Q3 2020 Earnings Call
[music] good morning, and welcome to the Broadridge fiscal third quarter earnings.
This conference call all participants will be in listen only mode should you need assistance leased signaling conference specialist approaching the Starkey hobbled by zero. After today's presentation, there will be an opportunity to ask questions to ask the question you make press Star then one on your telephone keypad withdraw your question.
Please press Star then chip.
Please note. This about just being recorded I would now like to turn the conference over to adding people.
<unk> Investor Relations. Please go ahead.
Thank you Andrew.
Good morning, everyone and welcome to broader just fiscal third quarter 2020 earnings call.
Our earnings release and the slides that accompany this call may be found on the Investor Relations section Broadridge Dot com.
Joining me on the call. This morning, our Tim Gokey, our CEO and our CFO Jim Young.
Before I turn the call over to Tim a few standard reminders, we will be making forward looking statements on today's call regarding broadridge that involve risks a summary of these risks can be found on the second page at the slides and a more complete description on or annual report on form 10-K.
We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding a broader just underlying operating results an explanation of these non-GAAP measures and reconciliations to their comparable GAAP measures can be found in the earnings release and presentation.
Let me now I'll turn the call over to Tim Gokey Tim.
Thank you adding.
Before turning to our financial and strategic result.
I wanted to start with the human impact of the Kobe virus as it continues to extend it to reach around the world.
We are Broadridge home base, and nearly 10000 associates and family members and the New York Metropolitan area.
Our team has seen.
Close the told this virus has taken on so many.
We have lost co workers.
Family members.
Friend.
Neighbors.
And our Hearts go out to all of them.
Entered the many still fighting this disease.
We also see economic dislocation experienced by so many.
In our communities here.
Around the world.
These are challenging.
And difficult times.
At Broadridge, our focus has been first and foremost on the safety and health of our associates.
We've also focused on serving our clients.
Helping many the incredible challenges they face as a result the crisis.
And we're stepping up to help communities in which we operate around the world.
Seeing how our teams are supporting one another.
Your family.
And our clients.
All in the face of wrenching change has been inspiring.
I have never been more proud to be a boundary associate.
Thank you.
With that important backdrop, let.
Let me lay out where we've been.
Where we are.
And where we're going beginning on slide five.
Despite the challenges and the New York area.
Broadridge has a global company.
Is resilient.
Is performing well.
And has real opportunity ahead.
The covert crisis has reinforced the essential nature and the importance of what we do.
To carry out this mission.
We have invested to ensure the health and safety of our associates as they carry out they are essential duties.
As a result, our operational performance has been exceptionally strong.
That strength led to continued growth and solid financial results and third quarter.
On which Jim will elaborate further.
Finally, as we look forward.
We see real opportunity in a post covered world.
Let's move on to slide six.
And these volatile and uncertain times, the critical infrastructure powering investing governance and communications has never been more important.
Throughout the crisis, our scalable and resilient technology platform to processed remarkable market volumes that are multiples of normal.
Supporting our capital markets and wealth management clients.
Enabling end investors to buy and sell securities.
Generate liquidity.
No investments.
And react to rapidly evolving outlook.
This performance will continue to be tested as we navigate uncharted waters.
Restarting the global economy.
We have also enabled tens of millions of investors to tractor holdings and other key information to periods at high uncertainty and volatility.
From distributing billions of dollars of checks to sending and receiving voting information.
Yes, sharing investors with timely confirmations and statements.
Flow information has remained open.
Finally, now more than ever strong corporate governance is critical.
As companies come to grips with unprecedented economic and help challenges.
Well all of the board of directors has never been more important.
We are proud of how we have worked to ensure vital communications and voting remain in place.
Our technology and people Havent short companies can conduct their annual meeting safely.
While enabling continued shareholder engagement.
As a result of our central role and securities trading and corporate governance.
Many of our operations have been deemed essential service providers under guidance provided by the federal government and other governmental authorities.
We have been in constant contact with the SEC and other regulators to help them better understand resiliency and challenges faced by our financial system as trading volume Spike and companies move their annual meetings on line.
11 states to date have provided temporary relief to enable virtual on the annual meetings.
Reinforcing the importance of strong and timely corporate governance.
Next slide please.
It's essential work as possible only two are engaged and highly expert associates.
At Broadridge the service profit chain.
We're engaged associates deliver for satisfied clients, leading to strong financial outcomes.
Defines our culture.
Sits at the heart of our delivery.
That's our thinking from the beginning of the crisis started with the health and safety of our nearly 13000 associates around the globe.
We first instituted a work from home policy in Asia.
Cobot began to spread in January.
As a pandemic became more widespread in March.
