Broadridge Financial Solutions, Inc. Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Strategic Initiatives: Broadridge is focused on tokenization, shareholder engagement, digital communications, and leveraging AI. Governance is driving the democratization and digitization of investing. Capital markets are simplifying and innovating trading. Wealth management is seeing strong organic growth and M&A contributions.
• Financial Results: Strong second quarter with 8% recurring revenue growth constant currency and adjusted EPS of $1.59. Reaffirmed 2026 guidance for recurring revenue growth, margins, and closed sales, and raised adjusted EPS growth to 9%-12%.
• M&A and Capital Allocation: Completed acquisition of Acler, with ongoing M&A and balanced capital allocation including share buybacks and dividend, aiming for 100%+ free cash flow conversion.

Segment Performance

• Governance (ICS): Recurring revenues rose 9% to $590 million, including a 2-point benefit from acquisitions and a 1-point headwind from lower interest rates. Regulatory revenues grew 18% in Q2, driven by 11% growth in equity revenue positions and 15% growth in fund positions. Data Driven Fund Solutions revenues declined 2%, while Issuer revenues grew 8%.
• Capital Markets (GTO): Recurring revenues grew 8% in Q2, including 6% organic. Capital Markets revenues grew 6%, with digital asset revenues at $7 million in Q2.
• Wealth and Investment Management: Revenues grew 11% in the quarter, propelled by strong organic growth and M&A revenue from the acquisition of SIS.

Guidance

• Reaffirmed 2026 guidance for recurring revenue growth at the higher end of 5%-7%, adjusted operating income margin 20%-21%, and closed sales $290 million-$330 million.
• Raised adjusted EPS growth outlook to 9%-12% for fiscal 2026.

Risks

• Tokenization complexity could impact business models.
• Volatility in digital asset prices may affect financial results.
• Competition and regulatory changes in the financial services industry pose challenges.

Q: Alex Kramm asked about tokenization concerns and how Broadridge benefits.

A: Timothy C. Gokey stated tokenized equities create opportunities, with Broadridge uniquely positioned to manage complexity for issuers, intermediaries, and regulators.

Q: Alex Kramm then asked about proxy advisory side and financial impact.

A: Timothy C. Gokey mentioned it's a multi-$100 million market with potential to add growth to governance business.

Q: Patrick O'Shaughnessy asked about SEC exemptive relief for tokenized equities.

A: Timothy C. Gokey said conversations show tokenization model can work without significant exemptive relief.

Q: Patrick O'Shaughnessy asked about tokenized equities impacting post-trade processing.

A: Timothy C. Gokey noted Broadridge's role in handling downstream complexity and avoiding duplication of costs.

Q: Michael Infante asked about closed sales outlook and second half visibility.

A: Timothy C. Gokey mentioned strong origination momentum and reaffirmed full-year guidance.

Q: Kyle Peterson asked about Canton network pipeline and balance sheet.

A: Timothy C. Gokey discussed roadmap for Canton network expansion and balance sheet approach to digital assets.

Q: Matthew Roswell asked about capital markets competition and timing differentials.

A: Timothy C. Gokey noted Broadridge's competitive position and Ashima Ghei discussed timing impacts and margin considerations.