BR - NYSE

Good morning, and welcome to the Broadridge Financial Solutions First Quarter and Fiscal Year 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Edings Thibault, Head of Investor Relations. Please go ahead.

Thank you, Kate, and good morning, everybody, and welcome to Broadridge's first quarter fiscal year 2024 earnings call. Our earnings release and 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; and our CFO, Edmund Reese. 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 and a more complete description on our annual report on Form 10-K. Two, we'll 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 and reconciliations to the comparable GAAP measures can be found in the earnings release and presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings, and good morning. I'm pleased to be here to discuss our strong start to fiscal 2024. Clearly, the economy and our world remain in a volatile and difficult place. Despite the uncertain economic environment, our business continued to perform well in the first quarter, which speaks to the long-term trends and needs driving our growth as well as the strength of our business model and the execution of our team. I'll start with the headlines. First, Broadridge reported strong financial results. Recurring revenue grew 8%, all organic, with strong growth across governance, capital markets and wealth. Adjusted EPS rose 30% driven by strong recurring revenue growth, timing of event-driven fees and continued expense discipline. After a slower finish to last fiscal year, closed sales rose $19 million to a first quarter record of $48 million. Second, while markets have remained uneven. Continued growth in investor participation drove equity and fund position growth of 8% and 3%, respectively. Third, we continue to execute our strategy to enable our clients to democratize investing, simplify and innovate trading and modernize wealth management. That execution is driving our results in the form of strong sales in our Government Solutions and strong performance of BTCS, and a growing pipeline in our Wealth Management business among many examples. Fourth, our commitment to balance capital allocation has always been a key part of our value creation strategy. In recent years, we've invested heavily to build out our wealth and capital markets platform capabilities. That investment is moderating. And in fiscal 2023, we repaid a portion of the debt from our BTCS acquisition and ended the year at our target leverage. Now we're returning to our more historical mix of investment and capital allocation. Type-4 investments declined significantly from last year's level, and we repurchased $150 million of our shares in Q1, our first share repurchase since fiscal 2020. Finally, with a strong start to the year, we are reaffirming our full year fiscal 2024 guidance. We expect recurring revenue growth of 6% to 9%, continued margin expansion, and another year of 8% to 12% adjusted EPS growth and closed sales of $280 million to $320 million. Those are the headlines for the quarter. Now let's turn to Slide 4 to review how we drove these strong results, starting with our governance franchise. Our ICS recurring revenue grew 6%, driven by a combination of revenue from sales, increased investor participation and higher interest income. Looking across our product lines, solid growth in our regulatory solutions was complemented by strong results in data-driven fund and issuer solutions. In Customer Communications, double-digit growth in our digital communications revenues more than offset a temporary slowing in print growth. The biggest driver of our growth remained revenue from new sales as we develop new solutions like our digital products and enhance our existing products. We're winning with both new clients and expanding our relationships with existing clients. Increasing investor participation also remains a positive driver for our regulatory business despite headwinds from a choppy market and rising interest rates. In what is the smallest quarter of the year, equity record growth remained strong at 8%. Growth within managed accounts remained in the mid-teens, more than offsetting low single-digit growth in self-directed accounts. Fund and ETF position growth was 3%, the underlying trends remain solid with double-digit growth in passive fund positions, offsetting weaker trends in actively managed vehicles. Our forward testing continues to indicate a mid to high single-digit outlook for equity positions and mid single-digit growth for fund positions. Equity driven activity also picked up in the quarter, event-driven activity also picked up in the quarter. I'm especially proud of the work done by our issuer business as part of the recent large cap spin-off. Not only did we seamlessly process critical communications for more than five million beneficial and employee shareholders. We also provided the digital composition and print work for the required filings. It's a great example how Broadridge can bring the full power of this network together to help public companies execute critical transactions. We also appointed new leadership for our ICS business, elevating Doug DeSchutter and Mike Tae to the role of co-presidents, as part of a long-planned transition. Mike and Doug are proven leaders, and they bring a long track record of execution to their new roles. Our governance business is in strong hands. Turning to capital markets. Our sell-side clients are seeking to expand their agency and principal trading capabilities and they're turning to Broadridge for our help. Capital Markets revenues rose 9% to $249 million, driven by strong growth in BTCS, and higher trading volumes. We also help our clients simplify their back-office operations. And during the quarter, we completed the rollout of our global post-trade platform for a large global bank. Step by step, we've worked with that client over the past few years to transition away from seven different disparate platforms covering 75 separate markets around the world, each of its own operational support and settlement structure, into a single unified Broadridge platform. This is a strong example of how we are helping our clients simplify their operations, reduce expenses and optimize capital utilization by modernizing their infrastructure. Wealth Management revenues grew 14% to $154 million. As we highlighted on our last call, we began recognizing revenue from UBS at the beginning of the first quarter. For some time, we've been discussing our move to a component-based approach, which we are calling transformation on your terms. I'm pleased that we are seeing success with this approach. Our pipeline continues to grow, and we have now sold one or more components to seven additional clients beyond UBS and RBC. These component sales give us confidence in our progress and the opportunity to expand these clients over time. Finally, we reported strong closed sales in the first quarter, driven by a combination of underlying demand and sales that moved from fiscal 2023. I was especially pleased to see sales growth across all of our franchise, including higher wealth sales and strong growth in BTCS. In an uncertain market, clients remain willing to invest in new capabilities, especially those that can deliver near-term benefits or to enhance the go-to-market strategies, including governance tools, enhance trading capabilities and adviser productivity tools. As a result, while time to close is sometimes longer, our conversations with clients remain strong, and our pipeline continues to grow. Let's move to Slide 5 for some closing thoughts on the quarter. First, Broadridge is off to a strong start to fiscal 2024. We reported strong first quarter results, including 8% recurring revenue growth and 30% adjusted EPS growth. We're executing against our strategy to enable the democratization of investing, simplify and innovate trading and modernize wealth management. Second, our growth is being driven by long-term trends and strong execution, continue to benefit from increasing investor participation and clients investing in new regulatory solutions, faster and more efficient trading and the modernization of wealth management. We have invested to ensure that we can help our clients benefit from these trends. That combination of long-term drivers matched with a clear investment and growth strategy is driving real value for clients and strong results for our shareholders. Third, we remain committed to balanced capital allocation, with our core priorities of retaining our investment-grade credit rating, funding, internal investment, growing our dividend, in line with earnings, completing tuck-in M&A and returning excess capital to shareholders. With our wealth platform investment now complete and target leverage achieved, we are confident that we will be able to return additional capital to shareholders going forward, and return to mid to high-teens ROIC. The $150 million share buyback we completed in the first quarter highlights that confidence. Fourth and last, we are reaffirming our guidance for fiscal 2024, and we remain well positioned for long-term growth. Our business has a long track record of delivering consistent top and bottom line growth and strong shareholder returns. Today, we are better positioned than ever to continue delivering even more value to our clients, and we're looking forward to sharing a newer set of three-year objectives at our upcoming Investor Day this December, in New York. Normally, I close my remarks with a thank you to Broadridge associates around the world. It's an acknowledgment of their work and focus on driving positive client outcomes. But today, I first want to thank and remember one associate in particular. Bob Schifellite passed away in September after a brief illness, while in the process of a long-planned transition away from his role, as President of our ICS business. He joined our governance business almost 40 years ago, and he was a principal architect in building the strong governance franchise, we know today. He was a passionate advocate for our clients, a champion of our culture, and most of all, a good friend and mentor to me and so many others at Broadridge. So I want to thank and remember, Bob, for his work in building our company. And I want to thank all of our associates for the work they do every day to serve our clients drive the transformation of our industry and enable better financial lives for millions. Edmund, over to you.

