Q2 2024 Broadridge Financial Solutions Inc Earnings Call

Yeah.

Good morning, and welcome to the Broadridge second quarter in fiscal year, 'twenty 'twenty four earnings conference call.

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At this time I'd like to turn the floor over to adding tebo head of Investor Relations. Please go ahead.

Thank you Jamie and good morning, everybody and welcome to Broadridge is second quarter fiscal year 2024 earnings conference call our earnings release and the slides that accompany this call may be found on the Investor Relations section of Broadridge dotcom.

Joining me on the call. This morning are Tim Gokey, our CEO and our Chief Financial Officer Edmund Reese.

Before I turn the call over to Tim a few standard call outs, one 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 of the slides and a more complete description on our annual report on Form 10-K.

<unk> will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of broadridge is underlying operating results.

Explanation of these non-GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and presentation.

With that let me now turn the call over to Tim Gokey Tim.

Timothy C. Gokey: Thank you Eddie.

Good morning, Andrew is greatly connecting with so many of you at our Investor Day in December.

As you heard we are more optimistic than ever about the near and long term growth opportunity that lies ahead.

You'll hear many of those same things today as I discuss our positive second quarter results and fiscal year outlook.

Before I do let me comment on the unique and complex moment in which we find ourselves.

In Dallas two weeks ago.

Timothy C. Gokey: Energizing to talk with our senior clients about the opportunities and challenges they see ahead.

Timothy C. Gokey: A lot of the discussion was on the promise of AI and how we move our industry forward.

Try to just recent announcements have ops GPT to leverage generative AI to transform capital markets operations with particularly timely.

At the same time, the geopolitical challenges and uncertainties in the environment are clear.

Which makes our highly recurring and resilient business model all the more attractive.

Against this backdrop it was rewarding to hear our clients continue to think of Broadridge as an important partner for innovation and growth as well as for efficiency and resilience.

Timothy C. Gokey: And with that.

Let me turn to the quarter.

First Broadridge is second quarter results Mark another step toward our growth plans for both fiscal 'twenty four and the next three years.

With healthy organic growth across both segments that was in line with our long term goals.

Second.

Additional growth trends remain positive with stronger fund position growth.

Timothy C. Gokey: Mid single digit equity position growth.

Timothy C. Gokey: Third we are executing against the growth plan, we shared last month at our Investor day.

By driving the democratization and digitization of investing.

Simplifying them innovating trading.

And modernizing wealth management.

Timothy C. Gokey: Fourth.

We generated strong free cash flow in the quarter, keeping us on track to achieve our 100% FY 'twenty four conversion objective.

And as Aaron will discuss returned more capital to shareholders.

Finally, as we entered the seasonally larger second half of our fiscal year, we expect to deliver another strong set of results.

Timothy C. Gokey: We are reaffirming our guidance for six 9% recurring revenue growth.

12% adjusted EPS growth in.

And importantly strong closed sales.

Now, let's turn from the headlines to slide four to review our results starting with our governance franchise.

Timothy C. Gokey: Ics recurring revenue rose, 6% in the second quarter.

New sales were the biggest driver of growth.

Direct result of our focus on delivering innovation across our governance business.

We are seeing growth from adding new broker dealer clients and from sales of our global insights data to asset managers.

We're seeing continued momentum in our regulatory composition and disclosure business.

And we're benefiting from a strong growth in our digital solutions and customer communications.

Increasing investor participation.

An important driver for our regulatory revenues, which rose 8% in the second quarter with mid single digit position growth across both equities and bonds.

In a seasonally small quarter equity position growth was 6%.

The biggest driver continues to be managed accounts, which represent just under 50 presented positions and which continues to grow in double digits.

To low single digit growth, Chris self directed accounts.

Fund and ETF position growth increased from last quarter to 5%.

The slowdown in the growth of passive funds was offset by a pickup in the number of active fund positions.

Timothy C. Gokey: Looking ahead as Edmund will outline we expect mid single digit position growth in the second half in both equities and fund investor participation remains healthy.

In December you also heard us discuss the growth opportunities and our other Ics product line.

In Q2, we saw strong growth across issuer and data driven solutions.

Cassidy with locations.

Timothy C. Gokey: Growth in high margin digital revenue.

Lower print.

I was particularly pleased with the continued digital transition, which you'll recall is a key part of our strategy.

In Q2, a significant proportion of this transition was driven by the successful onboarding of one of the largest U S wealth managers to our wealth and focused platform.

Timothy C. Gokey: This is a platform we highlighted at our Investor day.

And it's great to see our print and digital strategy playing out.

Four months in wealth and focus is delivering lower costs and increased investor engagement for our clients.

With industry, leading open rates and click throughs.

Capital markets revenues rose, 10% to $262 million.

Our focus on optimizing trading and connectivity in the front office continues to pay dividends in the form of strong growth in bdcs.

And the post trade side, where we're helping to simplify our clients back office technology.

Was pleased to see a new win at a regional bank, who will be using multiple battery products to drive their transition to self clearing.

Timothy C. Gokey: We also continued to drive innovation and capital markets with a distributed ledger and AI capabilities.

Early this month, we launched our ops GPT AI solution.

Timothy C. Gokey: Ops GPT uses generative AI to synthesize complex transactions settlements and physicians data to enhance client's fails resolution.

As clients focus on reducing the cost and complexity of their operations, especially in the accelerated world at T plus one.

They see broadridge as a natural partner given our deep subject matter expertise and early investments to leverage AI.

This progress on innovation.

Combined with strong <unk> sales in the front office wins.

Wins in the back office reinforces how we are successfully helping our clients simplify and innovate and trading.

Turning now to wealth and investment management revenues rose, 4% to $143 million as strong growth from UBS was partially offset by the EPA transition.

Timothy C. Gokey: In early January we on boarded the first client for alternatives workflow Mitra.

As you know alternatives and one of the fastest growing asset classes.

Timothy C. Gokey: Wealth managers are offering these products to a rapidly growing set of investors.

Many of the back office processes remain antiquated.

We are seeing strong interest in alternatives workflow as wealth firms seek to address this growing opportunity and challenge.

Timothy C. Gokey: Moving to close sales.

Sales rose, 12% for the first half.

Timothy C. Gokey: As you know the second half of the year typically accounts for the bulk of our closed sales and I'm pleased to note that our current pipeline sits at record levels.

As important we're starting to see more movement within the pipeline, increasing our confidence for the second half.

While our clients remain cautious.

We're seeing them invest in products that drive revenue.

Through productivity and meet regulatory requirements, which plays to the strength of our solutions.

In governance, we have built a strong pipeline around our digital and print solutions for the new tailored shareholder reports.

We're also experiencing increasing demand for global insight data products from asset managers.

And we continue to see significant print and digital opportunities and customer communications.

Timothy C. Gokey: Capital markets clients and being able to look to a world beyond the implementation of T plus one which is driving growing interest in our postpaid capabilities.

And in wealth, we saw significant sales in the first half as we begin to convert our strong pipeline.

The net result is it really remain on track to deliver strong closed sales for the year in line with our guidance of $280 million to $320 million.

Let's move to slide five for some final thoughts on our quarter and outlook.

First I'll reiterate that Broadridge delivered second quarter results that keep us on track for continued growth with more than 6% recurring revenue growth constant currency and strong free cash flow.

Second those of you who attended our Investor Day last month heard me talk about how we have made investments over the years to align our business with clear long term growth trends, including the democratization of investing to.

Digitization of communications, the acceleration of trading the <unk>.

Growing importance of data and AI.

Evolving regulatory environment.

Being aligned with those drivers enables us to help our clients operate innovate and grow.

And in so doing deliver steady and consistent growth for our investors.

This quarter again illustrated how we are executing against those priorities and governance capital markets and wealth and investment management.

Among these drivers AI in particular has the potential to drive step changes in client outcomes.

We've committed to be a leader in AI within our space.

Timothy C. Gokey: In the not distant future AI will be incorporated into our products and we here at work doing that across Broadridge.

More fundamentally companies with unique data it will be in a differentiated position.

And we believe that our position at the center of financial services gives us a unique opportunity to provide energy solutions that will make a difference.

That's a win win formula for our clients and our shareholders.

The products, we've already introduced including bond GPT ops, GPT and distribution AI.

Our first step in that direction.

Third.

Based on all that progress we are reiterating our guidance for both recurring revenue and adjusted EPS growth as.

As well as our outlook for closed sales for the full fiscal year.

Fourth we remain on track to deliver free cash flow conversion of 100%. This year, while funding the internal investment we need to continue to deliver innovation to our clients.

That's an approach that will enable us to retain our investment grade rating funding.

Internal investment and deliver a strong and growing dividend.

Timothy C. Gokey: We execute tuck in M&A and as Evan will discuss return additional capital to shareholders.

Evan: And that brings me to my last point.

Which is that Broadridge is well positioned to deliver on the three year financial objectives, we laid out in December including 79% recurring revenue growth constant currency.

Evan: 5% to 8% of which organic.

8% to 12% adjusted EPS growth.

As well to continue to grow beyond FY 'twenty six.

We attack, our $60 billion and growing market opportunity.

Speaker Change: Before I close.

Speaker Change: I want to thank our 15000 talented knowledgeable and hardworking associates.

Yesterday.

<unk> is recognized as one of fortune's most admired companies.

This is the 10th time, we've been recognized.

And that's a direct result of our associates' commitment delivering great service resiliency and innovation.

Speaker Change: It makes our clients and our industry stronger.

Speaker Change: And that enables better financial lives for millions of investors everyday.

Speaker Change: Thank you.

And with that let me turn it over to Edwin Thank you, Tim and good morning, everyone.

I'm really pleased to be here to discuss the results for the second quarter.

But before moving into the detailed review it's.

It's important to highlight with the first half signals.

For the seasonally larger second half and full year fiscal 'twenty four.

First we continue to execute the Broadridge financial model in the second quarter results have us right on track to deliver another strong year of recurring revenue growth.

Right in line with our guidance.

Second strong free cash flow of positive 91 million through two quarters.

Highlights the capital light nature of our business and increases our confidence in our 100% free cash flow conversion objective in fiscal 'twenty four.

Third.

Speaker Change: The combination of strong free cash flow and modest M&A in fiscal 'twenty four means.

It means that we expect higher capital returned to shareholders through increased share repurchases in the second half of fiscal 'twenty four.

And finally, the demand for our products is strong.

