Broadridge Financial Solutions, Inc. Aktie

Here we go. Well, thanks, everyone, for joining us. I'm happy you made it back from lunch. I know we're the second one post lunch, but it always is appreciated when you can have a good meal and come back. My name is Dan Perlin. I head up the fintech practice here at RBC and I'm delighted to continue to have great companies in the second half of the day. Broadridge is who we're hosting now. And from the company, we have Doug DeSchutter, who is the President of Investor Communications Solutions, which is arguably probably the most talked about part of the business these days.

And so I thought what would be great to kick it all off at a very high level, Doug, is just to talk about what ICS does in the context of Broadridge overall.

Great. Dan, thanks for having us. Thanks for having me here. It's great to be here today and, hopefully, answer any questions that you have. This is -- look, there's a lot of change going on right now. Change has traditionally been very good for Broadridge and -- because we've been in a unique position to be able to drive innovation at scale for our clients and the industry as a whole. When you think about Broadridge, so Broadridge is a leading technology and financial infrastructure provider to the financial services. We have $4.8 billion in LTM recurring revenue. And we operate at the intersection of capital markets, wealth managers, asset managers, corporate issuers.

ICS is about 60% of that. at the core of ICS is a pretty extensive industry network that's taken a long time to build and develop. And with that industry network, we connect 200 million-plus retail accounts to 1,000-plus banks and brokers and with access to virtually every public company, mutual fund, ETF across the world. We have leveraged that position within ICS, in that network position and connectivity, to think about what adjacent opportunities are and problems that we can solve for our clients. And so we've built a whole portfolio of like very attractive adjacent business opportunities off of that, some of which are really accelerating very well right now, like digital, like shareholder engagement, like institutional governance and data and analytics, and perhaps talk about a couple of those later.

Yes, for sure. So let's kind of stick with the core for now and maybe talk about the basics and, really, the mechanics of what you do in the regulatory communications side and the value that you're bringing to clients, so we can kind of level set what the ultimate debates are around this, but we got to understand the roots of what you do first.

All right. So step one is let's actually just explain what we do.

Yes. I'd like to make sure we look at that, what you really do.

Sometimes ICS can seem confusing to folks. So at the core of ICS are distributions to U.S. retail investors. The vast majority of revenues in ICS and kind of the core regulatory business piece is tied to distributions to U.S. retail investors. And so the question is, where are those investors sitting? 95% of those shares are sitting with a bank or a broker, 5% of those shares are held direct with an issuer. And if it's being held with a bank or broker, that's called a beneficial model. If it's held directly with an issuer, that's called the registered model or the direct model. Now the registered -- that mix, that 95% to 5%, has been growing on the 95% over time because the ultimate value proposition for the end investor in that account is -- and we'll probably get to things like tokenization later on in blockchain.

But the value proposition for them isn't what's the underlying recordkeeping system. The value proposition for them is they have one place to buy and trade any security type that they have. They get access to product. They have tax optimization, and portfolio planning, and estate planning. They get advice from their adviser as an example. And so that value proposition coming from a bank or an adviser, a broker adviser, has been very strong, so that beneficial component has been growing. Now those brokers have a responsibility to send things like proxies and disclosures to their clients in the shares and the funds that they're invested in. And back in the day, there was a kind of a network problem there because every broker had to communicate with every issuer, and that was a many-to-many problem. And what we've been able to solve is take that many-to-many communication problem and do a many-to-one-to-many.

So we simplify that process and we've taken a huge amount of cost out of that coordination process and create a lot of value and efficiency for all the industry participants as a result. There's a lot of value in what we do in terms of that core regulatory model, for that beneficial model. I would say we do still serve the registered side. 80% of the Fortune 500 still uses us for proxy voting for the registered side of their business, so we still have very strong relationships with issuers even on the registered side.

Okay. So let's dive right into it then. Let's talk about how the network that you've built is structured today, the buzz around digital assets, tokenized securities, like these are the things that we are constantly trying to answer questions for investors around. And so what is the impact as you see it as those models potentially evolve?

Okay. That's a pretty -- there's a lot of pieces to...

Yes. So I'll be happy to [ help you ].

So we'll have to kind of go back and forth here a little bit, but I think it's really kind of important to understand. Let me get to the answer first, which is it's going to be a tailwind for us in ICS. At the end of the day, this is going to create more security types, more disclosure requirements, and more complexity in the system and for issuers to be able to manage. By the way, all those things are good for us. And we have technology and we have solutions for those things. To say they're good for us, just that we have the ability to provide technology and solutions to be able to provide efficiency around all of those different things. We just -- Edings and I just came from -- we co-hosted a fantastic tokenization conference this morning along with the Financial Times. And there is a lot of buzz and excitement around this, and we certainly share that.

I think you have to break it down into just understanding, just like you said, like help us understand beneficial versus retail. Let me just break down for you a little bit in terms of tokenization and digital assets and things like that. The first topic is, what digital assets are really in scope for ICS? Let me tell you what it's not. It's not things like Bitcoin, and crypto, and stablecoin, and those things. Those are going to be considered commodities, cash. They're not securities, and they've never been in scope for ICS, nor will they be in scope going forward. So just kind of put those aside for a second when you're just trying to understand the ICS model. What will be in scope are tokenized securities. And it's really important to understand what the SEC has said about tokenized securities.

And the very first statement that they've repeated consistently and that they're adamant about is that a tokenized security is still a security. The underlying record-keeping system is irrelevant. A tokenized security is still a security. So what that means is that federal securities laws still apply to tokenized securities in the very same way that they will traditional securities and that brokers will have to provide things like proxy voting and disclosure and all the things that they do for traditional securities for tokenized securities. So just understand that there's an SEC Commissioner, Hester Peirce, who made a statement, "Tokenized securities actually aren't that special. They're securities. They have different recordkeeping system, but they're still securities." You then get a question which is not as relevant, but you may be kind of wondering about it, so I'll answer it, which is, "Well, does it matter who tokenizes these securities?"

And the answer is no. From our perspective, you could have an issuer tokenize these securities, they could be tokenized by a third-party. It could be DTCC with a large pilot. We're partnering with them around certain components of that. It could be exchanges like NASDAQ or NYSE. It could be a broker that's tokenizing these things. But at the end of the day, they're just different institutions tokenizing the security and tokenized security is still going to be a security. With all that as background, it's going to get back to this question of, "Well, where are they going to be held?" And there are -- I think there are 3 kind of examples of where these are going to be really positive, all tailwinds. And one is going to be, I think, a modest tailwind.

So let me go into all these. I think they're all good for us. First of all, the biggest use case around tokenized assets and tokenized securities, clearly, is institutional markets. It's going to be entities that have the knowledge and the know-how that are thinking about how they do instantaneous settlement between the cash leg and securities. And they want to play with perpetual futures called perps. They have a massive amount of leverage. They were talking about this morning, it's almost 500x leverage in some of these things, which in -- they're held outside the United States for reasons like that. But if you just think about institutional markets and how that's going to play, I think there's a big opportunity there.

And you've seen what we're doing in institutional markets as well. We are the leader in tokenizing assets with DLR. We're doing $365 billion a day, $7 trillion a month, and that's a real win for us. So there's a whole institutional angle here, which will be a big win for us, that's on the GTO side. The most money we make in ICS is on the retail side. So put it -- checking them as a positive, but it's not kind of an ICS thing. The next area there's a real opportunity is getting global retail investors access to U.S. securities where they don't today. And I think that will be -- it's hard to size what that potential could be, but that will be a tailwind for us. We are actually working with a company called Ondo. They're on Alpaca's platform, so they're a correspondent on Alpaca platform.

And they are the leading in third-party synthetic tokens. They're -- you won't see them in the U.S. anytime soon, frankly, and they won't even be part of the innovation exemption from the SEC, but they're kind of a first step in thinking about how foreign, global retail investors can get access to the equivalent of a U.S. security, and we're providing governance and voting to them. And in fact, they had a speaker at a conference today, and he made a specific point to call out that one of the great things that they're doing around proxy voting is because it gives credibility and credence to these securities for investors, which I thought was really positive.

So number one is institutional. Number two is global retail investors. Number three is, I think, a very niche market, even a subsegment of like neo digital investors who not only want to kind of invest all-digital, but the value of owning something in the blockchain actually means something to them. So they'll hold these in self-custody wallets where they're responsible for the keys. They'll be able -- they'll be willing to take the risk to be able to do that. And there's value to them in just owning it kind of natively in a wallet where they own the keys. All those things will kind of be a net positive. The thing you come back to is the core of the U.S. retail market for us. And if this asset class is going to have interest and demand, it's going to have to come from that 95% of the shares is held at banks and brokers.

And that's, again, where we're just really well-positioned. We're providing proxy voting disclosure for them already. And from the broker's perspective, they have a lot of existing infrastructure. I mean, we'll talk about it in a little bit, but we will continue to provide proxy voting and disclosure for them going forward. On this piece, on this last piece, Citibank put out a report recently. They made an estimate that 3% of the total equity market could be tokenized by 2030. So 3% is Citibank's estimate. They made a low case and a base case and a high case, 3% was their mid-case. That's in 3 years. I'll just do simple math and say, we'll see it's 1% a year for 3 years, if that comes true. Stock record growth, on an annual basis for us, has averaged 11% a year for the last decade. So just put in the context of we're 11% a year on average. There's a potential for 1% a year for the next 3 years if there's demand and it kind of takes off.

And then even of that 1%, I think a fair amount of that will be net new with that really niche persona on people that actually want to hold this stuff directly, these things directly. But the vast majority of those would be held through banks and brokers. And so it will give us a bit of a tailwind on stock record growth, just like ETFs have done, just like fractional shares have done, just like managed accounts, and low commission and no commission trading, and all these things. They're just all these innovations over time that continue to lead towards more involvement in equity markets by retail investors and, ultimately, position growth for Broadridge and we'll be there to provide the services for it.

Yes. What do you say to people that would say like the proxy and disclosure business can just be done in kind of smart contract forms by the issuer, and therefore, they're just going to go around you guys entirely. Like how does that -- again, working through the structure of the framework that you provided for us, like how does that not occur? Or why would that not occur?

Well, there's -- let's go back to the structure we just talked about, which is the vast majority of these are held through a brokerage firm and an adviser relationship. Let's talk about the broker business model. One of the primary components of the brokerage business model is providing privacy as to the underlying client. They do not disclose who owns these securities to the rest of the world. And privacy is a topic called NOBO/OBO. It is a cornerstone of the brokerage business model. So that's number one. And they are very particular about who communicates to their clients and what they communicate with. So the idea that they would give up privacy and that they would allow others to communicate directly, I would say, it's not going to happen.

And the second thing is -- so that's a business model reason. I'd say the second reason is really more just like the technical realities of it. Whether it's RBC or Schwab or Morgan Stanley, it doesn't matter, you're not going to be supporting and bring your own digital wallet to your adviser anytime soon, ok? That's not going to happen. Brokers are going to set up their own infrastructure to be able to house and custody these. They will -- they'll follow -- there's a pretty complicated web of, I think, wallet topography in there. At the end of the day, these are going to be large, cold, custodial wallets that look a lot like omnibus wallets or omnibus accounts of what they have today. So even from a technical perspective, there's actually no way to deliver it straight through a smart contract. So I just -- I don't see any view or any way as to how you would actually do that directly in something that sits in a brokerage relationship.

The one small kind of market where you could do that is that individual that wants to download a MetaMask self-custody wallet and do them themselves. And we provide wallet infrastructure and proxy voting to be able to do that. Galaxy came out with the very first digital-native proxy campaign that just closed last month. We are the proxy vote provider. So it's tokenized by Superstate. We're the proxy provider, use proxyvote.com, which is the main proxy voting engine that we use across all registered and beneficial. There's actually a pretty good video of that on LinkedIn site if you want to see it, but it's just kind of going to the proxyvote.com.

And just remember, like if it's going through a smart contract, you could see how that would be quite easy for a dividend or for a stock split or something like that. This is purely mathematical. Proxy voting is a full multimedia experience where you have to actually make a return value. So you actually have to display the proxy, you have to source all the information. It's much more -- there's a lot more involved than -- decades in building proxyvote.com, so I don't see that being replicated.

Okay. So I know that the NYSE and NASDAQ in terms of tokenization proposals are kind of a little bit different directionally. Maybe you could talk to what you're seeing in that regard as a regulatory framework from which you guys can work from.

Well, I don't know that they're all that different. I think what they're saying is they are going to support issuers that want to do digitally native tokens. And I think that would be a good thing. Again, the question is going to come back to not where are they tokenize. Question is going to come back to how are you going to own them and what are they going to be held? And again, if you're going to hold them in a brokerage account, the -- we're going to provide the same service tomorrow, just like we do today.

And if you do get to 3% adoption at some point, you could imagine a scenario where, let's say, in your RBC account, you've got 30 securities that are traditional and now you've got one tokenized security sitting in there as well. RBC is not going to say, "Well, we're going to do everything one way for all of the traditional stuff, but we're going to change the model. We're going to do different for this stuff." It's, "We already provide proxy voting for tokenized securities. So the answer is, yes, we're going to provide proxy voting and disclosure for all 31 security types and all through existing audits and controls and reports that we do already for RBC and for other brokerage firms."

So maybe talk about some of the products that you have today. You talked about Galaxy, and then Ondo, like maybe expounding upon what you're viewing the product road map to be in order to be supportive of whatever model ultimately comes to...

Yes. I mean the product road map is going to be -- well, look, ultimately, at the end of the day, regardless of how they're tokenized or where they're held, we're going to have products and solutions to be able to make that more efficient and to support that activity.

Yes. And that's been a hallmark of the company for a while.

That's been a hallmark of our company. We will, I think, for the existing intermediaries and brokers, I think they're looking for like, "So how can you support this in a lot of the existing infrastructure." That's going to be very important. So on the wealth management side, what we're talking to brokers about is they don't want to build a whole new set of infrastructure and have dual infrastructure running for an indefinite period of time because there's no view that this all goes -- and then depending -- if you talk to somebody who's on the sell side that actually runs the infrastructure, there's no view that this is all changing in the next short period of time.

So they don't want to run these dual reporting structures. So they're asking us, "Can you integrate this into our books and records? Put this into your cost basis engine. Put this into your tax engine. Put this into customer statements. Make sure that you're doing proxy and disclosure." So basically, "Broadridge, can you solve all this for us?" And our answer is yes. And we're already building the technology to be able to do that. And we've actually built out a very significant component of that technology stack.

So that's on the wealth management side. I shared with you what we're doing on the capital market side with DLR, and we continue to extend that, and we're a market leader in that. And even on the registered side, this will create more complexity for issuers because there will be different security types that they have to vote, and we'll provide solutions for them to be able to manage that complexity.

Okay. Let's pivot a little bit and just talk about what the SEC is looking at now in terms of digital default options and what that looks like from an investor delivery perspective and what, if any, ramifications that might have for the business?

Well, if I can step back a little bit, the SEC agenda, broadly, is something we are super aligned with. And I very much agree, and we're investing heavily to help make that happen. So you get into things like -- so digital assets. Let's talk about the top 3 initiatives. Digital assets, we just talked about that. Make IPOs great again, okay? SpaceX, OpenAI, I don't think any of those things are bad for anybody in this room. I think we're all aligned with that. You get into -- there's proxy adviser reform, and we're helping on that with technology solutions, maybe talk a little bit more in a bit. And then you get beyond those 3, you also get to the topic of digital default.

And for us, I've been responsible for digital transformation at Broadridge for the last 15 years. This is a bless you. This is not something new that we're working on. We've been getting ready for this for a long time. 90% of the regulatory communications today are already digital, 90%. And we've been investing in next-generation tools for statements like our wealth and focus platform, which is getting terrific traction in the market. It's a big part of our pipeline. So I think for us, we could see a potential -- look, the proposed rule hasn't come out from the SEC yet. I think there could be a likely impact in FY '29, if I had to guess, is when the impact starts.

I think when it does, it will be broadly neutral from a recurring revenue and adjusted EPS perspective. But I think when we come out of that, because of all the investments we've been making over the last 15 years, we're going to end up on the other side of this with a higher growth because we're going to have as much of a drag on the print and a higher-margin business. So we've been investing to make this happen for decades, and we're ready for it.

Awesome. Let's talk about all the things you're doing, really, in and around shareholder engagement. I mean there's pass-through voting, there's standing voting, there's custom policy engine. So there's a lot of really great things that you guys are working on. Maybe talk about that as we pivot away from some of the tokenized stuff.

The -- so there's a lot going on in the governance space generally. You have passive managers that have built up these really large stakes and now they've got a little bit of pressure because they have such influence. And so we've got a solution called pass-through voting, which allows them to pass the voting -- the expression of the voting which an interest to the underlying retail shareholder. And so we were doing 9 funds 3 years ago, now we're doing 900 funds. And we're doing, I think, $8 trillion to $9 trillion in terms of assets, in terms of pass-through voting. So that's one thing we're doing. There is, for the institutional asset managers, they -- we talked about proxy reform. So they're very much looking to figure out how can they reduce the reliance on third-party advice and advisers.

So we have something -- we have an AI-native custom policy voting engine, which effectively allows them to create -- here's the rules that they would like to have. It's our custom policy. We source all the data. We use AI to compare their policy against all the agendas and the information and the data, and there's like 900 data points. And then that automatically creates a vote recommendation, a vote for them that they can now get and apply. There are no third-party advisers or consultants involved in it. It's purely a technology solution for the institutional asset manager. So we're creating a lot of efficiency there. And then there's a topic called shareholder engagement, which is getting retail investors much more engaged. Exxon just did the first voter Choice program on retail, wildly successful.

We have a really good backlog of other issuers that are interested in that. And I think super exciting is the fund community is really interested in doing something similar, which I think would be fantastic. And we're partnering with the ICI and with SIFMA, generally, to figure out ways that we can make that happen.

That's great. So in the last 30 seconds or so that we have, what kind of closing thoughts would you have around the business that you're running in terms of how should we think about the growth algorithm going forward, all of these changes, many of which have opportunities and tailwinds for you. What should you leave with investors on that?

That ICS is a fantastic business. We have -- we've built up a network over decades. There's a lot of complexity and intricacy in that, but it's created an enormous amount of value for industry participants. We continue to innovate and lead in that space. And because of that, we continue to benefit from the industry growing more broadly. And again, because of that position, we've built up a whole portfolio of growth initiatives and -- that come off of that, shareholder engagement, pass-through voting, digital communications, data and analytics, or retirement business. There's a whole portfolio around those. And it's driving really strong growth for Broadridge.

I just can reference what we said at the end of April, so I don't get Edings in trouble over here, in trouble. But we think we'll be at or above 7% recurring revenue growth, 10% to 12% adjusted EPS growth. We're executing and operating really, really well here. And I think the future looks great because we've been delivering those results at the same time that we're actively investing meaningfully in kind of the platforms and the technology of the future, which is all the things that we just talked about. So we've got, I think, a great opportunity ahead of us.

Yes. It sounds like it, Doug. Thank you so much for your time. Really appreciate it, man. It's great. Great stuff.

Okay. Thank you.

The afternoon sessions. I am delighted to be here with me today, Tim Gokey, Chief Executive Officer of Broadridge.

Great. Thank you very much for having us.

So Tim, why don't we start with an overview of Broadridge for those less familiar with your story?

Yes. And I'm not sure that with this group, maybe people are more familiar, but it's an exciting time to be talking about it because there is actually so much change going on with a pro-innovation regulatory agenda with all the technology change. And one of the things that we really do is neutralize the cost and effort of change. And so it's a real opportunity for us to drive innovation at scale for our industry.

We're a technology company, just under $5 billion recurring revenue last 12 months. If you look at our sort of segment focus, it's all in financial services, capital markets, asset management, wealth management funds, also serving corporate issuers. And the core thing that we do is taking functions that are difficult, that are critical, often that are regulated, but that lots of people have to do the same thing and help neutralize that to be able to do it better and more cost effectively.

Same thing with change. When there's industry-level change, we can really help people address that by doing it once on behalf of many clients. So those -- that's sort of some of the fundamental drivers. We really look at change as something that is good for us.

So underneath that, 3 sort of core businesses, our governance or ICS business, that's our largest business, just under $3 billion recurring revenue. And there, we really -- the core part of that is providing voting for Boards of Directors elections for public companies, actually serving the broker-dealer who has to send and take back materials and tabulate the votes for that. And around that, a series of other communications businesses.

The second franchise is capital markets, which is $1.2 billion. It is -- there, we have front office platforms, back-office platforms in -- largely in cash securities globally, opportunity to help simplify both in the front and the back.

And then the third business is wealth management, which is about a $700 million business, focused on North America, Canada and U.S., again, bringing platforms there. And with that really sort of deeply embedded technology piece that we are, we are deeply embedded with operations with technology, with complex functions that gives us a lot of subject matter expertise in complex areas, which helps us identify the next thing and sort of help our clients the way we grow is by doing the next thing for satisfied clients.

That has led to a pretty predictable revenue and earnings model. What we target is 5% to 7% organic growth with tuck-in M&A, call it, 7% to 9% with the advantage of being a technology company, call it, 8% to 12% earnings. Buy back a point of shares, pay a 2% dividend, provide sort of low teens total returns to shareholders over long periods.

If you look at our last 10 years, we've exceeded those numbers over the past 10 years. We give 3-year guidance, and we've met that guidance in each last 5, 3-year periods. If you include this one, which we've announced, we will be -- we'll have a current 3-year period will end in June. And so we really like the business model. We like the client base. We like this moment when there's a lot of change, even though it's creating a bit of uncertainty in the environment is providing a really rich environment for us.

That's a great overview, Tim. What do you see as the 3 biggest areas of opportunity for the company over the coming years? And why is Broadridge positioned to win in those areas?

Yes. I think there are opportunities in each of our franchises in governance, in capital markets and in wealth. And we have really good visibility on those near term. And then longer term, they're really supported by the investments that we're making in AI and tokenization, which is -- that's that moment of change because we're seeing a lot of people grappling with how that's going to affect their business model, and we're helping them with that. So let me just run through those a little bit.

In governance, the mega trend that has been driving our business for a long time is, we call it the broad category of democratization, which is sort of more products for more investors at lower cost. And that has played out from -- they had been mutual funds to ETFs to managed accounts to free trading to direct indexing. And that has tended to create more positions we get paid per position. And so the more positions there are, the more work we have to do. And that has been a multi-decade trend. And we see tokenization as just sort of the next wave of that.

So in that governance, the opportunities there, that position growth driven, as I just said, by that innovation. There's an opportunity inside there relative to shareholder engagement, which I think we might talk more about, which is how do companies engage with their shareholders and asset managers with their shareholders. And then longer term, we think tokenization is a real -- hard to quantify, but nice tailwind for us in the governance business.

In capital markets, the opportunity is around simplifying in the front office where people tend to have lots of platforms that they've built up by asset class, by region. And so they end up with 20 different OMSs and how do we simplify that into a global multi-asset class piece of technology. Same thing in the back end and connecting front to back. And then on the -- and also, we're doing a lot of innovation in the capital market space with digital ledger technology, and I'm sure we'll talk about that ad nauseam, but we're doing $365 billion a day of tokenization, which is bigger than the entire crypto market, and we're by far the leader in that space.

And then as we move to wealth management, there, we have a really good -- we're the market leader in Canada. We're sort of more of a challenger in the U.S., but a good position. And the challenge for clients there is there's so much change going on. They're trying to incorporate all of that. So that creates real opportunities for us to help them adapt to that change. And our platform is -- really sort of has the advantage of being very modular, but all linking together. So it gives them a lot of flexibility in terms of how they implement change, and that's a nice driver for us.

So multiple opportunities in our franchises, supported by, and I'm sure we'll talk more about tokenization and AI, but we made a number of announcements just in the past few weeks about how we can serve tokenized equities and governance across all the different models that there are against how we will use agentic AI to help our clients be more effective and also about platforms for tokenized equities and other securities. So a number of those announcements sort of nod to the future in terms of where the growth will come in the future.

So let's talk about tokenization and AI, and we'll start with AI as an opportunity for you. So you recently announced your agentic AI platform. You highlighted up to 30% operational cost reduction for clients. How is AI turning into an opportunity for you?

Yes. So this is an announcement we made a couple of weeks ago at the SIFMA conference, that's the Securities Industry Association. It's the biggest operations and technology conference. And we have been investing for a few years to take all the applications that we have and turn them into sort of a coherent platform. So we defined a common data model across our applications, a common data layer, a set of APIs. And that, as it turns out, is the perfect basis for agentic AI because it gives you -- when you get into AI, one of the real challenges is I do it here and now I build all that up, but now the data is different over here and they're not reconciled with each other, and it creates a lot of -- so having a reconciled set of data where the same thing means the same thing irrespective of what you're doing, super powerful.

We have a -- for about 65 clients, we do the technology, but we also do the operations on top of that. We have a team of about 1,000 people doing that. And we've been, over the past couple of years, been deploying agentic AI to those 1,000 professionals. We've seen about 25% productivity improvement so far, and we have clear line of sight to the next 25%. So that announcement was really around AI partnership, which is give us your operations, we will give you 25%, 30% upfront savings and then additional savings as we continue to do more AI in the future.

And it's really a play of everyone is looking at where they can apply agentic and operations, very logical place to do it. But for each person to reinvent that for themselves, when we can invest more than any of them, it makes more sense for us to do it.

So we offered 2 ways, either we'll do the work and we'll guarantee the savings or we'll give you the technology, which you can do on a SaaS basis, and you can create the savings yourself. That's what that announcement was about. That, I think, is a really nice revenue opportunity, and it really shows off the power of the platform that we've created.

But this one on for revenue, I want to just mention, in addition, we're launching new products. So I talked about shareholder engagement. We've created a custom policy engine that allows asset managers to -- instead of using a proxy adviser to leverage technology to use their own policies. That's totally built on AI introduced this year. It's going to do -- it's going to serve about $800 billion in assets this year.

And similarly, our global demand model also in asset management that's gone from 0 to a couple of dozen clients in about 18 months, both built on AI. So there's a lot of opportunity for us to -- we already serve almost everyone, but to do the next thing for them and to think of our market as a $220 billion market that clients spend doing stuff that we do. $64 billion of that is vended. So doing the next thing in the non-vended space is a nice growth opportunity as well.

So let's now talk about the flip side of AI, the broader SaaSpocalypse narrative and kind of this view that AI also lowers the barriers to entry. How does that impact Broadridge?

Yes. I was having dinner a couple of weeks ago with the CTO of one of our largest clients. And he was really talking about how he just sees us in a different category than his sort of "SaaS" vendors. He sees us as market infrastructure as moving billions of dollars, incorporating a strong regulatory component, he has to certify to his regulators. So he just use us in a very different light.

Now when you think about applying AI, he thinks about it much more about I love that platform. I love the APIs. I want to apply my AI on top of that. But the idea of replacing that is something that he was having dinner with him is because he's about to do more. And how can he -- how can we partner together for us to do the things that are sort of the core market connectivity, the network, they're bringing in all the different -- it's not just a piece of software on their own data, it's connecting them to everyone else. And you think across our businesses, that was the technology business I just talked about. Think about the governance business, where we're connecting every public company to every fund, every asset manager, every individual investor, 1,000 broker-dealers, that network piece is something that is pretty hard for people to replicate.

So I think the -- we are not really seeing or hearing from our clients the SaaSpocalypse. Again, we're not a seat-based model either. We're sort of an outcomes-based model. So it's -- we never had that threat of, oh, they're going to have fewer people, therefore, they need less of our services.

So let's also talk about productivity a little bit more. How are you thinking about AI as a productivity driver? Is this something that could meaningfully impact your margin profile over time?

Yes. I mean I think every U.S. business at this point is looking across all of their functions and saying, how can I make a big difference with AI? And any company that's not doing that is probably going to be really challenged in the future.

When I look at us, we are -- we certainly have high AI adoption amongst our associates, 90% plus. We have seen real productivity in areas like that managed services offering that I just said, where we've gotten 25% so far, and we can see where the next 25% is going to come from. We are definitely seeing it in software development. Take an example of testing. We are significantly improving our testing in terms of coverage and automation, amount of regression, which is improving quality, but with many fewer people. And it's going into the other parts of software as well. And we -- that's obviously a big part of what we do is development.

So we'll be systematically going through all of our functions. I think it is too early to say for us or for anyone else, how does that end up getting reallocated between investment, between clients and investors and sort of what are the margin implications of that. I know right now, it gives us as we just look directly at -- we're at the end of our fiscal year, so we're doing our planning for next year right now. When we look directly at next year, we have a lot of investments around this change that we think is really good investment on behalf of our shareholders, but we feel very comfortable being able to maintain the same sort of rate of increase of margin that we have historically and still be able to fund these investments because we feel we have a lot of gas in the tank with AI.

So position growth has been one of the key drivers for Broadridge for a long time. What gives you confidence that these underlying drivers remain durable?

Yes. I think the main thing is the sort of track record of innovation in financial services is a thing that has driven position growth sort of for multiple decades. And I talked about it before, but we've gone from -- all the way from fixed commissions to non-fixed commissions to decimalization to -- and you just think about the arc of the past 50 years. And now as we look forward, right now, we're in the middle of a huge amount of growth driven by direct indexing and the next phase will be tokenization. So I think there's that continued arc.

We have seen -- so right now, we've been having position growth in the teens, which is -- typically, it's been sort of high single digits would be sort of a more "normalized" amount. The revenue position growth because this is a little bit about direct indexing, very small positions don't count. And so -- but the direct has been like still double digit. So that's probably a little bit above what the historic trend has been, but the historic trend has been very stable. And even in periods of severe downturn, like during the global financial crisis, position growth, it went to 0 for a while, but it never went negative. It's never gone backwards.

So I think all those things and you look at just the underlying dynamics of how many investor accounts are there, how many positions per account are there and you just do that multiplication to get to position growth.

I want to talk about tokenization and shareholder engagement. But before we get there, there's one more question that came in on AI that I want to ask. So can you, as your customers remain LLM agnostic after running with a given LLM for a couple of years, can someone really be able to switch? How do you port the learnings in memory?

Yes. So we have built our -- as have many companies, built a platform that is sort of between the layer of our product teams and the LLM providers. And so that connects into all of the LLMs and it -- and has a compliance layer in it, and it keeps track of the agents and does a lot of the stuff so that -- so you can switch from one to another. I think it is -- and that's worked very well so far.

As we get into agentic, there's a matter of like where do you put -- the context layer is really important. So where do you keep the context layer? Do you keep -- how private do you keep that to you versus in the LLM. I think one of the things that people are seeing is when you get into using AI for operations, there are some design principles around keeping the agents really small and simple, having lots of very simple agents versus fewer, bigger, more complex agents.

The bigger agents burn up tokens at a geometrically higher rate and they're much less replaceable. If you have simple agents, use the dumbest model possible that will do the task. It dramatically decreases the token cost, but also the flexibility that we talked about. So will there be some lock-in? I can't say there won't be, but I think there are measures that we and others are taking to try to make it as cost effective, but also as affordable as possible.

Just one final question on AI before we move to other topics. How do you think about cyber resilience, right? This is kind of has been a big topic over the last couple of quarters?

Yes. I mean, man, it's one that we're all spending time on. Certainly, all of our clients are spending real time on this. I think -- I hate to say it, I think it's sort of an advantage for scale players that are able to really take the steps that their clients expect. And we get 50-plus on-site audits per year from our clients, and that gives us sort of the opportunity to level up across all the things that our different clients see.

And so I think they see us as -- at least we seek to have them see us as at least as good and in many cases, better than themselves. There's such a focus on third-party risk right now amongst all of our clients. We're part of Glasswing and spending a lot of time right now on -- especially on how do we use the AI to accelerate the rate of remediation. The identification side, which is everything you read about in the papers, it is important, but we and many others already have lots of known vulnerabilities and the rate of those coming in is going to be a lot higher. So getting the automation around remediation is a big focus. And you can never feel fully protected on this topic, and you never should say that you are, but I do think in the end, it will be an advantage.

Great. I'm reflecting on some of the comments you made earlier, you talked about shareholder engagement as kind of a growing opportunity. Why is this becoming more important for you?

Yes. It's -- if you think about some topics that people have been wrestling with for a while and the solutions for those. So one topic that people are wrestling with is you think about the rapid growth of passive asset managers and the amount of voting power that they're accumulating. They obviously want to continue growing, but they don't want to be in the cross fires for having too much voting power. So they're very interested as one of the solutions for to devolve the voting power back to the shareholders.

And so that has engendered a whole set of technology around pass-through voting, which is enabling the end shareholder to indicate their preference. We started that with, I guess, 4 years ago, 8 funds, and then we did 100 funds. Last year, we did 400 funds. This year, we're doing 900 funds with $8 trillion AUM involved in the pass-through voting. So that continues to grow.

Another issue that people are concerned about is the power of the proxy advisers. And sort of the question of firms wanting to really show that they are independent. And so we've worked with a set of asset managers this year to create a technology solution that would basically enable people to detach themselves from proxy advisers, leverage technology with their own set of policies to come up with their own recommendations.

And really, instead of getting recommendations sort of a week before the meeting, get all of the data and the ability to apply their own policies 6 weeks before the meeting so they can run through and see if there's something controversial, now they have time to actually research it, whereas before they had -- they didn't have time to research it. So -- that solution will be serving asset managers this year that we're in right now with about $800 million -- $800 billion, excuse me, under management and it has a nice pipeline behind it.

And then the last solution is around standing instructions. This is really to help public companies with -- who would like to access their retail shareholders more. And as much as we try to do to make it convenient, retail shareholders vote at a lower rate. And this is -- and -- but we've all grown used to defaults in other parts of our life. So this is an opportunity for shareholders to sign up to say, I want to get all the materials, but unless I tell you differently, I want to vote with management. And that has been -- our lead client with that has been Exxon. They've had really good results. They just had their meeting. They had really good results in it. And that's causing a whole lineup of other clients that want to explore that.

So collectively, each of those is solving a little bit different pain point. And collectively, we think that could be a multi-hundred million dollar business for us over time. And we said on our earnings call that we think it will add sort of a point to our growth of our governance business over the next few years.

And speaking of earnings call, you lowered closed sales guidance this year. Walk us through what happened and why you remain confident in the broader pipeline over what -- and over what time?

Yes. Well, our sales in Q3 were definitely a disappointment to us. And at the same time, we don't think that it is -- they're any indicator of some sort of secular change. As you sort of unpack that, each year, we have a sort of a different mix of larger and smaller deals. Our ticket size ranges from $10,000 to $50 million. So it's a pretty wide range.

And this year, we had a few larger deals in there that the timing of which could really make a difference. And I think we just misjudged how quickly those were coming to fruition. None of them have gone away, but it's just happening more slowly, and that caused us to be more cautious about the full year.

I think if we step back, sort of the second part of it is, well, what does that say about the future? We feel really good about the demand situation. Our origination is up 25% compared to last year. Our pipeline is up over 20% compared to last year. And that pipeline is in origination is in areas where we are investing in digital communications and shareholder engagement and wealth platform in all the areas where we think there's need and where we're creating product, we're seeing pipeline. So I think we'll see how things develop, but we're not seeing anything that we think changes our ultimate growth algorithm.

Earlier in our conversation, you talked about 2 big topics, AI and tokenization. So let's talk about the second topic, tokenization. How will growth in digital assets and tokenization impact the broader financial services industry? And how does it impact your role within the industry?

Yes. I think we think tokenization is a real thing. We think it will affect market structure over time. We think it will take time and that there will, therefore, be a long period of hybrid infrastructure with digital distributed ledger to products and sort of traditional products side by side. And that's sort of the base case that we're planning for.

If you think about how that plays out across our different businesses, in our governance business, that is mostly about tokenized equities. The rate at which that happens, there's some uncertainty about that. We tend to think it's going to be a bit of a slow burn, and I'm sure we'll talk more about that. But we see that as upside as it happens. We're very well positioned across each of the models by which it could happen, and we think we'll create additional positions as it does, but slowly.

We think the biggest opportunity is -- or at least the most near-term opportunity is around capital markets. They're very tangible business case around moving, especially collateral movement, collateral mobility to tokenized solutions. And we're doing that today. We've been investing for the past 8 years. That's how we built our $365 billion day position in distributed ledger repo. And as we move that to real time, the benefits become even more tangible. There's a white paper out there that says firms can save up to 15% in capital buffer with real time, which when you think about what that can do an ROE and therefore, trading volume, that's real upside.

And then in wealth management, I think the first use cases will actually be around things like money market funds, alternatives and over time, tokenized equities. And we're providing platforms there. We announced about 4 weeks ago in Canada, an end-to-end platform for our wealth management clients there. We're the market leader to be able to do crypto and other tokenized assets and feed it directly into their existing infrastructure so they don't have to have 2 parallel infrastructures.

We made a similar announcement 2 weeks ago at SIFMA for institutional securities in U.S. Again, people are very concerned about -- they don't know how quickly this will develop. We don't want to have sort of separate infrastructures and have to bear the cost of that. And so the proposition of if you do it with us, you'll feed directly into the existing infrastructure you already have with us is very attractive. So all in all, I think we see this as a real change. We see it as something that's going to take a while to develop. It will be a long period of hybrid. But in the end, we see it as a nice upside.

Let's talk more about equities. How do you see the infrastructure evolving over time? What does that mean for proxy shareholder communications at Broadridge?

Yes. So I think a topic that people are trying to figure out is as and if tokenized equities develop, how will that impact us specifically. And here, I think there are a few things that are important to keep in mind. First of all, the SEC has been very clear that a tokenized equity is so security and still needs to come with sort of all the rights, the ownership rights of it being an equity. So that's an important sort of backdrop factor.

I think another backdrop factor that I'll return to in a minute is where this gets held, like who owns it and where they keep it is going to be a really important factor in this. Now if you look at tokenized equities and how they could develop, there are multiple models. And the SEC has said, I'm not going to prejudge which model is right. I'm going to let the market decide.