Thank you, Tim. And thank you, in particular, for those comments on Bob. There is no doubt that he will be missed. Good morning, everyone. I’m really pleased to be here to discuss the results from another strong quarter and a strong start to fiscal 2024. Before reviewing this quarter’s results, let me share a few key points. First, Broadridge delivered strong top line growth, led by strong recurring revenue in line with our expectations and higher event driven revenue. Second, and as a result, we expect to generate approximately 25% of adjusted EPS in the first half of fiscal 2024. Third, we are reaffirming our fiscal 2024 guidance. And finally, we resumed share repurchases in Q1 as we are confident in our ability to drive 100% free cash flow conversion and return more capital to shareholders. As you can see from the financial summary on Slide 6, recurring revenues rose to $871 million, up 8% on a constant currency basis, all organic. Adjusted operating income increased 33% and AOI margin expanded 220 basis points to 13.9%. Adjusted EPS was up 30% to $1.09. And I’ll remind you that while higher interest expense partially offsets operating income growth, the interest rate impact at the Broadridge level is fully offset by higher float income in our ICS segment. Continuing with the results. We delivered closed sales of $48 million, up $19 million over Q1 2023. And finally, I will note again that we repurchased $150 million of Broadridge shares as part of our balanced capital allocation model. Let’s get into the details of these results, starting with recurring revenue on Slide 7. Recurring revenues grew 8% to $871 million in Q1 2024 and was at the higher end of our full year guidance range of 6% to 9%. Our recurring revenue growth was driven by a combination of converting our backlog to revenue and double digit trade volume growth. Let’s turn now to Slide 8 to look at the growth across our ICS and GTO segments. We continued to see growth in both ICS and GTO. ICS recurring revenue grew 6% to $469 million. Regulatory revenue grew 5% and was led by fund and equity position growth. More importantly, position growth remains in line with our expectations, as I’ll detail in a moment. Data-driven fund solutions revenue increased by 9%, primarily due to higher float revenue in our mutual fund trade processing unit, which we have rebranded to be Broadridge Retirement and Workplace. Issuer revenue was up 19%, driven by growth in our registered shareholder solutions and customer communications recurring revenue was up 2%, propelled by continued double-digit growth in our higher margin digital business, which more than offset lower growth in our lower margin print revenues. And while we do expect print volumes to pick up over the balance of fiscal 2024, we continue to expect print revenues to decline over time and be replaced with higher margin digital revenue. As a result, over the long-term, we expect our customer communications business to have low-single-digit top line growth with expanding margins and continued low-double-digit earnings growth as it execute on its print to digital strategy. Turning to GTO. Recurring revenues grew 11% to $402 million. Capital markets revenue increased 9%, led by continued strong performance in BTCS and elevated equity and fixed income trading volume growth. Wealth and investment management revenue grew 14%, powered by the onset of revenue recognition related to the UBS contract, partially offset by the successful transition of E-Trade to the Morgan Stanley platform, which occurred at the beginning of September. Looking ahead, we continue to have high confidence in full year GTO growth being in line with our historical 5% to 7% growth objective. Now let’s turn to Slide 9 for a closer look at volume trends. As you can see by our results, investor participation in financial markets has continued to increase despite the market volatility. Equity position growth was 8%, driven by continued double digit growth in managed accounts. Our testing of position growth continues to prove reliable as Q1 was in line with our expectations. We have now extended our testing into Q2 and Q3, and those results support our outlook for mid to high-single-digit growth for the full year. Mutual fund position growth moderated from Q4 2023, but grew 3%, driven by strong growth in passive funds. Based on our testing, we continue to expect mid-single-digit growth for the full year. Turning now to trade volumes on the bottom of the slide. Trade volumes rose 15% on a blended basis, led by double-digit volume growth in both equities and fixed income, which benefited our capital markets business. Let’s now move to Slide 10 for the drivers of recurring revenue growth. Recurring revenue growth of 8% was all organic and grew above our 5% to 7% growth objective for a six consecutive quarter. Revenue from net new business contributed 5 points of growth. Internal growth, primarily trading volumes, expanding client relationships and float income contributed 3 points. Foreign exchange had a non-material 15 