We moved quickly to institute work from home mandate for Oliver Nonproduction Associates in Europe, and North America.
By been March extended that to include India.
We are now operating fully on a work from home basis for the 87% of associates not involved physical production.
As work from home as a normal part of our business continuity planning.
As a smooth transition.
We've also taken strong measures to ensure the safety of our production associates.
Working closely with our onsite medical teams and third party experts and in line with CDC guidance.
We equipped our associates with masks and gloves.
Close cafeterias and instituted onsite food delivery.
We removed economic pressure to work by providing extended Lee for those who are ill quarantined.
Are they are family member are in a high risk group.
We mandate temperature checks at beginning of every shift.
In New York, which has been most impacted by Cobank.
We reduced staffing to below 50% to maximize social distancing.
Redistributing work to other facilities.
These measures have been effective.
We will continue to take every action possible to protect our associates in the months ahead.
As we protect our own associates were acutely aware of the impact. This crisis is having on the communities in which we operate.
We've already committed $1 million in grants to support charities in schools globally, and 12, our largest operating regions.
These funds will focus on organizations targeting hunger relief for vulnerable populations.
Critical medical services any equipment.
In school equipment for remote learning.
We also want to support the charitable giving of our associates as they generally see support their communities.
We've allocated an additional $500000 to double match charitable donations made by associates.
Turning to slide eight.
Our engaged associates and leading technology platforms have delivered exceptional operating performance.
Our resilient scalable technology processed huge spikes in both equity and fixed income trading volumes flawlessly.
Upping, our client operating when others had challenges.
Our production facilities managed strongly to not only the peak of posses season at quarter end and month end statements.
Volatility driven surge and other communications relating to trading.
In some instances communications needed to be shifted to a new location or in time to accommodate demand.
But working with clients and regulators, we've now successfully moved past the peak at the season.
We feel very good sell through this unprecedented times.
Broadridge differentiate itself has the right industry solution for these critical functions.
At the same time public companies have rapidly shifted to move their annual meetings to our virtual format.
We pioneered virtual shareholder meetings or via Sams, and 2009 and steadily grew them to 326 meetings last year.
This year more than 1500 clients have already contracted with us for via Sams.
Virtual shareholder meeting is different than a webcast or symposium type meeting on which we've all been sitting the past few weeks.
We leverage our unique capabilities to validate shareholders.
Moderate questions.
And enable voting.
All in real time.
Our team is mobilized across broadridge and make it possible it dramatically larger scale than ever before.
Making a difference keeping corporate governance on track.
Finally.
We supported our clients, including stepping up to help them with work that either owned facilities are those suppliers were unable to handle.
The strongest relationships are created in difficult times.
And our ability to be there for our clients and this time, a need will strengthen our relationships for many years to come.
Moving to slide nine.
Our strong operating performance resulted in strong financial performance.
Indeed, our third quarter results in fiscal year outlook underlying the resilience of our business model and the strength of our value proposition.
Even in the context of sharp declines in GDP that already becoming apparent.
Despite headwinds from significantly lower event, driven revenues and a shift in proxy timing.
Broadridge to lift reported solid third quarter results.
With recurring revenue growth of 9%.
And adjusted EPS growth of 5%.
Close sales rose 20%.
Our outlook for the full year calls for continued growth.
We expect.
Two we continue to expect recurring revenue growth.
10% range.
To reflect the full impact of coated.
Including lower event driven revenues.
We've modified our adjusted EPS full year growth guidance to 5% to 7%.
Which Jim will explain in detail.
Importantly, we also remain on track to hit our full year guidance or close sales 190 $230 million.
Our pipeline is strong and the ability to achieve anywhere in that range speaks to the importance in value what we do.
I'm also pleased to note at Broadridge remains on track to deliver at or above the midpoint of our three year adjusted EPS growth objective of 14% to 18%.
Even with the impact of cobot and cyclical lows for event driven activity.
Our ability to achieve that objective. Despite those headwinds is a testament the long term demand trends driving our business.
The investments we've made support our growth.
And the hard work so many on our team.
Let me now turn the call over to Jim for more in depth to review of our financial results guidance.
Early thoughts on F right 21.
Jim.
Thanks, Tim.
Tim I'm deeply saddened by the told the virus has taken on the Broadridge family. We are still grieving, but we are resilient and it is impossible not to feel intense pride in the way our associates have responded they're truly delivering and remarkable ways to all our associates. Thank you and especial. Thank you to our production teams.
Our results.
I'm pleased with our performance in the third quarter, and even with ins and outs related to cobot. It was consistent with the outlook. We provided in early March our performance and outlook highlight the resilience of our business.
I will begin on slide 10 was six call outs.
