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

Welcome to the 2021 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. I'd like to welcome you all to Broadridge's 2021 Annual Meeting. We are delighted that you can join us this morning and participate in this meeting. I'm Rich Daly, Executive Chairman of Broadridge. This is Broadridge's 13th 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 past year, Broadridge has enabled companies to conduct almost 2,400 annual meetings virtually, which has allowed more than 95,000 shareholders and guests to participate in annual meetings. I'd like to introduce our slate of 11 director nominees who are all in attendance at this meeting. Joining me on 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, Maura Markus; and the Chair of our Governance and Nominating Committee, Bob Duelks. The other 5 director nominees are joining the meeting by audio. They are Melvin Flowers, Brett Keller, Annette Nazareth, Tom Perna 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 Martin McElroy. Our Chief Legal Officer, Keir Gumbs and our independent inspector of election, Tom Tighe are also joining the meeting on the phone line. I'll now turn the meeting over to our Corporate Secretary, Maria Allen, to conduct the business aspects of the meeting.

Thank you, Rich. This meeting is held pursuant to a notice dated October 5, 2021. On or about October 5, each stockholder of record as of the close of business on September 23, 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. Tom Tighe has been appointed inspector of elections to count all votes and determine the results of the voting. I received Tom Tighe's written oath of office as inspector and he has presented me with evidence that notice of this meeting was properly given to all stockholders of record as of the close of business on the record date. Tom, have you determined whether a quorum is present at this meeting?

I have determined that there are stockholders represented at this meeting, in person or by proxy, holding common stock representing 90% of the outstanding shares at this meeting, which is sufficient for a quorum and for transacting the business of this meeting.

Thank you. Mr. Daly, I find that a quorum is present for the purpose of conducting business at this meeting. I've been informed that there are 51 attendees at this meeting. All holders of the company's common stock as of the close of business on the record date are entitled to vote online at this meeting on all business to come before the meeting. I now declare the polls for this meeting to be open. If there's any stockholder present who wishes to vote or wishes to change their vote, please do so now. Broadridge stockholders also have the ability to submit questions, either online or by phone by dialing 1 (877) 328-2502 and providing the control number that was included with your notice of this meeting. Rich Daly will now present the proposals.

Thank you. The items to be considered at this meeting are set forth in detail in the notice of the 2021 Annual Meeting of Stockholders and Proxy Statement of the company, each dated October 5, 2021, and mailed or made available to stockholders of the company. The first item of business on our agenda is the election of directors to serve until the next annual meeting of stockholders or until their respective successors shall have been elected and qualified. The Board has recommended the 11 nominees listed in our proxy materials for election. 2 nominations by stockholders submitted to the company -- I'm sorry, there were no valid nominations by stockholders submitted to the company prior to this meeting in accordance with the bylaws. Therefore, I declare the nominations closed. The second item of business is a nonbinding advisory vote on the compensation of our named executive officers. I want to remind you that this vote is advisory, so it will not be binding on us. That being said, we recognize that our stockholders have a fundamental interest in Broadridge's executive compensation practices. So our compensation committee will take into account results of this vote when considering future executive compensation decisions. The third item on our agenda is the ratification of the selection of Deloitte & Touche as the company's independent registered public accounting firm for the 2022 fiscal year. The Board recommends that stockholders vote for all of these items. Are there any questions at this time pertaining to these items? I'll briefly pause for any questions.

Seeing no questions, I'll proceed. The polls are about to close. So if you've not already done so, please cast your vote. After the votes have been cast and the polls closed, the inspector will announce the preliminary results. We will now pause briefly for the votes to be tabulated.

All valid votes received will be included in the final report. [Voting]

All ballots have been submitted, and I now announce that the polls for this meeting are closed. Inspector, will you please report the results of the vote.

On the motion for the election of directors, more than 94% of the votes cast at this meeting were cast in favor of the election of each of the director nominees. On the motion for approval, more than 92% of the votes cast at this meeting have approved Broadridge's executive compensation as disclosed in the proxy statement. On the motion for the ratification of the appointment of Deloitte & Touche as the company's independent registered public accounting firm for the 2022 fiscal year, more than 98% of the votes cast at this meeting were cast in favor of ratification.