basis point positive impact on recurring revenue growth. And based on current rates, we expect a similar benefit in full year recurring revenue growth relative to fiscal 2023. I’ll finish the discussion on revenue on Slide 11. Total revenue grew 12% to $1.4 billion, of which recurring revenue was the largest contributor with 5 points of growth. Event driven revenue was $87 million and added 2 points to growth. As expected, event driven revenue increased sequentially and was above our seven year average. Event driven activity in the quarter was particularly strong and benefited from the timing of mutual fund proxy activity and significant corporate actions. We continue to expect more normalized event driven revenue for the remainder of the year and for the full year to be $230 million, $250 million in line with recent years. Low to no margin distribution revenues contributed 5 points to total revenue growth. Distribution revenue was elevated and reached 14%, with half of that growth coming from postal rate increases, which have a dilutive impact on our adjusted operating income margin. We continue to expect distribution revenue to grow in the high-single to low-double-digit range, driven by further postal rate increases. Turning now to margins on Slide 12. Adjusted operating income margin was 13.9%, a 220 basis point improvement over the prior year period powered by a combination of operating leverage on our higher recurring and event driven revenue, higher float income and continued discipline expense management. Excluding the net impact of higher distribution revenue and higher float income, which was accretive to margins in Q1, we delivered over 100 basis points of margin expansion after absorbing the amortization from our wealth platform. This performance gives us confidence in our ability to both fund long-term growth investments and still meet our earnings growth objectives. We continue to expect adjusted operating income margin to increase year-over-year to approximately 20% as we overcome the dilutive impact of higher distribution revenue. Let’s move ahead to closed sales on Slide 13. Closed sales were $48 million, $19 million higher than Q1 2023. We were encouraged by our strong start to the year with higher sales across all three of our franchises. We saw strong BTCS sales in GTO and strong customer communications and regulatory sales in ICS. As Tim noted, our pipeline remains strong as we continue to see strong interest from clients in our technology solutions. I’ll turn now to cash flow on Slide 14. I’ll start with a reminder that Broadridge’s cash flow generation is typically negative in the fiscal first quarter and strengthens throughout the year. Q1 2024 free cash flow was negative $76 million, a $142 million better than last year, driven by a reduction in client platform spend, which I’ll discuss in a moment. Free cash flow conversion, calculated as trailing 12 month free cash flow over adjusted net earnings, was 103% in Q1 2024. This is consistent with our expectations of free cash flow conversion of approximately 100% for full year 2024. On Slide 15, you’ll see that we remain committed to a balanced capital allocation policy that prioritizes our investment grade credit rating, internal investment, a strong and growing dividend and strategic tuck-in M&A that meets our financial criteria with excess capital being returned to shareholders through share repurchases. Our total capital investment for Q1 2024 was $34 million, including platform investment of $20 million, down significantly from the prior year’s $163 million. We returned $86 million to shareholders through the dividend, and with no M&A activity in the quarter. We returned an additional $150 million to shareholders through share repurchases, our first share repurchase activity since fiscal year 2020. Turning the Guidance on Page 16. As I said in the beginning of my remarks, the strong start to fiscal 2024 gives us the confidence to reaffirm our full year guidance on all of our key financial metrics. We continue to expect 6% to 9% recurring revenue growth, constant currency, adjusted operating income margin of 20%, adjusted EPS growth of 8% to 12%, and closed sales of between $280 million to $320 million. Additionally, we expect approximately 75% of our earnings to be generated in the second half of the year with 25% in the first half in line with our performance over the last 10 years. Finally, let me summarize my key messages. Broadridge delivered strong Q1 financial results. The demand and secular trends driving our growth remain strong, and our testing is showing continued equity and fund position growth into the second half of the fiscal year. We expect free cash flow conversion of approximately 100% in fiscal 2024, allowing us to invest for growth and return capital to shareholders in line with our balanced capital allocation model. We are reaffirming our fiscal year 2024 guidance, highlighting the strength of our business and financial model. And with that, let’s take your questions. Operator, back to you.