First half sales are up 12% over last year, and our pipeline and current client discussions reinforce our conviction that we will meet our full year objectives.

Speaker Change: Additionally, our equity position testing shows mid single digit growth for the full year.

So we continue to be encouraged by expanding investor participation in the financial markets, serving as a long term tailwind for our business.

These four items are.

Are the meaningful and significant signals from our results and the performance through the first half.

So now turning to the financial summary on slide six you see the performance for the second quarter.

Recurring revenues rose to $899 million up 6% on a constant currency basis all organic.

<unk> operating income increased 1% as we modestly increased growth investments given the above trend event driven revenue.

A AOI margin declined 100 basis points to 12, 4% adjusted.

Adjusted EPS was up 1% to 92 cents in.

Finally, we delivered closed sales of $58 million in the quarter, bringing our first half total to $106 million up 12% over the first half of fiscal 'twenty three.

Let's get into the details of these results starting with recurring revenue on slide seven.

Recurring revenue was within our full year guidance range and grew 6% to 899 million in Q2 24.

Our recurring revenue growth was driven by a combination of converting our backlog to revenue.

Fund position growth in Ics.

Speaker Change: And double digit trade volume growth in GTO.

And on slide eight we can see recurring revenue growth across our Ics and GTO segments.

Ics recurring revenue grew 6% to $493 million driven.

Driven by new sales position growth in float income.

Speaker Change: Regulatory revenue grew 8% led by healthy fund and equity position growth and revenue from new sales.

Speaker Change: Data driven fund solutions revenue increased by 9%.

Due to the higher float revenue in our retirement and workplace products as well as growth in our data and analytics products.

Issuer revenue was up 15%.

<unk> by higher float income and a registered shareholder solutions and revenue from strong sales of our disclosure solutions.

Customer communications revenue was flat as strong growth in higher margin digital business was offset by a decline in lower margin print revenues.

We expect print volumes to increase in the second half of fiscal 'twenty four as we onboard new clients.

And I will again pause here to note that customer communications continues to execute on its print to digital strategy replay.

Replacing declining print volumes with higher margin digital revenues.

Over the long term, we expect the combination to result in low single digit top line growth with expanding margins and continued low double digit earnings growth.

Turning to GTO recurring revenue grew 8% to $405 million.

Capital markets revenue increased 10% led by new sales and equity and fixed income trading volume growth.

I'll also note the continued strong performance in our front office BTC Fs solutions, which again had double digit recurring revenue growth.

Wealth and investment management revenue grew 4%. This revenue from the UBS contract was partially offset by the successful transition of E trade to the Morgan Stanley platform, which occurred late in the fiscal first quarter.

Looking ahead.

We continue to have high confidence in both businesses and full year GTO growth be.

Being in line with our 5% to 8% organic growth objective, which.

With second half growth in both capital markets and wealth more weighted to the third quarter driven by the timing of license revenues relative to last year.

Turning to slide nine for a discussion of volume trends.

Operator: Good morning, and welcome to the Broderidge Second Quarter and Fiscal Year 2024 Earnings Conference Call. All participants will be in a listen-only mode.

Speaker Change: Position growth for both equity and funds remained at healthy levels in the second quarter.

The long term trends that we highlighted at Investor day.

Operator: If you need assistance, please contact a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then 1.

More investor participation in financial markets and more positions per investor underpin that growth.

Equity position growth was 6% driven primarily by double digit managed account growth and more modest growth in self directed accounts.

Operator: For all your questions, you may press star and, So if you know today's event, it's being recorded. At this time, I'd like to turn the floor over to Edding Stiebel, Head of Investor Relations. Please go ahead.

As we approach the spring proxy season.

Which typically generates over 80% of our equity communications are testing is now extending into the second half of the year.

Edding Stiebel: Thank you, Jamie. And good morning, everybody. And welcome to Broderidge's second quarter fiscal year 2024 earnings conference call. Our earnings release and the slides that accompany this call may be found on the Ambassador Relations section of Broderidge.com. Joining me on the call this morning are Tim Gokey, our CEO, and our Chief Financial Officer, Evan Reed. Before I turn the call over to Tim, a few standard call-outs.

Giving us insights on the full year relative to our mid to high single digit range.

Speaker Change: Equity position testing shows mid single digit growth for the second half of the year.

As a result, we now expect mid single digit position growth for the full year fiscal 'twenty for keeping us on track to deliver our guidance of 6% to 9% recurring revenue growth.

Edding Stiebel: One, we will be making forward-looking statements on today's call regarding broader genetic-involved risks. A summary of these risks can be found on the second page of the slides in a more complete description in our annual report on Form 10-K. Two, 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. With that, I now turn the call over to Tim Gokey. Thank you, Eddie. Good morning, and it was great reconnecting with so many of you on our best day in December.

Mutual fund and ETF position growth improved from Q1, 'twenty, 3% to 5% again driven by passive funds.

We expect to see continued mid single digit growth for the second half of the year.

And turning now to trade volumes on the bottom of the slide.

Trade volumes rose, 12% on a blended basis with strong growth in fixed income trading volumes, which benefited our capital markets revenue.

Let's now move to slide 10 for the recurring revenue growth drivers.

Recurring revenue growth of 6% constant currency. It was all organic and in line with our 5% to 8% three year organic growth objective.

Timothy C. Gokey: As you heard, we are more optimistic than ever about the near and long-term growth opportunities that lie ahead. You'll hear many of those same themes today as I discuss our positive second quarter results in Fiscal Year Outlook. But before I do, I want to comment on the unique and complex moment in which we find ourselves.

Speaker Change: As I mentioned during the Investor day, we have a decade long history of delivering six points or better of revenue from closed sales each year.

In Q2, 24 had eight points of contribution with six points of Ics.

10 points in GTO, including a boost from wealth management.

Timothy C. Gokey: At Davos two weeks ago, it was energizing to talk with our senior clients about the opportunities and challenges they see ahead. A lot of the discussion was on the promise of AI and how we move our industry forward, trying to get these announcements of OPT-DVT to leverage generative AI to transform capital markets operations in a particularly timely manner. At the same time, the geopolitical challenges and uncertainties in the environment are clear, which makes our highly recurring and resilient business model all the more attractive. Against this backdrop, it was rewarding to hear our clients continue to think of Broadridge as an important partner for innovation and growth, as well as for efficiency and resiliency. And with that, let me turn to the first. Broadridge's second quarter results mark another step toward our growth plans for both fiscal 24 and the next three years, with healthy organic growth across both sides that is in line with our long-term growth strategy. Second,

With continued high retention from existing customers revenue from net new business contributed four points of growth.

Internal growth contributed two points to recurring revenue growth, including one point from position growth.

Foreign exchange had a half point benefit or recurring revenue growth.

So I'll wrap up the revenue discussion with a view of total revenue on slide 11.

Total revenues grew 9% in Q2 to $1 4 billion with recurring revenue being the largest contributor.

Powering four points of growth.

Low to no margin distribution revenues contributed three points to total revenue growth.

Distribution revenue grew 9%, primarily due the postal rate increases, which are a headwind to our adjusted operating income margin.

We continue to expect distribution revenue to grow in the high single to low double digit range driven by further postal rate increases.

Event, driven revenue was $55 million and added one point to growth.

Timothy C. Gokey: Transition growth trends remain positive. Strong Group on Physician Growth, and mid-single digit equity position growth. Third, we are executing against a growth plan we shared last month at our investment meeting by driving the democratization and digitization of investing. Simplified and Innovative Trading, and Modernizing Wealth Management are examples of it. We generated strong free cash flow in the quarter, keeping us on track to achieve our 100% FY 24 conversion objective, and as Evan will discuss, we're doing more capitalism. Finally!

Speaker Change: As anticipated we saw more normalized levels of mutual fund proxy activity compared to lower levels in Q2, 'twenty three driving a 47% increase in event driven revenue over last year.

I will also note that while contest activity is immaterial through the first half of the year we.

We expect the combination of increased mutual fund proxy activity and higher contest activity will now have us trending modestly above our historical $230 million to $250 million level for the full year.

As I mentioned earlier, we have the flexibility to ramp up or ramp down investments based on performance and we modestly increased growth investments in Q2.

Timothy C. Gokey: as we enter the seasonally larger second half of our history. We expect to deliver another strong set of. We are reaffirming our guidance for 69% return revenue growth, need to 12% and adjust the TPS growth. And importantly, don't lose sales.

Based on the above trend event driven revenue.

We are well positioned to stay committed to investing in long term growth.

Timothy C. Gokey: Now let's turn from the headlines to slide 4 to review our results, starting with our Governor's Franchise. ICS recurring revenue rose 6% in the second quarter. New sales were the biggest driver of growth, a direct result of our focus on delivering innovation across our government. We are seeing growth from adding new broker-dealer clients and from sales of our Global Insights data to Amazon, with continued momentum in their regulatory competition and disclosure, and we're benefiting from strong growth in our digital solutions for customer communication. An increase in investor participation remains an important driver for our regulatory revenues, which rose 8% in the second quarter with In a seasonally small quarter, equity position growth was 6%.

While still delivering our short term fiscal 'twenty four adjusted EPS guidance.

Turning now to margins on slide 12.

Adjusted operating income margin was down 100 basis points from prior year to 12, 4%.

And the benefit from the Q4 'twenty three restructuring initiative to realign some of our businesses and streamline our management structure.

The net impact of higher distribution revenue and higher float income, which have an immaterial impact on earnings growth as I detailed at Investor day.

Contributed a positive impact of 45 basis points in the quarter.

Those benefits were offset by the timing of other expense items.

And the impact of our growth investments as our outlook on the full year gave us the confidence to invest in product enhancements and our digital technology platforms.

Timothy C. Gokey: The biggest driver continues to be managed accounts, which represent just under 50% of physicians and which continue to grow at double digit rates compared to low single-fugue growth, Krishoff directed. Fund, and each year, physician growth increased from last quarter to 5% as the slowdown in the growth of passive funds was offset by take-up in the number of active funding. Looking ahead, as Edmund will outline, we expect mid-single-digit position growth in the second half of both equities and funds, and investor participation remains held. In December, you also heard us discuss the growth opportunities in our other ICS projects. YouTube, we saw strong growth across issuer and data-driven projects.

Looking ahead, we continue to expect adjusted operating income margin to increase year over year to approximately 20%.

And I'll remind you that we remain focused on disciplined expense management and creating investment capacity. So.

