Q3 2025 Broadridge Financial Solutions Inc Earnings Call
Good day and welcome to the Broadridge fiscal third quarter 2025 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.
Speaker Change: Please note. This event is being recorded I would now like to turn the conference over to Eddings Tivo head of Investor Relations. Please go ahead.
Eddings Tivo: Thank you, Dave and good morning, everybody and welcome to Broadridge is third quarter fiscal year 2025 earnings call.
Eddings Tivo: The earnings release, and the slides that accompany this call may be found on the Investor Relations section of Broadridge Dot com.
Eddings Tivo: Joining me on the call. This morning are Tim Gokey, our CEO.
Eddings Tivo: Our CFO <unk>.
Eddings Tivo: Before I turn the call over to Jim a few standard reminders.
Eddings Tivo: 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.
Eddings Tivo: Well also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of broadridge as underlying operating results and explanation of these non-GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and the presentation.
Tim Gokey: Let me now turn the call over to Tim Tim.
Eddings Tivo: Thanks, and good morning.
Eddings Tivo: Rogers delivered strong third quarter results and we are on track to deliver a strong fiscal 2025.
Eddings Tivo: To understand our confidence in the year, let me start with some observations on the current market.
Eddings Tivo: Clearly there has been significant uncertainty and market volatility over the past several weeks.
Eddings Tivo: As a SaaS technology provider with primarily U S exposure.
Eddings Tivo: Direct impact on Broadridge has been modest to date.
Eddings Tivo: Market trading volumes have been unusually high.
Eddings Tivo: Given our strong scalability.
Eddings Tivo: Our technology has performed well and higher volumes have been a modest near term projects.
Eddings Tivo: Like us our financial services clients are also benefiting from high trading volumes and are performing well.
Eddings Tivo: More broadly this period of volatility highlights the strength and stability of our business.
Eddings Tivo: With 94% recurring fee revenues.
Eddings Tivo: 98% revenue retention rate and a $450 million revenue backlog, we have strong visibility into our growth over the next 12 to 18 months, which in turn enables us to continue to invest in our solutions that will propel our future.
Eddings Tivo: While this period of uncertainty does have the potential to influence the timing of new investments by our clients.
Eddings Tivo: Our solutions that we can help clients.
Eddings Tivo: Cost and drive innovation.
Eddings Tivo: Which means we can help them in any economic scenario.
Eddings Tivo: At the same time, the long term trends that are shaping financial services, including the democratization of investing.
Eddings Tivo: Celebration of trading Digitization of communications and regulatory change are not slowing down.
Eddings Tivo: Seeing those trends play out directly in our results as I'll touch on in a moment.
Eddings Tivo: And Broadridge is one of the only players it has both deep expertise and proven ability to drive the innovation at scale, that's necessary to help our clients adapt to these trends.
Eddings Tivo: So while markets are likely to remain volatile and the economic outlook murky over the next few months I am confident that broadridge is well positioned to deliver strong fiscal year 2025 results.
Eddings Tivo: We remain on track to hear three objectives, and we are positioned to continue to deliver sustainable long term growth for our shareholders.
Eddings Tivo: So with those thoughts, let's get to the headlines on slide three.
Eddings Tivo: First <unk>.
Eddings Tivo: Rogers delivered strong third quarter results, including 8% recurring revenue growth and 9% adjusted EPS growth.
Eddings Tivo: Second DC.
Eddings Tivo: These strong results in the face of growing market uncertainty highlight both the resiliency of our business.
Eddings Tivo: Continued execution of our growth strategy to digitize and democratize investing.
Eddings Tivo: Innovate and simplify trading and modernized wealth management.
Eddings Tivo: Third Broadridge remains on track to deliver another year of steady and consistent top and bottom line growth.
Eddings Tivo: Reaffirming our guidance for 6% to 8% recurring revenue growth constant currency.
Eddings Tivo: Back to deliver adjusted EPS growth in the middle of our 8% to 12% growth guidance with strong free cash flow.
Eddings Tivo: Finally, our outlook for fiscal 'twenty five keeps us on track to achieve the three year growth objectives, we laid out at our December 2023 Investor day.
Eddings Tivo: Our results demonstrate the power of our strategy and our proven ability to execute.
Eddings Tivo: Now, let's turn to slide four to look at the key drivers of that execution.
Eddings Tivo: With our governance business.
Eddings Tivo: Governance recurring revenues rose, 6% driven by new sales and continued growth in investor participation.
Eddings Tivo: Equity position growth strengthened to 15% in the quarter.
Eddings Tivo: Highest quarterly growth rate since the end of fiscal 'twenty two.
Eddings Tivo: Equity positional growth began to pick up in October and continued to strengthen during the third quarter <unk>.
Even as markets began to soften in February.
Eddings Tivo: The acceleration in positional growth was driven by managed accounts.
Eddings Tivo: Self directed account growth remained stable in the mid single digits.
Eddings Tivo: An important trend I want to call out is the growth of smaller positions likely driven by direct indexing.
Eddings Tivo: We've talked about this for a while but we're now really seeing it begin to scale.
Eddings Tivo: That's exciting because one of the promises of democratization is it is opening the door for an increasing number of investors to take advantage of the sophisticated strategies available to institutional investors like model based investing and direct indexing.
Eddings Tivo: This evolution is driving rapid growth and small account sizes.
Eddings Tivo: What's also exciting is it highlights how innovation is working for public companies and funds.
Eddings Tivo: Rational positions, which include managed accounts with less than five shares and fractional shares in self directed accounts.
Eddings Tivo: Our free to public companies and fat.
Eddings Tivo: Leveraging our technology to make democratization and cost effective for all stakeholders.
Eddings Tivo: These factual positions do not translate immediately into revenue for Broadridge.
