Broadridge Financial Solutions, Inc. Price & Performance (BR)

A summary of these risks can be found on the second page of the slides in a more complete description on our annual report on Form 10 ks. 2, we'll also be referring to several non GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results.

An explanation of these non GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and presentation. Let me now turn the call over to Tim Gokie, Thank you, Eddings, and good morning.

I'd like to start this morning by congratulating our new Chief Financial Officer. As you know, Asha was named our permanent CFO last month. After serving as our Interim CFO since the summer. She's had a very positive impact since joining Broadridge 3 years ago and looking forward to partnering with her even more closely. As we continue to grow and transform our company, and our industry. Before I go to my review of our results, I want to share some thoughts on the market backdrop. [indiscernible] Even as we continue to see heightened global uncertainty. Our clients, especially in United States, are benefiting from a combination of a healthy economy strong markets, increased trading, and growing optimism about a recovery in capital markets activity and M and A. That is driving uptick in physician growth, and other activity is positive for Broadridge keeping us on track to deliver another year of strong top and bottom line growth while funding important investments. For the future. With that, go to the headlines. 1st, Roger delivered strong 2nd quarter results. Recurring revenues rose 9% driven by organic growth of 7% the impact of our SIS acquisition. And we set a new quarterly record for event driven revenues.

Adjusted EPS grew 70% to $1.56 dollars 2nd, that growth is being driven by long term trends. And by the execution of our strategy as we continue to democratize and digitize investing, simplify and innovate capital markets, and modernize wealth management. 3rd, we are now entering the seasonally more significant second half of our fiscal year. Well positioned to deliver another strong set of full year results. And finally, our outlook for a strong fiscal 'twenty 5 keeps us on pace to deliver on the 3 year financial objectives we laid out at our Investor Day in December of 'twenty 3. It was a strong quarter. So let's move to review of what drove those results. On Slide 4. I'll start with our governance business. Where we're driving democratization and digitization by delivering innovation and by helping our clients adapt to change.

ICS recurring revenues rose 9% in constant currency. Driven by strong revenue from sales, continued growth in investor participation. With strong growth across all our 4 product lines. Investor participation continues to be an important [indiscernible] Equity position growth strengthened to 11% in the second quarter. The highest quarterly growth rate since the end of fiscal 'twenty 2. Equity position growth which have been trending around 7% since the summer, began to pick up in October. And we now expect low double digit growth in the seasonally more meaningful second half of the year. As Ashwin will share in a few minutes. Managed accounts continue to be the biggest driver [indiscernible] Notably, physicians and self directed accounts also grew in mid single digits, an acceleration from fiscal 'twenty three 'twenty four, excuse me, when growth was essentially flat. That increased level of engagement from Main Street and Best was a key driver of the acceleration in overall equity position growth. Fund position growth remained stable at 5% in the second [indiscernible] Driven by balanced growth across both fixed income and equity funds. While fund position growth has picked up from the 3% rate we saw in fiscal [indiscernible] It remains at the lower end of its historic mid to high single digit range.

Across our governance business, our revenue growth is grounded in our focus on delivering innovative solutions to our clients. 2 quarters in, our tailored shareholder reporting solution can Very well. And as we prepare for the upcoming frosty season, more than 400 funds will be using our pass through voting solutions. To give their shareholders a greater voice on governance and other issues. Up from 100 funds. At the end of fiscal 'twenty 4. We are adding new governance clients in Europe and our data and analytics business is benefiting from strong demand for our AI enabled and Customer Communications our wealth in focus solution, is powering Beyond our recurring revenues, we saw a new quarterly record for event driven revenues. Driven in significant part by our work facilitating Board elections at a leading global mutual fund complex. Working closely with our fund client, we seamlessly process more than 100,000,000 beneficial held at more than 1,000 brokers Thanks to the investments we have made 90% of these communications were fully digital which means that our efforts to enable digital alternatives save that fund complex and its shareholders tens of 1,000,000 of dollars in print and mail expenses. Boards of Directors elections like these highlight the critical role we play behind the scenes in ensuring that funds can communicate with their investors and get the approvals they need on key governance matters securely and on demand.

Let's turn to capital markets. Which reported 6% recurring revenue growth. In Capital Markets, we're simplifying and innovating trading across the front and back office. In the front office, we continue to roll out new solutions to speed trading and reduce the costs trade execution. With a new AI enabled trading solution that uses real time liquidity mapping to help our clients optimize trade execution algorithmic trading strategies. We also introduced new trading capabilities that simplify and improve trading. For structured products.

