BROADRIDGE FINANCIAL SOLUTIONS, INC. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Market Observations: Market volatility had modest impact on Broadridge, strong scalability, 94% recurring revenues, 98% revenue retention rate, $450M revenue backlog.
• Business Resilience: Long-term trends like democratization of investing, digitization, etc., continue, driving Broadridge's growth; business model resilient with recurring revenues and strong backlog.
• Segment Details: Governance equity positions up 15% driven by managed accounts, ICS new product innovation, Capital Markets post-trade scalability, Wealth and Investment Management growth from SIS acquisition.
• Expense Management: Reduced distribution footprint by closing a print operation, incurring $5M restructuring charge.
• Proxy Positions: Over 90% of proxy positions recorded for the full year, high confidence in full-year recurring revenue and adjusted EPS guidance.

Segment Performance

• Governance: Recurring revenues rose 6%, equity position growth strengthened to 15% in the quarter (highest since fiscal '22), fund position growth remained healthy at 6% driven by passive funds.
• ICS: New product innovation is a big growth driver, demand for digital solutions and customer communications strong, AI-enabled Global Demand Data and Analytics model has 13 wins since launch.
• Capital Markets: Reported 10% recurring revenue growth, post-trade solutions processed record fixed income trades and doubled equity volume, Distributed Ledger Repo processes $100B daily average trading volume, integrated with Fnality.
• Wealth and Investment Management: Revenues grew 13% due to SIS acquisition, integration underway, 34 clients live on wealth platform components, closed major sale with leading U.S. wealth manager.

Guidance

• Reaffirm 6%-8% recurring revenue growth constant currency.
• Expect adjusted EPS growth in the mid-8%-12% range.
• Closed sales guidance revised to $240M-$300M.
• On track to deliver on free cash flow conversion target for the year.

Risks

• Market uncertainty causing clients to be more cautious with investments and new revenue opportunities, elongating closing process.
• FX headwinds impacting recurring revenue growth, with a 90 basis points headwind in Q3 due to Canadian dollar decline.

Question and Answer

• Q: Dan Perlin on demand environment and equity position growth A: Tim Gokey discussed demand environment uncertainty, elongation in closing process, but pipeline strong with focus on cost and simplification; equity position growth includes strong revenue positions and smaller positions with long-term potential.
• Q: Scott Wurtzel on sales cycle elongation and margin investments A: Tim Gokey said no specific product lines/geographies affected yet, monitoring; Ashima Ghei noted margin expansion held guidance, with incremental investments in Q4 to be monitored.
• Q: Michael Infante on equity position vs revenue growth and license activity A: Ashima Ghei explained equity revenue position growth at 11%, license revenue <5% of recurring revenue, with transition to subscription model ongoing.
• Q: Puneet Jain on delayed closed sales and M&A pipeline A: Tim Gokey and Ashima Ghei discussed delayed closed sales with minimal impact on long-term growth, M&A market uncertain but opportunities exist.
• Q: Patrick O'Shaughnessy on wealth platform solutions and M&A pipeline A: Tim Gokey detailed wealth platform suite solutions, Ashima Ghei noted strong trends for FY '26; Tim Gokey on M&A pipeline, uncertain market but opportunities exist with same principles.
• Q: Peter Heckmann on public-private retail vehicles and M&A market A: Tim Gokey discussed private asset access opportunities, Ashima Ghei on M&A market uncertainty and Broadridge's balanced capital allocation