Broadridge at Bernstein Conference: Strategic Growth Amid Uncertainty

On Wednesday, 28 May 2025, Broadridge Financial Solutions (NYSE:BR) presented at the Bernstein 41st Annual Strategic Decisions Conference, sharing insights into its strategic direction and market positioning. CEO Tim Gokey discussed the company’s growth drivers and challenges, including a lowered sales outlook due to macroeconomic uncertainties, while emphasizing long-term growth opportunities in digitization and AI.

Key Takeaways

• Broadridge targets 5% to 8% organic revenue growth and 8% to 12% earnings growth.
• The company is investing in digitization, AI, and platform development to enhance client outcomes.
• Sales guidance for FY25 was lowered, reflecting current macroeconomic challenges.
• Broadridge is focused on cybersecurity and adapting to regulatory changes.
• The company maintains a balanced capital allocation strategy, prioritizing internal investments and shareholder returns.

Financial Results

• Market Capitalization: $28 billion
• Revenue Growth Targets:

- Organic revenue growth: 5% to 8%

- Revenue growth with tuck-in M&A: 7% to 9%

• Earnings Growth Target: 8% to 12%
• Sales Outlook FY25: Lowered due to macro uncertainty
• Free Cash Flow Conversion: Historically about 100%; FY24 guided at 95% to 105%
• Dividend Payout Ratio: Approximately 45%, with consistent annual increases except during the COVID year

Operational Updates

• Corporate Governance and Communications:

- Manages nearly all board of directors elections in North America

- Processed 900 million equity positions last year

• Capital Markets:

- Clears and settles $10 trillion daily

- Two-thirds of North America’s fixed income transactions occur on Broadridge’s platform

- Conducts $100 billion daily in repos using digital ledger technology

• Wealth Management:

- Supports nearly all wealth management firms for some operations

• Global Technology and Operations (GTO):

- Generates $1.5 billion in fee revenue, with a total addressable market of $36 billion

- 34 clients using components of the UBS wealth management platform

Future Outlook

• Focus Areas:

- Digitization of communications

- Expansion of global platforms in capital markets

- Development of wealth management platforms

- Advancements in AI and potential growth through tokenization and 24/7 trading

Q&A Highlights

• Democratization of Investing: More products at lower costs have increased individual equity holdings from 40% to 60% of the adult US population
• Digitization: Transitioning communications from paper to digital; 80-90% of regulatory and 50-60% of customer communications are digital
• Platform Orientation: Common data model and API framework to enhance solutions and integrate AI
• GTO Investments: Moving from back office to front and middle office in capital markets
• Capital Allocation: Focused on maintaining investment-grade status with leverage at 2.5 to 1

Broadridge’s strategic focus on innovation and resilience positions it as a leader in financial services technology. For more details, refer to the full conference transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Harshita Rawat, Senior Analyst, Bernstein: Good afternoon, everyone. I’m Harshita Rawat, Bernstein’s senior analyst covering payments, processors, and IT services. And I’m delighted to be joined today by Tim Gokey, Broadridge CEO at Bernstein forty first Annual Strategic Decisions Conference. Tim, thank you so much for joining us today.

Tim Gokey, CEO, Broadridge: Thank you very much, Harshita. Great to be here.

Harshita Rawat, Senior Analyst, Bernstein: So for those in the audience who are less familiar, could you start by providing an overview of Broadridge?

Tim Gokey, CEO, Broadridge: Yeah, absolutely. And first of all, let me just thank you for having us. And I’ve always been a big admirer of Bernstein, so it’s great to be here today. Broadridge is a $28,000,000,000 market cap financial services technology focused at the intersection of capital markets, wealth management, asset management, and serving corporate issuers as well. And we really focus on functions that are critical, often with the regulatory component, that are mission critical but are less differentiating and helping our clients with those.

We have a core franchise in corporate governance and communications, in capital markets, in wealth management. And each of those have really nice market positions and have been growing over time in corporate governance. We serve, we’re related to nearly every board of directors election that happens in North America. This past year we did 900,000,000 equity positions. In capital markets, we clear and settle $10,000,000,000,000 every day.

