• Recurring Revenue Growth: 9% increase, driven by 7% organic growth and 2% from SIS acquisition.
• Adjusted EPS: Grew 70% to $1.56.
• ICS Recurring Revenues: Increased 9% in constant currency.
• Equity Position Growth: 11% in the second quarter.
• Fund Position Growth: Stable at 5% in the second quarter.
• Capital Markets Recurring Revenue Growth: 6% increase.
• Wealth and Investment Management Revenue Growth: 12% increase, largely driven by SIS acquisition.
• Event-Driven Revenues: Reached a new quarterly record of $125 million.
• Adjusted Operating Income Margin: Increased 420 basis points to 16.6%.
• Free Cash Flow: $214 million in Q2, with a year-to-date total of $56 million.
• Closed Sales: $46 million in Q2, with year-to-date sales of $103 million.
• Fiscal '25 Guidance: Reaffirmed 6% to 8% recurring revenue growth, 8% to 12% adjusted EPS growth, and closed sales of $290 million to $330 million.

• Warning! GuruFocus has detected 6 Warning Sign with BR.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Broadridge Financial Solutions Inc (NYSE:BR) delivered strong second quarter results with recurring revenues rising 9%, driven by organic growth and the SIS acquisition.
• Adjusted EPS grew significantly by 70% to $1.56, showcasing strong financial performance.
• The company set a new quarterly record for event-driven revenues, highlighting its ability to capitalize on market opportunities.
• Broadridge is well-positioned for long-term growth, driven by its strategy to democratize and digitize investing, simplify capital markets, and modernize wealth management.
• The SIS acquisition is extending Broadridge's Canadian wealth business, creating opportunities for upselling broader solutions.

Negative Points

• Event-driven revenues, while strong in the first half, are expected to be lower in the second half of the year.
• Fund position growth remains at the low end of historic trends, which could impact future revenue growth.
• The strengthening of the dollar is modestly impacting non-US earnings, posing a potential headwind.
• Closed sales were modestly lower in the second quarter compared to the previous year, with some large deals slipping into the third quarter.
• There is uncertainty regarding the impact of potential deregulation and changes in the regulatory environment under the new administration.

Q & A Highlights

Q: Given the strong year-to-date performance, why hasn't Broadridge adjusted its guidance? A: Ashima Ghei, CFO, explained that while the company is pleased with its performance, they are tracking in line with their guidance for 6% to 8% recurring revenue growth and 8% to 12% earnings growth. Factors such as strong equity position growth and event-driven revenues are balanced by expected lower event-driven revenues in the second half, modest impacts from a strengthening dollar, and continued investments in the business.

Q: Are you seeing increased optimism in the financial services industry post-election, and how does it affect your sales outlook? A: CEO Tim Gokey noted that while there is increased optimism, it is too early to see a significant impact on sales due to long sales cycles. However, the company has a record pipeline, particularly in areas where they have been investing, such as omnichannel communications, data analytics, and wealth management solutions.

Q: Can you highlight areas where Broadridge is deploying incremental investment dollars from event-driven upside? A: Tim Gokey mentioned investments in digital and omnichannel communications, data and analytics, AI, front and back-office simplification, and wealth management, particularly in Canada following the SIS acquisition. The company is also focusing on resiliency and cybersecurity.

Q: How is the SIS acquisition performing, and what are the learnings post-close? A: Tim Gokey expressed satisfaction with the acquisition, noting positive client discussions, integration of SIS associates, and progress on technology plans. The acquisition aligns with Broadridge's strategy to modernize wealth management and is expected to perform well in Canada.

Q: How is Broadridge approaching monetization of AI-related product improvements? A: Tim Gokey explained that AI is being integrated into existing products, with new AI-enabled products like BondGPT and OpsGPT already generating revenue. While AI-related revenue is not yet material, it is expected to grow over time. The company is also focusing on productivity improvements and maintaining strong governance around AI use.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.