Broadridge Financial Solutions Inc 2026 Q4 Earnings Call

Good morning, everybody, welcome to Broadridge's fourth quarter and fiscal year 2026 earnings call. Our earnings release, the slides that accompany this call may be found on the investor relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO, our CFO, Ash Ghei. Before I turn the call over to Tim, a few standard reminders. One, we will be making forward-looking statements on today's call regarding Broadridge that involve risks. A summary of these risks can be found on the second page of the slides in a more complete description on our annual report on Form 10-K, which will be filed later today. Two, we will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results.

An explanation of these non-GAAP measures, reconciliations to the comparable GAAP measures can be found in the earnings release, presentation. Let me now turn the call over to Tim Gokey.

Tim? Thank you, Edings, good morning.

I am excited to join you this morning to talk about our strong financial results. I am even more excited to talk about the progress that we are making, building the infrastructure for the financial markets of tomorrow. Markets that will be digitized, agentic, increasingly tokenized. The real story of fiscal 2026 is that Broadridge is delivering today, building for tomorrow. Now turning to the headlines. First, Broadridge delivered strong financial results. Fiscal year 2026 revenue rose 8% constant currency, adjusted EPS rose 12%, thanks to record fourth quarter, closed sales rose to $305 million. Second, Broadridge is executing across governance, capital markets, wealth, while building the infrastructure for the markets of tomorrow by driving digital communications, scaling agentic AI, accelerating tokenized assets.

Third, as I just noted, we're building the infrastructure for tokenized securities, and we expect the evolution to tokenized markets will be a significant tailwind for Broadridge. Fourth, we returned over $1 billion to our shareholders in fiscal 2027 in the form of our dividend and a record $600 million in buybacks. Last night, our board approved a 12% increase in our dividend. We've now raised our annual dividend in each of the 20 years that we've been a public company, underscoring our commitment to creating long-term shareholder value. Fifth and last, as we look ahead to fiscal 2027, we expect to drive another year of steady growth while continuing to fund our digital agentic platform and tokenization investments. We're guiding to 6%-8% recurring revenue growth and 8%-12% adjusted EPS growth.

Let's dig into the execution driving those results, starting on slide four. In governance, we're driving the democratization and digitization of investing. Fiscal 2026 recurring revenue rose 8%, driven by new sales and double-digit equity position growth. Market innovation continues to bring in new investors and drive portfolio diversification. Total equity record growth for the year was 16%, powered by the continued popularity of managed accounts. Equity revenue position growth was 12%. Funds are also benefiting from increased innovation in both passive and active strategies, driving fund position growth of 6%. For shareholder engagement, 2026 was also a year in which we moved from concept to reality. We completed a successful first proxy season for our AI-powered custom policy engine, which is giving asset managers a modern and independent voting capability and powering proxy votes across more than $800 billion in U.S. AUM. In fiscal 2027, we'll expand the scope of the product to include global equities.

We're re-engineering our ProxyEdge institutional voting workflow to make institutional voting even more intuitive. We're also enabling passive funds to extend governance decisions to their underlying shareholders with our passive voting solution with more than 900 funds and $8 trillion in AUM using our Voting Choice capability, up from 600 funds and $4 trillion last year. We're also completing the first full year of our standing voting instruction solutions, or SVI. With a year of proven success improving retail voting participation, we now have six clients on the platform. As U.S. companies become global bellwethers for innovation, we're seeing growing interest from global investors and global retail platforms in voting capabilities for U.S. equities.

The ability to offer proxy voting solutions is seen as a differentiator, especially for new entrants, and that translated into fiscal 2026 sales in both Europe and Japan. Each of these efforts I've discussed this morning extends our core regulatory communications business. By combining our deep voting and engagement expertise, our scaled technology and agentic AI, we've been able to accelerate our time to market and target new revenue sources. Also extending our governance capabilities to tokenized securities, which I'll address shortly. Finally, our print-to-digital strategy is driving digitization. Digitization rates in our proxy communications are now nearing 95%, with 80% for funds. In Customer Communications, digital revenues grew more than 10% for the fourth consecutive year. Our Wealth InFocus solution continues to gain momentum, and we now have six leading U.S. wealth managers either on or in the process of onboarding to the platform.

On the topic of digitization, the SEC has issued its much-anticipated E-Delivery rule proposal, which will allow institutions to shift the default for client communications from physical mail to digital. We are pleased with the proposal, which is an exciting step forward for investors, public companies, funds, and brokers. As with any regulatory proposal, it will take time to be fully implemented. Broadridge is well-positioned to help our clients through this change, and we expect it to be an important catalyst driving demand for more engaging digital-first communications, like those enabled by our Wealth InFocus platform. Let's move next to Capital Markets on slide five. In Capital Markets, Broadridge is helping our clients simplify and innovate their trading operations. Fiscal 2026 revenues rose 5% to $1.2 billion, driven by growth across both front and back office solutions.

We closed the acquisition of CQG in early May to strengthen our futures and options capabilities, and it contributed to a nice competitive win with a significant trading institution in the fourth quarter. Our business is benefiting from the ongoing push to extended-hours trading that's driving demand for our real-time post-trade solutions and our managed services. We're also tokenizing collateral management. DLR volume rose to $360 billion in June, up 3x from May of 2025. We're currently onboarding multiple Tier 1 banks to our platform, and we expect 50% growth by December, with further scaling as the fiscal year progresses. Last, we're extending our agentic capabilities across our managed services offering. Our agents analyze real-time data and operational context, identify exceptions, and initiate resolution, driving a step-change function in productivity.

In May, we announced the rollout of our agentic AI partnership model, offering up to 30% day one operational cost reduction, with additional savings over time. That's AI transformation in action. Turning to wealth management, where we're modernizing the industry, we had another strong year in fiscal 2026, with recurring revenue growth of 10%. Thanks to the SIS acquisition, we're seeing new momentum in the Canadian market. In the spring, we announced the onboarding of Aviso as our latest platform client, and we recorded another significant win with a leading Canadian bank. We're also accelerating the adoption of digital assets with the launch of our next-generation digital asset capability, which unifies traditional and digital assets within a single operating model.

In the U.S., we continue to make strong progress in onboarding the wealth platform sales closed last year, while on the component side, we're seeing strong demand for our corporate actions and managed services offerings. Across all three franchises, our AI initiatives are delivering results. Our new AI products, including our custom policy voting engine and Global Demand Model in ICS, and our operations solutions, BondGPT, and trading algorithms in GTO, are gaining traction. We're also deploying AI to accelerate product and software development and reduce the time and cost to onboard new clients. Finally, we're beginning to see real AI-driven productivity gains, including $25 million in fiscal 2027, and we're just getting started. I'll close my operating view with sales. After a slow start to the year, we accelerated nicely with a record $158 million of closed sales in Q4. Three things stood out for me.

First, we exceeded the expectations we had at the beginning of the quarter because we were able to drive larger deals to closing. These are the types of engagements that have been slower to move through the pipeline through much of the year. Second, our focus on closing did not come at the expense of sales origination. Our pipeline at year-end is up significantly from a year ago, highlighting growing demand for our next-generation solutions. Third, a growing share of our sales is driven by platform and innovation. Our platform-enabled AI and next-generation products, including shareholder engagement, DLR, and digital communications, rose 60%, and they accounted for nearly 40% of our closed sales. Before I sum up, I want to touch on a topic that's come up regularly in our conversations with you. Tokenization on slide seven. Tokenization has the potential to reshape how assets are issued, traded, financed, and serviced, and we expect it to be a significant tailwind for Broadridge.