Broadridge Financial Solutions, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Macro Environment: Market conditions normalized after a volatile April, with capital markets activity beginning to bounce back, contributing to a strong fiscal '25 close and confidence in fiscal '26 outlook.
• Fiscal '25 Results: Recurring revenue grew 7% in constant currency, adjusted EPS grew 11%. Executing on growth strategy in governance, capital markets, and wealth management.
• Growth Strategy: Driving democratization/digitization of governance, simplifying/innovating capital markets, and modernizing wealth management. Acquisitions like Acolin and SIS are accelerating growth.
• Regulatory Environment: Opportunities in digital assets, shareholder engagement, digitization of communications, and private assets, with Broadridge well-positioned to address these changes.

Segment Performance

• Governance: Recurring revenues rose 6% to $2.7 billion in fiscal '25, driven by strong growth in investor positions. Digitization rates for equity proxy communications rose above 90% and for funds above 77%. The acquisition of Acolin will accelerate efforts in fund data and voting choice solutions.
• Capital Markets: Fiscal '25 revenues grew 6% to $1.1 billion, driven by new sales and higher trade volumes. Solutions like NYFIX trade routing and OpsGPT are gaining traction, and the distributed ledger repo solution saw daily average trading volumes rise above $200 billion.
• Wealth and Investment Management: Recurring revenues rose 12% in fiscal '25, driven by the acquisition of SIS. Excluding E*TRADE deconversion, organic growth was 5%. The wealth platform is gaining momentum, with strong sales in the U.S. and Canada, and Sentry private credit solution sales rose 8%.

Guidance

• Fiscal '26 Outlook: Recurring revenue growth expected 5% to 7%, adjusted EPS growth 8% to 12%, closed sales $290 million to $330 million.
• Event-Driven Revenues: Expected to decline in fiscal '26 but remain above historical average.
• Free Cash Flow: Strong, with $1.1 billion generated in fiscal '25, positioning the company to invest internally, fund dividends, pursue M&A, and return capital to shareholders.
• Backlog: Recurring revenue backlog stands at $430 million, providing visibility into growth.

Risks

• Macro Volatility: Market volatility can impact sales cycles and capital markets activity.
• Sales Cycle Elongation: Potential for longer sales cycles, which could affect closed sales timing.
• Regulatory Changes: Uncertainties around regulatory changes in digital assets, shareholder engagement, and other areas could impact business operations and growth.

Question and Answer

• Q: Michael Infante asked about closed sales acceleration and sales cycle elongation.

A: Tim Gokey noted sales cycles have been longer, but strong underlying demand in key areas (voting choice, wealth and focus, etc.) exists, and the platform conversation is resonating with clients.

• Q: Scott Wurtzel inquired about tokenization opportunities on the ICS side.

A: Tim Gokey discussed digital assets and wealth management clients adopting digital assets, with Broadridge developing disclosure products for these new asset classes.

• Q: Puneet Jain asked about backlog duration.

A: Ashima Ghei explained backlog conversion times vary by product, with some wealth sales taking longer to convert than ICS sales.

• Q: Kyle Peterson asked about backlog replenishment.

A: Tim Gokey stated backlog is in balance, with a strong sales pipeline expected to keep things balanced.

• Q: Patrick O'Shaughnessy asked about tokenization of equities and debt profile.

A: Tim Gokey discussed tokenization impact on equities and Ashima Ghei mentioned debt is managed with leverage at 2x, within target range, and debt will be rolled forward as it comes due.