So there's a model where the issuer tokenizes the security. And that's an interesting one. There's been a lot of publicity about that and NASDAQ is talking about it and there's stuff in the press about it. This is one we like this model because we serve 80% of issuers today. If you think about how shares happen today, there's sort of 2 models. There's registered shares that are directly on the books and records of the company and then there are beneficial shares that are held in Street name. About 95% of shares are in Street name, 5% are registered. And this issuer, I think is sort of envisioning growing that registered side a bit.

We serve 80% of Fortune 500 companies for the registered shares, and we do it at economics that are better than what we do on the beneficial side. So I think some people that aren't as familiar with sort of how our business works sort of see, oh, if there is some registered model that would be a negative for Broadridge, actually it would be a positive for Broadridge. And we have -- there's been one company that's done it so far that did it with us, Galaxy, and there's a video on the Internet. You can see people voting their Galaxy shares on chain right now, and it works great. And so we'll see how that develops.

I think the interesting thing about that model, though, is even if the issuer tokenizes it, there is still the question of, well, where is it going to be held? We think the most likely place is going to be held is at Morgan Stanley or Bank of America or Charles Schwab. And if it's held there, then it looks very much like the second model I'm about to talk about. So that was Model 1.

Model 2 is where it's tokenized by sort of a third-party intermediary. And in that case, it looks very much like today's beneficial model. And even if it's tokenized by the issuer, if it's held at Morgan Stanley, Morgan Stanley is not going to give the issuer direct connectivity to the client. They're going to -- Morgan Stanley wants to control the communications and or -- any other broker, I don't want to specifically just call them out. And they are already our clients. We're already providing this activity for them. So we see that as just growth for us.

And then there's the third model, which is synthetic, which is, again, is done by a third party. This is largely for non-U.S. investors, where you have a bunch of the securities, you mobilize them and you issue sort of a derivative that is -- whose value is based on the performance of those underlying securities. The market leader in that is Ondo. They have very high share of that. We've announced they're doing proxy with us. And so really across each of the 3 models, we're already leading. We'll see which one plays out over time.

And as I say, it's a little bit of an edge case, if you think about, well, what's the -- where is the demand going to come from to buy these. There's a clear reason why Robinhood and Coinbase and others want to have them become popular, where the investors will come from and therefore, why the public companies will issue them is a bit interesting. I think the areas of demand we see would be existing client holders who want to diversify into equities, which would make sense for Coinbase or someone they haven't those investors.

If you look at how much AUM that is compared to the total of equities is our -- like vanishingly small number. The other one that could be interesting is global investors and could it make it easier for global investors to bring in that could be a source of demand that would cause someone going public to into a sleeve of natively issued tokenized securities. And we'll just have to see how that develops. But we don't serve global investors today. So if that does happen, then that's just another sort of tailwind for us.

So long story short, but I wanted to get into the details of it because it is sort of -- people feel uncertainty about it is we think it's somewhat slow developing. Irrespective of the model, we are investing to cover it, and we said to the SEC and our clients, we will cover whichever model there is. And as it develops, it's just going to be a source of new positions, which will be additional incremental tailwind to that sort of high single-digit position growth that we've been seeing for the past couple of decades.

You mentioned the SEC. I wanted to ask about the regulatory environment and initiatives more broadly. Is there anything on the horizon that meaningfully impacts the business on the regulatory side?

Yes. I think if you think about what Chair Atkins main priorities are -- and he -- if you listen to him, he's very consistent with it. Improving access to -- or creating a legitimate framework for digital assets is helping public companies making IPOs great again, and it is improving access for investors to private assets. So those are the 3 big themes that he keeps talking about.

So the digital asset side of things, I think we just talked about. There's been a little bit of noise back and forth the past sort of week about an innovation exemption that is going to come. And it is -- I think it's largely covered by what I just said. But it's been on again, off again, but it will come at some point, and it will be for a period of time. It will be a little bit limited in nature, but it will cover all 3 models. And I think it will make clear some of the protections that the SEC wants to see investors have.

In bucket 2 around making IPOs great again, one of the things in there is this concern about proxy advisers. And I think the work that we're doing around shareholder engagement that I mentioned feeds right into that. And that concern about proxy advisers is one of the things that's causing asset managers to have a lot of interest in our custom policy engine. So that's a good alignment.

The other topic that's not exactly one of those 3, but is a real topic that the SEC is working on is digital communications. And as you know, today, the default communication is paper and then you can elect to receive things digitally. And we've been working for a long time to increase the digital proportion. Today, the proportion of communications that are digital and regulatory communications it's over 90%. In customer communications, it's closer to 50%. But we're really working on, can we switch the default to be digital and you can request paper. And we've been working with SIFMA and with ICI and other industry groups to work with the SEC to make that happen.

I think we're getting close. We are expecting -- we would expect something from the SEC in the next few months. And then they will go up for comment. There will be comments, then there'll be rule making, then there'll be an implementation period. When you cycle through all of that, we're thinking this is probably our fiscal year '29 or after. And that will be something that we think is, again, a mild positive for us with some moving parts in between.

It would -- we have -- if you look at our top line revenue, which is why we always talk about recurring revenue. If you look at our top line revenue, there's a big chunk of pass-through revenue in there that's postage and paper and things like that, that are 0 to very low margin for us. So a lot of that will shrink as this transition happens.

At the same time, there will be some substitution within our existing products. There's some amount of recurring revenue that would go away. And then there is other recurring revenue we think we'll gain with sort of very closely related products that will increase. And we think the net result of all of that is roughly a wash. But at the end of that, we'll have higher margins because of less distribution revenue. We'll be a little bit faster growing because the digital part of our business has been a faster-growing business. It's been growing at double digits the past 3 to 5 years. And so we really like this change. And we'll think we'll see something in the next couple of months on it.

You -- I want to follow-up on some of your recent acquisitions. So you recently announced the acquisition of CQG, a provider of futures and options trade execution management. How does this fit in within your broader capital market strategy?

Yes. CQG is a really nice private business based out in Denver. It's a global company, call it, revenues in the sort of $50 million to $60 million, and it's in the front office space, focused on futures and a focus on execution management.

Our front office business is -- has been historically more focused -- first of all, it's order management. So execution order management, very complementary to each other. And it is -- ours has been largely focused on cash securities, but we're in the midst of building a futures capability to compete with Fidessa. And we're partnering with a large global Tier 1 institution to build that futures capability.

So what CQG brings is extremely complementary because they already have a strong position in futures. They have an EMS capability that will go with our OMS capability. And so it's a really a chocolate and peanut butter sort of situation, a very global company, a bunch of clients that -- some of which we already serve, some of which we don't serve, some nice cross-sell opportunity as well. And so we're really, really pleased and it's a great management team. So we're happy to have them on board.

And it's part of the theme that we've seen across our M&A portfolio over a long time, which is looking for really unique opportunities where we are really the best partner to help someone sort of achieve their ambitions of growing their business and respectively, things come out of it.

Can you also -- switching gears a little bit. Can you also help us understand the recurring revenue model? There has been some confusion about how to think about Broadridge's growth algorithm versus a software company.

Yes. It's -- that's a great question because coming back to that total revenue question, sort of the buckets of revenue that we have because we -- that can be a little bit confusing for people.

So when you look at our revenue, we have -- I'll say this of the $7 billion of revenue we have using really round numbers, there's like $2 billion of it that is the sort of pass-through distribution revenue, which is low to no margin. And then there's about $5 billion of it that is fee revenue, 95% of which is recurring. So when you hear me say 95% of our revenue is recurring, that's what I'm referring to. And then there's about 5% that is "event" which is not under multiyear contract. It comes and goes often due to mutual fund elections.

So we really focus on driving the growth in that recurring revenue, which is that sort of 95% of the fee revenue. That's really where the economics of our firm are based and it's very consistent. We have 98% revenue retention within that group. And this is where we talk about that 5% to 7% organic and then 1 or 2 points of tuck-in M&A, which is sort of the first year revenues that we acquired in subsequent years is the growth of those accounts.

I think about that relative to a software company, the vast majority of our revenue is Software as a Service. So there is -- every once in a while, there's some license stuff in there that creates, unfortunately, some quarterly noise, but mostly a Software as a Service is subscription-based. It's generally not based on seats. It's generally based on activity, how many trades you do, how many accounts do you have. And it's a great business model. It's very high free cash flow, 100% plus.

And we see that sort of long-term compounding, which isn't exactly as we were talking about before, in flavor right at this moment, but we see that long-term compounding as a really attractive proposition. And for that 7% to 9% recurring revenue growth turns into 8% to 12% earnings growth, buy back a point of shares, pay 3% dividends. You have low teens total returns to shareholders for a long time without sort of stretching the model in any way.

And speaking of shareholder returns, how are you thinking about the trade-off between buybacks and M&A?

Yes. So our capital allocation has been very consistent over time. We call it balanced capital allocation. We want to be an investment-grade company. We're going to make all the investments that make sense for our core business. We do pay a dividend, about a 40% payout ratio. So that goes up each year. It's risen double digits in 19 of the past 20 years in the past. And -- 18 of the last 19 years, pardon me, because we will be 20 next year.

And -- but then after that, that leaves sort of a bucket of money. And we do this very bottom up. We look for attractive accretive M&A like CQG. And if we find those opportunities with a hurdle rate of 20% IRR, sometimes high teens, depending on the property, then we'll go for that. And that's been a really nice source of growth for us, really nice source of strategically becoming more important to our clients. We track every transaction. We've done 40-some transactions in the 15 years that I've been here. Those are running unlevered at about 18%, 19% IRR. So really good returns to shareholders on that.

But if we don't find something, then we do share buybacks and not because of a top-down allocation, but purely bottom up. If you look back over history, it's been about 50-50 that we've done between share buybacks and M&A. And that does alter a little bit depending on sort of what the market prices of these assets. When they're higher, we're more -- less likely to be able to find those returns and more likely to do share buyback and vice versa.

It's an interesting one when I look right now because many of those asset prices are depressed. And so there are some really good buying opportunities. And then at the same time, I haven't in the past, but right now, I do have a sheet that has sort of here are the things that we're looking at. Here's our revenue, here's our earnings, here's the revenue growth, here's the earnings growth, what multiple are they trading at? And then right next to it, what Broadridge looks like. And right now, we look pretty attractive. So it's -- we just have to keep that in mind when we think about that balance.

So Tim, we talked about a lot of the business fundamentals, but the stock has lagged this year. What do you think investors are missing? Which of those concerns are overblown in your view?

Yes. I think that we, like many other names, have suffered, as we talked about, just in a reallocation of putting money to the hyperscalers and the big AI companies and where is that going to come from. So we've been caught up in that.

I think there is a -- there's concern about, well, how will AI play into things and some companies will be advantaged and some will be disadvantaged and how do I know which. So until I know which I'm a bit uncertain. And then I think a unique factor relative to us has been tokenization. And is there some bear case out there by which our very recurring model would be destabilized. And so I think that's sort of the drivers of why we are where we are right now.

I think, frankly, both AI and tokenization, as I said, I think, are tailwinds, not headwinds. And I think that creates an opportunity for everyone in this room that believes that as we do. And time will tell. I think the things that we plan to do are -- we have a great core business that's performing very well today. We're going to keep that going, especially around making sure that we deliver on sales and deliver on revenue and continue to deliver on margin, all those sort of core basic things.

I think then it's really making sure that we are making the investments in those future areas that will provide when we're talking about our Investor Day, not in December, but 3 years from December that the outlook looks just as good, and that's making the investments in tokenization, in digital communications, in AI, in shareholder engagement, in our platform, all the things that we've talked about, I think that's really laying the groundwork for that future growth.

And so when you have performance today and we have investment for tomorrow, I think we have a really nice package for investors. Obviously, our whole management team are big holders of our stock and are really thinking about the long-term future.

Tim, we have 1 minute left. So my last question for you. As you head into your next 3-year cycle, what should investors expect for the next 3-year targets?

Look, I think it's very similar to what I just talked about. We don't see a lot that is changing that core growth algorithm. And so I would expect our next 3 years in terms of where the metrics come out from the core growth algorithm to be very similar to the last 3 years.

Inside that, there's a lot of change in terms of introducing new technology and helping our clients make that transformation. When you then boil it out though into the numbers, the numbers look very similar. What's going on underneath, there will be a lot of innovation in there, and I think it's going to be a really exciting time for our industry.

Fantastic. Tim, thank you so much for your time. I learned a lot.

Thank you.

All right. Good morning, everyone. My name is Kyle Peterson. I'm the fintech analysts at Needham & Company. Welcome to our Tech, Media and TMT Conference. We are going to host a fireside chat here with -- we have Ashima Ghei from Broadridge, the CFO. Thank you for joining us, Ashima.

It's great to be here.

I want to see if you could start off just for those kind of maybe a little less familiar with the story, if you could give us kind of a quick primer and overview, I think that would be helpful for everyone in the audience.

Sure. I'm happy to do that, and thanks for having me here, Kyle. The financial services industry is going through significant transformation right now. And I feel like Broadridge is uniquely positioned to drive innovation at scale across the industry. So I'm happy to talk a little bit more about that.

So first, let me start off with the Broadridge business for those not as familiar. We're a global technology and infrastructure provider. We're about $6.9 billion in revenues, $4.5 billion of which are recurring revenues. And we essentially operate at the intersection of asset management, wealth management, capital markets and corporate issuers, right? The way to think about our business, the way we report our business, I should say, is in 2 different segments. We've got the ICS segment, which is about $2.7 billion in revenues. And here, we operate a unique network, which connects corporate issuers and asset managers with their own retail and institutional investors. And we do that via the bank broker-dealers, right? And it's through that network that we enable corporate governance, shareholder voting as well as other communication networks. And we've kind of built over that initial position to now create a whole range of other governance solutions.

On the issuer side, we also provide fund solutions, solutions for funds more based on data. And we've scaled our communications business as well, all in the ICS stream. So that's our ICS business.

The second business that we report our financials in is our GTO or Global Tech Operations business. That's about $1.8 billion in revenues. And the simplest way to explain it is we power trading for capital markets and wealth management in that space, right? On the capital markets side, we provide the core technology in the infrastructure that essentially enables capital markets firms to do trading, to manage their orders, to process the transactions, to settle the transactions, manage compliance, like the entire end-to-end process around it. And on the wealth management side, we provide the core technology that enables the wealth management divisions of whether it be the large banks, the RIAs, the private banks to manage the entire suite of wealth offerings. So that's the core of our businesses.

The other thing I would call out is we do all of this at scale for some of the most demanding clients. If I think about our portfolio right now, we cover 28 out of the 29 G-SIBs, the systematically important banks. We cover about 1.5 billion shareholder positions today across -- and we send out about 7.5 billion communications on an annual basis in our ICS business. In our trading business, we cover over $15 trillion in trades on a daily basis, and that's across fixed income, equities, the whole gamut. And our distributed ledger repo platform tokenizes close to $400 billion on a daily basis, right? That's quite a large scope.

So we -- and essentially, all of that scale that we have now creates a massive advantage for us, right? We're in the right position to scale even further to deploy some of the new capabilities across our client base right now. And where we're sitting right now, we're seeing financial services is at a stage of transformation, right? You're seeing all the advancements in technology. You're seeing a pro-innovation regulatory environment. What that's essentially creating is a need for more change, and we are well suited to drive that change. I just to give an overview of our priorities and where the industry is headed, I'll call out 4 key themes that are happening right now.

First, there is a lot of steam on tokenization, right? Both -- I'm sure you've heard a whole bunch about it, both on the asset management side as well as on the capital markets side. So we're seeing that across the board. The second theme is we're seeing a quiet revolution. We call it quiet. It's not so quiet on the shareholder engagement side, right, which is having funds, issuers deal with their shareholders in a different way. So we're seeing that happen a lot. Three, you're seeing the advent of more and more digital communication. Essentially, that's driving the cost of communicating, interacting with shareholders, investors down, and that's creating scale. And then finally, you have AI, which is enabling all of this at a much faster pace, right?

Bottom line, we're leaning into that change. We're leaning into the change across each of these 4 areas. We're looking at leading in tokenization, driving shareholder engagement, driving digitization and then scaling our AI capabilities across the board. So I feel pretty good about where we are headed right now. And we're doing all this while driving consistent sustainable earnings growth. We actually had our earnings call a couple of weeks ago where we raised our guidance for this year for both revenue and earnings. Our recurring revenue guidance is now at or above 7%. Our adjusted EPS guidance is at 10% to 12% and we feel really good about where we are headed.

Great. And maybe moving over, Broadridge has been one of the more consistent companies I've done diligence on in my career. Just you guys have been pretty transparent of kind of putting 3-year financial targets, rolling those forward and hitting or exceeding them pretty much across the board. So I guess, could you give us a reminder of kind of what those targets and how you think about balancing those are and the combination of diversification and revenue visibility, how that helps you guys really be as consistent as you guys have been over time?

Yes. Thanks for calling that out, Kyle. Yes, one of the things we often say and we hear about is at Broadridge, we say what we're going to do and then we deliver against it, right? Being consistent with -- against our commitments has been a big part of the Broadridge story, and it's earned us a lot of credibility across the base so far.

So you're right, what we do something that I've not seen a lot of companies do, though some do. We offer 3-year growth objectives, right? We come up with 3-year growth objectives. We've been doing that since 2011, and we're in our fifth 3-year cycle right now, right? That -- this current cycle started in December of '23 that we laid out these objectives, and it goes until our fiscal '26, which is going to be this coming June. So for the most current cycle, our objectives are 5% to 8% organic recurring revenue growth, 7% to 9% recurring revenue growth once you include the impact of M&A as well and 8% to 12% adjusted EPS growth. And we recently reiterated that we are on track again to deliver on both the top line and the bottom line growth objectives in that category.

Now to answer your question about why, how are we able to do that? I think the answer is, to some extent, rooted in the strength and breadth of our business model, right? Let's start with the fact that, one, we are a tech provider that's essentially deeply rooted in some of the core functionalities across our clients, right? These are not functions that are ancillary to their services trading, right? They're very core to the actual service that our clients offer themselves. What that means is that we sign multiyear contracts with those clients. What that also means is we get recurring revenues from those clients. And essentially, that gives us a lot of visibility, right? About 65% of our overall revenues, like I said, $4.5 billion of our revenues are recurring in nature. These are multiyear contracts with a significant amount of visibility into what's to come in the coming months. So that gives us the transparency as we think about our commitments.

The second thing I'll call out is we are constantly reinvesting in our business, right? We're committed to reinvesting in our business in -- either in existing products, continuing to enhance them, make sure they're in line with enhancements that we want to make in them or in new products, right? And when we look at new products, we're often looking at categories where there's the most demand or where we expect that to help with client retention even more because they're adjacent to where we are, et cetera. But essentially, long story short, what all of that means is that we now have a fair amount of road map that we're constantly always working on, right? And that road map does 2 things.

One, it obviously extends our runway to growth, right? It creates more addressable market opportunity for us. But two, it also gives us the flexibility. So if we are in a period of high event activity or if we're in a period of higher recurring revenue growth, we can use some of that upside that we're seeing to accelerate progress against that road map. And there's the flip side, too, right? If we are in a lower economic environment, we can temper that road map as we scale through those investments. So that essentially allows us to navigate and ensure that we deliver consistently against our commitments. And then the third reason I'm going to -- and the third factor I'm going to call out is our balanced capital allocation strategy. We have a history of maintaining a very balanced capital allocation, right, which starts with -- for us, it starts with investment-grade credit rating. Once we've got that, we use some of the capital available to fund our organic investments, like I said, the road map that we're working on.

Then we also use that to pay a growing dividend, typically growing in line with earnings. We make specific discrete strategic tuck-in investments, usually at valuations that are accretive to where our business model is headed in areas that -- where we see the most synergies that are -- that can drive the most value for us. And then we do share buyback across the balance, right? So if I bring this all together, the fact that our services are embedded in our clients' core functions, the fact that they're recurring in nature, the fact that we always are constantly reinvesting in our business and therefore, have the flexibility to flex investments up and down as we continue to reinvest in our business and our balanced capital allocation. That's a pretty good formula for shareholder success, and that's what's us over the years.

Great. Maybe switching over to AI. That's probably a topic we get from our clients on every company we cover and...

I would be surprised if not...

So I think kind of a two-pronged question here. I guess, one, what are some of the biggest moats that you guys have where Broadridge will continue to kind of be a key player in the space. LLM model runs wild for a few hours and kind of whip something up. But I guess like what are some of the key moats that you guys have and safeguards that you think prevent that and any disintermediation risk over the long-term?

And then the follow-up would be, how are you guys using AI in your business today? And where do you see that going over the next few years?

Yes. So I'll start with the first part of your question about the moats and our advantages, so to speak, right? I'll start off by saying the value of what we do is not the code. It's really a combination of the network. It's a combination of many of the capabilities that we have at scale. Essentially, we end up competing on connectivity, we end up competing on event coverage, operational resilience, scale and deep domain expertise, right? Let me actually break that down a little bit. When you think about our governance business, I was talking about what we do in ICS. Essentially, we're connecting 10,000 corporate issuers, 30,000 funds with 1,000-plus bank broker-dealers with 1.5 billion shareholder investors, right? And we're doing all of that at scale. We're making sure we're bringing the physical and digital communications together.

We're making sure we're managing the preferences across the entire investor base. We're making sure we're staying ahead of any of the regulatory changes, and then we are implementing those regulatory changes across the product offering. So essentially, even if you had the actual code, right, that would be a very small part of the equation. What we'll need is the entire scale and the entire operational resilience associated with the offering. That's on the ICS side.

If I think about the GTO side of it, -- like I mentioned before, our tech powers some of the core operations for our clients, right? So if I think about our capital markets companies, trading is core for them. The concern is not so much about what the Broadridge fees is because the error that you could have on one of the trading transactions, that could be many times the Broadridge fees itself. Our systems, our platforms have actually been enabled to anticipate the entire tail risk events, right, to the entire extent of what the different market economics could be, what kind of events we could have across a majority of clients in different environments. and that's very hard to replicate, right?

We think our scale actually provides us a huge opportunity. And frankly, I would go the other side, right? I think I love AI. AI to me and the LLM tools actually provide us an opportunity to strengthen our platform rather than disintermediate by any long stretch. The winning formula is really to combine some of those high-end tools with the deep domain expertise, the network, the operational resilience, scale, and that's something that Broadridge is doing really well. So that I feel actually provides much more of an advantage for us versus not.

And that brings me to what we're doing at Broadridge around it, right? Like I said, it's huge advancements. I'm quite excited about some of the moves on AI. Internally, at Broadridge, we think of it as not only can we leverage AI to drive change for our clients faster, we can use it to make us and our clients more efficient in the process as well, right? Because essentially, all we are doing is -- not all, what we're doing is mutualizing the investment associated with AI, right? You can have multiple clients try to make AI investments in their own accord. But because we've got the entire platform, we can make the investments once on their behalf and multiple clients can get to benefit from those investments. The way we're approaching it is in 3 ways, right? The benefits of AI, we're thinking about it in 3 ways.

One, about how do we launch new products in the marketplace that are more AI native. Two, how do we get more productivity gains for us and our clients using AI; and three, product development, how do we accelerate the pace of product development, software development by leveraging AI, right? That's the 3 ways we're addressing it. And we've got proof points on each of those areas, right? If I think about new products, we have various products that are already out in the marketplace where we are earning revenue across these products. I'll give you 2 examples. The first one is our AI-native custom policy voting engine.

Essentially, what that does is it reads and analyzes source information across multiples of issuers and then works with asset managers to apply the asset managers' own custom policies, right, on how their views on how they want to vote on certain actions. And it allows these asset managers, one, not to rely on proxy advisers. Two, because we're able to leverage AI and source and read all that material, we actually are able to provide some of this information to asset managers about 4 to 6 weeks earlier than they would have in the past. And it then leverages all that information to apply a customized recommendation for that asset manager itself. The product is already gaining steam. Today, we have asset managers that have over $800 billion in assets that are using this product live with us today. That's one example.

Another example that we've spoken about in the past is we have a global demand model that essentially tracks about $120 trillion in demand flows, right, where the sources uses, where the demand flows is globally. And it essentially allows asset managers to come up with their views on where they want to invest in product development, where they want to invest in marketing for the coming season, so to speak. We have about 2 dozen asset managers today who are already tracking this to make their product marketing decisions. So that's just on the new revenue side. What I'll say on that is I'm pleased with the returns, the revenues that we're seeing across these products. There -- it's small right now, but it's scaling nicely on that front.

Then the second area that I mentioned was productivity, right? We are seeing real productivity gains. We've essentially deployed Agentic AI across the business. We're using it to automate many of our workflows. We're using it to improve efficiency. One of the latest use cases we have is on our managed service offering in our GTO business, where we essentially do managed service for about 65 of our clients across the services.

And we're seeing real labor productivity gains in this space. We've deployed AI and Agentic AI across our workflows. And we've seen about 30% labor productivity gains and what we've essentially done with those labor productivity gains is, one, use it to get more clients to grow our business. And two, we're sharing some of those efficiency gains with our clients as well. We're now starting to approach AI approach this managed service business as an AI partnership, right? We're getting some gains. We're helping them grow their business faster by sharing these gains with our clients as well. And we're seeing some good returns on -- in terms of faster onboarding. We're seeing some good returns in terms of other process efficiencies as well. All real returns.

But on productivity, what I would say is these returns are helping create operating leverage for us, and they're creating investment capacity for us that's allowing us to continue to increase and accelerate our investment in the things that I mentioned.

And then finally, we're seeing good traction with our software development as well. The time to develop new software through faster prototyping is also leading to good AI benefits for us. So overall, quite excited about the opportunity. We actually just launched -- we announced yesterday that we're now embedding AI on top of -- we've shared before that we've created like a BR platform, right? We've got various solutions, which are now -- which are on a common data ontology that are on a common API framework. We've actually -- we're adding on top of that an Agentic layer as well, which essentially the clients can either come to us and use our managed service holistically where we would give them 30% efficiencies day 1 and more gains as we continue and drive partnership or they can use some of those Agentic capabilities, which are sitting on top of our platform for their own operations. They can leverage it and get the gains themselves and simplify their own operations.

So it's yet another example of how we're making AI available at scale to a lot of our clients without them having to make the individual investments themselves, and we are essentially mutualizing the investments for them.

And just to wrap this one, the only other thing I'll call out is we're -- the investments because I've been talking about investments a lot. All of these investments are essentially baked into as we think about both our guidance for this year, as we think about our forecast and our guidance that we'll be sharing in the future as well. It's all within our sustained, steady growing business model.

Okay. Great. I want to switch over to the proxy process. You guys have been doing a lot of interesting work trying to help with increased shareholder engagements, specifically with retail and some passive investors. So I guess, what are you guys doing on that front? How is that, I guess, driving increased engagement? And I guess, like are you -- do you expect that to continue if -- I think we've seen a few issuers kind of trend away from the use of proxy advisers. So I guess, like how are you guys helping with that and driving increased engagement?

Yes. We're quite happy about the progress that we're making in this space, Kyle. Like I said before, there has been a quiet revolution going on in shareholder engagement. It's a little bit of the themes that you mentioned just now. One, there's been flack about a few passive account managers essentially hold all the voting rights for many of the issuers, right? That's problem statement one.

Problem statement two has been the increasing role of reliance, I should say, on proxy advisers, right? There has been -- the proxy advisers have been providing data, providing recommendations. Sometimes it's too late, and there's just been an increasing reliance on that. And the third, frankly, has been the lack of engagement from retail investors overall, right? Everything has been focused on the institutional side. There's been lack of investment on the retail shareholder side. And those are the 3 pain points that we're looking at addressing through our product offerings.

The first one I'll talk about is on the fund side, right, where we have a voting choice solution. What that essentially does is it helps passive managers give their underlying shareholders more of a say in where to vote, right? Essentially, we call it a pass-through voting, right, where the fund manager through a series of questions, gauges what the voting preferences of the underlying shareholders are. And then those voting preferences are aggregated together to come up with a view of this is how the overall fund should be voting for different issuers based on that.

Essentially, what it's doing is now the passive -- the large passive manager is not making the decisions themselves. It's based on data and actual voting preferences that they're getting from the underlying shareholders. We're seeing good traction on that product today. We have about 900 funds that are already signed up for that product, assets under management of over $8 trillion across that base, right? So it's steadily picking up good steam.

The second product I'll call out, which actually addresses the second theme about the role of proxy advisers is -- and I touched on this before, is our custom voting engine, right, the AI custom voting engine that we've provided. That essentially addresses exactly the pain point about overreliance on proxy advisers, overreliance on getting the data 2 days before the proxy is due and limited time in handling all that. That's where our custom solution actually works with some of the larger providers. We have multiple clients that have signed up for this today, over $800 billion in assets under management for that particular offering.

And then the third offering is on the retail side, which I'm personally quite excited about, standing voting instructions. So you may have heard about the pilot that we're doing with ExxonMobil, where ExxonMobil is essentially asking their retail investors if they would choose to opt in to vote for management on certain issues, right? And of course, they have the rights to -- they'll still get a proxy on an annual basis. They can still change their vote if so. But if they don't change their vote, the vote would be voted in line with management on certain issues. This is still in a pilot stage. Exxon is our first client doing that, but we're seeing great response rates. What we saw is out of the retail investor base, about 10% of them have already voted or opted in and they're voting with management on certain issues. What I found interesting was about 1/3 of them, 30% of that 10%, had not even voted in the last election.

So if you think about it, that's driving real retail participation, something that didn't exist in that space before. And that's quite exciting. It's -- like I said, it's still in pilot stage. Exxon is our first client, but the response rates have been really promising, and I'm looking forward to seeing more traction on that one.

So essentially, that's the gamut of our shareholder engagement offerings, right, again, addressing the 3 pain points that you mentioned, passive managers, proxy advisers and retail engagement. This is actually a pretty interesting product offering. It's a whole sector, so to speak, right, not just a singular product. We see this as a multi-hundred million dollar opportunity. Of course, it's not going to happen overnight. For now, we're calling it about 1 point of growth to our governance business over the next 2 to 3 years each, but I'm quite bullish about the opportunity overall.

Great. That's great to hear. Maybe switching over to kind of another topic of the day here, but specifically tokenization. That's something I think we are getting a lot of questions on. You guys have been pretty active in the space with a lot of your work on the Canton network. And I know you guys had some news releases today about kind of your expansion of your tokenization offerings, doing some interesting work on the proxy side as it relates to it. So I guess like could you summarize what are these different things you guys are kind of legging into with tokenization? And kind of where do you see the opportunities going from here?

Absolutely. Tokenization is another one of those that we see as a huge tailwind for Broadridge across the gamut, right, on the proxy side in the tokenized equity space, like you mentioned, as well as on capital markets and on the wealth side. So let me address the tokenized equity and the proxy governance side of it first, and then I'll talk about capital markets and wealth. Capital markets is where we see announcement today, like you pointed out.

So first off, on the tokenized equity side, we believe whether it's a tokenized asset or a regular asset, what's core is the right level of governance, the right level of proxy voting, asset servicing needs to go associated with it, right? We're not -- and as we start to build that kind of scale for tokenized equities and tokenized assets as well, the industry needs a trusted market player that can drive those asset servicing, proxy, governance, shareholder, post-trade capabilities at scale. And that's where Broadridge comes in. Right now, on the equity front, there are various models out there, the various ownership models out there. I'm not betting on which one is going to be faster, better or not.

But where we're looking at is we want to make sure Broadridge is an enabler in each of those models, right, irrespective of which model picks up. Just to give you a little bit of overview, there are essentially 3 models that are being discussed right now. The first is an issuer native model. What that essentially means is corporate issuers will directly issue tokenized version of equities as well in addition to today, they issue regular equities that are either beneficially held through bank broker-dealers or they held directly in a registered format. So now in that model, today, as I mentioned, these issuers have beneficial holdings and registered holdings. Over 80% of those issuers already have signed up with Broadridge even for their registered holdings, right, where you could argue they have all the e-mail addresses or communication rights for those assets.

But there is a huge value in simplifying the complexity of saying, okay, Broadridge, you're dealing with the beneficial side, deal with the registered side as well and do it at scale for me with one pane of glass. Now imagine what's going to happen in this new world. Now you'll have a third asset class, which is these tokenized assets. Frankly, I might argue you'll have -- let me add more complexity to it. You'll have tokenized beneficial assets and you'll have tokenized registered assets in addition to the beneficial and registered that already exists. Now you're dealing with 4 different asset classes, right? That just increases the complexity even more from an issuer front. And what they've already partnered with us to do is solve that complexity for them.

I'm actually super-pleased to announce that one of the only issuers that's actually doing tokenized assets -- tokenized equities natively is Galaxy, right? They announced that they're going to do tokenized equities. We are already doing their proxy. So they already signed up with us because of exactly that. They don't want to deal with the complexity of managing different asset classes. So we'll be doing their proxy, which is happening in 2 weeks on the shareholder voting side, and we'll be doing it across the different asset classes for them. So that's model 1 on the native issuance.

Model 2, where you can see tokenization happen is on an intermediary side, where third parties like bank broker-dealers, exchanges are essentially creating the tokenized versions of these assets. Now all these intermediaries are already our clients, right? If you think about it, all these bank broker-dealers that would essentially tokenize all the exchanges that we're talking about in this setup, they're already clients that we're dealing with. They're already in the same workflow in the same ecosystem that we're dealing with right now. And we're already in discussions with all of them to figure out the next wave of how this works out. But I don't essentially see that as being significantly different from how the model works today.

And then the third way tokenization can happen is on -- through what we call a derivative form or a synthetic form, where essentially third parties, exchanges create a derivative version of equities, and they try to -- which don't come with all the same rights. But even in that space, we're already partnering with the leading global provider in that space, Ondo, and there was a press release on it a couple of weeks ago, where we'll be doing the shareholder voting and proxy governance for them on that model as well.

So frankly, like I said, we're not betting on which model is going to be faster. irrespective of the model, we're bringing our capabilities at scale across this new form of tokenized equities. And that makes me feel bullish about the tokenized equities opportunity. And frankly, it's all good, right? If you think about it, what is this going to do? It's going to create more investors coming into the marketplace. It's going to get more investors investing in more assets, more tokens, which essentially, one, increases our value prop for issuers; two, drives more revenue for us. So it's all a great setup.

But what I'm even more excited about is capital markets. If you ask us, that's where we think the biggest opportunity is with tokenization because we're seeing a real need for tokenizing some of these private assets, all fixed income, that's where the big opportunity is. And we're already the market leader in this space. Our distributed ledger repo solution already tokenizes over 368 million on a daily basis, which is greater than the whole stablecoin market cap currently, right? And we are moving from that position to also now start doing tokenization for -- on an intraday basis.

We've invested in HQLAx because of which we intend to extend our offerings across the European market as well. That is a real opportunity, right? That's where you can actually see benefits in terms of collateral management, collateral savings across banks, and that's where we expect that to pick up even more traction.

And then just to round it up on the wealth side, there's opportunity on the wealth side as well, right? Because as you see more investors wanting to invest in all these different asset classes, now for wealth managers, are they going to maintain a different set of infrastructure for crypto and digital on the side and all the traditional assets on the other side, that's incredibly chaotic. What we've already launched in Canada is one platform that supports crypto, digital assets and all the other regular traditional assets as well, all across one platform. So we're already there in Canada with that, and we intend to announce something similar in the U.S. coming up as well.

So overall, lots going on in the tokenization space. But as I think about our businesses, it creates unique opportunities across our 3 franchises in that area.

Great. Well, this has been super helpful. We've covered a lot of ground here. So I guess I'll turn it to you. Do you have any kind of closing thoughts or comments you want to make sure that you kind of leave the audience with?

I'm going to leave you with 3 main thoughts, right, some of which I've already covered, but I'm going to reiterate a little bit. One, we are executing well across our 3 franchises: ICS, Capital Markets, Wealth Management. We're showing steady, consistent growth, and we've recently upped our guidance, both for recurring revenue and adjusted EPS in that category. We feel great about it.

Two, I'll remind you that we continue to invest in future growth, right? We are transforming shareholder engagement, driving digitization, scaling AI, leading into tokenization, of course. And that's something we think is very important because we want to stay ahead of the trends for our clients and shareholders. We want to enable them to move at a faster clip and develop our own offerings at the same step.

And three, I'll wrap by saying we believe in balanced capital allocation, right? We have a steady record of delivering on balanced capital allocation over the last many years. That's something we aim to continue to drive through because we believe by having a long-term mindset of putting our clients first, investing in where the industry is headed, helping them innovate faster, helping them drive towards clients faster, managed with good financial diligence at our end is a winning formula for our shareholders.

Okay. Awesome. All right. Well, that takes us right up on time with 4 seconds to spare.

Perfect.

Good timing on our part. So thank you for everyone for joining, and thank you for coming to the conference.

Thank you.

Good day, and welcome to the Broadridge Fiscal Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Chuck, and good morning, everybody, and welcome to Broadridge's Third Quarter Fiscal Year 2026 Earnings Conference Call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com.

Joining me on the call this morning are Tim Gokey, our Chief Executive Officer; and our Chief Financial Officer, Ashima Ghei. Before I turn the call over to Tim, I want to make a few standard reminders.

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.

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.

Let me now turn the call over to our CEO. Tim?

Thank you, Edings, and good morning. Broadridge delivered strong third quarter financial results. And we're on track to deliver a strong fiscal 2026. The market backdrop remains positive. Equity markets have been resilient in the face of geopolitical uncertainty. And capital markets remain active, driving strong position growth, higher trading volumes and elevated event-driven activity, all of which are benefiting Broadridge.

At the same time, we've always been focused on driving steady and sustainable growth by aligning our business with the long-term trends that are shaping the financial services industry. And so I'm pleased to report they're also squarely on track to deliver on our 3-year financial targets for the fifth consecutive cycle.