So we continue to expect to complete the restructuring initiative that began in Q4 23 and have the remaining restructuring charge by the end of the fiscal year.

This restructuring charge will be excluded from our calculation of adjusted operating income and adjusted EPS.

Let's move ahead to closed sales on slide 13.

Closed sales were $58 million in the quarter, bringing first half total to $106 million up 12% from the first half of 2023.

Timothy C. Gokey: Strong Growth and High Margin Digital Revenue Offset Lower Price I was particularly pleased with the continued digital transition, which you'll recall, is a key part of our strategy. In Q2, a significant proportion of this transition was driven by the successful onboarding of one of the largest U.S. law firms in the world to our wealth and focus platform. This is a platform of highlights that are..., and it's great to see their print-to-digital strategy playing out. Four months in, Wealth in Focus is delivering lower costs and increased investor engagement for our clients. Industry League, Open Race, and Click

I was also pleased to see a strong start to the second half with continued sales growth in January.

More importantly, the pipeline momentum that Tim mentioned gives us increased confidence in meeting our full year objective.

And I will turn now the free cash flow on slide 14.

Q2, 'twenty four free cash flow was $168 million.

For the first half free cash flow is a positive $91 million relative to the negative $115 million in the first half of 2023.

Timothy C. Gokey: Capital Markets revenue rose 10% to $262 million. Our focus on optimizing trading and connectivity in the front office continues to pay dividends in the form of strong growth here, on the Post-Grade side, where we're helping to simplify our clients' back-office technology. I was pleased to see a new wing at a retail bank who will be using multiple products to drive their transition to self-clearing. He also continues to drive innovation in capital markets with his ledger and AI team. Earlier this month, we launched our new brand, TPTAI.

These results are being driven by our continued strong earnings growth and lower client platform spend.

Free cash flow conversion calculated this trailing 12 month free cash flow over adjusted net earnings was 110% in Q2 24 up from 51% last year.

This is consistent with our expectations and has us on track for free cash flow conversion of 100% for fiscal year 'twenty four.

On Slide 15, you can see that we remain committed to a balanced capital allocation policy.

For the first half of the year, we invested $66 million or in our technology platforms and converting clients to our platforms.

Timothy C. Gokey: OpsGPT uses generative AI to synthesize complex transactions, settlements, and positions data to enhance client-scale. As clients focus on reducing the cost and complexity of their operations, especially in the accelerated world of Keep Us One, they see Broadridge as a natural partner given our deep subject matter expertise and early investment to leverage AI. This progress and innovation..., combined with strong BTCS sales in the front office. The win in the Back office reinforces how we are successfully helping our clients simplify and innovate in trading. Turning now to wealth and investment management, revenues rose 4% to $143 million, and strong growth from UBS was partially offset by the E3 transition. In early January, we onboarded the first client for Alternative Workflow Models. As you know, alternatives are one of the fastest-growing asset classes; both managers are offering these products to a rapidly growing set of investors. Many of the back office processes remain ambiguous.

Additionally, through the first six months before option proceeds we returned $330 million in capital to shareholders due to dividend and share repurchases.

Given our expectations for 100% free cash flow conversion, we are positioned to return additional capital to shareholders.

Based on our current outlook for limited M&A in fiscal 2024.

We estimate $350 million to $450 million in total share repurchases, which includes an additional $200 million to $300 million in the second half.

So moving to guidance on slide 16, along with some concluding thoughts.

We are successfully executing the broadridge financial model in fiscal 'twenty four.

And therefore, reaffirming our full year guidance on all of our key financial metrics.

Speaker Change: We continue to expect 6% to 9% recurring revenue growth constant currency.

Adjusted operating income margin of approximately 20% adjusted EPS.

Timothy C. Gokey: We are seeing strong interest in Alternative Workflow as wealth firms seek to address this growing opportunity and challenge. Moving to close sale. Close sales rose 12% for the first half. As you know, the second half of the year typically accounts for the fall cover close, and I'm pleased to announce that our current pipeline sits at a record level. As important, we're starting to see more movement within the pipeline, increasing our confidence for the second half. However, all our clients remain cautious.

EPS growth of 8% to 12%.

And closed sales of between $280 million to $320 million.

And I'll note that embedded in that full year guidance is high single digit year over year adjusted EPS growth for both Q3 and Q4.

In addition to the guidance for fiscal 'twenty four it's important that I highlight our high free cash flow business model.

Timothy C. Gokey: We're seeing them in depth in products that drive revenue, prove how to kill it, and meet basically her requirements. In governance, we've built a strong pipeline around our digital and print for the new Taylor Journal Report. We're also experiencing increasing demand for a Global Insight Dataproc from Epson, and we continue to see significant print and digital opportunities in customer communication. Capital Markets Alliance is beginning to look to a world beyond the implementation of T-plus-Y, which is driving growing interest in our post-trade capability.

Speaker Change: We are investing for the long term beyond 2024.

And after six months in our fiscal year of strong free cash flow conversion, we are confident in our ability to consistently generate 100% free cash flow conversion.

That free cash flow conversion can.

Speaker Change: Combined with our current outlook for limited M&A in the next two quarters positions.

Positions, our capital return through dividends and share repurchases to reach a total of $700 million to $800 million in fiscal 2024.

Speaker Change: And finally, the drivers of growth.

Timothy C. Gokey: And in a while, we saw significant sales in the first half as we began to convert our strong pipeline. The net result is that we remain on track to deliver strong, closed sales... in line with our guidance of $280 to $320 million. Let's move to slide 5 for some final thoughts on our quarter and how First, I'll reiterate that Broadway... second quarter results to keep us on track for continued growth with more than 6% recurring revenue growth and Strong Freedman. Second, those of you who attended our investigative last heard me talk about how we have made investments to align our business with clear long-term growth, including the democratization of investing. The Acceleration of Training, the growing importance of data and AI, and an evolving regulatory environment. Being aligned with those drivers enables us to help our clients operate, innovate, and grow, and in so doing, deliver steady and consistent growth for our investors. This quarter, again, highlighted how we are executing against those priorities in governance, capital markets, and wealth investment. Among these drivers, AI in particular has the potential to drive step changes in client outcomes. We've committed to be a leader in AI within our space. In the not-distant future, AI will be incorporated into all products.

With strong demand.

Speaker Change: And investor participation.

Combined with the investments that I mentioned earlier.

Give us confidence in meeting our 2020 for 2026 objectives and driving sustainable long term growth so with that let's take your questions operator.

Ladies and gentlemen at this time well begin the question and answer session.

Speaker Change: Ask a question you May press Star and then one using a touchtone telephone you are using a speaker phone we do ask that you. Please pickup your handset.

Key to ensure the best sound quality.

Speaker Change: It was through all your questions you May press star into.

Once again that is star and then one to join the question queue.

Speaker Change: At this time, we will pause momentarily to assemble the roster.

Yeah.

Our first question today comes from James Faucette from Morgan Stanley. Please go ahead with your question.

Great. Thank you.

James M. Young: I just wanted to check some quick math on the wealth side man it looks like.

Losses were about a three point drag to constant currency recurring revenue growth.

And I, if I presume that those losses were concentrating the wealth business without them that business, probably would have grown about 6% to 7% or are we kind of looking at that arithmetic about right.

Speaker Change: So that's it.

Speaker Change: Good morning, James first and thanks for the question on wealth I think Theres, a couple of points to make and your.

Timothy C. Gokey: And we are at work doing that across broader, More fundamentally, companies with unique data will be in a differentiated position, and we believe that our position at the Center for National Service gives us the unique opportunity to provide industry solutions that will make that happen. That's a win-win formula for our clients and our shareholders. The products we've already developed, Ha! and Distribution AI, are first steps in that direction. Third, based on all that talk.

In your question there first just generally for Broadridge as I talked about during Investor day, and as you see here, we just have a long history of retaining 97% to 98% of our existing recurring revenue and when I set aside transitioning E trade to Morgan Stanley I think we're wrong.

Speaker Change: In line with that and even with it worth three points of.

Contribution so that's sort of the first point.

I think the you can do the math on the wealth segment, we gave a good sense about exactly what the incremental wealth revenue would be up for.

Timothy C. Gokey: We are reiterating our guidance for both recurring revenue and adjusted EPS growth, as well as our outlook for closed sales for the full fiscal year. Fourth, we remain on track to deliver a free cash flow conversion of 100% this year, while funding the internal investment we need to continue to deliver innovation to our clients. That's an approach that will enable us to retain our investment grade rating.

For the year.

Just over 75.

Yeah.

We said that would largely be offset by transitioning E trade.

And so it gives you some sense about what the with the losses would be with the knowing those two during those two components.

Got it got it okay. That's helpful. Thanks for that and then more broadly.

Timothy C. Gokey: I'm in Turner, Oregon, and I'm delivering a strong and growing business while we execute Suheed Haqqa in M&A and, as Ed and Will discuss, return additional capital to shareholders. And that brings me to my last point, which is that Broderick is well positioned to deliver on the three-year financial objectives we laid out, including 79% recurring revenue growth, constant currency, 5 to 8% of which are organic.

No I guess, obviously constructive to see the year to date closed sales number and I think you'd previously spoken about some of that being adversely impacted by European tech discretionary weakness, but you've now reiterated the closed sales outlook your tone seems particularly bullish.

On that so can you give a little more.

Inside of it and maybe if there is an improvement in the overall demand environment. What you think is motivating that and and how Broadridge is are there incremental opportunities for broadridge to take advantage of.

Timothy C. Gokey: 8-12% Adjusted EPS Growth, as well as continue to grow beyond Emory 26. We attack our $60 billion and growing market opportunity before I close.

Yeah, James It's a it's Tim I'll I'll take that one and first of all thanks for the question because I think we do feel really good about where we are on this.

Timothy C. Gokey: I want to thank our 15,000 talented, knowledgeable, and hardworking associates. Yesterday, Rogers was recognized as one of Fortune's most admired companies. This is the 10th time we've been recognized. And that's a direct result of our associates' commitment to delivering great service. Resilience and Innovation. It makes our clients and our industry stronger, and that enables better financial lives for millions of investors every day. Thank you. And with that, I will turn it over to Edwin.

And you know as a reminder, obviously closed sales don't have much impact on this year. This year is really supported by the conversion of our strong backlog of $400 million, we talked about at the beginning of the year. So the solid question about future growth.

And.

We saw a strong first half.

January was strong.

D.