First the net impact of co bid on a recurring revenue in the third quarter was modest but there are more notable impacts and individual product lines organic recurring growth was 3% in the third quarter and we expect high single digit organic growth in Q4, as we benefit from an increase in volatility and the shift some proxy.
He worked from Q3 Q4.
Second the week event activity trends, we saw in the first half of the year has continued and are now being exacerbated by cobot. This is the lowest event activity in six years.
Third we recorded a 20% increase in sales in the third quarter, and notably higher sales end March because of our strong pipeline of new opportunities. We have confidence that we can deliver on our sales guidance even in this environment.
Fourth our strong balance sheet.
Our investment grade credit rating in 1.5 billion of liquidity give us ample flexibility to fund our operations repair maturing notes and support our dividend.
There is no substitute for healthy balance sheet and access to capital and ours gives us the comfort and confidence to focus on doing what is right for the business.
Fifth guidance factoring a full quarters impact of coven, we're reiterating our guidance for recurring revenue growth in trimming our adjusted EPS guidance on the further drop in event activity below what we previously expected.
Six and final call out cobot any year ahead as is our practice, we will not provide formal guidance on next fiscal year until we report our fourth quarter.
I think is important we provide some perspective on how the business may perform in the recession, including a very preliminary view on recurring revenue growth.
Let's turn to slide 11, and our revenue growth drivers.
Our recurring fee revenues rose, 9% in the quarter with healthy new sales additions contributing five points to gross.
Most implementations have long lead times and are in motion months before go lives importantly, we did not see much of an impact on onboarding processes and March is clearly something we are keeping an eye on as the pandemic continues to unfold.
We saw the biggest covert impact an internal growth, although the net effect was neutral.
Headline here is that exceptional trade growth driven by high volatility related to the crisis was largely offset by the covert driven shift of certain proxy work from the third quarter to the fourth quarter.
These big revenue factors essentially neutralized each other I will touch on these again in my review of each business.
Acquisitions are performing well and contributed six points of growth.
I'll start to annualize two of our larger acquisitions next quarter. So the overall impact from acquisitions should decline modestly in the fourth quarter.
Looking to next quarter, we expect organic revenue growth to improve meaningfully the improvement should come from the combination of sustain strong sales to revenue performance and positive internal growth boosted by strong stock record growth and the realization of the known proxy timing shift from Q3 Q4.
Moving down to total revenue.
Total revenues increased 2% to 1.25 billion as recurring revenue growth was partially offset by a sharp decline in event driven and related distribution revenues.
Let's dive deeper into each of our business segments, starting with ice yes on slide 12.
Recurring revenues grew 2% as solid net new business and acquisition games each contributed three points.
Organic growth dip negative due to covert timing and other impacts.
The biggest driver of our decline organic growth was a timing shift and proxy.
As you may recall with the implementation of the new revenue recognition standard last year Q3 in Q4 mix is very sensitive each day represents about 5 million. So it only takes a couple of days of movement to shift meaningful revenue between quarters.
This year covered related safety measures, including staff level reductions in social distancing move some of our dates out by a few days this shift lowered our third quarter revenues by $15 million to $20 million.
Importantly stock record growth remained very healthy at 7% and with much of the quarter quarterly volume now shipped we expect high single digit stock record growth in the fourth quarter as well.
The proxy catch up coupled with the dramatic pickup in demand for virtual shareholder meetings that 10 described should lead to a notable pickup and our ECLI equity proxy revenue line next quarter.
Mutual fund ETF Interims revenues benefited from a positive mix shift underlying record gross was zero as the into fund industry experienced record outflows in March.
Customer communications and fulfillment revenues rose, 3% as the decline in equity markets triggered a wave of portfolio rebalancing, which drove a 24% increase in the volume of prospectuses, we sent out.
Customer communications revenues was also up 3%, which was nice to see.
Rounding out I see us recurring revenues continued growth and data analytics revenue was partially offset by lower revenues from securities market value in interest rate sensitive products and our retirement fund trading in custody business. Following the big market declines in the feds decision to slash rates.
Looking ahead I see us is on track for mid to high single digit organic revenue growth in the fourth quarter given the combination of a strong proxy season, the pickup from the proxy timing shift strong demand for virtual shareholder meetings at a modest pickup in post sale volumes is shaping up to be a strong finish to the year.
As I noted in my call outs event, driven revenues declined sharply to 39 million as you'll see on slide 13 third quarter event, driven revenues, where there is lowest level since 2014, reflecting a continuation of the trend we've seen all year and new coded related delays as a crisis unfolded, we have seen a couple of notable proxy campaign.
Push into fiscal 21 and high profile proxy fight set aside so we are now anticipating additional declines and event driven revenues in the fourth quarter are significantly reduced full year forecast of 155 million would take us to fiscal 13 levels and our weakest Q4 for event revs.