In wealth management, we serve nearly every wealth management firm for some part of what they do. And the economic model, if we look just at our sort of three year objectives, and we do three objectives every three years, and we generally talk about an organic growth company, 5% to 8% organically, revenue growth with some tuck in M and A, 7% to 9%, with the operating leverage of being a technology company, earnings in the 8% to 12%. But let’s say take the midpoint of that at 10% with a point of share buyback and call it a 2% dividend, we aim to deliver low double digit returns over the long term with low volatility. And I could go into our strategies on each of our capital markets, wealth management and governance. I think we’ll probably talk about that.

So I’ll let us get into the questions.

Harshita Rawat, Senior Analyst, Bernstein: Great. So let’s maybe talk about some of the themes first, Tim. So one of the big themes investors associate with Broadridge is the democratization of investing. Could you maybe talk about this in a little bit more detail and explain how that drives growth for Broadridge?

Tim Gokey, CEO, Broadridge: Yeah. So our largest franchise is around corporate governance and communications. And the primary way that we get paid in that business is through the number of investor positions. So whether you have one share of IBM or 100 shares of IBM, that’s one position. And so that long term position growth, either through the number of accounts or the number of positions per account, is a big driver.

And if you think sort of about the broad sweep of investing over the past nearly fifty years, it’s been this trend, we call it democratization, but it’s essentially more investment products becoming available to more investors at ever lower cost, ranging from end of fixed commissions to decimalization to the creation of ETFs to the creation of 401s, more recently with managed accounts and now self indexing and other new forms of investing. And so that has really driven an increase in the number of positions. Also, number of individuals holding equities has gone from 40% to 60% of the adult US population. And so that’s driving a nice sort of upper single digit position growth for us, which is one of sort of the drivers of that.

Harshita Rawat, Senior Analyst, Bernstein: And we are seeing this in a lot of in our coverage, too. A lot of individuals, especially in the less than affluent category, kind of starting to own stocks and other securities. So this is something that we are also seeing in just a broader fintech space. So Tim, let’s talk about some of the other long term trends. What are they in terms of driving growth for Broadridge?

Tim Gokey, CEO, Broadridge: Yeah, I think a key one is digitization. So when we talk about our governance business, I think we talk about a strategy of democratization, which is the investing trend that we just talked about and also bringing new technology to support those, and digitization. And digitization is really, again, long term process of turning those communications from being paper based to being digitally based. And that has been going on a long time. For our regulatory communications, between 8090% of the communications today are digital.

In customer communications, it’s things like statements and stuff, it’s more like between 5060%. I think the challenge and the opportunity there is that as things move from paper to email, is how do we make sure that we don’t lose investor engagement with that? If you just get an email with a link to go someplace, that’s not very engaging. And so one of the things that we’re really investing in is a platform to bring data directly into the body of what you receive, to make it clickable, to draw people into either the broker’s website or the asset manager’s website, and really create a much more engaging experience.

Harshita Rawat, Senior Analyst, Bernstein: And you’ve also spoken more recently about Broadridge being a platform oriented company. Can you elaborate on that concept?

Tim Gokey, CEO, Broadridge: Yeah, I think it is today our solutions are sort of solution by solution, asset class by asset class, and you can be a Broadridge client and the technology that. I think in the future, and we’re well into this, by having a common data model across all of our solutions, a common API framework, we can bring a lot more value to clients by having our solutions interact with each other. So that will make our solutions stickier. It will make it more cost effective for the client. It’ll make it easier to onboard.

And if you just think about the difference between sort of a platform and a collection of solutions, it’s when you have a collection of solutions, you may have the same data in different places and you have to keep it reconciled. You may have a similar function and you have it coded in multiple places. So when something changes, you have to recode it. So that creates geometrically higher complexity either for us or for our clients. And so by bringing that together, having one source of data, one source of functionality, that is more effective for our clients and more effective for us.

And then much better foundation as we talk about, we’re talking about trends in a minute. And of course, I didn’t talk about AI, but that’s a big trend in data and AI. And having that harmonized source of data to drive your AI is much easier in a platform context and something we’re pretty excited about.