Eddings Tivo: The good news is that we can expect many of these accounts to grow to larger position sizes over time.
Eddings Tivo: Providing an additional foundation for broader just long term growth.
Eddings Tivo: Meanwhile, <unk> physician growth remained healthy at 6% driven by continued demand for passive funds.
Eddings Tivo: Across our Ics business, new product innovation continues to be the biggest driver of growth.
Eddings Tivo: Demand for digital solutions in our customer communications business remains very strong.
Eddings Tivo: And I was pleased to see another sale of our AI enabled global demand as data and analytics model to another large asset manager.
Eddings Tivo: That's the 13th win for that AI data product since it was launched last year, highlighting the unmatched quality and depth of our data.
Eddings Tivo: Let's turn next to capital markets.
You reported 10% recurring revenue growth.
Eddings Tivo: In capital markets, we're simplifying trading across the front and back office.
Eddings Tivo: A key part of that value proposition is our ability to seamlessly scale, our postpaid capabilities in periods of market stress.
Eddings Tivo: That was certainly the case in the week following April 2nd when our settlements platforms processed record fixed income trades and double our typical volume in equities.
Eddings Tivo: Our ability to offer seamless scalability and global interoperability continues to drive demand for our global post trade solutions.
Eddings Tivo: We closed two new whole post trade sales in the third quarter.
Eddings Tivo: Including one to a rapidly growing trading firm that builds on a long term relationship that already includes both front and back office solutions in the U S and Europe.
Eddings Tivo: We're also delivering innovation at scale in other asset classes.
Eddings Tivo: Our distributed ledger repo solution is now processing $100 billion in daily average trading volume as we onboard new clients.
Eddings Tivo: And in early April we completed a successful integration with finality, a blockchain based wholesale payments for the next step towards real time settlement of inter day repo transactions.
Speaker Change: In wealth and investment management revenues grew 13% driven by the acquisition of SaaS.
Speaker Change: The integration of Fas is well underway and we're making strides integrating our Canadian wealth platforms with a new wealth modules.
Speaker Change: In the U S. We continue to make progress in the rollout of our next generation of wealth platform.
Speaker Change: We now have a total of 34 clients live on one or more platform components.
Speaker Change: Continue to see strong sales momentum.
Speaker Change: During the quarter, we closed a major sale with a leading U S wealth manager to provide a suite of solutions linked by a common data layer open Apis and a consistent user interface.
Speaker Change: The decision by this client to modernize key parts of this technology on the Broadridge platform. Its a great validation of our strategy to offer our clients transformation Honeywell terms.
Speaking of sales we ended March with year to date year to date closed sales and set $174 million, including 71 million in Q3.
Speaker Change: Excluding sales of our tailored shareholder report solutions closed sales rose, 9% for both the year to date periods as well as the third quarter tracking right in line with our full year guidance.
Speaker Change: As we enter our critical selling quarter in the fourth quarter. We continue to have a strong pipeline and are seeing significant interest in our digital solutions capital markets platforms and wealth components.
Speaker Change: At this point the vast majority of our Q4 pipeline is in late stage business our legal negotiations.
Speaker Change: At the same time as I noted in my opening there is now significant uncertainty about the health of the economy and the impact of tariffs.
Speaker Change: And we are seeing the closing process taking longer in Q4 than it did in Q3.
Speaker Change: Reflecting that elongation, we're taking a more cautious view of our fourth quarter sales and are updating our guidance for closed sales for fiscal 25 to $240 million to $300 million.
Speaker Change: Given our backlog of previously closed business to onboard we do not expect this to impact our FY 'twenty six result.
Speaker Change: And as I've said in the past where the southern closes in June or August, it's really immaterial to our future growth.
Speaker Change: I'll close my remarks, with a few summary comments on slide five.
Speaker Change: First <unk>.
Speaker Change: Executing on our growth strategy.
Speaker Change: We're driving the Digitization and democratization of investing as we process double digit growth in the number of shareholder positions.
Speaker Change: And our investment in Digitization are helping to drive down the cost of serving these physicians and are driving strong demand for our digital solutions.
Speaker Change: We're simplifying and innovating in trading the <unk>.
Speaker Change: I'll say process trillions of dollars in trades per day, while the distributed ledger refill capabilities, making <unk> a reality in the repo market not tomorrow today.
Speaker Change: And our next generation of wealth platform is gaining momentum in the market in both the U S and Canada.
Speaker Change: Second that execution is driving strong financial results.
Speaker Change: 8% recurring revenue growth and 9% adjusted EPS growth in the third quarter.
Speaker Change: More importantly, we are on track to deliver another year of steady and consistent recurring revenue growth and adjusted EPS growth with strong free cash flow in fiscal 'twenty, five even with the higher uncertainty.
Speaker Change: And that in turn keeps us on track to deliver our three year financial objectives for the fifth consecutive three year cycle.
Speaker Change: More broadly Perry.
Speaker Change: Periods of uncertainty have historically strengthened rodriguez position in the marketplace.
Speaker Change: Our recurring revenue business model helps insulate us from market swings and gives us the visibility to fund ongoing growth investments.
Speaker Change: Our broad product portfolio gives us the ability to help our clients drive productivity or growth depending on their requirements.
Speaker Change: And our capital light model and investment grade balance sheet gives us the capital flexibility to fund strategic M&A.
Speaker Change: And return capital to shareholders.
Speaker Change: So finally as a result.
Speaker Change: Broadridge is well positioned for long term growth.
Speaker Change: The long term trends reshaping the financial services industry are increasing not slowing down.
Speaker Change: Which means our clients need a trusted and transformative partner like broadridge to help them navigate those changes and grow their business.
