Broadridge Financial Soln Q1 2027 Earnings Call Transcript

Broadridge Financial Soln (NYSE:BR) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.

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Summary

Broadridge Financial Soln delivered a strong fiscal first-quarter 2027, with recurring revenues rising 11% on a constant currency basis, driven by double-digit growth in governance and GTO segments.

Strategic initiatives include democratizing and digitizing governance, simplifying and innovating trading, modernizing wealth management, and focusing on digital engagement, tokenization, and agentic AI.

The company repurchased $200 million in shares during Q1 and expects to continue strong fiscal 2027 performance, reaffirming full-year guidance for all metrics.

Notable operational highlights include 17% growth in capital markets recurring revenue and a significant partnership with the New York Stock Exchange for tokenized equity marketplace governance.

Management expressed optimism about Broadridge’s position to capitalize on market opportunities, highlighting AI-driven efficiencies and investment in core strategic areas.

Full Transcript

Jamie (Moderator)

Good morning and welcome to the Broadridge Financial Soln fiscal first quarter 2027 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touchtone phones. To withdraw your questions, you may press star and 2.

Please also note today’s event is being recorded. At this time, I’d like to turn the floor over to Eddings Thibault, Head of Investor Relations. Please go ahead.

Eddings Thibault (Head of Investor Relations)

Thank you, Jamie. Good morning, everyone, and welcome to Broadridge Financial Soln’s fiscal first quarter 2027 earnings conference call. This 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, Ashma Gay. Before I turn the call over to Tim, a few standard reminders. 1. We will be making forward-looking statements on today’s call regarding Broadridge Financial Soln that involve risks. A summary of these risks can be found on the second page of the slides and a complete description on our Annual Report on Form 10-K. 2. We will also be referring to several non-GAAP measures which we believe provide investors with a more complete understanding of Broadridge Financial Soln’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 Gokey (Chief Executive Officer)

Thank you, Adams, and good morning. It’s late in the U.S., which is a fitting time to talk about shareholder engagement and the importance of giving investors a voice. So thank you to everyone who’s already voted, and I encourage everyone eligible who hasn’t yet voted to do so later. Turning to Broadridge, our business is performing very well. We’re benefiting from a positive market backdrop that’s translating into momentum for financial services clients, continued double-digit growth in positions, and rising demand for our — and that in turn is enabling Broadridge to deliver strong financial results while funding investments in attractive new growth markets. Those investments build on our strong existing positions and are translating into tangible momentum, driving new products and client relationships, supporting investor engagement, and unlocking productivity.

So let’s get to those results, starting with the headlines on slide 3. First, Broadridge Financial Soln delivered a strong financial quarter. Recurring revenues rose 11% on a constant currency basis, with double-digit growth across both our governance and GTO segments. Those sales increased by 10%. Second, those results are being driven by the fusion of our strategy to democratize and digitize, simplify and innovate trading, and modernize wealth management.

Third, we’re also putting in place the building blocks for attractive future growth by driving digital engagement, accelerating tokenization, and scaling agentic AI. Fourth, we continued to deliver strong free-cash-flow conversion and increased capital returns to our shareholders, including repurchasing $200 million of our shares in Q1. And last, we expect to deliver strong fiscal 2027 financial results and are reaffirming our full-year guidance for all metrics.

Let’s move to the drivers and results, starting on slide 4 with our governance business, where we continue to drive democratization and digitization. Governance revenues rose 10% constant currency, driven in part by continued investor participation, very healthy position growth. Total equity position growth remained strong at 16%, led by growth in managed accounts and continued growth in self-directed accounts. Revenue position growth was 11%. Fund position growth accelerated to 16% in the quarter compared to 6% for the full year in fiscal 26.

While timing contributed to this quarter’s numbers, our testing is signaling a sustained pickup to high single-digit growth, as Ashma will share in a few minutes. We’re also seeing strong interest globally for our proxy solutions. During the quarter, we closed a sale with a leading Scandinavian wealth manager for U.S. equities, building on the strong momentum we saw at the end of last fiscal year and making inroads in Asia Pacific. Last month, Broadridge Financial Soln signed a memorandum of understanding with the Korean Securities Depository to begin collaborating on modernizing the proxy voting process there.

As newer financial markets step up their competition for global asset flows, they are recognizing the importance of corporate governance and, with it, efficient, digitized, and transparent voting. And no surprise, they see Broadridge as a key partner in that work. Turning next to capital markets, where we are simplifying and innovating trading, we had a very strong quarter with 17% recurring revenue growth, including organic growth of 12% in the U.S. market. Our clients are gearing up for the start of 23×5 trading, which will begin December 6th. At Broadridge, we’re fully prepared to enable that transition across our front- and back-office applications, further demonstrating the power of an industry solution.

In front office, the acquisition of CQG is already strengthening our futures and options offering. During the quarter, we won a mandate for a front-office solution for a leading global brokerage platform, providing an equities, futures, and options suite across both the U.S. and Europe. In the back office, we’re expanding our relationship with a major Japanese bank seeking to take advantage of our unified global post-trade platform. We’re also benefiting from strong demand for our corporate actions platform.

