Broadridge Financial Solutions: Strategic Moves and Growth Prospects

Impact of Recent Acquisitions

Broadridge's recent acquisitions are expected to contribute approximately 20 basis points to fiscal 2025 recurring revenue growth. While these acquisitions will not significantly impact margins or adjusted EPS in the first year, they are part of a broader strategy to leverage strong free cash flow for strategic, value-creative growth.

"to $85 million. The acquisition is expected to close during the first half of our fiscal year and will not have a significant impact on our margins or adjusted EPS during the first year of operation." --- (BR, earning call, 2024/Q4)

"Second, our record closed sales highlight the strong demand for our solutions and give us increased visibility into future growth. Third, we are putting our strong free cash flow to work for shareholders, with another double-digit dividend increase, strategic and value-creative acquisitions, and share repurchases. Finally, Broadridge is" --- (BR, earning call, 2024/Q4)

"The acquisition is expected to close during the first half of our fiscal year and will not have a significant impact on our margins or adjusted EPS during the first year of operation." --- (BR, earning call, 2024/Q4)

"We expect these two acquisitions will contribute approximately 20 basis points to fiscal ’25 recurring revenue growth. I'll finish the guidance on revenue on Slide 14. Total revenue grew 6% in Q4 to $1.9 billion, and recurring revenue was the" --- (BR, earning call, 2024/Q4)

"are putting our strong free cash flow to work for shareholders, with another double-digit dividend increase, strategic and value-creative acquisitions, and share repurchases." --- (BR, earning call, 2024/Q4)

Technological Advancements and Innovations

Broadridge Financial Solutions is leveraging modern technologies to transform reconciliation processes, generative AI to enhance financial services, and digitization to modernize infrastructure. These advancements have driven record sales and revenue growth. Additionally, Broadridge's T+1 test environment and AI initiatives have significantly improved industry metrics and liquidity.

"Fortunately, the emergence of modern technologies is transforming the reconciliation process and enabling capital markets firms to adopt a single solution that will meet all their needs, automating the reconciliation of any data sources and minimizing exposure to exception management delays." --- (BR, press release, 2024/07/10)

"Media Contact: Amy Angelinialangeli@us.ibm.com To read IBM recent client & partner testimonials, see below: Broadridge Financial: Leveraging Generative AI to Transform Financial Services "As a trusted global technology partner sitting at the intersection of financial services, application sustainability and advancement is critical to our business strategy to safely and confidently embrace new technologies and deliver advanced services to clients to help them better operate, innovate, and grow," said Tyler Derr, CTO, Broadridge Financial Solutions." --- (IBM, press release, 2024/05/21)

"Over the past six months, the market has been stable to improving. Our clients have been moving proactively to digitize communications, simplify and modernize their technology infrastructure, and enhance investor engagement.These trends played to Broadridge’s strengths, and they drove record closed sales for the quarter and for the year." --- (BR, earning call, 2024/Q4)

"that has grown on the order of 9% over the past 5 years in revenue. And that is really we'll continue to grow through partly the compounding of positions we get paid per position and partly the innovation and new products that we continue to introduce." --- (BR, conference, 2024/05/20)

"A year ago, we set up a T+1 test environment that enabled clients to thoroughly test their own preparedness, and we led and participated in industry-wide initiatives along with the DTCC and CDS. The results have been a seamless transition for our clients, marked by significant improvement in industry-trade date affirmation rates, a 30% reduction in certain collateral requirements, and increased liquidity. Finally, we're driving innovation across trading through the adoption of AI and distributed" --- (BR, earning call, 2024/Q4)

Market Expansion Strategies

Broadridge Financial Solutions is actively expanding its market presence through strategic partnerships, such as with a large global bank in the futures and options market and Prometheum in digital asset securities. Additionally, the acquisition of AdvisorTarget aims to accelerate growth for asset and wealth managers, supported by solid market fundamentals and ongoing technology investments.

"And so we're excited with this. We just announced a one of the largest global banks partnering with them to bring the global platform to the futures and options market where we haven't played Beef Force as an example of that expansion." --- (BR, conference, 2024/05/20)

""This strategic partnership marks an important milestone for Prometheum." "We are excited to collaborate with Prometheum to support the evolution of financial market structure and facilitate the ongoing expansion of digital asset securities," added Zachary Dea, Director, Head of Product for the Shadow Post Trade Processing Solution at Broadridge." --- (BR, press release, 2024/04/29)

"Together, we look forward to creating new and exciting solutions to accelerate growth for asset and wealth managers." Broadridge fuels market intelligence for asset managers providing insights on retail and institutional fund distribution globally using data derived from its proprietary business processes." --- (BR, press release, 2024/05/30)

"We see a market in which the underlying fundamentals are solid, where capital markets and retail investor activity are beginning to strengthen, and where our clients are highlighting the need for continued technology investment." --- (BR, earning call, 2024/Q3)

"I want to close by thanking our associates around the world. The market for what we do continues to evolve and Broadridge will be evolving as well." --- (BR, earning call, 2024/Q3)

Financial Performance Metrics

Broadridge Financial Solutions' financial performance metrics include Record Growth, Internal Trade Growth, and Closed Sales, which are key indicators of operational performance. The third quarter financial summary highlights these metrics, showing significant growth in internal trades and a detailed comparison of performance over the past year.

