BR - NYSE

Good day and welcome to the Broadridge Fiscal Third Quarter 2025 Earnings Conference Call. All participants will be in a 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, Dave [ph] and good morning everybody and welcome to Broadridge's third quarter and fiscal year 2025 earnings call. The 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, Ashima 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 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 the presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings and good morning. Broadridge delivered strong third quarter results and we are on track to deliver a strong fiscal 2025. To understand our confidence in the year, let me start with some observations on the current market. Clearly, there has been significant uncertainty and market volatility over the past several weeks. As a SaaS technology provider with primarily U.S. exposure, the direct impact on Broadridge has been modest to date. Market trading volumes have been unusually high. Given our strong scalability, our technology has performed well and higher volumes have been a modest near-term positive. Like us, our financial services clients are also benefiting from high trading volumes and are performing well. More broadly, this period of volatility highlights the strength and stability of our business. With 94% recurring fee revenues, 98% revenue retention rate and a $450 million revenue backlog, we have strong visibility into our growth over the next 12 to 18 months which in turn enables us to continue to invest in the solutions that will propel our future. While this period of uncertainty does have the potential to influence the timing of new investments by our clients, the breadth of our solutions means that we can help clients both reduce cost and drive innovation which means we can help them in any economic scenario. At the same time, the long-term trends that are shaping financial services, including the democratization of investing, acceleration of trading, digitization of communications and regulatory change are not slowing down. We're seeing those trends play out directly in our results, as I'll touch on in a moment. And Broadridge is one of the only players that has both the deep expertise and proven ability to drive the innovation at scale that's necessary to help our clients adapt to these trends. So while markets are likely to remain volatile and the economic outlook murky over the next few months, I'm confident that Broadridge is well positioned to deliver strong fiscal year 2025 results and we remain on track to deliver 3-year objectives and we are positioned to continue to deliver sustainable long-term growth for our shareholders. So with those thoughts, let's get to the headlines on Slide 3. First, Broadridge delivered strong third quarter results, including 8% recurring revenue growth and 9% adjusted EPS growth. Second, these strong results in the phase of growing market uncertainty highlight both the resilience of our business and the continued execution of our growth strategy to digitize and democratize investing, innovate and simplify trading and modernize wealth management. Third, Broadridge remains on track to deliver another year of steady and consistent top and bottom-line growth. We are reaffirming our guidance for 6% to 8% recurring revenue growth constant currency and expect to deliver adjusted EPS growth in the middle of our 8% to 12% growth guidance with strong free cash flow. Finally, our outlook for fiscal '25 keeps us on track to achieve the 3-year growth objectives we laid out at our December 2023 Investor Day. Our results demonstrate the power of our strategy and our proven ability to execute. So let's turn to Slide 4 to look at the key drivers of that execution, starting with our Governance business. Governance recurring revenues rose 6%, driven by new sales and continued growth in investor participation. Equity position growth strengthened to 15% in the quarter, the highest quarterly growth rate since the end of fiscal '22. Equity position growth began to pick up in October and continued to strengthen though the third quarter even as markets began to soften in February. The acceleration in position growth was driven by managed accounts, while self-directed account growth remained stable in the mid-single digits. An important trend I want to call out is the growth of smaller positions, likely driven by direct indexing. We've talked about this for a while but we are now really seeing it begin to scale. That's exciting because one of the promises of democratization is it is opening the door for an increasing number of investors to take advantage of the sophisticated strategies available to institutional investors, like model-based investing and direct indexing. This evolution is driving rapid growth in small account sizes. What also is exciting is it highlights how innovation is working for public companies and funds. Fractional positions which include managed accounts with less than five shares and fractional shares in self-directed accounts are free to public companies and funds, leveraging our technology to make democratization cost-effective for all stakeholders. These fractional positions do not translate immediately into revenue for Broadridge. But the good news is that we can expect many of these accounts to grow to larger position sizes over time, providing an additional foundation for Broadridge's long-term growth. Meanwhile, fund position growth remained healthy at 6%, driven by continued demand for passive funds. Across our ICS business, new product innovation continues to be the biggest driver of growth. Demand for our digital solutions and our customer communications business remained very strong and I was pleased to see another sale of our AI-enabled Global Demand Data and Analytics model to another