Investor Conference Call to Review First Quarter Fiscal Year 2027 Results - BROADRIDGE FINANCIAL SOLUTIONS INC

Explicit Guidance:

• Fiscal 2027 Recurring Revenue Growth: Reaffirmed 6% to 8% growth on a constant currency basis; expected to be within 6%–8% for the ICS segment and at the higher end of the range for the GTO segment.
• Fiscal 2027 Adjusted EPS Growth: Reaffirmed growth of 8% to 12% for the full fiscal year; Q2 EPS expected to represent approximately 12% to 14% of full-year results.
• Fiscal 2027 Adjusted Operating Income Margin: Guidance of approximately 21% for the full year.
• Fiscal 2027 Closed Sales: Reaffirmed full-year guidance of $290 million to $330 million.
• Fiscal 2027 Tax Rate: Expected full-year effective tax rate of approximately 22% (Q1 was 14% due to discrete items).
• Fiscal 2027 Event-Driven Revenue: Expected to normalize to historic levels of $60 million to $70 million per quarter for the balance of the fiscal year.
• Fiscal 2027 Free Cash Flow: On track to deliver free cash flow conversion of over 100%.
• FY2027–FY2029 Objectives: Full financial objectives and growth strategies for the 2027–2029 period will be disclosed at the Investor Day on December 8, 2027.

Business-Segment Outlook:

• ICS (Governance): Recurring revenue growth expected to be 6%–8% for the full year. Equity position growth testing indicates low double-digits for the full year; fund position growth testing indicates high single-digit growth (accelerating from 6% in FY26). Interest rates expected to be neutral in Q2 and a modest tailwind in H2.
• GTO (Capital Markets): Expected to lead the 6%–8% growth range, driven by capital markets which saw 12% organic growth and 17% total recurring revenue growth. Wealth and Investment Management growth expected to be slower.
• GTO (Wealth Management): 6% organic growth driven by Canada; continued onboarding of major U.S. wealth managers.
• Position Growth: Total equity position growth tested at mid-teens for Q2 and low double-digits for the full year. Fund position growth tested at high single-digits for the balance of the year.
• AI Productivity: AI savings of $6 million realized in Q1; full-year savings target of $25 million. Internal efficiency gains expected to reach a run-rate that allows for near 50% efficiency in managed services.
• LTX (Credit Trading Platform): Currently in launch phase with immaterial impact on results; targeting growth in volumes through dealer buy-side partnerships.
• Custom Policy Engine: Early demand from asset managers with nearly $1 trillion in AUM; expecting to provide client insights 6 weeks prior to votes, with data sharing with corporate issuers beginning next year.

Market and Competitive Outlook:

• Tokenization: Anticipated to create a "generational opportunity" and significant headcount growth in positions. Broadridge is building a horizontal governance layer across all tokenization models (synthetic, custodial, and exchange-based) to simplify complexity for issuers and intermediaries.
• Equity Tokenization Models: Multiple models emerging (Level 1 networks, Kraken Payword, Ando, DTCC, NYSE), increasing complexity that Broadridge's governance layer addresses. Expectations that economics for tokenized equities will be "equal to or superior" to current models.
• SVI (Standing Voting Instructions): Momentum accelerating with recent launches by Goldman Sachs and Tesla; anticipating further announcements from blue-chip names.
• Digital Engagement: SEC guidance on mutual fund e-defaults expected to drive deeper client engagement and usage of the "Wealth in Focus" platform.
• Trading Infrastructure: U.S. market gearing up for 23x5 trading starting December 6; Broadridge prepared to enable the transition across front/back office. Expansion in Asia Pacific (Korean Securities Depository MOU) and Scandinavia (wealth manager sale).

Macro / Industry Outlook:

• Interest Rates: Currently a modest headwind; expected to be neutral in Q2 and a modest tailwind in the second half of fiscal 2027.
• Regulation: SEC pro-innovation agenda advancing tokenization rules (innovation exemption); SEC guidance on e-defaults increasing compliance requirements for intermediaries. No immediate horizon identified for ICI preference management processing fee reviews, though noted as a potential future topic.
• Global Competition: Newer financial markets increasing global competition for asset flows, driving demand for digitized, transparent proxy voting.
• Economic Trends: "Democratization and digitization" of investing, simplification of trading, and modernization of wealth management viewed as sustained long-term drivers.
• Market Consolidation: Consolidation in credit trading (e.g., ICE/Market Access, TradeWeb/TrueMid) creating an opportunity for LTX to emerge as a third alternative for institutions.

Strategic Initiatives:

• AI & Agentic Capabilities: Scaling AI-powered institutional voting for global equities; expanding global demand models covering $130+ trillion in assets; signing consulting firms to replace in-house models.
• Tokenization Infrastructure:
  • Providing core governance layer for NYSE's planned tokenized equity marketplace.
  • Supporting DTCC's tokenization efforts across governance and trading.
  • Agreement with Kraken Payword for governance services covering global and U.S. models.
  • Launch of DLX platform to connect tokenized and traditional markets; DLR platform supporting cross-border atomic settlement for G7 securities and tokenized U.S. treasuries, with volume increases expected over the next six months.
• Digital Engagement: SEC comments submitted supporting e-default proposal objectives; active client engagement on compliance needs.
• M&A and Capital Allocation: Maintaining balanced approach; capacity to pursue "tuck-in" acquisitions and continue share repurchases given 2x leverage ratio. Recent $200M Q1 buyback; total $650M since January.
• Dividends: Commitment to strong and growing dividend, typically increasing at double-digit rates annually.

Risks and Headwinds to Outlook:

• Margin Pressure: Adjusted operating margin dilution in Q1/Q2 expected due to lower event-driven revenues (higher margin mix) and accelerated investment spend in AI, tokenization, and platforms.
• Non-GAAP Volatility: Recognition of non-cash gains/losses on digital asset holdings due to volatile mark-to-market accounting.
• Interest Rate Sensitivity: Lower interest rates previously created a two-point headwind for ICS; future impacts depend on rate trajectory.
• Execution Timing: Fund position growth timing contributed to Q1 results; testing signals sustained pickup but execution remains subject to client adoption speeds.
• Regulatory Uncertainty: Future impact of SEC proposals (e-default, fee reviews) and varying tokenization models (fragmented environment) could alter demand timelines.

Management Tone on the Future:

• Confidence: Management expressed high confidence ("never been more confident"), citing strong Q1 results, positive secular trends, and tangible traction on strategic investments.
• Growth Narrative: Described the current environment as an "exciting time" with change viewed as positive, driving investment needs for clients.
• Strategic Execution: Emphasis on "widen access," "build governance layer," and "deliver new agentic products" as key to unlocking productivity and funding growth.
• Guidance Integrity: Reaffirmed all full-year metrics with no changes to prior guidance, despite Q1 volatility.

Miscellaneous:

• Investor Day: Scheduled for December 8 in New York City (in-person and online) to update on growth strategies and FY27–FY29 financial objectives.
• Restructuring: $15 million restructuring charge recorded in Q1 related to AI and productivity initiatives.
• Share Buyback: $200 million repurchased in Q1 (3.9 million shares total since calendar year start); 2x leverage ratio supports continued capital allocation flexibility.