W. Edings Thibault - Broadridge Financial Solutions, Inc. Richard J. Daly - Broadridge Financial Solutions, Inc. Timothy C. Gokey - Broadridge Financial Solutions, Inc. James M. Young - Broadridge Financial Solutions, Inc..

David Mark Togut - Evercore Group LLC Darrin Peller - Wolfe Research LLC Peter J. Heckmann - D. A. Davidson & Co. Oscar Turner - SunTrust Robinson Humphrey, Inc. Christopher Roy Donat - Sandler O'Neill & Partners LP Patrick J. O'Shaughnessy - Raymond James & Associates, Inc. Puneet Jain - JPMorgan Securities LLC.

Good morning. My name is Tabitha and I will be your conference operator today. At this time, I'd like to welcome everyone to the Broadridge First Quarter Fiscal Year 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you, Mr.

Thibault. Please go ahead..

Thank you, Tabitha. Good morning, everybody, and welcome to Broadridge's first quarter 2019 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 are Rich Daly, our CEO; Tim Gokey, our President and COO; and our CFO, Jim Young.

Before I turn the call over to Rich, a few standard reminders. 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 slide and a more complete description on our Annual Report on Form 10-K.

We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results. An explanation of these non-GAAP measures and reconciliations to their comparable GAAP measures can be found in the earnings release and presentation.

Let me now turn the call over to Rich Daly..

Thanks, Edings; and good morning, everyone. I'll begin on slide 4. Broadridge is off to a good start to fiscal year 2019. We reported solid first quarter results and announced an important deal to build a next-gen wealth platform with UBS. We have four items on our agenda this morning.

First, I'll begin with some quick highlights of our first quarter 2019 results; then Tim will provide more information on the wealth management announcement and give you an overview of our operating results.

Next Jim will review our financials and I will close with some parting words, including some thoughts on why I think the best is yet to come for Broadridge. There's lots to talk about, so let's get started. Broadridge reported solid first quarter results.

Total revenues rose 5% to $973 million, propelled by recurring revenue growth of 5% and a 30% increase in event-driven revenues. Adjusted operating income rose 15% and margins grew by 110 basis points. Adjusted EPS, aided by a lower tax rate and a higher excess tax benefit from equity compensation, rose 46% to $0.79.

We continue to see strong momentum in the marketplace. The sale to UBS that we announced last month to build a next-gen front-to-back wealth management technology platform is a significant step.

At our Investor Day last year, Tim and the team highlighted the opportunity we saw in the wealth management market and this agreement is an important proof point that wealth management can be a strong franchise business for Broadridge alongside governance and capital markets.

In addition the size and scope of this deal are more indications that Broadridge is increasingly recognized as a transformation agent by the largest financial services firms in the world. Lastly, we remain on track to deliver the full-year 2019 financial guidance. It's early, but I am pleased with how the beginning of the year has taken shape.

Tim and his team are well-positioned and eager to take Broadridge into the future starting on January 2. So let me now turn the call over to Tim to share some of his thoughts about the UBS deal and to walk through the first quarter results..

Thanks, Rich; and good morning, everybody. Between signing a major strategic deal and delivering solid first quarter results, Broadridge is off to a good start for the year. I'll begin my comments on slide 5 by discussing the UBS deal, because it's such an important milestone.

I'd ask you to keep in mind three things as you think about the announcement that we will build a wealth management platform with UBS. First, this is a major milestone for the creation of a wealth management franchise at Broadridge.

Second, the decision by UBS to partner with Broadridge as the anchor client on a next-generation technology platform for the wealth industry is a testament to Broadridge's status as the FinTech leader trusted by leading global financial services players to deliver enterprise-wide technology transformation. Third, this is just the beginning.

The wealth management industry is undergoing significant changes, and we think Broadridge is especially well-positioned to help our clients adapt to meet those challenges. Now for the details. UBS is the anchor client for the new wealth management industry platform that we will build.

The Broadridge Wealth Management platform will be a next-generation open solution that will enable UBS and others as they sign on to enhance advisor productivity, create a superior client experience and drive enterprise-level efficiencies by mutualizing investments in technology, innovation and security.

The platform will bring together Broadridge's point capabilities across the front, middle and back office along with other best-in-class capabilities from both UBS and other third parties into a single platform.