And then one thing I just wanted to point out for you and our listeners is that that growth that we've seen so far really came from the areas that we've been investing in I'd like to find office and like wealth management, which is which is really nice to see.

Edwin: Thank you, Tim, and good morning, everyone. I'm really pleased to be here to discuss the results for the second quarter. But before moving into the detailed review,

And as we look at the second half hour, we're having really good conversations around tailored shareholder reports around digital Communications continued front office discussions continue wealth discussions.

Edwin: It's important to highlight what the first has seen for the Caesaree Martyrs' second half and full year of Fiscal 24. First, we continue to execute the Broadridge Financial Model, and the second quarter results have us right on track to deliver another strong year of recurring revenue growth. Morgan Expansion, and the Justice EPS Group, right in line with our guidance.

And.

It's true that we've heard caution from other tech companies and that we had been seeing.

Weakness in Europe at previously and that sales cycles remain extended I think partly what we're seeing now is is.

Speaker Change: You know as we said those conversations were extended but they didn't go away and some of those are now coming through.

And we're seeing that their clients really are willing to spend on areas that drive revenue that lower costs that have specific regulatory needs all of those really fit fit very well. So we are seeing that.

Edwin: Second, strong free cash flow of positive $91 million through two quarters highlights the capital life nature of our business and increases our confidence in our 100% free cash flow conversion objective in Fiscal 24, bird. The combination of strong free cash flow and modest M&A in fiscal 24, means that we expect higher capital return to shareholders and increase share repurchases in the second half of fiscal 24. And finally, the demand for our products is strong. First half sales are up 12% over last year, and our pipeline and current client discussions reinforce our conviction that we will meet our full year objective. Additionally, our equity position testing shows mid-single-digit growth for the full year. So we continue to be encouraged by expanding investor participation in the financial market, which serves as a long-term tailwind for our business.

That conversion of that strong pipeline, improving and and.

You should have heard in the talent and we do feel.

Some very good confidence in achieving our sales guidance of 280 to 320 million, which is obviously a nice nice uptick on last year and really returns as to the long term.

Our long term growth trend there.

Great Thanks for that.

Our next question comes from David <unk> from Evercore ISI. Please go ahead with your question.

Thank you good morning, Tim and Edmond all combined my two questions upfront.

The first is really on headwinds tailwind.

First part is really on revenue and when you talked about event driven revenue likely coming in above the historical trend line average of $230 million to $250 million, so that seems like a nice tailwind.

And then the other you seem to be guiding more toward the bottom half of your range on record.

Edwin: These four items are meaningful and significant signals from our results and our performance through the first half. So now, turning to financial discovery on slide 6, you see the performance for the second quarter. Recurring revenues rose to $899 million, up 6% on a constant currency basis, all organic. Adjusted Operating Income increased 1% as we modestly increased growth investment, giving an above-trend event-driven revenue. AOI's margin declines 100 basis points to 12.4%.

Speaker Change: Our record growth mid single digit versus the six to nine so maybe you could just walk through those walk through those two dynamics and how they might balance out in the guide and then the second is really on expenses.

SG&A as you called out in your remarks was up more than revenue at <unk>.

Port of the ramp in event driven can you talk about the evolution of operating expenses in the back half of the year. Thanks, So much.

Yeah, Good morning, David and thanks for the question I think it's an important one.

Gives us an opportunity to emphasize our confidence in and being in line with the full year guidance that we have your first question is really on headwinds and <unk> relative to the overall guidance.

Edwin: Adjusted EPS was up 1% to $0.92. And finally, we delivered closed sales of $58 million in the quarter, bringing our first half total to $106 million, up 12% over the first half of fiscal 23. Let's get into the details of these results, starting with recurring revenue on slide 7. Recurring revenue was within our 4-year guidance range and grew 6% to $899 million in Q2 2014. Our recurring revenue growth was driven by a combination of converting our backlog to revenue, fund position growth, and ICF, and double-digit trade volume growth in GTO. And on slide 8, we can see recurring revenue growth across our ICF and GTF segments. ICS recurring revenue grew 6% to $493 million, driven by new sales.

And how we think about event as part of that and let me first maybe make a comment on the event and then talk about the overall revenue recurring revenue guidance itself and the headwinds in the tail winds on the vent look thus.

Thus far as we talked about in the prepared remarks through the first half of the year, we have seen strong event and while headlines might suggest sort of higher contest activity. It was really driven by a recovery in the mutual fund proxy activity.

Given the low levels that we saw in Q4 'twenty three we expect that to continue in the back half of the year and.

And there could likely be some more contest activity, but I did mentioned that we started increasing investments in Q2 'twenty.

In this in this current quarter because of the outlook on the full year, including the outlook on event driven revenue and its good when we have this types of transparency earlier in the year because as you know we have a number of unfunded investments debt.

Edwin: Submission, Growth, and Float In. Regulatory Revenue Group 8%, led by Healthy Funds and Equity Position Growth, and Revenue from New Sales. David's Ribbon Fund Solutions revenue increased by 9%, driven by higher float revenue in our retirement and workplace product, as well as growth in our data and analytics products. This year, our revenue was up 15%, driven by higher flow income in our registered shareholder solutions and revenue from strong sales of our disclosure solutions. Customer communications revenue was flat; strong growth and higher than digital business was offset by a decline in Lower Morgaine's print revenue.

That when we are performing above our expectations. When we go deeper in that listen to increase those investments, we're able to do that because it drives long term growth and still allows us to be within our overall <unk>.

<unk> of 8% to 12% and so I think as we think about strengthened event being above those levels. We will continue to look for opportunities to invest where we have the opportunity to do it overall on the recurring revenue Guy that's as I've said before I think it really comes down to three items and those three items are our.

<unk> to be able to convert our revenue backlog.

Edwin: We expect print volumes to increase in the second half of Fiscal 24 as we onboard new clients. And I will again pause here to note that customer communications can choose to execute on its print-to-digital strategy, replacing declining print volumes with higher-margin digital records. Over the long term, we expect the combination to result in low single-digit top-line growth, expanding margins, and continued low double-digit earnings growth, turning the GTO Recurring Revenue Group 8% to $405 million. Capital Markets revenue increased 10%, led by new sales in equity and fixed income trading volume.

222 revenue and as you know we've had a long history of being able to do that driving over six points of growth from that and we have a very very strong quarter size continue to feel very confident that we will be.

Be right in line with our expectations. There. We had included in our guidance mid to high single digit.

Position growth. The testing is now showing mid single digit growth. So that allows us to stay right in line with the guidance and I think the third item that I'll mention here has been float income, which really is a first half event.

You know no change to that thinking so I think halfway through the year, we're still very comfortable about where we are and still being within that 6% to 9% range.

On expenses look I am really really pleased about not just the long history of being able to drive margin expansion here I know you know very well 50 basis points over the last 10 years, including <unk>.

Edwin: I'll also note the continued strong performance in our front office BTCS solution, which again had double-digit recurring revenue. Wealth and Investment Management Revenue Group 4% as revenue from the UBS contract was partially offset by the successful transition of E-Trade to the Morgan Stanley platform, which occurred late in the fiscal first quarter. Looking ahead, we continue to have high confidence in both businesses and full-year GTO growth, being in line with our 5-8% organic growth objective, with second half growth in both capital markets and wealth, more weighted to the third quarter, driven by the timing of license revenues relative to last year. Turn to slide 9 for a discussion of volume trends. Sufficient growth of both equity and funds remains at healthy levels in the second quarter.

77 basis points in our last three year objectives, but we have been able to execute based on the operating leverage that we have in the business based on our move to digital based on the initiatives that we've been taken to realign our businesses.

And not only deliver margin expansion, but create investment capacity I do not get hung up in any particular quarter. When it comes to the margin expansion as I think about the full year. It is playing out just as we expected we still expect to be approximately at 20% a O y margin, but more importantly.

We're creating that capacity to be able to invest in the items that Tim mentioned in his prepared remarks, so we'll be right there as the year as the year completes.

Edwin: The long-term trends that we highlighted yesterday, more investor participation in financial markets and more positions per investor, underpin that growth. Equity position growth was 6% driven primarily by double-digit managed account growth and more modest growth in self-directed accounts as we approach the spring process, which typically generates over 80% of our equity communication. Our testing is now extending into the second half of the year, giving us insight into the full year relevant to our mid to high single-digit range.

Understood. Thanks, so much.

Our next question comes from Dan Perlin from RBC Capital. Please go ahead with your question.

Yes.

Thanks, Good morning, I just wanted to.

Maybe revisit the wealth.

[noise].

And as we just go into kind of the third and fourth quarters here. So.

You said that you trade kind of came up I think you said late in the quarter and so I don't want to get over our skis kind of jumping into the March quarter. So.

The expectation is that the $1 43 that you printed it could step down from there. Despite the fact that new sales looked pretty.

Pretty robust in that area is that a fair assumption.

Edwin: Equity position testing shows mid-single-digit growth for the second half of the year. As a result, we now expect mid-single-digit position growth for the full year of FY24, keeping us on track to deliver our guidance of 6-9% recurring revenue growth. London's ETF position growth improved from Q1 2023 to 5%, again driven by passive funds. We expect to see continued mid-single-digit growth for the second half of the year. Turning now to trade volume, trade volumes rose 12% on a blended basis with strong growth in fixed income trading volumes, which benefited our capital markets growth.

As we think about modeling that second half.

It is.

<unk>.

E trade was offshore.

Pretty much a pretty much the entire quarter and so I think the balance you saw in in this quarter will be similar going forward.

Maybe some other factors up and down but you know that the net of those two is as positive.

Okay got it.

Super helpful and I'll, just add to Tim's point than.

You heard me mention that we do expect both the capital markets and wealth management for the full year to be within that 5% to 8% sort of longer term three year objectives. We feel good about that and I think that will be more weighted for both of those businesses are again to the third quarter relative to the fourth quarter.

Edwin: And let's now move to slide 10 for the recurring revenue growth driver. Recurring revenue growth of 6% constant currency was all organic and in line with our 5-8% per year organic growth objective. As I mentioned yesterday, we have a decade-long history of delivering 6 points or better of revenue from closed sales each year, and G224 had 8 points of contribution with 6 points in ICFs and 10 points in GTO, including a boost from wealth management. With continued high retention from existing customers, revenue from that new business contributed four points of growth. Internal growth contributed two points to recurring revenue growth, including one point from position growth, for to change to have a half point benefit over her in revenue growth. So I'll wrap up the revenue discussion with a view of total revenue on slide 11.