In the back office, our post trade platforms continue to support strong trading volumes across both equity and fixed income markets. We also introduced new Gen AI enhancements for operations GPT Post Trade platform and with 3 new clients added in Q2, our cutting edge distributed ledger repo product is enabling a growing number of institutions to more easily adapt to the new treasury clearing requirements.

In Wealth and Investment Management, revenues grew 12% largely driven by the acquisition of SIS. As we discussed last quarter, the FIF acquisition extends our Canadian wealth business by adding new clients and creating a greater opportunity for us to upsell our broader set of solutions. We saw an early indication of our strategy bearing fruit as a leading Canadian bank and current back office client, selected our advisor marketing solutions to address their goal of making it easier for investors to connect. With your advisors. More broadly, our broadest wealth management platform continues to be recognized for its leading edge capabilities. Winning awards in the quarter from both Chartis and the Everest Group. That recognition is helping to drive a record pipeline [indiscernible] Speaking of pipeline, I'll turn to closed sales. We ended December with year to date closed sales of 103,000,000 dollars essentially flat fiscal 'twenty 4. After a strong start to fiscal 'twenty 5, our sales were modestly lower in the second quarter with a handful of large deals slipping into the 3rd quarter. Some of those deals have already closed and we expect to close the remainder Our pipeline remains healthy and we are on track achieve our outlook for closed sales of 290 330,000,000 the full year.

I'll close my remarks with a few summary comments. On Slide 5.

First, Rogers delivered strong second quarter results. 2nd, those strong results are being driven by the execution of our long term strategy. We're driving the democratization of investment by helping tens of millions of mutual fund investors get the information they need to weigh in and governance while our investments in digitization are helping to drive down the cost of serving those investors. We're delivering innovation to our capital markets clients that will simplify their trading infrastructure and reduce trading costs. And we're extending our wealth business in Canada and the U. S. To bring increased innovation the wealth market. 3rd, as a result, we are well positioned to achieve another year of strong recurring revenue adjusted EPS growth in fiscal 'twenty 5. That outlook also keeps us on track to deliver again on our 3 year financial objectives, while continuing to invest for the future. Finally, Broadridge is well positioned for long term growth. In this era of technology transformation, the gap between digital leaders and laggards in Financial Services. Is set to grow [indiscernible] Firms who have traded in their fragmented legacy system. In exchange for cohesive platform based strategies, we'll continue to set themselves apart Our position at the center of financial services and our investments in our business have positioned Broadridge to be the trusted and transformative partner of choice.

Our clients, if they make that transition. That is driving a strong pipeline that includes a significant number of large opportunities across each of our businesses and that's a great place to be.

Before I turn it over to Ashma, I want to thank my 15,000 fellow Broadridge Associates around the world. Earlier this week, Broadridge was named as 1 of the world's Most Admired Companies for the 11th year. That's a tremendous testament to the work and client focus of everyone here at Broadridge. Thank you. And now, I'll turn it over to Ashima. [indiscernible] Thanks, Jim. Good morning. It's great to be here with you today. I'll begin my discussion this morning with 5 key callouts. First, Broadridge delivered strong second quarter results. Including 9% recurring revenue growth, and 70% adjusted EPS. 2nd, our key revenue growth drivers remain strong. Revenue from sales continues to be the biggest driver of our growth. As we tap into our $450,000,000 year end backlog. In addition, [indiscernible] is now showing low double digit growth. Supports our outlook for internal growth. 3rd, we reported record event driven revenues. Modestly ahead of our expectations. Surpassing our prior quarterly record from fiscal 2018. 4th, our strong performance continues to support our ongoing growth investments. In product innovation, AI and in our tech capabilities. 5th and last, we are on track to deliver strong fiscal 'twenty five results.

And we are reaffirming our guidance. On all metrics.

We also expect to generate free cash flow conversion of 95% to 105% giving us ample cash flow. To repurchase shares or pursue incremental M and A. With that, let's go to the numbers on Slide 6. Recurring revenues rose 9% on a constant currency basis. Driven by 7% organic growth and 2 points from our acquisition of SIS. Adjusted operating income increased 51%. Driven by strong organic recurring revenue growth. And record event driven revenues.

