All right. Good morning, everyone. My name is Kyle Peterson. I'm one of the fintech analysts at Needham Company. Welcome to our tech, media, and TMT conference. We are going to host a fireside chat here with Ashma Gay from Broadbridge, the CFO. Thank you for joining us, Ashma. I wanted to see if you could start off, just for those kind of maybe a little less familiar with the story, if you could give us kind of a quick primer, an overview. I think that would be helpful for everyone in the audience.
I'm happy to do that. And thanks for having me here, Kyle. You know, the financial services industry is going through significant drop summation right now. And I feel like Broadridge is uniquely positioned to drive innovation at scale across the industry. so I'm happy to talk a little bit more about that. So first, let me start off with the Broadridge business. For those not as familiar, we're a global technology and infrastructure provider. We're about $6.9 billion in revenues, $4.5 billion of which are recurring revenues. And we essentially operate at the intersection of asset management, wealth management, capital markets, and corporate issuers. The way to think about our business, the way we report our business, I should say, is in two different segments. We've got the ICS segment, which is about $2.7 billion in revenues. And here we operate a unique network which connects corporate issuers and asset managers with their own retail and institutional investors. And we do that via the bank broker-dealers. And it's through that network that we enable corporate governance, shareholder voting, as well as other communication networks. And we've kind of built over that initial position to now create a whole range of other governance solutions. On the issuer side, we also provide fund solutions, solutions for funds more based on data. And we've scaled our communications business as well, all in the ICS stream. So that's our ICS business. The second business that we report our financials in is our GTO or Global Tech Operations business. That's about 1.8 billion in revenues. And the simplest way to explain it is we power trading for capital markets and wealth management in that space. On the capital market side, we provide the core technology and the infrastructure that essentially enables capital markets firms to do trading, to manage their orders, to process the transactions, to settle the transactions, manage compliance, like the entire end-to-end process around it. And on the wealth management side, we provide the core technology that enables the wealth management divisions of whether it be the large banks, the RIAs, the private banks, to manage the entire suite of wealth offerings. So that's the core of our businesses. The other thing I would call out is we do all of this at scale for some of the most demanding clients. If I think about our portfolio right now, we cover 28 out of the 29 GSIBs, the systematically important banks. We cover about 1.5 billion shareholder positions today across, and we send out about 7.5 billion communications on an annual basis in our ICS business. In our trading business, we cover over 15 trillion in trades on a daily basis, and that's across fixed income, equities, the whole gamut. And our distributed ledger repo platform tokenizes close to $400 billion on a daily basis, right? That's quite a large scope. So we're, and essentially all of that scale that we have now creates a massive advantage for us, right? We're in the right position to scale even further to deploy some of the new capabilities across our client base right now. And where we're sitting right now, we're seeing financial services is at a stage of transformation, right? You're seeing all the advancements into technology. You're seeing a pro-innovation regulatory environment. What that's essentially creating is a need for more change, and we are well-suited to drive that change. Just to give an overview of our priorities and where the industry is headed, I'll call out four key themes that are happening right now. First, there is a lot of steam on tokenization. I'm sure you've heard a whole bunch about it, both on the asset management side as well as on the capital market side. So we're seeing that across the board. The second theme is we're seeing a quiet revolution. We call it quiet. it's not so quiet, on the shareholder engagement side, right, which is having funds, issuers deal with their shareholders in a different way. So we're seeing that happen a lot. Three, you're seeing the advent of more and more digital communication. Essentially, that's driving the cost of communicating, interacting with shareholders, investors down, and that's creating scale. And then finally, you have AI, which is enabling all of this at a much faster pace, right? Bottom line, we're leaning into that change. We're leaning into the change across each of these four areas. We're looking at leading in tokenization, driving shareholder engagement, driving digitization, and then scaling our AI capabilities across the board.
So I feel pretty good about where we are headed right now.
And we're doing all this while driving consistent, sustainable earnings growth. We actually had our earnings call a couple of weeks ago where we raised our guidance for this year for both revenue and earnings. Our recurring revenue guidance is now at or above 7%. Our adjusted EPS guidance is at 10% to 12%. And we feel really good about where we are headed.