Looking ahead, we're already investing in the next wave of industry innovation. Broadridge is transforming shareholder engagement, leading in tokenization, driving digitization and scaling our AI capabilities. And we're using our strong free cash flow to return capital to shareholders even as we make tuck-in acquisitions that strengthen and extend our value proposition.

The bottom line is that Broadridge is well positioned to drive steady and sustainable growth for a long time to come. As we close out fiscal 2026, we're delivering strong results today, including double-digit earnings growth, and we're putting in place the building blocks for long-term growth tomorrow and beyond. To see how all this plays out, let's go to the headlines on Slide 3.

First, Broadridge delivered strong third quarter results, including 6% recurring revenue growth constant currency and 11% adjusted EPS growth. Second, our growth is being driven by the execution of our strategy to democratize and digitize governance, simplify and innovate capital markets and modernize wealth management.

Third, as I just said, we are taking active steps to address future growth opportunities by leading in tokenization, driving the digitization of communications and scaling AI. Fourth, we are leveraging our strong free cash flow to make growth accretive acquisitions like Acolin and CQG while returning capital to shareholders with share buybacks at attractive levels, as Ashima will touch on.

Fifth and last, based on our strong performance, we are raising our fiscal '26 guidance for recurring revenue and adjusted EPS growth to at or above 7% for recurring revenue growth constant currency and 10% to 12% for adjusted EPS. These results demonstrate the power of our strategy and proven ability to execute.

So let's turn to Slide 4 to look at the key drivers of that execution, starting with our governance business. Governance recurring revenues rose 8% constant currency, driven by new sales and continued growth in investor participation. Investor participation trends remained very strong with total equity position growth at 15% and equity revenue position growth of 11%. We continue to benefit from strong growth in managed accounts and steady mid-single-digit growth in self-directed accounts. Mutual fund and ETF position growth was also healthy at 6%, driven by demand for passive funds.

Beyond position growth, our innovations to power shareholder engagement are building momentum. Our pass-through voting solution is now enabling voting choice for shareholders of 900 funds with assets under management of more than $8 trillion. Our new standing voting instruction solution, which enables retail shareholders to set their default voting instructions, is also off to a strong start.

Our pilot clients are benefiting from exceptional response rates nearly 10% of Exxon's retail shareholder base enrolled in just 1 year, and 30% of responders had not voted at the prior meeting, highlighting the power of this program to engage new voters. We're also now live and supporting proxy voting for institutional asset managers looking to enhance their voting processes and reduce their reliance on proxy advisers.

Beyond voting, our data-driven fund solutions business reported strong growth, driven in part by Acolin acquisition. We're seeing a lot of early interest from our U.S. fund clients on how they can use the Acolin capabilities to accelerate their growth in Europe.

In our Capital Markets business, healthy 6% underlying growth was offset by lower license revenues compared to the prior year. We are seeing good growth in our post-trade solutions, where our global platform capability is enabling clients to simplify their back-office technology stack across multiple geographies and asset classes. We also continue to see robust demand for our front-office solutions.

Earlier this morning, we closed the acquisition of CQG, a leading provider of futures and options trading, execution management and market connectivity. This acquisition accelerates our expansion into futures and options, where we are well advanced in building a next-generation order management solution with a Tier 1 global bank.

CQG will add highly complementary execution management, algorithmic trading and analytics capabilities. Our goal is to create an institutional-grade, end-to-end trading suite for global futures and options, and CQG is a nice accelerator of that strategy.

Turning to wealth management, recurring revenue rose 8% constant currency, powered by strong growth in Canada. We acquired SIS last year to deepen our relationships with key clients and accelerate the rollout of our platform. Now that strategy is paying off with attractive organic growth. We strengthened our core technology platforms, build connectivity to our wealth components, and I'm proud to announce just gone live with the first phase of our wealth platform solution for a leading Canadian wealth manager.

And as the market continues to evolve, we're leading that change. Two weeks ago, we announced the launch of our next-generation digital asset platform, building on a unified suite of solutions. The platform will enable Canadian wealth managers to accelerate their offering of digital assets, including crypto and tokenized equities, funds and alternatives.

I'll close my review of our results with sales. Year-to-date closed sales were $147 million, 16% below last year, even as deal origination and pipeline were substantially up. While we like the demand and pipeline we're seeing, based on our progress toward closing, we are updating our sales guidance for the year to $240 million to $290 million. We are seeing robust demand that's taking longer to close than we expected due in part to a mix of bigger, larger, more complex deals this year.

Some examples include wealth platform sales in GTO and on the ICS side, larger digital transformation sales and customer communications. Those $5 million-plus deals are powering a very strong pipeline and also take longer to close.

While we're lowering our outlook for fiscal '26, we feel good about the future. The pipeline I just mentioned is higher than it ever has been, well north of $1 billion. And we're seeing our product focus driving new demand. We're enhancing our trading solutions and driving the suite of shareholder engagement solutions I highlighted earlier. We're also building a track record of successful wealth platform and digital communication transformations, while linking more of our solutions to our data platform layer, all of which are driving active client discussions.

Now let's turn from the execution behind today's results to what we're doing to drive long-term growth on Slide 5. The financial services market is evolving rapidly, driven by the accelerating pace of technology and an innovation-friendly regulatory environment. Change has always been good for Broadridge as we help our clients adapt with a mutualized approach. We see the current set of changes as a significant opportunity, and we're leaning into them.

First, we're leading in tokenization. Broadridge is building on our industry-leading role in tokenizing more than $350 billion per day on our Distributed Ledger Repo platform.

In governance, we're now powering on-chain voting and disclosure. In wealth management, we're creating an end-to-end solution for crypto and tokenized equities, funds and alternatives. And in the capital markets, we're scaling our market-leading digital asset capabilities in multiple directions.

In a few weeks, we will be the first to power on-chain proxy voting for natively issued tokenized securities for a U.S. public company. As part of that process, we're consolidating and recording voting for beneficial shares, registered shares and tokenized shares to create a unified view for issuers to see all of their votes in one place, take the friction out of managing multiple ownership [ basis ].

In addition, we announced an agreement earlier this week with a leading global marketplace for tokenized real assets, including U.S. equities to provide proxy voting and other governance activities for their clients.

And we're just getting started where the shares are tokenized by an issuer or a third party, Broadridge is stepping up to power the governance capabilities for issuers and investors and make tokenized equities real. And investors will be able to express their voting preferences across their holdings, including tokenized holdings, through Broadridge's institutional-grade proxy vote platform.

We're also working with our wealth management clients to accelerate the launch of crypto and other tokenized assets to their clients. Our Canadian asset -- Canadian digital asset suite will support the governance and trading of digital assets in a seamless and integrated environment that includes our own capabilities as well as a growing ecosystem of digital asset partners.

And on the capital market side, we're extending the capabilities of our market-leading DLR platform to new trade types, geographies and asset classes. And our worldwide trade routing network is transmitting crypto order flow for a growing number of clients.

Second, we're driving the digitization of communications. The time is coming to shift the default delivery method for investor communications, and we're helping to drive the change. The SEC has indicated is taking a fresh look at moving to a digital default option for investors who do not request paper delivery. We've been working with the industry and our clients to move this forward. And while the timing is uncertain, we anticipate a proposal in this area over the coming months.

We believe this evolution will be positive for Broadridge and our clients. We've already digitized nearly 90% of proxy and mutual fund communications, savings funds and public companies hundreds and millions of dollars per year.

Now as we look forward to increasing electronic delivery for other communications, including statements and prospectuses, we're helping our clients prepare as they think about how to take advantage of such a change while also maintaining and improving experience for clients. We expect the implementation process of any action would occur over a few years and primarily affect our low to no margin distribution revenue. We expect the impact on recurring revenue and earnings will be broadly neutral.

On one hand, migration to digital default could have an impact on our recurring revenue of a few percent, mostly in our customer communications business. On the other hand, we believe this evolution will create demand for new services, such as their wealth and focused solution, which is already enabling omnichannel communications to millions of investors.

Like tailored shareholder reports, we expect these new opportunities to more than offset lost recurring revenue. The end result will be a more valuable Broadridge, which is growing faster with higher margins.

Finally, we're scaling AI by building on top of our common data ontology, shared API architecture and the operating workflows we already run at scale. Our AI capabilities are powering new products, accelerating our software development cycle and driving productivity gains.

Let me give you three examples. Our new custom policy engine, which is fully AI native, is able to read and analyze source materials and apply clients voting policies across thousands of companies. Today, that capability is already enabling asset managers with more than $800 billion AUM to implement their own voting policies without a proxy adviser.

Now we're building on that progress to modernize the entire front-to-back workflow supporting institutional voting by leveraging agentic AI to enhance our core institutional voting platform. One of our fastest-growing products is our AI-powered global demand model, which tracks $120 trillion in global assets and is assisting products and marketing decisions for nearly 2 dozen and growing leading asset managers.

And on the productivity side, our managed services business has already seen a 25% increase in productivity with line of sight to 50%. Going forward, we're extending our Broadridge platform to a growing number of core applications. This platform with its common data and APIs positions Broadridge to create agentic layer our clients can use directly or can leverage to create their own solutions using our embedded services.

In sum, AI is enabling Broadridge to deliver new services, become more embedded in our clients' agentic workflows and drive our own productivity. Stepping back, we believe that each of tokenization, digitization and AI are growth drivers for Broadridge as we help our clients in our industry take advantage of the next wave of transformation in financial services. And we're building that tomorrow while continuing to deliver today with another year of strong and steady growth in fiscal '26.

Before I turn the call over to Ashima, I want to thank our Broadridge associates. They're delivering superior service to our clients today while building the products and capabilities that will power the exciting future of governance, capital markets and wealth for a long time to come.

And on that note, let me turn it over to Ashima. Ashima?

Thanks, Tim. Good morning. I'm pleased to be here today. Broadridge reported strong third quarter results with 6% recurring revenue growth constant currency and 11% adjusted EPS growth, and we remain well positioned to deliver another year of strong growth in fiscal '26.

Before I dive into my discussion of those results and our guidance, I want to make four callouts. First, we now have records for 93% of full year proxy positions, which, combined with our recurring revenue backlog, gives us high visibility into our recurring revenue and adjusted EPS forecast.

Second, our strong year-to-date results are enabling us to increase our investments in long-term growth initiatives while positioning us to deliver double-digit adjusted EPS growth. Since the beginning of calendar year '26, we have stepped up our level of investment in tokenization, AI and shareholder engagement initiatives.

Third, we are using our strong free cash flow to drive shareholder returns. With the close of our acquisition of CQG today, we have completed 4 tuck-in acquisitions in fiscal '26 for $294 million and returned $681 million to shareholders in the form of dividends and buybacks. And given our outlook for free cash flow conversion of greater than 100%, we expect the same balanced approach in the fourth quarter.

Fourth and last, we are raising our guidance for recurring revenue growth to at or above 7% and adjusted EPS growth to 10% to 12%.

Now let's go to the numbers on Slide 6. In the quarter, recurring revenues grew 6% on a constant currency basis driven by 5% organic growth. Adjusted operating income margin was 21.5% as we continue to invest in our growth initiatives. Adjusted EPS grew 11% to $2.72, and closed sales were $58 million for the quarter.

Let's move to Slide 7 to discuss our segment recurring revenues, starting with ICS or our governance segment. ICS recurring revenues rose 8% to $800 million. Organic growth was 6%. Regulatory revenues grew 9%, driven by 11% growth in equity revenue positions and fund position growth of 6%. That strong position growth more than offset the 2-point timing headwind from Q2 I had called out last quarter.

Now looking forward to the fourth quarter, we expect another quarter of high single-digit regulatory revenue growth. This will be driven by a combination of low double-digit equity revenue positions and continued mid- to high single-digit fund position growth. Data-driven fund solutions revenue increased 8%, driven by a combination of organic growth and the acquisition of iJoin and Acolin. Lower interest income represented a 3-point headwind to growth.

Issuer revenues rose 8%, driven by growth in disclosure and shareholder engagement solutions, which more than offset a point of headwind from lower interest income. Customer communications revenue growth was 5%, driven by another quarter of double-digit growth in digital revenues. The acquisition of Signal contributed 2 points to customer communications growth. For the full year, we continue to expect ICS recurring revenue growth to be slightly ahead of our overall recurring revenue growth guidance.

Turning to GTO, recurring revenue grew 3% to $488 million. Capital markets revenues were $295 million. Excluding a 7-point impact from lower license revenue, capital markets growth was 6%. Digital asset revenues from our role as Canton Network super validator were $3.5 million in the quarter. Wealth and investment management grew 8%, driven by a combination of strong growth in Canada and higher trading volumes in the U.S.

For the year, we continue to expect GTO recurring revenue growth of 5% to 7%. In the fourth quarter, that includes a 3-point contribution in our capital markets business from the acquisition of CQG, offset by a 5-point license revenue headwind in our wealth management business.

Turning to volume drivers on Slide 8, Broadridge continues to benefit from strong growth in investor participation across both equities and funds. Third quarter equity position growth was 15%, including revenue position growth of 11%.

As Tim noted, we continue to benefit from growth in managed account strategies. We are now in the peak period for annual meetings and as of last week, have received records for 93% of proxies expected for the fiscal year. This visibility gives us a high degree of confidence in our outlook for continued low double-digit equity revenue position growth in Q4.

Mutual fund and ETF position growth was 6% in the third quarter. We expect mid- to high single-digit growth in the fourth quarter. And in GTO, trade volumes rose 16% on a blended basis, driven by double-digit growth in both equity and fixed income.

I'll wrap up my discussion of recurring revenues on Slide 9. Revenue from closed sales remains the biggest driver of our recurring revenue growth at 4 points. That growth was partially offset by 2 points of losses, resulting in a revenue retention rate of 98%.

Internal growth contributed 3 points, primarily driven by equity and fund position growth and higher trading volumes. As a result, organic revenue growth was 5%. Acquisitions contributed 1 point. And finally, changes in FX contributed 1 point to reported recurring revenue growth.

Given the recent strengthening of the dollar, we expect only a modest tailwind from FX in the fourth quarter and an overall benefit of approximately 50 basis points for the full year.

Let's close our discussion of revenue on Slide 10. Total revenues increased 8% to approximately $2 billion, driven by a 4-point contribution to growth from recurring revenue. Event-driven revenues increased $20 million to $73 million, contributing 1 point to total revenue growth. While there were no singular tentpole events in the quarter, we did benefit from elevated levels of activity across both funds and equities. Low to no margin distribution revenues grew 7% contributing 2 points to growth.

Turning to margins on Slide 11. Adjusted operating income margin was 21.5%. The 90 basis points decrease versus fiscal '25 was driven almost entirely by 80 basis points net impact from higher distribution revenues and lower interest rates. Looking ahead, we expect a similar margin dynamic to play out in the fourth quarter.

Turning to EPS on Slide 12. Q4 adjusted EPS grew 11% to $2.72. The tax rate was 19% in the third quarter versus 22% in Q2 '25, driven by the timing of discrete tax items. Looking ahead, we expect our full year tax rate will be approximately 22%.

Let's turn now to sales on Slide 13. Broadridge recorded Q3 closed sales of $58 million versus $71 million in Q3 '25. Year-to-date sales were $147 million. Given our lower sales results through the first 3 quarters of the year, we're updating our closed sales guidance to $240 million to $290 million.

Turning to our cash flows on Slide 14, Broadridge generated free cash flow of $591 million in the first 3 quarters of fiscal '26, up from $393 million in fiscal '25. Our strong cash performance continues to benefit from higher earnings and working capital management, and we remain on track to deliver free cash flow conversion of over 100% in fiscal '26.

Turning next to capital allocation on Slide 15. We are delivering against our balanced capital allocation policy. Year-to-date, we have deployed $77 million in capital spending and software with an additional $33 million to onboard clients onto our solutions.

We have invested $294 million in M&A in strategic tuck-in acquisitions, including the $173 million acquisition of CQG, which closed earlier this morning. We have also returned $681 million in capital to shareholders via our dividend and our share repurchase -- via our dividend and share repurchases through the first 3 quarters of the year. Looking ahead, our strong balance sheet and free cash flow conversion leaves Broadridge well positioned to fund additional tuck-in M&A and repurchase additional shares.

Let's conclude by reviewing our full-year guidance on Slide 16, followed by closing key messages. With 2 months left and high visibility into fiscal '26 position growth and with the acquisition of CQG, we are raising our fiscal '26 outlook for recurring revenue growth constant currency to at or above 7% from the higher end of 5% to 7%. We're also raising our guidance for adjusted EPS growth to 10% to 12% from 9% to 12%. And we also continue to expect fiscal '26 AOI margin of approximately 20% to 21%.

As I noted earlier, we are updating our closed sales guidance to the $240 million to $290 million range. I anticipate this will have only a modest impact to recurring revenue growth over the next 12 to 18 months. The most significant drivers of growth continue to be our existing recurring revenue backlog, which began this year at $430 million, as well as the impact of continued position growth, higher trading volumes and M&A.

I'll wrap by summarizing my key points. First, Broadridge reported strong third quarter results. Second, we remain very much on track to deliver strong fiscal year results with recurring revenue growth at or above 7% and another year of double-digit adjusted EPS growth.

Third, we are delivering these strong results while investing for the future growth. And last, our strong cash flow and capital position are enabling us to fund share repurchases and our strong dividend as well as make M&A investments.

With that, let's open up the line. Chuck?

[Operator Instructions] And today's first question will come from Scott Wurtzel with Wolfe Research.

Just on the closed sales guide, wondering if you can talk a little bit more about how long some of these sales cycles are lengthening by and maybe as 3Q and the first month of 4Q developed when you started to notice this change.

Yes, Scott. Thank you very much and I do want to emphasize that we feel very good about the demand that we're seeing. And we're trying to correlate just what you said, which is the timing of when all that will close. And just a couple of stats that I didn't mention, but our deal origination this year is up 25% in dollar terms. And at over $1 billion, our pipeline is 20% higher right now than it was last year at the same time. And we're seeing strong renewals, on track to renew over $1 billion this year.

So we do like the demand we're seeing. The pipeline that was happening, it's in the areas we're investing. It's in wealth, it's in digital, it's in shareholder engagement. Platform sales now make up 20% of that.

But then as you said, we're taking on some larger engagements. They take longer to close, and they are harder to predict. So while we're tampering a near-term view, we do like the outlook going forward. It is -- I think it's very hard to say, Q4 versus Q1, that's going to be a bubble. And it's just -- it is hard to predict, but we like what we're seeing out there.

Got it. That's helpful. And then just would love to hear more on the -- just the opportunity with the custom policy voting engine and just sort of the broader opportunity there? And how long could this potential tailwind from selling this into the market last for and impact closed sales over the medium to long term here?

Yes. We are -- we see the custom policy voting engine as one of our most exciting areas. I think there is a lot of concern out there about the role of proxy advisers. It has generated a lot of discussion over the years.

And when we think about the value proposition, under the current approach, people get to -- get very detailed research, but they get it very late, just sometimes a week before the meeting. And so if there's any error, if it's a controversial vote, there's very little time to react.

And I think the value proposition that we're offering, which is a clean set of data much earlier 4 to 6 weeks before the meeting, allows people to run their policies through, see the votes, understand if there are any votes that might be controversial and then do their own research on that.

So we really like the way that it turns the process on its head. We are seeing strong demand from asset managers. As I mentioned, the asset manager we did this year is $800 billion under management, and we have a nice pipeline for next year. So we would expect to have -- to be significantly ahead next year of where we are this year.

Typically, with these things, it takes a few years for it to build. So I'm not sure that I'd be saying it's going to be dramatically affect our top line next year. But I think over the next 3 years or so, you'll see some nice growth there.

Our next question will come from Dan Perlin with RBC Capital Markets.

Tim, I was just hoping you could just kind of elaborate a bit more on kind of your views around tokenization. I know you talked about it in the prepared remarks. Obviously, there's a narrative that makes it sound like you guys are in more of a loser camp as opposed to a winner camp. Clearly, hearing what you're talking about today, it sounds like it's a tailwind for you.

So I was just hoping maybe you would go a little bit deeper into why you think you guys are in a really good position to win here, and it's not going to be problematic going forward, in particular, again, around proxy where obviously, you just announced you're doing something with someone now.

Yes. Look, Dan, thank you very much. I'm glad you asked because there's been a lot of discussion around this topic, and I think it's important to understand. And there are multiple models out there. But a lot of people are talking about an issuer-sponsored model for tokenization. You hear NASDAQ and [ ICS ] both talking about this as they seek to serve their issuer clients.

And we don't know if that will be the winning model, but we like it for a couple of reasons. First, we are already the leading provider of voting solutions for issuers. Even beyond the beneficial shares that we serve on behalf of brokers, 80% of large cap companies use us today to solve the complexity of bringing together the beneficial and registered shares, and they do that really at economics that are more attractive than what we see on the regulated side.

In the future, with tokenized shares is going to be even more complex because people have their beneficial shares, their registered shares and now their tokenized shares. And we solve all that with a single pane of glass. So we are really pleased to announce that we're going to be providing the first unchanged proxy voting in May for Galaxy, who is a leading digital asset infrastructure provider.

And second, even if shares are tokenized by issuers, they're still very likely to be held at broker-dealers, who are already our clients. And we believe those brokers will set this up in a way that protects the privacy of their clients. So in this issuer-based model, we have two ways to win, and we really like it.

But that's not the only model. The SEC has talked about three different models, and we're putting in place governance capabilities for each. So there's issue responsored one that I just talked about.

There's also an intermediary-led model, where third parties such as brokers and digital exchanges tokenized shares away from the issuer. Again, these intermediaries are they're already our clients, and this is going to work very much like today's model. We're working with multiple parties on this, and we'll be making announcements in the near future.

And then the last model is a so-called synthetic model, often led by digital exchanges for global investors. And we are pleased to announce just earlier this week that we're enabling this capability for Ondo, who is the leading provider in this space.

So really regardless of where the tokenization is taking place, what's clear is that people are coming to us to talk about how to solve their governance requirements. And as and when tokenized equities begin to get traction, it's going to be because it's drawing in new investors, client holders, global investors. And that's going to grow investor positions. So that increases the market opportunity for us, and we're leaning into that. So that's the governance side.

I'd be remiss if I just didn't point out the other opportunities here because really, frankly, we think the biggest opportunity is in capital markets. That's where we've been doing quite a bit of investing. When you think about the capital savings from better collateral from faster settlement, it's going to create higher trading at higher ROEs.

We're the leader there today, tokenizing more than $350 billion a day on a DLR platform. That's larger than the entire crypto market. We'll be introducing additional enhancements this year, including real-time repo. We just made an investment in HQLAX to extend our relationships in Europe. So a good head of steam there.

And then in wealth management. And our wealth clients are increasingly seeing money market funds, [ privates ] and alternatives and tokenized form as something that could be very interesting for their clients.

And I think the key here is how do you prevent people having to put on a lot of cost with the dual infrastructure? How do you enable those tokenized and crypto assets alongside the traditional assets without blowing up the cost? And as you know, we just launched an end-to-end solution in Canada. We'll be bringing that to the U.S. And I think that's going to really help wealth managers solve that.

So whether it's wealth management, capital markets or importantly, governance; we think that there's just a lot of opportunity for us here. And as you know, change is good for Broadridge. What we do is we mutualize the cost of change. We help our clients adapt faster, and this is just another example of that.

That is a very comprehensive answer. Thank you, Tim. I really appreciate it. Just a quick one on margins, which I think will probably be a lot shorter. Just thinking through the dynamics, as you say, similar dynamics going into the next quarter. But as Tim just pointed out, there's a lot of good things happening there for the investment cycle.

Is it accelerating in terms of investment dollars that are going to be required to capture all these opportunities? And how might that play into our views of kind of how the margin profile of the company might go, let's say, over the next several quarters?

Absolutely. So I'll start with this year, right, by reiterating that we remain very much on track to deliver on our full year AOI margin guidance, which is between 20% to 21%.

From a margin basis, you've heard me say this before, right? We think about margins more as a means to an end. Our goal has been to take advantage of periods of elevated event activity and strong results to accelerate our investments in growth initiatives while we continue to deliver double-digit EPS growth.

This year is a great example of that. Our strong results enabled us to accelerate some of these investments in the areas you heard Tim talk about, shareholder engagement, tokenization and AI, especially in the second half of the year, all while working within our 10% to 12% adjusted EPS growth.

Now remember, with regards to the fourth quarter, you should expect us to do more of that in Q4 as well. And if you look at our updated EPS guidance, that would imply low to mid-single-digit adjusted EPS growth in Q4, which would lead us to a strong 10% to 12% for the full year. That reflects the impact of our expected investments in the quarter.

And I'll just add on that, you'll hear us this morning talking about a lot of opportunities and the investments behind those, but those investments are baked into all of the forecast that we're giving. And as we -- particularly as we think about the productivity from AI going forward and other things, it's really a matter of how do we get the right mix between investment and delivering to shareholders. But we don't see anything that's going to prevent us from continuing to drive double-digit earnings growth.

The next question will come from Kyle Peterson with Needham.

I want to start off on some of the work you guys are doing on the repo front with DLR. Obviously, you disclosed the Canton Network stats and some of the revenue coming in from that. And it's growing nicely, but still small.

But I just wanted to see like what some of the other products or capabilities you guys are looking at and kind of how we should think about the evolution of your work on repo and potentially in the other asset classes and potential other ways to monetize the Canton Network.

Kyle, thank you very much. So we're really excited about this product and what it means for the broader theme of tokenized securities and really optimizing collateral. And as we said, we did a little over $350 billion a day in March, which is 4x what our volume was last year. We're clearly the leading at-scale platform. And we have a series of signed clients that are in the process of being onboarded.

As I think about our road map, we have a pretty well-defined road map here in terms of moving from intercompany to intercompany. Moving on to Canton mainnet will enable that, and we'll be on other networks as well, bringing in real-time capability. And we think the opportunity there with real-time capability is to enable new trade types that don't exist today.

When you think about today, repos largely funds, sort of it's a treasury function that funds the company, funds the balance sheet. And we think about the possibility of that moving to a debt-level function that could fund individual trades is pretty exciting. So we think that sort of the functional dimension in terms of intercompany and real-time.

Then there's the geographic dimension in terms of Europe and Asia. And we're seeing nice demand in both those geographies as well. And then there's the asset class dimension. And our investment in HQLAX as an example there to move to other types of collateral.

So we think this is going to be really an area where we can help our capital markets clients for a long time to come. It's just gaining traction. But as we said, between this and Canton, it added 2 points of growth to our capital markets business this year. And so we think that's just the beginning.

Awesome. That's great to hear. And then maybe a follow-up on kind of use of cash flow. Historically, you guys have been extremely consistent between whether it's CapEx and shareholder return and M&A.

But with cash, especially kind of free cash flow generation, trending towards the higher end of the ranges this year, I just want to see like are you guys willing to be opportunistic and maybe step up the buyback, given the market does seem to be misunderstanding kind of your role in tokenization and some of these other growth initiatives? Or do you guys think you'll just continue to be stick to the historical plan? Just want to gauge on how opportunistic you'd be willing to be on the buyback.

Yes. So I'll start off with agreeing with exactly what you said. We have strong cash flow, we're in a great capital position. That's a great place to be right now, right? I will also say we do remain committed to balanced capital allocation.

And just as a reminder, what that means for us is maintaining our investment-grade credit rating, making internal investments to drive organic growth, paying a strong dividend growing in line with our earnings, pursuing attractive M&A and then share buybacks in that order.

And fiscal '26 has been a great example of that approach and action for us. Since the beginning of the year, we've already invested close to $300 million to make 4 strategic tuck-in acquisitions. We've returned $681 million to shareholders, which included $350 million in buybacks that we have done already.

And we continue to be in a strong capital position, right? We're sitting at a leverage ratio of 1.9x, which is below our target range of 2 to 2.5x right now. Given our forecast for free cash flow, we're on track to deliver more than $1.1 billion for the full year, which essentially leaves us with ample capacity to do both potential M&A and share buyback in Q4, which I agree with you, the share buyback levels are quite compelling right now.

I'll just add, Kyle. I think we have stepped up this year. It's likely to be a record for us in share buybacks. And at the same time, we've seen some very unique opportunities on the M&A side that really add to our franchise and have represented also unique value.

So we're looking at each M&A opportunity pretty keenly relative to our own shares. And we do see our shares as being attractive at current levels. So stay tuned. And again, as Ashima said, you'll probably continue to see a mix, but we're keenly aware of the value of our shares right now.

The next question will come from Puneet Jain with JPMorgan.

So I wanted to ask about delays that you're seeing in closed sales. Is evolution of AI also contributing to those delays in any way as your clients take like build versus buy decisions? Does AI change any of those dynamics, specifically in GTO?

Yes. Puneet, thank you for that question. It's interesting. I had dinner a couple of nights ago with the Head of Technology of one of our largest clients, and he was talking about how -- what a different position he sees us in relative to other SaaS vendors that he works with.

And he's really talking about the network and the way that we connect hundreds of brokers or dealers to thousands of public companies to tens of millions of investors, but also the technology different than the really deeply embedded way that we are relative to the other things that he see. And I was there obviously talking to him about an opportunity.

So we're not seeing AI affecting things. It is -- and if anything, we're seeing interest in AI-enabled products that we do. So if I think about looking forward, we are seeing positive trends for next year. As I mentioned, our pipeline and origination are both substantially up.

But beyond that, we're seeing the benefit from organic product development beginning to bear fruit. I think we will see some benefit from the tuck-in M&A that we just talked about. And we're starting to see benefits from the ongoing investments in our go-to-market capabilities, especially international.

So we like the demand going forward. We're not seeing AI or sort of self-builds taking over. And I think people are really liking our platform story, too, which becomes a sort of a build and buy where being able to leverage the agentic layer that we're creating. So all in all, we sort of like the way it's working out.

And Puneet, I'll just add, I want to be clear, we see minimal impact of this on next year, right? The math would say 10 to 30 bps. But what I do see is positive momentum from the factors I called out, position growth, higher trading volumes, faster conversion from our existing backlog and what Tim mentioned, the growth accretive M&A. So we'll talk more about next year in August, but I'm feeling pretty positive right now.

Got it. Got it. Yes, I understand like many of those deals are long cycle deals. And second, somewhat related to the first question, like as AI generates productivity in software development as well as in managed services expenses, are any of those dynamics driving any pricing pressure for you?

Yes. We haven't seen that yet. We are -- it is -- as we talked about, it is the improvements in SDLC are certainly helping us innovate faster and bring new products forward faster as you did with custom policy engine, the global demand model, the institutional voting platform, all of which are leveraging AI in the way they work, but also in how we develop them.

I think the managed services one is interesting because there, it is -- we are -- as we talk to clients about that capability today, we're largely talking about AI partnerships. We'll do an AI partnership, we'll guarantee you a level of savings, and we'll share the savings above that.

And it really changes the conversation because we're going into it together, their AI plus our AI and the APIs I talked about, and we can really create -- we've seen increases in demand as a result of that. And our managed services sales this past year have really -- that formula has been pretty powerful with clients. So it's leading to a lot of good conversations and I would say, really helping to drive demand.

The next question will come from Michael Infante with Morgan Stanley.

Ashima, you alluded to the fact that you feel comfortable about fiscal year '27 recurring revenue even with the lower closed sales outlook, based on backlog composition and conversion of revenue along with some of the position growth factors you cited.

But if we just think about the contribution of closed sales to recurring revenue historically being around that 6-point range, how should we be thinking about your conviction in the durability of recurring revenue growth on a go-forward basis if closed sales performance doesn't inflect?

Yes. So Michael, I'll answer in two parts, right? I'll talk about what gives me conviction of -- well, one, I'm not giving you any guidance for fiscal '27 right now, I want to be very clear about that. We'll come and have that call in August.

My aim was to give you a little bit more color on the drivers that we see as allowing us to continue to see strength in recurring revenue growth. And those drivers specifically were we have early indication on volume trends, which continue to look good even for our first half position testing for next year. Our backlog continues to look good. And in addition, I expect the acquisitions that we've made this year to contribute to both reported growth and organic growth over the course of next year.

Specifically on sales, if you look at -- even if you look at the difference in guidance that we had previously versus what we have right now, that implies only -- from a midpoint perspective, that implies only a $40 million to $45 million delta.

Given our conversion cycles across our ICS and GTO products, you would expect only a fraction of that to convert over the next year, which was my -- which is why I called out the impact of that would be 10 to 30 basis points at most, right, which is why, given all the other positive drivers that we're seeing with volume trends, backlog, acquisitions and the internal growth in the business; I feel good about where we will be for next year.

That's helpful. And then just on the Galaxy announcement, what's the gating item to seeing more Galaxy-like announcements in terms of your on-chain efforts? How closely are other corporates, including non-crypto-oriented businesses, monitoring that? And are there other parts of their infrastructure stack or other businesses like them in terms of their infrastructure stack that you intend to leverage over time?

Yes. Thank you on that. I think, first of all, just the last part of it, will there be others that we leverage? Absolutely. We'll be partnering with everyone, we'll be integrating into all the various wallets. So I think this -- when you think about how this will work, there will be, I think, a pretty broad ecosystem of partners.

And the great news, as I talked about earlier, is that pretty much everyone we talk to in this area, when we talk to them about how we can help make this real, they're very interested in talking to us, very interested in integrating and partnering. And so we've really been pushing on open doors in terms of that.

So I think the gating factor in more announcements is just really how fast we can talk to people. And we're doing that, and we're expanding our capacity to talk to partners to make sure that we can basically meet all the demand for that.

I think in terms of how fast this will go with other companies, it is a little bit less clear. We do know of some companies that are in the pipeline that we're in discussion with. So far, they do tend to be other companies that are in the sort of digital asset ecosystem. They're more focused on this than others.

I think it will really be a matter of companies -- if they're not in the digital asset ecosystem themselves, they do this to raise capital at good rates. And so that is a chicken-and-egg question in terms of is there supply from corporates, is there demand from investors.

And you could imagine as a sleeve if you're able to attract global investors through this, having a sleeve of this and things. I think it will be -- and I don't have any knowledge of this at all, but I think there are some very large IPOs that are coming later this year. I haven't heard any hint that any of those are going to have a tokenized sleeve, but if they did, that would certainly be an impetus to the market.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Tim Gokey for any closing remarks. Please go ahead.

Yes. I just want to thank everyone for joining us this morning. We're really excited about the story that we have right now, the way we're delivering results today, but also how we are really helping our industry at a moment of key change. And as I said a couple of times on the call, we think change is good for Broadridge.

We help our clients mutualize making it happen, help them adapt faster. And so we're really excited about the opportunities that we're seeing and that we talked about this morning. Thank you.

And this will conclude our conference call for today. Thank you for attending today's presentation. You may now disconnect.

All right. Good morning again, everyone. I'm Scott Wurtzel covering Info Services here at Wolfe Research. Delighted to be joined here by Broadridge with Tom Carey, the Head of the GTO business. So Tom, thank you for joining us.

Thank you.

I'd love to maybe start off if you'd like to share just a little bit about yourself and your background with everyone in the room.

Yes, fantastic. Everyone can definitely hear me. That's all works. So yes, so I have been in the company amazing 30 years. So I actually joined out of the University. And I say that because my degree at University was in AI. So I had the most useless degree going out in 1992 in terms of unemployable from that viewpoint.

And so I'd love to be back sort of in a time machine right now going back to like now launching my career in AI, would be fantastic. So really cool stuff. I'd say, look, I've run most functions in the company over my 30 years, and I currently run our GTO division. We think about that as wealth management and capital markets effectively. And I also look after our NGO operations and our product management capability as well.

So I look after our products globally as well. And it's been a fascinating journey. And I did reflect on like, well, I've been here 30 years, why have I stayed for 30 years? And I'm pretty ambitious and I'm pretty keen to learn. And the reason why is because we've been a great innovator over that period of time. We develop great products and great services, and we look after our clients.

And we have a really fantastic culture as well, led by Rich and by Tim Gokey now as well. So I think that's a really positive sort of outlook. And we follow megatrends in the market. Think about democratization of investing, think about the acceleration of trading and now AI. And it's a really exciting time to be part of Broadridge and to be powering the future as well.

Got you. That's helpful. I think most people in the room might be familiar with Broadridge as a whole, but there's a good amount of different moving parts in the business and segments and all that. So just wondering, if you can give a quick overview of the GTO business and how it has been built up over time.

Sure. Why don't I actually start with a little bit of Broadridge, just to set the scene with Broadridge because it does link into sort of GTO. And we sit at the center of capital markets, wealth management, asset management and issuer community as well. So we really are the sort of the market infrastructure provider for all those services.

And we really's help the global financial markets and these global clients actually transact, trade, and comply every day of the week. And that's a very important aspect of what we do. We are this 99.999% accurate firm in terms of delivery information. 15,000 associates, $23 billion market capitalization. And we really do offer scale and breadth. So when we think about our services, we do it for multiple clients in the same way at scale every day of the week as well.

And I talked about those 3 megatrends as well about democratization of investing, about acceleration of trading, including the Internet tokenization conversations that we're all having at the moment as well and AI as well. Think about our sustainable financial model, our 5% to 7% recurring revenue metrics, our 7% to 9% with M&A, our EPS at 8% to 12% and a nice dividend as well.

And we do that with balanced capital allocation. Now if you turn to GTO and GTO is this capital markets and wealth and investment management function. And we serve 29 of the 30 G-SIBs globally. We do that because we offer scale, we offer processing and we offer transactions at scale and reliably every week. And I sort of break it down into sort of 4 areas we do.

And for the -- I'm going to call it the rails for today because it's very popular to call them rails at the moment. But we are the effective rails for the infrastructure for our clients. So we enable transaction processing. We enable settlement. We enable corporate actions. We enable tax processing, and we do that at scale in a mutualized way. That second theme on mutualization is very key. When you look at how we actually use our value props to our clients, we drive that a lot on this mutualization conversation of your regulatory change, your cyber costs, your resiliency costs will be covered by us in a mutualized way because we can do that at scale across 30, 40 clients on one platform.