AOI margins rose 4 20 basis points. To 16.6%. Adjusted EPS increased 70% to $1.56 At strong recurring revenue growth, and higher event driven revenues, more than offset the impact of investments. Finally, we delivered closed sales of 46,000,000 dollars year to date sales were 103,000,000 compared to 106,000,000 last year. Let's move to Slide 7. Recurring revenue grew 9% 980,000,000 dollars Our growth was driven by a strong contribution from new sales. Highlighting the importance of innovation. Internal growth from higher positions and increased trading volumes also contributed to recurring revenue growth. Let's turn to Slide 8 to look at the growth across our ICS and GTO segments. ICS recurring revenues rose 9% to $540,000,000 Regulatory revenues [indiscernible] [indiscernible] Reflecting low double digit equity position growth and mid single digit fund position growth. Data Driven Fund Solutions revenue increased 8% driven by growth in our data and analytics products. M and A contributed 0.5 point to Fund Solutions growth. Issuer revenue grew 18% led by growth in our disclosure solutions, and a short term bump our transfer agency revenues. Customer communications revenue rose 10%, led by double digit growth in digital revenues driven by new client onboarding and a higher mix of value added print jobs.

Looking ahead to the second half, we expect total ICS recurring revenue growth to be in line with our 6% to 8% full year recurring revenue growth outlook. By product, we expect high single digit growth in regulatory revenues, driven by equity and fund position growth and mid single digit growth across the balance of our ICS businesses. Including Customer Communications.

Turning to GTO. Revenues rose 8% to 440,000,000 dollars Capital Markets revenue grew 6% all organic. Driven by the growth of our global post rate capabilities. Which benefited from higher fixed income and equity trading volumes. As well as our BTCS front office solutions. Lower license revenues were a 3 point headwind to Capital Markets Growth. Wealth and Investment Management revenues rose 12% driven by a combination of 2% organic growth and the addition of 2 months of revenues. From the SIS acquisition. Excluding the impact of E*TRADE deconversion, organic growth was 6%. [indiscernible] As a reminder, this was the last quarter in which we have any Grover impact. From E*TRADE.

Looking ahead, we expect GTO revenue growth to be in the low double digits for the second half of the year. Driven by high teens growth in Wealth Management, and mid to high single digit growth in Capital Markets. Now let's move to Slide 9 to review our key volume indicators. Broadridge continue to benefit from the secular growth in investor participation. Across both equities and funds. Equity position growth was 11%. Driven by managed accounts. And modestly ahead of our testing at the end of the Q1. Relative to 1st quarter equity position growth of 3%, we benefited from both an improved mix of companies hosting annual meetings and from an overall uptick position growth.

Looking ahead to the more meaningful second half of the year, when we processed more than 80% of equity proxy positions our forward testing is now showing low double digit growth. [indiscernible] reflects the underlying growth we typically see throughout the year.

And the additional increase that began in October. As Tim noted. Mutual fund and ETF position growth was more muted at 5%. And our current testing is indicating continued mid single digit fund position growth. On the bottom of the slide, trade volumes rose 13% on a blended basis, led by strong growth in both fixed income and equity volumes. I'll wrap up my discussion of recurring revenue growth. On Slide 10. Revenue from closed sales remains the biggest driver of our recurring revenue growth. At 7 points as we onboard revenues from our $450,000,000 year end backlog. That growth was partially offset by 3 points of losses. Including the deconversion of E*TRADE. Internal growth contributed 3 points, primarily driven by fund and equity position growth and higher trading volumes.

Which more than offset lower 30e3 regulatory fee revenue. As a result, organic revenue growth was 7%. Acquisitions contributed 2 points. Primarily driven by 2 months of revenue from SIS. Which closed at the beginning of November. Finally, changes in FX, had an immaterial impact on our growth in the 2nd quarter. With the recent strengthening of the dollar, we now expect changes in FX to be a 50 basis points headwind to recurring revenue and adjusted EPS growth. For the balance of the fiscal year.

Let's close our discussion of revenues on Slide 11. Total revenue increased 13% to $1,600,000,000 dollars driven by 6 points of growth from recurring revenue. Event driven revenues rose 69,000,000 dollars to $125,000,000 and contributed 5 point to total revenue growth.