Moving now to wealth management, revenues rose 6%. In wealth, we’re benefiting from continued growth in Canada, driven in part by the extension of our platform capabilities across our Canadian clients. In the U.S. market, we continue to see significant interest in our wealth platform capabilities, aided in part by the progress we’re making in onboarding several major wealth managers. Finally, I want to call out closed sales. After a record finish to fiscal 26 in June, we are pleased to close $36 million in Q1 sales, up 10% on fiscal 26.

More importantly, our pipeline continues to strengthen, and we are nicely on track to deliver our full-year guidance of 290 to 330 million. In sum, across governance, capital markets, and wealth, we are executing well on our current businesses, each of which has a long runway and substantial opportunity. At the same time, we’re seeing powerful new trends that have the potential to change markets over the next three, five, and ten years. The good news is the change is positive for Broadridge because it increases the need for investment by our clients, and Broadridge is exceedingly well positioned to take advantage of the new market opportunities that are being created.

Our successful execution today positions Broadridge as the trusted partner as clients adapt to the next phase tomorrow, and we’re ready. We’ve been investing in the core themes of engagement, tokenization, and agentic AI, in some cases for years, and those efforts are now bearing fruit. So let’s turn to slide 5 to review our progress on these fronts. First, digital engagement. Our standing voting instructions, or SVI, capability is gaining real momentum in the marketplace. Over the last few weeks, both Goldman Sachs and Tesla have launched SVI engagement programs to make it easier than ever for retail shareholders to vote their shares. The success of early campaigns from Exxon and others are opening eyes, and we anticipate further announcements on blue-chip names in the months to come.

Furthermore, in late September, the SEC provided guidance as to how mutual funds can implement their version of an SVI program. The upcoming move to e-Default is also increasing digital engagement. We submitted our comments to the SEC in September, reiterating our support for the proposal’s core objectives. The proposal creates new requirements and complexities for intermediaries, and we’re actively engaging clients on what they need to stay compliant.

At the same time, forward-thinking firms are using this shift as a catalyst to drive deeper and more valuable engagement with their clients. As a result, our Wealth InFocus platform continues to gain momentum as clients look forward to what they will need to successfully implement the new rules and deliver tailored digital communications at scale. Turning next to tokenization, Broadridge is building the infrastructure that helps markets support tokenized assets while preserving the governance and servicing that investors, brokers, clients, and issuers need. First, in tokenized equities, the SEC continues to advance its pro-innovation agenda with its recently released innovation exemption. That rule is designed to encourage new marketplaces for tokenized equities. Importantly, the Commission explicitly reiterated the importance of shareholder rights, including voting, as a core feature of tokenized equities.

The competition across the multiple models of equity tokenization and across the different level one networks points to a more diverse and fragmented environment for issuers and intermediaries to navigate. It’s now clear that the introduction of tokenized equities will result in increased complexity for issuers, wealth managers, and investors. Broadridge is stepping in to reduce that complexity by extending our scaled and institutional-grade governance layer to cover all models of tokenized equities.

Leaders in each of the models know they want strong governance as a feature of their offerings, and they’re turning to Broadridge to help them deliver. We recently announced an agreement with Kraken Payward to provide governance services, building on existing relationships with Ondo and Alpaca. Importantly, these new relationships cover both global tokenized equities, which are largely synthetic, as well as the custodial tokenized model that these players are planning to bring to the U.S. market.

We’re also working with big market infrastructure providers. As we announced yesterday, Broadridge will provide the core governance layer for the New York Stock Exchange’s planned tokenized equity marketplace and will support issuers with digital transfer agency services. We’re also supporting the DTCC’s tokenization efforts across governance and trading infrastructure, and we anticipate further announcements with other market infrastructure providers over time.

In sum, tokenized equities can bring real benefits and also come with new complexities. There’s significant growth opportunities for Broadridge as we solve those new needs — a horizontal governance layer that simplifies complexity for issuers, intermediaries, and investors. Outside of equities, we’re building the trading infrastructure to support tokenized securities across multiple asset classes. Our Distributed Ledger Repo, or DLR, platform now supports cross-border atomic settlement for GC repo securities alongside tokenized U.S. Treasuries, enabling us to bring our market-leading collateral management capability to our global clients. Based on clients signed and currently in implementation, we expect further significant increases in our DLR volumes over the next six months.

Building further on DLR, we launched DLX, an end-to-end platform that goes beyond repos to connect tokenized and traditional markets across multiple asset classes through an integrated operating layer. The first use case is supporting the DTCC’s tokenization initiative, and we’re leading a user group of nearly two dozen institutions to help them as they begin to access and use the DTCC’s new service. Turning last to AI, where we continue to scale our agentic capabilities. We have now expanded our AI-powered institutional voting solution to include global equities and enhanced workflow to make institutional voting more seamless and independent than ever. Demand remains strong, and we signed another tier-one wealth manager to our growing client roster in Q1. Our global demand model is also gaining momentum, covering more than 130 trillion. Its predictive AI capability is giving our clients unrivaled visibility into future asset flows.

