Broadridge Financial Solutions, Inc. (BR) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting of Broadridge Financial Solutions. I would now like to introduce the first presenter, Rich Daly, Executive Chairman of Broadridge. Mr. Daly?

Thank you. Good morning, everyone. I'm Rich Daly, Executive Chairman of Broadridge. I'd like to welcome you all to Broadridge's 2020 Annual Meeting. We are delighted you can join us this morning and participate in this meeting. This is Broadridge's 12th completely virtual meeting of stockholders. Our virtual meeting solution permits validated shareholders to vote and ask questions during the meeting. Virtual shareholder meetings have increased the ability of shareholders to attend meetings from home wherever they choose to be. This is particularly important this year with the pandemic preventing in-person meetings from occurring. This year, Broadridge's Virtual Shareholder Meeting solution will enable close to 2,000 companies to hold their annual meeting virtually. I'd now like to introduce our slate of 10 director nominees who are all in attendance at this meeting. Joining me on the video are our CEO and Board member, Tim Gokey; our Lead Independent Director, Les Brun; the Chair of our Audit Committee, Pam Carter; the Chair of our Compensation Committee, Alan Weber; and the Chair of our Governance and Nominating Committee, Bob Duelks. The other 4 director nominees are joining the meeting via audio. They are Tom Perna, Maura Markus, Brett Keller and Amit Zavery. I'd also like to introduce the partner representatives from our independent audit firm, Deloitte & Touche, who are joining us via audio, June Niklus and Marty McElroy. Our General Counsel, Adam Amsterdam; and our independent inspector of election, Tom Tighe, are also joining the meeting on the phone. I'll now turn the meeting over to our Corporate Secretary. Maria Allen, to conduct the business aspects of the meeting. Maria?

Thank you, Rich. This meeting is held pursuant to a notice dated October 6, 2020. On or about October 6, each stockholder of record as of the close of business on September 24 was sent either a notification of Internet availability of proxy materials or the proxy materials themselves. All documents concerning notice of the meeting will be filed with the records of the meeting, and the company has appointed Tom Tighe as the inspector of election. I've been informed that there are 93 attendees at this meeting today. The tabulator has provided me with a report indicating that approximately 89% of our outstanding shares are present by proxy at this meeting. Accordingly, I certify that a quorum exists. All Broadridge stockholders entitled to vote at this meeting have the ability to do so online during the meeting until I close the polls. [Operator Instructions] I will be closing the polls after I review the proposals. So if you're a stockholder entitled to vote and have not yet voted or you want to change a previously cast vote, please do so now via the website. [Voting]

The Board recommends that stockholders vote for proposals 1, 2 and 3 and vote against proposal 4. Proposals being considered today are explained in detail in our proxy statement. They are proposal 1, the Board has recommended 10 nominees for election to our Board of Directors, proposal 2, the Board is seeking approval of our executive compensation, proposal 3 is the ratification of the appointment of Deloitte & Touche to serve as the company's independent auditors for the 2021 fiscal year, and Proposal 4 is a stockholder proposal on political contributions. Mr. McRitchie will now present proposal 4. And I'd like to note that if there are any technical issues with Mr. McRitchie's line, I will read proposal 4. Mr. McRitchie, you have 3 minutes to present the proposal. I'll now ask that the operator open Mr. McRitchie's line.

Mr. McRitchie, you line is now open.

Okay. Thank you very much, and thanks for the offer to read it in case there is any problem. So my proposal is based on an analysis by the Center for Political Accountability. And yes, I would like to acknowledge that Broadridge has improved its reporting of political contributions over last year. However, they still fall short on several measures. For example, Broadridge should disclose all political payments made by trade associations or other tax-exempt organizations where they are neither -- where they're either a member or a donor. As a former legislative chief in California, I know that companies often hide behind their trade associations on issues or candidates their shareholders might oppose. Disclosure is in the best interest of the company and its shareholders. The Supreme Court recognized this in its 2010 Citizens United decision which said, "Disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages." However, that can't be done if we don't know where that money has gone. Additionally, a congressional budget rider prohibits the SEC from promulgating a rule requiring companies to fully disclose political contribution. That's something that Republicans put in after more than 1 million letters were sent in to the SEC saying that they want such a rule. Unfortunately, Broadridge chose not to talk with me or with the Center for Political Accountability. Had they done so, I expect we could have easily suggested minor changes to Broadridge's policies that would have enabled them to hold their trade associations more accountable by either having them report specific payments or by having Broadridge prohibit them from using funds from Broadridge for certain activities. Please vote for proposal #4. In this election year, everyone should want dark money disclosed. Thank you.

Thank you, Mr. McRitchie, and thank you for your interest in Broadridge. We have received the stockholder votes, and I declare the polls closed. And now I'll turn the meeting over to our Chief Executive Officer, Tim Gokey.