This was a quarterly record. Surpassing the prior high of 97,000,000 dollars set in fiscal 2018. It's an important reminder that while event driven revenues tend to be variable on a quarterly or annual basis, their long term growth is tied to position growth. Which has grown to mid to high single digit rates over time. Looking ahead, we expect event driven revenues, to be more in line with the $55,000,000 to $60,000,000 [indiscernible] Over the balance of the year. I will remind you that last quarter we benefited from the Disney proxy contest in the 3rd quarter. Which presents a headwind to growth. The Q3 this year. Low to low margin distribution revenues grew 7%. Contributing 2 points to total revenue growth. Higher postage rates represented approximately 90% of the growth. We now expect distribution revenue to grow in the mid single digit range for fiscal 'twenty 5.

Driven primarily by higher postage rates.

Turning now to margins.

On Slide 12. Adjusted operating income margin was 16.6 percent an increase of 4 20 basis points from Q2 'twenty 4. As our operating leverage from higher recurring and event driven revenues more than offset the impact of ongoing ongoing growth reinvestment and higher distribution revenues. The net impact of changes in float income and distribution revenues had virtually no impact on AOI margins in the quarter. For the year, we remain on track to generate 50 basis points plus of underlying core margin expansion. Let's move on to sales. Closed sales were $46,000,000 $12,000,000 lower than the Q2 'twenty 4 sales as higher sales of our GTO products were offset by lower governance sales. Year to date, sales are 103,000,000 dollars Turning to our cash flows. I'll start with a reminder. That Broadridge's cash flow generation is typically lower in the first half of the year and strengthens over the second half. Q2 'twenty 5 free cash flow was $214,000,000 an increase of 46,000,000 from Q2 'twenty 4. Driven by higher earnings. Year to date, free cash flow was 56,000,000 [indiscernible] $1,000,000 for the 1st 6 months of fiscal 'twenty 4. The first half change was driven by an increase in cash taxes and severance pay.

Severance payments in the Q1. As well as changes in working capital. Which benefited which offset the benefit of higher income. We continue to expect free cash flow conversion of 95 [indiscernible] fiscal 'twenty 5. Turning next to capital allocation on Slide 15.

Year to date, we have deployed $55,000,000 in capital spending. And software and returned just under $200,000,000 to shareholders. Via our dividend. Platform investments which in the past have represented a significant source of investment, absorbed only 4,000,000 In part, because of our focus on getting clients to share most of the upfront cost of onboarding. [indiscernible] We also invested $193,000,000 in M and A. Primarily the acquisition of SIS on November 1. $485,000,000 [indiscernible] We remain committed to balanced capital allocation.

As part of our long term growth strategy. After taking into account our strong and growing dividend, Broadridge is well positioned. To return capital to shareholders in the form of share repurchases, or fund additional tuck in M and A. Let's conclude by reviewing our outlook fiscal 2025 on Page 16. Followed by closing key messages. On all key metrics. Including 6% to 8% recurring revenue growth constant currency. 8% to 12% adjusted EPS growth and closed sales of 290 to $330,000,000 With respect to the 3rd quarter, a couple of modeling callouts. We expect Q3 EPS growth to be in the mid to high single digit range. In addition, changes in license revenue, will have an impact on the composition of GTO revenues. Contributing to low double digit growth in Capital Markets and low single digit organic growth in Wealth Management.

Turning now to my closing messages. Broadridge delivered strong Q2 financial results. Including 9% recurring revenue growth. The demand and secular trends driving our growth remains strong. For the balance of the year, our testing is showing low double digit equity position growth. And mid single digit fund position growth. [indiscernible] The combination of higher equity position growth and strong 2nd quarter event driven revenues. Positions us to deliver on our full year guidance. While funding our ongoing investments in new products and technology. 4th and last, we are on track to deliver strong fiscal year 'twenty five results. And are reaffirming our guidance. With strong cash flow that has Broadridge well positioned. To repurchase shares or fund additional tuck in M and A. With that, let's take your questions.

We will now begin the question and answer session. Our first question comes from Alex Graham with UBS. Please go ahead.

Yes. Hey, good morning, everyone. Maybe just starting off on the guidance here where you ended. Obviously, the tone and the year to date performance really, really strong. But then no real change in the outlook. And I know you mentioned FX at the end there being a headwind. So excluding that, do you feel like underlying results are running better than you expect expected? Or is there anything else that you would call out?