"So, now turning to the financial summary on slide six. You see the performance for the third quarter." --- (BR, earning call, 2024/Q3)

"Record Growth and Internal Trade Growth are useful non-financial metrics for investors in understanding how management measures and evaluates Broadridge’s ongoing operational performance within its Investor Communication Solutions and Global Technology and Operations reportable segments, respectively." --- (BR, sec filing, 2024/Q3)

"The key performance indicators for the three and nine months ended March 31, 2024, and 2023, are as follows: Select Operating Metrics Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Record Growth Equity positions (Stock records) 5 % 10 % 6 % 10 % Mutual fund/ETF positions (Interim records) (1) % 6 % 2 % 8 % Internal Trade Growth 11 % 1 % 13 % 4 % Results of Operations The following discussions of Analysis of Condensed Consolidated Statements of Earnings and Analysis of Reportable Segments refer to the three and nine months ended March 31, 2024 compared to the three and nine months ended March 31, 2023." --- (BR, sec filing, 2024/Q3)

"Closed sales is a useful metric for investors in understanding how management measures and evaluates our ongoing operational performance." --- (BR, sec filing, 2024/Q3)

"Refer to the section 'Results of Operations' for a description of Closed sales and an explanation of why Closed sales is a useful performance metric for management and investors. Revenues" --- (BR, sec filing, 2024/Q3)

Competitive Positioning and Differentiation

Broadridge Financial Solutions leverages derived and aggregated data to provide asset managers with visibility into wealth management, and uses AI to analyze global flows and macroeconomic scenarios, identifying growth areas with precision. This strategic use of data and technology differentiates Broadridge in the competitive financial services technology sector.

"Can you just delve into some of the competitive differentiation that you think will enable you to achieve that?" --- (FIS, event transcript, 2024/05/07)

"And I think we've positioned our value proposition very strongly against the competitive set that we're going up against." --- (PAYX, earning call, 2024/Q4)

"I think the part for us outside of our incredible distribution organization which has always been a competitive advantage in how we go to market, that distribution is also anchored to our ability to upsell to the base." --- (ADP, earning call, 2024/Q3)

"And so that's the balance that we always try to strike. I think the way that we've been doing it with particularly with derived data and aggregated data to especially provide visibility to asset managers into what's going on in wealth management." --- (BR, conference, 2024/06/11)

"where it actually is. Something as simple as that to as complex as here then let's take all the global flows retail institutional across all the product types globally, look at all the macroeconomics and all the levers around that, use AI to say, if this is what you believe the macroeconomic scenario is going to be, here's how that's going to flow across products and where the growth areas will be over the next 3 years within a high degree of precision." --- (BR, conference, 2024/06/11)

Future Growth Prospects

Broadridge Financial Solutions anticipates 5-7% recurring revenue growth and 8-12% adjusted EPS growth by fiscal 2025, driven by net new business, internal growth, and expanding client relationships. Strong pipeline growth in wealth management solutions and historical performance with 10% recurring revenue and 14% earnings growth compound its future prospects.

"That capital will contribute directly to our top and bottom line growth. These four areas position us well to deliver our three-year financial objectives and our fiscal '25 guidance which calls for 5% to 7% recurring revenue, constant currency growth, almost all organic and 8% to 12% adjusted EPS growth. With that let's go through the numbers on Slide 8." --- (BR, earning call, 2024/Q4)

"Revenue from net new business contributed three points of growth. Internal growth, primarily trading volumes, expanding client relationships and float income, offset by the timing of proxy communications, contributed one point." --- (BR, earning call, 2024/Q3)

"James Faucette: Great. Thank you very much. I wanted to ask on wealth. It seems like on the wealth front, you alluded to strong pipeline growth for some of the new wealth management solutions." --- (BR, earning call, 2024/Q4)

"First, we are poised to deliver another year of mid single digit organic recurring revenue growth and double-digit earnings growth, right in line with the long-term growth goals we laid out at our Investor Day in December." --- (BR, earning call, 2024/Q3)

"And we have delivered very strong returns over the past 10 years, recurring revenue growth of 10%, earnings growth of 14% compounded." --- (BR, conference, 2024/05/20)

Regulatory and Compliance Impacts

Regulatory changes and compliance requirements can significantly impact Broadridge Financial Solutions. New laws and increased enforcement actions pose risks, while Broadridge's services help clients meet compliance needs. The focus on safety and reliability by regulators and the potential reduction in compliance fees as clients become more compliant are key considerations.

"New or changing laws and regulations, including changes to their interpretation and implementation, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition." --- (PYPL, sec filing, 2024/Q1)

"To give you now a better understanding of the breadth of our business, let me take you through our solution ecosystem, starting first with treasury and risk. Within treasury, our enterprise treasury solution helps the world's largest banks and corporates manage their cash, protect against liquidity risk and comply with ever changing regulations." --- (FIS, Investor Day, 2024/05/07)

"We also provide the distribution of regulatory reports, class action and corporate action/reorganization event information, as well as tax reporting solutions that help our clients meet their regulatory compliance needs." --- (BR, sec filing, 2024/Q3)

"And I think regulators appropriately are very focused on safety, soundness, security, reliability, and we, of course, are important part of that." --- (V, conference, 2024/05/30)

"And second, it's -- there's a whole host of reasons why that might happen. For example, as customers get more compliant, you might have less than the nature of compliance fees that you're charging them." --- (MA, earning call, 2024/Q2)