Harshita Rawat, Senior Analyst, Bernstein: And I want to follow-up on AI and data in a few minutes. But before that, let’s talk about your GTO investments. And for the audience, can you maybe just highlight for them what the GTO segment is? And then I have a question

Tim Gokey, CEO, Broadridge: for you. Yeah. So GTO, Global Technology and Operations. And is, so Broadridge is about two thirds of the company is what I’ll call Investor Communications Solutions. One third is Global Technology and Operations.

And here’s where we are providing technology largely on a software as a service basis to our clients in capital markets, wealth management, and to a smaller extent, in asset management. It has historically been more back office focused, but with some recent investments that we’ll probably talk about in a minute, we’re increasingly moving into being front and middle as well.

Harshita Rawat, Senior Analyst, Bernstein: So alluding to your point, so in recent years, you’ve made large investments in this segment, in some cases through acquisition, in others through internal bills. Can you talk about the opportunities you saw at the time, how your efforts have progressed, and how you view your competitive positioning as a result of these investments?

Tim Gokey, CEO, Broadridge: Yeah, absolutely. So our GTO business is about $1,500,000,000 in fee revenue, a total addressable market of, call it, 36,000,000,000. Capital markets is the biggest piece of that. And there we have again, we are historically more back office. We have a really strong position, especially in North America, where two thirds of fixed income in North America is on our technology platform.

We clear and settle $10,000,000,000,000 every day. And the opportunity to move from that to be more global and to be more front to back has been a big opportunity over the past five years. About three years ago, we acquired a firm called Activity, which is the number three player in the front office. A firm named Fidesa is the number one player. They’d recently been bought by a company called ION whose whole strategy is to strip out costs, not sell anymore, but just take the cash flow and leverage it for other acquisitions.

So we had many clients coming to us saying, you help us? So we brought activities now called Broadridge Trading and Connectivity Solutions, a really nice business. I think it’ll be sort of a low double digit grower in the future. And so that has really repositioned our GTO business in capital markets. It’s a very strong business, but this really positions it even more strongly.

I think the other thing, just while we’re in capital markets, is there’s a lot of innovation there. We’re bringing AI to face income trading. We’re doing a ton on digital ledger technology, which we may talk about again in a few minutes as well. And then on the wealth management side, so within GTO, it’s about two thirds capital markets, one third wealth management. And on the wealth management side, we have invested about a billion dollars co investing with UBS on building a modern platform that is a very open platform, API driven, common data model, which when we talk about the platform model, it’s actually leveraging the technology we built for this.

And we are bringing that to all of our wealth management clients. We have a very strong position in Canada. We’re bringing that technology into Canada. And what it allows wealth management firms to do is to many wealth management firms, every firm makes money a little bit differently. They end up with a whole series of point solutions that don’t necessarily talk to each other.

And this provides an integration framework that allows the solutions to work with each other and make advisors more efficient, better end client experience, and more efficient operations.

Harshita Rawat, Senior Analyst, Bernstein: And is there anything you think is missing in your overall portfolio of businesses in the segment?

Tim Gokey, CEO, Broadridge: There’s nothing that is missing per se in the sense of we need to have it to compete effectively. At the same time, there’s a lot of opportunity if you look at what are all the things our clients do where we do or where we don’t do it. And if we want to do the thing next to the thing that we do today, and that’s a growth opportunity for us. And we typically look at those opportunities as sort of build versus buy. And each of our different businesses is responsible for understanding, well, what are the adjacencies they’d like to be in?

Is that something that they should build? Is there a competitor that has something that if we could acquire it, it would be good? Which gets us into sort of our whole M and A process. And when you think about Broadridge, we are an organic growth company. So when I talk about that 7% to 9% recurring fee revenue growth, that is only one to two points from M and A.

But that one to two points is a thing that has allowed us in many cases to move into adjacencies. We’ve done about 45 acquisitions over the last ten years. Generally smaller acquisitions, generally underwritten for IRRs in the high teens to 20%. And we track all of those below 20% unlevered. So on a levered basis, we’d be a very good PE firm.

But it’s been a nice additive source of our growth.