Thank you, Tom. I declare that the proposed slate of directors has been duly elected. Our executive compensation has been approved by a nonbinding advisory vote. And the appointment of Deloitte & Touche as our independent registered public accounting firm has been duly ratified. I hereby direct the results of the voting to be incorporated into the minutes of this meeting. The business of this meeting is now complete, and I declare the meeting formally adjourned. The complete voting results will be contained in the Form 8-K that the company will file with the SEC within 4 business days following this meeting. And now I'll turn the meeting over to our Chief Executive Officer, Tim Gokey, for a business presentation and Q&A. Tim?

Maria, thank you, and good morning to everyone. I'm Tim Gokey, CEO of Broadridge. Welcome, as Rich said, to our 2021 Annual Shareholder Meeting. And it is our 13th meeting. It is virtual-only again. And as Rich mentioned, this virtual solution has supported almost 2,400 annual shareholder meetings this year, allowing 95,000 participants to be part of the annual meeting process across the country. We are really proud of the important role that we play in governance. And it's an area that is coming into sharper focus as new investors enter the market. And really with a new focus on ESG and how that is driving demand for engagement between investors and public companies. Now before I discuss our results, I want to thank our over 13,000 Broadridge associates around the world who are delivering on our mission in a world that is still challenged by COVID-19. Their resilience has allowed us to uphold our high standards for client service while continuing to execute our longer-term growth strategy. As we move into the next phase of recovery, we'll continue to prioritize their health and safety, enabling them to continue the outstanding service to our clients, which in turn will lead to strong returns for our shareholders. Let me start by discussing our fiscal '21 results, followed by first quarter '22 results, and then we'll take questions from our stockholders. Less than a year ago -- it seems incredible, it's less than a year ago, but in December 2020, we held an Investor Day. And during that day, we set out new 3-year objectives and we described our strategy for how Broadridge will continue to scale as a global fintech leader. The objectives that we set out included: 7% to 9% recurring revenue growth, 50 basis points of annual adjusted operating income margin expansion, and 8% to 12% adjusted earnings per share growth. When we measure our fiscal '21 results against those objectives, you can see that we're off to a great start. Recurring revenues grew by 10% to $3.2 billion. Total revenues grew 10% to $5 billion and adjusted EPS grew a robust 13% to $5.66. In the fourth quarter of fiscal '21, we acquired Itiviti. This is our largest ever acquisition and is already having a positive impact. And in August, our Board approved an 11% increase in our annual dividend to $2.56 per share. Broadridge has increased dividend every year since becoming a public company in 2007, and this year's increase marks our 9th double-digit increase over the past 10 years. Finally, I encourage you to read our 2021 sustainability report, which we released in October. You'll learn about how we are working to build the most engaging workplace for the most talented associates in our industry. We believe that the efforts that we're making to keep our clients' data secure and our success in reducing greenhouse gas emissions for ourselves and importantly, for our clients, along with a lot of other very exciting things I might say. On November 23 -- actually November 3, we released our first quarter fiscal '22 results. The results were strong, and they showed continued positive momentum. Recurring revenue grew 16%. Adjusted earnings per share grew 9% in what is historically a seasonally smaller quarter for Broadridge. These strong results were powered in part by our governance franchise, which we expect to continue growing in size and importance as the democratization of investing propels market participation to record levels. Meanwhile, our activity integration is going well and was a strong contributor to our first quarter results. We're excited about the opportunities this acquisition is unlocking across asset classes, geographies and fund to back-office connectivity. With these strong results, we reaffirmed our fiscal '22 guidance during our earnings call. That calls for 12% to 15% recurring revenue growth. Adjusted EPS growth of 11% to 15% and cost sales between $240 million to $280 million. With that guidance, we're in a strong position to deliver at the high end of the 3-year objectives through June '23 that we outlined in last December. As you can see, we're delivering strong results. driven by continued execution and powerful underlying growth trends. We're advancing our long-term strategy, and we're committed to making the investments that will create additional opportunities. And we're doing it the right way by also driving engagement by our associates by making a positive impact on our communities, by reducing our environmental footprint and improving the financial lives of millions of investors. I'm confident that Broadridge is on track to achieve the higher end of our 3-year growth objectives, and we're well positioned to drive sustainable growth for the long term. Before I close, let me make just a few final acknowledgments. To Alan Weber, who retired from the Board this year. I want to thank him personally for his exemplary and extended service. Alan, I wish you the best. To our new directors, Melvin Flowers and Annette Nazareth, welcome to Broadridge. We're thrilled you joined Broadridge's Board and we look forward to your contributions. And to our full Board of Directors, thank you for your insights, guidance, valuable contributions, which have been essential to our success over the years. I also want to express my gratitude to you, our shareholders, for the confidence you have shown in me as your CEO. We're on a strong path for scaling a global fintech leader. And I remain confident that the best is yet to come for Broadridge. I'm now going to 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, with responses available on our Investor Relations website, www.broadridge-ir.com.

