Business Overview and History

Broadridge Financial Solutions, Inc. (BR) is a global financial technology leader, providing investor communications and technology-driven solutions to the financial services industry. With over 60 years of experience, Broadridge has established itself as a trusted partner, enabling its clients to navigate the evolving landscape of the financial markets and empower their digital transformation.

Broadridge's origins trace back to 1962 when it was founded as Automatic Data Processing (ADP) Brokerage Services Group. The company's initial focus was on providing proxy processing and other investor communication services to the financial services industry. In 2007, the company was spun off from ADP and became an independent public company, Broadridge Financial Solutions. This separation allowed Broadridge to focus solely on its core business and accelerate its growth as a leading provider of financial technology solutions.

Over the years, Broadridge has expanded its offerings and footprint, both organically and through strategic acquisitions, to become a comprehensive provider of mission-critical solutions for the financial services industry. The company successfully navigated challenges such as the 2008 financial crisis, which impacted many of its clients in the financial services industry. Broadridge emerged stronger from this period, continuing to expand its product and service offerings to meet the evolving needs of its clients.

A significant milestone in Broadridge's growth strategy was the 2021 acquisition of Itiviti Holding AB, a leading provider of trading and connectivity solutions for capital markets firms. This acquisition strengthened Broadridge's position in the global capital markets technology space and enabled the company to provide a more comprehensive suite of solutions to its clients.

Today, Broadridge operates in two reportable segments: Investor Communication Solutions (ICS) and Global Technology and Operations (GTO). The ICS segment provides governance and communications solutions, including the processing and distribution of proxy materials, regulatory reports, and customer communications. The GTO segment offers technology-driven solutions that streamline the front-to-back office operations of capital markets, wealth management, and investment management firms.

Broadridge is now a part of the S&P 500 Index and has a presence in over 100 countries, serving a diverse client base that includes banks, broker-dealers, asset managers, and public companies. The company's success can be attributed to its focus on innovation, its deep industry expertise, and its commitment to delivering high-quality products and services to its clients.

Financial Snapshot

Broadridge's financial performance has been consistently strong, showcasing its resilient business model and ability to navigate industry challenges. In the most recent fiscal year (2024), the company reported revenues of $6.51 billion, a 7.4% increase from the prior year. Net income for the same period stood at $698.1 million, with a net profit margin of 10.7%. The company's robust cash flow generation is evidenced by its annual free cash flow of $943.2 million, allowing it to maintain a healthy balance sheet and pursue strategic investments and shareholder-friendly initiatives.

In the most recent quarter, Broadridge reported revenue of $1.59 billion, representing a 13% year-over-year growth. This growth was driven by a 9% increase in recurring revenues and a new quarterly record for event-driven revenues. The increase in recurring revenues was attributed to 7 points of organic growth and 2 points from the SIS acquisition. Net income for the quarter was $142.4 million.

Key Financial Ratios

Broadridge's financial ratios paint a picture of a well-managed, financially stable company. As of the end of fiscal year 2024, the company had a current ratio of 1.35, indicating a strong ability to meet its short-term obligations. The debt-to-equity ratio stood at 1.64, suggesting a moderate level of leverage. Additionally, Broadridge's return on equity (ROE) was a healthy 34.2%, demonstrating its ability to generate solid returns for its shareholders.

Liquidity

Broadridge's strong liquidity position is reflected in its robust cash flow generation and healthy balance sheet. The company's free cash flow of $943.2 million provides ample financial flexibility to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders through dividends and share repurchases. With a current ratio of 1.35 and a quick ratio of 1.35, Broadridge demonstrates its ability to meet short-term obligations comfortably.

As of December 31, 2024, Broadridge had $289.9 million in cash and cash equivalents. The company also maintains a $1.5 billion five-year revolving credit facility, of which $1.2 billion was available as of the same date. This strong liquidity position provides Broadridge with significant financial flexibility to pursue growth opportunities and navigate potential economic uncertainties.

Segment Overview

Investor Communication Solutions (ICS) Segment: The ICS segment provides a wide range of governance and communications solutions. A significant portion of this segment's business involves the processing and distribution of proxy materials to investors in equity securities and mutual funds, as well as the facilitation of related vote processing. Broadridge's ProxyEdge is an innovative electronic proxy delivery and voting solution for institutional investors and financial advisors that helps ensure the voting participation of the largest shareholders of many companies.