Trading, in 2021, we acquired front office capabilities, and that is now driving a conversation around powering the future of trading with Broadridge and a front to middle to back story as well. And the final piece I'd say is that -- we enable our clients to focus on revenue and really focus on their growth, both by our products and also by the fact we take care of all this infrastructure day in, day out as well.

Got it. That's very helpful. And if we kind of look at some of the recent results that the GTO segment has put up, I mean, they've been pretty strong. I think you had high single digit, I think 9% revenue growth in the second quarter. But you also talked about maybe a step down in growth in the second half of the year. So wondering, if you can talk about what has gone well in the GTO business recently and then maybe discuss some of the puts and takes in the second half of the year.

Sure. Very solid Q2, 8% growth, as you noted, 6% from our organic build as well. So very strong there. Capital markets grew at 8% as well. Looking at that, you saw benefits from our digital assets effectively. So our Canton Coin that we have on our books. And secondly, from our digital asset revenues from our DLR platform as well, we saw a big pickup in the flows in that. Our volumes in our DLR platform are about $380 billion a day in actual notional. That's 5x the volume we had 12 months ago. So a real pickup in volume.

And secondly, in Q2, we had the trading tailwinds behind that as well. We had opportunities in trade growth as well. So that was capital markets. Wealth Management, we were 11% of growth. 6% of that was from organic, 5% from M&A effectively. That 5% was an acquisition we did in Canada. We love our Canadian market. It's a really strong market for us, and we acquired a new asset in November 2024 called SIS, and we're servicing our clients really well in that space now.

And with that drove that 5% as well. When you look at the wealth business, it's got very strong pipeline and opportunities in that space. We're really pleased in that space. Now as you said, we do have some growth moderation in the second half of the year. There are a few reasons behind that when we look at those numbers. First off, and it's a little bit complex, we have some term licenses. So when we acquire businesses, we often find they were selling on-site software.

We don't do that very much. We typically sell a hosted or SaaS software agreement. But these legacy agreements tend to renew on a sporadic basis effectively. So the schedule for those is up and down in terms of just pure, pure timing of when they renew. And we have less of those effectively in the second half of the year than we had in the first half of the year. So it's purely, purely down to timing. We know all our schedules behind that, and we have some peaks and some troughs, but it's not something we focus on ourselves.

Second is the digital asset revenues. We talked about the Canton network. The minting curve for that changed in the second half of the year. So we've acted as a super validator as it's called on the Canton network since it started. And we've been earning Canton Coins for that. We actually hold 1.5 billion of those today.

In the second half of this year, as of 2026, that curve now changes more towards rewarding applications on the Canton network and less for been a super validator. We knew that coming in. But overall, the Canton digital currencies give us about 1% growth anyway in capital markets. And then the final thing I mentioned was M&A. SAS is now fully integrated. It's on a full 12 months. So it's no longer in our sort of growth curve. It's now embedded into that. That's what's driving that.

Having said that, we see a lot of opportunity with our clients going forward. We talked about our pipeline opportunities has been strong. We talk about 20% reengagement in terms of additional creation of new opportunities in the first half of the year. So we're pretty bullish about that as well.

Got you. That's helpful. And then if we move on to sort of like kind of tracking growth, I mean, what are the key KPIs that drive growth within the GTO segment? Now internal trading volume is one that the company does publish and we're able to track. But how does that movement in that metric translate to revenue growth? And are there any other metrics that you track internally that are important to keep in mind?

Yes. So you're very well aware of the internal trade growth metric, the stock record growth metric we have effectively. But if you think about GTO overall, the key thing is, I think, look at our sales metrics overall and our onboarding metrics as well tied to that as well. So you should look for -- and we don't break out GTO sales, by the way, from the rest of the company. We publish one holistic number.

But when you look at GTO, look at Tier 1 names signing up for platforms. We'll be talking about that kind of opportunities going forward. Think about our digital asset revenues and how we're powering our DLR platform. Think about our platform news. We've invested a lot of time and effort in our platform story, which is where we've integrated core APIs and ontology, a data model, and that is resonating really well with our clients as well. So that's enabling us to also increase the size of the bundle of software we put out there in a sale as well because we've now got an integrated solution that really powers that going forward.

Internal trade growth, as you said, 11% for the quarter. So pretty healthy, as I've highlighted. So look at that in terms of ongoing. We like volatility in the markets of course, that helps a little bit. So the news that comes out tends to be buoyant for us, maybe. Internal trade growth is about 1/3 of the revenues in GTO. So on that metric, sort of you can work through that in terms of that.

Some key milestones, I think, as we go out as well, think about our digital asset announcements and what we're doing in that space. We've got a number of activities in that space, particularly around our digital repo platform. Look at our core products, we've done a lot of product investment over the last few years in corporate actions, and in asset servicing and in DLR and looking for those to accelerate in terms of opportunities that we announced effectively.

And then in our wealth business, look at the adoption of our wealth platform as well. We announced last year a very big client joining that platform. They're going live as well in this period of time to look for live announcements in the wealth platform and net new logos we sign up, both for the platform itself and for more components as well. And they're all, I think, healthy indicators of why we are -- we talked about our 5% to 7% guidance for GTO in revenue.

Got it. That's helpful. And if we kind of shift into the capital markets subsegment within GTO, I mean one of the main questions that we get from investors regarding this area of the business is around how it's differentiated versus competitors. So can you address that question and talk about how Broadridge's Capital Markets business has differentiated itself over time?

Yes, perfect. Let's talk about scale. Let's talk about the mutualized model and let's talk about the front-to-back integration that we offer. I think there are 3 key things that are out there that really create an opportunity for Broadridge compared to competition. And I also say that we have a lot of trust with our clients, too. So our trusted brand is very important, particularly in these times as well.

To scale, as I've already mentioned, we serve 29 out of the 30 G-SIBs globally. So we have a really deep footprint. We have MSAs. We have contracts with all of these firms. 20 out of 24 of the primary dealers in the U.S. market are our technology. That's powering a lot of our DLR conversations, our repo conversations, too. $15 trillion a day goes through our pipes in settlements. So through fixed income and equity, we're a very large part of the U.S. market and the Canadian market.

And we win out really on this connectivity, operational resiliency and regulatory change agenda, where we're mutualizing that for our clients. And that's why I touched that second piece as well. Our clients look to us to mutualize those costs and to drive innovation as well. And we've got a very nice balanced mutualization agenda where we're helping clients with operational resiliency, with regulations and also launching net new products that we're very excited about as well.

And then finally, that front-to-back integration as well. So through our acquisitions, we now offer both in Wealth Management and in the Capital Markets group front-to-back offerings. And for our -- I don't like differentiating our clients, but for our Tier 2, Tier 3 clients, they look more and more for single vendor solutions as well. They're consolidating.

Third-party risk management is not allowing firms to contract with very small entities with no balance sheet. They look for bigger firms, who can actually offer them a wider range of products, and that's where we play as well. So I think that's a really cool thing. I was going to cover one other thing on competition, which is AI. Because it's sort of like -- is AI competition or not effectively, yes. So I'll give you my viewpoint with my own thoughts on that.

When you look at what we do in GTO, we are the core books and records for our clients. We are the book of record for what they do effectively. We are not workflow that sits on top of their own data. We're not a simple application in what it does. And we have to make sure that every transaction, every trade in ICS, every instruction, every statement accurately goes out the door. If we mess up 1% of those, the market does not work effectively.

So our programs, our engineers, our deep domain knowledge powers the industry in this space. And we've programmed and we've engineered our products for all the edge cases that sit in the marketplace as well. So if we process in 80 markets globally, we know how every single market interacts and how you maximize straight-through processing, okay? So we're actually anti-pattern to AI to a certain degree because we've already engineered our applications to actually take the human out the loop.

And our job with a lot of our value props is actually to talk to our clients about you need less operational overhead, you need less people already because our platforms are automating what you do, and we'll embrace that. I sort of have it -- and again, it's probably -- I don't know if it's a good analogy or not. But if you want to talk about sort of start-ups coming into the market and disrupting in our space, I sort of think about it that any of us can play sport, okay? Any of us can go and play baseball maybe or cricket or whatever you want to choose.

But not many of us can compete at elite levels, yes. So you can all go out there and compete. You can all play friendly baseball or whatever it may be. But if you want to get to that last 5% of being an elite athlete, you need skill, you need knowledge, and determination. And that's what Broadridge brings to capital markets, wealth management and governance that all those edge cases, all the SME debt effectively very hard to disrupt from competition. So that's my conclusion.

That's very, very helpful explanation. And I guess shifting over to the other, I think, big debate with respect to Broadridge around tokenization. Yes, it's been a big topic that comes up in our conversations with investors. And just wondering, if you can start off by sharing your view on how tokenized assets could impact Broadridge's business and what you're doing internally to address this emerging trend.

Yes. It's been most of the conversation this morning Edings and I had. Thank you very much for that. So yes, so let's start with the governance business and what we believe is actually opportunity. We do not think it's disruptive. We think it's really opportunity for us going forward.

So think about this. #1, the SEC has already stated very clearly that tokenized assets will have the same governance and compliance framework as a traditional asset. And we don't want a hybrid market, a split market where there's difference to that. So that's a very powerful statement as to what has to happen.

#2, we believe the vast majority of tokenized assets will remain traded through a broker-dealer or digital online platform. They are our clients today already. And they do not want to end up with cost base and disruption to that model effectively. So they want to see an integration of tokenized and traditional assets through a channel effectively that gives them their statements, their compliance, their regulatory framework, their tax reporting, all the things that goes on.

There's a life cycle to a transaction effectively and anything we do, and it's a very long transaction life cycle. And managing that is what we do really, really well. There are people talking about the issuer-led model, and there was a press release yesterday, we know very much about as well around that. But our clients, our intermediaries giving up those relationships seems very, very strange to us effectively.

And while that technology may come into play, you're still going to want to see the brokers, the banks, the end clients seeing a consolidation of the data. And that's exactly what we've done with all of our technology over the years as well. So we think it's pretty strong for us going forward. There's obviously going to be lots of market news that comes out, and you've got to differentiate between, I think, the tense that's used. We will be doing versus we are doing effectively.

And there's a lot of press releases out there saying we will be. We're thinking of, I'd say one thing that Broadridge, we are doing effectively. In capital markets, we've been a leader in tokenization, since incept. Our digital repo platform is currently tokenizing $380 billion a day in assets on the platform. We have 14 live clients on the platform and growing rapidly, and we're helping the market evolve and do that.

So we see a lot of opportunity there for that going forward as well. And I think the tokenization space, yes, it may help get to T+0 quicker. It may be the model for that effectively. But then you've got all the rails of tax processing. You've got statement production, you've got consolidation of statements, all the work that we do today will still have to be done in a way and probably triggered off a smart contract maybe in the future, but you're not going to have that embedded in a way that the calculations aren't going to be there. It's going to be part of a service we offer back as well.

And I think, look, one thing I'd say at the moment, our clients are most concerned particularly maybe in the wealth sector around escalating costs. They know they need to compete and offer potentially in some respect to crypto assets. They are very concerned that, that's going to start to increase the operational overheads and their costs. And that's what we're here for to enable the dual rails. We'll earn fees from them, absolutely, but it won't be at the doubling of cost effectively, and we'll be managing that for them and producing a really strong solution that enables them to meet their end client needs.

That's helpful. And then just as a follow-up, you mentioned Canton Coin a little bit earlier. So just wondering, if you can discuss the project and the initiative there that the company has recently undertaken, how it drives and kind of ties in with the sort of digital asset strategy. And yes, I think you talked about the impacts on the P&L, but any other details to share there would be great.

Yes. Very, very quickly. So I think Canton is a public permission blockchain. Effectively, we were an early investor in DAH, the holding company for that technology. So we've been there, since day 1. We act and we have acted since day 1 as a super validator for the network, 3 basically authorized transactions using our infrastructure.

And from that, we earned $1.5 billion in Canton Coins effectively. As I've mentioned, the minting curve for that is now lowering as well so that you'll see a lower minting curve going forward as well. So you'll see less of those revenues in the future, but more application revenues and digital ledger repo is an example of an application we're deploying, and we have other ideas of how we're going to deploy more applications too.

So that's the story there. I would say Canton is one network out there. It's one L1 network. Part of our value proposition is to support all L1 networks going forward and to be the network interface, interoperable agent to allow our clients to get those networks. So it's a real explosion happening right now. It's very similar to the 1990s ATS explosion in the markets, where there's so many different venues.

We'll see consolidation. We'll see things going forward. Very quickly on the actual Canton Coin itself. Going forward, as we mint Canton Coins, we are recognizing those as revenue in capital markets. For the $1.5 billion that currently we hold today, they are on our balance sheet and any net gains are mark-to-market and they're noncash and they're not in our disclosures.

Got you. That makes sense. And I guess if we shift over to the wealth side of the business, I think when we were here discussing this with Ashima last year, and I think it's still apparent this year, but we remain excited about the secular growth drivers within the wealth management space, the digitization of the wealth office, generational wealth transfer, all themes that still seem apparent this year. So can you just talk about how Broadridge is capitalizing on these trends within the broader wealth management space?

Yes. It's a fascinating space. It's obviously very broken down by different sectors, RIAs, wirehouses, et cetera. So it's not one homogenous space, if you like, but we're very excited about what we're doing there. 3 mega themes and then maybe we'll get on to sort of how we're doing that. Generational change in wealth. So obviously, wealth is moving to a new generation. They're digital savvy. They want to connect via omnichannel. They want to choose their preferences. So we're servicing that.

#2, democratization of investing and product expansion. Think about managed accounts, direct indexing, ETFs, alternatives and digital assets. So there's a growing demand to have those within the wealth sector as well. It does vary by client as to the appetite for that as well. Third is the digitization of communications. And as I look at this, we've got Wealth in Focus, our flagship product here, and we're helping our clients actually consolidate their statement production and information into one omnichannel communication with preferences.

And we're amazed -- or I shouldn't say amazed by, but when we look at firms, they're very fragmented in their communication methodologies by group, and we're bringing that all together in one solution. So we're super excited about the space. It's really cool.

Yes, definitely, definitely is. And it seems like there are several players in the wealth space that are also growing well, capitalizing on similar trends. There are some other companies in our coverage universe that are reporting similar growth metrics.

And so just wondering, if you can talk about how Broadridge sort of fits into this broader wealth space with some of the other players in the market. I guess as a follow-up to that, kind of what inning do you believe we're in, in this whole digitization journey?

Yes, sure. I mean a lot of the ones that you have in your space, they are sort of data analytics, benchmark type providers. And we typically integrate to those with our clients. I think a lot of what we do is operational deep infrastructure that we offer. So it's very different. We are the core books and records. We do the regulatory reporting -- we provide the adviser framework for the advisers to get out there and acquire and retain new clients as well, very important mission we're on.

So we see ourselves pretty differentiated from that group because they enable the investment. We actually process, hold and record the investment and manage the whole life cycle of it going forward. In terms of innings, I actually like baseball, so that's okay. So we're good on this front. We're probably in the middle innings, I think, of that. And that's because I touched on it earlier, is that when we look at our clients, they are on legacy infrastructure that we're helping modernize -- they have a very fractured sort of communication interface to their clients by group, and we're bringing that all together effectively.

So there's an element with our platform technology of integrating all the data into one place and empowering their transition with Wealth and Focus and other product lines we have and getting to a true digital experience, where all of you receive the information in a really clean way going forward.

That makes sense. Besides some of these secular drivers that we've discussed, I mean, what are the products that wealth managers are demanding most these days in your discussions with them? And where do you see sort of the next leg of growth within the segment coming from?

Yes. I think very keen on the adviser front for our advisers to retain and attract clients. That's a big thing for them. There are some pretty scary stats out there for advisers, I should say, around the fact that when the portfolio changes, i.e. someone dies and actually inherits the portfolio that it's very likely, currently that people swap their adviser effectively. So people are very keen to make connections with the family effectively and know who to talk to in that.

So we're powering a lot of that conversation around next best action, knowing what your client is going to do next, advising on that and communicating in a way that they want to be communicated with effectively. Digital asset expansion, yes, the wealth firms are looking at how they offer in a small way, cryptocurrencies perhaps in their portfolio going forward, digital assets and how we enable that. That will be a big theme for us as well.

And then adviser productivity, particularly through AI, we'll come to in a minute, really around the AI journey around how they can use Agentic and other things to be more efficient and spend more time with their clients and less time on internal administration. And again, our front-to-back story there is powering that because we are the ones, who make it much more efficient to put a trade onto our platform, and we'll take care of all the flows there. They're kind of the macro themes we see are playing through.

Got you. Got you. Yes, you mentioned AI. The topic of AI risks and opportunities has been very prevalent across whether it's info services and fintech over the early part of this year. And I know you touched on it earlier, but just if we could discuss just how you view AI in the context of the GTO segment, what does the segment have that's proprietary, contributory and how you're incorporating AI into the broader business as well?

Yes, super. Look, we think we actually have a differentiated position against disruption. I sort of touched on it earlier, and I'll maybe go into a little bit more detail there. And we also think we have opportunity, too, which I'll also touch on. I think there's 2 parts to this as well.

So we think we're very differentiated from other SaaS providers. And I don't mean to be dismissive of anybody out there. But a lot of the announcements you've seen from Anthropic and other providers have been around disruption of SaaS-based workflow products that are charged on a per seat basis potentially, effectively.

And they're getting attacked from 2 angles, I think. One is the seat model may reduce because there'll be Agentic AI taking over from people. So there'll be less requirement to do that. I'm sure they'll get around that by claiming that Agentic is a person in time. And secondly, a lot of these SaaS companies that we look at, they are doing workflow on top of data effectively. They're not augmenting the transaction. They're not owning the life cycle. They're not the books and records. So their role, in my view, is disruptible to a certain degree, yes.

And it's possibly disruptible from sort of new entrants, who create a cheaper mousetrap effectively. And I was listening to a podcast recently, where it's like debating around your upper tier of clients will stay with these vendors, the big vendors. But the very long tail of private companies out there and public companies, who don't need the sophistication that's offered today in these engines could swap effectively and go to a cheaper mousetrap that's charged on a rental basis rather than a seat basis.

So it's interesting. That's not Broadridge. I mean all we do, if we don't get these trades right, if we don't settle correctly, if we don't produce the statements correctly, if we don't get regulations right, the markets do not work. So we can't be 99% -- we can't be 99.99%. We have to actually transact accurately and do that. And I think that's a real disruptive -- anti-disruptive pattern, if you like, yes.

And we've coded our platforms really, as I said before, to be straight through. So the opportunity to supply Agentic to our platform is actually somewhat limited as well in that regard. But I do think actually, there's opportunities there, too, opportunities on revenue, cost and velocity.

On the revenue side, we talk about the fact that we operate in a $60 billion TAM today approximately. That's the vended spend in the market. The bank side client IT spend is $160 billion, okay? So it's 2.5x bigger than our current spend. And we see that using Agentic and accelerating our own product road maps can actually get us access to more of that market. And we think we can be first in market with products and services because of the fact we've got a technology platform, we've got [indiscernible] data and canton capabilities, and we can power actually our road maps at a faster rate.

Cost, like any firm out there, we're looking at obviously our cost model in every single function, and we will be no different to the rest of the market, and I think, in adopting Agentic and other techniques to optimize our cost base. And then finally, time to market and something we're working on. It won't be for the short term, but one of the big things in GTO is that when we sell, we have to onboard the client.

And that means we have to integrate to the client. We have to do UAT testing. We have to do all this work. We see a way of accelerating that time to market using Agentic, and we're doing active work right now to sort of start to close the window between signing and going live, which would give us a faster time to revenue in the future. Work in progress, nothing to announce today, but it's certainly something we aspire to.

Got it. That makes sense. Then I guess before we wrap up here, I just wanted to get your thoughts. If we were to be back here 12 months from now, what would have happened for you to be sitting up here and say that the last 12 months were a successful period for the GTO business for Capital Markets and Wealth. Super cool.

Yes. Well, first, Scott, thank you very much and Wolfe Research for hosting us today and allowing us the opportunity to talk to you all. So it's been fantastic. I do one thing on this is that our business model may seem quite complex. In this current world, that's actually an advantage. We see it. The complexity of what we do, the deep edge cases, is a competitive advantage of who we are in that space. Doing the books and records well is important. Doing statements accurately all the time is really important. And then driving innovation that we're doing through the DLR platform and other initiatives is great, too. So I'll leave you with 4 things to think about.

#1, looking forward that we continue to deliver on our 5% to 7% recurring [ DeepGen ] model. #2, in capital markets, let's go through the business lines. In Capital Markets, we continue with our front-to-back wins, and you start to see us announce more wins in the space and more marquee names.

We've got our new acquisition, CQG. It's a futures and options platform. We're going to close that subject to approvals in Q4 of our financial year, look to that to contribute 5 points to our capital markets business and drive opportunities and greater front-to-back stories.

Digital repo, we've increased volumes fivefold in the last 12 months. We have a ton of use cases that are really, really valuable to our clients. So we're going to push those through, increase the velocity of those and sign more business. And then look for Broadridge to be the dual rails of tokenization and traditional assets and look through all the hype and the news in the market for actually what Broadridge is doing in that space.

In wealth, we put the wealth platform to look for the adoption of the wealth platform, both clients going live that we'll announce and also new signings. Digital adoption of our wealth and focus platform and digital engagement -- and #3, again, similar for capital markets, adoption of crypto assets and other things on our technology rails and announcements around that.

And finally, as I covered in that last section, look for us to drive AI from a revenue creation viewpoint, a cost optimization viewpoint and from a time to market. Super exciting space to be in. As Tim would often says, the best way to predict the future is to create it. That's what we're doing here as well, and we're looking forward to it, and I'm delighted to be part of that. Thank you, Scott.

Yes. Well, Tom, thank you so much for joining us here.

Thank you.

I appreciate it.

Going to get started. Thank you, everybody, for joining us this morning, and welcome to the conference. This is your first presentation. I'm Patrick O'Shaughnessy, the Capital Markets technology analyst here at Raymond James. And presenting this morning for our fireside chat, we have Tim Gokey, CEO of Broadridge Financial. So Tim, welcome back.

Great. Thank you for having me here. And great to help open things up.

So to get started, for those in the room who might be less familiar with Broadridge, can you please provide a brief overview of the company and what you think makes it unique?

Yes. Thank you. And I'm really excited to be here today because I think it is a time of tremendous change, obviously, as we look around. And we think that we are uniquely positioned to help drive innovation at scale in our part of the industry.

So for those of you less familiar, we sit at the intersection of capital markets, wealth management, asset management and public companies. And we scaled quite a bit over the past 15 years, and we've done that really by growing and innovating at the intersection of key long-term trends like the acceleration of trading and the democratization of investing. And we think some of the changes we're seeing right now are just going to continue to accelerate those trends, really putting us at a good place.

If you think about just some of the positions we have, we process about $15 trillion in trades every day. We are -- and of that, about $400 billion are tokenized, which is a really leading position in that space. Our governance platform managed about 1.5 billion positions over across about 150 million accounts, and we serve 28 of the 29 G-SIBs. So it's a strong position really at the center of things. And at a time of change, it's a really interesting place to be. It gives us high connectivity across a real group of complex functions. So I can go on. I can talk about acceleration of trading and can talk about digitization and democratization. I think maybe we should get to your questions, just to give us time. I see you sort of looking at the clock there and getting a little nervous.

No, we have plenty to get through, and we will certainly touch on some of those.

One thing I will -- I won't come back to it, though. It just all of that creates a -- it rides on the financial model, just for everyone to hear, that is investment grade 5% to 7% organic revenue growth, 7% to 9% recurring revenue growth with a little bit of tuck-in M&A there with the leverage of being a technology company, call it, 8% to 12% over the long term in terms of earnings growth, 10% in the midpoint, buy back a point of shares, pay a nice dividend. We can support really low double-digit or low teens return to shareholders over a long period. And our guidance this year is right in the same place, 9% to 12%, including mid-single-digit growth in this quarter and in the next quarter.

Got it. Great. Great place to start from. So the conference is obviously just getting underway, but I'm sure the #1 topic is going to be the threat of disruption from AI. If I gave a blank check to your best salesperson, a subject matter expert and a great software engineer to build an AI-native competitor to Broadridge, why would they still fail to disrupt Broadridge?

Yes.Well, look, I'm really -- I'm glad you asked that question because we do think that AI is going to be a tailwind for Broadridge. We're pretty differentiated from pure SaaS players that sort of take your data and do some workflow and sort of UI on top of that. We are a regulated market infrastructure provider that moves money, move securities and moves votes. And for the vast majority of what we do is not just code. It is a network and it's a combination of many capabilities at scale. We compete on connectivity, on event coverage, on operational resilience and on certified compliance with regulatory change.

So in governance, we directly collect events from thousands of public companies, and we connect them to over 100 million investors. We combine the physical and the digital at scale, and we monitor and implement regulatory change. So even if you had the code with all of the nuances of all of the edge cases over all the years across all the clients, you need the other capabilities to be at scale.

On the GTO side, we're providing mission-critical services back to the $15 trillion a day and where one error would be many, many times our annual fees. And as I said, our platform are engineered to anticipate all the edge cases that can come up and that can create those kinds of errors. And the platform is surrounded by the people and the expertise to operate it daily because as straight to as everything is, it's not always as straight through as you think with all the various providers that are providing inputs to that as well as when there's industry and regulatory change.

So -- and finally, if someone were to make a change, it's not just our platform. It's all the things that go around it. All the other systems, all the testing that goes into that. So the ROI of change is tough to make that case. And -- but then conversely, we think that the opportunity, once you have everything in place that we have and all the connectivity, the opportunity to build on top of that and use AI to attack the $160 billion of unvended space just in the categories where we already serve is a real positive for us.

Got you. So I think that's a good setup for my next question, which is what are some of the examples of how Broadridge is embedding AI within its products and services to increase your competitive moat as well as extract operational efficiencies?

Yes. We are -- I think about this in really in 3 buckets. There's a first bucket, which is just bringing AI to everything that we do already. And we're doing that with natural language search, with embedding self-service help and with all of those things under our existing platforms. We think that's going to be table stakes in the future. The second bucket is where we have unique data or a unique position where we think we'd create new services. Examples there would be in asset management, our global demand model, which is predictive given economic scenario, it will tell you in what countries, what asset classes, what wrappers. That's been very successful. I think we sold on the order of 20 clients so far, that.

Another example would be the custom policy engine, where we're helping people with proxy voting. We just announced that. That wouldn't have been possible without AI. And then the last opportunity is using agentic AI to be more efficient ourselves in our operations, in our coding to go faster, do more. And great examples there are what we're doing around managed services, what we're doing on client onboarding and other areas where we can really see the acceleration.

I want to go back to something you said about there's a network aspect to Broadridge. Can you flesh that out a little bit and kind of how it applies across your key businesses?

Yes. We are connected to thousands of brokers, about 1,000 brokers, tens of millions of clients, 30,000 funds and, call it, 10,000 corporate issuers. And when you think about the economics of when there are many to many connections, having an intermediary that is a trusted intermediary in the middle of that is something that reduces cost for all the parties involved. And that's a core element of what we do. And so that's a really key piece.

And when you think about the governance side, the way we simplify all that for all the parties is something that is, the more people you have on the network, the more effective it is. On the GTO side, I think the scale is also about interoperability. It's about change. It's about scale. And again, it comes back to all the edge cases I talked about and how we drive that.

So I think people in this room may have read a story a couple of weeks ago about Goldman Sachs using AI to handle things such as trade exceptions. Are you hearing anything from your clients about them leveraging AI to handle tasks that Broadridge historically handled for them?

Yes. So broadly, no, but we are talking to clients about AI, obviously, and we think it's an opportunity. When -- remember the majority of what we do is really market infrastructure. What Goldman announced a couple of weeks ago was really around the operations that ride on top of that. And it was in finance, but there are some in the trading space. And so now they don't happen to be a client for our market infrastructure services. But if they were, then their AI would be basically riding on top of our platform.

All that said, operations do prevent great use cases for agentic AI, and we're doing that ourselves, applying it at scale. We do have a managed services business that helps clients with operations. It's a pretty small part of our business, about $100 million in revenues. But we've seen about a 20% improvement in productivity over the past year. We have line of sight on another 20%. That's something we're sharing with clients, and we're using that to take more business. And we really think here, this is a perfect example of neutralization, which is it makes more sense for us to invest in the AI to make that efficient than for each of our clients to try to invest in themselves. So we don't see the Gold announcement as a risk to AI. It doesn't really affect the 98% of what we do. And the part that it does affect, we think, is an opportunity.

Got you. So you mentioned your clients letting you invest as opposed to them investing. But I think a lot of broker dealers and other clients are just kind of trying to figure out how to invest in this new AI world. Does that create any headwinds for Broadridge in terms of your sales pipeline and particularly on the GTO side of things?

Yes. It's not what we're hearing today from clients. And who knows what the future will bring. But what we've actually seen in the first half of the year was an increase in new opportunity generation relative to last year. So our new opportunity generation was up about 20% in the first 6 months compared to a year ago. And our pipeline is more robust now than it was a year ago at this time relative to how much we have to get done.

The thing that I really like is that, that growth has been driven in the areas we're investing in areas like tokenization, shareholder engagement, digital communications. And so we like the fact we're investing and then we're seeing clients come to us for that. So we feel good about it. Obviously, we did $89 million in the first half, which is a little bit less than the first half last year. So we have a lot of wood to chop in the second half. That's not unusual given the seasonality of our business. And -- but really the strength of the pipeline and the way it aligns with what we're doing is what gave us the confidence in our last call to reaffirm our guidance for the year.

Got it. Appreciate that. I want to turn now to tokenization, another current topic of note. Starting with your ICS segment, there's a notion that tokenized equities could potentially disrupt the current model where broker-dealer intermediaries play a critical role in investor communications. Why are you confident that tokens won't change this role?

Yes. Again, I think this is one that we see as an opportunity, not a risk for our governance business. And I think that view is really supported as we talk to clients and regulators and exchanges and all the folks around the ecosystem. So just a few things. I think, first, it's not clear when or what pace tokenization will come to equities. There are a lot of market observers that think that really this makes more sense in fixed income and collateral and may eventually get to equities, but it may not. And 23x5 trading may sort of suck up the demand. So we'll see about that.

But second, tokenization is going to create more complexity for some of the actors. And what we said to our clients and to regulators is that we are going to solve that complexity for them so that the governance aspects won't become a barrier to growth. And so we're supporting it. Because third, we think when it comes as a tailwind for Broadridge. Over time, position growth for us has always been driven by innovation and by the next thing. And so we see tokenization as one of those next things and that as it draws more investors into U.S. equities, whether that's global investors or investors that are on the sideline now, that's going to help us with physician growth.

So now as high level. Let me just break this down because it is an important topic. The SEC has given guidance that tokenized securities have -- our securities and have all the same protections of regular securities. And the disruption case really assumes sort of large-scale disintermediation of wealth managers and broker-dealers. And we just don't see that happening. So what we see happening is that the vast majority of tokenized equities when it comes, are going to be purchased through the broker-dealers and wealth manager that are in business today. And those are all in digital exchanges. And those are all our clients. And they're going to have the same obligations that they do today, and we're going to be able to help them with that.

Then people talk about, well, issuers will have direct access to clients' wallets. And again, we don't think that's something that's going to happen. Wealth managers are investing literally hundreds of millions of dollars to acquire clients, and they're very protective about those clients and not letting that through. And then finally, when you think about it from the issuer side, it creates a lot of additional complexity. So today, I have my registered shares. I have my beneficial shares. In the future, on top of that, I could have tokenized shares that could be tokenized in multiple models on multiple Layer 1 networks. So today, 80% of the Fortune 500 engages us to help them with their election process, and this just creates more value, more value for them.

Got it. Very thorough answer. And then on the GTO side of your business, particularly in post-trade processing, would instant settlement on the blockchain change the nature of how Broadridge serves its clients?

No. The -- it changes -- it could change the settlement part of it. But when you think about all the downstream activities that need to happen, they're still going to happen, and they're not going to be able to be compressed into some smart contract. It's going to go through, as we've said, traditional broker-dealers, they continue to have all those obligations. They are our clients today. And whether it's tax, margin, class actions, think about all the asset servicing things that is going to need to take place.

Now what clients are concerned about is that as this begins to come, the most likely scenario is a very long transition period of where you have digital assets and tokenized assets and regular assets and you're trying to operate all of those. And so people are very concerned about building up a parallel infrastructure where I have to do it one way, but also do it the other way. And so what we're doing is enabling our existing core processing engines to handle all the asset servicing for digital assets so that you can maybe take advantage of quicker settlement, but still run things through your existing infrastructure. And we think that's going to be a very powerful value proposition.

And then I think building off of that, so as with AI, Broadridge is not just sitting on his hands regarding tokenization, and you kind of spoke about one of your initiatives. But what are some of the other key things that you guys are doing right now in the tokenized space?

Yes. So I talked about our distributed ledger repo platform quite a bit. And that is something we see is very rapidly growing. We're continuing to sign major new logos every quarter. And we have a really nice road map of that, bringing that to real time, bring it to new asset classes, bring it to tokenized deposits. And so we think that's going to be something that's really nice.

And I also just talked about how on the asset servicing side, allowing people who are using our platform today to flow their digital assets to those platforms. That is enabled already. We have -- well, already "call it this quarter", we're rolling that out. And then on the governance side, we have -- we're talking to all of our clients and to the digital exchanges. We'll be fully enabled for unchanged governance by the end of this calendar year. And again, we think we don't know how quickly that will come, but we have been very clear that we will be an enabler of that.

Got it. Another current events item is the SEC's recent proposal to default investor communications to electronic, which comes on the heels of a similar process at FINRA. Broadridge submitted a comment letter to FINRA that was in favor of default electronic communications. Why is this Broadridge's position? And do you worry at all that your preference management fee could be at risk because of this change?

Yes, it is. That's a great question. So thank you. I think you know that we have been a leader in digital communications for a long time. It's been an area that we've invested in significantly. And that's why regulatory communications are currently at nearly 90% digital.

But when you step back and think about why we have been a market leader and continue to be a market leader. It's really around 3 things. It's, first of all, knowing that the system works and being able to prove that it's 99.49% accurate and having all that certified by third parties. Secondly, it's continuing to drive innovation and showing change and whether that's tailored shareholder reports or universal proxy or pick your change that we've driven over the past few years. And finally, is that the cost continues to come down and become more efficient. And the cost of sending a communication, all in is down 75% since 2010. So we've really driven a lot there. And this is in the current situation.

So we think there's no question that done the right way. Digital delivery can be very engaging for investors and will be sort of at the next level of driving cost, and that's something we've always been doing for our clients.

And to the point that you said that 90% of communications are already electronic. If the default were to switch to electronic, I assume that means that there's just not going to be much financial impact one way or the other?

Yes. I think -- and you know, Patrick, your other question, you asked about the preference management fees. So let me just mention that because I realized I didn't address that because it's an important part of your question, which is if it's all digital, then what happens with preference management fee. And so for those -- this is really in the weeds, but when you look at sort of our total fees that we get, there's a chunk that's sort of a core fee and then there's a chunk that's a preference management fee for digital communications.

And that -- I think that whole fee is, I would just call it a bit of a misnomer because when you look at how we get paid, we only get paid today for the communication. When you look at what we do, it's much, much broader than that. We are connected to every public company. We collect the events from all the public companies. We're connected to every investor. We collect their preferences for how they want to receive communications. Then when there's an event, we pulled the positions from all of our broker-dealer clients. We communicate to the end investors in the way that they've chosen to be communicated to. We take back their votes and process them and tabulate them. We provide a 365, 24/7 view of that for the brokers, for the issuers, so they can see what's going on. We tabulate all the results, reconcile them, show the end-to-end that it's worked. And then we provide one reconciled bill on behalf of the industry. And so all of that activity right now is all charged.

But really, it shouldn't be about sending a communication. It should be about -- it should be like an annual -- what 3 months ago, I would have called a SaaS fee, but I won't call it that today, but an annual fee around per position for covering all those activities. So all that work, whether it's digital or physical, it's 98% the same. And so we feel good about that.

Meanwhile, you just asked about a new question, which was how will this affect -- if it does go electronic, when communications go electronic as they will, how will that affect our revenue. And I think -- and you pointed out, look, regulatory communications were already 90% digital. So how much will this affect our revenue? And I think you're right that the impact will be relatively small. Now what we do think is it's going to make us a more valuable company with higher margins and more growth, and I'll come back to where that is. So as I said, we've been investing to make this happen for years. And if you go back to our last Investor Day, we shared our strategy for our new digital platform at that time to really help drive things away from print towards digital. We made a lot of progress with that. And digital default, I would call that sort of the next step on that journey.

Now it's important to note that the timing of this is pretty uncertain. There has been talk on the hill. There's actually a bill passed in the House, sort of stalled some place in the Senate. The SEC has said that they're going to be working on this. And so we think it is quite possible that in the next -- before the summer that there could be movement on this and the beginning of a process. If the process begins in that time frame, then it would -- and these can often be very protected processes, as you know, but we think this one could play out more quickly. And in 2 to 3 years, we could be there. That would affect a small percent. I'm going to say, a few percent of our revenue, sort of if you look at the direct impact, we think that there are directly linked products that would create demand for that would really make the revenue impact and the profit impact negligible.

So just if you think about again, for those that follow us closely, and go back a few years of something called tailored shareholder reports that were introduced. And we talked about at the time that, that was going to be a $30 million to $40 million sort of revenue impact on us. And then by the time we got the implementation, we had created new products that more than offset that. And in the end, the impact was 0, and we grew our earnings 11% that year. So that's really the way we think about this playing out.