Speaker Change: I am confident that as time passes broadridge will be stronger and better positioned than ever for long term growth.
Speaker Change: Before I turn it over to Akamai.
Speaker Change: I want to thank the broadridge team around the world.
Speaker Change: Their work.
Speaker Change: Their focus on our clients.
Speaker Change: Is driving the growth of our company and.
Speaker Change: And the transformation of our industry.
Speaker Change: Thank you.
Speaker Change: And now I'll turn it over to Akamai.
Speaker Change: Right.
Speaker Change: Thanks, Tim Good morning, it's great to be here with you today.
I'll start with the headline.
Speaker Change: Which is the Broadridge delivered strong third quarter results.
Speaker Change: Including 8% recurring revenue growth constant currency and 9% adjusted EPS growth.
Speaker Change: And just as importantly, we remain on track to deliver another year of steady and consistent growth in fiscal 'twenty five.
Speaker Change: Before I dive into my discussion of those results and our guidance I want to make for callouts.
Speaker Change: First is revenue.
Speaker Change: Third quarter recurring revenue includes the impact of two headwinds.
Speaker Change: Is FX and the second is the movement of a meaningful wealth management license renewal in through the fourth quarter.
Speaker Change: Taken together. These two items represented a 160 basis point headwind to our reported third quarter recurring revenue growth.
Speaker Change: Second.
Speaker Change: We continue to take a disciplined approach towards managing our expense base.
Speaker Change: During the quarter, we made the difficult decision to reduce our distribution footprint.
Speaker Change: Closing of print operation in our customer communications business, resulting in a 5 million restructuring charge.
Speaker Change: My Todd called out is that as of last week, we have records for over 90% of proxy positions for the full year.
Speaker Change: Which when combined with our recurring revenue backlog gives us a high degree of confidence in our full year recurring revenue and adjusted EPS guidance, even in this uncertain environment.
Speaker Change: Finally capital.
Speaker Change: We are on track to deliver on our free cash flow conversion target for the year.
Speaker Change: Giving us significant flexibility to pursue a balanced capital allocation strategy.
Speaker Change: With that let's go into the numbers on slide six.
Speaker Change: In the quarter recurring revenues grew 8% on a constant currency basis.
Speaker Change: Driven by 6% organic growth and two points from our acquisition of S. I S.
Speaker Change: Adjusted operating income grew 10% driven by strong organic recurring revenue growth.
Speaker Change: Eli margins Rose 100 basis points to 22, 4% and adjusted EPS increased 9% to $2 44.
Speaker Change: Finally, we delivered closed sales of 71 million.
Speaker Change: Year to date sales were $174 million.
Speaker Change: Let's move to slide seven.
Speaker Change: Third quarter recurring revenue grew 8% to $1 2 billion in line with our full year guidance for 6% to 8% growth.
Speaker Change: Our growth was primarily driven by new sales balance across Ics and GTO.
Speaker Change: As well as internal growth from higher trade volumes and higher positions.
Speaker Change: Let's turn to slide eight to look at the growth across our Ics and GTO segments.
Speaker Change: Ics recurring revenues rose, 6% to $740 million.
Speaker Change: Regulatory revenues grew 6%.
Speaker Change: 15% growth in equity positions was driven by a healthy 11% growth in equity revenue positions with the balance coming from the strong growth in smaller non revenue positions that Tim highlighted.
Speaker Change: Fund position growth was 6%.
Speaker Change: Overall revenue growth from strong position drill it was offset by mix, including slower growth in international.
Speaker Change: Looking ahead to the fourth quarter, we expect mid teens equity position growth, including low double digit equity revenue positions.
Speaker Change: As well as mid single digit fund position growth.
Speaker Change: Together this should drive high single digit regulatory revenue growth.
Speaker Change: Data driven fund solutions revenue increased 8%.
Speaker Change: Driven by double digit growth in our data and insight products.
Speaker Change: Issuer revenue growth of 2% was driven by strength in our shareholder engagement solutions.
Speaker Change: Offset by a modest decline in disclosure solutions revenues.
Speaker Change: Customer communications revenue growth with 5% led by double digit growth in digital revenue as we continued to execute our print to digital strategy.
Speaker Change: Overall, we continue to expect full year Ics recurring revenue growth to be in line with our 6% to 8% recurring revenue growth guidance range for the full company.
Speaker Change: Turning to GTO.
Speaker Change: Revenue grew 11% to $464 million.
Speaker Change: Capital markets revenues grew 10% driven by strong growth in both our global bolstered capabilities, which benefited from higher trading volumes as well as all Bdcs front office solutions.
Speaker Change: Higher license revenue contributed three points to capital markets growth in the quarter.
Speaker Change: Wealth and investment management growth was 13%.
Speaker Change: Driven by the acquisition of S. I S, which more than offset a 3% decline in organic revenue growth driven by lower license revenues.
Speaker Change: Lower license revenue included a five point headwind to wealth management organic growth from the license renewal would shift from Q3 to Q4 that I highlighted in my opening remarks.
Speaker Change: In Q4, we expect strong wealth management growth driven by high single digit organic growth, including the timing benefit from license revenue.
Speaker Change: And continued contribution from SaaS.
Speaker Change: For the full year, we continue to expect overall GTO recurring revenue growth to be in line with the 6% to 8% recurring revenue guidance.
Speaker Change: Now, let's move to slide nine to review our ski volume indicators.
Speaker Change: Broadridge continues to benefit from strong growth in investor participation across both equities and funds.
Speaker Change: Third quarter equity position growth was 15%.
Speaker Change: For the full year, we now expect mid teens equity position growth.
Speaker Change: We are now in the peak period for annual meetings.
Speaker Change: As of last week have received record data for over 90% of proxies expected for this fiscal year.