Thanks, Alex. Great question. So I'll start with, like you said, we're very pleased with our results halfway through the year. Biggest driver of our revenue growth continues to be revenue from new sales. It's coming in essentially in line with our expectations. And like you said, we are tracking right in line with our guidance for both 6% to 8% recurring revenue growth and 8% to 12% earnings growth. We think about where we are, clearly, there are some puts and takes that keep us right in that range. Let me break them out. On the positive side, Like you heard, we're seeing strong equity position growth. The market momentum since October has led to our outlook improving to low double digits now.

And we have seen strong event driven revenues in the first half of the year. On the other hand, we do expect event to be lower in the second half of the year.

Given that we saw some activity come in earlier than expected. Fund position growth remains at the low end of historic trends. And the dollar strengthening is modestly impacting our non U. S. Earnings. Most importantly though, we continue to use some of the event upside that we saw in the first half of the year to invest in our business. So overall, we're tracking right around the midpoint of our target range and the first half growth gives us confidence. That guidance range. And Alex, it's Tim. I just want to reinforce that last part, which is We just continue to see really strong future opportunities across our business. And multiple areas where where we think we're going to get a really good return on investment. So that's our focus right now.

Okay, great. And then maybe just shifting gears quickly, sales pretty much in line with last year and the year over year decline in the second quarter, I think you explained some slippage. Obviously, a lot of things going on in the last quarter. But just wondering post election, a lot of enthusiasm around the financial services industry, So just wondering if you see pickup in conversations, if you're feeling more optimistic around end markets, yes, anything you would you would notice, again, like the financial service industry seems to be more bullish these days.

Yes, Alex. I'll take that as Tim. And I would point out that in the first half, ex we grew sales 8 percent. So we feel good about the first half. And And as I said, we did see some deals slip too early to say why, don't see a common denominator expect those to close.

And that's why we're reaffirming the $290,000,000 to $330,000,000 When you think about the increased optimism in the market, and how that's influencing us. I'd say it's just too early to tell. Our sales cycle tend to be pretty long.

And so even though there is increased optimism, there's increased conversations, it probably wouldn't have that much impact [indiscernible] But what I do really like and want to call attention to is that when we look at our pipeline, which is at a record, momentum that we have is in the areas where we've been investing. Omnichannel communications with wealth and focus, front and back office simplification, digital ledger repo and capital markets [indiscernible] and back office modernization. So we're seeing really good conversations in all of those areas. As always, there's a lot to do between now year end, but we feel good.

Sounds reasonable. Thank you very much.

And the next question comes from Scott Wardell with Wolfe Research. Please go ahead.

Hey, good morning guys. So thank you for taking my question. I just wanted to follow-up on a point you made in the answer to Alex there just in terms of investing and with the venture of an upside, can you maybe highlight some of the areas that you are deploying those incremental investment dollars into? Thanks.

Yes, it is. Thanks for that because it is it is something we think a lot about. And Just as background, Scott, as you know, we're in a granite an organic growth company. We are always thinking about what's next and how do we get in front of that and that in place for our clients, our associates, our shareholders. And so reinvesting for that organic growth is what has helped us deliver consistently over the past 10 years and beyond. And I just highlight some of the areas, they're the same ones that where we're seeing the sales momentum. Lot of focus on digital and omnichannel communications with our wealth and focus product, which we demoed at our Investor Day in December 2023. Lots of good conversations on that. Continuing to invest in data and analytics, And as part of that, AI lots of stuff in AI across our portfolio. Front and back office simplification and digital ledger repo and capital markets, And then continuing on the wealth side, now with what we're doing in Canada, with the SaaS platform, a lot of opportunity to bring that platform to life across the Canadian [indiscernible] and to bring the modular solutions that we have been successful within the U. S. Bringing those to Canada that takes investment as well.

So it's an exciting time. And then I'd be remiss if I didn't mention resiliency, cyber, the activity around Dora in Europe, helping clients with solutions for that helping clients with a solution around data immutability, a lot of uptake for that.

And a lot of belief in our clients and the importance of that. So it's all part of that our view of being our clients' trusted and transformative partner.

Yes.

And I'll just add, right, while many of these are ongoing investments, we have the ability to flex them up and down. As we see things like event activity. And that's what's baked into our guidance as we think about the year.

Got it.

Got it. That's helpful. And then just as a follow-up things are trending well post close. Wondering if you can maybe share if you've had any incremental learnings now that you've had the asset under control for a few months and just broadly how you're viewing that opportunity? Thanks.