Great. Thank you for that and you know maybe moving over you know Broadridge has been you know one of the more consistent companies I've done diligence on in my career just you guys have been pretty transparent of kind of putting through your financial targets rolling those forward and hitting or exceeding them pretty much across the board so I guess could you give us a reminder of kind of what those targets and how you think about balancing those are and you know the combination of diversification in in revenue visibility how that helps you guys really um be you know as
consistent as you guys have been over time yeah thanks for calling that out kyle yeah you know one of the things we often say and we hear about is at broadridge we say what we're going to do and then we deliver against it right being consistent with against our commitments has been a big part of the broad red story and it's earned us a lot of credibility across the base so far so you're right what we do something that i've not seen a lot of companies do though some do we offer three-year growth objectives right we come up with three-year growth objectives we've We've been doing that since 2011. And we're in our fifth three-year cycle right now, right? This current cycle started in December of 23 that we laid out these objectives, and it goes until our fiscal 26, which is going to be this coming June. So for the most current cycle, our objectives are 5% to 8% organic recurring revenue growth, 7% to 9% recurring revenue growth, once you include the impact of M&A as well, and 8% to 12% adjusted EPS growth. And we recently reiterated that we're on track again to deliver on both the top line and the bottom line growth objectives in that category. Now, to answer your question about why, how are we able to do that, I think the answer is to some extent rooted in the strength and breadth of our business model, right? Let's start with the fact that, one, we are a tech provider that's essentially deeply rooted in some of the core functionalities across our clients, right? These are not functions that are ancillary to their services trading, right? They're very core to the actual service that our clients offer themselves. What that means is that we sign multi-year contracts with those clients. What that also means is we get recurring revenues from those clients. And essentially, that gives us a lot of visibility, right? About 65% of our overall revenues, like I said, $4.5 billion of our revenues are recurring in nature. These are multi-year contracts with a significant amount of visibility into what's to come in the coming months. So that gives us the transparency as we think about our commitments. The second thing I'll call out is we are constantly reinvesting in our business, right? We're committed to reinvesting in our business either in existing products, continuing to enhance them, make sure they're in line with enhancements that we want to make in them, or in new products, right? And when we look at new products, we're often looking at categories where there's the most demand or where we expect that to help with client retention even more because they're adjacent to where we are, et cetera. But essentially, long story short, what all of that means is that we now have a fair amount of roadmap that we're constantly always working on, right? And that roadmap does two things. One, it obviously extends our runway to growth, right? it creates more addressable market opportunity for us. But two, it also gives us the flexibility. So if we are in a period of high event activity or if we're in a period of higher recurring revenue growth, we can use some of that upside that we're seeing to accelerate progress against that roadmap.
And there's the flip side too, right?
If we're in a lower economic environment, we can temper that roadmap as we scale through those investments. So that essentially allows us to navigate and ensure that we deliver consistently against our commitments. And then the third reason I'm gonna, the third factor I'm gonna call out is our balanced capital allocation strategy. We have a history of maintaining a very balanced capital allocation, right? Which starts with, for us, it starts with investment-grade credit rating. Once we've got that, We use some of the capital available to fund our organic investments, like I said, the roadmap that we're working on. Then we also use that to pay a growing dividend, typically growing in line with earnings. We make specific, discrete, strategic tuck-in investments, usually at valuations that are accretive to where our business model is headed, in areas where we see the most synergies that can drive the most value for us. And then we do share buyback across the balance, right? So if I bring this all together, the fact that our services are embedded in our client's core functions, the fact that they're recurring in nature, the fact that we always are constantly reinvesting in our business and therefore have the flexibility to flex investments up and down as we continue to reinvest in our business and our balanced capital allocation, that's a pretty good formula for shareholder success and that's what's helped us over the years.