We recently signed an agreement with a leading consulting firm, replacing their longstanding in-house model. We’re also delivering real AI efficiencies, as Oshmo will share, and using that capacity to fund investment and drive EPS growth. Putting it all together, it’s an exciting time. Our industry is evolving rapidly, creating significant new opportunity for which no one is better positioned than Broadridge. We’ve been investing to meet that demand, and we’re now seeing the beginning of real traction across multiple areas. Let me close with a quick recap of our key headlines. First, we delivered strong first-quarter results, including double-digit growth in both ICS and GTO. Second, we’re putting our cash flow to work to expand our market, grow our dividend, and repurchase shares.

Third, we’re on track to deliver another year of steady and consistent top- and bottom-line growth, and we’re reaffirming our guidance on all metrics. And last, we’re translating our growth investments into tangible results. We’re widening access with better digital engagement. We’re building the governance layer for tokenized securities and the operating infrastructure to connect traditional and digital assets. And we’re delivering new agentic products and workflows while using AI to create internal efficiencies that will fund investment and support NC growth.

Before I turn it over to Ashima, I want to thank the 16,000 Broadridge associates worldwide who turn our strategy into execution. They’re delivering exceptional value to our clients and, in turn, for the tens of millions who rely on our industry to invest in the future. I’ve never been more confident and excited about Broadridge’s ability to serve our clients, engage our associates, and create compelling long-term value for shareholders. Ashima.

Eddings Thibault (Head of Investor Relations)

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 five key callouts. First, Broadridge Financial Soln is off to a strong start in fiscal ’27. In our seasonally smallest quarter, recurring revenue grew 11% constant currency, including 9% organic growth. Closed sales also rose 10% to $36 million. Second, underlying growth drivers remain positive with double-digit equity and fund position growth and continued trade-volume growth.

Third, we continue to be a buyer of Broadridge Financial Soln shares. We repurchased $200 million in Q1, bringing our total since January to $650 million. Fourth, we are delivering on AI productivity gains. AI savings were $6 million in the first quarter and we are on track for $25 million for the full year, enabling us to deliver strong bottom-line results and fund strategic growth initiatives. And finally, we are reaffirming our full-year outlook, delivering 8% to 12% adjusted EPS growth while investing in our future growth.

With that, let’s go to the numbers on slide 6. Recurring revenues grew 11% on a constant-currency basis, including 9% organic growth. Adjusted operating income margin was 13.8%, lower year on year as we lapped record event-driven revenues in Q1 last year. Adjusted EPS grew 3% to $1.56, above our expectations, driven by timing benefits in our regulatory revenues and a lower effective tax rate. And closed sales were $36 million, up 10% from Q1 last year.

Let’s move to slide 7 to discuss our segment recurring revenue, starting with ICS, our Investor Communication Solutions segment. ICS recurring revenues rose 10% to $568 million, including a one-point benefit from acquisitions. Regulatory revenues rose 17% in Q1, driven by 11% growth in equity revenue positions and 16% growth in fund positions. The timing of certain fund communications resulted in a three-point benefit to regulatory revenues. Data-Driven Fund Solutions revenues grew 10%.

Organic growth was 4%, which included a two-point headwind from lower interest rates. Issuer revenues grew 4%, driven by strong growth in Disclosure Solutions, which more than offset a two-point headwind from lower interest rates. Customer Communications revenues rose 3% with strong growth in digital solutions offset by lower growth in print. The acquisition of Signal contributed one point to growth for the year. We expect ICS recurring revenue to be within our 6% to 8% total recurring revenue growth guidance.

Interest rates, which have been a modest headwind to growth for the last few quarters, are expected to be neutral in Q2 and then be a modest tailwind to growth in the second half of the fiscal year. Turning to GTO, revenues grew 13% in Q1, including 10% organic growth. Capital Markets revenues grew 17%, driven by organic growth of 12% and a five-point contribution from the acquisition of CQG. Higher term-license revenues contributed four points to organic growth. Wealth and Investment Management revenues rose 6%, all organic, led by strong growth in Canada. Higher term-license revenues contributed three points to growth for the year. We continue to expect GTO recurring revenue growth at the higher end of our 6% to 8% guidance range, led by growth in Capital Markets with slower growth in Wealth.

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 16%, including 11% growth in revenue positions. Looking ahead, our testing shows mid-teens total position growth in Q2 and low double-digit growth for the full year. Q1 fund position growth was 16%, driven in part by the timing mix of certain jobs in the quarter. Putting timing aside, our testing indicates high single-digit growth for the balance of the year, an acceleration from 6% in fiscal ’26.

In GTO, trade volumes rose 7% for the quarter, driven by growth in equity volumes. I’ll wrap up my discussion of recurring revenue growth on slide 9. In Q1, recurring revenue growth, constant currency, was 11%, primarily driven by nine points of organic growth. Revenue from closed sales contributed four points of growth. Our retention rates were 98% for the quarter, and internal growth contributed seven points of growth. Acquisitions contributed two points of growth.