large asset manager. It's the 13th win for that AI data product since it was launched last year, highlighting the unmatched quality and depth of our data. Let's turn next to Capital Markets which reported 10% recurring revenue growth. In Capital Markets, we're simplifying trading across the front and back office. A key part of that value proposition is our ability to seamlessly scale our post-trade capabilities in periods of market stress. That was certainly the case in the week following April 2, when our settlements platforms processed record fixed income trades and doubled our typical volume in equities. Our ability to offer seamless scalability and global interoperability continues to drive demand for our global post-trade solutions. We closed two notable post-trade sales in the third quarter, including one to a rapidly growing trading firm that builds on a long-term relationship that already includes both front and back office solutions in the U.S. and Europe. We're also delivering innovation at scale in other asset classes. Our Distributed Ledger Repo solution is now processing $100 billion in daily average trading volume as we onboard new clients. And in early April, we completed a successful integration with Fnality, a blockchain-based wholesale payments firm as the next step toward real-time settlement of intraday repo transactions. In Wealth and Investment Management, revenues grew 13%, driven by the acquisition of SIS. The integration of SIS is well underway and we're making strides in integrating our Canadian wealth platforms with our newer wealth modules. In the U.S., we continue to make progress on the rollout of our next-generation wealth platform. We now have a total of 34 clients live on one or more platform components and we continue to see strong sales momentum. During the quarter, we closed a major sale with a leading U.S. wealth manager to provide a suite of solutions linked by a common data layer, open APIs and a consistent user interface. The decision by this client to modernize key parts of this technology on the Broadridge platform is a great validation of our strategy to offer our clients transformation on your own terms. Speaking of sales, we ended March with year-to-date Closed sales of $174 million, including $71 million in Q3. Excluding sales of our Tailored Shareholder Reports solutions, Closed sales rose 9% for both the year-to-date period as well as the third quarter, tracking right in line with our full year guidance. As we enter our critical selling quarter in the fourth quarter, we continue to have a strong pipeline and are seeing significant interest in our digital solutions, capital markets platforms and wealth components. At this point, the vast majority of our Q4 pipeline is in late-stage business or legal negotiations. At the same time, as I noted in my opening, there's now significant uncertainty about the health of the economy and the impact of tariffs. And we are seeing the closing process taking longer in Q4 than it did in Q3. Reflecting that elongation, we're taking a more cautious view of our fourth quarter sales and are updating our guidance for Closed sales for fiscal '25 to $240 million to $300 million. Given our backlog of previously closed business to onboard, we do not expect this to impact our FY '26 results. And as I've said in the past, whether something closes in June or August is really immaterial to our future growth. I'll close my remarks with a few summary comments on Slide 5. First, Broadridge is executing on our growth strategy. We're driving the digitization and democratization of investing as we process double-digit growth in the number of shareholder positions. And our investments in digitization are helping to drive down the cost of serving these positions and are driving strong demand for our digital solutions. We're simplifying and innovating in trading to seamlessly process trillions of dollars in trades per day, while the Distributed Ledger Repo capabilities are making tokenization a reality in the repo market not tomorrow but today. And our next-generation wealth platform is gaining momentum in the market in both the U.S. and Canada. Second, that execution is driving strong financial results, including 8% recurring revenue growth and 9% adjusted EPS growth in the third quarter. More importantly, we are on track to deliver another year of steady and consistent recurring revenue growth and adjusted EPS growth with strong free cash flow in fiscal '25, even with the higher uncertainty. And that, in turn, keeps us on track to deliver our 3-year financial objectives for the fifth consecutive 3-year cycle. More broadly, periods of uncertainty have historically strengthened Broadridge's position in the marketplace. Our recurring revenue business model helps insulate us from market swings and gives us the visibility to fund ongoing growth investments. Our broad product portfolio gives us the ability to help our clients drive productivity or growth, depending on their requirements. And our capital-light model and investment-grade balance sheet gives us the capital flexibility to fund strategic M&A and return capital to shareholders. So finally, as a result, Broadridge is well positioned for long-term growth. The long-term trends reshaping the financial services industry are increasing, not slowing down which means our clients need a trusted and transformative partner like Broadridge to help them navigate those changes and grow their business. I'm confident that as time passes Broadridge will be stronger and better positioned than ever for long-term growth. Before I turn it over to Ashima, I want to thank the Broadridge team around the world. Their work, their focus on our clients is driving the growth of our company and the transformation of our industry. Thank you. And now I'll turn it over to Ashima. Ashima?