Got it.

That's super helpful.

Tim This is up from a bigger picture question, you alluded to it a little bit but.

Did you talk to a bunch of clients at Davos.

We turned the page on the calendar here, so just the operating environment the expectations.

The pace of commitment from clients.

Speaker Change: I'm just trying to figure out.

Where.

Where are the pockets of I guess.

So demand in your view will come from and then maybe the speed with which you think clients are willing to put capital back into their business. Thank you.

Yeah, Thanks, Dan and I.

You know these days, there's a little bit embarrassing to talk about Davos I guess, but it is a it is a great opportunity to connect with a bunch of clients. All are all at the same time. So it was it was a really useful.

Edwin: Total revenues grew 9% in QG to $1.4 billion, with recurring revenue being the largest contribution, powering four points of growth. Loaded No-Margin Distribution revenues contributed 3 points to total revenue growth. Distribution revenue grew 9% primarily due to postal rate increases, which are a headwind to our adjusted operating income margin. We continue to expect distribution revenue to grow in the high single to low double-digit range driven by further postal rate increases. Base-driven revenue was $55 million and added one point to growth.

Useful set of discussions.

Speaker Change: And I think.

B.

The nice demand that we're seeing for the second half. It really is those two factors I talked about before which is its a little bit of a catch up of discussions that were already taking place.

And then it is then as new discussions and we are seeing.

And it is people are being cautious.

So there they are really looking at areas, where they see very tangible returns or they have very specific needs that they need to address and.

And many of our products fit in to that arena, but where we you know as we look at the incremental incremental demand going forward.

Edwin: As anticipated, we saw more normalized levels of Mutual Fund Proxy Act activity compared to lower levels in Q2'23, driving a 47% increase in advance-driven revenue over last year. I will also note that while contest activity is immaterial through the first half of the year, we expect a combination of increased mutual fund proxy activity and higher contest activity will now have us trending modestly above our historical 230 to 250 million level for the full year. As I mentioned earlier, we have the flexibility to ramp up or ramp down investments based on performance, and we modestly increased growth investments in Q2. Based on the above trend, event-driven revenue We are well positioned to stay committed to investing in long-term growth while still delivering our short-term fiscal 24 adjusted EPS guidance. Turning now to the margins on slide 12. The adjusted operating income margin was down 100 basis points from the prior year to 12.4%.

You know there is a big industry change around tailored shareholder reports.

We have a great solution for that that really really saves our clients' money over over any other way they could implement it.

That is not only going to be a nice driver of sales in the second half of it is really improving our whole relationship with the with the fund industry as being part of the solution.

The the digital communications those conversations continue to be a very robust really across all of our wealth management firms as they are looking to how do they better engage their their clients.

And do so at lower cost and with the conversion of one of the large wealth management players and the success of that you know that I think is is a great proof point on that.

The and while we're just talking about communications I don't want to actually skip over the fact that the.

When you look at our our Omnichannel communication strategy. It had the two parts that had the long term conversion to digital but that had a pretty extended midterm period of you know that market is still 50% I invented and there are a lot of in house players that are are basically losing scale as the world goes more digital and our.

Edwin: Adjusted Operating Income Margin continued to benefit from the operating leverage of our higher recurring and event revenue and the benefits from the Q423 restructuring initiative to realign some of our businesses and streamline our management structure. The Net Impact of Higher Distribution Revenue and Higher Float Income, which have an immaterial impact on earnings growth, as I detailed in them yesterday, contributed a positive impact of 45 basis points in the quarter. Those benefits were offset by the timing of other expense items, and the impact of our growth investments and our outlook for the full year gave us the confidence to invest in product enhancements on our digital technology platform. Looking ahead, we continue to expect adjusted operating income margins to increase year-over-year to approximately 20 percent, and I'll remind you that we remain focused on disciplined expense management and creating investment capacity. So we continue to expect to complete the restructuring initiative that began on June 4, 2023 and to have the remaining restructuring charge by the end of the fiscal year. This restructuring charge will be excluded from our calculation of Adjusted Operating Income and Adjusted E-Funds.

Therefore, choosing to outsource and we have some of those conversations going as well so you know.

So I think all sides of the communications will have some nice sales.

And the in the second half.

Continued strength in front office a lot of discussions there.

As you know we're sort of number three.

One and number two are really not investing in their business and our clients are looking for long term partners and so we're having a lot of great discussions there.

And then the wealth side.

Double sales in the first half and a set of really good discussions around the components that we have.

That we've talked about with with clients.

Speaker Change: Having those those components in their hands to trial them in a sandbox environment are seeing how they play out and so we see really some really nice strength across multiple dimensions of the strategy.

Speaker Change: Thank you so much.

Our next question comes from Darrin Peller from Wolfe Research. Please go ahead with your question.

Thanks, guys, Hey, thanks, guys.

Maybe a quick follow up on the wealth side.

When you think about the cross selling opportunities and what you will have progress you've been making there.

There is embedded in the closed sales now are obviously could be embedded in the year ahead.

Edwin: Let's move ahead to closed sales on slide 13. Closed sales for $58 million in the quarter, bringing the first half total to $106 million, up 12% from the first half of 2023. I was also pleased to see a strong start to the second half with continued sales growth in January. But more importantly, the pipeline momentum that Tim mentioned gives us increased confidence in meeting our full-year objectives, and I'll turn now to pre-cast flow on slide 14. In Q224, free cash flow was $168 million.

Darrin Peller: Maybe just comment again on how that's been progressing after UBS is now more more of earnings.

Yeah Darrin, it's it's Tim. Thank you. Thank you because it is that it's a.

Yeah, we think it's a great a great topic for us we talked.

I had an investor day about how the pipeline has really accelerated over the past year is now at over $200 million and so then the question has really been about how do we begin to convert that pipeline into sales and you know what I just talked about.

Is you know as we have lives software and you know it makes a huge difference for our clients to be able to.

Edwin: 64 million better than last year. For the first half, free cash flow was a positive $91 million, relative to the negative $115 million in the first half of 2023. These results are being driven by our continued strong earnings growth and lower client platform spend. Free cash flow conversion, calculated as trailing 12-month free cash flow over adjusted net earnings, was 110% in CT24, up from 51% last year.

Demo hands on keys have a sandbox I see the software with their own data inside and out and so I think that is one of the things that has really led to the strong first half.

And and why we feel like we have good traction in the second half and it is across a pretty broad set of components remember that for for UBS. There were 29 different components that we invested in and modernized and foster the cloud and.

Edwin: This is consistent with our expectations and has us on track for pre-cash flow conversion of 100% for fiscal year 24. On slide 15, you can see that we remain committed to a balanced capital allocation policy. For the first half of the year, we invested 66 million in our technology platforms in converting clients to our platform. Additionally, through the first six months... With option proceeds, we returned $330 million in capital to shareholders. Dividend and Cherie Parton.

So whether that's tax or it's client on boarding or its corporate actions.

In many clients see a little bit different path in terms of what the immediate need is and sort of their and their transition to sort of our north star.

And so we're having lots of good conversations both in the U S and in Canada. So it's a we feel good about where we are and just one point to add to Tim We quantified what we expect in terms of increments holiday from wealth.

The $30 million in incremental sales and we saw as Tim just said feel very good about that number.

Thanks, guys and then just one quick follow up just to revisit.

The BRC the customer communications business I know you talked about <unk>.

Edwin: Given our expectations for 100% free cash flow conversion, we are positioned to return additional capital to shareholders. Based on our current outlook for limited M&A in Fiscal 2024, we estimate 350 to 450 million in total share repurchases, which includes an additional 200 to 300 million in the second half.

Digital transformation from print.

I mean, maybe just help us understand how to think about the growth profile of that business I know it had been challenged a little bit. After you first closed the deal and then it went to pretty strong positive growth rates pretty consistently.

Thank you was flat right now just to remind US again, what your what your expectations are for that.

Yeah.

For that end.

And it would have to put in one more time I plugged that we really think this quarter was a great demonstration of how our broader omnichannel communication strategy is working.

Edwin: So moving to guidance on slide 16, along with some concluding thoughts. We are successfully executing the Broadridge Financial Model in Fiscal 2020 and therefore reaffirming our four-year guidance on all of our key financial metrics. We continue to expect 6-9% recurring revenue growth, cost of currency, an adjusted operating income margin of approximately 20%, adjusted EPS growth of 8-12%, and closed sales of between $280 to $320 million. And I'll note that embedded in that four-year guidance is high single-digit, year-over-year adjusted EPS growth for both Q3 and Q4. In addition to the guidance for Fiscal 24, it's important that I highlight our High-Greed Cash Flow business. We are investing for the long term, beyond 2020. And after six months in our fiscal year of strong free cash flow conversion, we are confident in our ability to consistently generate 100% free cash flow conversion. That free cash flow conversion, combined with our current outlook for limited M&A in the next two quarters.

Darrin Peller: And you know that that growth rates will be tick up and down you know as you as you just said there and you know in any particular quarter, but but longer term.

What we are now that strategy is really the one we talked about from before which is to leverage our scale, our synergies and technology to be the low cost provider in the industry.

To consolidate print, which is still 50% on invented as in house operations lose scale, and then to drive to high digital.

Drive from print to high margin digital so that remains our strategy.

Thinking about how all that plays into sort of long term growth expectations.

We continue to see not any given quarter, but over many quarters.

Expect sort of low single digit top line growth.

With expanding margins and low double digit earnings growth. So that's really sort of the profile you should expect from that business.

Cards.

Thanks, guys great job.

Our next question comes from Peter Heckmann from D. A Davidson. Please go ahead with your question.

Peter J. Heckmann: Good morning, everyone. Thanks for taking the question going back to tailored shareholder reports and some of the compliance market. There can you talk about how youre thinking about the opportunity around tailored shareholder reports for Broadridge I'm sure. It is.

Edwin: These positions are capital returns through dividends and share repurchases to reach a total of $700 to $800 million in fiscal 2024. And finally, the Drivers of Rome, for Strong Demand, and investor participation, combined with the investments that I mentioned earlier, give us confidence in driving sustainable long-term growth. So with that, I'll take your questions. Operator. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then 1 on a touchscreen telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. You may press the star and two.

It's dependent upon the wins, but I guess, how do you feel your position there.

Peter J. Heckmann: Okay.

Yeah, Peter Thank you and and you know remember that.

When the industry moved to a 33.