Since fiscal 12.
Let's turn to our GTL business on slide 12, which reported very strong results for the third quarter.
Revenues rose, 23% on 11 points of organic growth. The biggest driver was exceptional trading growth, 28% in equities, a 19% and fixed income.
As Tim noted it is a testament to our technology and our associates that we handled record volumes so flawlessly.
As a reminder, about 30% to 40% of the GTL business is volume sensitive to trading activity. The majority of our contracts are based on trading trading bands were not every trade translates into incremental revenue.
We also continued to achieve strong net new business additions and pickups from licenses the recent acquisitions perform well, adding meaningful revenue.
The on the higher trading volumes the impact of the code crisis on our GTL business was limited we did see one large license contracts slip out of the quarter and ultimately close in April.
More generally we're keeping a very close eye on our client onboarding schedules and most plans are on schedule at this time.
Looking ahead to the fourth quarter, we expect to see more strong sales to revenue growth and continued higher trading volumes, although below levels in March in the fourth quarter, we expect GTL organic revenue growth to be in the high single digit range in total growth in the high teens.
Turning to slide 15.
And this uncertain economic environment, our balance sheet as a source of strength at the close of the quarter are available liquidity was $1.5 billion comprised of $402 million in cash balances and 1.1 billion remaining on our committed 1.5 billion dollar revolving credit facility.
Moreover, our debt maturity MAGE maturity profile further enhances our liquidity outlook.
Over 75% of the fixed portion of our debt does not mature for six or more years are only maturity less than six years is $400 million a senior notes coming due in September of 2020, and we anticipate having ample excess cash and revolver availability to refinance this maturity.
Our revolving credit facility as one financial covenant debt leverage ceiling, which we are well below.
Cash flow Broadridge generated free castle of 82 million for the first nine months of the year. We continue to expect healthy free castle in the fourth quarter, where we typically generate most of our free cash flow.
Two other call outs first in our operating cash flow you can see the impact of the large investment we are making to develop the U.B.S. and industry wealth management platform, which is on schedule.
Second we are keeping I'll watch flying collections, which have been very healthy so far in the crisis.
We have invested $339 million and tuck in them in a fiscal year today, which includes or acquisition of funds library that closed at the end of February.
Finally, we remain committed toward dividend in earlier this week or board approved our next dividend payable on July 2nd.
I've made a lot of comments about our outlook on my discussion of our results. So let me some they're here with our full year guidance on slide 16.
We expect total recurring revenue growth in the 8% to 10% range for fiscal 20, including organic growth of 3% to 4%.
Are outlook for the fourth quarter implies hi single digit organic growth with an additional four to six points from acquisitions for total recurring growth of low to mid teens.
Taking into account event, driven revenues of approximately 155 million down from our previous 175 295 million dollar range and a modest decline and distribution revenues, we're getting to total revenue growth at the low end of 3% to 6%.
We continue to expect our full year adjusted operating income margin to be about 18%.
We're expecting adjusted D.P.S. growth, a five to seven per cent down from our prior guidance of about 8%. The biggest driver the decline or U.P.S. guidance is our outlook for event driven revenue. We've also dearest our outlook for the excess tax benefit to 12 million from 20 million, notably the reduction in event and E.T. be combined.
Separate represents approximately 20 cents or four points vps growth.
Finally, a comment on sales.
Our guidance for clothes sales in the range of $190 million to $230 million remains unchanged, while our sales pipeline is strong the challenges of remote work and the stressed economic environment make a wide range, especially appropriate.
All in all I would consider this a pretty strong performance if we close out the year with adjusted D.P.S. growth of 5% to 7% in the face of a 90 million dollar downdraft, an event fees and in range sales in this environment and this outcome would mean, achieving a 16% or better three year, adjusted E.P.S.K. or compared to our target a four.
18%.
We all know the economic outlook is uncertain and many of you've asked about the outlook for Broadridge beyond our fiscal fourth quarter with so much on known I for one I'm relieved that I don't owe you a 12 months outlook until August.
Said, we do want to share with you some of our preliminary thinking about how broadridge may perform at least from a revenue perspective in a recession.
Let's move to slide 17.
Our first point of references to go back and look at the last downturn in 2008.
We're stronger company today, but it's worth noting how broadridge performed in the global financial crisis, which began to gather force in the beginning of fiscal Oh nine.
Well the impact varied by business and total broadridges able to sustain recurring revenue growth a 5%.
And the first year the crisis in the second year that distinctly financial services focused crisis Broadridge posted modest positive growth. Despite big client consolidations in lower trading volumes by 2011 Broadridge had returned a mid single digit organic growth. These crises are very different and we are better position today than we weren't too.