Great. Thank you for all of that. Maybe switching over to AI, that's probably a topic we get from our clients on every company we cover. I'd be surprised if not. So I think kind of a two-pronged question here, I guess. One, what are some of the biggest moats that you guys have where Broadbridge will continue to kind of be a key player in the space you know LLM model runs wild for a few hours and kind of whip something up but I guess like what are some of the the key moats that you guys have and safeguards that you think prevent that and any disintermediation risk over the long term and then the follow-up would be you know how are you guys using AI in your business today and where do you see that going over the
next few years. Yeah. So I'll start with the first part of your question about the modes and our advantages, so to speak, right? I'll start off by saying the value of what we do is not the code. It's really a combination of the network. It's a combination of many of the capabilities that we have at scale. Essentially, we end up competing on connectivity, we end up competing on event coverage, operational resilience, scale, and deep domain expertise, right? Let me actually break that down a little bit. When you think about our governance business, I was talking about what we do in ICS. Essentially, we're connecting 10,000 corporate issuers, 30,000 funds with 1,000 plus bank broker dealers with 1.5 billion shareholder investors, right? And we're doing all of that at scale. We're making sure we're bringing the physical and digital communications together. We're making sure we're managing the preferences across the entire investor base. We're making sure we're staying ahead of any of the regulatory changes. And then we're implementing those regulatory changes across the product offering. So essentially, even if you had the actual code, right, that would be a very small part of the equation. What we'll need is the entire scale and the entire operational resilience associated with the offering. That's on the ICS side. If I think about the GTO side of it, like I mentioned before, our tech powers some of the core operations for our clients, right? So if I think about a capital markets company's trading is core for them. The concern is not so much about what the Broadridge fees is, because the error that you could have on one of the trading transactions, that could be many times the Broadridge fees itself. Our systems, our platforms have actually been enabled to anticipate the entire tail risk events, right? To the entire extent of what the different market economics could be, what kind of events we could have across a majority of clients in different environments. And that's very hard to replicate, right? We think our scale actually provides us a huge opportunity. And frankly, I would go the other side, right? I think I love AI. AI, to me, and the LLM tools actually provide us an opportunity to strengthen our platform rather than it's disintermediated by any long stretch. The winning formula is really to combine some of those high-end tools with the deep domain expertise, the network, the operational resilience scale, and that's something that Broadridge is doing really well. So that, I feel, actually provides much more of an advantage for us versus not. And that brings me to what we're doing at Broadridge around it, right? Like I said, it's huge advancements. I'm quite excited about some of the moves on AI. Internally at Broadridge, we think of it as not only can we leverage AI to drive change for our clients faster, we can use it to make us and our clients more efficient in the process as well, right? Because essentially all we're doing is, not all, what we're doing is mutualizing the investment associated with AI, right? You can have multiple clients try to make AI investments in their own accord, but because we've got the entire platform, we can make the investments once on their behalf, and multiple clients can get to benefit from those investments. The way we're approaching it is in three ways, right? The benefits of AI, we're thinking about it in three ways. One, about how do we launch new products in the marketplace that are more AI native. Two, how do we get more productivity gains for us and our clients using AI. And three, product development. How do we accelerate the pace of product development, software development, by leveraging AI? That's the three ways we're addressing it. And we've got proof points on each of those areas. If I think about new products, we have various products that are already out in the marketplace where we are earning revenue across these products. I'll give you two examples. The first one is our AI native custom policy voting engine. Essentially what that does is it reads and analyzes source information across multiples of issuers and then works with asset managers to apply the asset manager's own custom policies on how their views are, on how they want to vote on certain actions. And it allows these asset managers, one, not to rely on proxy advisors, two, because we're able to leverage AI and source and read all that material, we actually are able to provide some of this information to asset managers about four to six weeks earlier than they would have in the past. And it then leverages all that information to apply a customized recommendation for that asset manager itself. The product's already gaining steam. Today, we have asset managers that have over 800 billion in assets that are using this product live with us today. That's, you know, one example. Another example that we've spoken about in the past is we have a global demand model that essentially tracks about 120 trillion in demand flows, right, where the source is used, where the demand flows is globally. And it essentially allows asset managers to come up with their views on where they want to invest in product development, where they want to invest in marketing for the coming season, so to speak. We have about two dozen asset managers today who are already tracking this to make their product marketing decisions. So that's just on the new revenue side. What I'll say on that is I'm pleased with the returns, the revenues that we're seeing across these products. It's small right now, but it's scaling nicely on that front.
Then the second area that I mentioned was productivity.