Yes, Scott. We are very pleased when you think about it from the dimensions of clients, associates the underlying technology, all of those are are really tracking nicely. Obviously, we had lots of client discussions before took on the acquisition. And then it's always different once you have the asset and you're talking to the clients. But those those conversations about our plans for how we'll support them have continued to be very warm. It's been very gratifying to onboard the FIS associates to see their knowledge and passion for what they're doing, but also their excitement about now working with broader associates who have passion around the same topics because they were a bit isolated before. As part of Kyndryl. And And then the plans that we've talked about on technology to bring the the open APIs and integration layer and ability to bring the different modules that we have into the clients that are served by the FIS back office and that's that's going well. So So we are happy. It really fits into the broader strategy of modernizing wealth management with that modular suite of solutions around advisory productivity including client experience and digitizing operations. And so we think that's going to really play out well in Canada.

And we're feeling very good about it.

It. Great. Thanks guys.

And the next question comes from James Fossil with Morgan Stanley. Please go ahead.

Great. Thank you very much. Wanted to ask a couple of questions. First on monetization AI related product improvements. Previously, you'd talked about the fact that over time, you thought you might be able to charge incrementally for AI related project improvements. How are you thinking about that among the key factors that or what the key factors are that would drive that transaction as well as when we can expect some contribution there?

Yes, James. And we've talked about being an AI leader in our space, that doesn't mean that we're going to be inventing the next generation of Gen AI models, although with all the recent news maybe think about that. But it's really about how do we apply that in sort of the arcane areas that we're in. [indiscernible] we are We are at the center of unique network. And over time, we think the power of the late large dataset that that we steward is a potential differentiator.

For us.

But getting more directly to your question around monetization, we think about AI really across 4 areas. There is we believe in the future that AI will be part of every product. So there's really work around bringing AI to our current And I'm not sure if there's a specific monetization opportunity there that's really just it is I think it's going to be a client expectation and it's going to be part of making sure that we're on the cutting edge with all those platforms. The future. The second part though is launching new AI products where there's new functionality that is enabled by AI. And we've seen that [indiscernible] insights. So we have live products out there and you also get real learnings from those because when people are beginning to pay incremental money for it, they ask a lot of questions and you learn a lot about what does it really mean to have this be ready. So we're excited to have real clients signed up for those and have those in production and being used. [indiscernible] there is revenue attached to that. It is not material enough at this point to be really showing up in our aggregate sales numbers or something that is a material driver.

But over time, we expect it to be to be more important. The third piece is productivity. [indiscernible] we have 50 plus AI projects going on across Broadridge about half those are on the revenue side, half are on the productivity side. We are seeing some nice pickups in coating We're seeing some nice pickups in when you think about bringing all the events together globally for some of the things that we do and how we source that. But again, too small to be [indiscernible] notably impinging on on our margins or other sort of broad cost metrics. Still pretty early days.

So I wouldn't I'm not seeing really a measurable impact probably, this call is not about FY20 but we're thinking about FY 'twenty six, I wouldn't look for a measurable impact in 'twenty six but I'd look for us to do a lot of things that could begin to help after that. And I'd be very remiss if I didn't talk about the governance that we have around all of this. Very important thing for our client Everyone wants to know where their data is that is being used in the right way. And so that's also a key focus for us. Great. Appreciate that. And then on the wealth segment, just wondering if you can give us an update on where you are for your targets to add incremental module sales within wealth and how that's tracking? [indiscernible] James, we talked about wanting to have relative to the sort of baseline of a couple of years ago, an incremental $20,000,000 to $30,000,000 of wealth sales. And when we look at our pipeline right now, It is. Quite a bit up since 6 months ago and a nice increase since 12 months ago.

And so we feel we're on track for that $20,000,000 to $30,000,000 this year. It's across lots of different things, a couple of chunkery of things inside there, but it's across a lot of different areas, both in the U. S. And Canada.

That's great. Thank you very much.

The next question comes from Dan Erlin with RBC Capital Markets. Please go ahead.

Thanks. Good morning, everyone. Just wanted to clarify a couple of things on I think you called out in GTO that quarter, but then I think actually you called out in the 3rd quarter guidance that there's going to be some changes in license sales impact capital markets. I thought you said low double digits. So would you mind just maybe helping me reconcile kind of the flip flop there?