Thanks, Tim. Good morning. It's great to be here with you today. I'll start with the headline which is that Broadridge delivered strong third quarter results, including 8% recurring revenue growth constant currency and 9% adjusted EPS growth. And just as importantly, we remain on track to deliver another year of steady and consistent growth in fiscal '25. Before I dive into my discussion of those results and our guidance, I want to make four callouts. First is revenue. Our third quarter recurring revenue includes the impact of two headwinds. The first is FX. And the second is the movement of a meaningful wealth management license renewal into the fourth quarter. Taken together, these two items represented a 160 basis points headwind into our reported third quarter recurring revenue growth. Second, we continue to take a disciplined approach towards managing our expense base. During the quarter, we made the difficult decision to reduce our distribution footprint by closing a print operation in our customer communications business resulting in a $5 million restructuring charge. My third callout is that as of last week, we have records for over 90% of proxy positions for the full year which, when combined with our recurring revenue backlog gives us a high degree of confidence in our full year recurring revenue and adjusted EPS guidance even in this uncertain environment. Finally, capital. We are on track to deliver on our free cash flow conversion target for the year, giving us significant flexibility to pursue our balanced capital allocation strategy. With that, let's go into the numbers on Slide 6. In the quarter, recurring revenues grew 8% on a constant currency basis, driven by 6% organic growth and 2 points from our acquisition of SIS. Adjusted operating income grew 10%, driven by strong organic recurring revenue growth. AOI margins rose 100 basis points to 22.4% and adjusted EPS increased 9% to $2.44. Finally, we delivered Closed sales of $71 million. Year-to-date sales were $174 million. Let's move to Slide 7. Third quarter recurring revenue grew 8% to $1.2 billion, in line with our full year guidance for 6% to 8% growth. Our growth was primarily driven by new sales balanced across ICS and GTO as well as internal growth from higher trade volumes and higher positions. Let's turn to Slide 8 to look at the growth across our ICS and GTO segments. ICS recurring revenues rose 6% to $740 million. Regulatory revenues grew 6%. 15% growth in equity positions was driven by a healthy 11% growth in equity revenue positions, with the balance coming from the strong growth in smaller non-revenue positions that Tim highlighted. Fund position growth was 6%. Overall revenue growth from strong position growth was offset by mix, including slower growth in international. Looking ahead to the fourth quarter, we expect mid-teens equity position growth, including low double-digit equity revenue position as well as mid-single-digit fund position growth. Together, this should drive high single-digit regulatory revenue growth. Data-driven fund solutions revenue increased 8%, driven by double-digit growth in our data and insight products. Issuer revenue growth of 2% was driven by strength in our shareholder engagement solutions, partly offset by a modest decline in disclosure solutions revenues. Customer communications revenue growth was 5%, led by double-digit growth in digital revenue, as we continue to execute our print to digital strategy. Overall, we continue to expect full year ICS recurring revenue growth to be in line with our 6% to 8% recurring revenue growth guidance range for the full company. Turning to GTO. Revenue grew 11% to $464 million. Capital Markets revenues grew 10%, driven by strong growth in both our global post-trade capabilities which benefited from higher trading volumes, as well as our BTCS front office solutions. Higher license revenue contributed 3 points to Capital Markets growth in the quarter. Wealth and Investment Management growth was 13%, driven by the acquisition of SIS which more than offset a 3% decline in organic revenue growth, driven by lower license revenues. Lower license revenue included a 5-point headwind to wealth management organic growth from the license renewal shift from Q3 to Q4 that I highlighted in my opening remarks. In Q4, we expect strong wealth management growth, driven by high single-digit organic growth, including that timing benefit from license revenue and continued contribution from SIS. For the full year, we continue to expect overall GTO recurring revenue growth to be in line with the 6% to 8% recurring revenue guidance. Now let's move to Slide 9 to review our key volume indicators. Broadridge continues to benefit from strong growth in investor participation across both equities and funds. Third quarter equity position growth was 15%. For the full year, we now expect mid-teens equity position growth. We are now in the peak period for annual meetings. As of last week, have received record data for over 90% of proxies expected for this fiscal year. These records, combined with our testing, give us a high degree of confidence in both our position growth and revenue outlook. Finally, based on recent trends, our forecast calls for low double-digit growth in equity revenue positions. Mutual fund and ETF position growth was 6% in the third quarter. We expect a similar level of growth in the fourth quarter. In GTO, trade volumes rose 14% on a blended basis, led by double-digit growth in both equity and fixed income trade volumes. Strong trade volume growth continued into April and we expect continued