We are seeing real productivity gains. We've essentially deployed agentic AI across the business. We're using it to automate many of our workflows. we're using it to improve efficiency. One of the latest use cases we have is on our managed service offering in our GTO business, where we essentially do managed service for about 65 of our clients across the services. And we're seeing real labor productivity gains in this space. We've deployed AI and agentic AI across our workflows, and we've seen about 30% labor productivity gains. And what we've essentially done with those labor productivity gains is, one, use it to get more clients to grow our business, and two, we're sharing some of those efficiency gains with our clients as well. We're now starting to approach AI, approach this managed service business as an AI partnership, right? We're getting some gains. We're helping them grow their business faster by sharing these gains with our clients as well. And we're seeing some good returns in terms of faster onboarding. We're seeing some good returns in terms of other process efficiencies as well. All real returns, but on productivity, what I would say is these returns are helping create operating leverage for us, and they're creating investment capacity for us. That's allowing us to continue to increase and accelerate our investment in the things that I mentioned. And then finally, we're seeing good traction with our software development as well. The time to develop new software through faster prototyping is also leading to good AI benefits for us. So overall, quite excited about the opportunity. We actually just launched, we announced yesterday that we're now embedding AI on top of, we've shared before, that we've created a BR platform, right? we've got various solutions which are now, which are on a common data ontology that are on a common API framework. We've actually, we're adding on top of that an agentic layer as well, which essentially the clients can either come to us and use our managed service holistically where we would give them 30% efficiencies day one and more gains as we continue and drive partnership, or they can use some of those agentic capabilities which are sitting on top of our platform for their own operations. They can leverage it and get the gains themselves and simplify their own operations thing. So it's yet another example of how we're making AI available at scale to a lot of our clients without them having to make the individual investments themselves. And we are essentially neutralizing the investments for them. And just to wrap this one, the only other thing I'll call out is we're the investments, because I've been talking about investments a lot. All of these investments are essentially baked into as we think about both our guidance for this year, as we think about our forecast and our guidance that we'll be sharing in the future as well. It's all within our sustained, steady, growing business model.
Okay, great. Thank you for all of that. Wanted to switch over to the proxy process. You guys have been doing a lot of interesting work, trying to help with increased shareholder engagement, specifically with retail and some passive investors. So I guess, what are you guys doing on that front? How is that, I guess, driving increased engagement? And I guess, do you expect that to continue if, I think we've seen a few issuers kind of trend away from the use of proxy advisors. So I guess, how are you guys helping with that and driving increased engagement.
Yeah, we're quite happy about the progress that we're making in this space, Kyle. Like I said before, there has been a quiet revolution going on in shareholder engagement. It's a little bit of the themes that you mentioned just now. One, there's been flack about a few passive account managers essentially hold all the voting rights for many of the issuers, right? That's problem statement one. Problem statement two has been the increasing role of reliance, I should say, on proxy advisors. The proxy advisors have been providing data, providing recommendations. Sometimes it's too late, and there's just been an increasing reliance on that. And the third, frankly, has been the lack of engagement from retail investors overall. Everything's been focused on the institutional side. There's been lack of investment on the retail shareholder side. And those are the three pain points that we're looking at addressing through our product offerings. The first one I'll talk about is on the fund side, where we have a voting choice solution. What that essentially does is it helps passive managers give their underlying shareholders more of a say in where to vote. Essentially, we call it a pass-through voting, where the fund manager, through a series of questions, gauges what the voting preferences of the underlying shareholders are. And then those voting preferences are aggregated together to come up with a view of this is how the overall fund should be voting for different issuers based on that. Essentially what it's doing is, now the large passive manager is not making the decisions themselves. It's based on data and actual voting preferences that they're