Broadridge(US:BR)2025-05-01 12:30Financial Data and Key Metrics Changes - Broadridge reported strong third quarter results with 8% recurring revenue growth and 9% adjusted EPS growth [9][25] - The company reaffirmed guidance for 6% to 8% recurring revenue growth in constant currency and expects adjusted EPS growth in the middle of the 8% to 12% range [10][43] - Recurring revenues grew 8% to $1,200 million, driven by new sales and higher trade volumes [29][30] Business Line Data and Key Metrics Changes - Governance recurring revenues rose 6%, with equity position growth strengthening to 15% in the quarter [11][30] - Capital Markets reported 10% recurring revenue growth, benefiting from higher trading volumes and strong demand for global post-trade solutions [14][32] - Wealth and Investment Management revenues grew 13%, driven by the acquisition of SIS [16][32] Market Data and Key Metrics Changes - Market trading volumes have been unusually high, positively impacting Broadridge's performance [6][7] - The company has a $450 million revenue backlog, providing strong visibility into growth over the next 12 to 18 months [7][10] - Equity position growth is expected to remain strong, with mid-teens growth anticipated for the fourth quarter [30][34] Company Strategy and Development Direction - Broadridge is focused on digitizing and democratizing investing, simplifying trading, and modernizing wealth management [9][21] - The company aims to leverage its technology to help clients reduce costs and drive innovation amid market uncertainty [7][23] - Broadridge is well-positioned for long-term growth, with a capital-light model and investment-grade balance sheet [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong fiscal year results despite market volatility and uncertainty [9][10] - The company noted that periods of uncertainty have historically strengthened its market position [22][23] - Management highlighted ongoing demand for digital solutions and the importance of innovation in navigating economic challenges [52][80] Other Important Information - Broadridge's recurring revenue model provides insulation from market swings, allowing for ongoing growth investments [23][24] - The company is taking a disciplined approach to managing expenses, including a $5 million restructuring charge from closing a print operation [28][39] - Free cash flow for Q3 was $337 million, significantly higher than the previous year, with expectations of 95% to 105% free cash flow conversion for fiscal 2025 [41][43] Q&A Session Summary Question: Demand environment and investment willingness - Management noted a cautious approach from clients regarding new investments, focusing on cost reduction and operational simplification [49][50] Question: Equity position growth and revenue impact - Management explained that while equity position growth is strong, smaller positions do not immediately translate into revenue but may grow over time [54][56] Question: Sales cycle elongation - Management indicated that elongation in sales cycles is being monitored but has not been linked to specific product lines or geographies [60][61] Question: License activity and subscription model transition - Management discussed ongoing efforts to transition clients from a license model to a subscription model, particularly in newly acquired businesses [73][74] Question: Regulatory environment and opportunities - Management expressed optimism about the regulatory environment, highlighting opportunities in digital assets and shareholder engagement [79][80] Question: M&A pipeline attractiveness - Management acknowledged uncertainty in the M&A market but noted potential proprietary deal opportunities [102][103]