Let’s close our discussion of revenues on slide 10. Total revenue increased 5% to $1.7 billion, driven by seven points of growth from recurring revenue. Lower event-driven revenue offset three points of growth to total revenue as event-driven revenues returned to more normalized levels after a record quarter last year. We expect event-driven revenues to continue to be at our historic average levels of $60 million to $70 million per quarter for the balance of fiscal ’27.

Low-to-no-margin distribution revenues grew 4%, primarily driven by higher postage rates, and contributed one point to total revenue growth. Turning now to margins on slide 11, adjusted operating income margin was 13.8%, a decrease of 200 basis points from Q1 ’26 as operating leverage from our scale business was offset by lower event-driven revenues and higher growth investments for the quarter. Margin dilution from lower interest rates was offset by an improved mix of distribution revenue, resulting in no material net impact on AOI margins.

Let’s move on to earnings on slide 12. Q1 adjusted EPS grew 3% to $1.56, with a lower tax rate and lower share count offsetting lower adjusted operating income. First-quarter earnings benefited from a lower tax rate of 14%, reflecting the timing of discrete tax items. Looking ahead, we continue to expect our full-year tax rate will be approximately 22%. In addition, Broadridge Financial Soln recorded a $40 million non-cash loss driven by the decrease in the value of our digital asset holdings.

That non-cash loss is reported in other non-operating income and was excluded from our calculation of adjusted EPS. Given the volatile nature of digital assets, we expect to continue to recognize non-GAAP gains and/or losses as we mark our Canton holdings to market every quarter, just as we did last year when we recognized a $227 million non-cash gain. In addition, we also recorded a $15 million restructuring charge related in part to our AI and productivity initiatives.

Let’s turn to sales now on slide 13. Broadridge Financial Soln reported closed sales of $36 million, an increase of 10% from the first quarter of fiscal ’26. 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 flow on slide 14, Broadridge Financial Soln generated free cash flow of $76 million, up from $13 million a year ago. We remain on track to deliver free cash flow conversion of over 100% in fiscal ’27.

Turning next to capital allocation on slide 15, we continue to take a balanced approach to capital allocation. In Q1 we invested seven clients onto our Wealth and Capital Markets platform. We also took advantage of the compelling value in Broadridge Financial Soln shares, repurchasing an additional 1.1 million shares for $200 million in the first quarter. That brings our total repurchases to 3.9 million shares since the beginning of the calendar year.

We also returned an additional $111 million to our shareholders in Q1 via our dividend. With a leverage ratio of 2x at the end of the quarter, we have a strong balance sheet and are well positioned to repurchase additional shares and/or pursue strategic tuck-in acquisitions. Let’s start to wrap by reviewing our fiscal ’27 guidance on slide 16. As I said in my callouts, Broadridge Financial Soln is on track to deliver strong fiscal ’27 results and we are reaffirming our guidance on all measures. We expect fiscal ’27 recurring revenue growth, constant currency, of 6% to 8%, adjusted operating income margin of approximately 21%, and adjusted EPS growth of 8% to 12%. And last, we expect closed sales of $290 million to $330 million.

A quick callout regarding our outlook for the second quarter: we expect Q2 EPS to be approximately 12% to 14% of our full-year results as growth in recurring revenue is offset by more normalized event-driven revenues and tax rate. I’ll wrap by summarizing my key points. Broadridge Financial Soln is off to a very good start to the year, delivering strong Q1 results. The demand and secular trends driving our growth remain very healthy, and the testing shows low double-digit equity and high single-digit fund position growth for the year. We’re putting our cash flow to work to invest in growth and enhance shareholder returns. And last, we remain very much on track to deliver another strong year of recurring revenue and adjusted EPS growth in fiscal ’27.

As we move to Q&A, I just want to remind you that we will be hosting an Investor Day in New York City on December 8th. At the event, which will be open to institutional investors in person and to everyone online, we will be updating all of you on our growth strategies and providing our latest set of financial objectives for fiscal years ’27 to ’29. I hope we’ll see many of you there. With that, let’s move to Q&A.

OPERATOR

At this time, we’ll begin the question-and-answer session. To ask a question, you may press star and then one on your touchtone phones. If you are using a speakerphone, please pick up your handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue. We’ll pause momentarily to assemble the roster. Our first question today comes from Dan from RBC Capital Markets.

Please go ahead with your question.

Dan Perlin (Analyst)

Morning, and good results here. I wanted to ask on the tokenization of equities here. Clearly you’ve strengthened your position over the last several quarters. I think the question that’s a little bit standing is how does the economics of these future models compare maybe relative to more traditional models that you guys have processed for? Thank you.

Tim Gokey (Chief Executive Officer)

Yeah, Dan, thank you very much for that. And as you say, we’re really excited. We do see tokenization as a significant driver of change across the industry and a significant somewhere between long-term tailwinds and generational opportunity for Broadridge Financial Soln. And as I mentioned in my remarks, there are multiple models of tokenization for equities, multiple level-one networks, all of which introduces complexity for brokers and issuers.