Broadridge's front-to-back solution will include a modernized advisor desktop as well as order management, advisory, full back office functionality and integrated workflow across the entire enterprise to accelerate client onboarding and other key service tasks.

It will be fully open with a comprehensive, real-time data fabric that enables connectivity to UBS's and third-party applications. At our Investor Day last December, we said we thought we could build a third Broadridge franchise in wealth management.

To do that, we knew we would have to transition from a suite of point solutions to an integrated product set across the wealth managers' front, middle and back offices. Our engagement with UBS is a major step toward that goal.

Beyond the strategic benefits for Broadridge, the decision by UBS to partner with us to provide next-generation and mission-critical infrastructure is a powerful endorsement of our ability to deliver enterprise scale solutions for our clients.

In the words of Tom Naratil, Co-President of UBS Global Wealth Management, "Broadridge is the only FinTech player (sic) [leader] with the proven technology, scale and experience to deliver such a transformational solution." That's a tremendous statement of confidence from an important client and key industry leader.

It's also the direct result of the investment we have made in developing platform technologies in our capital markets franchise. The data fabric and other capabilities we have built developing a global post-trade management platform are now evolving to power our wealth solution.

We made a strategic decision to invest in and develop new technology capabilities so that we could meet the needs of the largest financial services players. And that investment continues to pay dividends. Finally, while the deal with UBS is exciting, it is only one step in building a long-term growth engine for Broadridge in wealth management.

We anticipate that to be a new development phase of the platform, which will give us time to reach out to other major wealth managers. The continued evolution of wealth management put pressure on the industry.

And the Broadridge Wealth Management platform will present a compelling value proposition to firms that need to increase the capability and reduce the cost and complexity for their technology and operations. Now let's turn to slide 6 to review our first quarter operating results. Overall, I'm pleased with our results.

We delivered solid recurring revenue growth across both our ICS and GTO segments. And we also benefited from strong mutual fund proxy activity. Most importantly, with one quarter in the books, we're on track to achieve our full-year guidance. I'll begin my review with Closed sales.

Closed sales were $18 million in the first quarter, down from $23 million last year. Keep in mind that we reported an exceptionally strong fourth quarter sales number, with a meaningful part of that activity coming late in the quarter, which resulted in a fairly quiet start to the year.

As always, the timing of major deals also plays a role in quarter-over-quarter comparison. With the signing of the UBS deal, which was not a first quarter event, we feel good about where we are year-to-date from a Closed sales perspective. Our Investor Communications segment continues to perform well.

Excluding customer communications, ICS recurring fee revenues, rose 14%, of which the biggest contributor was mutual fund and ETF interims. We also continue to see strong demand for data and analytics products, with contributions from strong organic growth, as well as the acquisitions we made in FY 2018.

Customer communications revenues, as expected, declined from FY 2018 levels. Event-driven revenues were a big part of the ICS results for the quarter. We saw one of the largest mutual fund complexes go out for proxy in the first quarter, which helped drive a significant growth in event-driven mutual fund proxy revenues.

That major role (11:00) behind us, we do not expect to see a similar level of activity in the remainder of the year. Now, let's turn to our GTO segment, which reported another strong quarter. Our business continues to benefit of new client additions, as well as higher trading revenue and a growth of financial services revenues.

Equity trading volumes across our platform increased by 19% and fixed income trades were up 4%, both of which contributed to our growth. The addition of new clients for our platform remains the biggest driver of GTO's growth and we're working through our healthy backlog to turn our recent sales performance into revenue.

We continue to make progress in on-boarding several large clients and are making good against our delivery commitments. With our ability to build and deliver complex global technology platforms for leading financial services firms over the last few years that gave UBS the confidence to partner with Broadridge.

So I'm very pleased to see the team executing against these commitments. Next, I wanted to provide an update on recent regulatory events.

As you recall, in June, the SEC requested comments on whether to review the fees broker dealers and Broadridge on their behalf charge issuers to distribute critical mutual fund disclosures as well as comments on how to modernize the design and delivery of these disclosures. That comment period ended on October 31.

Broadridge was pleased to share our data and comments, and we look forward to any next step the Commission decides is appropriate. For our part, we're confident in the value proposition that we provide for the industry.

By investing in digital technologies, we've already reduced by 40%, the total unit cost to distribute these important regulatory communications to benefit shareholders, including paper, postage and fees over the past 10 years, creating more than $400 million annual savings for the industry in 2018.