Thousand a with no clearing business more diverse revenue streams and a much stronger G.T.O. business.
I will turn of my final slide 18.
There's no easy way to to mention the exact size and shape of the code recession, but our initial planning approach has been to assume that we are in a prolonged recession with tough macro economic conditions extending through our fiscal 21, we feel there's a prudent way to prepare for the year ahead, while keeping our eye on a large opportunities ahead of us.
In assessing our business in a recession scenario is important to first ground in those aspects of our business that we believe are uniquely resilient.
First or biggest revenue growth driver is the conversion of sales to revenue.
Currently estimated revenue backlog to be about $330 million, which is equivalent to 11% of our approximate threebillion and recurring revenue.
This gives us a strong starting point to generate revenue growth without any new sales.
Second.
One of our most important drivers is positioned growth and our governance business and while we expect position grow it to him to moderate in a recession, we take comfort that aggregate position grow stayed modestly positive even at the low point of the global financial crisis.
Third we have a long track record of 97 plus percent client revenue retention, which should service well any potentially more challenging sales environment.
In fourth the core of what we do is mutualization across the financial services industry, which historically performs well and tougher times.
Communications, an example of a historically lower growth business is not cyclical underperform evenly through a recession with even more opportunities.
But to be sure there are definitely headwins that we expect to feel in those covered recession.
First because we are beneficiaries of market volatility, we would expect to face some tough copper bowls and trading and post sales volumes and the second half of next year.
Second lower assets under administration from market declines and interest rates may impact our fees and our mutual fund processing and transfer agency businesses, we were saying this now and Q3 in Q. for.
And third our clients may not be able to engage in onboarding activities in the same way, which would have the effect of delaying onboardings frankly, though we're not seeing this at this point clients could also contract for smaller or fewer licenses for certain on premises software.
Net net our preliminary work indicates recurring fee growth in the low single digits any tougher session, which would again demonstrate the resilience of our business.
Again this represents a preliminary view and is based on our current outlook will learn more with the passage of time and more data and we back in August with our queue for our results and latest thinking and fiscal 21.
Let me wrap up here as I know I've, given you a lot to digest and summary, after a solid third quarter, we expect to close out fiscal 20 with very healthy organic recurring revenue growth and strong sales are strong balance sheet, and apple liquidity keep us well position to navigate a challenging environment above all we have to technology culture and people to grow and succeed.
Now back to Tim.
Thanks, Jim.
<unk> is well positioned to whether any economic downturn.
<unk> our team Trump hair for an extended period of economic weakness.
As always we will balance the sometime competing in here and here I've investing for what we believe very strong future.
And delivering bottom line growth in the near term.
Like others will use this time to evaluate wherever devoting resources.
Concentrate our efforts and those most relevant in the new environment.
I'm confident will find the right balance and I looked for updating you on our next ratings call.
[noise] I'm convinced that a long term focus has never been more important.
As we emerged from the crisis the world will be a different place.
And they talk to client is clear to the fallout will cause permanent shift in the way they operate it's drinking long-term drivers of our growth.
We must ensure will be ready help our clients.
These challenges.
First and foremost existing trends driving our growth about mutualization digitization and data will only strengthened in this new Norma.
I think driver Mutualization has been a need by our clients to reduce the cost and complexity of their operations.
Now with financial services friends come to grips slower growth and here's your interest rates.
There needs to transform their business with next generation technology will only increase.
Oh well.
That was already in transition.
<unk> more pressure to evolve.
The need for digitize communications will grow.
The challenges facing the investment management industry have accelerated.
And as I noted outside of my remarks.
The importance of strong corporate governance will only increases investors ensure that board supply harder and lessons about business and financial mess.
But the impact of code is going to do more than simply confirm existing trends.
It will cost more fundamental changes incline operations.
[noise] every business leader has enforced thing more deeply about resilience or their technology and operations.
<unk>, even greater impetus to adopt the right industry solutions with proven scale ability and resilience.
Simply put the cost and the risk of going it alone has never been grader.
The impact of work from home is accelerating digital literacy ended demand for digitize communications.
Where they're signing up for digital content or using remote learning tools.
More people are relying more than ever and digital communications and every facet of their lives.
This is only going to increase the pressure on financial services firms to raise the bar on delivering enhanced digital communications.
Whether it'd be a bill.
Statement or regulatory disclosure.
All these trends played a broader just strings and will fuel our growth over the next decade or more.
In a time of uncertainty business fundamentals are more important than ever.
And Broadridges fundamentals are strong.
We have a highly resilient business model.
With recurring revenues hundred longterm contract.
I'm, providing mission critical services for leading institutions.
We have a strong investment grade balance sheet.