[Operator Instructions] The first question is from David Togut of Evercore ISI. Please go ahead.

Thank you. Good morning. Good to see the strong start to fiscal 2024. Looks like you’re running at about 3x the EPS growth targeted for the year as a whole, 30% versus 8% to 12%. Granted, 1Q is your smallest quarter of the year, and fourth quarter is the most important. Can you unpack the drivers of outperformance between recurring elements, which seem to be expense discipline, recurring revenue growth and some that are non-recurring, like event driven fees and obviously E-Trade was on your system perhaps a little longer than anticipated. But it looks like you’re on track to outperform versus your annual guide. What’s keeping you a little more conservative?

David, good morning to you. Thanks for joining. You asked the question and answered it within your own question. You did a very good job of that. And you said it exactly. I’ll start with one of the points you made, that Q1 is really a small quarter for us. And you know well that our focus is on driving medium to long-term growth and in the short-term meeting our commitments. In the short-term we’re focused on annual growth, and we run the company as an annual growth company. And over the last 10 years, you’ve seen, as I said in my remarks that roughly about 25% of our earnings happened in the first half of the year that’s given the strong proxy season in the back half of the year. And I think 2024 will be no different. And to the question that you ask, it is some of the non-recurring items that’s driving that type of performance. Specifically, in Q2, you’ll see more normalized event driven revenue as we talked about. We said in Q4 that we expected some of the pent-up demand from 2023 coming into 2024, and that’s exactly what we saw. It will be more normalized as we go through the rest of the year. You’ll see the full impact another non-recurring item of converting E-Trade over to the Morgan Stanley platform. And within your question you made the final point that I think is important to point out here is that the more recurring drivers of growth are stable, both for this year and both for the long-term. And I’ll call those out as converting our backlog to revenue. That’s very stable. That drove, as you saw in my remarks, over 5 points of growth here. The position growth and our testing for that remains in line with our expectations both for equities and funds. And to your – another point you made the continued discipline on expense management to be able to get the operating leverage from the scale in our business, to be able to execute on the actions that we’ve taken as we evaluate our cost basis. Those things continue to help us have the kind of growth. I would not get too hung up, the final point you made on the growth in this particular quarter. But on a full year basis, we continue – nothing’s unusual here and we continue to feel very strong and confident about the full year guidance.