Harshita Rawat, Senior Analyst, Bernstein: How do you integrate those acquisitions into the business, make sure that this is kind of driving the organic growth for Broadridge in

Tim Gokey, CEO, Broadridge: the long term? Yeah, great question. We are, when you do acquisitions, they are sponsored by one of our business units in the first place. And as part of, when you think about the sort of the workflow of doing acquisitions from a sourcing standpoint, The business units are responsible for what would they like to own. The M and A team is responsible for talking to all the PE firms and bankers to make sure if there’s a transaction we get a book.

The underwriting, the model is owned by the M and A team. The assumptions are owned by the business unit. The integration, I mean, to get into due diligence, we have each of the different functions part of the due diligence for the acquisition so that at the point of when we price the acquisition, we know all the investors are going make. We know what the integration plan is. And then carrying that out is and that’s all built into the business case.

And carrying that out is then the responsibility of the business unit. And we bring that back to our board a year after to say that it happened. And we keep track of every acquisition from a return standpoint. We have everyone going all the way back to make sure that we are getting the returns that we needed. So it’s been a pretty detailed process.

It has been very successful. And I think everyone sort of understands what their role is. But if you’re a business leader and you sponsor an acquisition, knowing that bringing that into your business, leveraging it for all the synergies that we described in the business case and did you get the synergies or not is a big part of being able to get to do the next one.

Harshita Rawat, Senior Analyst, Bernstein: That’s great. I want to switch gears a little bit, Tim, and talk about client priorities. We are in a pretty dynamic environment for financial services as we sit here today. What are your clients talking about prioritizing today?

Tim Gokey, CEO, Broadridge: Yeah. There’s sort of today, and then there’s sort of what does that mean like right now? What does it mean medium term? What does it mean longer term in terms of how people are thinking right now? So let me just hit each of So at the very moment, we’re in May 2025 and there’s tremendous volatility out there.

And in financial services, you’re all part of this. There’s just a lot of dynamism, a lot of focus on just the day to day and getting through things. And we’re helping them with that. We scaled our volumes tremendously when there’s all the volatility. In April, we had some of our record days even bigger than some of the meme stock days.

And we’re proud of that and proud of how we contributed to our client’s success there. If I think about sort of medium term and we think about the solutions that our clients are looking for right now, because of the uncertainty, they’re probably a little more cost focused than growth focused. But if we look at the areas you’re talking to us about, they’re really some of the areas where we’ve been making investments and talking about investments. So seeing a lot of demand in terms of digital communications, in terms of data and analytics, in terms of technology platforms, global multi asset class platform. So all areas that we’re investing in, those capital markets or wealth management on those platforms.

So those are really nice conversations. And then beyond that, there’s sort of a broader conversation. One of the things that we talk about ourselves as a company is trusted and transformative. So trusted in the sense of being resilient and being able to do the job as you think about going forward. And on that partnership side, the conversations are really at a different level.

There’s a whole set of conversations around business resilience, which includes cyber and the fact of just being able to be there, be scalable, be resilient, and be better than if they’re doing it themselves. There’s a conversation around roadmap and around how are we reinvesting in our business? Where do we see the business going five years from now? What are we building for the future? If you look back, say, five years, companies would be much more buying for a current solution.

Right now, they’re buying much more for how will things evolve. And they want to be with a partner that is reinvesting back in the business, which we are. That’s part of our growth algorithm. And the last part is this whole platform discussion that I just talked about. That it’s not just us that’s talking about platform.

It’s a real theme. And because of the advantage they talked about before in terms of one source of data, one source of functionality, interoperability, That’s something that clients really like to see. And that is part of the formula that I think makes them feel very good about us as a long term partner in their transformation.

Harshita Rawat, Senior Analyst, Bernstein: I want to follow-up on your comments on cyber and trust and resilience, which is very important in this environment, especially over the last couple of years when you look at what happened. Can you expand upon that and tell us about what you’re hearing from your clients and how you’re being a partner in this regard, especially given some of the regulatory changes which are also happening? Yeah, I think,

Tim Gokey, CEO, Broadridge: you know, let’s just talk about fiber first of all. It is, on one hand, it is a huge industry challenge. It’s a huge pain to be in a position to deliver for our clients. And it’s a real differentiator for us. So we have the ability to invest in cyber protections and to evidence that and to allow our clients to evidence that at a level that’s a lot higher than say, if you think about some smaller startup or PE backed firm or someone that is trying to compete with us at a JPMorgan or a Bank of America, they have to think about the actuality of the solution.