I have just been informed that I was speaking into a muted microphone. So thank you, Maria. And good morning to everyone. I'm Tim Gokey, CEO of Broadridge, and I want to welcome you to our 2020 Annual Shareholder Meeting. I also want to add my thanks to Maria's to Mr. McRitchie. The issue that he's pointed out is a very important one, one we take very seriously, and his proposal caused us to rereview our policies and, I think, make some real improvement. So thank you, Mr. McRitchie. As Rich said, this is our 12th virtual-only annual meeting, which is once again powered by Broadridge's Virtual Shareholder Meeting technology. We are on track this year, calendar 2020, to directly facilitate almost 2,000 virtual shareholder meetings. That's up from just over 300 last year. That's just one area where Broadridge has seen substantial growth in the past year. Before I jump into Broadridge results, I want to take a moment to acknowledge this period of unprecedented global turmoil, the one that we've been in since the onset of COVID-19 pandemic. The pandemic has had profound impact on people and communities, including our own. Combined with an increased focus on racial justice, these health, economic and social crises make it clear that we are in the midst of a unique moment. This difficult period is testing the strength and resilience of both individuals and companies, and it's been inspiring to see how Broadridge and our associates have responded. It's also a moment that has underscored the critical and important nature of the work that we do to support financial markets by providing critical infrastructure powering investing, corporate governance and communications. By staying focused on health and welfare of our associates, supporting our communities, delivering strong results, executing flawlessly to our clients and increasing investment in capabilities, Broadridge is meeting the moment. As part of this virtual annual meeting format, I want to share with you just a few highlights regarding our fiscal year 2020 financial results as well as results from the first quarter of fiscal '21. When I'm done with my prepared comments, I'll answer questions received from shareholders. First, some highlights from 2021, and I'm very pleased with the strong results that we showed. Our recurring revenues grew by 10% to $3 billion. This strong performance contributed to an 8% growth in adjusted earnings per share. We generated record closed sales of $239 million, which provides us strong momentum for fiscal '21. In August, our Board approved a 6% increase in our annual dividend to $2.30 per share. This is the 14th consecutive year of a dividend increase, which is every year since we became a public company in 2007. In fiscal 2020, we also achieved our 3-year objectives for recurring revenue growth, margin expansion and adjusted EPS growth. We've generated total shareholder return of 76% over the 3-year period, resulting in performance in the top quartile companies in the S&P 500. We're right now in the process of setting new objectives that will take us forward to fiscal year 2023. And I look forward to sharing within you -- sharing them with you at our upcoming Investor Day on December 10, 2020. I want to also give you a brief summary of our first quarter fiscal '21 results. We continued the strong momentum from fiscal 2020 into the first quarter. Our performance in the face of the ongoing pandemic highlights the resilience of our recurring revenue business model and the power of the long-term trends propelling our results. Recurring revenues rose 8% to $671 million. The growth in recurring revenues and strong cost actions contributed to 44% growth in adjusted EPS for a first quarter record of $0.98. In summary, we're off to a good start. And as we noted on our first quarter earnings call on October 30, this positive start to the fiscal year gives us additional confidence in our full year guidance and enables us to increase our level of investment in our people, platforms and technology. All in all, we started '21 with real growth momentum. Now in my 11th full fiscal year at Broadridge, now my 2nd full year as CEO, I'm more excited than ever about our ability to create growing long-term and sustainable value for our clients, associates, shareholders. Before I turn it over to the Q&A portion, I want to thank our Board of Directors for their insights, their guidance and contributions, which have been essential for our success. I also want to thank our more than 12,000 fellow associates across the globe whose shared passion and dedication have driven Broadridge's success over the past years. Even in a normal year, it's their commitment and passion for serving our clients that has set us apart. Now in this unusual time, our associates are persevering through remote work, temperature checks, social distancing. They're balancing parent and family responsibilities. And through all of that, they're delivering world-class service for our clients. I also want to express my gratitude to you, our shareholders, for the confidence you've shown in me as your CEO. Our continued growth highlights the long-term trends driving our business and the strength of our recurring revenue business model. And I remain confident that the best is yet to come for Broadridge. And one final point. I want to remind all of you of our upcoming virtual Investor Day on December 10, when I'm looking forward to showcasing the depth of our management team, providing more insight about our growth strategy across governance, capital markets and wealth investment management and sharing our updated 3-year growth objectives. I'm going to now open the Q&A portion of our meeting. [Operator Instructions] If time doesn't allow or a follow-up is required, we'll respond to your questions within 24 hours. The response is available on our Investor Relations website, broadridge-ir.com. We're going to take the questions in the following order. First, we'll answer any questions that were submitted prior to the meeting, then we'll answer questions submitted online live during the meeting. Finally, we'll answer questions from the phone. After Q&A, Maria Allen, our Corporate Secretary, will report the meeting results. I'll begin with questions that were submitted to us before today's meeting. Maria will read the questions. Maria?

Tim, the first question is, I would like to know more about the company's position on the global pandemic and how it will affect Broadridge in the long term.

Well, thank you for the question. And there's no question that this pandemic has wreaked tremendous human and economic toll in our country and around the world. And I think we can't wish for it to be over soon enough. And your question about the long-term impact is an important one. So I'm glad that you asked. Broadly speaking, we're seeing that the trends that are driving our growth are being accelerated by the pandemic. The pressure on financial services firms to simplify their operations and reduce costs through mutualization has only grown. And our extra time at home has been a crash course in digital for all of us. So the need to adopt new technologies and to incorporate additional data only continues to grow. So this urgency around next-generation mutualization, resiliency and digital transformation is already starting to show up in our discussions with clients. Clients used to worry about losing a facility. Now they need to worry about losing the country or the globe. And the investment required to build that resiliency across their entire technology has faced significantly increasing logic for mutualized solutions. Digital transformation, next-generation technology are also significantly in increased demand. So as we move through fiscal '21, we are upping our investment in our people, platforms and technology to be able to further support our clients. And I'm very confident that these investments are going to leave Broadridge better positioned than ever to take advantage of the post-pandemic recovery for the long term. So while we're being very cautious about the uncertain outlook in the near term, I can say that the long-term growth opportunity for Broadridge has never been better. We look forward to sharing more details about these trends that I just mentioned when we host our Investor Day in December. Maria?

Tim, the next question also submitted before the meeting is, for Broadridge Solutions proxy vote, how do I get a copy of the proposal report for changes to political contributions?