double-digit growth in the fourth quarter. I'll wrap up my discussion of recurring revenue growth on Slide 10. Revenue from Closed sales remains the biggest driver of our recurring revenue growth at 5 points as we onboard revenues from our $450 million year-end backlog. That growth was partially offset by 2 points of losses, resulting in a revenue retention rate of 98%. Internal growth contributed 2 points, primarily driven by fund and equity position growth and higher trading volumes. As a result, organic revenue growth was 6%. Acquisitions contributed 2 points, primarily driven by the revenue from SIS. Finally, changes in FX reduced our reported recurring revenue growth by 90 basis points, driven by the decline in the Canadian dollar relative to the U.S. dollar. The 90 basis points third quarter headwind from FX marks the largest quarterly impact since fiscal '23. Given the recent weakening of the U.S. dollar, we see a much more subdued FX impact going -- outlook going forward and a headwind of only 20 basis points for the full year versus our constant currency guidance. Let's close the discussion of revenues on Slide 11. Total revenue increased 5% to $1.8 billion, driven by 5 points of growth from recurring revenues. Event-driven revenues declined $14 million to $53 million as we lapped two notable proxy contests in Q4 of last year. We expect fourth quarter activity to be in line with our $55 million to $60 million historic quarterly average. Low to no margin distribution revenues grew 4%, contributing 1 point to total revenue growth, as the approximately $32 million impact of postage rate increases more than offset lower mail volumes. Turning now to margins on Slide 12. Adjusted operating income margin was 22.4%, an increase of 100 basis points, driven by the operating leverage from higher recurring revenue. This was impacted by a 10 basis point headwind from changes in float income and distribution revenues. During the quarter, we recognized $11 million of non-GAAP acquisition, integration and restructuring charges. $5 million of this was related to the closing of the print operation I noted earlier, with most of the remaining related to the integration of our SIS acquisition. As I noted in my opening remarks, we are committed to maintaining our expense discipline, while continuing to deliver strong returns to our shareholders and funding reinvestment in our business. That's enabled by the operating leverage in our scale business which provides the flexibility to manage our expense base across market cycles. For the year, we remain on track to generate 50 basis points plus of underlying core margin expansion. Let's move on to sales. Closed sales were $71 million, $8 million lower than Q3 '24. Year-to-date sales are $174 million compared to $185 million last year. Fiscal '24 Closed sales benefited from strong sales of our Tailored Shareholder Reports solutions which fund companies were required to implement last July. Excluding TSR sales, Closed sales rose 9% for both the quarter and the year-to-date period. Turning to our cash flows. Q3 free cash flow was $337 million, an increase of $170 million from Q3 '24, driven by higher earnings and modestly lower capital investment. Year-to-date free cash flow was $393 million versus $259 million for the first 9 months of fiscal '24. We continue to expect free cash flow conversion of 95% to 105% in fiscal '25. Turning next to capital allocation on Slide 15. Year-to-date, we have deployed $78 million in capital spending and software and returned approximately $300 million to shareholders via our dividend. Platform investments were $9 million as we continue to work with clients to manage our onboarding spend. We've also deployed $193 million for targeted M&A investments, primarily to purchase SIS. As I noted earlier, our strong balance sheet and capital-light business model give us significant flexibility to continue to fund growth investments, pursue value-accretive strategic M&A and repurchase shares. Let's conclude by reviewing our full year guidance on Page 16, followed by closing key messages. With 2 months left and high visibility into fiscal '25 position growth, we continue to expect recurring revenue growth constant currency of 6% to 8% for the full year, with only a modest headwind from changes in FX rates. We expect our recurring revenue growth to be balanced across both our ICS and GTO segments. We also continue to expect fiscal '25 AOI margin of approximately 20% and adjusted EPS growth in the middle of our 8% to 12% range. We now expect Closed sales of between $240 million to $300 million. And I will also note that we continue to expect free cash flow conversion of 95% to 105% of adjusted earnings. To bring all of this together and highlight what it means for our financial objectives, I'll share some concluding thoughts. First, Broadridge reported strong third quarter results. Second, we remain very much on track to deliver strong fiscal year results, including 6% to 8% recurring revenue growth and adjusted EPS growth in the middle of our 8% to 12% guidance range. Third and probably most relevant for the environment that we are in, I want to emphasize the resilience of our business model. Broadridge has a long history of delivering consistent, sustainable recurring revenue growth. The combination of recurring revenue growth and the operating leverage in our scale business allows us to drive margin expansion and earnings growth while funding growth investments. We've done this across multiple 3-year cycles and we are on track to do it again. With that, let's take your questions.