They have to think about what they’re going to tell the regulators about the solution. They have to be able to evidence to the regulators about that. And so that whole apparatus of not only being secure but evidencing that you secure becomes very important. And we have every level of certification around that. We have on-site audits from 50 clients a year.

All of that multiplicity of and then we’re reviewed ourselves by the FFIEC and cyber is a big part of that. So all of those things give our clients confidence that from an enterprise security level, we’re in a really good position. And that is a real differentiator for us.

Harshita Rawat, Senior Analyst, Bernstein: So Tim, you lowered your sales outlook for FY twenty five given the current macro uncertainty, but you confirmed that the long term dynamics are still intact for the business. Can you walk us through the Broadridge sales model to show how you navigate different environments from a sales perspective?

Tim Gokey, CEO, Broadridge: Yeah. So when I talk about the 5% to 7% organic growth, there is a couple of points of that that comes from the organic growth of positions in our Governance and Communications business. And the rest of it comes from net new sales. And is, when we talk about sales, that’s the annual value of contracts that we sign in a given year once they’re onboarded. And it takes some time for them to be onboarded, so there’s a sort of a backlog of projects to be onboarded that will flow into revenue in future years.

And so our sales last year were a little over $300,000,000 and we had guided at $2.70 to $3.20 was our original guidance, which would feed into our long term growth algorithm. If you go through the March, remember our fiscal year ends in June, through the March we were right on track for that. Sales were up 9% year over year excluding a sort of a one off product that we did last year. So that was great. We had a very soft April.

A lot of the volatility of clients, very busy. And because there’s just such a short window between then and getting to the end of the year, we wanted to really alert our investors it was uncertain where we would end up for this year. The same thing we said at the same time is because of this nature of when we do sales as it goes into backlog and our revenues then in the future really draw from the backlog, Whether we close something in June or we close something in July or August, it really doesn’t make that much difference in terms of how we’ll perform in the future. That we’re not seeing, you think about the demand generation or demand model, we’re not seeing, no one has told us they’re not doing anything, none of the conversations have stopped, no one has even said they’re slowing anything down. It’s just a matter of getting through things before the end of the year.

And anything we’re selling that we’re gonna finish by this year is already in contract and red lines are being exchanged and things like that. So it’s really a matter of getting through the legal process, the procurement process.

Harshita Rawat, Senior Analyst, Bernstein: And I want to switch gears and maybe talk about the current administration and how are the policies kind of impacting your business? What are the opportunities that you’re seeing?

Tim Gokey, CEO, Broadridge: Yeah, obviously a lot of change with the current administration. If you look at the big topics administration is pushing on tariffs, taxes, immigration, culture, none of those things really impact our business. We do think if you look at a number of the sort of second level issues, there are real ways where we can help. So what are some of those? Certainly, a lot of talk about digital assets in the current administration.

And there are a couple of things there where we think we can help. One is as digital assets go more mainstream and become something for more and more retail investors, if you think about traditional wealth management firms dealing in crypto assets, they’re gonna want disclosure around that. And so what is the right disclosure regime? We believe that effective disclosure has been one of the things in the past that has enabled innovation. And I always tell our wealth management clients, we’re very leery of these assets, as you know, to say, look, it’s better actually for you to provide it than for them to go someplace outside of you with no financial advisor.

So you should provide it, but in the context of a balanced portfolio. If you want to have 1%, anything you want to lose, you can put in this. But any wealth management firm is going to want good disclosures that go with that. And it won’t surprise you that we’ve created a disclosure product for crypto assets. So as those grow, we think that could be an opportunity for us.

Related to that is tokenized assets. And as trading accelerates, as we move to T plus one in this country that’s happening abroad and on the way to T0, tokenized securities is a way to do that. We’re a leader in that area. We’ve been doing repos. So I think I mentioned that about two thirds of fixed income is on our technology platform.