We got a sort of a you know an uptick are we.

Argued against against it, but we got a sort of a $30 million uptick and we had commented that when a when.

Moved world when the World moved away from 33 that we would have a headwind of about about $30 million in revenue and what.

Peter J. Heckmann: I'm really pleased about is as we look at the now as they help our clients solve the issues that that Taylor's shareholders and I'll come back to the second you know the issues that it creates I think we're going to see that revenue more than replaced which is very nice.

The challenge that clients face with tailored shareholder reports just remind people what it is it's taking the <unk>.

Operator: Once again, that is the star and then one to join the question team. At this time, we'll pause momentarily to assemble the rocks. Our first question today comes from James Placette from Morgan Stanley. Please go ahead with your question. Great, thank you. I just want to check... Marr on the well.

150 page yourself annual and semi annual reports that people receive and it is saying what are the key data points that are inside there that people really care about and creating a condensed much more readable sort of two to three page summary that is much more digestible for investors.

So that's good the challenge it creates for our clients is that those reports.

James M. Young: It looks like client losses were about a three point drag on revenue. And that's if I presume that those offices were concentrating the wealth. Without them, that business probably would have grown about 6-7%, about right. So, good morning, James, first, and thanks for the question on love.

The new regulation has M. B b why it's tailored it has to be specific to the share class that that client has so in the past you would've gotten a report and we have a table and you'd have to have to look up your share class and try to figure out for you. What it means now has to be specific to you that.

Edwin: I think there are a couple of points to make in your question there. First, just generally for Broadridge, as I talked about during Investor Day, and as you see here, we just have a long history of retaining 97% to 98% of our existing recurring revenue. And when I set aside transitioning E-Trades to Morgan Stanley, I think we're right in line with that, and even with it, we're at three points of contribution. So that's sort of the first point.

That dramatically increases the number of Skus.

Peter J. Heckmann: In an earlier call about you know a fine that we talked to you that had.

Like a 120 to 150 different.

Different reports and now that's going to be 1200 different reports.

That makes it very hard to printed reports in advance and inventoried them. So the solution that we have is because we've invested in digitizing all of this in a digital database of all the latest our latest regulatory reports.

We can for that percentage of things that is is print which is.

Edwin: I think you can do the math on the wealth segment; we gave a good sense about exactly what the incremental wealth revenue would be for the year, just over $75 million. We said that would largely be offset by transitioning E-tray, and so it gives you some sense about what the losses would be, knowing those two components. Scott.

A lot of this is digital is 80% digital but.

There's still a lot of friends, we can print that in line.

Right in our in our facility.

And put multiple things in the same and the same envelope significantly savings on creating significant savings on all of the inventory, but also all the postage and the envelopes and all of that and so that ability to consolidate multiple reports into a single envelope all digitally in line.

James M. Young: Okay, that's helpful. Thanks for that. And then, more broadly, you know, I guess, obviously, it's instructive to see the year-to-date closed sales number, and I think you had previously spoken about some of that being adversely impacted by European tech discretion. Bye.

Peter J. Heckmann: And in fact, many funds that used to do this themselves on the registered side are also coming to us for that so that's the whole sort of.

Timothy C. Gokey: Now, reiterated the closed veiled outlook, your tone, polish on that. Keep a little more insight into me. If there is an improvement in the overall demand environment, what do you think is motivating that? Thank you for watching. We'll see you next time.

Plant output and and and and mailing side of things. The other thing I'm really pleased though about as moving upstream into the composition side of things and historically that work has been done by others.

By Donnelley financial and by confluence and one of the other unique things in the regulation is that the reports are need to be tagged with EXPAREL and I wish it's great for digital delivery and extraction of data points that can be a very laborious process and composition.

Timothy C. Gokey: Are there incremental opportunities for broader... Yeah, James, it's Tim. I'll take that one. And first of all, you know, thanks for the question, because I think we do feel really good about where we are on this. And, you know, as a reminder, obviously, closed sales don't have much impact on this year.

Engine that we have is pretty unique in that it's it's first of all it is it's built in a way that makes it very easy to have many versions of the same thing and it's also built with the <unk> tagging.

Timothy C. Gokey: This year is really supported by the conversion of our strong backlog of the $400 million we talked about at the beginning of the year. So this is all a question about future growth, and, you know, we saw that in the first half of January. And one thing I would just want to point out for you and our listeners is that that growth that we've seen so far really came from the areas that we've been investing in, like the front office and like wealth management, which is, which is really nice to see. And as we look at the second half, we're having really good conversations around tailored shareholder reports on digital communications, continued front office discussions, and continued wealth discussions. And it's true that we've heard caution from other tech companies and that we've been seeing weakness in Europe previously, and that sales cycles remain extended. I think partly what we're seeing now is, you know, as you said, those conversations were extended, but they didn't go away, and some of them are now coming through.

Natively embedded in it so that you don't have to come back as a second process. So it's a it's a much better solution on the composition side, where a newer player there, but we've seen a lot of client interest and that's really enabling us to move upstream to have a much deeper relationship with the asset managers.

Alright.

And our next question comes from Patrick O'shaughnessy from Raymond James. Please go ahead with your question.

Hey, good morning, so for GTO in past quarters, I seem to recall you guys speaking to a 5% to 7% growth outlook for that business.

And I think fiscal 'twenty, four as well as the medium term and today I heard you speak to 5% to 8% growth. So I'm curious if anything has changed in terms of your outlook for that business and then I think specific to this year is faster or higher trading volumes may be a bigger contributor to growth than you had previously anticipated.

David Mark Togut: And we're seeing that clients really are willing to spend on areas that drive revenue, that lower costs, that have specific regulatory needs. All of those really fit very well. So we are seeing that conversion of that long pipeline improve. And, you should have heard in the tone, and we do feel a lot, you know, some very good confidence in achieving our sales guidance of 280 to 320 million, which is obviously a nice, nice uptick on last year and really returns us to the long-term, long-term growth trend. Great, thanks for that. Our next question comes from David Togut from Evercore ISI. Please go ahead with your question, you.

Good morning, Patrick and thanks for that question.

Did I I will emphasize that we did come out at the Investor day, and one of the big changes and an important change for US is moving our growth objectives is our three year growth objectives for organic growth from five to 7% to 5% to 8% now the strong growth that we expected in fiscal 'twenty four has a lot to do with.

That but the investments that we've been making in the strength that we've been saying, Tim said earlier, our front office capital markets business and even the strength in wealth management, given the incremental sales that we have we think that GTO will be a contributor there as well those are our objectives are 5% to 8% over the next three years and I think youre going to see.

David Mark Togut: Good morning, Tim and Edmund. I'll combine my two questions up front. The first is really about headwinds and tailwinds.

See each of the GTO businesses are playing are performing right in line with that both capital markets and.

Edwin: The first part is really on revenue. Edmund, you talked about event-driven revenue likely coming in above the historical trend line average of $230 to $250 million. So that seems like a nice tailwind.

Peter J. Heckmann: And wealth management here.

Alright, great. Thank you for reminding me of that.

And as you guys are used to being able to modulate your investment spend due to higher event driven revenue.

Edwin: And then the other, you seem to be guiding more towards the bottom half of your range on record growth, mid-single digit versus the six to nine. So maybe you could just walk through those two dynamics and how they might balance out in the guide. And then the second is really on expenses.

Can you maybe give a little more detail on kind of the type of spending that represents are you bringing on more consultants.

Or are there other kind of very short term expenditures that youre able to ramp up.

Yeah, Patrick it's a it's a great question. It is it is.

Edwin: SG&A, as you called out in your remarks, was up more than revenue in support of the rampant event-driven business. Can you talk about the evolution of operating expenses in the back half of the year? Thanks so much.

Hi.

One of the things that we're very clear with all of our businesses on is that the investments we're making are a R.

Our onetime investments so we have.

Edwin: Yeah. Good morning, David, and thanks for the question. I think it's an important one and gives us an opportunity to emphasize our confidence in being in line with the four-year guidance that we have. Your first question is really about headwinds and tailwinds relative to the overall guidance and how we think about events as part of that.

You know.

Peter J. Heckmann: We as do many firms have a whole set of relationships with external providers.

Sure building technology.

Consulting other kinds of things and so when we had the ability to incrementally invest it is you know it's not adding associates that are going to be here for the long run, but it is really going deeper into projects that may be already underway in accelerating those but leveraging largely third parties for for things that are already in most.

Edwin: Let me first maybe make a comment on the event and then talk about the overall recurring revenue guidance itself and the headwinds and the tailwinds. On events, look, thus far, as we've talked about in the prepared remarks through the first half of the year, we have seen strong events. And while headlines might suggest sort of higher contest activity, it was really driven by a recovery in mutual fund proxy activity. Given the low levels that we saw in Q4-23, we expect that to continue in the back half of the year, and there could likely be some more contest activity.

And that we can accelerate.

Got it very helpful. Thank you.

And our next question comes from Brendan miles from J P. Morgan. Please go ahead with your question.

Hey, guys. Thanks, so much for Christmas.

I'm on for Puneet.

Oh absolutely.

From Jpmorgan so.

Edwin: But I did mention that we started increasing investments in Q2-20 in this current quarter because of the outlook for the full year, including the outlook for event-driven revenue. And it's good when we have this type of transparency earlier in the year because, as you know, we have a number of unfunded investments that when we are performing above our expectations, we go deeper into that list and increase those investments. We're able to do that because it drives long-term growth and still allows us to be within our overall guidance of 8 to 12 percent. And so I think as we think about strength in the event that we are above those levels, we'll continue to look for opportunities to invest when we have the opportunity to do it.

Thanks for all the updates on <unk>.

Well so it's been really cool is that I've been talking to start to watch sort of like the J curve on your investments in the past four months old on the free cash flow generation. So that's exciting to see.

Quickly on cap markets kind of bouncing off this last question. It seems like it was a great quarter in capital markets could you just give us a quick.

Update on the state of the market in that business and then maybe like a technical question quickly on it.

Asking another question for the ops GPT in laundry pitches with products that you guys are rolling out.

Peter J. Heckmann: Understand you have access to tons of incredible data is that data just kind of data that's in your custody or is it data that.

Uh huh.

Yeah. So let me just start with the last one and then come back to the broader broader capital market because I'm I'm I'm pleased to be able to talk about about AI. It is it is an area that we.