getting from the underlying shareholders. We're seeing good traction on that product today. We have about 900 funds that are already signed up for that product, assets under management of over $8 trillion across that base. So it's steadily picking up good steam. The second product I'll call out, which actually addresses the second theme about the role of proxy advisors is, and I touched on this before, is our custom voting engine, the AI custom voting engine that we've provided. That essentially addresses exactly the pain point about over-reliance on proxy advisors, over-reliance on getting the data two days before the proxy is due and limited time in handling all that. That's where our custom solution actually works with some of the larger providers. We have multiple clients that have signed up for this today, over 800 billion in assets under management for that particular offering. And then the third offering is on the retail side, which I'm personally quite excited about, standing voting instructions. So you may have heard about the pilot that we're doing with ExxonMobil, where ExxonMobil is essentially asking their retail investors if they would choose to opt in to vote for management on certain issues, right? And of course, they have the rights to, they'll still get a proxy on an annual basis, they can still change their vote if so, But if they don't change their vote, their vote would be voted in line with management on certain issues. This is still in a pilot stage. Exxon is our first client doing that. But we're seeing great response rates. What we saw is, out of the retail investor base, about 10% of them have already voted or opted in, and they're voting with management on certain issues. What I found interesting was about a third of them, 30% of that 10% had not even voted in the last election. So if you think about it, that's driving real retail participation, something that didn't exist in that space before. And that's quite exciting. Like I said, it's still in pilot stage, Exxon is our first client, but the response rates have been really promising, and I'm looking forward to seeing more traction on that one. So essentially, that's the gamut of our shareholder engagement offerings, right? again, addressing the three pain points that you mentioned, passive managers, proxy advisors, and retail engagement. This is actually a pretty interesting product offering. It's a whole sector, so to speak, right? Not just a singular product. We see this as a multi-hundred million dollar opportunity. Of course, it's not gonna happen overnight. For now, we're calling it about a point of growth to our governance business over the next two to three years each. But I'm quite bullish about the opportunity overall.
Great. That's great to hear. You know, maybe switching over to kind of another, you know, topic of the day here, but specifically tokenization. That's something I think we are getting a lot of questions on. You guys have been pretty active in the space with, you know, a lot of your work, you know, on the Canton network. and I know you guys had some news releases today about kind of your expansion of your tokenization offerings, doing some interesting work on the proxy side as it relates to it. So I guess like, could you summarize, you know, what are these different things you guys are kind of legging into with tokenization and kind of where do you see, you know, the opportunities going from here?
Absolutely, tokenization is another one of those that we see as a huge tailwind for Broadridge across the gamut, right? On the proxy side in the tokenized equity space like you mentioned, as well as on capital markets and on the wealth side. So let me address the tokenized equity and the proxy governance side of it first and then I'll talk about capital markets and well, capital markets is where we have the announcement today, like you pointed out. So first off, on the tokenized equity side, we believe whether it's a tokenized asset or a regular asset, what's core is the right level of governance, the right level of proxy voting, asset servicing that needs to go associated with it, right? We're not, and as we start to build that kind of scale for tokenized equities and tokenized assets as well, The industry needs a trusted market player that can drive those asset servicing, proxy, governance, shareholder, post-trade capabilities at scale. And that's where Broadridge comes in. Right now, on the equity front, there are various models out there. There are various ownership models out there. I'm not betting on which one is going to be faster, better, or not. But where we're looking at is we want to make sure Broadridge is an enabler in each of those models, right? irrespective of which model picks up. Just to give you a little bit of overview, there are essentially three models that are being discussed right now. The first is an issuer-native model. What that essentially means is corporate issuers will directly issue tokenized version of equities as well, in addition to today they issue regular equities that are either beneficially held through bank broker dealers or they're held directly in a registered format.