The segment also offers distribution of regulatory reports, class action and corporate action/reorganization event information, and tax reporting solutions. For asset managers and retirement service providers, it provides data-driven solutions and an end-to-end platform for content management, composition, and distribution of regulatory, marketing, and transactional information.

Through its Retirement and Workplace business, Broadridge provides automated mutual fund and exchange-traded funds trade processing services. The segment also offers public corporations and mutual funds a full suite of solutions to manage their annual meeting process, including proxy materials distribution, virtual shareholder meeting services, and environmental, social, and governance solutions.

The ICS segment generates revenue from both recurring and event-driven activities, including fees for processing and distributing investor communications, vote processing and tabulation, and special events processing.

Global Technology and Operations (GTO) Segment: The GTO segment provides mission-critical infrastructure to the global financial markets as a leading software-as-a-service (SaaS) provider. It offers capital markets, wealth and investment management firms modern technology to enable growth, simplify their technology stacks, and mutualize costs. The segment's solutions automate the front-to-back transaction lifecycle of various financial instruments, from order capture and execution through trade confirmation, margin, cash management, clearing and settlement, and more.

The Wealth Management business within GTO provides solutions for advisors and investors and streamlines back and middle-office operations for broker-dealers. The Investment Management business offers portfolio and order management solutions for traditional and alternative asset managers.

Broadridge's capital markets technology and solutions deliver simplification and innovation across the trade lifecycle, from order initiation to settlement. Through Broadridge Trading and Connectivity Solutions, the company offers global front-office trade order and execution management systems and connectivity solutions.

The GTO segment generates recurring revenues primarily from fees for trade processing and related services, recognized over time as Broadridge satisfies its performance obligations by delivering services to clients.

Competitive Positioning and Growth Drivers

Broadridge's competitive advantage lies in its deep industry expertise, innovative solutions, and strong client relationships. The company's focus on digital transformation and technology-driven offerings has positioned it as a trusted partner for its clients, helping them adapt to the evolving financial landscape.

Key growth drivers for Broadridge include the continued rise in investor participation, the increasing demand for wealth management services, and the ongoing digitization of the capital markets. The company's investments in areas such as artificial intelligence, blockchain technology, and cloud-based solutions have enabled it to stay at the forefront of industry trends and deliver innovative solutions to its clients.

Risks and Challenges

While Broadridge has demonstrated resilience, the company is not without its risks and challenges. The financial services industry is subject to stringent regulations, which can create compliance hurdles and increase operating costs. Additionally, Broadridge's reliance on a relatively small number of large clients, as well as the potential for cybersecurity threats, pose risks that the company must actively manage.

Outlook and Guidance

Broadridge's management has provided a positive outlook for the company's future performance. For the current fiscal year (2025), the company expects to deliver recurring revenue growth of 6-8% and adjusted earnings per share growth of 8-12%. This guidance reflects the company's confidence in its ability to capitalize on the ongoing digital transformation in the financial services industry and continue its track record of consistent growth.

Specifically, Broadridge is reaffirming its guidance for fiscal year 2025, including:

• 6% to 8% recurring revenue growth (constant currency)
• 8% to 12% adjusted EPS growth
• Closed sales of $290 million to $330 million

For Q3 FY2025, Broadridge expects EPS growth to be in the mid to high single-digit range. The company anticipates changes in license revenue to impact the composition of GTO revenues, leading to low double-digit growth in capital markets and low single-digit organic growth in wealth management.

Broadridge expects strong cash flow conversion of 95% to 105% in fiscal 2025, allowing flexibility for share repurchases or tuck-in M&A. The company's key revenue growth drivers remain strong, with revenue from sales continuing to be the biggest driver and equity position growth now showing low double-digit growth.

Industry Trends

Broadridge operates in the financial technology industry, which has seen a compound annual growth rate (CAGR) of 8-10% over the past 5 years. This growth has been driven by the continued digital transformation of the financial services industry, a trend that Broadridge is well-positioned to capitalize on with its comprehensive suite of technology-driven solutions.

Conclusion

Broadridge Financial Solutions, with its strong market position, innovative solutions, and robust financial performance, is well-positioned to capitalize on the evolving needs of the financial services industry. The company's relentless focus on digital transformation, combined with its deep industry expertise and client-centric approach, make it a compelling investment opportunity for those seeking exposure to the fintech space. As Broadridge continues to shape the future of financial services, its long-term growth prospects remain promising, supported by strong recurring revenue growth, record event-driven revenues, and a clear strategic vision for the future.