Absolutely. Yes. Just for context, license revenues on a full year basis are not as impactful for us there about. 5% of GTOs total recurring revenue. But you're right, they do cause some quarterly noise and that's what I was aiming to clarify in my notes. For this quarter specifically, we did see a 3 point drag due to license revenue growth specifically in Capital Markets. [indiscernible] we do expect it to have an impact on the 3rd quarter. Because of the noise, we will see strong growth in the Q3 in capital Markets. We're expecting low double digit growth. And we will see low single digit organic growth. On the Wealth Management side. Just specifically for the Q3. But again, across the year, it all evens out. It's not a material driver Yes. No, I just wanted to clarify that because historically, like it has maybe that much of a swing on the specific Got it. Got it. Got it.

Yes.

Yes. Okay. That's great. And then Tim, I just had a question for you. Again, you talked a lot about the market backdrop in the strength. What I'm wondering specifically though is as we think about maybe 2 things. 1, kind of a potentially more robust M and A back [indiscernible] How does that flow into the business? All else equal, if these deals start to flow in over the next 6 9 months, you see a bunch of this stuff happening. Can you just remind us how that impacts your business and where it would show up kind of in the P and L? And then the other piece is just on the regulatory horizon are there any things that we need to be mindful of that could be [indiscernible] that could potentially impact your business both good or bad. As a whole? Thank you.

Yes, Dan, just first of all on how increased capital markets activity, where it specifically flows into Broadridge? M and A really doesn't affect things that much. If there's a public company that goes away, I guess that could reduce positions a little bit. But so much of this is private companies as you know. IPOs is a nice sort of incremental positive that creates more positions. We do have a not a large business, but in serving corporate issuers, we do help them with the prospectuses and sort of things around the around the specific disclosure. The other place is really On the event driven side, where sometimes it's M and A that needs to come to a shareholder vote. Then we'd see activity there. And that can be a pickup. But it's it doesn't tend to be a hugely hugely material piece. On the regulatory side, I think it is obviously there's a lot going on.

With the new administration. I think all of us are are looking at that and trying to understand the full impact. There is sort of the positive market sentiment we just talked about, which for the reasons we just discussed is a positive. When we look at the administration's biggest priorities around taxes, tariffs, immigration, cultural issues and those things are broadly neutral. To our business. And they know they have a window to get things done. So they're very, very focused on those core issues. When you look at the things that are in our space, they're not really the primary issues administration. However, it's going to be a broadly deregulatory environment. It will be a new environment. So I think we should anticipate change. Some of the topic areas that we're certainly tracking, digital assets, there are definitely probably will be action on digital assets. That's an opportunity to make crypto more accessible to mainstream investors and that could create an opportunity for disclosure. Over time. So we're certainly tracking that. Likely probably action around reform with proxy advisory firms, we saw that in the previous Trump administration. Certainly, we're making clear to everyone that we're not a proxy advisory firm, but also that sort of leads to leads to opportunities around shareholder engagement.

Around a lot of inquiries around our shareholder voting platform, and pass through voting. So those things could be some nice things. And And the last one is just continued progress on digitization, which as you know we've invested in. So obviously a lot going on. We'll know a lot more in coming quarters as the new SEC Commissioner is approved. We do think that Paul Atkins is a strong choice to to lead the SEC. He's been a commissioner before. Very knowledgeable, very trusted by markets. And then I'll remind you that historically we've worked with both sides of the aisles really providing technical assistance when there's change, our clients need to adapt to it and we help them with that.

That's great. Thank you both very much.

And the next question comes from Peter Heckmann with D. A. Davidson.

Hey, good morning. Most of my questions have been answered, but just a few little housekeeping items. So event driven proxy revenue for the year, is that the low $300,000,000 range. Is that right? And then any reason why it wouldn't kind of revert back to a more normalized range in fiscal 2026?

Yes, I think your math is right. Add up to 55 to 60 a quarter over the next couple of quarters, that's kind of where we are. The thing with event driven is it's [indiscernible] Right? It's hard to predict exactly what it's going to be in any quarter or in any year. We typically have more visibility about event within the next 3 to 4 months. But beyond that, I would expect 26 events to be in line with our average long term averages.

Okay. And then just in terms of the postage increase, I'm just trying to get a better feel of how that affects margins. When do you lap that that posted rate increase? And and are there others that are already planned that would drive distribution higher? I guess, ex distribute ex postage increase, would you expect 3% to 5% range a year.