High liquidity.
In a long history of balanced capital allocation, including a dividend increased every year since broadridge became a public company.
And finally, we have a track record of delivering gross.
Backed by 97% client revenue retention.
$330 million sales backlog.
Unfavorable long-term trends that have been reinforced by the crisis.
So well the near term remains understandably uncertain.
We are well positioned.
And the longer term opportunity for Broadridge has never been stronger.
Or more clear.
Before I close.
I want to speak directly to our associates around the globe listening to this call.
To all of you working from home.
In our production facilities.
Thank you.
You have risen to the challenge and the more difficult conditions and any of us could have imagined a few months ago.
Thanks to your financial system has begun to adapt to the biggest economic shock of our lifetime, keeping vital services open to millions around the glow.
I'm truly proud to be on your team.
And the best is yet to come.
Thank you.
Now open for question.
We will now begin the question and answer session.
I see question you May Cross star than one on your <unk> Oh.
If you were using the speaker phone, we used to pick up your handset before pressing the keys.
Withdraw your question please press northern too.
Please limit yourself to two questions.
At this time, we will pause momentarily through some more roster.
First question.
From David <unk> <unk> I saw these go ahead.
Oh. Thank you good morning, Tim and Jim Hope you were both well unhealthy.
My question really relates to the early thought process you laid out a gym on fiscal 21.
Ah really with with three specific points of clarification first on position growth or you assuming position growth falls from high single to low single digit in fiscal 21.
The second is on event driven revenue are you assuming a further decline in event driven for 2021, so how much and then third how are you thinking about managing expenses.
No to the extent the revenue picture for 2021 is you know challenged as you've laid out.
Yeah I've, thanks, David Yeah in a position gross scenarios and look again very preliminary and we'll come back in August with with Oliver details, but in the scenario as we laid out yes. We're we're saying we would assume the position growth goes from high single digits too low single digits, and even flat and you know as we saw in the in the global financial Craig.
<unk> so that's embedded in in some of our thinking for for those scenarios on event, obviously, it's not in that recurring revenue we haven't called it out probably just too early but obviously we are staring at you know remarkable lows of you know $155 million, which states that takes US back you know seven eight years.
And we are so I think all at all that's a good base to start off of just given you know no one can call bottom, but clearly a good base to build off but we'll come back in in August with our our thoughts on event recognizing that's always the toughest line item to get.
And then and then on on Yeah.
Yeah.
I don't always <unk> you want to continue on the fence I'd want me to grab that.
Okay. We're not in the same room. So we're doing this over a a web access. So you can imagine the the hand waving that's going on.
So.
You know the important thing is he going to next year is that we position ourselves for the future and we think as as I said earlier that there are a real opportunities are going to be coming out of this and so we will definitely be investing in 21 at the same time.
Given our scenario around revenue growth, we need to match our expense grow as well and so we'll be looking I very carefully at all of our expenses and as you heard me say, we'll be looking at all the Arizona definitely have to make sure that were really focused on the ones that have the biggest impact in this in this new environment.
Understood stay safe.
Thank you.
The next question comes from Christina of Uproot Sandler. Please go ahead.
Hi, good morning, good to hear voices wanting to ask it kind of a follow up on the event driven just to to think about.
The.
I don't know cycles is always the right word to talk about it but is there anything fundamentally changed on event driven either from the corporate proxy side or for a mutual funds that would you think might alter things and I know, there's other puts and takes around contested proxies and things like that but just the the big picture on.
Mutual fund activity.
Yeah, absolutely it is.
Because as you know <unk> event, driven revenues are according to our business. They can be quite volatile, they're attractive high margin business and they grow over time in line with with stock record gross.
And what we're seeing right now is cyclical we are not seeing any changes to the underlying structure.
For different reasons, both mutual fund proxy an equity contests, alright cyclical lows.
Typically in these periods of of high stress.
Find companies do what they can to put off these events. So we wouldn't expect to see.
Anything come back really on the mutual funds side in a in a significant way.
On the equity contest side you know.
We've clearly seen to pull back and activism.
During the you know this part of the crisis, what five that people are saying is that that will be back in the future. So we'll have to see how that goes.
I think the good news is that we're delivering 5% to 7% adjusted G.P.S. growth in the face of this $90 million <unk> this year and and we won't face that grow over next year. So I think with those points. We yeah. We feel we feel good about the contribution event will make in the future.
Okay.
Helpful and then.
We think about.
Him you alluded to some of the the conversations you're starting to have with potential new business opportunities can you give us any more color on that one or is it just too soon to know where you might have new business opportunities with existing clients or are you getting bound phone calls from potential new clients.
I I got to believe that yet there are a lot of banks and brokerage firms in the world that that figured out that their technology was not.