Appreciate that. Just as a quick follow-up. Good to see the improved bookings performance in Q1 after a somewhat soft second half of FY2023, despite the pipelines being strong last year. Was there anything that changed in particular in the first quarter that gives you a better line of sight to your full year bookings target? Or is it just some of these sales cycles just got over the goal line?

Yes, Dave, it’s Tim. And thank you for that question. Look, we were really pleased with record sales in Q1. I think as you have heard from others, sales cycles are lengthening, which did drive some slippage from Q4 into Q1. But I think as we look forward, one of the advantages that we feel is really the breadth of our product set, which enables us from a mixed perspective to benefit from a wide range of market conditions. And so we have many chances to ensure that we’re sort of part of the solution to the problems that our clients are facing at any given time. So right now we’re seeing more demand for components and solutions that are addressing cost or are driving near-term revenue less for transformational solutions at this time. But we’re seeing good demand across all three of our franchises. Our pipeline has never been higher. And so that’s why we confirmed the $280 million to $320 million for this year.

Understood. Thanks so much. And condolences on Bob’s passing. I remember him well from your Investor and Analyst Day’s.

Thanks, David.

The next question is from Peter Heckmann of D.A. Davidson. Please go ahead.

Hey, just to follow-up, Tim and you addressed this in your answer to the last question. You’re talking about some of the components of the wealth management system. At least I think you’re referring to that when you said that the components that are more designed for cost efficiencies or cost savings are proving a little bit more popular. But could you just dig into that a little bit in more detail. Talk about some of the components in terms of relative demand and then the implementation cycles? Can some of the components go live fairly quickly? And then lastly, I didn’t hear you say it, but I think in the last quarter call you talked about perhaps $20 million to $30 million of new closed sales related to wealth management components. Do you think that’s still a good estimate?

Yes. Good. Peter, good morning. I would say, and we can talk about components across all of our franchises, but I think you were specifically asking a little bit more on the wealth side. And we really remain quite pleased with our progress on wealth. And obviously we began recognizing revenue from UBS in July. And on the components, we really started that marketing the components last spring with a really significant kick-off at the Securities Industry Conference, the CIFFA Conference in May, demoing live software, really being able to show clients working components. And so we’re sort of fully into selling mode on that. Our pipeline has built nicely and is quite a bit where it was a year ago. And we’re seeing – I think in the near-term, we’re seeing demand around things that can help drive advisor productivity. We’re seeing demand in corporate and class actions. We’re seeing demand around helping people process alternatives. So lots of things that are meeting some important needs that our clients have. So as I said, we now have clients – multiple clients live with at least one component and others in implementation. I think that shows that component approach is working. As you said, we are targeting $20 million to $30 million in incremental sales, and I think we’re on track to achieve that over time. So I think when you look at how we’re looking about our wealth strategy, we’re really assuming mostly these component sales within every few years, something a little bit larger that will boost sales in that year. But I think right now we’re focused on the component side.

Okay. Okay, that makes sense. And then just I didn’t hear you reference it. And certainly historically, Broadridge has been pretty active on M&A. But now with leverage back down below 2.5%, how do you view the M&A pipeline? And do you think we could still see a deal or two happen in fiscal 2024?

Yes, it is. I think if you look at the market there’s still a disconnect between buyers and sellers in terms of what the values are. So the landscape in terms of what is available is a little light, I would say. There are some interesting things that we are looking at. So I wouldn’t be surprised if we’re able to transact something in 2024. But the degree of pipeline and activity is definitely way below where it was a few years ago. I think one of the things, Peter, is that with the investments that we’ve made, we’re feeling really good about our ability to drive organic growth through organic investment. And so that balance between organic growth and M&A that may be a little bit different over the next few years than it was in past. But we will continue to look for the right opportunities that meet our criteria.