And as you know, we’re not here to pick which model will prevail. What we’re doing is building a horizontal governance layer across all those models and networks to simplify complexity for our clients. And there’s no one better positioned to do that because of the institutional scale, the regulatory knowledge, and the network that we bring. And so the most active players in each model are telling us that they believe governance is important, they want to partner, and they’re coming to us. And across the different models, you think about the economics, it depends a little bit on where things end up being held. We think most of these will end up being held with wealth managers, and that looks very much like our existing beneficial model. To the extent that it is issuer driven, we also are serving 80% of the Fortune 500 at economics that are better than they are on the beneficial side.

So we think all this translates into opportunity for Broadridge Financial Soln that will grow positions as it gathers steam, and we see those positions being processed at economics equal to or superior to today’s model.

Dan Perlin (Analyst)

That’s great. Thank you so much.

OPERATOR

Our next question comes from Alex Cram from UBS. Please go ahead with your question.

Alex Cram (Analyst)

Yes, good morning everyone. Just actually wanted to come back to the mutual fund position growth. I think that’s a positive surprise. There were some one-timers in there, but I think the full-year outlook definitely points to acceleration. So any new trends there, any new clients, anything to point to why this may be a more structural acceleration here?

Tim Gokey (Chief Executive Officer)

Yeah, I will. Alex, first of all thank you for the question. I’ll start and then add in. I think we’re seeing a pickup there nicely in the first quarter and there was some timing in there, but as Ashma said, it is showing increases over last year. I’m not sure that we are seeing specific drivers. There’s been more success relatively. The long-term trend has been towards passive, but active has done quite well recently as well, and so we see a lot of positivity here.

Alex Cram (Analyst)

Okay, fair enough. And then another. Sorry. Okay, good, thanks. And then just a very quick follow-up, and this may be a little bit to my needs, but you haven’t talked about your credit trading platform in a while, LTX, and I bring it up because there’s been some consolidation here in the space recently with obviously ICE buying MarketAxess and Tradeweb buying TruMid. So just wondering, that consolidation may allow for maybe more players to surface again.

So just wondering if you’re spending more time on that. I know it’s small, but also specifically, are you getting incoming calls from dealers or the buy side who are wondering what this consolidation means and if there’s maybe a new player that needs to evolve here.

Tim Gokey (Chief Executive Officer)

Yeah, Alex, thank you for the question. And just a reminder for everyone else, LTX is our next-generation fixed income trading platform, and it leverages enhanced AI tools to help investors and dealers find liquidity and counterparties to trade more efficiently. And, you know, it’s been a long time coming. We are pleased with the recent progress and, just to bring everyone back on the history, I think the most exciting development was last spring when we announced that five tier-one banks, including Goldman Sachs, J.P. Morgan, Morgan Stanley, Bank of America and TD, had signed on as liquidity players.

And then over the summer we launched agentic capabilities to really help our buy-side clients trade. Now with the consolidation, Alex, that you talked about between TruMid and Tradeweb and ICE and MarketAxess, you know, TruMid really was that sort of third player in the market. And so I think it’s an interesting question as to whether, with them now becoming part of Tradeweb, as that happens, will institutions be looking for a different third alternative? So I do think it creates a time of opportunity. We’re certainly talking to our dealer co-investors about that and about the way forward.

Obviously it’s very low volumes at this stage, so the task now is to really build those volumes and continue with both the buy side and the sell side. We do think there’s a long runway of growth in credit trading and that there’s a gap here, but we’ll just have to see where it goes. And I will just remind you that it’s very much in launch phase. It’s immaterial to our results, it’s immaterial to our outlook, but I would view it really as a nice option for our shareholders.

Alex Cram (Analyst)

Very good. Thank you very much.

OPERATOR

Our next question comes from Scott Wurtzel from Wolfe Research. Please go ahead with your question.

Scott Wurtzel (Analyst)

Hey, good morning, guys. Thank you for taking my question. Just wondering if you can talk a little bit about the client policy or custom policy engine product a little bit more and maybe some of the early demand that you’re seeing out of that.

Tim Gokey (Chief Executive Officer)

Yes, Scott, thank you very much. This is one that we’re really excited about because it’s been a longstanding issue in the industry, and there’s been a lot of stuff sort of talked about in terms of are the major proxy advisors tipping the scales one way or the other, but just completely separate from that, when you look at this from the asset manager perspective, the challenge that they have today is there are lots of data points out there. They have many, many things to vote and the current approach brings together all of that into a pretty comprehensive report.

But because of the work to create that comprehensive report, they don’t get it until literally like about a week before the election. And so it leaves them no time to react. And it also leaves the issuers very unhappy because they don’t have any time to get in touch with asset managers if there’s something in there that they don’t agree with. And so we’re really turning that model on its head. We’re using AI to bring in the data points much, much earlier. We’re not producing that report. But what we’re doing is letting the asset managers, with their policies, say what would their vote be. They get that now something like six weeks ahead of time. So they then can have time to say, yep, that’s fine, or this is a controversial one, I want to do more work. And then at the same time, those data points, not this year, but beginning next year, will also go to the corporate issuers so they’ll have the opportunity to comment on them right within the application.

