• Recurring Revenue Growth: 8% growth in Q3 on a constant currency basis.
• Adjusted EPS Growth: 9% increase to $2.44 in Q3.
• AOI Margin: Increased by 100 basis points to 22.4%.
• Revenue Retention Rate: 98% with a $450 million revenue backlog.
• Closed Sales: $71 million in Q3; year-to-date sales of $174 million.
• Free Cash Flow: $337 million in Q3; year-to-date free cash flow of $393 million.
• Capital Markets Revenue Growth: 10% increase in Q3.
• Wealth & Investment Management Revenue Growth: 13% increase in Q3, driven by the acquisition of SIS.
• Equity Position Growth: 15% in Q3, with expectations for mid-teens growth for the full year.
• ICS Recurring Revenue Growth: 6% increase to $740 million in Q3.
• GTO Recurring Revenue Growth: 11% increase to $464 million in Q3.
• Free Cash Flow Conversion Target: 95% to 105% for fiscal '25.
• Full-Year Guidance: 6% to 8% recurring revenue growth constant currency; adjusted EPS growth in the middle of the 8% to 12% range.

• Warning! GuruFocus has detected 6 Warning Sign with BR.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Broadridge Financial Solutions Inc (NYSE:BR) reported strong third-quarter results with 8% recurring revenue growth and 9% adjusted EPS growth.
• The company has a high revenue retention rate of 98% and a $450 million revenue backlog, providing strong visibility into future growth.
• Broadridge's Governance business saw a 6% increase in recurring revenues, driven by new sales and growth in investor participation.
• The Capital Markets segment reported 10% recurring revenue growth, benefiting from strong trading volumes and seamless scalability.
• Wealth & Investment Management revenues grew 13%, supported by the acquisition of SIS and progress in integrating wealth platforms.

Negative Points

• There is significant uncertainty in the market, which may influence the timing of new investments by clients.
• The closing process for sales is taking longer in Q4 compared to Q3, leading to a more cautious sales outlook.
• The company faced a 160-basis-point headwind to recurring revenue growth due to FX and a delayed wealth management license renewal.
• Broadridge had to close a print operation in its Customer Communications business, resulting in a $5 million restructuring charge.
• The elongation in the sales cycle could impact the timing of closed sales, with guidance for fiscal '25 sales adjusted to $240 million to $300 million.

Q & A Highlights

Q: Can you elaborate on the current demand environment and any potential pauses in client investments? A: Timothy Gokey, CEO, explained that while there is strong client demand, there is some uncertainty leading to an elongation in the closing process for deals. Clients are moving forward with cost-reducing and operational simplification projects but are more cautious about new revenue opportunities. The pipeline remains strong, and the company is not losing any mandates, but they are being cautious about the near-term outlook.

Q: How does the growth in smaller equity positions impact Broadridge's revenue? A: Timothy Gokey noted that while smaller positions driven by direct indexing are growing rapidly, they do not immediately contribute to revenue. However, they are expected to grow into revenue-generating positions over time, supporting long-term growth trends.

Q: Are there specific product lines or geographies where you are seeing elongations in the sales cycle? A: Timothy Gokey stated that there is no specific product line or geography experiencing significant delays. The elongation is being monitored, and it is not clear if it will persist. The company remains optimistic about closing deals in the coming months.

Q: Can you provide more details on the Wealth platform sale and its components? A: Timothy Gokey described the sale as involving a Wealth Operating Model that integrates various components through a data layer. The sale does not involve significant onboarding costs, and the technology is already built, minimizing impact on margins.

Q: How might new administration policies, such as deregulation, affect Broadridge? A: Timothy Gokey mentioned that the SEC's focus on digital assets, shareholder engagement, and digital delivery aligns with Broadridge's capabilities. The company sees opportunities in providing technology solutions to support regulatory changes and enhance investor engagement.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.