The total unit cost of these communications to beneficial mutual fund shareholders were delivered by Broadridge, including the regulated fees, it was 25% lower than the same communications to registered shareholders where fees are unregulated.

Keep in mind, this includes significantly higher complexity that we and our broker clients incur for beneficial shareholders in integrating holdings data across funds, addressing managed accounts, and protecting the security of this highly sensitive account information.

Going forward, continued growth of e-delivery, implementation of Rule 30e-3 and other new ideas like enhanced notices and summary reports can create hundreds of millions of additional annual industry savings.

By applying the full scope of our digital capabilities, we can continue to raise the level of engagement for fund shareholders while simultaneously reducing their costs. It's exciting for us. And we think it's compelling for our clients, for funds, and for the Commission.

There is also an SEC Roundtable event schedule for next week to discuss the full range of proxy-related topics. As a reminder, Roundtable brings together industry participants and can be helpful to source new ideas, but they are not part of any formal regulatory process.

We are always eager to engage with the SEC and others on how Broadridge can use technology to decrease costs and increase retail shareholder engagement.

So we're looking forward to presenting at the Roundtable to highlight how Broadridge and the brokerage industry have invested together and can continue to invest together to better engage and inform investors while driving down the cost of communications. So to sum up, Broadridge is off to a good start in 2019.

The UBS deal is a major step forward in building a wealth management franchise and an important validation of the team's strategy to focus on that market segment. Broadridge reported solid first quarter results, with ICS continuing to benefit the strong underlying growth and GTO continuing to grow at a steady pace.

We're on track to achieve our full-year financial guidance and on track to achieve a three-year financial objectives we laid out at our Investor Day last year. And finally, Broadridge continues to be well-positioned to drive growth for the long term.

Before turning the call over to Jim for a review of our financials, I want to thank our more than 10,000 associates for their hard work and dedication to the service profit chain. I also want to take a moment more to thank Rich.

Rich, you've been a tremendous leader for our entire company and a great friend and mentored me personally over the past eight years. Broadridge is in a strong position, with a great culture and an exciting future ahead of us. That is a direct result of your leadership and vision.

So thank you for that, and thank you for agreeing to stay on in your new role as Executive Chairman. Now let's go to Jim..

UBS win, when reported, will increase our backlog meaningfully. While the development work to standup this platform will be a use of cash beginning this fiscal year, we do not anticipate any revenue until 2021. Our growing backlog gives us good visibility into our medium- to longer-term revenue growth. Second, tax.

Our strong operating performance was boosted by the double effect of the full benefit of a lower corporate tax rate from the Tax Act and higher excess tax benefit a year ago. These tax benefits account for approximately 30 points of our 46% adjusted EPS growth.

Third, the new revenue recognition standard, or ASC 606, our first quarter results reflect the adoption of the new revenue accounting standard. The accounting impact on recurring fee revenue growth from ASC 606 was modestly negative in the first quarter. Overall, we expect the new standard to have an immaterial impact on the full-year revenue growth.

The new standard will, however, impact the quarterly comparison, and we've provided some data today that should help you to quarterize your estimates. Fourth, a remainder about the volatility of event-driven fee revenue.

A strong 30% growth in the first quarter's event-driven revenue includes a large mutual fund proxy that was anticipated in our guidance. Looking ahead to the second quarter, we expect a 40% to 50% decline in event-driven activity as we lapsed an exceptionally strong quarter in the prior year.

Our full-year outlook for event-driven revenues remains unchanged as we continue to expect the 2019 event-driven revenues will be 10% to 20% below the record 2018 levels. Fifth and final, guidance. With this good start to the year, we reaffirm our fiscal year 2019 guidance.

As we move to slide 7, let me expand a bit on the new accounting standards impacts on Broadridge's recurring fee and event revenue. First, we expect the full-year impact from this accounting change to be neutral to recurring fee revenue growth.

Second, in the first quarter, there was a modestly negative impact, one point of growth from the new accounting standard on recurring revenue growth. In the second quarter, we expect a modestly positive impact.

Third, the most significant impact will be in the third and fourth quarters when we expect a large amount of regulatory communications revenue to shift from the fourth quarter to the third quarter, a certain deferral conventions will no longer be applied under new standard.