We are doing about $100,000,000,000 a day in repos on digital ledger technology today. To put that in perspective, outside of Tether, that’s the size of the entire crypto market put together. So there’s a lot of activity on repos now. With the way the world is evolving, there’s a new regulation coming to create central clearing of US Treasuries and that’s going to create a, because it’s complicated to be connected to that, it’ll create a lot of sponsored repo. This is a great solution for that.

So we have a lot of clients queuing up to continue to grow in the digital ledger repo. So just one topic around crypto assets and digital ledger technology. A second topic is around shareholder engagement. Folks in the current administration really are concerned about the apparent power of the passive asset managers in corporate governance and also about the role that ISS and Glass Lewis play in making recommendations around proxy voting. We’re helping with both of those things, one by helping the large passive asset managers with pass through voting to be able to pass on their voting rights to their investors.

It’s pretty easy on the institutional side because people already have voting platforms. A little trickier on the retail side, but we’re working with the top five passive managers. We did pass through voting for eight funds two years ago, for 100 funds last year, for 400 funds this year. So that’s a real growth area. We’re also helping on the side around ISS Glass Lewis by creating a voting platform that is again, we’re never going to be an advisor.

We’re strictly a technology provider. But it has all the data involved so that people can create their own data driven voting policies to either supplant or supplement what they’re doing with ISS and Glass Lewis. So that’s a way of helping with that shareholder engagement piece. And the last part, last trend, I think, would be digital communications where there is a lot of interest in how do we just continue to digitize all the communications that are taking place. And again, we’ve invested in that for a long time.

We’re a leader in it. And how do we do that in a way that is really engaging for shareholders? I think the thing that runs through all of those is the how do we leverage technology to, you know, there’s some things you can do through pure policy, but sometimes you can get there faster with market solutions based on technology.

Harshita Rawat, Senior Analyst, Bernstein: Tim, you talked about AI earlier in our conversation. Let’s zoom in on that. Where does Broadridge fit into the AI conversation? Where are you differentiating yourself with clients? What are the productivity use cases for you internally at the company?

Tim Gokey, CEO, Broadridge: Great question. Obviously, is thinking about AI right now. And what we said is we are gonna be a leader in AI within our space. And think about the sort of fairly archaic areas or sort of very specific areas that we do. It doesn’t make sense for our clients to individually invest in bringing AI to some of those things.

So we’re not gonna be inventing the next LLM model, but in terms of bringing AI to the arcania of clearance and settlement, it’s a natural thing for us. And we’re doing that in multiple ways. Think about our strategy has several parts. One part is just bringing AI to all of our existing products. I think in the future, AI will be part of every product and we are enabling many of our largest products with AI, even if that is sort of a help function.

The second piece is where are there unique products, where we have unique data that will be, where there’ll be a sort of sustainable way to have advantage on that in the future. And we’re introducing new products where we’re selling it. It’s a revenue enhancing product. So we’ve introduced four products, one on the asset management side. We have a data analytics business.

In the past it’s been largely descriptive and we’re making that predictive. We have a global demand model it’s called that allows asset managers to really look forward to really say based on their own assumptions about macroeconomic scenarios, what products in what regions, in which wrappers will have the most demand. We introduced that eighteen months ago. We have 14 clients so far, so that’s growing nicely. We introduced an AI product around bonds and fixed income.

We have one around operations. So those are just a few examples and really nice client conversations around those. And then the third part, as you mentioned, is how do we use it internally? Really two pieces there. One on development productivity.

We have about 1,000 people of our team that are actively using Copilot. I would say not with earth shattering results so far, but it’s a journey. And then how do we bring AI to our operations? And there again, we have a number of use cases. I think the challenge I put to our team is how do we get to zero headcount growth and continue to scale the firm?

I’m not sure we’ll get there in ’26, but could we get there in ’27? I think we have a good basis of things we’re working on now that could begin to scale by then. We are doing that since we have lots of products and lots of teams, sort of how to do that at scale across the firm. We have created a platform where we have a core team that has built a platform connected to all of the industry standard models. Because sometimes it makes sense to use OpenAI.

Sometimes you may want to host something internally in LAMA too. So be connected to all those models. Create a common compliance layer because industry. The first thing our clients ask about is compliance and where is the data going and how do we know this is safe and they have governance themselves and common data operations. So mutualize all of that within our firm and then enable each of our product teams that have the SME knowledge and the areas that they have to leverage that.