[Operator Instructions] Our first question comes from Dan Perlin with RBC Capital Markets.

I wanted to just maybe touch on the demand environment a little bit more closely. It sounds like there's this kind of like the economy where you've got you've got client demand that's there and now maybe you're starting to get a sense that there's a little bit of a pause in willingness to make these investments. Tim, I know you called that out a little bit in your prepared remarks. So maybe you could just dive a little bit deeper into those conversations and what maybe some of the nuances are?

Yes. Thanks, Dan. And I think this is the one that we ourselves have been sort of really looking at and talking about amongst ourselves. First of all, just we're really pleased with our performance year-to-date. Excluding the Tailored Shareholder Reports sales, as I said earlier, we grew 9% in Q3 and year-to-date and that puts us sort of right in the middle of our full year sales guidance as of the end of Q3. We're just trying to interpret what we're seeing over the past few weeks but I think it's somewhat the same as what others are seeing which is there is a fair bit of uncertainty out there. And so we think that is -- we only have a few data points here because it's literally only been a couple of weeks since April 2 but we think we're seeing an elongation in our closing process. I had a conversation last week with the CEO of the investment bank of one of our major global clients. And I just asked them, what are they thinking? What's their conversation around their executive table? And they said, look, they're continuing to move full speed ahead on anything that reduces cost or simplifies operations. But that they are taking more of a wait-and-see approach on investments and new revenue opportunities. Now I think the good news is the vast majority of our work falls in that bucket of cost and simplification. And we don't know how long this period of elongation will last. But as you know, a large proportion of our sales fall in Q4. So even a couple of weeks could make a material difference in what our Q4 is. We're not seeing any clients walking away from deals or not losing any mandates. If you look at our pipeline, the vast majority of it is deep in negotiations. So -- and I said before, if something happens in June or it happens in July or it happens in August, it doesn't really make that much difference in terms of our long-term growth. And that our revenues for next year are really broadly locked already based on the backlog that we have. So this isn't a '26 revenue issue. It isn't a long-term growth issue. It's certainly not a demand issue. The pipeline is very strong. Origination activity continues to be very strong. It's just we want to just be cautious here about this elongation that we're seeing. Last thing is just I really like the areas where we're seeing momentum in the pipeline. It's the areas that we've been investing and it's the areas that will help our clients in an uncertain environment. Omnichannel communications which is with the wealth and focus that we've talked about which is helping people move to digital, saving their money. Data analytics which is helping them target their sales force. Front and back office simplification which is bringing lower cost, better operations, modernization to our clients, Distributed Ledger Repo, direct cost savings. Everything we're doing on the wealth side, similarly. So I really like the areas and again, we feel great about the demand. We're just being cautious on what's going to happen over the next few weeks.

Just a quick follow-up, if you wouldn't mind. On the equity position growth and the callout between kind of smaller positions not really driving revenues but over time that is expected to build versus kind of revenue producing. Again, can you just maybe tease out a little bit the nuance there and how that is again going to impact the business maybe going forward? It seems like that position growth could stay elevated but the revenue piece of that. So I'm just trying to make sure that we understand maybe the spread differential between revenue producing versus not?

Yes. Thank you. And that's again one. We've talked quite a bit in the past about model-based investing and direct indexing and how we thought that would be something that would help us sustain over a long period sort of the high single-digit growth that we've always talked about for positions. And -- but we haven't really seen it in the data. And the reason we called it out this quarter is because we really are beginning to see it. And so what we've seen is the same very robust growth in the revenue positions, double digit which is, very pleased to see that. But then on top of that, we saw quite rapid growth in these smaller positions. And we're still teasing all of that out. It's interesting to think about is building up pretty soon we'll be talking about a position backlog because they're building up a set of small positions that are becoming material now that as those begin to scale, they could begin to bleed into revenue positions. I'm not going to sit here and say, I think that is yet something I'm going to talk about is a major source of future growth. But I do think it's supportive of the long-term trends of the upper single digits that we've always talked about. And then we're in a more robust period right now. And so we really like it and we wanted to call it out and also call out the way it just shows the system is working both for investors and for the other stakeholders.