Speaker Change: These records combined without testing.
Speaker Change: US a high degree of confidence in both our position growth and revenue outlook.
Speaker Change: Finally based on recent trends our forecast calls for low double digit growth in equity revenue positions.
Speaker Change: Mutual fund and ETF position growth was 6% in the third quarter, we expect a similar level of growth in the fourth quarter.
Speaker Change: In GTO trade volumes rose, 14% on a blended basis led by double digit growth in both equity and fixed income trade volumes.
Speaker Change: Strong trade volume growth continued into April and we expect continued double digit growth in the fourth quarter.
Speaker Change: I'll wrap up my discussion of regarding revenue growth on slide 10.
Speaker Change: Revenue from closed sales remains the biggest driver of our recurring revenue growth at five points as the onboard revenues from our $450 million year end backlog.
Speaker Change: That growth was partially offset by two points of losses, resulting in a revenue retention rate of 98%.
Speaker Change: Internal growth contributed two points, primarily driven by fund and equity position quote and higher trading volumes.
Speaker Change: As a result organic revenue growth was 6%.
Speaker Change: Yeah.
Speaker Change: Acquisitions contributed two points, primarily driven by the revenue from I S. I S.
Speaker Change: Finally changes in FX reduced our reported recording revenue growth by 90 basis points driven by the decline in the Canadian dollar relative to the U S. Donna.
Speaker Change: The 90 basis points third quarter headwind from FX marks the largest quarterly impact since fiscal 'twenty three.
Speaker Change: Given the recent weakening of the U S. Dollar, we see a much more subdued FX impact going outlook going forward.
Speaker Change: And a headwind of only 20 basis points for the full year versus our constant currency guidance.
Speaker Change: Let's close this discussion of revenues on slide 11.
Speaker Change: Total revenue increased 5% to $1 8 billion driven by five points of growth from recurring revenues.
Speaker Change: Event, driven revenues declined $14 million to $53 million as we lapped two notable proxy events contests in Q4 of last year.
Speaker Change: We expect fourth quarter activity to be inline with our 55 to 60 million historic quarterly average.
Speaker Change: Low to no margin distribution revenues grew 4% con.
Speaker Change: Contributing one point to total revenue growth.
Speaker Change: As the approximately 32 million impact of both these rate increases more than offset lower volumes.
Speaker Change: Turning now to margins on slide 12.
Speaker Change: Adjusted operating income margin was 22, 4%.
Speaker Change: An increase of 100 basis points, driven by the operating leverage from higher recurring revenue.
Speaker Change: This was impacted by a 10 basis point headwind from changes in float income and distribution revenues.
Speaker Change: During the quarter, we recognized 11 million of non-GAAP acquisition integration and restructuring charges.
Speaker Change: $5 million of this was related to the closing of the print operation I noted earlier with most of the remaining related to the integration of our <unk> acquisition.
Speaker Change: As I noted in my opening remarks, we are committed to maintaining our expense discipline.
Speaker Change: While continuing to deliver strong returns to our shareholders and funding reinvestment in our business.
Speaker Change: That's enabled by the operating leverage in our scale business, which provides the flexibility to manage our expense base across market cycles.
Speaker Change: For the year, we remain on track to generate 50 basis points plus of underlying core margin expansion.
Speaker Change: Let's move on to sales.
Speaker Change: Closed sales were $71 million 8 million lower than Q3 'twenty four.
Speaker Change: Year to date sales.
Speaker Change: 174 million compared to 185 million last year.
Speaker Change: Fiscal 'twenty foreclosed sales benefited from strong sales of our Taylor shareholder to both solutions.
Which fund companies were required to implement last July excluding.
Speaker Change: Excluding GSR sale closed sales rose, 9% for both the quarter and the year to date period.
Speaker Change: Turning to our cash flows.
Speaker Change: Q3 free cash flow was $337 million, an increase of $170 million from Q3, 24, driven by higher earnings and modestly lower capital investment.
Speaker Change: Year to date free cash flow was 393 million versus 259 million for the first nine months of fiscal 'twenty four.
Speaker Change: We continue to expect free cash flow conversion of 95, 205% in fiscal 'twenty five.
Speaker Change: Turning next to capital allocation on slide 15.
Speaker Change: Year to date, we have deployed 78 million in capital spending and software.
Speaker Change: <unk> returned approximately 300 million to shareholders.
Speaker Change: Evidently.
Speaker Change: Platform investments were <unk> 9 million as we continue to work with clients to manage our onboarding spend.
Speaker Change: We've also deployed $193 million for targeted M&A investments.
Speaker Change: Primarily to purchase S I S.
Speaker Change: As I noted earlier, our strong balance sheet and capital light business model give us significant flexibility to continue to fund growth.
Speaker Change: Fund growth investments pursue value accretive strategic M&A and repurchase shares.
Speaker Change: Let's conclude by reviewing our full year guidance on page 16, followed by clothing key messages.
Speaker Change: With two months left and high visibility into fiscal 'twenty five position growth. We continue to expect recurring revenue growth constant currency of 6% to 8% for the full year with only a modest headwind from changes in FX rates.
Speaker Change: We expect our recurring revenue growth to be balanced across both our Ics and GTO segments.
Speaker Change: [laughter].
Speaker Change: We also continue to expect fiscal 'twenty five a wide margin.
Speaker Change: Similarly, 20% and adjusted EPS growth in the middle of our 8% to 12% range.
Speaker Change: We now expect closed sales of between 240 to 300 million.
Speaker Change: And I would also note that we continue to expect free cash flow conversion of 95, 205% of adjusted earnings.
Speaker Change: To bring all of this together and highlight what it means for our financial objectives I'll share some concluding thoughts.