So now in that model, today, as I mentioned,
these issuers have beneficial holdings and registered holdings. Over 80% of those issuers already have signed up with Broadridge, even for their registered holdings, right? Where you could argue they have all the email addresses or communication rights for those assets. But there is a huge value in simplifying the complexity of saying, okay, Broderick, you're dealing with the beneficial side, deal with the registered side as well, and do it at scale for me with one pane of glass. Now imagine what's going to happen in this new world. Now you'll have a third asset class, which is these tokenized assets. Frankly, I might argue you'll have, let me add more complexity to it, you'll have tokenized beneficial assets, and you'll have tokenized registered assets in addition to the beneficial and registered that already exist. Now you're dealing with four different asset classes, right? That just increases the complexity even more from an issuer front. And what they've already partnered with us to do is solve that complexity for them. I'm actually super pleased to announce that one of the only issuers that's actually doing tokenized assets, tokenized equities natively, is Galaxy, right? They announced that they're going to do tokenized equities. We are already doing their proxy. So they already signed up with us. because of exactly that they want don't want to deal with the complexity of managing different asset classes so we'll be doing their proxy which is happening in two weeks on the shareholder voting side and we'll be doing it across the different asset classes for them so that's model one on the native issuance model two where you can see tokenization happen is on an intermediary side where third parties like bank broker dealers exchanges are essentially creating the tokenized versions of these assets now all these intermediaries are already our clients right if you think about it all these bank broker dealers that would essentially tokenize or the exchanges that we're talking about in this setup they're already clients that we're dealing with they're already in the same workflow in the same ecosystem that we're dealing with right now and we're already in discussions with all of them to figure out the next wave of how this works out but I don't essentially see that as being significantly different from how the model works today. And then the third way tokenization can happen is on through what we call a derivative form or a synthetic form where essentially third parties, exchanges create a derivative version of equities and they try to, which don't come with all the same rights. But even in that space, we're already partnering with the leading global provider in that space, Ondo, and there was a press release on it a couple of weeks ago, where we'll be doing the shareholder voting and proxy governance for them on that model as well. So frankly, you know, like I said, we're not betting on which model is going to be faster. Irrespective of the model, we're bringing our capabilities at scale across this new form of tokenized equities. And that makes me feel bullish about the tokenized equities opportunity. And frankly, it's all good, right? If you think about it, what is this going to do? It's going to create more investors coming into the marketplace. It's going to get more investors investing in more assets, more tokens, which essentially, one, increases our value prop for issuers. Two, drives more revenue for us. So it's all a great setup. But what I'm even more excited about is capital markets. If you ask us, that's where we think the biggest opportunity is with tokenization, because we're seeing a real need for tokenizing some of these private assets, alls, fixed income, that's where the big opportunity is. And we're already the market leader in this space. Our distributed ledger repo solution already tokenizes over $368 million on a daily basis, which is greater than the whole stablecoin market cap currently, right? And we're moving from that position to also now start doing tokenization on an intraday basis. We've invested in HQLAX, because of which we intend to extend our offerings across the European market as well. That is a real opportunity, right? That's where you can actually see benefits in terms of collateral management, collateral savings across banks. And that's where we expect that to pick up even more traction. and then just to round it up on the wealth side there's opportunity on the wealth side as well because as you see more investors wanting to invest in all these different asset classes now for wealth managers are they going to maintain a different set of infrastructure for crypto and digital on the side and all the traditional assets on the other side, that's incredibly chaotic what we've already launched in Canada is one platform that supports crypto digital assets and all the other regular traditional assets as well all across one platform so we're already there in Canada with that and we intend to announce something similar in the U.S. coming up as well so overall lots going on in the tokenization space but as I think about our businesses it creates unique opportunities across our three franchises in that area great well you know this
has been super helpful we've covered a lot of ground here so I guess I'll turn it to you do have any kind of closing thoughts or comments you want to make sure that you kind of leave the
audience with? I'm going to leave you with three main thoughts, right? Some of which I've already covered, but I'm going to reiterate a little bit. One, we are executing well across our three franchises, ICS, capital markets, wealth management. We're showing steady, consistent growth, and we've recently upped our guidance, both for recurring revenue and adjusted EBS in that category, feel great about it. Two, I'll remind you that we continue to invest in future growth, right? We are transforming shareholder engagement, driving digitization, skating AI, leading in tokenization, of course. And that's something we think is very important because we want to stay ahead of the trends for our clients and shareholders. We want to enable them to move at a faster clip and develop our own offerings at the same step. And three, I'll wrap by saying we believe in balanced capital allocation, right? We have a steady record of delivering on balanced capital allocation over the last many years. That's something we aim to continue to drive through because we believe by having a long-term mindset of putting our clients first, investing in where the industry is headed, helping them innovate faster, helping them drive towards clients faster, managed with good financial diligence at our end is a winning formula for our shareholders.
Great, awesome. All right, well, that takes us right up on time with four seconds to spare, so good timing on our part. So thank you for everyone for joining and thank you for coming to the conference.
Thank you.