Yahoo Finance Broadridge Financial Solutions Inc (BR) (Q3 2024) Earnings Call Transcript Highlights: Key ...
Recurring Revenue Growth: 4% increase, impacted by timing of annual meetings.
Adjusted EPS Growth: 9% increase.
Free Cash Flow Conversion: On track for 100% for the full year.
Equity Position Growth: 5%, driven by double-digit growth in managed accounts.
Fund and ETF Record Growth: Declined to -1% for the quarter.
Closed Sales: Rose 29% in the quarter, up 19% year-to-date.
Capital Markets Revenue: Increased 8% to $266 million.
Wealth Investment Management Revenue: Rose 11% to $159 million.
Full Year Guidance: Recurring revenue growth at constant currency at the low end of 6% to 9% range, adjusted EPS growth at the middle of 8% to 12% range.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Broadridge Financial Solutions Inc (NYSE:BR) reported a 4% increase in recurring revenue and a 9% growth in adjusted EPS for the third quarter.
Closed sales rose by 29% in the quarter, with year-to-date sales up by 19%, indicating strong market demand and effective sales execution.
The company remains on track to achieve 100% free cash flow conversion for the full fiscal year, supporting strategic investments and shareholder returns.
Broadridge Financial Solutions Inc (NYSE:BR) is well-positioned for continued growth, reaffirming its fiscal year 2024 outlook with adjusted EPS expected to grow by 8% to 12%.
The company is actively engaging in strategic M&A opportunities, aiming to complement organic growth and enhance long-term value.
Negative Points
The timing of annual meetings affected revenue recognition, pushing some expected governance revenues from the third to the fourth quarter.
Despite overall growth, the fund and ETF record growth declined to negative 1% for the quarter, reflecting challenges in certain product segments.
The company's recurring revenue growth for the fiscal year is projected at the lower end of the guidance range (6%), which may indicate slower than anticipated growth in some areas.
Regulatory communications revenue was flat, impacted by the shift in timing of annual meetings and mixed position growth trends.
The transition of the E-Trade platform and its integration into Broadridge's offerings has partially offset revenue growth in the Wealth and Investment Management segment.
Q & A Highlights
Q: Given the solid early demand for OpsGPT and BondGPT, where do you see the biggest opportunity to increase Gen AI-related product development? A: Timothy C. Gokey, CEO & Director of Broadridge, expressed excitement about AI, noting significant progress with OpsGPT and BondGPT. He highlighted the potential for deepening AI applications in capital markets and asset management, where Broadridge can leverage its proprietary data to create unique offerings. Gokey emphasized the importance of integrating AI across all products and using it to enhance internal efficiency safely.
Q: Since you've deleveraged the balance sheet post the Itiviti acquisition, where do you see the greatest white space for your acquisition opportunities? A: Timothy C. Gokey discussed the potential for M&A, particularly in wealth management and data analytics. He mentioned that private equity firms are preparing their properties for acquisition, suggesting a growing number of opportunities that align with Broadridge's strategic and financial criteria. CFO Edmund J. Reese added that the company's strong capital position allows for strategic acquisitions to supplement organic growth.
Q: Can you comment on the characteristics within your pipeline? Are deal sizes expanding? A: CEO Timothy C. Gokey noted that while there are some deals over $5 million, most opportunities are of manageable size, aligning with investments in areas like BTCS and regulatory solutions. He emphasized the alignment of these opportunities with Broadridge's investment strategies, which supports positive returns on investments.
Q: What opportunities in wealth management are resonating with prospective customers? A: Timothy C. Gokey highlighted significant interest in Broadridge's wealth management solutions, particularly component sales, with a strong pipeline and sales up 75% for the year. Customers are attracted to Broadridge's digital roadmap and open API framework, which allows them to address specific pain points while planning for broader digital integration.
Q: What are the factors driving 6% recurring revenue growth this fiscal year towards the lower end of your range, and how does this inform your outlook for next year? A: CFO Edmund J. Reese explained that the 6% growth, at the lower end of the guidance range, is due to lower than expected position growth and customer communications revenue. However, he noted positive momentum with sales expected to be up 15% to 30%, and position growth showing early signs of increase, providing a strong basis for future growth aligned with the company's three-year objectives.
Q: Can you clarify the impact of timing and shareholder meetings on your financials? A: CFO Edmund J. Reese confirmed that the timing shift of shareholder meetings affected regulatory and issuer revenues but not data-driven fund solutions or customer communications. This shift is expected to benefit regulatory revenue in the fourth quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