Yes. If I remember correctly, tailored shareholder reports actually led the record closed sales activity for you guys that year. Do you worry at all about a world where nearly 100% of communications are electronic that would reduce your regulatory communications mode by giving Broadridge's -- or given Broadridge's scale and expertise of handling physical proxies and interims, could a digital native competitor maybe come up? And I think this probably ties back into some of your earlier comments.

Yes, it definitely does. So we're -- we don't think that's going to happen really for 2 reasons. So first off, even when you move to digital default, that doesn't mean that physical goes away 100%. There are a lot of investors that really prefer the physical side and that when you look at the people getting paper today about not everyone wants it, but like 80% of people say, well, they want to continue. Now they have to default into it. And with defaults, they along. So there will be a relatively small percent of paper left. But a small percent of a lot is still hundreds of millions of communications that someone has to deal with and the integration of all of that.

Second, it comes back to the breadth of the value proposition that I just talked about. The event collection, just if you look at sort of standard industry feeds, they miss a lot of events. When we've done benchmarking about what we're doing relative to sort of publicly available information, you'd be a regulatory risk if you just went with the publicly available information. So that combination of all the things that we do that come together is a really powerful value proposition and clients engage us for that. That's why our Net Promoter Scores are in the 70s, both with brokers and with issuers. And so we think it's just going to be the next step in what has been a long evolution.

And then another interesting development is that Broadridge's role in proxy voting is changing, whether that's pass-through voting or issuer engagement or displacing proxy advisers. Why are these opportunities all emerging right now? And how would you frame the potential upside for Broadridge?

Yes. I think right now is there has been frustration building for many years over a set of problems, a set of problems for passive asset managers as they've grown in this very significant share of voting that they control, a set of problems for active asset managers around sort of lack of choice in the proxy adviser space and a set of frustrations among corporate issuers around how they communicate to their end investors and engage their end investors who engage at a lower rate than they'd like. And so then what you're seeing, I talked about this being a very pro-innovation administration. So you're seeing a bit of an unlock against all those things that have been building frustrations for a while.

And so seeing that, we have been looking for a while and how do we help each of those. So with passive asset managers, we have been driving pass-through voting for a number of years. This year, we will do -- last year, we did, I think 400 funds with about $2 trillion in assets. This year, we'll do about 600 funds with $4 trillion in assets, so it continues to really grow. This year, we've introduced this custom policy engine, as I mentioned, they really give asset managers a clean set of data and then allow them to apply their own rules to it, be able to do that much earlier in the cycle and really -- and also provide visibility into that data to the corporate issuers to really solve some of the pain points there.

And then withstanding voting instructions, allowing public companies to directly engage with their shareholders and allow them to default because defaults are popular, default into voting with management. So we think those are powerful solutions. I think I said on the last call that collectively, they could add something like a point of growth to our governance business in each of the next several years. And -- but even beyond what that does is it really embeds us strategically with our clients in a way that is much deeper than we really like.

Perfect. I see we have about a minute left. So maybe a good place to end the conversation. And this probably will bring it back a little bit higher level, but what are some of the key messages that you want to make sure that people walk away with today?

Well, first of all, I want to thank you and Raymond James for having us and for allowing me to speak to some of the core concerns that investors have and why there are opportunities. And then I would just want to leave people with 3 messages.

So first of all, we are doing very well today. We've given strong guidance for the remainder of the year in terms of growing earnings 9% to 12%. I don't see any change in that. So we really like that where we are today. Second, our growth is being driven by long-term trends like democratization of investing and the acceleration of trading that are only being pushed further by the changes that we're seeing happen in the environment. And so we think the changes we're seeing in the environment are really beneficial to us. And so that really brings me to third, which is we've been investing really to create the growth platforms for the future, whether that is tokenization and trading, whether it's all the things I talked about in terms of new ways for shareholders to engage, whether it's bringing our technology platforms on to a true platform that will enable our clients to drive AI and driving it ourselves. Those things are all, we think, really setting us up really well for the future.

We've run this company. As you know, with a very long-term view, we view every client as a 99-year client and that they really look to us to help them navigate periods of change. And when we invest on their behalf, it allows them to do things even faster and that's why I always talk about and help our industry drive innovation at scale.

All right. Perfect. With that, we are out of time, but we'll have a breakout session downstairs. Thank you, everybody, for joining us.

All right. I guess welcome to the conference. This is really the beginning of 3 exciting days here in Key Biscayne, Florida. I'm Alex Kramm, senior research analyst at UBS, covering exchanges and business services. Excited to start the conference on with the new participant, Broadridge, I think has never been to this conference, at least you haven't been here, Tim. So why don't we just get started with Tim Gokey, Chief Executive Officer of Broadridge.

So look, as I just said, you've never been to this conference personally before. So for everyone's benefit in the room here, just to get us started on an easy note, why don't you just remind everybody what Broadridge is all about and why we should be excited about the company?

Yes. First of all, Alex, thank you very much for having us. It is our first time here and an amusing thing, we -- not knowing where the conference was, we were here with our family for a week over Christmas at this hotel. So it's funny to be back and it's great. I'm really excited to be here today because there is so much change going on in financial services right now. And we think that Broadridge is uniquely positioned to help drive innovation at scale for our industry. We sit at the intersection of capital markets, wealth management, asset management and corporate issuers. And if I go back to when I joined the company in 2010, we had 3,000 associates, about $2.5 billion market cap. Today, we're 15,000 associates, $22 billion market cap depending on which hour you look at.

And that's all been around -- all that scaling has been around driving innovation at the intersection of a couple of big trends, the democratization of investing, the acceleration of trading. And so today, we're a technology and market infrastructure provider that $4.5 billion recurring fee revenues. And just to give an example of that, we process $15 trillion of trades every day. In the tokenized assets, we process $400 billion a day. On the government side, we process 1.5 billion shareholder positions across 150 million accounts. We serve 28 of the 29 globally significant financial institutions. So that gives us a really unique sort of complex functional knowledge and network connectivity that really suits us well to drive change.

And I just have to talk about a couple of the things that we're investing in, and we'll do your questions, but it's -- there's so much change going on in financial services right now with a really pro-innovation regulatory agenda, with a lot of technology change. And so it's creating change across 3 areas that we're investing in: Democratization investing, shareholder engagement and AI. And those are -- and acceleration of trading, I can't forget that one.

So if we think about just stepping into each of those for a moment, you look at the democratization of trading has been a trend for a long time. We see 3 exciting things happening right now. Tokenization, we think it's going to develop over time, but we're really well positioned to help our clients with that. And we think it's going to be a nice driver of physician growth over time.

Shareholder engagement. The way public companies and funds are beginning to engage with their shareholders and the retail shareholders, very different. We're helping them with that. And then digitization of communications where it's already 90% on the regulatory side, but our tools are making it even more powerful. So we really like what's happening there.

Acceleration of trading, very similar in terms of the opportunity. It's getting faster trading, narrower spreads, more markets, more products, really creating demand for what we do. And now as you think about the tokenization of that where we're a leader, we can take that to the next level.

And finally, AI, we have more powerful uses of data, bringing in agentic, bringing in coding tools, we think that's a real opportunity for us. It's obviously been sort of bespoke to the market over the past few months, but we think we're really differentiated from the typical SaaS player that is overlaying sort of workflow on top of their own data whereas what we're doing is core market infrastructure. We're moving money, we're moving securities, we're moving votes, we're competing in operational resilience. It's a vast network, and it's really hard for one person to replace that.

And on the converse, the upside of that is the ability to really go after the white space in our market. We talk about a $60 billion market that we manage. That's the vended side. Unvended is another $160 billion. And so being able to go after that like with what we've done with Wells Fargo, JPMorgan, ExxonMobil, just recently, to name a few. So we really like that opportunity. And of course, we're using it internally. And that's all in a financial model that is very simple 5% to 7% growth organic, 1 to 2 points of M&A for a 7% to 9% recurring revenue growth.

With the operating leverage of being a technology company, grow -- earnings 10%, 8% to 12% is our guidance, buyback a point of shares, pay a 2% dividend, deliver low teens to shareholders for a long time. So we take that financial model, the ability to reinvest and the ability to really help our clients drive change and mutualize change. It's an exciting place to be.

Well, I think there's a lot to unpack here.

Exactly.

So let's start with the regulatory side, which is obviously still the core of the business, the regulatory communications side. So one of the things you're talking about, the long-term outlook is position growth in that mid- to high single digits. I don't think you just mentioned it, but maybe just talk about that for a second. What gives you confidence in what and both the long-term outlook there and that, that can actually continue?

Yes. I think -- so a core part of our business, regulatory communications and so position growth is the main driver of our economics there. And it's not -- if you look at the sort of contribution to the growth of our whole company, this is a part of it. It's not the whole thing, but it's an important part. And we always talk about position growth in the high single digits. And that has been -- basically it's been where it's been for literally the past few decades. And the reason it's been that way is just constant innovation in financial services.

So if you go back 15 years ago, it was the advent of ETFs. If you go back 10 years ago, it's a real growth of managed accounts, and that's still going. If you looked 5 years ago, it was free trading. If you look right now, we're seeing significant growth in direct indexing and if we look ahead, you think about the potential impact of tokenization. So that continued innovation is what gives us confidence. If we look right now in the very near term, we have a good ability to test forward over the next few months. And we're seeing a continuation of that same thing.

So nothing on the near term -- I guess, we jumped ahead a little bit. But like anything on the near term, given some of the volatility, it seems like retail is resilient, seems like you're still pretty comfortable with what you're seeing out there?

Yes. It's interesting when you see market volatility and market pullbacks and stuff in terms of how that affects our business, we tend to be a very lagging indicator and it tends -- if there is an impact, it tends to happen way after the fact, if there's an impact. It is -- right now, what we're seeing is retail investors are sort of buying in on the dips. So we've always talked about this testing, but what we do is we pulled the positions today that we're going to be communicating with 6 weeks from now. And that doesn't change that much. So we have really good visibility into the season right now.

Okay. And then outside of the macro drivers, you mentioned already in your -- in the first answer, the quiet revolution. I think you call it on the investor communications side, so I did ask about this on the earnings call, and you made a comment that there's a variety of new initiatives, but that overall, I think you mentioned could maybe add a point to your growth over time. I think you mentioned maybe even a couple of hundred million dollars was the number. So maybe just flush it out a little bit. Any particular chunky solutions we should be thinking about? Because it always sounds great when it's like, oh, it's the percent, it's a few hundred million, but obviously, I assume the teams looking at more detail than that.

Yes. There are -- what we're going after is some things that have been sort of issues and topics for the past several years, and we're bringing technology to solve those. And sort of different -- different client segments have different issues. So for the large path of asset managers, they are very concerned that -- there is a concern that they have too much voting power. And so they're trying to -- they're trying to distribute that to their underlying shareholders with pass-through voting. And that's been a big growth area. We've gone from 100 funds to 400 funds, 600 funds this year, $4 trillion under management. It's not huge economically, but it really positions us well.

And the real thing there is going to be how do we make it -- we're still not there yet, how to make the interface easy enough that there's really good uptake amongst investors. But a lot of innovative ideas on that.

The second chunk is that asset managers are -- they just don't like the -- having only the choice of ISS and Glass Lewis around how to do their voting. And so we've been approached by a number of those. We're driving using AI, clean data, giving them a policy engine, allowing them to do their own votes. That could be a really nice chunky growth area for us. And we're doing that with three significant clients this year -- 3 Tier 1 clients, and we see a lot more of that next year.

And then the third area is standing instructions for public companies. We're doing that with ExxonMobil. We'll do sort of a beta this year with about 6 companies, allowing investors to set a default because retail investors tend to want to vote with management. If they don't like management, they sell the company.

And so they really like that. This could also be a really chunky business. It's pretty new, but it could be pretty chunky. So collectively, just ISS and Glass Lewis, that's a multi-hundred million dollar market by itself. The standing instructions, hard to say how big that could be, but it could also be substantial. So if we think about building a business more than $100 million over the next few years, that's where I get the point. And it's not on the whole company, it's on the governance business.

Perfect. And then maybe to touch on the other side of that. I mean, you just mentioned the proxy advisers, and there's been a lot of scrutiny even from the administration, so just given that you're a little bit ancillary to that business, and I think sometimes investors don't really understand where you are relative to those guys. What is the risk that you get caught up in this whole regulatory focus as well.

Yes. Great question. Thank you for asking because I think you hear the word proxy and it's like, what was that? So we just don't see any appetite at the SEC for a review of sort of the underlying voting technology or the pricing around proxy. Obviously, everyone wants it to be less expensive, that's their job, but we're just -- there's just no momentum around that if you look at the public agenda of the SEC. What is on the SEC's agenda and it's really clear, Chair Atkins has said it multiple times. It's tokenization and digital assets, and we've talked a little bit about that. We are really helping there. And we think we can make a big difference in bringing governance to that.

It is -- we always talked about making IPOs and public companies great again. And that's where you hear some of the proxy stuff inside that. But it's much more around making it harder for people to put forward proposals. Our economics are not geared on the number of proposals. It's about simplifying some of the disclosures, the length of the proxies, some of the things that are inside there, again, doesn't touch our economics. Even if they move to semiannual reporting, which I don't think is going to happen, but that doesn't touch our economics.

So those are all things that sort of sound like they're in the space that they're really oriented as something else. And in fact, we're really helping with that -- with what we're doing with ISS and Glass Lewis and sort of creating an alternative to that, which people really like.

And then the last piece of this agenda is making private assets more available to people. We're not as geared on the private asset space, but we are helping wealth managers with that. And as private assets move from just high net worth investors to broader investors, it does raise the question which I'm not claiming as an opportunity yet, but it raises the question, should there be more disclosure? And could that be a future opportunity. So when we look at how the agenda is lined up, we see it much more as an opportunity than a set.

We definitely think there will be more disclosure needed as you broaden access to private markets. Switching over to the GTO side for a minute and maybe just starting with Capital Markets. I'll keep this broad, but a lot going on in that business all the time. So maybe just anything that you're excited about in the near and long term here?

Yes. I think -- so near term, we announced the acquisition on Friday of CQG. CQG does execution management, especially in futures and options. We don't really play in the execution management space today. And we're building in futures and options. We have one core client, we're building up from that. So it really strengthens in both dimensions there. That was about $170 million purchase and we think that will -- not necessarily this year because it's going to close later in the year, but you think about its addition to the capital markets business is about 5 points of growth. So that's a nice exciting thing.

If I think medium term, we always talk about the simplification that we bring to platforms, both on the front office side where many clients who go and look, and they have 30 different front office trading platforms and bringing that together on a single multi-asset class platform is a great simplification opportunity for them. Similarly, in the back office where their infrastructure has been built up asset class by asset class, region by region and simplifying that onto a global multi-asset class platform. That continues to be something that has a lot of room to run.

And then if we think about longer term, we really like what we're doing in the tokenized trading space, again, leading with digital ledger repo, the $400 billion a day that I've talked about, but we have a nice road map on that if we look forward around bringing in real time, moving to new asset classes and so we always talk about simplification and innovation in terms of our capital market strategy, and you can just really see how that plays out.

Okay. Staying on GTO, but moving to the wealth side, which is the other part of that business, generally an area that -- and it's not just because I represent this firm, but clearly, an area that we're excited about. But look, what are you doing in that area? Are you going to be able to participate to the -- in the growth in wealth? And anything again that gets you excited near or medium term?

Yes. We are -- in wealth, we're focused on making advisers more productive, making the end investor experience better and on digitizing all the operations. And as you know, we have invested pretty heavily in a platform that is componentized. It's sort of the more you have, the better it works, but you can take any of the components that allows people to modernize really sort of on their own pace. We have -- we announced multiple sales of that last year. So we have a nice organic growth in this business.

And when you think about the component side, we have -- of those, we have about 48 components are installed live at clients. We have another 40-some that are in -- currently in implementation. We just won a number of industry awards. So we like the momentum. We like the story here. And it's a long-term story in helping firms with their modernization road map.

Good. All right. I want to kind of take it back to the bigger picture a little bit and maybe get even a little bit more into the numbers. But sales activity is an important metric that we all track. Second quarter, I think, was a nice boost year-over-year. But I think year-to-date, you're still lagging a little bit if I look at last year, and the guidance for the year. So just talk about maybe the pipeline, what you're seeing and what gives you confidence that we're going to reach that number this year.

Yes. So first of all, just for those that aren't as familiar, when we think about sales for us, it's sort of a bookings measure. It's sort of stuff goes into a bucket and then we implement out of that bucket. So if you look at sort of near-term revenue, it's much more about the pace of implementation out of the bucket. So we talk about the backlog that we have at the end of each year. Last year it was $430 million at the end, and that's where we're getting our near-term revenue.

So sales can go up and down, it doesn't really affect our near-term growth, obviously affects our long-term growth. And then we tend to be pretty seasonal in our sales and do a lot more in the second half than in the first half. But as you rightly point out, we're a little bit behind where we were last year at this time. So we've done about $89 million in the first half. And as I said on the call last week, we have a lot of wood to chop. So what makes us optimistic about that, a couple of things. When you look at the new originations, which is an important measure that we look at, our new originations in the first half this year were up 20% over last year.

The other thing we look at is pipeline multiplier. So if I look at all the things in our pipeline that have a date where the -- it's expected to close sort of in this fiscal year. Now by the way, if you added up all the stuff that's expected to close this fiscal year, we blow past our sales numbers. But institutions always -- there's always like a little complication and things get delayed a little bit. And so there's always a percentage that happens. But if you look at the multiplier of the ratio of that compared to where it was last year, it's much healthier. So those are a couple of things that are -- that give us optimism.

The other thing I really like is where we're originating, where we're in conversations is these areas where we're investing, whether that is digital communications, the platform, the tokenization topic, the shareholder engagement topic. And so we have really healthy client conversations around all of those. So those are the opportunities, we are seeing some good momentum in the second quarter. I don't go so much by quarterly results as much. It's just sort of looking at the whole year, but that's where we come out on the $290 million to $330 million.

Okay. You just mentioned tokenization again. I think we've come up a couple of times already. So maybe we'll need to dig a little bit deeper if -- look, I think it's going to be a big topic at this conference for sure. So yes, can you talk a little bit more about the opportunities, but then also about the risks that, again, I think, been a focus for investors here over the last few days, weeks or maybe even months already. So yes, and then specifically on the opportunity side, you have the repo product out there. I think it's on a -- it's on a private chain now or ledger now. I think you're going to move that public. So can you just talk about when that's going to happen, what that could mean? And then, of course, other initiatives around that and potentially other asset classes?

Yes.

The big question, I know it's a -- it's a lot going on, but...

There's a lot going on. And who knows what the market is concerned about this tokenization or if it's software or what it is because it's really -- this is where you get the big bucks for figuring that out, but let's start with where people have some concern, which is on the governance side, and is there some way that this could disintermediate Broadridge. And I just want to be really clear here, which is we think that this is absolutely an opportunity, not a risk for us. And say that again, we think this is absolutely an opportunity. And why is that? If you think about, first of all, tokenized securities, with the SEC, they've consistently talked about the fact that the tokenize security is still a security. So all of the different requirements that traditional securities have to have -- we expect tokenized securities have including everything around governance.

And then you really look at, well, where will these be purchased. And we believe overwhelmingly, they're going to be purchased with traditional wealth managers or the digital exchanges like the Coinbases and the Krakens of the world. And all of these are our clients.

And those intermediaries are going to have all of the same asset servicing obligations that they have today. And that includes proxy and class actions and corporate actions and tax and all the complexity around that, that they need to address. And that's what we do, and they are our clients. So people talk about, well, what about issuers having direct access to those clients.

In the end, intermediaries are not going to give up the names of their clients to funds and public companies. They're just not going to do it. And investors want the choice around that privacy. So we don't think issuers are going to have that direct access.

Now if I go and buy my shares directly from Exxon or directly from Apple or directly from Microsoft or pick your public company then they'd have direct access. But that's a hugely clunky model. When you think about at scale, is that what's really going to happen? No, it's going to go through intermediaries. So we think, conversely, what's going to happen is it will go to intermediaries. It will bring in new investors, new products, new sources of demand, the digital changes will grow, and that will all be a nice contributor to position growth in the future and a nice tailwind for Broadridge.

Excellent.

Oh, DLR. And the capital market side, yes. So that's the governance side. Then we go to sort of the platform side of things, where we have been a leader. If you went to Davos 10 years ago, every street sign and every billboard and everything would have been all about blockchain. And then it sort of went away and got quiet. But we never stopped investing in that. And so we started with repo because 60% of fixed income in North America is on our technology platform, and we're looking for where is a use case where we can help our clients make money. We can make the money, not go broke.

And so we started with repo, with internal -- intra-institution repo. UBS is a user of that. And that enables clients to save money right now without a big complex network. That had grown to about $100 billion a day up to sort of this time last year. And since then, with the market awareness, with treasury clearing coming up, which is a great new use case for sponsored repo and the new administration that's grown from $100 billion to $400 billion a day, a bunch of new clients signing up. It continues to grow. And so that's a nice use case.

As you say, right now, we started with that in a private version of Canton, which is one of very financial services-oriented, institutional trading-oriented networks that is out there. That we will bring to the public version of Canton. They're doing some work on it. They have a statement of work with DTCC to really make it sort of fully ready for prime time. So that will happen later on this calendar year. That will create a lot more interoperability for bilateral repo.

In the meantime, we're bringing it real time. And you think about the way repo works are not today, it's overnight. It's sort of a treasury function. Think about the future where it can be real-time atomic settlement. It can be right on the trading desk financing trades as you go. And really the volume differential there could be really nice and really create something that would really help the whole daylight overdraft situation and that exists today.

So we really like that, but this is a multi-asset class platform. We already announced in Q2 that we helped Societe Generale issue its first natively digital bond, corporate bond, and we can do that with others. We're also talking to institutions about tokenizing deposits. So we see a really nice road map of growing real time, much more interoperability, other asset classes. And we think the experience of doing it at scale, which we've been doing versus experiments is -- gives us a really nice edge in this.

Good. Staying on new technologies. And I think you, again, mentioned it at the beginning already, AI, which again, will be a huge topic at this conference across, I think, the whole -- all of the subsectors. But look, I think starting with what you're doing, maybe give us a refresher of where you're doing -- using it internally, maybe for cost purposes, but also obviously, where can it help grow the business? And then, again, just looking at the last couple of weeks again in parts of my coverage and financials broadly, clearly, investors are focused on the disruption from AI again software data, workflows, I mean, some people think everything is changing, obviously. So how are you positioned against that potential disruption that a lot of people are trying to price in right now?

Yes. Obviously, we think it's more of an opportunity than a disruption. And probably every company that comes up here today is going to say that, but let me just talk a little bit about what I think differentiates us from sort of some of the traditional SaaS players, where what they're essentially doing is giving you access to your own data, giving you a nice user interface, giving some workflow on top of that to manage your sales force to do your HR picture what you're doing.

And as I said before, I think we're very differentiated from that because they're really core market infrastructure, connecting all the institutions and the trading venues and the depositories, moving money, moving securities, moving votes and something that is -- requires that many firms interact with each other with strong regulatory requirements. And we're making an error can -- would be many, many times our fees, 1 error.

So that really makes it different. I mean, look, we've looked at our own -- all the software that we purchased ourselves. And we can look at applications. We say, yes, we can internalize that. And we look at like, okay, our Oracle Financials. We're not going to internalize that, right? And it's the same kind of thing. So we just don't see the vast majority of what we do is have this broad network quality. That's just very different.

Conversely, we do see real opportunity. When we look at the ways we've already been able to generate new revenue by doing new things for clients. So what are some examples. We have a data and analytics business that serves the asset management industry. And that has always been and it's a really beautiful business. We have great data around who is buying what and what channels, both retail and institutional globally. It's always been descriptive.

With AI, we've been able to make it predictive to say what's going to happen. And that has been -- I won't say it's flying off the shelves, but we sold on those 20 clients in 18 months since we introduced it. What we're doing, we've announced with Wells Fargo and others around proximity. That is a natively AI custom policy engine. Again, it's applying AI to do something really nice growth trajectory there. The -- if you -- next time you get -- pardon me, let me get an annual -- an e-mail with an annual, semiannual report from a fund, take a look at it, there's going to be a picture of the report on there that you can just click on.

I know that sounds a bit trivial, but until 6 months ago, it was a link. It was very disengaging because no one ever clicked through to a link. Now you can see the document right there. Investor engagement is up 10x. While keeping track of all those documents in source and making sure they have the right one is we're using AI to do that.

So with AI, we were able to do that. It's not a pure direct revenue, but it's a great client enhancement. So those are just some examples. We're already -- we're driving revenue for better client experience with AI. Looking at the cost side, there was an announcement by Goldman on Friday about using AI on there -- it wasn't on their technologies, under operations to make their operations more efficient. We're already doing that. We're more way more levered towards technology, but we do have a business we serve about 40 clients doing their back office operations. We have about 1,000 people doing that. It's about a $100 million business.

We've improved productivity, they are 20% in the last year. We have a clear road map on the next 20%. We're sharing that with clients. And we think that's actually -- the very biggest firms can do that themselves. A lot of midsized firms would really love to mutualize the ability to invest and using the AI to do that. So we think that's actually going to be a nice growth opportunity for us there. So obviously, deploying agentic inside Broadridge will be -- we're deploying the new coding tools inside Broadridge. That is allowing us to be more cost effective to drive margins while still reinvesting and all the growth opportunities I talked about.

Well, since you just finished that topic on cost and expense opportunities, I know your CFO isn't here today, but maybe you can talk a little bit more broader around how you view investing and margin expansion in the business. From my perspective, I look at the peers, if it's the right peer group, and some of those have significantly higher margins. So I know some of these businesses are different, but maybe just talk about where maybe margins could go over time or why they are where they are given your business profile?

Yes. Thank you. Great question. So if you look at Broadridge and you look at it, there's 20% operating income margin and you compare that to other fintech and you say, like, what's going on? And so let me just unpack that a little bit. First of all, we have a significant chunk of pass-through revenue. I wish we could report that sort of separately. And I always encourage people that are following us to sort of do the analysis and you exclude all the distribution. When you do that, our margin is about 30%. That's still 10 points lower than a lot of our competitors, but it just helps you put it a little more in the ballpark. And then we have a pretty different growth strategy than a lot of our competitors. We have a lot of competitors that are -- have a sort of a lock people in and grow revenue with price and then do M&A. And we are much more of an organic growth company where we're investing in solutions. We have organic growth, if you look at price as a contribution to growth, it's almost -- is like flat. It's really much more around reinvesting to do the next thing for clients. We view every client as a 99-year client.

And all of our growth comes from having very satisfied clients. If you look at our Net Promoter Scores on our core solutions, over 60. So really satisfied clients that want to do the next thing with us. And we think that that's a superior long-term growth model for investors. Now there is lots of room to grow margins, and we've been growing them over the past many years of approximately 50 basis points a year.

There are some adjustments in there when postage costs go up. It's a direct pass-through, and it deprecates what is reported as our operating margin. Similarly, when interest rates move, it changes above the line, but it's compensated below the line on our variable rate debt. So we'd give you what those adjustments are. So you sort of have to think about that as well. But I think that we have lots of room as we scale the company to continue to invest, to continue to grow margins and to deliver great returns for shareholders.

And just as a reminder, we really think about growing earnings, not necessarily about managing the margin. And so what we're managing the company to is that 10% sort of mid-case earnings growth.

Great. And then maybe finally, as I look at the time here, let's finish on capital allocation. You are an active acquirer, and thanks for the additional disclosures just now about the deal from last week. But look, you still have a lot of capacity. So maybe help us think about what else you can do, what your appetite is, any holes in the offering where you're spending a lot of time. So yes, what's -- in a year that a lot of people are looking for more M&A across sectors, where is Broadridge going to fit in?

Yes. I think the thing we always talk about balanced capital allocation. You'll hear is balanced capital allocation, balanced capital allocation, balanced capital allocation, which is a little bit boring, but I think it's -- that's superior for investors. And so that's being investment grade, it is making the internal investments that make sense, paying a good dividend. And then with the extra of that, doing M&A when it makes sense, tuck-in M&A and buying back shares.

And over the past 10 years, if you look at that and that -- those last 2 buckets, it's been about 50-50 between those. We have a lot of cash flow right now. So we have a lot of capacity to do both M&A and to buy back shares, but the tuck-in M&A has been a very successful strategy for us. We track every transaction going back the past 15 years and we're delivering unlevered IRRs of between 18% and 20%, which you put a little bit of leverage on that if you're a PE firm, that would be a great track record. So we really like that.

We really look for areas where we're the right owner, where the synergies with us, make us the right person to win. We look at 100 opportunities a year. About half the things we've done have had a proprietary dimension to the CQG transaction we just did, totally proprietary transaction. So we look for those areas where we have an edge because it does matter that you buy it cost-effectively to do well at this. And so we like that.

We've done a couple of small tuck-ins this year. Looking out at where there are opportunities, there are a number of opportunities that are out there. We'll see how it plays out. Obviously, with the environment going where it is, it's really interesting how -- what will happen to valuations for things that are in the M&A market. But in the end, it's going to come back to balanced capital allocation. And if we do, do something, it's because we're the right owner, but we're very happy to buy back our shares. And obviously, they are incrementally a lot more attractive now than they were 6 months ago. And so if we're a buyer, we'll be happy with that, too.

Excellent. All right. We do have three more minutes. If we have a mic in the room, I believe we do. If there's any live questions, this will be the time. I know this is the first meeting of the day. Everybody is still just waking up. I think you can also use the app, but we'll do that some other time. Maybe just for my -- we talked about the sales pipeline earlier and the comfort level with it. Maybe you can just -- any more detail you can impact there because, again, you sometimes talk about the sales more holistically, but there are different businesses. So maybe just talk a little bit more about where you're actually seeing the most demand?

Well, I think the -- coming back to the really strategic sort of kinds of conversations we're having, having a good conversation with people about their communications infrastructure, whereas things are going more digital, they have physical infrastructure and what are they going to do with it? And how can we help them rationalize that, take it over, rationalize it and move it digital. And so there's a good set of conversations on that team. This standing instructions for public companies. There are -- after Exxon announced that they did, we literally have 100 companies coming to us saying, "can we get in on this?" So lots of great conversations there.

Lots of great conversation with asset managers around the custom policy engine. So -- and then always ongoing conversations around our back-office platform. So I think if we just look at the areas where we're investing, that's where we're seeing the conversations. It does sort of spread across our portfolio. So it's hard to sort of say, oh, Alex is like this area is the one that's going to do it. But I like that. The other thing I like about that is it's very -- when you have a portfolio approach, you end up with sort of more balanced results. And I think that's what we're going to see.

Okay. No, that's very fair. Last chance for the room. Otherwise, I'm going to call it. All right. Why don't you help me thank Tim for being here today. Thank you very much.

Thanks. Great. Thank you.

Good morning, and welcome to the Broadridge Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. SP1 I would now like to turn the conference over to Edings Thibault, Head of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Drew, and good morning, everybody.

Welcome to Broadridge's Second Quarter Fiscal Year 2026 Earnings Conference Call.

Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our Chief Executive Officer; and our Chief Financial Officer, Ashima Ghei.

Before I turn the call over to Tim, I want to make a few standard reminders. 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 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 the presentation.

Let me now turn the call over to our CEO. Tim?

Thank you, Edings. Good morning. I'm delighted to be here this morning to discuss our strong second quarter results and provide an update on some of our strategic initiatives.

Entering the second half of our fiscal year, the market backdrop remains positive. U.S. equity markets rose 16% in calendar '25, and they largely remained strong in January. Our clients are clearly benefiting from strong capital markets activity, and so are we. I'm especially excited to be here today because the accelerating pace of technology and a pro-innovation regulatory agenda are together creating exciting change, and Broadridge is uniquely positioned to help our industry drive innovation at scale.

A few examples. Tokenizaton continues to gain steam across capital markets, wealth and asset management. In shareholder engagement, a quiet revolution is transforming how funds and public companies engage shareholders and manage proxy. Digital communications are driving down the cost of interacting with shareholders and increasing investor engagement. And of course, AI is enabling all this at a faster pace.

These are the kinds of transformational changes we have built Broadridge to address. And our ability to drive innovation and scale is creating opportunity for the future, even as it translates into results today. So let's dig into those results, starting with the headlines on Page 3.

First, Broadridge delivered a strong second quarter, including 8% recurring revenue growth constant currency and adjusted EPS of $1.59. Second, we continue to execute on our strategy to democratize and digitize investing, to simplify and innovate trading, and to modernize wealth management. We're beginning to see positive incremental impact from delivering new forms of shareholder engagement, extending our omnichannel digital capabilities and driving tokenization across governance, capital markets and wealth, all enhanced by our platform and AI capabilities.

Third, we remain committed to balance capital allocation to drive shareholder value. We are on track to deliver another year of 100% plus free cash flow conversion, which gives us ongoing flexibility to pursue additional compelling M&A opportunities while returning capital to shareholders. Fourth and last, we remain on track to deliver strong results in fiscal '26 and beyond. We are reaffirming our '26 guidance for recurring revenue growth, margins and closed sales, and we are raising our outlook for adjusted EPS growth to 9% to 12%. That outlook keeps us on track to deliver on our 3-year top and bottom line objectives.

Let's move to the drivers of those results on Slide 4. Starting with our governance business, where we continue to drive the democratization and digitization of investing. Governance recurring revenues rose 9% constant currency, driven by revenues from sales and continued position growth. Investor participation trends remain healthy across both equities and funds. Total equity position growth remained strong at 17%, with revenue position growth at 11%, driven by growth in managed accounts. Looking ahead, we're seeing low teens position growth for the second half, which should drive high single-digit growth in revenue positions.

Fund position growth, which was hurt by timing in Q1, strengthened as expected, from 2% in Q1 to 15% in Q2. Looking through the timing noise, fund position growth was 8% for the first half. Looking ahead, we continue to see fund position growth for the year, trending in the mid- to high single digits, in line with H1.

We've also seen higher-than-expected event-driven activity across both fund elections and corporate events, which gives us the opportunity to accelerate our innovation road map for the benefit of our clients and our shareholders. Beyond position growth, our business is benefiting from our investments in innovation, starting with what we are calling, a quiet revolution in shareholder engagement. This coming proxy season, we expect more than 600 funds covering $4 trillion of assets to use our voting choice solution, up from 400 funds and $2 trillion last year and fewer than 100 funds 2 years ago.

We are also rolling out our AI native custom policy engine and vote implementation capabilities for institutional investors like JPMorgan and Wells Fargo who are seeking to reduce their reliance on proxy advisers. This is a powerful example of how our AI capabilities are enabling new revenue. And we continue to build on our pilot program, first launched with Exxon Mobil, to enable retail shareholders to provide standing voting instructions for annual meetings. We also continue to make progress in driving the digitization of communications, closing a significant sale to extend our flagship health and focused platform to cover 1 million additional accounts.

I'm also excited to note the rapid progress we are making in addressing the tokenization opportunity in equities. I said on our last call that we see tokenized equities as an opportunity for Broadridge and recent client and industry conversations have only reinforced that conviction. The last several weeks have seen announcements by the major changes in the DTCC on their plans to build tokenized trading capabilities for equities as well as the announcements by issuers themselves of tokenized equity offerings. As tokenized equities scale, providers will need to ensure they meet the same governance and disclosure requirements as traditional equities.

And for real liquidity, the market will need to access broker-dealers who are our core clients, even as we increasingly serve new intermediaries as well. For both, the challenge is to gather communications from every issuer and fund, distribute them accurately according to clients' preferences, take back and reconcile votes and ensure regulatory requirements are met and the proxy voting is accurate, transparent and documented. And that's our core competency.

And for issuers, while tokenized equities enable real benefits, they also represent new complexity. Each of which will now have registered shares, beneficial shares and potentially tokenized shares across multiple models of tokenization and multiple layer one networks. The opportunity for Broadridge is to simplify that complexity for brokers and platforms, issuers, investors and regulators, just like Broadridge simplifies that complexity in traditional models today.

To make this happen, we expect to integrate tokenized and digital assets into our proxy capabilities by the end of this year. From there, we'll extend those capabilities to include other parts of the servicing model, including corporate actions and disclosures. We'll also extend our solutions to digital wallets to create a seamless client experience regardless of where investors hold their equities and other tokenized assets.

Since our last update, we have talked to and worked with dozens of clients, regulators and industry partners. Feedback from them on our road map has been universally positive. There is a clear market need and we are stepping into it, ensuring that governance complexity does not inhibit market growth. And as we open the market to new investors and new products, that will drive additional position growth, just as innovation has done in the past.

I'll close my review of governance by noting that we also continue to strengthen our business with M&A. In early January, we closed the acquisition of Acolin, which will augment the suite of services we offer to funds in Europe across their life cycle, from creation and registration to ongoing distribution. The acquisition of Acolin, like the tuck-in deals we completed earlier this year for iJoin and Signal, extends our product and geographic reach.

Turning next to capital markets, where we are simplifying and innovating trading. Recurring revenues grew 6% on a constant currency basis. Our capital markets business is benefiting from balanced demand across our front and back-office solutions and from tokenization revenues, including the growing adoption of Distributed Ledger Repo platform and revenue from Canton Coin.

Volumes on our market-leading DLR platform, Distributed Ledger Repo platform continue to grow as we add new clients. We tokenized $384 billion per day in December or $9 trillion for the month. It's more than double where we were in June. As demand for our tokenized collateral solution grows, we are on track to launch a real-time repo capability in fiscal year '26, which will incorporate Stablecoin to make repos at real trading and financing instrument and further scale volumes.

I'm also pleased to note that we completed SocGen's first digital bond issuance in the U.S. during the second quarter. This issuance highlights the flexibility and power of our DLR platform to tokenize a wide range of assets. So it should be no surprise to know that Broadridge will be extending our tokenization platform to other asset classes, including deposits in fiscal '27. Beyond DLR, we are also actively working to enable our primary trade processing engines to support digital assets alongside traditional assets by the end of fiscal '26 across both capital markets and wealth management.