The asset managers will see that. And so it really provides a much smoother workflow for the industry. And so we really like the value proposition. It’s taking a different angle on it, and we’re seeing a lot of interest from asset managers. So as you know, we had through last proxy season signed asset managers with just under a trillion in assets and we’re seeing continued momentum in that pipeline. We’re really pleased with the win we had this first quarter with a very large wealth manager. And wealth managers here, they do vote; they often have a sort of a house policy for voting the managed accounts.

And so that will bring a nice set of additional assets. And we expect to have further announcements as we move forward.

Scott Wurtzel (Analyst)

Great, that’s helpful. And then just as a quick follow-up, just on the internal trading volume growth, I know there was maybe a little bit of a tougher compare from 4Q to 1Q, but anything to call out on the deceleration there, just given some of the kind of consistent double-digit growth that we had seen over the past couple of years?

Ashma Gay (Chief Financial Officer)

Not much to call out there, Scott. We were happy with the internal trade growth of 7%. That was supported by higher equity volumes, and we continue to see good growth around that area.

Scott Wurtzel (Analyst)

Great, thank you.

OPERATOR

Our next question comes from Patrick O’Shaughnessy from Raymond James. Please go ahead with your question.

Patrick O’Shaughnessy (Analyst)

Hey, good morning. What’s your current thinking on sharing AI cost savings with your clients, and to what extent are you using that capability to drive new sales activity?

Tim Gokey (Chief Executive Officer)

Yeah. Patrick, thank you very much. It is a great question, and it’s, you know—I’m going to step back for a second. As we think about AI, there’s the revenue opportunity, there’s a speed-to-market opportunity, there’s the internal productivity opportunity, and I will touch on those. But let me start with where you are on sharing savings with clients. I think the place that that is most relevant is in our managed services business, where we serve over 70 clients with doing the operations in addition to providing the technology.

And we are applying AI there. We’ve gotten a lot of efficiencies, about 25% so far, with clear line of sight to getting near 50%. And the conversations today we’re having with clients about that is we’re not really talking about managed services; we’re talking about AI partnership and talking about does it make sense for each of those clients to invest independently in AI for operations. That’s something we can do on our side and then give them immediate savings and then share in the savings as we go forward.

So I think that’s one where it’s very explicit. I think in some of the technology-based products, it’s a little bit less clear as to how that will work out over time. But what we are seeing is the ability to introduce products faster, to onboard clients more quickly, and we like the demand that we’re seeing for our AI-driven products. Now, I’d be remiss if I didn’t also talk about some of the internal efficiencies that we’re getting. There’s the 25 million that we talked about last quarter. I really like the way we’re seeing that come in.

It’s fully built into our run rate. If you look at this quarter, we realized roughly a quarter of that amount. And that’s something that will certainly continue as we move forward and look at other areas. And, as we have now, we’ll use that as a mix of delivering earnings to shareholders but also investing because there’s so much opportunity right now.

Patrick O’Shaughnessy (Analyst)

Terrific. I appreciate that comprehensive answer. And then on the Regulation E delivery effort that the SEC is working on, is there a risk, I guess, that that could expand into a review of preference management processing fees that the ICI is pushing for?

Tim Gokey (Chief Executive Officer)

Yeah, it is, Patrick, it is. When you look across the more than 100,000 comments, that definitely was not a theme. Certainly it’s ICI’s job to advocate on behalf of their members. We’re not hearing that actually from individual funds. And as we talk to the SEC, this is just not something that’s on the horizon. And if it were on the horizon, until we collectively see what the penetration is, how brokers—how quickly they move, what the investor uptake is, what the opt-back is—we don’t really know where all that settles out for a number of years.

So if there were a review, it would be more appropriate in the future. And, as you know, we’ve really argued that thinking about this on a per-communication basis is not really the right way to think about it. When you look at the activities that we do, from agenda sourcing, keeping track of investor preferences, bringing all that to sending the notices, taking them back, tabulating, voting, providing a unified bill across the industry—it’s a 24/7/365 platform. And it really should be more like a per-position-per-year kind of thing, because none of those activities get paid for; we only get paid for the communication. So that’s something that we’ve talked to our industry partners about as things evolve. But I think it’s pretty far in the future.

Patrick O’Shaughnessy (Analyst)

All right, thank you very much.

OPERATOR

Our next question comes from Peter Heckman from DA Davidson. Please go ahead with your question.

Peter Heckman (Analyst)

Hey, good morning. A lot of my questions have been already addressed. I just wanted to check in on the M&A pipeline and allocating excess cash between share repurchases and M&A. You’ve had a couple decent-sized deals so far, rather last fiscal year. But how are you thinking about M&A as it’s adding capabilities and adding scale?

Tim Gokey (Chief Executive Officer)

I’ll let Ashma comment on share repurchase, and I’ll jump in on M&A.

