: Tim Gokey talked about AI in products and productivity, and the SIS acquisition tracking well with warm client conversations and positive associate integration.

Q: On GTO license sales and regulatory impact?

A: Ashima Ghei clarified license revenue noise as a quarterly factor, and Tim Gokey discussed M&A and regulatory impact on business operations and client behavior.

Q: On event-driven revenue and postage increase impact?

A: Ashima Ghei said event-driven revenues are choppy, and postage impact is baked into margins. Excluding postage, distribution growth is low single-digit.

Q: On client behavior and capital budgeting?

A: Tim Gokey discussed early impact of deregulation on client behavior, and capital allocation principles including M&A and share buybacks based on strong free cash flow conversion.