All right. That’s helpful, Tim. I appreciate it.

The next question is from Darrin Peller of Wolfe Research. Please go ahead.

Hey, guys. Thanks. Maybe we could jump in a little more to the components of the business, maybe just touching first on the communication side. I just want to make sure we understand. I know we saw strong growth in digital offset by slowing print. If you could just give us a little bit of an update on some of the additional color on print trends, sustainability of it and just broadly speaking, that’s a segment that is one that’s shown us some element of improvement obviously, since you – really, since you closed the deal, but it took a little while at first. So just give us a little more color on what you’re seeing there first, please.

Sure. Darrin, thank you very much. Thank you for that question. We really liked this quarter because we’re now beginning to see that conversion of print to digital that we’ve been talking about. So this quarter we had a significant client that went live on our next-generation digital solution and moved a lot of communications from print to digital. So they saved a ton of money, and their end clients and advisors are really happy with the new solution and are very engaged with it and seeing real upticks in satisfaction. So on the base of that, we saw lower print volumes on that client, but overall, we saw a double digit increase in our digital revenues and a double digit increase in profitability. So that really shows how this transition can work for us. So I do think – just stepping back a little bit, our main story is that continued flow towards digital. But I do have to put an asterisk on it, which is that we are continuing to see a lot of demand from companies that are seeking to rationalize their print facilities. And so there still is an opportunity sort of in that midterm to be the consolidation point for print, which we'll do and are happy to do as long as the digital comes with it so we get the transition over time. So longer term, we expect to see lower growth in print, with strong growth in digital and strong profitability growth, which is exactly what we saw in the first quarter. But there will be some bumps along the way where we have stronger print volume.

And then in the mean – and I'll just add, Darrin, you made a point in your question is worth highlighting that since the acquisition, we've continued to see margins expanding and low double-digit earnings growth as we execute on this strategy for print to digital that Tim just talked about. So we feel very good about that.

Quick follow-up just on the positional growth side, specifically on mutual fund, but maybe more – first more, just more broadly what you're seeing and what you're expecting on trends. You guys tend to have a lot of really good data as you always say, in terms of at least the next six months. So just remind us your conviction on what you're seeing now on that front broadly. But then specifically mutual funds, I think, were 3%, I think you said driven by passive – and so – if you could just add color on active mutual fund position trends here broadly and just couple that into the first question on overall position growth.

Yes, Darrin. Look, I think that the underlying trends on both numbers, both the equity side and the fund side are positive. And as we've talked about, that includes growth in managed accounts and then over time, things like direct indexing and pass-through voting. And we were certainly happy with the 8% record growth, which I know wasn't your question about what it was, but I have to repeat it. And that was really driven by the managed account side. On the fund side, where it was 3%, we have seen that be a little bit noisier quarter-to-quarter based on timing, and that is really what we think was going on this quarter. Sort of looking inside that, it's – there's good growth in money market funds, not surprisingly given sort of the volatility that is out there. And – but then as we look forward, I think the thing that really is giving us the confidence is the forward testing, which again, is showing the mid-high for equities and the mid single for funds. But really, the long-term trends we haven't really seen any change in those. So we're – that's why we're confirming where we are.

Okay, thanks a lot.

The next question is from Matthew Roswell of RBC Capital Markets. Please go ahead. Matthew, is your line muted?

Hopefully you can hear me now.

Yes.

Excellent, sorry about that. It's Matt Roswell on for Dan Perlin. Congratulations on a nice quarter. Just a couple of quick questions, hopefully. What was the FX impact in the quarter? And how should we think about it for the rest of the year?

Yes. Matt, that's – I'll just be quick on that one. In the quarter, on our recurring – it was not material on our recurring revenue, 15 basis points benefit to us. What we said when we gave guidance in Q4 is that we expected a modest 0.5 point benefit to earnings, and that's not us trying to do our own estimates of FX, but just looking at what current rates sit at today. And I think we're still largely in that range. If you look at our 10-K, and you'll see that a change in the U.S. dollar of 10% against the currencies that matter to our economics, primarily the pound, the Canadian dollar and increasingly with BTCS, the euro and the Swedish corona, there is about a $15 million impact on earnings. So that gives you some sense about what the overall impact can be, but we've been specific about what we think for fiscal 2024.

Okay. And then on the margin expansion for the remainder of the year, is there anything we should look out for in terms of either seasonality or grow over compared to last year?