Ashma Gay (Chief Financial Officer)

Sure. Let me start off, Peter. So as you know, we completed a $200 million share repurchase in the first quarter, and that was directly linked to the compelling valuation that we see on our shares. More broadly, we’re expecting another strong year. Like I said, with free cash flow conversion over 100%, we’re sitting at a 2x leverage ratio. So that essentially gives us the capacity to both repurchase shares and fund attractive M&A, all of that while continuing to fund organic growth and dividend.

And as we do that, we will continue to look at M&A and making the trade-off, given the compelling value that we have with our shares, but find the right strategic M&A in that regard.

Tim Gokey (Chief Executive Officer)

Yeah, and I’ll just add on this is another chapter in our long history of very balanced capital allocation, starting with investment-grade credit rating, making internal investments to drive organic growth, paying a strong dividend, pursuing attractive M&A when it’s out there, and then using the rest to buy back shares. And it’s been the same algorithm for a long time. It gives different results at different times, depending what the conditions are.

Over long periods, it’s resulted in about half of that capital being put to share repurchase versus tuck-in M&A. As Ashma said, we do see our shares right now as a very strong value, which is why we’ve been leaning into that. And as we move through 27, we expect continued healthy levels of share repurchase. That said, we do continue to look at opportunities and there’s some very attractive ones that are out there. So if the right property presents itself, we have the flexibility to do both, given the compelling value in our shares. If you see us do something, you’ll know that we think it is something very special. So we’re feeling good about it.

And then last thing, and I know you know this, but we can’t overlook the dividend. We’ve always viewed a strong and growing dividend as a pillar of long-term value creation and we’ve increased it every year we’ve been a public company, in almost all years by double digits. So that’s another pillar that we also think about.

OPERATOR

And our next question comes from Kyle Peterson from Needham. Please go ahead with your question.

Ross Cole (Analyst)

Hi, this is Ross Cole. I’m for Kyle Peterson. I know you touched on this a bit earlier in terms of the AI savings going back to clients through price, but could you maybe touch a little bit more on GTO pricing and what you’re seeing in terms of renewal price and win rates compared to competitors? Thank you.

Tim Gokey (Chief Executive Officer)

Yeah, as we look at GTO, it’s been a strong start to the year and we really like what we’re seeing going forward. I don’t have a GTO number for renewals in front of me, but when I look across Broadridge Financial Soln, we renewed nearly $800 million last fiscal year, literally zero losses to AI, zero losses in proxy. When you look at the upsells versus any concessions that would come in, the net renewal numbers are always positive, as the net renewal number is over 100%.

So we feel good about things. Our model though is not to look at software companies. You’ll see a lot of them growing by pushing the price lever, and that has not been our business model. Our business model is to have happy clients that want to do the next thing with us. We always have a healthy discussion at renewal time. It generally results in something positive with some additional services to the client. We really like that model and we really like the way that continues to make us systemically more important for our clients and to continue to deepen the relationship that we have.

Ross Cole (Analyst)

Great, thank you. And then switching gears a little bit. So just to confirm with the Q1 margin dropped a couple percentage points versus last year, which seems, but also seems to be relatively in line with prior years. Do you see the adjusted operating margin kind of playing out similarly as it has in prior years, where the first two quarters tend to be a little lower before increasing the final two quarters, probably just due to mix changes, thus getting to that 21% guide?

Is that a good way to think about it? Kind of like the previous years?

Ashma Gay (Chief Financial Officer)

Yeah, I’ll take that. The short answer to your question is yes. The longer answer is, yeah, our margins declined about 200 basis points, but that compression was driven by, like I said in my remarks, the combination of lower event revenues. And remember, these lower event revenues typically carry higher incremental margins. So it was a combination of that and higher investments that we’ve been making on platform, tokenization, some of the initiatives we spoke about, which essentially offset the leverage in our recurring revenues.

We do expect a similar trend in the second quarter as we’ll have pretty much the same story. We will lap elevated levels of event-driven and higher investment spend. But as we move to the second half of the year, we expect both of these pressures to moderate exactly the way you said it, which will keep us well on track to deliver on full-year margins of 21%.

Tim Gokey (Chief Executive Officer)

Yeah, I think just to give sort of a way to think about it, there are some factors and you’ll see these repeat in each year and we’ll talk about them. But factor one is just the seasonality of our business in which we get a lot of our revenue in the second half. But there are fixed costs that go throughout the year. So you generally see across all the years, higher margins in the second half than in the first half. Then you layer on top of that the timing of event-driven revenue, which comes in, again because the fixed costs are already there and the higher margins are based on the timing that would affect the margin of the quarter.

And then the last piece is the timing of our investments. And as you know, when we’re having a good year, we often use that to reinvest and pull forward our roadmap. And the timing when we do that can also affect our margin. So we manage the company on an annual basis targeting that sort of annual increase in operating margin. And we always try to tell you about those factors as we go through so that you can try to disentangle that.

Ross Cole (Analyst)

Great. Thanks for confirming. I appreciate the additional color.

OPERATOR

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions you may press star and two. Our next question comes from James Faucette from Morgan Stanley. Please go ahead with your question.