Edwin: Overall, on the recurring revenue guidance, as I said before, I think it really comes down to three items. And those three items are our ability to be able to convert our revenue backlog into revenue. And, as you know, we've had a long history of being able to do that, driving over 6 points of growth from that. And we have a very, very strong quarter, so I continue to feel very confident that we will be right in line with our expectations there. We have included in our guidance mid- to high-single-digit position growth. The testing is now showing mid-single-digit growth, so that allows us to stay right in line with the guidance. And I think the third item that I'll mention here has been flowed income, which really is a first half event, and, you know, no change to that thinking.

We're investing in as I talked about earlier, we expect to be a leader in our space.

It is a it's.

It's a real natural place for Mutualization Ware.

Because we're doing this for for many clients you know a particular activity and because really getting value out of this often depends on the nuances of a specific activity. We can invest more than it makes sense for any one client to invest and we can have better data than than anyone client would have so it's a it's a really nice opportunity.

Peter J. Heckmann: For a neutralized benefit add two and for the benefit of our clients now.

Peter J. Heckmann: Now in terms of specifically of the data we have.

Edwin: So I think halfway through the year, we're still very comfortable about where we are and still being within that 6 to 9 percent range. On expenses, look, I am really, really pleased about not just the long history of being able to drive margin expansion here, I know you very well 50 basis points over the last 10 years, including, you know, 77 basis points in our last three-year objectives. But we have been able to execute based on the operating leverage that we have in the business, based on our move to digital, and based on the initiatives that we have been taking to realize our business and not only deliver margin expansion but create investment capacity. I do not get hung up on any particular quarter when it comes to margin expansion.

We do house, a lots of data across clients.

Are being very.

Very careful on this.

In terms of of how we leverage our models that we are you know at this point doing that.

By client. It is a you know we are is that data is owned by our clients and and we're extremely careful about that could there be a longer opportunity with client permission to have have across that.

Across those pools at that could be possible in the future, but it is.

It would be specifically with our clients with our clients a permission.

Peter J. Heckmann: When we look at things like ops GPT.

Today, when there is say a fail it gives a whole research process that it kicks off.

And you have.

Edwin: As I think about the full year, it is playing out just as we expected. We still expect to be approximately at 20% AOI margin. But more importantly, we're creating that capacity to be able to invest in the items that Tim mentioned in his prepared remarks. So, you know, we'll be right there as the year completes. Okay. Thanks so much.

Knowledgeable and fairly expensive ops people.

Looking up and and you know.

This database and then that database and then cross referencing it and.

Peter J. Heckmann: <unk> working out what's the reason for the fail and then contact and the other party about it at that that sort of research process.

Can be can.

It can be easily automated here and it does not and that's sort of.

Darrin Peller: Our next question comes from Dan Perlin from RBC Capital. Please go ahead with your question. Thanks, good morning. I just wanted to maybe revisit the wealth expectation as we just go into kind of the third and fourth quarters here. So, he said that E-Prague kind of came off, I think he said late in the quarter. And so I don't want to get ahead of ourselves kind of jumping into the March quarter. So the expectation is that the 143 that you printed could step down from there, despite the fact that resale was pretty, pretty robust in that area. Is that a fair assumption?

Peter J. Heckmann: Looking at the Internet of things like that it is it's it's using AI to write sequel queries to real databases to get real data to Dean I would put that together enjoying it and be able to present <unk>.

In answer to an ops professional who can quickly validate it and really cut out tons of time and this is just we're just scratching the surface in terms of what will be possible, but I think our clients are are very excited about it and very excited about the idea that.

We'd be taking on this investment really on behalf of the industry to really help drive.

Peter J. Heckmann: Drive a lot of a lot of efficiency and remember we're a technology company not so much a people company so as we make things more efficient.

Timothy C. Gokey: Um, if you think about, you know, modeling that second half. Yeah, Dan, it's Tim. No, we don't, we don't see him stepping down. It is, you know, he traded off for pretty much, pretty much the entire quarter. And so I think, you know, the balance he saw in this quarter will be similar going forward. There may be some other factors up and down, but you know, the net of those two is positive. Okay, I got it. That's super helpful. And I'll just add in some twinks.

That's not coming out of.

Peter J. Heckmann: Our personnel and that's really helping our clients save money. So that's that's AI and I'm sure we'll be talking about it a lot more.

D.

The other part was just the state of the market on capital markets.

The drivers of growth in capital markets and I can probably hit three things and thanks for asking the question of Brenda because it does allow me to come back to <unk>.

Peter J. Heckmann: Item that Patrick mentioned, but there are probably three things that I'd point out there. One is the continued double digit growth in our front office capabilities as we brought on BTC. Yes, we just continue as Tim talked about earlier to see strength in that business too and this is the case across each of our different business units as our.

Edwin: Dan, you heard me mention that we do expect both the capital markets and the wealth management for the full year to be within that 5% to 8% sort of longer-term three-year objective. We feel good about that, and I think that will be more weighted for both of those businesses again in the third quarter relative to the fourth quarter. Got it. That's super helpful.

<unk> to be able to convert the revenue backlog into revenue, particularly given the investments that we've been making at our post trade solutions. We continue to see strength in the capital markets post trade solutions converting new clients into revenue that is a strong boost for that business in the third and this is a point that <unk>.

Darrin Peller: Tim, this is a bigger picture question. You alluded to it a little bit, but you said you talked to a bunch of clients at Davos, and we have turned the page on the calendar here. So just the operating environment, the expectations, the pace of commitment from clients. I'm just trying to figure out, you know, where the pockets of, I guess, incremental demand, in your view, will come from, and then maybe the speed with which you think clients are willing to put capital back into their businesses. Thank you. Yeah, thanks, Dan.

Peter J. Heckmann: Rick mentioned, we did see strength in some of the trading volumes in the quarter. You know we go into our planning cycles, not expecting significant growth from trading volumes, almost assuming flat, but as I mentioned the fixed income trading in particular has continued to have strong growth over the past couple of quarters.

That is also driving a boost in the capital markets and again, most importantly, having us very confident that that business along with Wolfe will be within our 5% to 8% objective here and I am sorry, I have to just add one other thing which is when.

Timothy C. Gokey: And I, You know, these days it's a little bit embarrassing to talk about Davos, I guess, but it is a great opportunity to connect with a bunch of clients all at the same time, so it was a really useful set of discussions. Uh, and I, I think, um... The, The nice demand that we're seeing for the second half is really those two factors I talked about before, which is a little bit of a catch-up on discussions that were already taking place, and then it is new discussions.

When you.

Take our capital markets team you know capital markets is very esoteric business you take our capital markets team.

Put in front of any even very top tier client and it is a very impressive team and you see that in the innovation with digital ledger repo with with L. T X with AI across all of those areas that are at the leading edge of where capital markets are going front to back.

Timothy C. Gokey: And we are seeing, and it is, you know, people are being cautious. So they're really looking at areas where they see very tangible returns, or they have very specific needs that they need to address. And many of our products fit into that arena. But we're, you know, as we look at incremental demand going forward, there is a big industry change around tailored shareholder reports. We have a great solution for that that really saves our clients money over any other way they could implement it.

We are showing real thought leadership and having great conversations with clients.

And ladies and gentlemen, with that we will be concluding today's question and answer session I would like to turn the floor back over to management for any closing remarks.

Speaker Change: Jamie Thank you very much and thank all of you for joining us this morning.

As I hope you heard we see a long runway for growth ahead.

And as we enter our seasonally larger second half we are on track to deliver another strong year.

And to continue to make a difference for investors everywhere.

Timothy C. Gokey: That is not only going to be a nice driver of sales in the second half, but it's really improving our whole relationship with the fund industry as, you know, being part of the solution. The digital communications, those conversations continue to be very robust really across all of our wealth management firms as they are looking to how they can better engage their clients and do so at a lower cost, and with the conversion of one of the large wealth management players and the success of that, you know, that I think is a great food point on that. I don't want to actually skip over the fact that when you look at our omni-channel communication strategy, it has two parts. It has made the long-term conversion to digital, but it had a pretty extended mid-term period of that market is still 50% unvended, and there are a lot of in-house players that are basically losing scale as the world goes more digital and are therefore choosing to outsource.

Speaker Change: And for our clients, our associates and our shareholders.

Speaker Change: Thank you very much for your interest this morning.

Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.

Timothy C. Gokey: And we have some of those conversations going on as well. So I think all sides of the communications will have some nice sales in the second half. And he just speaks in the front office.

Timothy C. Gokey: A lot of discussions there. You know, as you know, we're sort of number three, but numbers one and number two are really not investing in their business, and our clients are looking for long-term partners, and as we're having a lot of great discussions there, and then the website, you know, doubled sales in the first half.

Timothy C. Gokey: And that are really good discussions around the components that we have, that we've talked about this with clients, you know, having those those components in their hands to trial them in a sandbox environment, seeing how they play out. And so we see really nice things across, you know, multiple dimensions of the strategy. Thank you so much.

Darrin Peller: Our next question comes from Darrin Peller from Wolfe Research. Please go ahead with your question. Thanks, guys.

Darrin Peller: Hey, thanks guys. Just maybe a quick follow-up on the wealth side. When you think about the cross-selling opportunities and what you know, what kind of progress you've been making that either is embedded in the closed sales now or, obviously, could be embedded in your head. Maybe just comment again on how that's been progressing after UBS. Yeah, Darrin, it's Tim.

Timothy C. Gokey: Thank you. Thank you that we think it's a great, great topic for us. You know, we talked at our investor day about how the pipeline has really accelerated over the past year, now at over $200 million. And so then the question has really been about how to begin to convert that pipeline into sales. And, you know, what I just talked about are 29 different components that we invested in and modernized and brought to the cloud. And so whether that's a task or it's client onboarding or it's corporate actions, you know, many clients see a little bit of a different path in terms of what their immediate need is and sort of their transition to sort of a North Star. And so we're having just, you know, lots of good conversations both in the U.S. and in Canada. So we feel good about where we are.

Edwin: And just one point to add to Tim, you know, we quantified what we expect in terms of incrementality from wealth at 20 to 30 million in incremental sales, and we still, as Tim just said, feel very good about that number. Thank you. And then just one quick follow-up, just to revisit the BRCC, the customer communications business. I know you talked about the obvious, you know, the obvious digital transformation from print. But maybe just help us understand how to think about the growth profile of that business. I know it's, you know, it had been challenged a little bit after you first closed the deal and went to pretty strong positive growth rates, pretty consistently, but you were flat right now. Just remind us again what your expectations are for the future. Yeah, thank you for that.