Speaker Change: Uh huh.
Speaker Change: Broadridge reported strong third quarter results.
Speaker Change: Second.
Speaker Change: We remain very much on track to deliver a strong fiscal year results.
Speaker Change: Including 6% to 8% recurring revenue growth and adjusted EPS growth in the middle of our 8% to 12% guidance range.
Speaker Change: Third and probably most relevant for the environment that we are in.
Speaker Change: I wanted to emphasize the resilience of our business model.
Speaker Change: Broadridge has a long history of delivering consistent sustainable recurring revenue growth.
Speaker Change: The combination of regarding revenue growth and the operating leverage in our scale business allows us to drive margin expansion and earnings growth.
Speaker Change: <unk> funding growth investments.
Speaker Change: We've done this across multiple three year cycles, and we are on track to do it again.
Speaker Change: With that let's take your questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star and then two are first.
Dan Perlin: Question comes from Dan Perlin with RBC capital markets. Please go ahead.
Dan Perlin: Thanks, Good morning.
Speaker Change: Wanted to just maybe touch on the demand environment, a little bit more closely it sounds like is this.
Dan Perlin: Kind of like the economy, where you've got you've got client demand that's there.
Dan Perlin: Now, maybe you're starting to get a sense that theres, a little bit of a pause and willingness to make these investments.
Speaker Change: Tim I know you called that out a little bit in your prepared remarks. So.
Speaker Change: Maybe you could just dive a little bit deeper into those conversations and what maybe some of the nuances are.
Tim Gokey: Yes, Thanks, Dan.
Speaker Change: And I think this is the one that.
Speaker Change: We ourselves have been sort of really looking at and talking about amongst ourselves first of all just you know we're really pleased with our performance year to date, excluding the tailored shareholder report sales.
Speaker Change: I said earlier, we grew 9% in Q3 and year to date and that that puts us sort of right in the middle of our full year sales guidance as of the end of Q3.
Speaker Change: And.
Speaker Change: We're just trying to interpret what we're seeing over the past few weeks, but I think it is somewhat the same as what others are seeing which is there is a fair bit of uncertainty out there.
Speaker Change: And so we think that is we only have a few data points here because it's literally only been a couple a couple of weeks since April 2nd, but we think we're seeing any elongation in our closing process.
Speaker Change: I had a conversation last week with the CEO of the investment bank one of our major global clients and and I just asked them what are they thinking what do they what their conversation around their their executive table and they said look you continue to move full speed ahead on anything that reduces cost or simplifies operations, but that they are taking more of a weighting.
Speaker Change: And see approach on investments in new revenue opportunities.
Speaker Change: Now I think the good news is the vast majority of our work falls in that bucket of cost and simplification.
Speaker Change: And and we don't know how long this period of elongation will last but as you know you know a large proportion of our sales fall in Q4, so even a couple of weeks could make a material difference in what our Q4 is we're.
Speaker Change: We're not seeing any clients walking away from deals we're not losing any mandates. If you look at our pipeline the vast majority of it is deep.
Speaker Change: And in negotiations so I've said before if something happens in June or it happens in July it happens in August it doesn't really make that much difference in terms of our long term growth and that.
Speaker Change: Our revenues for next year are really.
Speaker Change: Broadly locked already based on the backlog that we have so this isn't this isn't a 26 revenue issue.
Speaker Change: It isn't a long term growth issue.
Speaker Change: Certainly not a demand issue that pipeline is very strong origination activity continues to be very strong.
Speaker Change: It's just.
Speaker Change: We want to just be cautious here about about this elongation that we're seeing.
Speaker Change: Last thing is just.
Speaker Change: I really like.
Speaker Change: The areas, where we're seeing momentum in the pipeline I see areas that we've been investing and it's the areas that will help our clients in an uncertain environment, Yes, Omnichannel communications, which is with the wealth and focus and we've talked about which is helping people move to digital saving them money data analytics, which is helping them target their salesforce front and back office simplification.
Speaker Change: <unk>, which is bringing.
Speaker Change: Lower cost better operations modernization to our clients' distributed ledger repo direct cost saving everything we're doing on the wealth side. Similarly, so I really like the areas and Ah.
Speaker Change: Again, we feel great about the demand, we're just being cautious on what's going to happen over the next few weeks.
Speaker Change: Yeah, No that's great color just a quick follow up if you Wouldnt mind.
Speaker Change: On the equity position growth and the call out between kind of smaller positions.
Speaker Change: Not really driving revenues would over time that is expected to build versus kind of revenue producing again can you just maybe tease out a little bit the nuance there and how that is again going to impact the business, maybe going forward. It seems like that position growth could stay elevated with the revenue piece of that so I'm just trying to make sure that we understand maybe the spread differential between revenue.
Speaker Change: Super Thank you.
Speaker Change: Yes.
Speaker Change: Thank you and that's again, one we've talked quite a bit in the past about.
Speaker Change: Model based investing in direct indexing and how we thought that would be something that would be a help us sustain over over a long period sort of the high single digit.
Speaker Change: Growth that we've always talked about four positions.
Speaker Change: And but we haven't really seen it in the data.
Speaker Change: And the reason we called it out this quarter is because we really we really are are beginning to see it and so you know what we've seen is.
Speaker Change: The same.
Speaker Change: Robust growth in the revenue physicians double digit.
Speaker Change: Which is very.
Speaker Change: Very pleased to see that but then on top of that we saw quite rapid growth in these in these small acquisitions and were still teasing all of that out.
Speaker Change: It's interesting to think about is building up pretty soon we'll be talking about a physician backlog.
Speaker Change: They're building up a set of small positions.