James Faucette (Analyst)

Thank you so much and thanks for all the detail. I know we’ve kind of gone around and we’ve talked a little bit about timing, but I want to go back to margin, margin expansion. You guys are looking for a little bit of acceleration in expansion here. Can you, and I apologize for this, but can you just recap for us what we should be paying attention to as kind of the key drivers, the bit of margin expansion acceleration expected for the coming fiscal year?

Ashma Gay (Chief Financial Officer)

Absolutely. I’ll just reiterate what we just spoke about. If you think about the business, we have a seasonal business; the second half is the much larger portion of our entire revenues. So even in a BAU setup, we do see our margins increasing year on year. Second, if you remember, we had a record event-driven fee last year. A lot of it was concentrated in Q1 and Q2. So as we grow over that, and this year we’re expecting much more normalized levels of event-driven fee—I’ll call it 60 to 70 million every quarter—and if you compare to the compares that we had last year, you would automatically see the margins continue to increase more in the second half of the year versus the first half of the year.

And I will also point out we have been ramping up our investments in our growth areas—platform, AI, tokenization, et cetera—which we started doing more of in the second half of last year. So again, if you think about the seasonality of that, you will see more to grow over on those investments in the first half of the year before they get to more normalized levels that we saw in the past year. So all those factors will lead to our margins just increasing as we go through the year.

James Faucette (Analyst)

Got it. Got it. I appreciate.

Ashma Gay (Chief Financial Officer)

Yeah, James, I do know we are talking about margins. I gave you the answer. But I do want to remind you that all this margins discussion is to ascertain that we are making sure we are in a good position to deliver on our full-year EPS guidance of 8 to 12%. You might see volatility in event fee as we go through. We will moderate our investments as we always do. The important message I want to leave you with is we will deliver on our 8 to 12% earnings guidance.

James Faucette (Analyst)

Got it. And then I want to ask about an opportunity set we’ve had and really would like to get your perspective on innovation exemption. We saw the announcements that they were going to be permitted, but I think a lot of people felt like in a lot of ways there are still restrictions there that could encumber a lot of really innovation being attempted. So from your perspective, do you think that we’re likely to see meaningful benefit from the innovation exemption and is it happening?

Not happening? And how should we think about the impact on record growth? Thanks.

Tim Gokey (Chief Executive Officer)

Yeah, I’ll take this one. I think with the regulatory change that the SEC is making here, they are collectively beginning to pave the way for a long-term framework in the absence of congressional action. And you know what we liked about the exemptive relief is it’s very specific about preserving shareholder rights, including voting and dividends. And so we like that. That reinforces our focus on governance and investor communications for tokenized assets.

I think the innovation exemption specifically allows for these tokenized security venues. That will be one of the models that are out there, and there are limits on the volumes of that. So I think there will be some good experimentation there. But I’d like to just remind you that that’s not the only model out there. There’s what people like Kraken and Ondo are doing globally. They have also announced that they’re going to be bringing that to the US with a custodial model; it’s what the DTCC is doing and we’re working specifically with them. There’s what the New York Stock Exchange is doing, and just the announcement yesterday where we’re partnering with the New York Stock Exchange to bring on-chain governance and integrated digital transfer agency services into their infrastructure for tokenized equity, which is separate from the TSP. They’re going to have an ATS. It will be fully regulated. It will be under the national market system.

So there are lots of different models out there and we are playing in all of them. I do think, by the way, the fact there are so many models does pose a challenge for issuers in terms of how they bring all those votes back and give an integrated view. The fact that we are already serving 80% of the Fortune 500 to provide that integrated view for registered and beneficial, we’re extending that to all the different permutations of tokenized equities. That will really simplify that complexity and provide a great value proposition to corporate issuers.

So we think all this translates into opportunity. How fast it comes is unclear. But what we do think is that as it comes, the faster it comes, what it’s going to do is drive position growth because these are bringing additional investors from outside the US here, and it’s bringing new ways of holding shares. And so we see more position economics, as I said earlier, that are equal to or superior to what we’re doing today. And it’s really just—we talked about position growth and how different ways of innovation have spurred position growth—and we see this as the next wave and really getting onto the next S-curve.

We’ll see how quickly it develops. But I think it really bodes well for the long-term health of US capital markets and Broadridge Financial Soln.

James Faucette (Analyst)

Great. Appreciate that color and context.

OPERATOR

And with that, ladies and gentlemen, we’ll be concluding today’s question and answer session. I’d like to turn the floor back over to management for any closing remarks.

Tim Gokey (Chief Executive Officer)

Well, I just wanted to thank you all for joining us today and just reiterate three key messages from today. We delivered a strong first quarter. It is our smallest quarter, but the strength of that quarter makes us feel incrementally better about the full year. Second, that the investments that we’re making in tokenization, in AI, and in digital assets are really beginning to play out in terms of results. And we like the returns that we’re seeing on those.

And finally, third, that we’re on track for a good year for fiscal 27 and beyond. Thank you again for joining us and we look forward to seeing you at our Investor Day in December.

OPERATOR

And with that, we’ll conclude today’s conference call and presentation. We thank you for joining. You may now disconnect your lines.

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