And speaking of Wealth Management, recurring revenues grew 11% during the quarter, propelled by strong organic growth and the final month of M&A revenue from the acquisition of SIS. Our wealth platform continues to gain recognition in the marketplace and was recently named a leader in wealth management technology by IDC. That recognition is contributing to a growing pipeline of platform opportunities.

I'll finish my review this morning with Closed Sales. After a slower start in Q1, a I'm pleased to report that our sales momentum is picking up. Q2 Closed Sales rose 24% to $57 million. In addition, new pipeline generation, which is our measure of new sales opportunities, rose more than 20% over the first half of fiscal '25 driven in part by the transformational opportunities I just mentioned. Clients are engaging with us on tokenization, shareholder engagement and digital communications as well as more traditional needs by preparing for T+1 in Europe and 23/5 trading in the U.S. Those conversations are driving multiple exciting pipeline opportunities and keeping us on track to deliver on our closed sales guidance.

I'll close my remarks with a few key takeaways on Slide 5. First, Broadridge is delivering strong results today with 8% recurring revenue growth and adjusted EPS of $1.59 in the second quarter. More importantly, we're on track to deliver a strong fiscal '26 with recurring revenue growth in constant currency at the higher end of 5% to 7% and adjusted EPS growth of 9% to 12%. And with this guidance, we're on track to deliver on our top and bottom line objectives for the 3 years ending this June, which will be the fifth consecutive 3-year period in which we met our goals.

Second, we're actively put in place the building blocks for continued growth tomorrow. I started my comments this morning by calling out the shifts we are seeing in the financial services industry. In each of those areas, we're investing to create what we believe will be a significant opportunity tomorrow. We're leading in tokenized trading, and we're extending that capability to new uses and asset classes. As tokenized equities begin to emerge, we'll accelerate that adoption by addressing the full suite of proxy and other asset servicing needs so that tokenization platforms can focus on gathering assets, driving liquidity and reducing trading costs.

We're actively enabling the next generation of shareholder engagement. Asset managers and issuers are dramatically changing the way they interact with investors, equity owners and fund owners and Broadridge is enabling that change with the suite of new solutions. We're driving the next generation of digital communications. Our wealth and focused platform is already making communication between wealth managers and their clients more effective, more engaging and less costly.

And we're leveraging our strong AI and platform capabilities to rapidly build these and other new solutions while improving productivity. With our deep domain knowledge and critical wealth of intersection of financial services, AI will both expand Broadridge's opportunities and drive efficiency improvements.

Third, given all these opportunities, we are managing our investments and capital wisely and with balance to deliver for shareholders today and tomorrow. We're leveraging the unexpected benefit of more event revenue to accelerate our road map in each of one of the key initiatives I just noted, even while delivering higher earnings. And we're carefully balancing capital allocation in light of the strategic opportunities we see for both share buybacks and for strategic tuck-in M&A.

With the pace of industry evolution starting to accelerate, Broadridge has never been better positioned to play a critical role in helping our clients grow and win. And I've never been more excited about the opportunities that we have in front of us.

Before I turn the call over to Ashima, I want to thank our Broadridge associates. We often talk about the importance of culture because we see firsthand how our focus on clients drive success and sets the stage for continued growth. With that client-focused culture, and unprecedented depth in financial markets, our associates have been and are the key to make Broadridge the trusted and transformative partner for the financial services industry. Thank you.

I also want to take a moment to thank Brett Keller, who will be leaving our Board at the end of April. Brett has been an invaluable counselor for nearly 11 years and we'll miss his wisdom and insight. And I want to welcome Trish Moscone and our own Chris Perry to the Board. Trish brings a wealth of experience from senior consulting roles at both McKinsey and BCG and fromer senior executive positions at BlackRock and Synchrony. And Chris brings a long career in wealth, data and financial services generally, along with intimate knowledge of Broadridge's most important clients. Trish and Chris, welcome.

Now let me turn it over to Ashima. Ashima?

Thanks, Tim. Good morning. It's great to be here with you today. I'll begin my discussion this morning with 5 key call-outs. First, Broadridge delivered strong second quarter results. Second, we continue to benefit from elevated event-driven activity. We reported $91 million of event-driven revenues in Q2, which contributed to a record $204 million in the first half. As always, we take advantage of periods of elevated event-driven revenues to accelerate our long-term growth investment, and we are investing in key product initiatives around tokenization, shareholder engagement, digital communications and in our core tech infrastructure.

Third, we recorded $187 million noncash mark-to-market gain related to our digital asset holdings. Between our coin holdings and our stake in the digital asset treasury, the value of our digital asset holdings rose to $265 million at quarter end, which represents real value for Broadridge shareholders. Fourth, our capital position remains strong, and we are actively delivering against our balanced capital allocation policy. We recently closed on the Acolin acquisition and have now completed 3 tuck-in acquisitions in fiscal '26, totaling $126 million.

As we enter the second half of the fiscal year, we remain on track to deliver free cash flow conversion of greater than 100%, and we are in a strong position to deploy additional capital to drive growth and shareholder returns. Finally, we expect to deliver strong fiscal '26 results. We are raising our adjusted EPS growth guidance to 9% to 12% from 8% to 12%. Additionally, we are reaffirming our recurring revenue growth outlook at the higher end of the 5% to 7% range and Closed Sales of $290 million to $330 million.

Now let's go to the numbers on Slide 6. Recurring revenues grew 9% or 8% on a constant currency basis, including strong 7% organic growth. Adjusted operating income margin declined by 110 basis points to 15.5% as we lapped record event-driven revenues in Q2 last year. Adjusted EPS grew 2% to $1.59 and Closed Sales grew 24% to $57 million.

Let's move to Slide 7 to discuss our segment recurring revenue, starting with our ICS or governance segment. ICS recurring revenues rose 9% to $590 million, including a 2-point benefit from acquisitions and a 1 point headwind from lower interest rates. As a reminder, the earnings impact of lower rates is functionally hedged by lower interest expense on our variable rate debt. Regulatory revenues rose 18% in Q2, driven by 11% growth in equity revenue positions and 15% growth in fund positions.

Regulatory revenues in Q2 saw a 6-point timing benefit with approximately half coming from Q1 and half being brought forward from Q3. Data-driven Fund Solutions revenues declined 2%, with healthy growth in our data and analytics business, offset by a decline in our Retirement and Workplace Solutions. Lower interest rates represented a 2-point headwind to growth. Looking forward, we expect to see Data-driven Fund revenue growth to accelerate, driven by stronger organic growth and an approximately 5-point contribution from the iJoin and Acolin acquisitions in the second half.

Issuer revenues grew 8% driven by growth in our shareholder engagement solutions, including revenues from outstanding voting instruction solution. And customer communications revenues rose 5% driven by double-digit growth in our digital communications revenues as we continue to execute on our print to digital strategy and a 4-point contribution from the acquisition of Signal. For the year, we expect ICS recurring revenue growth to be in line with our guidance for total recurring revenue and in line with the first half.

Turning to GTO. Recurring revenues grew 8% in Q2, including 6% organic. Starting with Capital Markets, revenues grew 6%. Our Q2 revenue growth benefited from a balanced mix of sales, digital asset revenues and growth in trade volumes which more than offset a point of losses related to the business exit that we discussed at the end of last year. Digital asset revenues were $7 million in the second quarter.

Looking to the second half of the year, we expect digital asset revenues to moderate significantly as a result of scheduled changes in the Canton network minting curve. Overall, we expect digital asset revenues to contribute approximately 1 point to capital markets growth in fiscal '26.

Moving to Wealth and Investment Management. Revenues grew 11%, driven by 6% organic growth and a 5% contribution from the SIS acquisition. As a reminder, we have now lapped the November 1, 2024 close date of the acquisition. For the year, we continue to expect GTO recurring revenue growth of 5% to 7% with higher growth in wealth. As a reminder, timing of license revenues can have an impact on quarterly revenue growth rates in both our GTO businesses. We expect lower license revenue to result in a 4-point headwind to GTO growth in the third quarter, largely in our Capital Markets business.

Now let's move to Slide 8 to review our key volume indicators. We saw strong growth in investor participation across both equities and funds. Equity position growth was 17%, including 11% growth in revenue position. Looking ahead to the seasonally more significant second half of the year, our testing indicates low teens growth in total equity positions, which we expect will generate high single-digit revenue position growth.

Q2 fund position growth of 15% was partially impacted by the timing of fund communications in the quarter. First half position growth was 8%. Our testing continues to indicate mid- to high single-digit position growth in the second half of the year. In GTO, trade volumes rose 11% for the quarter, driven by growth in both equities and fixed income volumes.

I'll wrap up my discussion of recurring revenue growth on Slide 9. In Q2, recurring revenue growth was 9%, primarily driven by 7 points of organic growth. Revenue from Closed Sales remained the biggest driver of our organic growth at 5 points as we onboarded revenues from our $430 million fiscal '25 year-end backlog. Our revenue retention rate was 98% for the quarter. Internal growth contributed 4 points driven by position and trade growth, timing of fund communications in the quarter, and digital asset revenues.

Acquisitions, primarily SIS and Signal contributed 2 points to growth. And finally, changes in FX contributed 1 point.

Let's close our discussions of revenues on Slide 10. Total revenue increased 8% to $1.7 billion, driven by 5 points of growth from recurring revenue. Lower event-driven revenues accounted for a 2-point headwind. While event-driven revenues of $91 million declined $34 million versus the prior year's quarterly record, they remain elevated relative to long-term averages. Strong event-driven revenue was driven by a combination of healthy mutual fund proxy activity and higher levels of corporate actions, including the M&A context for a major media company.

Looking ahead to the second half of the year, we expect quarterly event-driven revenues to return to closer to the 7-year average of approximately $60 million. Low to no margin distribution revenues grew 14% driven by a balance of higher postage rates and higher volumes and contributed 4 points to total revenue growth.

Turning now to margins on Slide 11. Adjusted operating income margin was 15.5%, a decrease of 110 basis points from Q2 '25. The decline was driven by a year-over-year reduction in event-driven revenues, which more than offset the operating leverage from higher recurring revenues. Additionally, the net impact of lower interest rates and higher distribution revenues reduced AOI margins by 40 basis points. Looking ahead, we remain on track to deliver full year adjusted operating income margin of 20% to 21%.

Let's move on to earnings on Slide 12. Q2 adjusted EPS grew 2% to $1.59. As I noted in my call outs, in Q2, Broadridge recorded $187 million noncash gain, driven by the increase in the value of our digital asset holdings in the quarter from $0.04 at the end of September to $0.15 a on December 31. That noncash gain was reported in other nonoperating income and was excluded from our calculation of adjusted EPS.

Due to the volatility of digital asset prices, we will continue to exclude quarter-to-quarter noncash gains or losses in the value of our digital assets from our calculation of adjusted EPS.

Let's turn to sales now on Slide 13. Broadridge recorded Q2 Closed Sales of $57 million, an increase of $11 million from Q2, '25. Year-to-date sales were $89 million, down from $103 million last year. As Tim noted, we are seeing higher levels of client engagement which is translating into a more than 20% increase in pipeline creation and giving us confidence in our full year Closed Sales guidance of $290 million to $330 million.

Turning to our cash flows on Slide 14. Broadridge generated free cash flow of $319 million in the first 6 months of fiscal '26, up from $56 million in fiscal '25. Our strong cash performance continues to benefit from higher earnings and working capital management, and we remain on track to deliver free cash flow conversion of over 100% in fiscal '26.

Turning next to capital allocation on Slide 15. We are delivering against our balanced capital allocation policy. Year-to-date, we have deployed $49 million in capital spending and software with an additional $17 million to onboard clients onto our solutions. We have invested $126 million in M&A in 3 strategic tuck-in acquisitions, including the acquisition of Acolin on January 5 for $70 million.

We have also returned $367 million in capital to shareholders via our dividend and share repurchases through the first 6 months of the year. Separately, in the second quarter, we contributed 342 million Canton coins valued at $53 million, for an approximately 8% stake in the Tharimmune digital asset treasury. Looking forward, our strong balance sheet and free cash flow conversion leaves Broadridge well positioned to fund additional tuck-in M&A and repurchase additional shares over the balance of the year.

Let's start to wrap by reviewing our fiscal '26 guidance on Slide 16. We are reaffirming our guidance for recurring revenue growth constant currency to be at the higher end of the 5% to 7% range. We continue to expect adjusted operating income margin of 20% to 21%. We are raising our adjusted EPS guidance to 9% to 12%. And and we continue to expect Closed Sales of $290 million to $330 million.

I'll wrap by summarizing my key points. Broadridge reported strong second quarter results, Second, our key revenue drivers remain healthy, giving us incremental confidence that we will continue to deliver strong results in the second half. As a result, we remain on track to deliver another strong year of recurring revenue and adjusted EPS growth in fiscal '26 while funding additional investment in key growth initiatives. And that, in turn, should enable Broadridge to deliver again on our top and bottom line 3-year objectives.

And finally, our strong balance sheet and cash flow generation positions us to continue to fund additional share repurchases and pursue attractive M&A opportunities as we focus on driving shareholder value.

With that, let's move to Q&A.

[Operator Instructions] The first question comes from Alex Kramm with UBS.

Tim, thanks very much for all the color on tokenization and how you think you're going to benefit from that. I will have to obviously note though that, as you're probably aware, there's a -- there's a big debate out there, and you've seen this in your share price that tokenization is actually something that's going to work against you. I think there's a lot of different ways of this narrative, but I think in its purest form, it's basically, hey, in a tokenized world, companies can directly engage with shareholders, maybe through smart contracts, they're going to cut you out of the process or at the very least, it's going to drive pricing down. So maybe you can just respond to that and see -- give us your view on maybe that side of the debate.

Great, Alex. Well, look, thank you very much for that question. And obviously, as you heard from the script, we see tokenized equities as a significant opportunity. We think they represent the next wave of democratization. We think they're going to create new sources of demand for U.S. equities and that's going to drive position growth. When you think about -- and I think implicit in your comment is the agreement that tokenized securities are still subject to all the core regulatory principles, including governance. So the question is really how that's going to happen.

We see the vast majority of tokenized equities in the future, irrespective of the model, whether they're tokenized directly by the issuer or they're tokenized by an intermediary or by a depository or wrapped in some way. We see the vast majority of those are going to be purchased through a broker-dealer or through a digital trading platform. And those intermediaries are going to have the same asset servicing obligations that they have today, including proxy, but also corporate actions, class actions, tax and all the other things that are actually big opportunities for us.

And it's not -- we think about are those intermediaries going to give knowledge to the underlying corporate issuers as to who the shareholders are. It's not at all clear that they're going to want to turn over their client list that way. When you think about the [indiscernible] protections, the ability of investors to keep their identity and their private information separate. So we do think that it is going to remain a complex situation between issuers, brokers and other intermediaries and managing that complexity is what we do irrespective of the model of tokenization. And obviously, there are multiple models out there. It is not clear which one is going to win as we talk to the SEC, they're clearly going to let the market decide.

And I would also comment just on the new entrants in the market, the Coinbase and Krakken of the world. We think they are drawing in new investors. We think that expands the market, and that's going to contribute to long-term growth. So -- and then let's not actually forget, you talked about issuers and there are benefits, if they do end up with a little more direct access. But don't forget, this also creates significant complexity for issuers also because now, and I've said this in the script, but in addition to their regular shares, they have registered shares, beneficial shares, tokenized shares across multiple models across multiple L1.

So trying to get materials and distributions and events to all those different end points, take it back, reconcile it. That's a lot of work. And we think that's a great opportunity for Broadridge to help issuers. For 80% -- nearly 80% of the Fortune 500 engages Broadridge today to reduce the complexity of proxy when they only have to worry about registered and beneficial. And so in the future world, we see that even more value created there.

So whether it's creating value directly with issuers or really through the intermediaries where we think the vast majority of investors will go, we think there's a great opportunity here.

Excellent. All right. And then maybe staying on topical items. Clearly, a lot happening on the proxy advisory side. You mentioned JPMorgan. I think you hadn't disclosed that one before and also Wells Fargo, which I think we've heard about. So you're clearly helping, I guess, drive change. Can you just talk a little bit more what that means financially? I mean, is there a big pipeline behind the JPMorgan and Wells Fargos of the world? How do you view the TAM? How quickly do you think this can ramp? I know it's all just beginning, but just curious how you see that opportunity because it is, I guess, a very specific item where you're winning in the marketplace right now?

Yes. And look, we can do different things for different people. Sometimes it will be the full AI-driven custom policy engine. Sometimes it will be helping more in the vote execution side. We think that this is -- when you look across all the different things in shareholder engagement and this is one of the needs that we're talking about with helping with data-driven and objective voting. But we think collectively, this is a multi-hundred million dollar market. So it's an opportunity to expand the services. Obviously, it will take time to grow into that. But we think collectively, this could add as much as a point of growth to our governance business over the next few years, really creating more revenue position -- per position.

And I just -- I think there are multiple topics here. And collectively, we really love what's happening as we work with our clients to create what I would call really the next generation of shareholder engagement. It's deepening our role, and as I just said, it's a substantial business opportunity because there are multiple industry issues that have been building and are reaching a critical mass. There's the -- what we just talked about in terms of the concern about proxy advisory firms. There's also a growing concern about the concentration of power with passive asset managers and this concern that retail participation has been lower.

And each of those are opportunities for us to work with our clients to bring market-driven technology to help solve those. Obviously, we're asset managers like JPMorgan and Wells Fargo, but we're also working with the large passive funds that I mentioned in the script. And we see a big opportunity to work with public companies to make retail shareholder voting more convenient through standing instructions. We launched that with Exxon, but there's a lot of demand behind that one. So collectively, all of those we think really create a significant opportunity financially, but also just strategically as we deepen our role.

The next question comes from Patrick O'Shaughnessy with Raymond James.

So going back to the topic of tokenized equities, what do you see as some of the main obstacles that need to be worked through by the SEC as the SEC considers various exemptive relief requests?

Yes. Thanks, Patrick. I think the -- one of the questions that SEC has is this all going to be too complex, and therefore, how much event relief do they need? And I think in our conversations with them, we've really stressed that we're here to solve that complexity and that irrespective of the tokenization model it is completely feasible for there to be really good front-to-back communication and connectivity. So I actually don't think there's a need for exemptive relief in this area. And I think that -- I think they see that, too.

So we'll see how it all plays out. But I think the conversations that we're having with each of the others -- whether it is with issuers, whether it's with the DTCC, whether it's with the exchanges and the digital trading platforms, I think it's pretty clear how this model can work and work really well.

Got you. Appreciate that. And then staying with the topic of tokenized equities, if they were to clear and settle on the blockchain, how would you see that impacting the range of services that you provide to your post-trade processing clients?

Patrick, I think part of this is we have to expect to have a significant role in that. We are one of the largest trading platforms today. And when you think about our DLR platform, it is designed as a multi-asset platform, and we'll be extending that to additional asset classes. I think the other thing is that there's all the other complexity around asset servicing that needs to take place. And when you think about what takes place today, there's a trade. And then what happens after that.

There is -- obviously, we've been talking about proxy, corporate actions, but let's talk about tax, let's talk about margin, talk about SEG, talk about securities lending. The idea that all of that is going to happen through some sort of smart contract is, I don't think people are really thinking through all the implications of a tax, for instance, it's not just the instrument. It's the person and what position the person is and what are the other things that they have and where are they?

So it's really -- there's a lot of complexity there. I think one of the concerns that many players have is actually that in the very -- as long as they can foresee, the costs could go up instead of down because they could have a whole infrastructure around the digital assets and a separate infrastructure around their regular assets. And that's one of the things when we talk about enabling digital assets in all of our core engines. What we're talking to clients about is actually mirroring the positions in the core engines so that they can use all their existing technology for margin, tax, all those other things, so they don't end up with that duplication of cost.

And that's something that they are finding really attractive because it is it's complicated to handle all of those downstream activities.

The next question comes from James Faucette with Morgan Stanley.

It's Michael Infante on for James. I just wanted to ask about obviously, the reaffirmed closed sales outlook. But can you maybe just speak to how you're thinking about your visibility into the second half? Like how much is already sort of late-stage from a contracting perspective or sort of time line of expected renewals versus truly jump on net new logos? I'm just curious how you would describe confidence levels on being able to deliver on the full year.

Yes. Thank you. Thank you very much. And look, first of all, I'll just say with $89 million year-to-date, we clearly have wood to chop in the second half. That's not uncommon for us given the seasonality of business, and we do really like the momentum that we're seeing. I think one of the things that I talked about in the remarks is how we've seen origination pick up in the first half of the year, up more than 20%. And that's a really nice indicator for us, for clients.

I think maybe as implicitly in your question that you rightly pointed out, is that things that we've just originated in the first half, maybe those aren't necessarily things. Some of those are things that will close this year. Some of them are things that will close next year. But when I look at that, we're seeing growth driven by our strategic initiatives around shareholder engagement, [indiscernible] communications, platform, wealth and tokenization. And we have really nice things in each of those areas that we originated some time ago.

I mean, just last week, we closed strategically significant DLR sale to a Tier 1 global bank. That's the largest sale to date for that. So we really see continued momentum there. And we're really seeing as I was just in Dallas a couple of weeks ago, talked to more than a dozen client CEOs, and it's clear that they welcome our help in contributing to the transformation of our business. As we look deep into our pipeline and look at what stage things are in and which of those are solidly on track to close this year versus could close this year, we really like that mix, and that's why we are reaffirming our guidance of $290 million to $330 million because that's what we think we're going to finish by the end of the year.

That's helpful, Tim. Just 1 housekeeping follow-up for me. Just on the sort of spread between equity position growth and equity revenue position growth, you obviously gave some helpful commentary on the forward look. But it looks like the spread there is widening at least marginally. Like how do you think about sort of the underlying mechanics of that spread and/or whether or not you expect the spread to sort of remain consistent with recent levels or perhaps widen or compress?

Yes. I think it's an interesting question. And I think it's 1 we're still figuring out ourselves as the growth of this is really new. And I think of it a little bit more as a little bit less than the top line number from which you're taking away some things and a little bit more as there's growth in equity revenue positions. And then on top of that, there's this additional growth in fractional shares and sort of small dollar managed accounts. And so it's really -- I tend to come back to sort of say, what's just the driver of the core revenue positions, which is around good sort of single name growth and then continued growth in managed accounts, which remains very healthy.

So I think that spread, so to speak, will go up and down a little bit, but what we're really monitoring is the core drivers of the revenue positions.

Yes. And I'll just add on to that a little bit, right? If you think about the revenue position growth that we're seeing 11%, of course, for the quarter, it is still higher than our long-term history, right? We typically talk about mid- to high single-digit position growth. So this is still elevated versus those levels. And like Tim alluded to the additional is incremental on top of it, which I would akin to almost position backlog that we might see converting at a later point, but even the base level is higher than what thehy have been.

The next question comes from Kyle Peterson with Needham.

I wanted to start off on some of these on chain progress that you guys have had on the Canton network, the DLR stuff, seems to really be making some good milestones. I wanted to see if you had an update or pipeline on potentially moving some other asset classes to this platform and how we should think about the potential for this to expand both in the near and medium term?

Yes. Kyle, thank you very much for that question. It's one that I'd love to talk about. As you know, as I said, this has doubled since last June. And we have a nice road map of additional significant clients that we're looking at and talking to. I think about the road map for this platform, and as I said, it is multi-asset and has a lot of capabilities built into it, including, as I noted in the script, that we did our first issuance of a corporate bond for SocGen in the second quarter.

I think the next real thing is taking it real time. When we think about repos, today, they're sort of largely a financing function carried out by treasury on an overnight basis. And as we move that to -- and largely a lot of the volume we're doing is intra institution, as we move that to bilateral and to real time, this can become -- we see -- it's very unclear, where the volumes could go, but it becomes less -- it can be more than a financing function but really a trading function to -- and allowing desks to do trades and finance them simultaneously.

That we expect to be doing in the first half of the calendar year within this fiscal year. And then going to other asset classes, other things in fixed income, deposits, we're talking to a number of institutions about that. And so I think that over the course of this year, you'll see us continue to advance both the speed and the breadth. I think the other factor to think about here is moving this into the, I'm going to call it, main net of Canton. Right now, we're on a private version, which is separate from that, which is -- makes interoperability not as high as it will be when we're on the main version.

There are some things for that version that still need to take place for it to be ready for that. DTCC has a statement of work with DAH and is looking towards this sort of the second half of the calendar year for that to all be ready, and we're committed to move on to that when it's ready. And of course, we are -- we stated that we will be multiple L1s beyond the Canton network as well. So a lot to do, a lot of road map. That's one of the reasons why we're really excited to be able to accelerate the investment that we've talked about and really move up and accelerate some of these things on our road map.

Great. That's really helpful. And then maybe as a follow-up on to ask about kind of the plans for the balance sheet, as you guys are continuing to accumulate more of the Canton coins here, I guess, like the mark-to-market gains, it's a little bit material now. And assuming you guys will continue to get more even if the minting curve slows a little bit. But wanted to see like are there additional opportunities such as Tharimmune out there that you guys would consider? Are there other avenues you guys would take to potentially create some more liquid assets from that? Or just any thoughts on that as you guys continue to accumulate more, especially it would be great to hear about.

Yes. Kyle, thank you. Well, we are continuing as a Super Validator. As you mentioned, the minting curve has changed. That was sort of something that's sort of built into it, change as of January 1. So we will be accumulating at a lower rate in the future just to be level set for everyone. And I said on the last call, we're an operating company, not an investment company. So we're not going to be the next micro strategy. And on the other hand, when you look at the value of these network coins versus others, they are -- there's argument they could be a lot more valuable than this.

So we'll see, but I think our intent is to really sort of over some time dollar cost average out of these, but that's probably over multiple years. And that's -- I don't see us sort of trying to get immediate liquidity or things like that from it, but I think it's something that will be on the balance sheet. And but could be a nice source of value in the future. We're not looking for particular investments like Tharimmune that was sort of -- it came up because the key actors around Canton were just trying to make sure that they were sort of multiple ways for people to access that.

The next question comes from Matthew Roswell with RBC Capital Markets.

Congratulations on a nice quarter. There's been a lot of talk about the innovation that's been going on in the whole space. And I'm thinking specifically the capital markets piece. Are you seeing any changes among clients looking at their legacy systems and kind of the competition with either them doing it in-house or your more traditional competitors? Hopefully, that question made sense.

Yes, yes, it does, Matt. I think the -- when we think about competition in capital markets and you think about our traditional competitors, one of the things that we have really liked, Matt, is just how we're positioned relative to competition because really our legacy competitors have been disinvesting in this area for some time. And it's an area where we have continued sort of good regular investment as we have globalized our platform as we are evolving onto the new platform architecture that we've talked about.

And so we think that the functionality and utility of our platform relative to legacy competitors within -- certainly within cash securities is significantly higher, and that's why I think we continue to see nice competitive wins. We haven't seen anyone looking at internalizing or doing self-builds in this area in capital markets. There are a few players that have that internally and they're saying where they are, but we haven't seen any broad new efforts.

Okay. And if I could sneak in a modeling question. Are there any timing differentials we should think about between the fiscal third and fourth quarter? Like if I remember correctly, last year, the timing of the Easter caused a flip in the proxy business. Is there anything that we should be thinking about?

Yes. There's just two things I'll call out in terms of what we are aware of right now. One, when I spoke about in my prepared remarks, I spoke about a timing in our regulatory business, half of which you should expect to see in Q3. So that's one timing impact that you'll see, not so much between Q3 and Q4. And two, I also called out in my remarks, term license, the impact of term license on our GTO business, specifically in capital markets. So you will see a 7-point headwind in our capital markets in Q3 and a more modest about a 1 point impact in wealth in Q4, but those are just term license swings to be aware of.

The only other thing I'll call out is event, as you know, varies from quarter-to-quarter. Where we sit right now, we're not aware of any large mutual fund proxy or any large tentpole event that would lead us to believe that it will be anything higher than the $60-ish million average that we see in terms of long-term averages.

And anything hitting the margin other than the revenue switches?

Nothing hitting the margins, except for what we called out already. The strong growth that we've seen in the first half of the year is allowing us to increase our investments, you will see the impact of some of those investments come through in Q3 and Q4.

This concludes our question-and-answer session. I would like to turn the conference back over to Tim Gokey for any closing remarks.

Thank you, operator, and thank you for everyone on the call today. As we wrap up, I hope you hear how excited that we are about the transformation we're seeing in the industry, the opportunities that it's creating for Broadridge, the opportunity for us to add value for our clients and our industry and to really take that innovation and scale it and through that, to deliver returns to you, our shareholders. Thank you for investing in our company, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to Broadridge's Fiscal First Quarter 202 Earnings Conference Call. Please note this event is being recorded. I would like now to turn the conference over to Mr. Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Alan. Good morning, everybody, and welcome to Broadridge's First Fiscal First Quarter 2026 Earnings Call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO; and our CFO, Ashwin Ghei.

Before I turn the call over to Tim, a few standard reminders. 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. 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. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings, and good morning. I'm pleased to be here to discuss our strong first quarter results. With a positive economic backdrop, equity markets remain strong and the fixed income market is steady. Capital markets are healthy and our financial services clients are benefiting. And last, we're operating against a pro-innovation regulatory backdrop. As a result, it should come as no surprise that Broadridge is off to a very good start to fiscal year 2026. We delivered strong first quarter results, and we're raising our recurring revenue outlook to the higher end of our 5% to 7% growth range. Our pipeline is growing as our clients look at how they can accelerate change across their businesses. And we're also investing in new governance solutions in expanding our tokenization capabilities and in making value-added acquisitions. With that backdrop, let's dig into the results, starting with the headlines.

First, Broadridge delivered strong first quarter results, including 8% recurring revenue growth constant currency and 51% growth in adjusted EPS. Second, we continue to execute on our strategy to democratize and digitize investing, simplify and innovate trading and modernize wealth management. That execution is driving our results in the form of strong growth, continued product innovation and a growing pipeline. Third, we are using our investment-grade balance sheet and strong free cash flow to strengthen our business. Over the past year, we made a handful of small acquisitions to strengthen our ICS business. And of course, last year, we acquired SIS to accelerate our platform rollout in Canada. And in the last 2 quarters, we repurchased $250 million of our shares. Finally, we expect to deliver strong fiscal year 2026 results. With our positive start to the year, we now expect to be at the higher end of our 5% to 7% recurring revenue range, and we're reaffirming our guidance for 8% to 12% adjusted EPS growth and $290 million to $330 million of closed sales. That outlook also keeps us on track to deliver again on our top and bottom line 3-year growth objectives. Let's move to the drivers of our strong start on Slide 4. I'll start with our governance business, where we continue to drive democratization and digitization and to deliver innovation. Governance revenues rose 5%, driven by revenue from sales and continued healthy position growth. Investor participation trends remain healthy across both equities and funds. At 2%, fund position growth was impacted by the timing and mix of communications in the quarter. Looking through that noise, we continue to see fund positions growing in the mid-single digits, consistent with fiscal '25. Total equity position growth was 12%, driven by continued growth in [indiscernible] accounts.

For the first half of the year, we expect mid-teens position growth overall with high single-digit growth in revenue equity positions. Five years ago, we began to talk about direct indexing, and we're now seeing it is driving growth in managed account positions. Today, we're beginning to see interest in tokenized equities which could create future sources of demand for new U.S. equity positions.

Our speed of adoption is uncertain, the SEC has been clear that tokenized securities are still securities. That means they will need to incorporate all the complex features of corporate governance and corporate actions that regular equities [indiscernible], and Broadridge is committed to making all that work.

We will be there with disclosure and governance solutions for tokenized equities to ensure that there are no roadblocks to [indiscernible] adoption. It's too early to say how popular tokenized equities will become [indiscernible] and decking, we see them as another leg of democratization that will continue to drive physician growth over time. Beyond position growth, we're also benefiting from a quiet a significant shift in how asset managers and public companies are approaching shareholder engagement and proxy voting.

Last quarter, we talked about how the growth of Patos investing is forcing the largest asset managers to rethink how they grow. With a growing number of funds, nearly 400 at the end of fiscal '25, representing nearly $2 trillion in assets using Broadridge's voting choice solution to enable their shareholders to engage by expressing their voting preferences. Now we're working with large asset and wealth managers to create an objective, a different approach to voting.

To be clear, we're a technology company, not a proxy adviser. Our solution which will be live with a select group of clients disproxy season, will meet an important market need by enabling clients to define and implement independent policies to complement ISS and Glass Lewis. In addition, we're also working with public companies to better engage retail shareholders by increasing the convenience of voting. This past quarter, we launched a pipe program with ExxonMobil to enable retail shareholders to provide standing voting instructions for annual meetings. Shareholders who opt in will continue to receive all the materials they do today and they can change their vote at any time.

This approach makes it more convenient to both and has the potential to increase retail voting. It's a new and exciting front in shareholder engagement, and we're seeing significant interest from other public companies. Taken together, these innovations across passive funds active institutional funds and public companies are enabling a quiet revolution in shareholder engagement by leveraging Broadridge's technology to give Main Street investors a greater voice in the companies they own. That's great for our markets. We also completed 2 tuck-in acquisitions in the first quarter to strengthen our governance business. Signal is focused on digital client communications.

It yields our customer communications business, a foothold in Europe and strengthens our global relationships with key financial services firms. I join as a retirement plan technology provider that will strengthen our Workplace and Retirement Solutions business. Both are great examples of how small strategic M&A can accelerate our product development. and deepen our product set. Let's turn next to capital markets, where we are simplifying and innovating trading. Capital Markets revenues grew 6%, driven by a combination of new sales and higher trading volumes with a boost for tokenization, which I'll comment in a moment. The growth in new sales is being driven by a balanced mix across both front and back office solutions.

In the front office, We're seeing strong demand for our connectivity solutions. And in the back office, we're seeing increased demand for solutions that help our clients simplify their global trading operations. We're also engaging clients in some of the market structure changes coming in calendar '26, namely the move to 225 trading of equities in the second half of '26 and to centralized clearing for treasuries at the end of '26.

The good news is that the move to 235 trading will be seamless for Bad bridge clients, highlighting the benefit of a mutualized platform. As we move toward treasury clearing, that is accelerating demand for our DLR distributed ledger repo solution. In September, we processed over $300 billion in tokenized equity -- tokenized trades per day, up from $100 million per day 6 months ago. And we're clearly the leading at-scale platform. Next, regarding to real-time repo, which will make repos a trading and financing instrument and further sale volumes. While we started with repo, the platform is fully multi-asset and we'll be going to other asset classes over the next 12 months. We'll also be incorporating stable coin as the cash rails for real-time transactions.

More broadly, we see tokenization as a make a trend over the next 10 years. It's ideal for less liquid, [indiscernible] asset classes, and there could be real benefits in other areas of income, collateral, private credit and alternative assets. One of the avenues for tokenizes activity to grow is on the Canton network, a public permission digital asset network designed specifically for financial services. As a result of our investment in digital asset holdings, and our work on DLR. We have been a super validator on the Canton network since beginning of fiscal '25 for which we have earned Canton coins.

In Q1, we recorded $4 million in recurring revenue from our super validated role. In addition, the coin holdings we earned previously have also gained materially in value, as Asma will share in a moment. We see the potential for the Canton network to serve as the operating system for tokenized institutional markets, including DLR. To support this vision, an investor group led by DRW announced yesterday the formation of a Canton focused digital asset treasury or DAT, which intends to invest in Canton client and create applications for the network. We are contributing a portion of our [indiscernible] client Holdings to take an 8% pro forma stake in that DAT, which will trade on the NASDAQ. This transaction is just 1 more indicator of the potential for our DLR and broader tokenization capability to create value as tokenized activity grows.

Moving to wealth, where we're modernizing Wealth and Investment Management. Revenues grew 22% in the quarter, paced by solid organic growth and the acquisition of SIS. Fiscal '25 was a strong sales year for our wealth business with 3 significant platform sales. So I'm pleased to note that we're making good progress in onboarding these new clients and are on track to begin recognizing revenue at the end of fiscal 2016.

November 1 marked the 1-year anniversary of the SIS acquisition, and I'm pleased with how it's driving value for our business and our clients. Over the past year, we've extended our relationship with key Canadian clients, and we're making strong progress in integrating SIS onto our wealth platform. More broadly, we continue to see a strong pipeline across our wealth business. And finally, close sales. After a strong finish to the fiscal '25 year in June, we closed $33 million in Q1 sales. More importantly, our pipeline continues to strengthen, and we are on track to deliver on our full year guidance of $290 million to $330 million.

All this means that Broadridge is better positioned than ever. Tokenization is just one of the many innovations we are driving that are transforming our industry. and setting the stage for long-term growth. Let me close with final thoughts. First, Broadridge delivered strong first quarter results. Second, our first quarter performance is Broadridge on track to deliver another strong year, including recurring revenue at the higher end of our 5% to 7% range and 8% to 12% adjusted EPS growth.

We're also deploying capital to drive value. Third, our results are being driven by the execution of our long-term growth strategy. We're driving to democratization and digitization of governance by delivering new voting solutions that put Main Street investors front and center. We're simplifying and innovating in capital markets across both the front and back office, and we're modernizing wealth management by delivering platform capabilities for clients in both the U.S. and Canada.

Fourth, we're positioned to benefit from the growth of digital assets and the trend towards tokenization A combination of a pro-innovation regulatory backdrop and accelerating technology change is putting digital assets and tokenization front and center as a new mega trend in financial services that creates significant opportunity for Broadridge.

Across our businesses, Broadridge is well positioned. Tokenization is the next wave of democratization to drive equity position growth, and our early start makes us the leader in supporting the technology behind tokenized assets trading. And finally, Broadridge is well positioned to deliver on its 3-year financial objectives and beyond. This will be the fifth consecutive 3-year period in which we've met our goals and the opportunity going forward is even larger.