We've provided a pro forma revenue view of fiscal 2018 under ASC 606 by quarter, by revenue type and by segment to illustrate the expected impact of this new standard. You can find these pro forma views on pages 15 and 16 in the Appendix of this presentation. This may be particularly helpful in calibrating the quarterization of your estimates.

Fourth, (sic) [sixth] (19:49) the new standard similarly impacts event revenue, but given the inherent volatility of event revenue, we don't believe it is helpful to assess event or total revenue growth, using the pro forma view. Now let's get to the revenue drivers, starting with total revenues.

Total revenues grew 5% to $973 million, with growth across the board in recurring fee revenues, event-driven and distribution. Event-driven activity was very strong in the first quarter, rising 30% to $77 million with a large mutual fund proxy contributing to this growth. Recurring revenues grew 5% in the quarter.

Organic revenue growth contributed 4 points to growth. Onboarding of new business or Closed sales, as shown here, was the largest contributor. An additional point of growth came from acquisitions made in our ICS segment in fiscal 2018.

Finally, the impact from the new revenue recognition standard was negative one point, drove recurring revenue growth in the quarter. Turning to slide 8. Adjusted operating income rose 15% to $123 million in the first fiscal quarter of 2019.

Growth was driven by higher organic recurring and event-driven fee revenues and the favorable margin profiles of trades and event revenue. This strong growth translated into 110 basis points in margin expansion to 12.6%. Adjusted EPS rose 46%, or $0.25, to $0.79 a share in the first quarter.

Approximately, $0.09, or 17 points of growth, came from the strong growth in operating performance with the balance coming from a lower tax provision. Broadridge's effective tax rate fell to 14% in the first quarter from 33% last year. The lower tax provision was a result of two factors.

First, the full benefit of the lower corporate tax rate from the Tax Act, which was not in effect a year ago. Excluding the ETB, our reported the tax rate was 22%. We continue to expect that our full-year tax rate, excluding ETB, will be 24%.

And secondly, the impact of our higher ETB in the first quarter, the ETB was $7 million in the first quarter, up from $1.5 million a year ago. We continue to estimate that our full-year ETB will be $25 million, down from $41 million in 2018.

Excluding the excess tax benefit, which can swing significantly from both the current period and the prior period, adjusted EPS growth was 40% in the first quarter as can be seen in the slide 14 in the Appendix. Turning to slide 9. I will now discuss the first quarter performance of ICS and GTO segments.

Our ICS segment total revenues rose 5% to $766 million in the first quarter, driven by higher event-driven, recurring fee, and to a lesser extent, distribution revenues. ICS recurring fee revenues rose 4% to $347 million, which included 2 points from acquisition made in fiscal 2018. Event-driven revenues rose $18 million to $77 million.

Event-driven strength helped to drive a nice pickup in the ICS segment margins. ICS earnings before taxes rose 29% to $59 million, mainly from the elevated levels of event-driven activity. The GTO business continued to perform well. GTO recurring revenues rose 6% organically to $228 million.

The largest contributor to organic growth was internal growth with robust equity trading volumes. Also, new revenue additions from sales maintained a healthy pace as Broadridge continues to extend the reach of its capital markets franchise. Moving to slide 10. Free cash flow is seasonally negative in the first quarter.

And that was again the case in fiscal 2019. Broadridge generated free cash flow of negative $111 million in the first quarter. In the quarter, Broadridge invested $16 million in capital expenditures and returned $42 million to shareholders in the form of the quarterly dividend. We did not undertake any share repurchase activity in the first quarter.

Let's turn to guidance on page 11. Our fiscal year 2019 guidance is unchanged. We continue to expect recurring fee revenue growth to be in the range of 5% to 7%, and total revenue growth to be in the range of 3% to 5%. We expect our adjusted operating income margin to be approximately 16.5%, up about 60 basis points from fiscal 2018.

We expect adjusted EPS growth to be 9% to 13%. We expect free cash flow to be in the range of $565 million to $615 million. We expect Closed sales to be in the range of $185 million to $225 million, which we expect will include the UBS Wealth sale announced in October.

Finally, as you think about Q2, please note that we expect event revenues to be down sequentially and year-over-year. And accordingly, we expect that earnings will be down significantly both sequentially and year-over-year. So to sum up, we're off to a good start to fiscal 2019 and remain on track to deliver our full-year guidance.