Timothy C. Gokey: And I just have to plug one more time that we really think this quarter was a great demonstration of how our broader omnichannel communication strategy is working. And, you know, the growth rates will be picked up and down, you know, as you just said, Darrin, in any particular quarter. But longer term, what we are – you know, the strategy is really the one we talked about some earlier, which is to leverage our scale, our synergies, and technology to be the low-cost provider in the industry, to consolidate print, which is still 50% unvended as in-house operations lose scale, and then to drive from print to high-digital, which is to drive from print to high-margin digital. So that remains the You know, as we think about how all that plays into sort of long-term growth expectations, we continue to see not in a given quarter, but over many quarters, we expect sort of low single-digit top-line growth with expanding margins and low double-digit earnings growth. So that's really sort of the profile you should expect from that quarter.

Timothy C. Gokey: Thank you. Thank you. Good job. Our next question comes from Peter Heckmann from D.A. Davidson.

Peter J. Heckmann: Please go ahead with your question. Morning, everyone. Thanks for taking the question. Going back to Taylor shareholder reports and sort of the compliance market there, can you talk about how you think about the opportunity around Taylor shareholder reports for Broadridge? I'm sure it all depended upon the wind, but I guess, how do you feel you were able to do it?

Timothy C. Gokey: Yeah, Peter, thank you. And, you know, remember that... When the industry moved to 30E3, we got a sort of an uptick. We argued against it, but we got a sort of $30 million uptick. And we had commented that when the world moved away from 30E3, we would have a headwind of about $30 million in revenue. But what I'm really pleased about is, as we help our clients solve the issues, and I'll come back to this in a second, the issues that it creates, I think we're going to see that revenue more than replaced, which is very nice. You know, the challenge that clients face with tailored journal reports, just to remind people what it is, is taking the, you know, 150-page or so annual, semi-annual reports that people receive and saying, what are the, you know, key data points or insiders that people really care about and creating a condensed, much more readable, sort of two to three page summary that is much more digestible for investors. So that's good. The challenge it creates for our clients is that those reports, the new regulation has them be tailored. It has to be specific to the share class that that client has.

Timothy C. Gokey: So, in the past, you would have gotten a report, it would have had a table, and you essentially have to look up your share class and try to figure out for yourself what it means. Now, it has to be specific to you. That dramatically increases the number of SKUs. We talked on an earlier call about, you know, a fund we talked to that had something like 120 to 150, you know, different reports, and now there are going to be 1,200 different reports. That makes it very hard to print reports in advance and inventory them.

Timothy C. Gokey: So the solution that we have is, because we've invested in digitizing all this and a digital database of all the latest regulatory reports, we can pour that percent of things that are print, which is, you know, a lot of this is digital, 80% digital, but, you know, there's still a lot of print. We can print that in line, right in our facility, and put multiple things in the same envelope, significantly saving on, creating significant savings on, you know, all the inventory, but also all the postage and the envelopes and all of that. So that ability to consolidate multiple reports into a single envelope, all digitally in line, creates a very significant saving for our clients over any other way of doing it. So we're having a really high percent of funds coming to us for that, and in fact, many funds that used to do this themselves on the registered side are also coming to us for that. So that's the whole sort of...

Timothy C. Gokey: The other thing I'm really pleased about is moving upstream into the composition side of things. Historically, that work has been done by others, by Sound Lake Financial and by Confluence. One of the other unique things in the regulation is that the reports need to be tagged with FBRL, which is great for delivery and collection of data points. That can be a very laborious process.

Patrick O'Shaughnessy: And the composition engine that we have is pretty unique in that, first of all, it's built in a way that makes it very easy to have many versions of the same thing, and it's also built with FBRL tagging natively embedded in it, so that you don't have to come back as a second process. So it's a much better solution on the composition side. We have a newer player there, but we've seen a lot of client interest, and that's really enabling us to move upstream to have a much deeper relationship with the asset managers. And our next question comes from Patrick Astronicy from Raymond James. Please go ahead with your question. Hey, good morning.

Edwin: So for GTO, in past quarters, I seem to recall you guys speaking to a five to 7% growth outlook for that business, both in, I think, fiscal 24, as well as in the medium term. And today, I heard you speak to five to 8% growth. So I'm curious if anything has changed in terms of your outlook for that business. And then, specifically for this year, faster or higher trading volumes, maybe a bigger contributor to growth than you had previously anticipated. Good morning, Patrick, and thanks for that question.

Edwin: You know, we did, I'll emphasize that we did come out on investor day. And one of the big changes and an important change for us is moving our growth objectives, our three-year growth objectives for organic growth from five to seven to five to 8%. Now, the strong growth that we expected in fiscal 24 has a lot to do with that. But the investments that we've been making in the strengths that we've been saying, Tim said earlier, our front office capital markets business and, and even the strength of wealth management, given the incremental sales that we have, we think the GTO will be a contributor there as well. Those are our objectives of five to 8% over the next three years, and I think you're going to see each of the GTO businesses playing, you know, performing right in line with that, both capital markets and, and wealth management here. All right. Thank you for reminding me of that.

Patrick O'Shaughnessy: And, you know, if you guys are interested in being able to modulate your investment spend due to higher event-driven revenue, can you maybe get a little more detail on kind of the type of spending that represents? Are you bringing on more consultants? Are there other kinds of very short-term expenditures that you're able to ramp up? Yeah, Patrick, it's a great question. It is. It is.

Edwin: You know, one of the things that we're very clear with all of our businesses on is that the investments we're making are, are one-time investments. So we have, you know, we as many firms have a whole set of relationships with external providers for building technology, consulting, other kinds of things. And so when we have the ability to incrementally invest, it is, you know, it's not adding associates that are going to be here for the long run, but it is really going deeper into projects that may be already underway and accelerating those, but largely leveraging third parties for things that are, you know, already in motion that we can accelerate.

Edwin: Very helpful. Thank you. And our next question comes from Brendan Miles from J.P. Morgan. Please go ahead with your question. Hey guys, thanks so much for squeezing in here. I'm on for Puneet Jain, by the way, on JPMorgan. So thanks for all the updates on wealth. It's been really cool.

Brendan Miles: I've been following the stock to watch sort of like the J curve on your investments in the platform unfold and the free cash flow generation. So that's exciting to see. Quickly on CapMarcus, kind of bouncing off this last question, it seems like it was a great quarter for CapMarcus.

Brendan Miles: Could you just give us a quick update on the state of the market for that business? And then maybe, like, a technical question quickly on AI. For the OpsGPT and BondGPT products that you guys are rolling out, I understand you have access to tons of incredible data. Is that data just kind of data that's in your custody, or is it data that you own?

Timothy C. Gokey: Yeah, so let me just start with the last one and then come back to the broader capital market for them. I'm pleased to talk about AI. It is, it is an area that, you know, we're investing in, as I talked about earlier. We expect to be a leader in our space. And it is, you know, it's a real natural place for mutualization, where, because we're doing this for, for many clients, for a particular activity, and because really getting value out of this often depends on the nuances of a specific activity, we can invest more than it makes sense for any one client to invest, and we can have better data than any one client would have.

Timothy C. Gokey: So it's a really nice opportunity for mutualized benefit and to benefit our clients. Now, in terms specifically of the data, you know, we actually do house lots of data across clients. We are being very careful with this in terms of how we leverage our models that we are, you know, at this point, doing that client by client. It is, you know, we are it is that data is owned by our clients. And, and we're extremely careful about that, you know; could there be a longer opportunity, with client permission, to have them across, you know, across those schools? That could be possible in the future, but it would be, you know, specifically with our clients, with our clients' permission.

Timothy C. Gokey: When we look at things like OpsCPT, you know, today, when there's, say, a fail, there's a whole research process that kicks off, and, you know, you have, you know, knowledgeable and fairly expensive operations people looking up in, you know, this database and then that database and then cross-referencing it and working out what the reason for the fail was and then, you know, contacting the other party about it. That sort of research process can be, you know, easily automated here, and it's not sort of, you know, looking at the internet or things like that. It uses AI to write SQL queries to real databases to get real data to put that together and join it and be able to project an answer to an operations professional who can quickly validate it and really cut out tons of time.

Timothy C. Gokey: And this is just, we're just scratching the surface in terms of what will be possible, but I think our clients are very excited about it and very excited about the idea that, you know, we'd be taking on this investment really on behalf of the industry to really help drive a lot of efficiency. And remember, you know, we're a technology company, not so much a people company, so as we make things more efficient, you know, that's not coming out of, you know, our personnel. That's really helping our clients save money. So that's AI, and I'm sure we'll be talking about it a lot more.

Edwin: The other part, which is the state of the market and capital markets, or the drivers of growth in capital markets. And I've probably hit on three things, and thanks for asking the question, Brenda, because it does allow me to come back to an item that Patrick mentioned. But there are probably three things that I point out there.

Edwin: One is the continued double-digit growth in our front office capabilities as we brought on BTCS. We just continued, as Tim talked about earlier, the fee strength in that business. Two, and this is the case across each of our different business units, is our ability to be able to convert the revenue backlog into revenue, particularly given the investments that we have been making in our post-trade solutions. We continue to see strength in our capital markets post-trade solutions converting new clients into revenue. That is a strong boost for that business. And thirdly, and this is a point that Patrick mentioned, we did see strength in some of the trading volumes in the quarter. You know, we go into our planning cycles not expecting significant growth in trading volumes, almost assuming it to be flat.

Edwin: But as I mentioned, fixed income trading in particular has continued to show strong growth over the past couple of quarters, and that is also driving a boost in capital markets. And again, most importantly, making us very confident that that business, along with Wealth, will be within our 5-8% objective here. And I'd like to add one other thing, which is when you... take our capital markets. You know, capital markets are a very esoteric business.

Timothy C. Gokey: You take our capital markets, and put them in front of any, you know, even very top-tier clients. And it is a very impressive team, and you see that in the innovation, with Digital Leisure Repo, with LTX, with AI. Across all those areas that are at the leading edge of where capital markets are going, front to back, we are showing real thought leadership and having great conversations with clients. And, ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks. Jamie, thank you very much. And thank all of you for joining us this morning. As I hope you heard, we see a long runway for growth ahead. And as we enter our even larger second half, we are on track to deliver another strong year and to continue to make a difference for investors everywhere. And for our clients, our associates, and our shareholders. Thank you very much for your interest this morning. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.