Yes. So this time, for the quarter, like we shared, most of the distribution increase was driven by postage rate changes. The postage rate change came into effect in July So we did we have been seeing it for a few months now. It's hard to predict exactly what the postage rate changes would be. There was some discussion about something else maybe coming through. It's hard for me to plan for. What I will say is yes, if you exclude the impact of postage rate changes, we're looking at low single digit growth. In distribution as we continue to see more and more digitization. On the regulatory side and on our customer communication side.

We're seeing more digital growth [indiscernible] And Peter, we've been I think we've been sort of thinking about for probably a decade as to when will distribution grow, ex postage turn negative. And And I think the print to digital strategy of helping clients think about their future communications platform and what they want to do with that. So as they as they lose as they lose volume the opportunity to take that over rationalize it, bring it to a new cloud based platform that can do the remaining print as it runs off. But provide a much better digital experience than they've had before. That That combination is one of the things driving our digital business. So you've heard us talk a lot about wealth and focus, but the other sort of big theme is working with clients sort of to help them with that transition. And that does end up feeding more print volume into our platform at the initial stages of that. And so so despite what we thought would happen the distribution piece has continued to remain positive. [indiscernible] And I'll just close out because you mentioned margins. Right? The expected impact of distribution is baked into our margin guidance.

Both as we think about the 20% margins on average as well as if we exclude the impact of it when we talk about the core margin expansion 50 basis points plus. Got it. All right. Thank you both.

The next question comes from Puneet Jain with JPMorgan. Please go ahead.

Hey, thanks for taking my question. I wanted to quickly follow-up on the earlier question about the new administration's priorities like have you seen any change in your client behavior from potential deregulations, specifically in your GTO segment. And if you can remind us like how like reduced level of regulations, how has that impacted client behavior and your GTO bookings?

Yes, Puneet, it's Tim. Thank you for that question. I think it's too early to tell. I think our clients themselves are are sorting things out. I think they are [indiscernible] first happy with maybe some things that won't happen that we're scheduled to happen. Obviously, I think you know the clients have been very concerned about upcoming capital rules like the next phase of Basel III and other things that would significantly increase the amount of capital that they would have to carry and therefore be real detriment to trading activity. So I think stopping or slowing down some of that is sort of it's Phase 1. I think as you as you look at a more deregulatory environment, I think the other the other piece is the the environment has been so punishing for public companies over the past decade that there's been such a move to private assets And I think some of the deregulatory motion here could could help that balance out a little bit between the advantage of being public versus being private. So think there are lots of threads. I think they're all things that will take a while to unfold.

Understood. Thanks for that. And then like as you think about your Capital budgeting plans for next fiscal year How are you thinking about like M and A versus investments? And for the investments, how should we think about ROI or like payback easier for of those investments?

Yes.

Let me just take that and I'll let Ashma add Ian. I think when you think about this, Feneet, we have to sort of segregate between investments that are sort of part of our P and L they go on our balance sheet versus versus M and A, which is sort of out of free cash flow and share buybacks. And so when we think about when we think about the former it's really around what's our investment capacity to continue to invest to the future while delivering 100% free cash flow and good returns earnings returns to shareholders. So we really sort of prioritize within within that framework. As we think about how we deploy our strong free cash flow, I think our principles for capital allocation are similar to what you're aware of from the past. Our business model, strong fee cash flow conversion, remain investment grade and then really think about balanced capital allocation with a clear priority of we need to invest internally according to that algorithm I just spoke about to continue to grow our dividend with earnings And then what's the balance between high return M and A and the remainder in share buyback.

And we're certainly seeing that play out this year. We think we'll see it play out next year. Those pencils have been constant and they have resulted in a pretty different mix. At different times. But they've led over time to a nice balance between dividends, M and A share buybacks. Think if you look at the M and A market, right now, It's we've been excited with some of the things we've been able to do like SIS, There are a lot of assets coming to market, but it's still very unclear what the clearing price for those will be and whether they would fit into our economic criteria. So you do see us execute on something, it's going to be because we found something really compelling. And we don't find something compelling, we're very comfortable buying back our shares.

Thank you.

So I think that was our last question. That right? Yes. Okay. So with that, I want to just thank everyone for for being with us today. Thank you for your interest in Broadridge we are excited about the strong quarter we presented. We're excited about our future momentum, how we're continuing to work with our clients, our associates and delivering returns for our shareholders And we look forward to talking to you again next quarter.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [indiscernible]