And that's a great one to point out, Matt, because I think looking at the margins in any particular quarter is not – you should certainly be looking at that on a full year basis, given the timing of our investments and the timing of some things that are recurring versus nonrecurring? The short answer of what you should expect is that approximately 20%, which is margin expansion. And there's a couple of things going on there, right. There is setting aside the float income that we see in our ICS business, which is a benefit to the overall reported margin expansion but has no impact to our earnings because we have the interest expense that offsets that. The second component that you see impacting the reported rate is the distribution revenue, particularly with no margin postal rate increases in it that has no impact to our earnings. The impact of those two things together for the full year, we estimate to be dilutive by about 50 basis points and what we said is we'd be able to overcome that and continue to deliver margin expansion in the 50 basis points range absorbing the amortization associated with the Wealth management platform. So you put those two things together, to dilutive impact from the items that I mentioned, our ability to be able to drive margin expansion after absorbing the wealth management platform and you get to this approximately 20%. And I think the first quarter is a strong testament to that. I put those two things aside, we drove 100 basis points with the amortization in our overall results. So we continue to feel very good about that guidance. And finally, I think it's just important – it's important for us to drive that margin expansion because it allows us to both hit the earnings objectives that we have and fund.

Hello?

We're still here, Matt.

Okay, all right. Just lost you for a second there. And then I guess the final question I have is just what's the repurchase assumptions in the guidance?

Well, look, I think you have seen over the – as Tim said in his earlier remarks, our focus has been on paying down the debt and building out the wealth management in our capital markets platforms now that we are past that elevated investment phase and with the expectation of approximately 100% of free cash flow conversion. When you think about that, we have a dividend that we pay $3.20 a share at our share, as you can expect, just under $400 million of that going towards the dividend. The rest of that capacity will either be devoted to M&A, if we find the right opportunities, as Tim just said, that meet our strategic and financial criteria or return back to investors in the form of share repurchases. So I think those are the components you need to think about what that range of share repurchases is – approximately 100% free cash flow conversion the dividend and the rest of that capacity towards M&A and share repurchases.

And I think the only thing I would add to that is we tend to wait on that until we really have high confidence on how the year is coming out. So that from a – it's really almost more of a 2025 question because any share repurchase we do would tend to be later in the year and not affect our weighted average share count for this year.

Excellent, thank you. Thank you for all the color.

Yes.

The next question is from James Faucette of Morgan Stanley. Please go ahead.

Great. Thank you. I wanted to ask a couple of questions here. First, on the announcement of the UBS go live on the DLP platform, is that incremental to the $75 million of contribution outlined previously? Or is that project already contemplated in that number?

Great to clarify that is – that's part of the $75 million.

Okay, thank you for that. And then I wanted to ask a more broad-reaching question around competition. I think we all know about the competitive dynamics at play within the proxy space. But there were – have been one or two announcements of more AI-focused players that seem to be pretty well funded that are looking to get into the space. Anything to call out in terms of changes in competitive dynamics or where there may be some incremental investment needed from your perspective?

Dave, I don't think there's anything significant that is incremental to what has been out there. I think that we always say that competition has always been significant in this area. And even though people like to talk about us as a market utility, the – we've always had in-house – competition from in-house and from other players. And we think that we win that on the merits by being safer for our clients, more resilient, less cyber risk, smarter in terms of better all-in economics when you take into account all the things we can provide our clients based on our unique network. So we don't really see a change, and we are certainly – we've already talked about on the AI side that we are going to be a leader in AI in our spaces. And we have products in market – AI different products in market, BondGPT on the Bond side, which is one of the earliest products we've got quite a bit of attention and reviews on that. And we're certainly investing to apply AI also on the governance side. So I think to the extent there's something interesting in applying AI in the governance space, we'll be a leader in that.

And I also – James, I just want to comment back to your first question, overall across both UBS and across the success that we've been seeing with DLR with our Digital Ledger Repo system. Right now, the economics to Broadridge are not material at all for any of our clients. We've had great success really signing that up, but the economics are still not having a significant material impact on our guidance for fiscal 2024.

Great, really appreciate the color on both those things.

This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thank you very much for joining us today to talk about our strong first quarter results. We look forward to seeing you and talking to you at our Investor Day in New York on December 7, when we'll be talking about our outlook over the next three years, which we think will be a pretty productive day. And we have – we're pretty excited to share our forward view. Thank you.