Speaker Change: They are becoming material now that as those begin to scale. They could begin to bleed into a bleed into revenue positions I'm not going to sit here and say I think that is.
Speaker Change: Yeah, it's something that we'll talk about it as a major source of future growth, but I do think it's supportive of the long term trends of the upper single digits that we've always talked about and then you know.
Speaker Change: We're in a more robust period, right now and and so what we really like it and we wanted to call. It out and also call out the way. It just shows the system is working both for investors and for the other stakeholders.
Speaker Change: Excellent. Thank you so much.
Scott Wurtzel: And the next question comes from Scott Wurtzel with Wolfe Research. Please go ahead.
Scott Wurtzel: Hey, good morning, guys. Thank you for taking my questions I just wanted to go with one on the sales to start I'm. Just wondering you know when youre seeing the elongation is potentially in the sales cycles is that happening in specific product lines or geographies.
Speaker Change: Scott. Thank you are not as far as we can tell right now where we're still parsing through the data and again, we have literally three weeks of data points and and it's sort of almost day by day in terms of in terms of things, but there's not anything that I could point to and say.
Scott Wurtzel: Wow has fallen off the table over here, it's really a.
Scott Wurtzel: It's really something that we're just we're continuing to monitor I I'll be somewhat embarrassed about happy if we come back here in June so it looks it was all nothing and everything closes the way we expected it to but it's a it's just something that we're watching and being cautious about.
Speaker Change: Got it that's helpful. And then just one quick follow up on the margin side of things.
Speaker Change: Margin expansion drove during the quarter was was pretty strong still holding your guidance for the year. So just wondering as we think about the fourth quarter or are there incremental planned investments, maybe you're already seeing with the revenue mix that we should be we should be thinking about.
Scott Wurtzel: Yeah Scott.
Scott Wurtzel: A great question, you know I would remind you we're in a full year company right. We plan our business, we look at our business from a full year perspective.
Scott Wurtzel: And within that context, we look at driving margin expansion funding incremental investments all with the aim of delivering what I already said, we're looking to deliver.
Speaker Change: <unk> at the midpoint about 8% to 12% guidance.
Speaker Change: So in that context, I would think about margins almost as a means to an end we are absolutely investing in our business and we do expect high levels of investment spend in Q4.
Speaker Change: Which could translate into some margin impact, but we are very focused on the full year and delivering at the midpoint about 8% to 12% guidance.
Speaker Change: And I'll just I'll just add to that you know we were an organic growth company.
Speaker Change: We reinvest to drive that organic growth as we've delivered consistently over the past 10 years and when I look at you know the areas, where this omnichannel communications data analytics front to back office simplification. The wealth side, we have a whole set of things that we think are really exciting for our clients that are that we're investing in and when we have.
Speaker Change: The opportunity.
Speaker Change: We will take that.
Speaker Change: Great. Thank you guys.
Michael <unk>: And the next question comes from Michael <unk> with Morgan Stanley. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking my question I just wanted to circle back on Dan's earlier question just in terms of the differential between equity position growth and revenue growth is there a way to quantify.
Speaker Change: Revenue growth, maybe it would have been if the size of positions is more in line with historical trends I just wanted to clarify just because the comp in <unk> and regulatory there was quite a bit easier than what you faced in Q2 of last year.
Speaker Change: Yeah.
Speaker Change: Yes, I think the the.
Speaker Change: And I'll, let asrama add onto this but I think it's I'm thinking about it is less about the sort of the proportion and it's more about you know we saw really the growth in revenue positions that we expected and then we had this add on of other positions, but I actually meant why don't you add onto that no absolutely. So let me.
Speaker Change: Let me try to break this down for you Michael So if you think about the drivers of growth specifically in our regulatory business and in our revenue growth.
Speaker Change: Like I said in my remarks before equity position growth was 15%.
Speaker Change: Having said that equity revenue position growth.
Speaker Change: 11% right that is the part that contributed to the revenue growth and Additionally, we saw six 6% growth in funded positions.
Speaker Change: I'll just reiterate what Jim already said, that's higher participation in the smaller positions is a positive for us in the long term when the accounts grow in size, but they don't help our current revenue. So 11% is the number you should have in mind.
Speaker Change: Moreover, when you think about our regulatory revenues only 75% to 80% are directly impacted by equity and fund position growth with the balance being in other regulatory communications anti international proxy business and these other businesses were a little slower than the position growth in the quarter.
Speaker Change: Uh huh.
Speaker Change: So hopefully that gives you a context in bridging our regulatory position growth I will also add.
Speaker Change: If you look at last year I know there was a little bit of timing Q3 versus Q4, Theres nothing material that I have to call out this quarter in terms of seasonality across quarters.
Dan Perlin: Okay very helpful. Maybe just on some of the license activity I know there are obviously some comp dynamic Tim I think in the past you've mentioned there could be an opportunity to sort of smooth some of the quarterly revenue volatility from license renewals by switching to more of a subscription model I know it's still.
Dan Perlin: <unk> license is still only a low single digit percentage of your overall recurring revenue, but where are you just in that journey.
Dan Perlin: From transitioning for a license to subscription.
Dan Perlin: Yeah, typically where this happens is.
Dan Perlin: Areas, where we've made acquisitions and where those acquired companies were less mature than we are and we're operating more on a license model that typically are often often companies earlier in their in their growth phase I operate with that business model and I wanted to do that we'd begin to try to work.
Dan Perlin: Clients over to a to a to SaaS model.
Dan Perlin: And and but that takes time and in this quarter, particularly on the wealth side there was a.
Dan Perlin: Significant.
Dan Perlin: Significant transaction that will close in the fourth quarter, we had expected to close in the third that that caused that caused the change this quarter.
Dan Perlin: And we will see the benefit of that next quarter. So.