Everything it should be.
In March and April.
Yeah, I think as you said these are long term conversations it is definitely true that.
Many firms experienced challenges.
I think that the trend toward Mutualization will accelerate.
As as inhouse platforms make even less sense.
And and firms ability to invest in those things versus other priorities that are more customer facing will be even lower so so we do see significant longterm opportunity.
Those those discussions typically I do take awhile.
And then enter the other opportunities we're seeing we're certainly expect that.
What we're seeing with virtual shareholder meetings there'll be there'll be some you know obviously, they're states that that they gave a temporary temporary pre so those will go the other way, but I think people are going to see the success of the season and how well those are going and getting very good feedback on them and that will continue that trend and obviously as I as I said in my remarks of we believe that.
The trend towards digital communications continues to represent a real opportunity.
Okay. Thanks, very much they've they've got.
Thank you.
Thanks for the next question.
The next question comes from there and tell her we'll for search. Please go ahead.
That is does glad to hear your your do okay.
Look I mean, I think it's it's really something that is impressive to see the March close sales growth rate still strong per your your comments.
Guess I really just be curious to hear where you're adding business in this kind of environment like what kind of calls are getting about but what specific businesses. You know I mean, there is only instead of your business is clearly showing rumors is a lot of other companies that are cupboards in the market overall, but what can you actually what's the highs demand right now if we just started there.
Yeah.
You know first of all we just talk about March it was interesting because we didn't have any sales that were above a million and half dollars in March we had lots of different solutions and as you know we have a pretty wide wide solutions that there. So it was his gratifying to see.
Such a nice increase across a broad array of of products.
And as we look forward you know, we think about the sales that will happen in the next six months or so those are based on conversations that are already taking place and there was a nice balance of conversation across both the communication side of the business and technology side of the business with.
So we think some pretty exciting solutions that we are in discussions with with clients.
As we look at the period add beyond that then we're getting into.
You know things, we'll take longer, but you know and interest and what I think we monitor very closely.
Our our pipeline pipeline formation of of new opportunities and that is holding it very nicely. So what we're seeing is not just at least March not just the continuation and sales, but also the continuation of the pipeline going.
Okay.
And in terms of your capability to implement deals in the in a more remote working environment, obviously with him last forever, but can you just common on your capabilities and it's actually execute on contracts and your business.
And then maybe just a quick touching up on the B.R.C.C. area glow in the quarter was there anything anything update on the post self respect as dynamic or.
Just any more colored give on that I grew up for a while others looks it looks like an as lucky thanks guys.
Yeah, Okay. So just both that both good topic so.
Implementation is certainly something that we are watching very carefully.
We have been.
Really a impressed with how smoothly the transition to work from home has gone and and it's going reasonably well for our clients as well and so we are seeing that we're not seeing and drop off and productivity relative to our onboarding projects and so it is something that we are going to watch.
Very carefully and that we have in our scenarios, we looked at different scenarios for that but we are not seeing any any change your push back in our major projects today.
On the.
The R.C.C. side.
The we did ended a couple of pieces there down there is that in that communications and fulfillment line because the post P.L.P.'s and there's b. or C.C. proper, which is the which is the the transitional print piece. The post sale dynamics very very high volumes this quarter relative to all of the.
Trading activity and that more than made up for if you recall, we were planning a a bit of a downtick, they're based on some changes and how people are handling managed accounts, but that was more than made up for by the volatility.
And then on the B.R.C.C. side.
You know as I mentioned at the last call. The office sorting of major compliant is is complete.
So we did see modest growth in two to three from higher transaction volumes as the second second quarter stabilization and it's like growth.
For the year, we're expecting B.R.C.C. to contribute to earnings, but but not too revenue growth and I. We continue to have discussions with large clients about outsourcing their in house transactional communications and that's that's a part of that long term hypothesis and we write and continued progress on digital with with more than 100, <unk> fun complexes on a digital platforms.
We expect further growth as they begin to take advantage of new capability. So we're feeling you know, especially in this in this uncertain environment as a very stable business and and we're feeling very solid about it.
Okay. That's good there.
Thank you.
Thank you.
And that's question comes from Puneet Jane O.J.P. Morgan. Please go ahead.
Hey, Thanks for taking my question that no Oh, no let's see.
So then you have been quite I.
Simply should we expect like Oh, Yeah, Mmm do do given everything that's going on <unk>.
[noise] <unk>.
Great question, and we we did make a lot of investments in in fiscal 20.
And we really we really like what we got and is making a a nice impact on our business, particularly on the wealth management side.
And and that has left us with a little bit elevated leverage you know because we like being investment grade we like to to Plano.