Before I turn it over to Ashima, I want to thank our associates around the world. Their focus on serving clients and driving change is how we add value to our clients and our industry every day. and is making a real difference in the financial lives of millions. Amisha?

Thanks, Tim. Good morning. It's great to be here today to share our Q1 results. Before I begin my review, I want to make 5 key callouts. First, Broadridge is off to a strong start to fiscal '26 with strong recurring revenue and adjusted EPS growth. Second, event-driven revenue. We reported $114 million of event-driven revenues in Q1, well above the long-term average, driven in part by a proxy election at a major mutual fund complex.

Third, we are deploying capital to drive shareholder returns. During the first quarter, we completed 2 tuck-in M&A deals for a total of $56 million and repurchased $150 million of our shares. Fourth, we continue to expect to deliver strong fiscal 2016 results. We are now raising our recurring revenue growth outlook to the prior end of our 5% to 7% guidance range.

We are also reaffirming our guidance for 8% to 12% adjusted EPS growth and close sales of $290 million to $330 million. And one final call out. digital asset revenues and mark-to-market gains. As Tim referenced, Broadridge recognized $4 million of digital asset revenues related to our work as a super validator on the Canton network. While we have been earning coins for the service over the last year, they had de minimis value. Now as these points have increased in value, they are not only contributing to revenue, their value is also being recognized on our balance sheet.

As a result, we recorded a $46 million unrealized gain on the value of the 1.7 billion coins we held at the end of the quarter. That gain was excluded from our calculation of adjusted EPS. With that, let's go to the numbers on Slide 6. I Recurring revenues grew 8% on a constant currency basis, including 5% organic growth. Adjusted operating income margin expanded by 280 basis points to 15.8%. Adjusted EPS grew 51% to $1.51, driven by strong event revenue and closed sales were $33 million.

Let's move to Slide 7 to discuss our segment recurring revenue, starting with our ICS or governance segment. ICS recurring revenues rose 5% to $518 million. including a 1 point benefit from acquisitions and a 1 point headwind from lower interest rates.

As a reminder, the earnings impact of lower interest rates is functionally hedged by lower interest expense on available rate debt. Regulatory revenues rose 4% in Q1, driven by 7% growth in equity revenue positions and 2% growth in fund positions. Regulatory revenues were partially impacted by a shift in fund communications from September to October, which lowered Q1 regulatory growth by 2 points. Data Driven Fund Solutions revenue grew 2% as a 3-point headwind from lower interest rates partially offset strong growth in our Retirement and Worklist Solutions revenue. We also completed the acquisition of [indiscernible] joint in mid-September, which had only a modest impact on growth in the quarter. We expect to see data-driven fund revenue growth accelerate in the second half of the year. Issuer revenues grew 6%, driven by strong growth in both our Disclosure Solutions and our shareholder engagement solutions. Customer Communications revenues grew 8% and driven by organic growth in digital and print revenues and the addition of signal.

For the year, we expect ICS recurring revenue at the high end of our 5% to 7% total recurring revenue guidance, including a modest benefit from the [ I ] Joint and Signal acquisitions and the continued drag from lower interest rates. Turning to GTO. Revenues grew 12% in Q1, including 6% organic. Capital markets revenues grew 6% and driven by the growth in our global post rate solutions, which benefited from high trading volumes and by the recognition of digital asset revenues, which together more than offset a point of losses related to the business exit that we discussed last quarter.

Digital asset revenues contributed $4 million or 1 point to the growth of our capital markets business in the first quarter. With the recent increases in coin value, we expect these digital asset revenues to contribute approximately 1 point to capital markets growth in fiscal '26. Taken together with our growing revenues from distributed ledger repo platform, it's exciting to see our tokenization efforts starting to drive a small but real revenue contribution to our Capital Markets business. Wealth and Investment Management revenues grew 22%, driven by 5% organic growth and the impact of the SIS acquisition.

As a reminder, we closed the FIS deal on November 1, 24, and that revenue will be reported as organic for the last 2 months of our second quarter and in the second half of the year. For the year, we continue to expect GTO recurring revenue growth within our 5% to 7% guidance range with higher growth in wealth. Now let's move to Slide 8 to review our key volume indicators. We continue to see healthy growth in investor participation across both equities and funds. Equity position growth was 12%, including 7% growth in revenue positions.

Looking ahead, our testing showed mid-teens total position growth in Q2. Full year testing is showing low double-digit growth. which would imply revenue position growth in the mid- to high single-digit range. Q1 fund position growth of 2% was impacted by the timing of fund communications in the quarter. Our testing continues to indicate mid-single-digit position growth for both the first half and the full year. In GTO, trade volumes rose 17% for the quarter. driven by double-digit growth in both equity and fixed income volumes. I'll wrap up my discussion of recurring revenue growth on Slide 9.

In Q1, recurring revenue growth constant currency was 8%, primarily driven by 5 points of organic growth. Revenue from closed sales remains the biggest driver of our organic growth at 5 points as we onboarded revenues from our $430 million fiscal '25 year-end backlog. Our retention rate was 98% for the quarter. Internal growth contributed 2 points, primarily driven by higher trade volumes and digital asset revenues. Acquisitions, primarily FIS contribute 3 points to growth.

And finally, changes in FX contributed 1 point. Let's close our discussion of revenues on Slide 10. Total revenue increased 12% to $1.6 billion, driven by 5 points of growth from recurring revenue. Higher event-driven revenue drove 4 points of growth. Q1 2016 revenues of $114 million were our second highest quarter ever. The biggest driver of event-driven revenue in the quarter was board elections at a major mutual fund complex.

This fund company had its last proxy event in the first quarter of fiscal 2019. In the 7 years since that event, the number of positions grew approximately 30%. We highlighting the long-term growth drivers propelling event-driven revenues. Looking ahead, we expect event-driven revenues to return to historic average levels. of $50 million to $60 million per quarter for the balance of fiscal '26. Low to no margin distribution revenues grew 8%, primarily driven by higher postage rates, and contributed 3 points to total revenue growth. Turning now to margins on Slide 11. Adjusted operating income margin was 15.8%.

And an increase of 280 basis points from Q1 '25. This growth was driven by higher event-driven revenue and operating leverage from our scale business. partially offset by our ongoing reinvestments. The net impact of lower interest rates and higher distribution revenues reduced AOI margins by 30 basis points. Let's move on to earnings on Slide 12. Q1 adjusted EPS grew 51% to $1.51, driven by higher event-driven revenue.

Interest expense was $24 million in the quarter, a decrease of $8 million from Q1 '25 driven by a combination of lower balances and lower rates. As I noted in my call out, Broadridge recorded a $46 million unrealized gain driven by the increase in the value of our digital asset holdings in the quarter. that noncash gain was reported in other nonoperating income and was excluded from our calculation of adjusted EPS, given the volatile nature of digital asset values, we expect to continue to record gains and losses as we mark these digital assets to market every quarter. Let's turn to sales now on Slide 13.

Broadridge reported closed sales of $33 million, driven by sales of our governance solutions. Looking ahead, our pipeline remains strong, and we are reaffirming our guidance for full year closed sales of $290 million to $330 million. Turning to our cash flows on Slide 14. Broadridge generated free cash flow of $13 million in the first quarter.

Our strong cash performance was driven by higher earnings and working capital management, and we remain on track to deliver free cash flow conversion of over 100% in fiscal '26. Turning next to capital allocation on Slide 15. We continue to take a balanced approach to capital allocation. In Q1, we invested $30 million in capital spending and software spend with an additional $7 million to onboard clients onto our solutions.

We deployed $56 million during the quarter on 2 tuck-in acquisitions to strengthen our governance franchise. In addition, we continue to expect our previously announced acquisition of [ Akalin ] to close at calendar year-end, pending approval by German regulatory authorities. During the quarter, we also repurchased $150 million in Broadridge shares and returned an additional $103 million to shareholders via our quarterly dividend. And yesterday, we entered into an agreement to use approximately $340 million of our Canton Coin Holdings as part of a pipe offering in [ PARIMmUNE ] incorporated, a NASDAQ-listed company with the ticker THAR that intends to execute a digital asset treasury strategy for Canton coins. When the deal closes later this week, we anticipate holding warrants for 8% of the publicly traded vehicle.

Let's start to wrap by reviewing our fiscal 2016 guidance on Slide 16. As I said in my call outs, Broadridge is on track to deliver strong fiscal 2016 results. Given our strong start to the year and the incremental revenue from our Signal and I join acquisitions, we now expect fiscal 2016 recurring revenue growth, constant currency, to be at the higher end of our 5% to 7% guidance.

We continue to expect adjusted operating income margin of between 20% to 21%, adjusted EPS growth of 8% to 12% and $290 million to $330 million in closed sales. Additionally, I will highlight that we are expecting a more normalized level of event-driven revenue in the second quarter of 26% compared to last year's record $125 million.

As a result, we expect 2Q adjusted EPS to be approximately 13% to 15% of our full year outlook. I'll wrap by summarizing my key points. Broadridge is off to a strong start to the year, and the combination of strong performance and recent acquisitions has us incrementally more confident in growth in recurring revenues. We are deploying capital to boost growth and shareholder returns. And last, we remain very much on track to deliver another strong year of recurring revenue and adjusted EPS growth in fiscal '26 and deliver again on our top and bottom line 3-year objectives.

With that, let's move to Q&A.

[Operator Instructions] Our first question comes from James Faucette of Morgan Stanley.

It's Michael in [indiscernible] for James. I just wanted to ask on the recurring revenue outlook tracking towards the high end of the range versus the reiteration on the EPS front. I recognize that we're going to see a reversion of some of the event-driven revenue strength in the quarter. But can you just walk through some of the puts and takes as to why EPS wouldn't similarly track towards the high end of the range, just given the the high incremental margin nature of that event-driven revenue you saw in the quarter?

Absolutely. Thanks, Michael. I'll take that. You're right. We're off to a strong start of the year. And as a result, we raised our guidance for recurring revenue to the higher end of the 5% to 7% range. The biggest driver of the revenue upside is the acquisitions that we are seeing from [indiscernible] join and Signal that we announced earlier this year, which are more than offsetting the additional rate cuts that we are seeing in the year. I will say beyond that, we are seeing strength in our underlying business. Revenue from sales from converting our $430 million backlog is continuing to deliver consistent results and fuel our growth. Position growth is another important factor for us, and we are growing increasingly confident about the mid-teens growth that we are expecting for equities in Q2 and mid- to high single-digit revenue growth for the full year. .

Fund position and revenue growth also continues at mid-single digit. And we've seen a bit more upside from the digital asset revenues driven by increase in market value relative to the standpoint of the year. And specifically, in Q1, as you noted, we also saw the impact of event, which we were expecting given the large mutual fund proxy that was planned in Q1. All in all, all of this gets us to a super strong start to the year, which enables us to invest in our business while we continue to drive towards our 8% to 12% adjusted EPS growth.

I'm just going to add on to that a little bit because it's pretty early in the year for us to think about the translation of an incremental margin, if I can talk into earnings. And I just note this is a time of great opportunity in the industry for us and for our clients. And we're really pleased that we're in a position to be both investing and delivering on our commitments. And I do want to focus you on 4 key areas that we're investing in now, tokenization, digital assets, shareholder engagement. -- digital communications, AI and platform. And each of these are areas where we have a strong right to win and can bring real value to our clients by helping them really drive innovation. And so it's just -- it's early in the year to think about the balance of investment and earnings delivery. And so really staying with our guidance is the right call right now.

That's helpful. And then maybe just a quick housekeeping 1 on Canton. I recognize you're using those funds or those holdings to participate in the pipe. But maybe after contemplating that transaction, do you intend to convert some of those holdings to cash, if at all, to sort of mitigate some of the GAAP volatility? And if so, like how should we think about maybe like a theoretical 10% change in Canton coin and the impact on GAAP EPS.

Yes, I'll take it. Just at a very high level. I do think there's -- we're going to see some GAAP volatility. That's why we're certainly going to adjust this. We do think this is going to be a pretty volatile asset. And is probably something we'd prefer to have off on the side. I think the core thing here is we're an operating company, not an investment company.

And so I think you should expect to see us liquidate these holdings over time. There are reasons because a lot of the momentum in the network and the potential for the network to become really the rails for institutional financial transactions that the corn could become a lot more valuable over time. So I think this will be something that you'll see us evolve over over probably a few years.

Yes. The only thing I'll add is, remember, in terms of the revenue, at least, I called out that we expect this to be about 1 point of impact to our capital markets business. So in the larger scale, I wouldn't expect the value to have a significant impact to Broadridge revenues.

Our next question comes from Kyle Peterson of Needham.

I wanted to talk a little bit on sales cycles and kind of what you guys are seeing, particularly if there's been any impact from the government shutdown, obviously, at least some things in capital markets and things have been hit snags a little bit. But I guess, have you guys seen any impact to getting deals across finish line or client conversations that might have kind of slowed down in the last month plus? .

Yes. Kyle, thanks. It's Tim. And first of all, I think we are really pleased with the strong close we had to fiscal '25, and we're still on our guidance for this year. Specifically to your question, I think the selling environment that we're seeing is pretty stable. It is -- we haven't seen any slowdown in conversations because of the government shutdown. Now I think many of our conversations are -- they have a sales cycle that's really outside the window of whether a few weeks makes a difference unless we're coming right up on the end of the year, like we talked about last spring.

So I think it's it's really -- we're not seeing any change. It's pretty early in the year in terms of doing anything other than confirming our guidance. And all that said, I think the market remains strong. The conversations we're having with our clients are pretty exciting around strategic topics in digital communications and shareholder engagement in platform, among others. And the conversations that I'm having with clients are really very much more on the transformational side, which I think is a testament to the investments that we've made. So we have a lot of confidence going forward is grounded in those conversations are grounded in our pipeline, which remains healthy and has actually grown since the beginning of the year.

Great. That's really helpful. And then maybe just a follow-up, broadly, kind of your thoughts on how digital assets and tokenization fits within. Broadridge, obviously, several moving pieces, you guys are starting to get some revenue from that. You made the investment. But I guess, how should we think about how digital assets kind of should continue to evolve? And how -- what role do you see that playing in your business, both in the near and long term here?

Yes, thank you for that. I think we see digital assets and tokenization is a megatrend for the next 10 years and is a real opportunity for Broadridge and the industry. And our strategy is to drive tokenization across the asset class where we have deep expertise and where we think the asset class will benefit the most. And that certainly includes fixed income, repos, collateral. Longer term, tokenized equities, we think can be part of the next wave of democratization that drives demand for U.S. equities and contributes to long-term position growth. And then sort of as a double-click within that, we think the Canton network is has the potential early days, but potential to become an operating system that makes a lot of that more possible. So I think as you look across our businesses, you're seeing the continued progress on distributed ledger repo in capital markets.

And there, we're certainly going to be expanding traditional use cases, including real-time new asset classes, stable coin. There's a Canton network side of things, which is also sort of within capital markets. Tokenized equities, we'd see as a longer-term opportunity that would be really affecting more or somewhat on the capital markets side, more our ICS business in terms of extending position growth and really being the next wave of the evolution of democratization to drive that mid-single, high single-digit position growth into the foreseeable future and beyond. So -- and then last, on the wealth management side, this demand for digital assets is putting pressure on wealth managers to integrate those assets into their traditional client service operations. And they've sort of stayed away from them in the past, and I think that is changing quickly now. But when you think about a wealth manager for now offering digital assets to clients is all the other things that you need to do tax statements, all those things.

And so we think of an area where we can really help our core engines will be enabled to represent data assets by early next calendar year. And that is going to allow our clients to flow transactions through for everything from cost basis tax, margin SEG, statements, asset servicing and all that complexity that comes with being a large scale, either capital markets or wealth manager.

I'll just -- maybe I'll just add on because you were also asking about the near term and the midterm implications from a revenue perspective, right? So I'll just tack on, as you know, we specifically for Canton coins, we earn these canton points for being a super validator on the Canton network.

In Q1, we recognized $4 million of revenue, like we said, associated with this service. The actual revenue that we earn over the course of the remainder of the year would vary based on the actual minting activity, the number of coins specifically and the price of these kinds, right? They have a -- we've got a whole minting schedule. But bottom line, it translates into about a point of impact to capital markets, higher in Q2 and lower in Q3 and Q4.

We -- so that's from a revenue perspective. And on the balance sheet perspective, the only thing I'll call out is, we do have -- at the end of last quarter, we have 1.7 billion coins that were valued at $74 million, right? And like you said, we've contributed some of these to the DAT, but there could be volatility associated with this $74 million, which we'll continue to adjust out of our adjusted EPS.

our next question comes from Scott Wurtzel from Wolfe Research. .

Ash, just on the 2Q EPS guided about 13% to 15% of full year EPS. I understand that we should see a normalization of event-driven revenue. But just wondering if there's anything else going on there that we should keep in mind for 2Q EPS?

No. That's really the major driver, Scott. It's just a tough compare when -- because of the event activity that we saw last year in Q2. Just wanted to make sure you guys saw the grower impact coming in from that, nothing else significant to call out. .

That makes sense. And then forgive me, I was hopping from another call, so I may have missed the commentary here. But just wondering if you can talk a little bit more about the position growth trends that saw in the quarter and how that sort of trended relative to expectations?

Look, position growth is remaining strong. And we're seeing really nice strength in the underlying drivers. For equity positions, which grew 12%, really driven by healthy growth in managed accounts, but also pretty good growth in self-directed. As we talk to our clients, they continue to tell us that direct indexing is a significant driver of the managed account growth.

And then the equity revenue positions, taking out the smaller accounts and the fractional shares of 7%, which is really in line with what we've seen over the long run. And then I noted that on the fund growth side, it was 2%, but that was really an anomaly driven by timing, and we're continuing to see underlying position growth in the mid-single digits.

It is still early in the year, but our testing is now beginning to have a little bit of visibility into the second half, and showing, again, continued strength across funds and equities, low-doubl-digit equity position growth continued mid-single-digit fund growth for the balance of the year. I know you asked about drivers right now, but I just -- since I have the floor, I think that the key takeaway here is that innovation remains the key driver for long-term position growth.

15 years ago, we were talking about the rising popularity of ETFs. And 10 years ago, we started to talk about managed accounts.

Five years ago, it was 0 commission trading, and we started talking 5 years ago about indexing, but now we're seeing how that's beginning to become an important component of growth now. And as I said in my remarks, now we're beginning to hear the innings of interest in tokenized equities. And I think that just highlights the ongoing innovation that has driven physician growth for the past 40 years, there's always the next thing. And that's exciting. And so I think really, we feel good about long-term healthier.

Our next question comes from Puneet Jain of JPMorgan.

So I want to make sure, like I understand like -- so the super validator status that [indiscernible] digital asset repo platform, it seems like. So is it common for you to be paid for that REPO platform in form of coin. And then the second question on that is like the investments that you made in [indiscernible] network, like how do you expect to make returns on that investment? .

Yes. It's Tim, Puneet. So first of all, just to be clear, the goal as super validator is separate from what we are doing on distributed ledger repo. So built a distributed ledger repo platform, which is, at this point, actually, on the -- it's on a private version of the Canton network. It will go public later on. But that's an investment we've made. And I was just saying that because of our [indiscernible] digital asset holdings, they invite us to be a super validator. That was a separate investment we made for that activity, and it's just a separate activity. so related but separate. And in terms of getting paid and how people get paid for that rule, yes, it is very common to be paid in coin. There's a whole governing document for the Canton network, much like there are for Ethereum or Bitcoin that acclaims the different roles that people play and how the economics of that works.

And so the payments we're getting which, again, until this quarter really didn't have any value. We are picking this up, but now they do. So it's sort of interesting. Does that help? And then the investment in Canton, it's really -- the investment that we made was just the investment to become a super validator and operate that, which was, frankly, [indiscernible] low.

Got it. Got it. And then the guidance increase for recurring revenue growth, can you talk about puts and takes like the acquisition contribution I think Asia, you mentioned that the lower interest rates that being a headwind there. So can you talk about various puts and takes that drove 1 point increase in the guidance? .

Yes, sure. I'll just reiterate what I said before, Puneet, yes, the biggest driver of our revenue upside, the guidance was the contribution that we saw from [indiscernible] and Signal both of which were announced within the quarter, it's really less than 50 basis points of contribution coming in from those. We are -- so that's one put. The other side I'll call out is we are seeing additional rate cuts. What we're baking in right now is our expectation based on the latest Fed dot plot, right, which calls for 2 more interest rate cuts in the balance of our fiscal year.

That's baked into our guidance as well. But beyond that, the guidance really reflects our growing confidence in our underlying growth, right? Tim spoke a little bit about position growth that continues to be strong. Our revenue from sales is tracking well, and the digital asset revenue, while it's super small, is helping our growth overall. So that all of that gives us confidence in our guide towards the higher end of 5% to 7% recurring revenue growth.

The next question is by Patrick O'Shaughnessy of Raymond James.

In a world where tokenized equities trades are recorded on the blockchain, do you see that impacting the need for intermediated communications between corporate issuers and their shareholders? .

Patrick, thank you very much for the question. And look, we see this as an opportunity. And really, we see it as the next wave of democratization that's going to create new sources of demand and position growth. And as I said in my remarks, the SEC has been really clear that tokenized securities are still securities at week 4 last at a major industry event. Paul Atkins was asked specifically about tokenized equities in the main stage. And he is clear that they're going to be subject to all the same regulation, including Reg NMS and all the governance provisions that traditional equities are.

We believe the vast majority of tokenized equities are going to be purchased through a broker-dealer or exchange. And those intermediaries are going to have the same name asset servicing obligations they have today, including proxy, but also corporate actions, class actions, protecting the personal information of their clients, all of which creates a real opportunity for Broadridge.

So as I said in my remarks, we're going to be there to manage the complexity of disclosure, governance and all of that. And we're already talking to clients and industry participants about how we enable them to make this possible.

So I think -- and then as I said earlier, this work on tokenized equity, it's just part of our broader strategy to drive tokenization across multiple asset classes where there's real value and where we have a deep expertise.

All right. Got it. And then total trade volume growth continues to be a healthy tailwind for GTO segment revenue. Can you remind us the percentage of segment revenue that's tied to trading volumes? And how durable do you view this growth to be?

Yes. So overall, Patrick, if you think about the GTO revenues, I'd say about 1/3 of GTO revenues are tied to trade volume. Not all of it is exactly paper trade, right, one-on-one though. I would say about half of that is direct paper trade, half of that e-band kind of structures that we have. .

And we're definitely seeing the impact of higher volumes on the direct paper trade portion. It is you typically see higher trade and higher periods of higher volatility, it's proven to be double digits for the last many quarters. We're not counting on very elevated levels of trade volumes going forward, but we're expecting continued strong growth.

This concludes the question-and-answer session. I would like to hand things over back to management for any closing remarks.

Well, thank you, operator, and I want to thank everyone for joining our call today. Again, just to reiterate, we're really pleased with the strong start to the year. We're excited about what we see coming forward. We're excited about the innovation in the industry. And we hope that you're as excited as we are about everything that's happening in our industry and about the year ahead as we continue to really work with our clients to transform the financial services industry. So thank you for your interest in Broadridge. We look forward to speaking to you on the next call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day and welcome to the Broadridge Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Thibault, Head of Investor Relations. Please go ahead, sir.

Thank you, Chuck. And good morning, everybody, and welcome to Broadridge's Fourth Quarter and Fiscal Year 2025 Earnings Call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. .

Joining me on the call this morning are Timothy Gokey, our CEO; and our CFO, Ashima Ghei.

Before I turn the call over to Tim, a few standard reminders. 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. 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.

Let me now turn the call over to Tim Gokey.

Thank you, Edings, and good morning. Before I begin my review of our strong results and outlook, I want to share some thoughts on the macro environment. After volatile April, market conditions normalized in May and June. And we saw the beginnings of a bounce back in capital markets activity including new IPOs, M&A, and continued confidence from main suite investors. This positive environment contributed to a strong close to our sales for the year and gives us incremental confidence in our outlook for fiscal '26.

With that, let me turn to our results and our outlook going forward. I'll start with the headlines. First, Broadridge delivered another strong year in fiscal '25. Recurring revenue rose 7% in constant currency and adjusted EPS grew 11%, both right in line with our long-term objectives. Second, we're executing on our growth strategy. We're driving the democularization and digitization of governance simplifying and innovating capital markets and modernizing wealth management. Third, and as a result, we are positioned to deliver another year of strong financial performance in fiscal '26 including 5% to 7% recurring revenue growth, 8% to 12% adjusted EPS growth and closed sales of $290 million to $330 million. Those results keep us on track to deliver again on the 3-year top and bottom line objectives we shared at our last Investor Day.

And finally, worth translating the execution and financial performance into shareholder value. Last night, our Board approved an 11% increase in our dividend to $3.90 per share. We have now raised our dividend every year since becoming a public company, that's 19 years now with double-digit increases in 13 of the past 14 years.

Let's move to Slide 4 to start a review of those results. In governance, we're driving the democratization and digitization of investing. Governance recurring revenues rose 6% to $2.7 billion in fiscal '25 driven by strong growth in investor positions. The long-term trend of the democratization of investing, enabling more investors to participate in capital markets or giving them access to a widening array of financial products remains a driving force. The number of equity shareholder positions rose 16% in fiscal '25 with revenue positions growing 12%. Managed accounts were a key driver of this growth and self-directed position growth was also healthy as investors took advantage of market volatility to increase their participation.

Mutual fund and ETF position growth was also strong, growing 7% driven by demand for passive funds. Growth was driven by demand for both equity and fixed income funds or the number of money market fund positions, which have surged in recent years, declined slightly. Driving the digitization of these communications has long been a focus for us. Digitization rates in fiscal '25 for equity proxy communications rose above 90%. And and they were more than 77% for funds. Those rates have increased by more than 25 points over the last decade, translating into hundreds of millions in annual savings from public companies and funds.

Beyond position growth, Broadridge is making it easier than ever for investors to have a voice in the governance of the companies they own through funds. Nearly 400 funds managing a total of $1.8 trillion now offer a Broadridge voting Trice solution to their shareholders. That's up from 100 funds at the end of fiscal '24 and only 8 funds 2 years ago.

Looking ahead, we'll be making it even easier for fund investors to opt in by integrating our voting choice options with standard annual and semiannual reports. We're also working with funds in Europe to lower their registration, distribution and disclosure expenses. The acquisition of Acklen, which we announced last month will further accelerate these efforts. Acklen will deepen our roles in intermediary between distributors and funds and enhance the quality and scope of our fund data. And data quality is a key reason our AI-enabled global demand model is gaining traction in the marketplace and becoming an industry standard for helping fund companies predict future demand.

Finally, our Print and Digital strategy is driving digitization and customer communications with the third consecutive year of double-digit growth in digital revenue. We've rolled out our Wealth and Focused solution to more than 6 million wealth management accounts, only adding 1 million more in coming quarters.

Now let's move to our capital markets franchise on Slide 5. We continue to make strong progress against our goal of simplifying and innovating across the trade life cycle. Capital Markets fiscal '25 revenues grew 6% to $1.1 billion, driven by a combination of new sales and higher trade volumes. We are seeing strong demand for our trade processing solutions, driven by our clients' need for scalability and global interoperability. We notched several notable back office wins during the year including a sale to a leading Japanese bank, a longtime U.S. client. The bank is now turning to Broadridge to help modernize and upgrade its operations across other markets.

In the front office, our NYFIX trade routing solution is seamlessly delivering multi-asset class connectivity to almost 2,000 buy and sell-side clients around the world and powering tens of millions of trades every day. And our order management solution is helping our clients automate complex high- and low-touch trading processes for a growing number of clients. We're also driving innovation in capital markets, Our OpsGPT solution, which marries AgenticAI with our expertise and operations is drawing strong interest from clients looking to optimize their back-office processes in a world of faster settlement and extended trading hours.

Tokenization is clearly a hot topic in markets today. There's real momentum around speeding settlement times and reducing liquidity requirements across multiple asset classes by tokenizing securities and other assets. That's driving strong demand for our distributed ledger repo solution, which is the largest platform for tokenized assets in the world. Daily average trading volumes rose above $200 billion in June, up from $100 million just a few months ago and nearly 5x the size of any other platform. It's a great example of how Broadridge can bring to bear deep domain knowledge and modern technology to drive innovation at scale for our clients.

Let's turn now to Wealth and Investment Management on Slide 6. Our Wealth and Investment Management franchise had a strong fiscal '25. Recurring revenues rose 12%, driven by the acquisition of SIS. Excluding the impact of the eTrade deconversion, organic growth was 5%. Importantly, our Wealth platform continues to gain momentum in the market. After closing a sale with a leading U.S. wealth manager to modernize the set of in-house solutions in the third quarter we closed another significant U.S. sale in the fourth quarter, this time displacing a long-time competitor.

In Canada, the acquisition of SIS strengthened our relationship with key clients and allowed us to accelerate our efforts to bring new capabilities to market. Those efforts were rewarded in the fourth quarter as we closed our first Canadian wealth platform sale with a leading Canadian wealth manager who will use our adviser Workspace solution to modernize and enhance key elements of their front office. We're also seeing strong demand Sentry, our market-leading private credit solution, including a sale to one of the leading alternative managers in the fourth quarter. Sentry sales rose 8% in fiscal '25. And with more asset managers seeking to expand their private credit offerings, we have a strong sales pipeline going into '26.

Our execution across governance, capital markets and wealth and investment management is driving our sales. As I noted earlier, overall client sentiment improved during the quarter, paving a way for us to deliver strong closed sales at the higher end of our revised guidance. I'm especially pleased to see growing sales from our new products. We're benefiting from our efforts to increase investor engagement with new voting choice solutions for funds, our investment in digital omnichannel solutions and our AI-enabled data solutions. And we're seeing growing sales of our wealth platform, distributed ledger repo network and our global post-trade solutions.

Looking ahead, we have a robust pipeline, which positions us to deliver another strong sales year in fiscal '26, strong for our innovative solutions makes it clear that our clients increasingly see Broadridge as a trusted and transformative partner.

Before I close my review, I want to provide a brief update on the regulatory environment. Going into the fall, we see new momentum on digital assets, shareholder engagement, private assets and the digitization of communications. The good news is that we are well positioned to help drive many of these changes, which we see as opportunities for Broadridge. With the recent stablecoin legislation and other changes, it's clear bipartisan support to make it easier for more Americans to invest in digital assets. We see this as a natural extension of the democratization of investing with implications for disclosure, wealth management and capital markets. With [indiscernible], we've already introduced an innovative disclosure solution for digital assets, and we're actively talking to clients about how we can help them grow their digital asset offerings. Second area is shareholder engagement. Both the SEC and Congress are focused on ensuring that institutional investors vote in the interest of the shareholders and that should drive continued growth of our Voting Choice solution for funds. We're also seeing opportunities to help funds and asset owners develop and execute their own custom voting policies using a data-driven approach.

Third, we are working with our clients and industry partners to accelerate the digitization of financial communications. We're proud of the work we've already done in driving nearly 90% digitization rate for regulatory communications. Now we see an opportunity to further increase digitization by making digital the default for most financial communications. This will take some time but we see it as an opportunity to create next-generation digital experiences that save the industry money, enable more effective disclosure and increase investor engagement.

Finally, another area we're seeing change is private assets. While growth of private assets has been a strong trend for some time, it is increasing movement to open these products to a broader set of investors and to retirement accounts. This will drive growth in our Sentry private credit platform and longer term could have implications for disclosure. So there's a lot going on, it's exciting. And keep in mind that most of the changes I just described will take time, perhaps years for some. But we are confident that as they do take shape, our scale, domain expertise and commitment to innovation will enable Broadridge to implement change faster and at a lower cost for our clients.

I'll close my remarks with some summary thoughts on Slide 7. First, Broadridge is executing on our strategy with 7% recurring revenue growth and adjusted EPS growth of 11% in fiscal '25. We are democratizing and digitizing governance by driving shareholder engagement with our digital solutions and by making it easier than ever for investors to participate in the governance of companies they own directly or indirectly. We're accelerating and innovating trading by reducing the cost and complexity of capital markets worldwide and by helping clients take advantage of tokenized trading. And we're modernizing wealth management, one client at a time and on their own terms in both the U.S. and Canada.

Second, we're continuing to transform Broadridge. We're leveraging the investments we made in our wealth platform to become a platform company. We're extending a common application layer to more products adding open API architecture to more solutions and adding more applications onto a common BRX data layer. These changes will allow us to scale faster, deliver more value to clients more rapidly and unlock additional value through data and AI.

Third, and as a result, we're delivering steady and consistent growth. We expect another strong year in fiscal '26 with 5% to 7% recurring revenue growth and 8% to 12% adjusted EPS growth. That outlook has Broadridge delivered positions to deliver -- excuse me -- to deliver on the 3-year top and bottom line financial objectives we shared with you at our last Investor Day.

Fourth, we're using your capital efficiently and effectively with 100% plus free cash flow conversion, ROIC in the mid- to high teens, attractive tuck-in acquisitions and an 11% dividend increase. And finally, Broadridge remains positioned for long-term growth. Potential regulatory changes are only adding to the long-term trends driving our growth, including the democratization of investing the acceleration of trading, the modernization of wealth management, data and AI and regulatory change. Our position is our clients' trusted and transformative partner positions us well to help them adapt to change with modern technology and innovative new products that will help drive their growth. I've never been more optimistic about the opportunities in front of our company and about how well we are positioned to help our clients in this evolving environment.

Before I turn the call over to Ashima, I want to thank our 15,000 associates around the world. Their work and commitment to serving our clients is driving our transformation of our company and our industry. Ashima?

Thanks, Tim. Good morning. It's great to be here today to share our strong fiscal '25 results and our fiscal '26 guidance. Before I begin my review, I wanted to make 5 key callouts. First, the fourth quarter, Broadridge closed the year with a strong quarter including 6% organic recurring revenue growth and $114 million in closed sales. Second, event-driven revenue. Event-driven revenues was $79 million in the fourth quarter, ending a record $319 million year on a strong note, and contributing to our 11% adjusted EPS growth.

Looking ahead, we expect that event-driven revenues will decline in fiscal '26 but will remain above the historical average. Third, free cash flow. Broadridge generated $1.1 billion in free cash flow in fiscal '25, equal to 104% of our adjusted net income. As a result, we enter fiscal '26 in a strong position to make internal investments, fund a strong dividend, pursue strategic M&A and return capital to shareholders. Fourth, backlog. Thanks to a strong finish on sales, our recurring revenue backlog stands at $430 million. At 10% of recurring revenue, it gives us great visibility into the biggest driver of our growth in fiscal '26 and '27, which leads me to my fifth and last call out. Our guidance calls for another strong year in fiscal '26 and keeps us on track to deliver on our 3-year top and bottom line growth objectives.

With that, let's go to the numbers on Slide 8. Fiscal '25 recurring revenues grew 7% on a constant currency basis including organic growth of 5.5%. Adjusted operating income margin expanded by 50 basis points to 20.5%. Adjusted EPS grew 11% to $8.55, and close sales were $288 million. For the fourth quarter, recurring revenue constant currency grew 7% to $1.4 billion. including 6% organic growth. Adjusted EPS rose 1% as we increased our growth investments. And we delivered $114 million in sales.

Let's move to Slide 9 to discuss our segment recurring revenue. ICS recurring revenues rose 5% to $959 million in the fourth quarter, led by strong growth in regulatory revenues. For the full year, ICS recurring revenues rose 6%. Regulatory revenues rose 8% in Q4 and 7% for the full year, driven largely by strong position growth across both equities and funds. Equity revenue position growth, which excludes small or fractional positions for which we do not bill issuers, was 14% for the quarter and 12% for the full year. Fund position growth was 7%. The impact of higher position growth was partially offset by slower growth in other regulatory communications and international revenues.

Data-driven Fund Solutions revenues were flat in Q4 and rose 5% for the full year. During the quarter, strong growth in our data and analytics revenues were offset by a modest decline in our Retirement and Workplace Solutions, which was impacted by lower float income. For the full year, we saw strong growth in our Data and Analytics Solutions and Retirement and Workplace Solutions. Issuer revenue grew 3% in the quarter and 5% for the full year, driven by balanced growth across our shareholder engagement and disclosure Solutions, partially offset by lower float income. Customer communications revenues rose 3% in the fourth quarter and 5% for the full year as we continue to execute our print to digital strategy.

Strong growth in our digital solutions including the third consecutive year of double-digit growth was offset by lower growth in print revenues. Looking ahead to fiscal '26, we expect another year of steady and consistent growth in the ICS business, in line with our overall recurring revenue guidance and led by continued strong growth in regulatory revenues.

Turning to GTO on Slide 10. GTO revenues grew 12% in Q4 and full year revenues rose 8% to $1.8 billion. Capital markets revenues grew 4% for the quarter, driven by new sales and growth in trade volumes, partially offset by losses related to an exit of a business. Full year revenues rose 6% driven by growth across both our front office BTCS and back-office post-trade solutions.

Wealth and Investment Management revenues grew 26% in the fourth quarter, driven by 11% organic growth and the impact of the SIS acquisition. Organic growth benefited from the timing of license revenues which contributed 5 points of growth. Full year Wealth and Investment Management revenues rose 12% driven by the acquisition of SIS. Adjusting for the impact of the E*TRADE deconversion, full year organic growth of 1% would have been 5%.

Looking ahead to fiscal '26, we expect GTO to grow within our 5% to 7% historical range with higher growth in Wealth Management and lower growth in Capital Markets. Now let's move to Slide 11 to review our key volume indicators. Broadridge continues to benefit from strong growth in investor participation across both equities and funds. Fourth quarter equity position growth was 18%, including 14% growth in revenue-generating positions. Fund position growth was 7%. For the full year, the combination of 12% equity revenue position growth and 7% mutual fund and ETF growth was at the high end of the long-term trend of mid- to high single-digit blended average position growth.