Dan Perlin: We're we're well advanced but where.
Dan Perlin: There continues to be a tale of these things that when every time it comes up for renegotiation, we have that conversation.
Dan Perlin: Yeah, and I already said this Michael but I, just reiterate you're right for the full year license revenue was like less than 5% of the GTO revenues right. So completely agree with your sentiment that it doesn't really have a material impact on our revenue growth.
Dan Perlin: For the full year, it creates quarterly noise as you're well aware.
Dan Perlin: Thank you.
Puneet Jain: And the next question comes from Puneet Jain with Jpmorgan. Please go ahead.
Puneet Jain: Hey, Thanks for taking my question, Tim totally agree.
Puneet Jain: It doesn't impact me data growth rates, but can you also recap.
Speaker Change: What the new administration policies and priorities such as deregulation potentially disclose critical.
Puneet Jain: Our requirements could mean for Broadridge.
Speaker Change: Yeah, absolutely and you know.
Puneet Jain:
Puneet Jain: If I think sort of broadly about the evolving regulatory environment and and what that means for broadridge.
Puneet Jain: You know there when you're thinking about the big issues that the.
Puneet Jain: Creation of pursuing around tariffs and trade and cultural issues are those really don't affect us.
Puneet Jain: And really that much our financial services clients.
Puneet Jain:
Puneet Jain: That.
Puneet Jain: The.
Puneet Jain: The biggest thing right now Paul Atkins has now been formally firmly installed at the SEC. The SEC is the area that is really.
Puneet Jain: The area that affects us the most and it's in good hands and we think we can make a positive contribution in the policy areas that that touch us, including in digital assets and shareholder engagement in digital delivery.
Puneet Jain: And so we're actually very positive on where that's going to go when we think about digital assets. Obviously, there's a lot that the administration is doing after the SFC has joined they've had many round tables asking for industry feedback we think the opportunity there is.
Puneet Jain: As you know as we've talked about that when theres. Good disclosure. It really is good for innovation helps investors have the confidence and so there is some debate inside the digital effort industry about how much disclosure to have but we've provided views on that and and and.
Puneet Jain: Not surprise you to hear that we have in products that could help help solve that at that.
Puneet Jain: That we are talking to people about it is live with that with a couple of the exchanges and so we think that's an opportunity for us.
Puneet Jain: The other another area is around shareholder engagement proxy reform.
Puneet Jain: Continuing to see growing interest in our pass through voting solution.
Puneet Jain: Pass as the passive managers are looking to extend voting preference twice to their end investors. We're also creating a data driven voting solution that would allow people to.
Puneet Jain: To have an alternative view to a to the proxy advisory firms that were not in our proxy adviser and must be but we can provide the data and technology behind that.
Puneet Jain: And another issue that that I think I could come up over the next few years is around Digitization, where we've made huge investments to really improve the investor experience and help make it more cost effective for industry and we're partnering with the industry on moving that forward.
So I think across all of those areas. The common theme is.
Puneet Jain: Yes, there's regulatory change.
Puneet Jain: There's a big agenda out there in the pipeline to get it all done is is not that big but.
Puneet Jain: But we can help the industry move forward with technology and so we always think about private market solutions with technology to help achieve the objectives that.
Puneet Jain: Really folks on both sides of the aisle have around making investor.
Puneet Jain: Investments better for all investors and all stakeholders.
Puneet Jain: Got it no that's.
Puneet Jain: That's very helpful. And then like the work that's being delayed like the close it looks like that is being delayed.
Puneet Jain: These typically.
Puneet Jain: Long implementation.
Puneet Jain: <unk> type of deal sort of like a quick short term deals, which could have some very good revenue in fiscal two successful.
Puneet Jain: To think about that.
Speaker Change: A waterfall impact.
Speaker Change: I mean, the weekend bookings for more than a quarter like the waterfall impact on revenue.
Speaker Change: Yeah.
Puneet Jain: You know I think puneet, we're not.
Speaker Change: Seeing.
Speaker Change: The.
Speaker Change: We're not seeing any particular area be impacted so it's hard to say across all of our sales probably the any year conversion is call. It a third.
Speaker Change: I think actually this shorter term sales tend to be simpler and are less affected by uncertainty. So so I don't have the data to tell you, but my my hypothesis would be that is actually the more complex longer longer sales that are longer conversion sales that are that are more impacted but I don't.
Speaker Change: I'm not looking at a sheet of paper, telling me that I'm, just I'm just intuitive that yeah, but let me just add rate, let's put it in perspective, if you look at the midpoint of our prior guidance versus the midpoint of our guidance now we're talking about $40 million of sales right. Even if all of that will impact revenue that's way less than that that's less than 1% of our recurring revenue.
Speaker Change: Still a fraction of that given what Jim just said most of our conversion cycles range between 12 to 24 months the impact for near term in terms of the revenue for the fall that you would expecting would be very fractional rate in less than a quarter of what the full year impact.
Speaker Change: And we're talking about a delay here not reduction so I really wouldn't expect much of an impact over the longer term either.
Speaker Change: Yeah no understood.
Speaker Change: Thank you.
Speaker Change: And the next question comes from Patrick O'shaughnessy with Raymond James. Please go ahead.
Patrick O'Shaughnessy: Hey, good morning.
Patrick O'Shaughnessy: Turn out with your wealth platform sale that you mentioned can you give a little bit more color on what's within that suite of solutions that you sold to that client.
Patrick: Yeah, Patrick Thank you very much it is.
Patrick O'Shaughnessy:
Yeah.
Patrick O'Shaughnessy: The core piece is I'll call. It the wealth operating model that that is the data layer that allows the client to connect different things that they are building with things that we're building with third party solutions I'll call. It the wealth operating system.