And the next question comes from Scott Wurtzel with Wolfe Research.

I just wanted to go with one on the sales to start. Just wondering when you're seeing these elongations potentially in the sales cycle, is that happening in specific product lines or geographies?

Scott, thank you. Not as far as we can tell right now. We're still parsing through the data. And again, we have literally 3 weeks of data points and it's sort of almost day by day in terms of things. But there's not anything that I can point to and say, wow, it's falling off the table over here. It's really something that we're just -- we're continuing to monitor. I will be somewhat embarrassed but happy if we come back here in June and say, oops, it was all nothing and everything closed the way we expected it to. But it's just something that we're watching and being cautious about.

Got it. That's helpful. And then just one quick follow-up on the margin side of things. I mean, the margin expansion you drove during the quarter was pretty strong, still holding your guidance for the year. So just wondering, as we think about the fourth quarter, are there incremental planned investments maybe or anything with the revenue mix that we should be thinking about?

Yes. Scott, great question. I'll remind you, we're a full year company, right? We plan our business, we look at our business from a full year perspective. And within that context, we look at driving margin expansion, funding incremental investments, all with the aim of delivering what I already shared. We're looking to deliver earnings at the midpoint of our 8% to 12% earnings guidance. So in that context, I'll think about margins almost as a means to an end. We are absolutely investing in our business and we do expect high levels of investment spend in Q4 which could translate into some margin impact. But we're really focused on the full year and delivering at the midpoint of our 8% to 12% guidance.

Yes. And I'll just add to that. We're an organic growth company. We invest to drive that organic growth as we've delivered consistently over the past 10 years. And when I look at the areas whether it's omnichannel communications, data analytics, front to back office simplification, the wealth side, we have a whole set of things that we think are really exciting for our clients that we're investing in. And when we have the opportunity, we take that.

The next question comes from Michael Infante with Morgan Stanley.

I just wanted to circle back on Dan's earlier question just in terms of the differential between equity position growth and revenue growth. Is there a way to quantify what revenue growth maybe would have been if the size of positions was more in line with historical trends. Just wanted to clarify just because the comp in 3Q in regulatory was quite a bit easier than what you faced in 2Q of last year.

Yes, I think the -- and I'll let Ashima add on to this but I think it's -- I'm thinking about it is less about the sort of the proportion and it's more about, we saw really the growth in revenue positions that we expected and then we had this add-on of other positions. But Ashima, why don't you add on to that?

Absolutely. So let me try to break this down for you, Michael. So if you think about the drivers of growth, specifically in our regulatory business and in our revenue growth, like I said in my remarks before, equity position growth was 15%. Having said that, equity revenue position growth was 11%, right? That is the part that contributed to the revenue growth. And additionally, we saw 6% growth in fund positions. I'll just reiterate what Tim already said, this higher participation in the smaller positions is a positive for us in the long term when the accounts grow in size but they don't help our current revenue. So 11% is the number you should have in mind. Moreover, when you think about our regulatory revenues, only 75% to 80% are directly impacted by equity and fund position growth, with the balance being in other regulatory communications and our international proxy business. And these other businesses were a little slower than the position growth in the quarter. So hopefully, that gives you context in bridging our regulatory position growth. I will also add that if you look at last year, I know there was a little bit of timing Q3 versus Q4. There's nothing material that I have to call out this quarter in terms of seasonality across quarters.

Okay. Very helpful. Maybe just on some of the license activity. I know there are obviously some comp dynamics. Tim, I think in the past, you've mentioned there could be an opportunity to sort of smooth some of the quarterly revenue volatility from license renewals by switching to more of a subscription model. I know it's still -- license is still only a low single-digit percentage of your overall recurring revenue. But where are you just in that journey from transitioning for a license to subscription?