So we have about 70 projects going on. And I do think that it is just another way from a sort of mutualized perspective for us to bring value to our clients.

Harshita Rawat, Senior Analyst, Bernstein: And staying on this theme of technology, Tim, let’s just talk about tech and innovation more broadly. In what ways are you positioned to capitalize on the innovation technology and financial services? How do you see those trends evolving over time?

Tim Gokey, CEO, Broadridge: Yeah, I think three areas I’ll just expand on a little bit, and we’ve touched on them a little bit so far, but digitized communications. And it is super important for our clients. It’s a money saving opportunity, but it’s also a real engagement opportunity. And so we’ve done a lot of research into what clients want to see, what end investors want to see, how they interact with communications, what’s engaging to them, and then creating the platforms that will enable us to do that, not on a solution per client, but overall sort of configurable platform to bring the communication. So that’s been an important area of investment.

I talked already about tokenization and digital ledger technology. That’s been hyped for ten years now. We built a whole proxy platform ten years ago because we thought the whole world would go that way and it turns out it didn’t. But the way it’s beginning to scale now in tokenized securities, think, is really interesting and we want to continue to be a leader there. And then the other piece, and again, we touched on it, but sort of the platformification of what we’re doing with clients and internally.

What I always tell people is we want to be sort of like a West Coast technology company but focused on the Arcania of financial services where Adobe or Salesforce is never going to get there. But we want to have that same level of technology and bring that to our clients. And I think we’re well on the way to doing that.

Harshita Rawat, Senior Analyst, Bernstein: Let’s switch gears and talk about capital allocation. Walk us through your framework. How has your capital allocation evolved and what investors can expect going forward?

Tim Gokey, CEO, Broadridge: Yeah. By and large, we are a pretty capital light company in terms of what it takes for us to do our core business. So we historically have generally been about 100% conversion of earnings to free cash flow. And for this year we’ve guided 95% to 105 and just came back at our last call and said we’re sort of on target for that. So that will give us, call it, dollars 1,000,000,000 of free cash flow this year to reinvest.

And as we think about that, it is and historically has been a very balanced approach with a sort of a clear hierarchy about we want to be investment grade. So our leverage we sort of look at as a sort of a 2.5 to one. We prioritize first what are the internal investments that we need to continue growing and partnering with our clients. We have a dividend which we raise sort of with earnings. Have about a 45% payout ratio.

We’ve driven our dividend 10% or more every year we’ve been a public company except for the COVID year. So that’s been a really nice source of returns to our clients. And then after the dividend, it’s tuck in M and A. We had the M and A conversation where we’re looking for sort of high return investments that are strategic and accretive to us where we’re really the right owner. And then what is left over, we are very happy buying back our shares.

And that’s sort of the order we think about it. That same formula has, in some years, had us take all the capital after the dividend and apply it to M and A and in other years take all the capital after the dividend and apply it to share buybacks really based on what’s available in the market. When you average all that out over the past fifteen years and you look at the capital after the dividend, it’s turned out to be about fiftyfifty between M and A and share buybacks. But where that goes in the future, it really will depend on the opportunity set.

Harshita Rawat, Senior Analyst, Bernstein: So Tim, we talked about a number of opportunities and exciting trends for Broadridge. What are the top two risks you worry about in the context of the company?

Tim Gokey, CEO, Broadridge: I’m sorry, the top two?

Harshita Rawat, Senior Analyst, Bernstein: Risk you worry about in the context of the company.

Tim Gokey, CEO, Broadridge: You know, I think from a risk perspective, the things that we are constantly, risk and opportunity are two sides of the same coin. And when we think about the regulatory environment and how could the world evolve and how can we in many cases, there’s something that’s a regulatory change and it feels like a risk. And then when we think more about it, we realize that’s actually a problem for our clients and we can help them solve that and we make it into an opportunity. So staying on top of and ahead of our clients in terms of how regulatory change is happening so that we can help them enable that. It’s a risk, it’s an opportunity.