Patrick O'Shaughnessy: And then there are components on top of that several components on top of that and in fact, there are future opportunities for for additional components.
Patrick O'Shaughnessy: Later on so I think it's.
Patrick O'Shaughnessy: Yeah.
Patrick O'Shaughnessy: You know we're excited about them.
Speaker Change: Pursuing this it is interestingly I think if I were on the other side of the call I might be concerned.
Speaker Change: Concerned about or is this a large deal that is going to have a significant onboarding cost and and I can I can tell you with confidence that that's that's not the case. This is technology. That's already built there's a little bit of conversion.
Speaker Change: Some of the upfront charging so it's not really something I think you're going to see any sort of big impact on us.
Speaker Change: And then just beyond this this sale that I did call out I just.
Speaker Change: You didn't say it before but I would be remiss if I didn't mention now. So we have these 34 components that are that are currently live we have 40, others that are in the process of being on boarded with other clients. So that's one of the things that makes us feel really good about you know it's not just this one sale.
Speaker Change: Pretty broad in terms of the demand that we're seeing.
Speaker Change: Got it that's very helpful. Thank you and then apologize if I missed this earlier, but did you provide any color on kind of current position count growth trends.
Speaker Change: What your early testing for next fiscal year looks like in light of.
Speaker Change: Recent market weakness.
Speaker Change: Yeah, So I'll just give more color here.
Speaker Change: Looking into Q4, we're expecting low double digit equity revenue positions remember revenue positions and mid double digit equity position growth.
Speaker Change: And we're expecting continued mid single digit fund position growth up we feel good about the full year given that we already have records for 90% of the positions and frankly haven't seen any real impact.
Speaker Change: During the month of April in spite of the volatility up talking about FY 'twenty six we're seeing strong trends for 26, it's about we didnt shed any specific numbers yet.
Speaker Change: Patrick just we do get a data sort of each week that adds incrementally onto what we know and so each week in the month of April we're seeing yeah.
Speaker Change: Incremental impact on this and we're not we haven't seen any any falloff or any material change.
Speaker Change: Alright, perfect. Thank you.
Speaker Change: And the next question comes from Peter Heckmann with D. A Davidson. Please go ahead.
Peter Heckmann: Hey, good morning, Thanks for taking the question Tim I didn't hear you mentioned it but do you have any early thoughts on some of the public private.
Speaker Change: Retail investment vehicles that are being discussed.
Peter Heckmann: Uh huh.
Peter Heckmann: Basically create a hybrid product I'm not sure exactly how they would be created but you see that as an opportunity and would there be any unique accounting needs.
Peter Heckmann: Yeah, Peter it's a it's a great question it is.
Peter Heckmann: Certainly as we talk to our fund clients and as we talk to I see I one of the things that the fund industry is.
Peter Heckmann: Very focused on is giving and administrations focus on is giving access to to investors to more retail investors to private assets and you know one of the ways to do that is by lowering what it is to be a qualified investor and things like that but another route that's very promising is <unk>.
Peter Heckmann: Creasing the amount of private assets that are available inside a 40 act in Etfs and that is something that we think it would be positive for us that sort of the part of the industry that we're focused on and we frankly think it's a good thing for investors because when you you know I have invested in some of these private assets myself personally and it is real.
Peter Heckmann: Complicated and the paperwork back and forth and then I feel as you know me I feel like I'm pretty sophisticated, but you know going up against someone who's really sophisticated and so the giving access to investors to these assets, but doing it with professional management, representing U is a better way to invest.
Peter Heckmann: And and we think that will be.
Peter Heckmann: That evolves.
Peter Heckmann: That can.
Speaker Change: At a real opportunity as Larry talked about in his letter you know opportunity for people to and retirement folks to participate in private assets, but to do it and it sort of safe and very professionalized way and and that would be a benefit to the 40 Act in ETF part of the industry.
Speaker Change: Okay. That's helpful. And then just lastly, any thoughts on kind of the M&A pipeline, whether there's a you view this as a relatively attractive or unattractive markets to go hunting for tuck in deals.
Speaker Change: Yeah, I think it is.
Speaker Change: You know the M&A market is is pretty uncertain. I think we are everyone began the year thinking there'd be a lot of things out there and and that is just less clear.
Speaker Change: Right now in terms of scale and we certainly have seen half.
Speaker Change: They have seen people put processes off.
Speaker Change: That said there are opportunities.
Speaker Change: I think as you and I've talked about in the past.
Speaker Change: Pretty significant portion of our deals had been proprietary deals where it's sort of a unique situation, which is one of the ways. We've gotten really really good good value.
Speaker Change: And so there are opportunities like that.
Speaker Change: If you see us do something it is really the principles. We have you know where does this environment are different environment.
Speaker Change: Really the same which is.
Speaker Change: We are an investment grade company.
Speaker Change: We do our internal investment we pay a good dividend.
Speaker Change: And then we do look for M&A opportunities, but if we don't find them, we're very happy to do to do share buybacks. So if you see us execute it will be because there's something compelling.
Speaker Change: And if you don't see us execute you'll see us doing share buybacks.
Speaker Change: Sure. Okay. That's helpful. I appreciate it.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Speaker Change: Well I'd like to just thank everyone for joining today.
Speaker Change: We reported.
Speaker Change: What we believe are really strong results for the third quarter, we are seeing really good demand for our products.
Speaker Change: While we're showing some caution today.
Speaker Change: When you look at the underlying trends, whether its position growth whether its trades, whether its our backlog we feel really good about the future and we feel really good about the demand that we're seeing from our clients in the areas that we're investing where we think we can make a real difference so with that thank you very much and we look forward to talking to you next quarter.
Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.