Looking ahead to the first half of fiscal '26, our position testing is showing low double-digit equity position growth, which we expect will translate into high single-digit revenue position growth. We expect fund position growth to remain in the mid-single digits. In GTO, trade volumes rose 14% for the quarter as we saw double-digit growth in both equity and fixed income trade volumes. For the year, trade volumes were up 13%.

I'll wrap up my discussion of recurring revenue growth on Slide 12. For the quarter, recurring revenue growth constant currency was 7%, primarily driven by 6 points of organic growth. Revenue from closed sales remain the biggest driver of our organic growth at 5 points as we onboarded revenues from our fiscal '24 year-end backlog. Our retention rate was 98% for the quarter. Our 97% full year retention rate included a 1 point impact from the E*TRADE deconversion. Internal growth contributed 2 points, primarily driven by position growth and higher trade volumes. Acquisitions, primarily SIS contributed 2 points to growth. Finally, changes in FX reduced reported growth by 10 basis points.

Let's close our discussion of revenues on Slide 13. I Total revenue in Q4 increased 6% to $2.1 billion, driven by 5 points of growth from recurring revenue. Event-driven revenue of $79 million benefited from higher levels of mutual fund proxy activity and contributed less than 1 point to growth. Low to no margin distribution revenues grew 4%. And contributing 1 point to total revenue growth.

Turning now to margins on Slide 14. Fourth quarter adjusted operating income margin was 27%, a decline of 180 basis points from fourth quarter '24 as operating leverage from our scale business was offset by the timing of growth investments. On a full year basis, adjusted operating income margin was 20.5%, up 50 basis points. As the combination of strong recurring revenue, record event revenue and strong operating leverage enabled Broadridge to increase investments in key growth initiatives while offsetting the impact of the E*TRADE deconversion. The impact of float and distribution revenues was a 10 basis point headwind to our fiscal '25 AOI margin.

Let's move on to sales. Broadridge reported fully closed sales of $288 million. Backing out the benefit of sales of our tailored shareholder report regulatory solution, close sales were essentially flat year-over-year. Turning to our cash flows on Slide 16, Broadridge generated free cash flow of $1.1 billion in fiscal '25, up 12% from fiscal '24 driven largely by higher earnings. Free cash flow conversion was 104%.

Turning next to capital allocation on Slide 17. We continue to take a balanced approach to capital allocation. In fiscal '24, we deployed $115 million in capital spending and software with an additional $12 million to onboard clients onto our platforms. We returned $402 million to shareholders through our dividend. After internal investment and dividends, targeted M&A is a core part of our capital strategy. We deployed $193 million to strengthen our wealth franchise in Canada with the acquisition of SIS and made 2 other small tuck-in acquisitions in our ICS business. More recently, in July, we announced the acquisition of Akalin, which will extend the suite of services we offer to our fund clients in Europe. This approximately $70 million acquisition is expected to close in the first half of fiscal year '26. We also returned $100 million to shareholders through a fourth quarter buyback and repaid $104 million of our debt.

At June 30, our leverage ratio was 2x, below our target of 2.5x, giving us ample capacity to pursue additional strategic M&A and/or repurchase shares. Last night, our Board approved an 11% increase in our annual dividend to $3.90 per share. This marks the 13th double-digit increase in the last 14 years, which underscores our sustained earnings growth over the period. Our capital-light model and our long-term commitment to a strong and growing dividend as a component of balanced capital allocation.

I will close my prepared remarks this morning on Slide 18 with some detail on our guidance. As we enter fiscal '26, we expect another year of strong recurring revenue and adjusted EPS growth, accompanied by underlying margin expansion and higher sales. Let me walk through each of these points, starting first with revenue. We expect recurring revenue growth constant currency of 5% to 7% with balanced growth across both ICS and GTO. We expect organic growth to be driven by new sales as we onboard our $430 million backlog and the acquisition of SIS adding approximately 60 basis points to growth. The acquisition of Akalin is not expected to have a significant impact on our fiscal '26 recurring revenue growth.

After setting a record in fiscal '25, we anticipate a lower but still healthy year for event-driven revenues. We anticipate event-driven revenues will be at the high end of their historical $230 million to $280 million range, driven by a first quarter proxy campaign at a major mutual fund complex. Distribution revenues are forecast to grow at mid-single-digit range, powered in part by higher postage rates. We expect these low to no margin revenues to have a dilutive impact to our reported margins.

Now let's move to margin. We expect adjusted operating income margin will be 20% to 21%, approximately flat to fiscal '25. The combination of operating leverage and disciplined expense management should enable us to fund ongoing investments and deliver over 50 basis points of core margin expansion excluding the impact of float and distribution income. Third, EPS. We expect adjusted EPS growth of 8% to 12%, embedded in this outlook is an expected tax rate of 22%. Additionally, for the first quarter of fiscal '26, we expect our adjusted EPS to account for 12% to 15% of our full year earnings roughly in line with our historical average. Finally, we expect closed sales of $290 million to $330 million.

So let's wrap up with a quick summary of the key takeaways from our strong fiscal '25 results. First, Broadridge delivered another year of strong and sustainable recurring revenue growth and double-digit adjusted EPS growth. Second, our guidance for fiscal '26 calls for another strong year and keeps us on track to deliver on our 3-year top and bottom line objectives. Third and last, our strong free cash flow has the company well positioned to make internal investments, fund another double-digit dividend increase, pursue strategic and value-enhancing M&A and repurchase shares. Net-net, Broadridge is entering fiscal '26 well positioned to continue to deliver strong and sustainable growth.

With that, let's move to Q&A.

[Operator Instructions] And our first question will come from James Faucette with Morgan Stanley.

It's Michael Infante for James. I wanted to ask on the contemplated closed sales acceleration. We've been hearing from others that sell into a similar customer cohort that there is some level of sort of sales cycle elongation or at least has been over the last several months. Your GTO segment obviously tends to be more discretionary in nature with lumpier deals. So I'm just curious whether or not you're seeing any of that elongation and/or if you're just bullish on the growth and the composition of that pipeline that you can absorb some incremental elongation throughout the year.

Yes. Thank you. Well, I'll just start with that we were very pleased with the way we closed out the year near the high end of our revised guidance. And you certainly saw sales cycles have been longer, I'd say, really, this whole past year compared to the previous. I'm not sure we're seeing anything specific right now that's different than that.

I think what we really like is that -- where we are seeing sales are the areas where we're investing, voting choice, wealth and focus, global demand model, our wealth platform, global post trade, distributed ledger repo and these all meet real client needs where they're making a real difference in their business. And yes, it takes a while. But when there's a real business case behind it, our clients eventually move.

And so as we look forward now, it's a new year. We do feel like we have a very strong pipeline. And there is macro uncertainty, which is potentially contributing to the elongated sales but what I can tell you is that we're seeing really strong underlying demand. Demand for simplification and modernization in both capital markets and wealth, demand for the digitization of communications, demand for better stewardship solutions and across all of those AI is a real driver as a theme in all of these.

And then I think the last thing I'd leave you with is just -- we are having more strategic conversations than we've ever had before. And a key theme is the platform conversation that I mentioned at the end of my remarks. Our vision for where we're taking our technology over the next several years is really resonating with clients and is really reinforcing our position as a trusted and transformative partner for the long term which we think is making a real difference in some of these conversations.

Very helpful Tim. Maybe just on DLR, I appreciate the commentary just given all of the news flow in the market. But is there any sort of qualitative color you can provide just in terms of how how big of a closed sale driver DLR is at this point? And maybe how you think about some of the regulatory, technical or counterparty hurdles that have to be cleared before banks start to lean more aggressively into monetizing some of their balance sheet exposure through tokenized.

Yes. Great questions. And we're excited about our distributed ledger repo product both in itself and also for what it means as you just mentioned, after that broader theme of tokenize securities. I mentioned that through most of last year, we were processing about $100 billion and that really rose and near the end of the year. And just for scale, that is larger than the entire crypto market, excluding tethered. So this capability, it's tokenized securities, it's smart contracts and there has been, as you sort of alluded to a lot of underlying work in terms of detailed knowledge in fixed income and the legal background to make this work.

The core uses that we've been seeing so far have been intercompany transfers which is a surprisingly large part of the repo market. But the real driver this past year has been sponsored repo. As people are looking forward to treasury clearing, they're seeing a real need for this. And so it's interesting how one regulatory change creates pressure to accelerate in another area. And so I think what people are seeing is that the market leaders have been doing this for a few years now, has worked really well. They're getting their legal teams comfortable. Now they have a new reason to come on board, and so they're coming on board.

I think the next piece that we're really excited about is moving this to intraday repo. And that can really accelerate things. It is -- you asked about how material a factor is this in our sales. It's sort of not like moving the needle from a -- when you look at the whole $288 million, but it's very material for this product.

In FY '28, we signed 8 new clients, including some Tier 1s. And so we expect that $200 billion to continue to rise. So really nice things going on here. And we're excited about what that means longer term for other classes of tokenized securities. Those use cases are just emerging. So it's really too early to say which will gain traction first. But we really feel like we're the market leader here. And our position as a scaled leader in this space, we think, puts us in a great position to help our clients and our industry move forward with this.

Next question will come from Scott Wurtzel with Wolfe Research.

Just wanted to kind of follow up on that question on tokenization. And Tim, maybe if you can talk about the opportunities on the ICS side of the business with tokenization would be great.

Yes. It's -- I think when you think about this whole world, it's tokenized securities and its digital assets. And it's easy to sort of mix and match those, but they're both very relevant. And then I'll just add sort of stable climb somewhat in the middle because it's not exactly a tokenized treasury, but it is backed by treasuries, and it will be a great vehicle for real-time settlement.

So I think when I think about ICS, I think a little more on the digital asset side. Our wealth management clients have been reluctant to offer these in the past, but they're really now getting on board. And I think our opportunity is to help them offer digital assets to their clients. but then especially connect them to all the traditional capabilities like statements, tax, margin, risk and other needs. Some of those are provided by GTO business, but a lot of them are provided by the ICS business. And it's just another leg in the democlarization of investing.

And then I think longer term, there are real questions about whether a stronger disclosure regime could help growth in this category. And I'd say the industry itself is a little divided on this. There are some folks in the industry that really think this would help fuel growth. Others that think they're not sure. So without really taking a view on that debate, it won't surprise you to know that we developed a product that we think can address that need. We have signed clients over the past 12 months. And so we'll see where that goes, but we will be ready to provide good disclosure if that's the way the world evolves.

.

That's helpful. I just wanted to follow up just on the guidance side and with the outlook for capital markets revenue maybe being a little lower than the total GTO segment revenue. Wondering if you can talk about the drivers there. I know you mentioned the exit of a business but just wondering if there's anything else that we should be contemplating for fiscal '26.

Yes. So we were pleased with the full year growth in capital markets that we saw, which continues to deliver in line with a 5% to 7% growth range -- just double-click on Q4, capital markets grew 4% as we saw the benefits from higher sales, higher trading volumes, it was partially offset by slightly lower professional services and the impact of the business exit that you called out. That exit was about a 1 point drag to our Capital Markets business. And essentially, as we've transitioned a single client to an alternate provider we do expect this to continue to have a modest 1 point impact on our capital markets growth in fiscal '26 which is why the guide towards the lower end of the 5% to 7% recurring revenue outlook.

The next question will come from Puneet Jain with JPMorgan.

I wanted to quickly ask about backlog like it's $430 million outstanding. But the increase in digital solutions like those solutions growing double digits, are you seeing any change in duration of the backlog or maybe duration of close sales? .

Punnet, I missed a part of your question. I think you're asking about backlog and the duration. Was there something about a separate...

That's essentially like the question, like is there any change in duration because of higher sale of digital solutions or hard mix of digital solutions in there.

Got It. Got it. Yes. So our backlog overall is, like I said, $430 million, about 10% of our recurring revenues. It is a combination of backlog that we haven't converted both on the ICS and GTO side. ICS, call it, 60-40 ICS [indiscernible] deal, -- we do typically see a difference in conversion times across ICS products and GTO products. Some of the wealth sales that we saw this quarter will take longer to convert. We should expect them to start having more of an impact around the '27 time period. While some of the ICS sales will be faster to convert. So it's not an overall rule. It's just a mix of how we're seeing across those products.

Got it. Got it. And then on margins, like did I hear it correct that you said like the underlying margins will be up 50 basis points incline that the distribution and interest rates will have like a 50 basis points year-on-year headline?

What I did guide to is that we are expecting overall margins to be 20% to 21% for the year, essentially flat to this year. And I -- what you said is right. In these reported margins is the impact of distribution and interest. When I think about distribution, there is a postage rate change that's already effective in July, which is essentially passed through. So that will be a drag to our reported margins. And on interest income, we're aligning a current forecast with the latest Fed dot plot, which is forecasting 3 more rate cuts in fiscal '26. So we would expect float income to come down as a result. Though you know that. It will be offset on the debt side with interest expense on a variable rate debt. So yes, excluding the impact of those 2 variables, we expect the underlying margin expansion will be over 50 basis points, which will allow us to fund our investments and deliver at the 8% to 12% earnings growth.

And just as a reminder, the interest it is neutralized at the company level. So we think it's appropriate to give you those numbers and it includes that because it turns up in operating income, but then it's backed out at the EPS level.

Your next question will come from Kyle Peterson with Needham.

Great. I wanted to follow up on Pete's question really in the backlog. I know it's down a little bit year-on-year. Obviously, the base is bigger heading into this year. I just want to see what the time line to potentially get that replenished and be a little higher? Or is there any concern about kind of exhausting the backlog as the year goes on? Just want to see what the pipeline is to kind of restore that and keep that moving higher versus kind of flat to down?

Yes, it's Tim, Karl -- Kyle, thanks for the question. I don't think we really would call the backlog between this year and last year materially different. We completed a pretty large sale just at the very end of last year that pumped it up a little bit, and we've made that onboarding. And so I think it bobbles around a little bit, but we think -- we really like 10% of recurring revenue, having that visibility, and it is something that just the visibility that we have with our recurring revenue model with we're looking to get, call it, 6% revenue from sales, and we have 10% that we know of really gives us confidence in our ability to deliver. And we're expecting a strong sales year this coming year with a good guide. And we think that will keep things very much in balance.

Great. That's super helpful. And then I guess just a follow-up. I appreciate the color you guys gave for the event-driven revenue and some of the seasonal expected impact in the first quarter. I know you have a tough comp there in the second quarter. I guess, are there any other seasonal items we should be mindful of for this year either on the event-driven side or at the business at whole besides those factors that you guys called out in the prepared remarks?

You got it. I think the only specific item I would call out is event, right? You are aware of our strong comp with the proxy activity in Q2 last year. I would expect Q2 this year to have a grower impact. And we are expecting -- we are aware of a mutual fund proxy that's going to come through in Q1. That is baked into when I spoke about our EPS guidance for Q1 being at 12% to 15%, that higher event activity is essentially baked in there. Nothing else that's material that I would call out.

The next question will come from Patrick O'Shaughnessy with Raymond James.

I want to go back to the topic of the tokenization of equities. How do you think about the potential threat of disintermediation specifically if retail investors were to own tokens as opposed to underlying securities, do they participate in the proxy process at that point?

Yes, Patrick, thank you very much for the question. I think a couple of things. When you look at the sort of the range of asset classes likely to be impacted by tokenization I would put equities sort of on the lower/later end of that as the overall equities infrastructure is really effective and highly scaled and cost effective. I think you are seeing sort of edge cases around 24/7 trading and things like that but it's not really affecting sort of the broad and I don't think really will the broad breadth of of equities.

And then within that, as you know [indiscernible] is one of the SEC commissioners is sort of leading this thinking for the SEC. And one of her clear statements is First of all, there's this division between what's under the office of the SEC versus under the CFTC and equities are clearly under the SEC, And she has been very clear that tokenized securities or securities. So all of the things that pertain to underlying will pertain to the token. And that's -- they haven't sort of formalized that, but that's the direction of travel. And so -- it's not really something that we are seeing this as an opportunity to provide infrastructure on the GTO side and potentially disclosure on the ICS side around these new asset classes and do think that they won't sort of take away the disclosure from the existing asset classes.

Got it. That's very helpful. And then how are you guys thinking about your debt profile going forward? You do have those senior notes that are coming due within next year. Obviously, you have the floating rate debt as well. How are you thinking about managing the balance sheet going forward?

Yes. So Patrick, we're happy with the level of debt that we have currently with -- like I said, we're sitting at 2x leverage, which is at the low end of our 2 to 2.5x range. So I would expect that we would roll over that debt that's coming current.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.

Thank you, operator. And I just want to thank everyone for joining our call today. We are really pleased to have delivered another strong year in fiscal '25 and I hope you heard in our voices, our excitement about the path ahead as we execute on our strategy for our 3 franchises and as we transform into a platform company. Thank you very much for your interest in Broadridge. We look forward to talking to you next time. and what we hope will continue to be strong results as we go through the year. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

This is Broadridge. Joining us is Doug DeSchutter. He's the Co-President, Investor Communication Solutions. So welcome. Thank you.

Thanks, Matt. Thanks for having us.

A lot of people in this room are probably using Broadridge technologies solutions and may not even know it. So can you give us a brief overview of the company in total and then the ICS unit.

Good. Yes. Happy to do so again. Thanks for having us today. And again, my name is Doug DeSchutter. Thanks for the time today. Just a bit of background on me, and then I'll get to Broadridge. I'm Co-President of our ICS division. I've been part of the Executive Committee, Broadridge since we spun off in 2007 from ADP. I've run a number of businesses, our post-sale business, our proxy business, our customer communications business. I've been responsible for our overall digital strategy at Broadridge as well. So it's a pleasure to be here today.

So let's talk about Broadridge. In doing that, I'm going to talk about what we do. I'm going to talk about our growth plans a little bit, talk about our execution model, how that translates into numbers and return. So in terms of what we do, we are a leading provider of technology infrastructure to the financial services industry. We have roughly a $28 billion market cap. We have $4.5 billion a year in fee revenue. That $4.5 billion is against a $60 billion addressable market. So we think we have a long runway left. The clients that we serve are primarily in wealth management, asset management, capital markets and corporate issuers. We service 28 of the 29 globally systemic important banks around the world. We do that through providing technology, operations, governance and communications. The ICS business is a pretty unique network. And sometimes people think the ICS business is complicated to learn. But think about it as a network linking corporate issuers to investors through banks and through advisers. So think issuers, investors, banks and advisers and the network, and Broadridge is sitting in the middle of that.

In the GTO business, we have a capital markets business. We have a wealth management business. Capital markets is providing front, middle and back-office systems for capital markets. And in the wealth business, we are a leading wealth provider in the industry. It's about a $600 million business there as well. Just in terms of what that translates to in terms of volumes, we processed almost $900 million equity positions last year. That translates into 7 billion communications that we send out to investors. We clear and settle $10 trillion a day in fixed income settlements. We do that on behalf of 20 of the 24 primary fixed income dealers in the United States, where we're the primary back office platform.

And I think we're the primary back-office platform for 11 of the top 15 equity houses across North America. We -- and we're increasingly doing all these things as a platform company. We'll probably talk a little bit about some of the things we're doing in wealth management and some partnerships that we've done to create the next-generation wealth platforms. But increasingly, as a platform company, we're doing this across common data ontologies, common data mapping language, common APIs and just other ways to make it easier for businesses to do business with Broadridge. So that's who we are.

In terms of our growth plans, we'll break it down into 3 different things. We'll talk about our governance franchise, where we are democratizing and digitizing governance. We have capital markets, where we're simplifying and innovating and trading in capital markets. And then, of course, we're modernizing wealth management. So let me talk about each of those in turn. In terms of our governance franchise, we've got a clear power around that business from the democratization of governance and investing. We'll probably talk about position growth in a little bit. But we've seen in FY '25, mid-teens position growth in equities and mid-single digits in terms of funds, and we're investing a lot to make those communications more engaging and more effective for shareholders.

We are doing a lot with funds. We just rolled out a tailored shareholder report platform on behalf of the industry about a year ago, which is the next-generation disclosure for fund companies. We are helping asset managers and funds better engage with the underlying shareholders and passive funds through something called pass-through voting. We -- pass-through voting is an increasing trend. We supported 8 funds in that in '23. We had about 100 funds last year, probably 400 funds this year, and that continues to grow in terms of things we're doing.

And in the customer communications space in ICS world, we have a huge effort around the print to digital migration, helping our clients digitize communications, investing in next-generation digital communications platforms around that as well. So that's around the democratization and digitization of governance. In the capital markets, which is about a $1 billion business, capital markets, again, it's about simplifying and innovating and trading. We have a class-leading global post-trade books and record system in the back office. We made a pretty meaningful acquisition in Europe.

It got us into the front office with a global leading SaaS platform for front office trading capabilities in capital markets. And we're really doing a lot of innovation in capital markets right now. We're doing real things around AI. A lot of people are talking about AI and how they're experimenting, exploring. We're executing, we're implementing. It's driving real revenue for us. I think we just announced there's a press release this morning around BondGPT and the rollout of BondGPT. We have real platforms and real revenue around distributed ledger repo.

And all these things are basically helping speed execution, lower execution costs, lower execution risk, a lot going on in capital markets. Wealth management for us is very much around modernizing wealth management. And back in the day, a wealth management back-office conversion was a huge big bang. And we've really extended to creating modular solutions that you can use as various different point solutions. And we talk about transforming on your own -- transforming on their own terms, transforming on your own terms. So the firms now can think about modernizing back office and back-office capabilities using these modular solutions that we've been spending the last 5 to 6 years investing in. So that's what we -- that's kind of our growth strategy.

Just quickly, Matt -- I'm sorry, just about the execution like -- so what does that mean to you guys? And how does that translate around execution and returns. If I go back to the last 10 years for Broadridge, we've had 10% recurring revenue growth, 13% adjusted EPS growth. We've had dividends growing in line with earnings. I think we've had a double-digit dividend increase for 12 of the last 13 years, and over the last 10 years, a 19% TSR, total shareholder return. We're a pretty unique company in that we hold an Investor Day every 3 years. And when we do that, we provide 3-year guidance. And at the last Investor Day, we talked about that guidance, 5% to 8% organic revenue growth, 7% to 9% revenue growth in total with a point or 2 coming from M&A, 8% to 12% EPS growth. And we're just over halfway through that 3-year period, but we're on track to achieve that.

Overall, I would say, as you think about Broadridge as an investment, we target low double-digit TSR returns with high defensiveness and low volatility. And we think that's relatively boring, and we think boring is exciting in that context. That's my line, and I'm sticking to it.

Okay. I want to drill down a little bit. You mentioned democratization. There's this theme of democratization of investing. You mentioned the position growth.

Yes.

Can you kind of unpack the trends that are underlying it maybe, first, what is it?

What is it? So what -- if you say democratization of investing, it took me a while ago to get those words out consistently. What does that mean? That means more people are transacting in the market, and that brings in more positions. And generally, our revenue trends are tied to the number of positions that we process. So this trend around democratization isn't new. Going back to -- I'm going way back for some of the old folks in the room, right? The end of fixed income are the fixed commissions and you get decimalization. And then there's a point where you could get a managed account if you had a $250,000 balance. And now the balance for managed accounts is like way down. And then you have the advent of app-based investing in digital brokers and robo advisers and you have model indexing and all these various different things, that where you see underlying broker-dealers that are basically innovating, thinking about new ways to make it effective for investors to participate and enter into the market. All those things are continue to drive position growth.

So let's step back. What is position growth? Because this is a core driver for Broadridge in the ICS business. Position growth is if you own -- [ Edings ], if you own 100 shares of Amazon or you own 1,000 shares of Amazon, that's just one position. And generally speaking, we get paid for processing positions. Position growth over the last decade, Matt, has grown about high single digits. And the way to think about that is through 2 primary factors. There are more investors coming into the market that's been of that, call it, high single digit, that's been 2 to 4 of that -- 2 to 4 points of that high single digit. And then, of course, for folks in the market, more positions per investor. That's been worth about 5 to 7 points. And so on a combined basis, it's been high single-digit growth. Again, we talked about where we are in fiscal year '25 year-to-date, we've been at mid-teens in terms of equity position growth and mid-single digits in terms of fund growth.

In terms of where I think that's going to -- is that trend going to continue? For me, I think positively, it will. There are certain demographic drivers behind that, more investors in the market. And then, of course, there's the innovation that our clients are doing around creating more product for investors to invest in, and that will continue to drive growth. And even things that where the regime has yet to been set in terms of digital assets or private assets and how those are going to come to the market and investors participate in that, all those things will need investor information and investor disclosure and ways for investors to engage with those underlying assets. And I think all those things will bode well for Broadridge. So the democratization of investing is all these things, and it's been a positive trend for us.

You talked about it, it impacting the ICS business. How do you think it's impacting the GTO business in terms of capital markets, wealth management?

Well, the GTO business, I go back to the strategy is we've been creating a multi-asset class on the front end. And of course, we have leading capabilities on post-trade on the back end. And innovation is a common theme around all those different things. So it's simplifying operations, creating scale and around the innovation. And that's -- I think Broadridge plays very well in that space. We're going back to being a $28 billion market cap company and $4.5 billion of revenue. I will -- at some point, I don't know if Dan is in here, like you guys always talk about your capital model because it's very interesting to investors.

But the first thing in the pecking order for our capital allocation model is investing in attractive internal growth opportunities. And we have the balance sheet and the capacity to be able to do that. So we're innovating at scale. And whether it's things like BondGPT or OpsGPT and things like that, you're seeing that. And in the wealth markets, you're seeing the investments that we're making. We had a big partnership with a client going back over the last 5 years, where we created a next-generation wealth platform and investing in that. All these things are so that our end client can reduce the cost of operations, make it more effective and provide tools that they can continue to innovate. Innovation, everybody is innovating, and we fuel that innovation, and that's a good trend for us.

Okay. Can we drill down on the digitization that you also talked about. Is that simply replacing paper with digital communications? Or is it more involved?

A good question. Is it more involved? It's a lot more involved. So let's just talk about what digital is and what that means. The financial services industry has been doing digital for 25 years, and digital started off as e-mail. Where we are right now as a financial services industry, and you think about the things that we do and the communications that we provide. 85% to 90% of regulatory communications, so think of it as a proxy or an interim or prospectus, 85% to 90% of those are already suppressed digitally. So there's about 10% to 15% left in paper. In terms of the transactional communications, like the things that we do in the customer communications business, 50% of those have gone electronic and 50% of that is paper.

We've been partnering with an industry for the last 25 years to drive that electronic -- to drive those rates up higher. And it's not something that we're concerned about in protecting the print business. It's just the opposite. We are actively investing and engaging to help our clients go from print to digital. And it's to drive -- yes, it is around cost savings, but it's also around client engagement and deeper engagement with clients in a digital way. And then when you think about digital, Matt, I'd ask you think about not just e-mail, that's the simplest way to think about it, but that's just a fraction of what it is.

The digital ecosystem around digital communications ranges from data ingestion to composition to e-delivery to SMS texting, providing personalized [ ETMO ] microsites on behalf of clients, the preference management process around that, the [indiscernible] delivery process around that, archiving all those communications. There's a compliance layer that goes across all those different things. And there's a whole vertical stack of capabilities tied into digital, which is attractive for us. And so when you step back and say, Broadridge, you're still doing print, are you concerned about print going away and that driving digital? I think about just a mirror of that. I think about the 50% that's not yet digital. I think about that as the opportunity. And I'm not concerned about the print, the 50% of print that exists because of all the different things in that value stream around what is digital.

You mentioned the customer communications business. I mean, I think most people think of Broadridge, they think of the proxy business. So what is the customer communications that you're talking about?

Customer communications. So think of it -- so it's a $700 million business. It's about 85% print today and 15% digital. That digital business within there, I think, is a terrific business. So you can do the math on what 15% of $700 million is. And that business grew double digit in '23, double digit in '24. We're on track to be solidly double digit this year in '25. So it's a pretty meaningful business growing double digit because of all the different things that I just talked about. Our typical client could be a -- like somebody you're familiar with, think of a large financial services firm, that it is consumer-facing and has to send out really important communications like a customer statement or a trade confirm or a letter and various different disclosures and things like that.

And what a firm like that would be looking to do is to essentially optimize that overall program across print, they really like to streamline and reduce the cost of providing print. And they want to create better digital experiences, so they have a better digital interaction with their clients. And they're looking for our help to help convert clients from print to a digital relationship. And I think that's a win-win. That's great for our clients. It's good for us because we're going from a low-growth, low-margin print business to a high-growth, high-margin digital business. So it's really -- there's a good synergy and a very good fit there.

And so that's our typical client. For us, we are a leading omnichannel platform, which is pretty unique. There are -- if we were to get into competition, there are a number of folks out there doing purely print. There are some folks out there doing e-mail. There are some folks out there that can provide the technology stack to do archive. We have a fully integrated suite. We have a whole set of next-generation digital experiences tied to all those things, and we actively work and partner with our clients to drive print to digital. And I think it's a pretty unique value proposition for us. And that's why you're seeing this double-digit growth in the digital business underneath within customer communications growing pretty attractive over the last several years.

Okay. You've mentioned a couple of times recurring revenue, where you also report event-driven and distribution revenue. Can you kind of explain the differences? And how should investors sort of think about them and the drivers?

Recurring revenue is revenue under contract for multiple years. It's a pretty simple concept. Event-driven revenue is something which is not recurring. It may happen 1 year and not again for another few years. It may just be a onetime one-off or something like that. That's event-driven revenue. Examples of that could be a proxy contest when there's an activist. It could be a mutual fund complex having to go out to a Board vote because they have a new CEO. You actually saw that in '24 and '25. In '24, we had a Disney contest. It was pretty active and pretty public. And we -- of course, we were doing communications on behalf of Disney, but there were also 2 activists in there.

And our job is to be the fair middleman in there, helping everybody do effective communications and to manage the overall process. So you saw a big event in '24 from Disney. This year, you've seen a large mutual fund complex. They have a new CEO, a CEO at the top of the house. And so they had a board-led complex to put them on the Board of the various different funds. On average, I think we range from $240 million to $260 million a year on average in terms of event-driven revenue, and that generally should grow in line with position growth, something like that. Distribution revenues, about $2 billion. Think of it as things like postage tied to physical distribution and physical output. It's just a pass-through. I would say long-term, the trend on that is that will dissipate as we continue to execute on digital strategy.

I think in the medium term, we're still winning a lot of print business because we have such an effective digital strategy in customer communications and a lot of times the print comes with it. So we've got between position growth and customer communications, I'll call it, low single-digit growth in distribution revenue because of that, maybe add a couple of points on top because of post-trade increases. So I think in the medium term, you'll see mid-single-digit growth in distribution revenue. Over a long period of time, though, I would see that ceding away as we continue to drive more digital.

Okay. You mentioned medium term, maybe we will move a little more short term. What are you seeing in terms of demand? Does market volatility help hurt the business? Very open-ended question.

I think part of that side is sales. So let me just break that question down into maybe sales and then demand and what I'm personally seeing in the businesses that I lead and I'm involved in. In our Q3, we talked about sales. We've -- excluding our tailored shareholder report rollout last year, which is kind of a one-off, we've grown sales 9% year-over-year for Q3 and actually for year-to-date. And at that time, we were seeing some slowing in the pipeline for the full year just because the Q4 is such a big sales quarter for us. And so we ended up revising guidance, which is why we did that. But the demand in terms of solutions that we have tied to anything cost and operation efficiency related, every one of our clients need to get more efficient and save money.

There's not a director of operations in the industry that doesn't have a goal every year to save money and take cost out. And we're a big mechanism and partner for them to be able to do that, and we continue to see very strong demand for those. In my particular business and the thing I was doing in areas that we're investing in heavily, data and analytics solutions, really strong demand. Our digital solutions like Wealth InFocus, very strong demand. Even some things where proxy reform and some of the things that are happening there, where you see -- there's a lot going on with proxy advisers right now. Now we're not a proxy adviser. We don't advise them the vote. We're just the -- we're the processor, making sure that it all happens the right way. But fund companies are looking for ways to reduce their reliance on proxy advisers, and we provide tools and technologies for them to be able to do that and the data and analytics for them to be able to do that. So we're seeing some really strong demand for a lot of things in the government space.

Thinking about position growth. If I think about the history, what does it tend to do when markets are up and then when markets are down? Is there any?

Well, it's interesting. It's since 2007, and we've had some pretty big swings in cycles since 2007, right? You think about for those of us, Broadridge, we spun off in 2007, right into the face of a hurricane, which was 2009. And then we've had some other periods, and we've had COVID and various different things. Since 2007, stock record growth and mutual fund growth on a combined basis has never been negative. So there's some pretty good -- pretty strong defensibility in there. And I think that's because the underlying drivers are still pretty strong around population and things like that. You tend to see -- there's probably a couple of effects.

These are not statistically modeled out. So they're just kind of hypotheses. But when markets go down, you end up seeing people not getting eliminating, getting out of positions, which, by the way, would trigger tax in a lot of cases. But you see people looking at it as a buying opportunity and getting into more positions. So we saw that during COVID. And even during the most recent uncertainty, you've seen over the course of this year where our stock record growth has increased, and there is some uncertainty that got introduced right around January, February time frame tied to tariffs and things like that, and you still saw stock record growth increasing.

Let me switch gears and talk about the competition. I mean, your proxy business seems like it has a nice moat, but there are competitors. It seems like it's predominantly U.S. Can you compete internationally with the business?

Well, we -- well, a couple of things. So the regulatory business in ICS was about 45% of the revenues in ICS. We -- the fees around proxy process, the fees that a broker can charge an underlying issuer tied to proxy and related communications is actually set by the New Stock Exchange and the SEC. And those fees haven't changed in over a year -- over a decade. We have a large share in the beneficial market, which is the market for -- where shares are held through broker-dealers. It's about 8% of the market. And we've got competitors in the space like [ proxy trust ] and [ median ], and we have competitors in that space. We do have a global proxy business as well. And that's where individuals outside of the United States are holding shares in non-U.S. or non-Canadian businesses, and they're doing it through global custodians -- global brokers, global custodians. We're actually starting to see an increasing phenomena, where you've got global investors buying shares held directly in U.S. securities, and we think that's a new growth opportunity for us as well, actually.

I'm going to open it up for any questions from the audience. I still have plenty, but if there's any. No? Okay. I'll give you a chance in a little bit. You mentioned that the pricing is set by the SEC and the New York Stock Exchange. So how -- is regulation a tailwind or a headwind to the business?

Well, let's talk about regulation holistically. When I say the things that -- in the current administration, and the things that the current administration is really focused on are kind of top of the mind issues, tariffs, taxes, immigration, social issues. By and large, those don't impact our clients' business or Broadridge's business. We're service businesses. So those top-of-line things that the current administration is focused on really are not impacting us. I think the next set of potential priorities for the administration could be pretty positive for us.

So digital assets. We -- the administration is looking to think about what the overall disclosure and investment regime is going to be for digital assets. I probably wouldn't surprise you to know that we've already come out with a disclosure solution for digital assets called ClearFi, which we're pretty excited about. So digital assets, I think, for us will be an opportunity. We touched briefly on proxy reform. That's a pretty hot topic for the SEC. And I think that's an opportunity for us because we -- when they talk about proxy reform, they're not talking about what we do, they're talking about proxy advisers and potential conflicts of interest and various different things.

What that translates into is that our clients on the asset management side and the fund side are looking for different ways that they can get informed decision-making on how to vote their shares, and we have tools and technologies that enable them to do that. And we have tools and technologies that enable them to actually pass that vote back down to the underlying shareholder in a passive fund. So if you go in a passive fund and you've got retail shareholders out there, like all of us could be a retail shareholder, you can actually allow that underlying shareholder to indicate how they would prefer to have their votes presented and shared. And again, we're not processing 400 funds. So digital assets is an opportunity, proxy reform is an opportunity. And then, of course, digitization and continuing to drive digitization for the industry. And that's a win-win for the industry and a win-win for us.

What about ESG?

That's gotten more complicated over the last...

Exactly.

But that's -- if you look at it on a global basis, there are -- ESG continues to be an important topic for different countries and different regimes on a global basis in Europe and APAC and things like that. And so you almost have to answer that differently depending on where you are in the time and things like that. And in some countries and some pension funds overseas, that's why they're thinking about pass-through voting as a way to pass that through the underlying institutional shareholder and things like that. So it's more around the governance piece of it is where I focus on the opportunity, but that's -- we play very strongly in the governance part of that.

Okay. It's a bit of an unfair question because it's more of a broader question. How does Broadridge think about its capital allocation? You got steady business, growing nicely.

That's actually -- that's a layup for us. That's a layup for me to answer. So thank you for ending on that one. We -- look, we have a low capital-intensive business. We have a pretty strong -- we have very strong free cash flow. This year, we've given guidance of 95% -- I think 95% to 105% free cash flow conversion for this year. Again, I've been on the executive committee since 2007. We have a very clear pecking order in terms of how we think about money and investing. The first is we look to fund and prioritize attractive internal growth investment opportunities. That's the first thing. The second thing is continuing to provide a dividend that continues to grow in line with earnings. And that's a good way to give cash back to shareholders.

The third is around executing attractive tuck-in M&A opportunities that support our growth strategy. And then after those 3, returning excess cash to shareholders through buybacks. So think about as internal investment, dividends, tuck-in M&A, supporting growth strategy and then buybacks. And we do all that in the context of maintaining an investment-grade credit rating. And so it's -- in any given year, that may change a little bit in terms of the relative mix, but over long cycles, it's been pretty consistent. It's worked out very well for us. And for those of you that have been around Broadridge long enough, we have a saying, we're stewards of investments in the money because after all, it's your money, and we really do believe that.

Excellent. Well, thank you very much. Appreciate it.

Good. Thanks, Matt.

Thank you.