And we're going to work that down here over the next quarter's we have a very strong cash flow.
As we as we look forward you know we want to put ourselves in a position of being very flexible going forward and so let me just let me just ask them to to comment further and give us any any additional collar on that.
Tim Gotta right I think near term goal was to end the year much closer to our our two times number, which I think keeps us and really good shape and a lot of flexibility for all the capital allocation priorities. We have I think it'll leave us in a really good position to be opportunistic.
You know down the road, but will be a you know, making sure that we are ready and nimble unhealthy.
And then how does that like if nomics, so but to share holder meetings like <unk> football day.
I give us and so like the scale like the magnitude of potentially but you might get a.
Settled up meetings was to me.
Yeah.
A great question. These are.
Not major events in and out of themselves you know think of a ticket price of a anywhere from 10 to $15000 per per per meeting and so by themselves. They you know, they're nice it's not gonna materially move the I.C.S. line width.
Does do though is that really cements our relationship with those companies with the with the corporate Secretary the assistant Secretary and it leads over time to us being able to help them in other ways in our our our vision as you know is to provide a very holistic.
Proche to the annual meeting, where we're doing a number of the services in and around the annual meeting and so we have been doing you know the posse piece.
But as we go out to the other services in around that we think we can make it much more convenient and much deep relationships with our corporate issue where clients.
Oh did and who would who do compete.
Back business.
She has.
Yeah.
Mm.
Well for virtual shareholder meetings.
It is a it it's it's you know it's not just doing a a a web x. or a web cast. It is there is is.
You know.
Real capabilities required to.
Validate shareholders and to provide voting in real time the.
The transfer agents have created a competing offer.
Basically and we provide information to them to allow them to to do that.
The their offers are much more nascent than ours I, we've been doing it for a long time and frankly, there are a bit more clunky. So so we do have a a strong advantage in this and and it's something that we you know we think we can do really well for people.
Okay. Thank you.
The next question comes from Patrick Oshaughnessy of Raymond James. Please go ahead.
Hey, good morning, maybe to follow up on your earlier commentary on development.
Any updated on your U.B.S. filled out you know I I think it sounds like that cap expending, there's still taking place as expected, but any changes in the development timeline under the go like timeline without one.
Yeah. Thank you for for that question is you know that really remains very much on track.
We are we continue to be very excited about the overall opportunity in wealth management and with U.B.S. and as you saw we appointed Mike Alexander to lead our wealth management business or that they I I keep step there.
We.
We are investing significantly in that engagement.
For U.B.S. and for the platform to really create what we think is the the platform the future that will I'd be very attractive for others any industry and that that project remains.
Ontrack and and is it one of those examples of you know some large <unk> project and we we criticizing a change but we're working very effectively in the in the remote environment.
And then just stepping back from from U.B.S. talk more broadly about about wealthy feel really good about that overall overall opportunity. We you know when I look at the emanate we've done over the past year, there's a a fair bit of it that was in and around a wealth management and that has led to a lot of good discussions across it.
And wealth man, whose face we are having a number of discussions with large rough managers nothing nothing imminent, but there are a real pain points, we can solve around helping people moved from more open architecture platform to future.
Period appreciate that and then just a quick clarification question you've mentioned a couple times the 330 million dollar sales backlog or is it the number.
March or are you referring to the number that you guys previously discussed as of the end of fiscal 2019.
Yeah, Patrick those Jim the it's it's one of the same we you know we will do a final true up a a year end, but we are our estimate right now is it it's somewhat similar which meetings. We've added you know 120 plus million and and sales this year and we've Onboarded you know somewhat similar amount so.
You're you're back to a similar place obviously, if we have the strong queue for that we're planning you know that we we would be a you know adding to that you know in the in the fourth quarter and again, we'll we'll come back and true. This all up in in August.
Great. Thank you.
This includes or question and answer your question I would like to turn the conference like <unk> closing remarks.
[noise] good.
I just kinda I do want to summarize your I just want to mention I want to just expand on one answer that we talked about previously was just we got into a description of discussion about capital allocation and I did just want to mention you know, we just paid our dividend and that is something that we we continue think is important going forward. So.
You know we remain committed to a dividend and that was something I. Just think it's important in the context of the call for for that to be out there. So.
With that I want to thank you for joining today. These are unprecedented times and you know because of what we do.
Because how we're doing it <unk> is resilient and performing strongly.
We expect is Jim said strong fourth quarter.
And while there's uncertainty around 21, we are positioned well.
And we see real opportunity as the world evolves to a new normal. So thank you very much for drawings today and we appreciate appreciate sport.
<unk>.
The conferences now concluded that keep where it's sending today's presentation you may know disconnect.
Yeah.
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Mm.
<unk>.
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