I take questions in the following order. First, I'm going to answer questions that were submitted prior to the meeting. And I'll answer questions that are submitted online during the meeting. And finally, any questions from the phone. Let me start with questions that were submitted to us before the meeting. Maria?

Tim, the first question is, will you please implement a policy to not fund insurrections?

Do not insurrections, Maria?

Correct.

Okay. Well, thanks for this question. And many are concerned about how public companies might take shareholder money to try to influence the election. So it's a good question. And I want to say that we are really proud of the commitment that we have at Broadridge to doing the right thing as a company. And that includes how we engage in the legislative and regulatory process. As many of you may recall, we adopted a political contributions policy last year. That policy provides that no company resources may be contributed to any potential political candidate, political committee, political party, state [ ballet measure ] committee or any other organization for the purpose of attempting to influence elections or valid measures. And it is our policy not to make contributions to Internal Revenue Code section 501(c)(4) social well for organizations, which it sounds like a mouthful, but those are a way that some people use to sort of go around the policy they might otherwise have We don't do that. And we only have voluntary contributions from directors, executives and other folks made to our [indiscernible] committee. We're committed to transparency in all of our activities. We've publicly disclosed our [indiscernible] policy. We publicly disclosed the names of the trade associations to which we've made annual payments that exceed $50,000, and we publicly disclose the aggregate amount made to all trade associations. So I see we now -- other -- I think that's the last one we had submitted ahead of time. Maria, were there any questions submitted online during the meeting?

Yes, Tim, the VSM team. So far, there's 1 question they've notified me. The first question is what is Broadridge doing to help facilitate the ease of attendance at the annual meetings of companies that choose to hold their virtual shareholder meetings on platforms provided by your competitors? Do you like me to repeat the question, Tim?

Sure.

What is Broadridge doing to help facilitate the ease of attendance at the annual meetings of companies that choose to hold their virtual shareholder meetings on platforms provided by your competitors?

Great. Thank you. That's a very good question. And what's behind the question is Broadridge has the access to all of the beneficial shareholders who hold accounts say with a brokerage firm. And if a company chooses to have an annual meeting like this with -- through someone other than Broadridge, they've been concerned whether they would have seamless access to all of those beneficial shareholders, which is about 80% -- more than 80% of the votes. So to alleviate this, we worked with the industry to create an API for other platforms to be able to link in on the day. And be able to ratify or validate people online just that they're using a Broadridge platform. And that's a really important technological innovation. We put that in place last season. It was a modest uptake of it last year. We're seeing a lot higher uptake of it this year, and we think that will be a really good solution for the industry.

I'm checking with the VSM team. Tim, there are no further online questions. We will now take questions from the phone line. Operator?

[Operator Instructions] As there are no questions, this concludes our phone question-and-answer session. I would like to turn the meeting back over to Tim Gokey.

Great. I want to thank everyone again for coming to the meeting. We really appreciate your participation in this really important process for our company and for all public companies. It's a real opportunity for people to participate and to make a difference. And with that, I'm going to turn things back to our Chairman to conclude the meeting.

Thanks, Tim. I too want to sincerely thank you all for attending this morning, and thank you for your interest in Broadridge. Please choose to have a great day.