Yes. Typically, where this happens is areas where we've made acquisitions and where those acquired companies were less mature than we are and we're operating more on a license model. That's typically often companies earlier in their growth phase operate with that business model. And when we do that, we begin to try to work clients over to a SaaS model. And -- but that takes time. And in this quarter, particularly on the wealth side, there was a significant transaction that will close in the fourth quarter, we had expected to close in the third, that caused a change this quarter and we'll see the benefit of that next quarter. So I think, we're well advanced but we're -- there continues to be a tail of these things that and every time it comes up for renegotiation, we have that conversation.

Yes. And you already said this, Michael but I'll just reiterate. You're right. For the full year, license revenue is like less than 5% of the GTO revenues, right? So completely agree with your sentiment there. It doesn't really have a material impact on our revenue growth for the full year. It creates quarterly noise, as you're well aware.

And the next question comes from Puneet Jain with JPMorgan.

Tim, totally agree that timing of bookings doesn't impact medium term growth rates but can you also recap what the new administration policies and priorities such as deregulation, potentially few disclosure requirements could mean for Broadridge?

Yes, absolutely. And I think sort of broadly about the evolving regulatory environment and what that means for Broadridge. I think there when you think about the big issues that the administration is pursuing around tariffs and trade and cultural issues, those really don't affect us and really that much our financial services clients. I think that the biggest thing right now, Paul Atkins has now been formally installed at the SEC. The SEC is the area that is really the area that affects us the most and it's in good hands. And we think that we can make a positive contribution in the policy areas that touch us, including in digital assets, in shareholder engagement, in digital delivery. And so we're actually very positive on where that's going to go. If we think about digital assets, obviously, there's a lot that the administration is doing. Also the SEC is doing. They've had many roundtables asking for industry feedback. We think the opportunity there is, as we've talked about, that when there's good disclosure, it really is good for innovation, helps investors have the confidence. And so there is some debate inside the digital asset industry about how much disclosure to have but we've provided views on that. And not surprised to hear that we have a product that could help solve that we are talking to people about is live with a couple of the exchanges. And so we think that's an opportunity for us. Another area is around shareholder engagement, proxy reform. We're continuing to see growing interest in our pass-through voting solution as the passive managers are looking to extend voting preference choice to their end investors. We're also creating a data-driven voting solution that would allow people to have an alternative view to the proxy advisory firms. Now we're not a proxy adviser and won't be but we can provide the data and technology behind that. And another issue that I think could come up over the next few years is around digitization, where we've made huge investments to really improve the investor experience. and help make it more cost-effective for our industry and we're partnering with the industry on moving that forward. So I think across all those areas, the common theme is, yes, there's regulatory change. There's a big agenda out there and the pipeline to get it all done is not that big but we can help the industry move forward with technology. And so we always think about private market solutions with technology to help achieve the objectives that really focus on both sides of the aisle have around making investments better for all investors and all stakeholders.

Got it. No, that's very helpful. And then like the work that's being delayed like the Closed sales like that are being delayed, are these typically long implementation cycle type of deals? Or are these like the quick short-term deals which could have generated revenue in fiscal '26 as well? I'm just trying to think about the waterfall impact, like if things remain weak in bookings for more than a quarter, like the waterfall impact on revenue?

Yes. I think, Puneet, we're not seeing any particular area be impacted. So it's hard to say across all of our sales, probably the in-year conversion is, call it, 1/3. I think actually, the shorter-term sales tend to be simpler and are less affected by uncertainty. So I don't have the data to tell you. But my hypothesis would be that it's actually the more complex, longer conversion sales that are more impacted. But I don't -- I'm not looking at a sheet of paper telling me that. I'm just intuiting that.

Yes. Puneet, let me just add, right, let's put it in perspective. If you look at the midpoint of our prior guidance versus the midpoint of our guidance now, we're talking about $40 million of sales, right? Even if all of that would impact revenue, that's way less a -- that's less than 1% of our recurring revenue. Two, a fraction of that, given what Tim just said, most of our conversion cycles range between 12 to 24 months. The impact for near term in terms of the revenue waterfall that you were expecting would be very fractional, right, less than quarter of what the full year impact. So -- and we're talking about a delay here, not reduction. So I really wouldn't expect much of an impact over the longer term either.

And the next question comes from Patrick O'Shaughnessy with Raymond James.

Starting out with your wealth platform sale that you mentioned, can you give a little bit more color on what's within that suite of solutions that you sold to that client?