And I’m always of the mind of making lemonade out of lemons and sort of turning anything that’s a challenge into an opportunity. So regulatory change, same would be said of technology change. If we are sitting here trying to sit on our existing technology and sit on high switching costs and just sort of extract rent from our clients, That feels good in the moment and it’s a very risky long term strategy. And so again, you’ll hear us talking about how we’re reinvesting in our businesses, in our platforms, and our clients are looking to always evolve to the next generation of technology. And we can be the on ramp for that next generation of technology if we’re investing ourselves.

Our clients have a lot to do. And if you’re the chief technology officer of one of these large universal banks, you have lot of money, but you have so many things to do. And if they can offload some part of that modernization onto us and we can be the on ramp, that’s just one thing off their plate. So again, it’s a risk but it’s also an opportunity. And so that’s almost always the way I think about things is how to take the things that seem like risks and make sure we’re ahead of the curve.

We’re thinking not one move out, but two or three moves out. And therefore, we’re ready to help our clients with that.

Harshita Rawat, Senior Analyst, Bernstein: So my last question for you, Tim. We talked about a number of trends that you’re making. Can you take a step back and walk us through what has changed in the company over the last five years, and more importantly, where you think you will be in five years?

Tim Gokey, CEO, Broadridge: Yeah. You know, it’s an interesting one because if you were to look at our Investor Day not last time, but maybe the time before that many of the things that we’re talking about are the same things that we’re talking about now. So it sort of sounds like, man, there hasn’t been a lot that’s changed. And then at the same time, since 2020, say just in our governance business, today we’re doing 70% more positions than we were five years ago. So just the scaling of that has been very significant.

And then along with that, what we’ve introduced in terms of new solutions like pass through voting. There’s a whole new regulation around tailored shareholder reports. We built a new platform to do that and did that for the entire industry. There is how we’re engaging on voting platforms now. There’s many, many innovations inside that along with the scaling that has really had that business sort of continue its franchise and continue to deepen its franchise pass through voting.

Didn’t even exist five years ago. Now we’re doing it with 400 funds. So I love the dynamism there of the long term trend of democratization but the new technology that’s supporting that. If you turn to capital markets, five years ago we were purely back office oriented. Now we’re front to back and much more global.

And if we look at wealth management, we were just finishing the platform that we’re building with UBS and now we’re quite far along in terms of bringing that platform to our clients. We have 34 different clients live with at least one of the components. We have 40 more components that are in implementation right now. So a really nice scaling of that. And then the more interesting part of the question, which is so where will we be five years from now?

I think there’s a lot of extension of the things that we’ve been talking about. The digitization of communications, I expect to be a lot further along with that, but in a much more modern, engaging way with leveraging the platform we’re building to be having many more clients live on something that feels very different in terms of how they digitally engage with their wealth management firm or their asset management firm. So I think that will be much further along. We will have made more progress in capital markets on our global platforms and wealth management in bringing the platforms that we talked about to all of our clients. I think AI is something that incremental, but then when you add up all the progress.

So I don’t think there’s going to be any sort of tipping point, but I feel like five years now when we look back, it’s going to be a really big change. And we’re excited about that and think we’ll be part of leading that. And tokenization is something that is There could be a couple of different worlds there. But it is, particularly as we move towards 20 fourseven trading, that could be a real driver of tokenization. So I think there’s a real potential world in which that’s a much bigger thing and will certainly be a significant part of that.

So I’m pretty excited about it. I think the growth opportunity, when I just step back and reflect on where we’ve been and where we’re going, I think there’s so much opportunity for us as a company well, for our industry, first of all. I think about the dynamism of capital markets, how important what we do is in terms of helping people save and invest for the future, in terms of helping companies raise the money that they need, in terms of having the right governance and ability to judge risk and return. I think what we do as an industry is really important. Our associates get really jazzed about the part of that that we do and the opportunity to help our clients as they help their end clients, I think, is back to the infinite.

And so we’re really excited about what we’re doing going forward.

Harshita Rawat, Senior Analyst, Bernstein: Fantastic. Tim, thank you so much for joining us today. I learned a lot. Great conversation. Thank you.

Tim Gokey, CEO, Broadridge: Thank you very much.

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