Yes, Patrick. The core piece is, I'll call it the wealth operating model that is the data layer that allows the client to connect different things that they are building with things that we're building with third-party solutions, I'll call it the wealth operating system. And then there are components on top of that, several components on top of that. And in fact, there are future opportunities for additional components later on. So I think it's -- we're excited about them pursuing this. It is -- interestingly, I think if I were on the other side of the call, I might be concerned about, oh, it's just a large deal that is going to have a significant onboarding cost. And I can tell you with confidence that that's not the case. This is technology that's already built. There's a little bit of conversion is some upfront charging. So it's not really something I think you're going to see any sort of big impact on. And then just beyond this sale that I did call out, I just -- I didn't say it before but I would be remiss if I didn't mention. So we have these 34 components that are currently live. We have 40 others that are in the process of being onboarded with other clients. So that's one of the things that makes us feel really good about. It's not just this one sale, it's pretty broad in terms of the demand that we're seeing.

Got it. That's very helpful. And then I apologize if I missed this earlier but did you provide any color on kind of current position account growth trends what your early testing for next fiscal year looks like in light of recent market weakness?

Yes. So I'll just give more color here. Looking into Q4, we are expecting low double-digit equity revenue positions. Remember, revenue positions and mid-double-digit equity position growth. And we're expecting continued mid-single-digit fund position growth. We feel good about the full year given that we already have records for 90% of the positions. And frankly, I haven't seen any real impact as -- during the month of April in spite of the volatility. Talking about FY '26, we're seeing strong trends for '26 as well. We didn't share any specific numbers yet.

And Patrick, just we do get data sort of each week that adds incrementally on to what we know. And so each week in the month of April, we're seeing incremental impact on this and we haven't seen any falloff or any material change.

And the next question comes from Peter Heckmann with D.A. Davidson.

Tim, I didn't hear you mention it but do you have any early thoughts on some of the public-private kind of retail investment vehicles that are being discussed that would basically create a hybrid product. I'm not sure exactly how they would be created. But do you see that as an opportunity? And would there be any unique accounting needs?

Yes, Peter, it's a great question. It is -- certainly, as we talk to our fund clients and as we talk to ICI, one of the things that the fund industry is very focused on is giving -- and administration is focused on is giving access to investors to more retail investors to private assets. And one of the ways to do that is by lowering what it is to be a qualified investor and things like that. But another route that's very promising is increasing the amount of private assets that are available inside 40 Act and ETFs. And that is something that we think will be positive for us. That's sort of the part of the industry that we're focused on. And we frankly think it's a good thing for investors because when you -- I have invested in some of these private assets myself personally and it is really complicated and the paperwork back and forth. And then I feel it's me and I feel like I'm pretty sophisticated but going up against someone who's really sophisticated. And so the giving access to investors to these assets by doing it with professional management representing you is a better way to invest. And we think that will be -- as that evolves that can be a real opportunity, as Larry Fink talked about in his letter, opportunity for people to and retirement folks to participate in private assets but to do it in a sort of safe and very professionalized way. And that will be a benefit to the 40 Act and ETF part of the industry.

Okay. That's helpful. And then just lastly, any thoughts on kind of the M&A pipeline, whether there's, you view this as a relatively attractive or unattractive market to go hunting for tuck-in deals?

Yes. I think it is -- the M&A market is pretty uncertain. I think we were going to begin the year thinking there'd be a lot of things out there and that is just less clear right now in terms of scale and we certainly have seen people put processes off. That said, there are opportunities. I think as you and I have talked about in the past, a pretty significant portion of our deals have been proprietary deals where it's sort of a unique situation which is one of the ways we've gotten really good value. And so there are opportunities like that. If you see us do something, it's really the principles we have, whether it's this environment or a different environment, are really the same which is we're an investment-grade company. We do our internal investment. We pay a good dividend. And then we do look for M&A opportunities. But if we don't find them, we're very happy to do share buybacks. So if you see us execute, it will be because there's something compelling. And if you don't see us execute, you'll see us doing share buybacks.

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

Well, I'd like to just thank everyone for joining today. We reported what we believe are really strong results for the third quarter. We are seeing really good demand for our products while we're showing some caution today, when we look at the underlying trends, whether it's position growth, whether it's trades, whether it's our backlog, we feel really good about the future and we feel really good about the demand that we're seeing from our clients in the areas that we're investing where we think we can make a real difference. So with that, thank you very much and we look forward to talking to you next quarter.