And importantly, we're also on track to meet our current set of three-year objectives, which conclude in 2020. As I hand the call back to Rich for the last time, I too want to express my thanks to Rich. Rich, I will be forever grateful for your leadership, your partnership and your mentorship. It has been an absolute privilege..

Thanks, Jim. This is my 47th and last earnings call as CEO of Broadridge. I'm delighted that Tim has encouraged me to stay on as Executive Chairman. In my new role, I will manage the board and work with Tim on specific issues for which I have a true passion, including digital adoption and working to engage retail investors.

My new activities will, in many ways, take me back to my entrepreneurial roots when I focused less on the day-to-day management of the company and more on value propositions to evolve the governance marketplace, to create opportunities for our business, and to improve the effectiveness and efficiency of the process for brokers, issuers, funds and regulators.

I strongly believe, both as an associate and a shareholder that the best is yet to come for Broadridge. The truth is that I'm more excited about the future of our company today than when I sat down in my extra bedroom 30-odd years ago to write the first business plan for our communications business.

The opportunities for what Broadridge does today are bigger than ever. My confidence is driven in part by the near-term growth path I see ahead, much of which is already in our revenue backlog.

As CEO, my confidence also comes as I look further ahead, where I see clear and tangible growth opportunities for Broadridge in governance, capital markets and now wealth management.

We have the right strategy, the right products, and the right investments to ensure that we can deliver value to our clients today, more value tomorrow, and even more value in five years. We also have Tim Gokey, the right next CEO and a strong and deep management team to lead our company to that next level of growth.

There is another less tangible reason why I think Broadridge is well-positioned for the future. One of the great lessons of my career is the importance of corporate culture to our success as a company, especially over the long term. Never underestimate the power of engaged associates.

At Broadridge, the core of our culture is the service profit chain through which highly engaged associates deliver superior service, generate strong business performance and create shareholder value. It takes engaged, dedicated and knowledgeable associates to serve clients well and to create real and sustainable competitive advantage and value.

Broadridge understands this, and we are committed to a culture of service and performance. We strive to be an employer of choice and are passionate about creating an environment in which every associate can drive, build their knowledge and skills and be rewarded for doing so. We do this in a way that puts the client first.

We view every client as a 100-year client, and client satisfaction is the common metric against which every one of our more than 10,000 associates is compensated. That focus on delivering value is recognized by our clients.

It is no coincidence that we are consistently rated as a top provider, which, in turn, creates greater loyalty and willingness to do more business with Broadridge.

So the next time you think about the importance of a 97%-plus retention rate, or you consider what growth rate to put in your model, remember that beneath those numbers lies a collective focus on serving our clients by our associates. I know Tim shares my passion for this subject, which is a key reason why he is such a strong leader.

Another factor driving my optimism about Broadridge is more tangible. And that is the consistent focus we have made on investment. One of my great satisfactions as CEO has been the increase in Broadridge's level of investment in products and people over the last few years.

I have seen all too often the negative impact that comes from placing too big a focus on maximizing short-term results; not at Broadridge. We have invested in our people to strengthen and deepen our management team and improve our employee benefits.

We have invested in our products as well as we have built our capital markets franchise and broadened the suite of services we offer to our governance clients.

Our investments in global post-trade management platform in extending our data services and enhance content for regulatory reporting in digital and identifying unique network opportunities in areas like fixed income have clearly positioned us in our clients' minds as an important and long-term player who they can rely on.

Some of our investments are expected to have a rapid payback period. Others like blockchain are longer term. Not all of our investments will be successful, but all are important.

They will drive the innovation and capabilities that will fuel our future growth and they are a clear signal to our clients that Broadridge will stand behind its solution and continue to adapt and evolve to meet their critical needs going forward.

Our focus on building a strong and client-focused culture and our capacity to invest shareholder money today against future growth, along with our strategy and a deep management team, as well as our track record of execution, we've been more optimistic than ever about Broadridge's growth prospects.

I am looking forward to watching Tim and the team deliver on that opportunity. As always, I want to thank our associates for the work they do. As I said earlier, it is important and the critical factor in our success. I also want to thank all of you on the call today.

When I became CEO, many people told me that dealing with analysts and investors would be among the most frustrating parts of my job. To the contrary, I found it to be one of the most engaging. Working with the Street has made me a better manager and helped me sharpen my points of view on Broadridge's value proposition.

On a personal level, I enjoyed my interactions with analysts and investors over the past decade plus. So thank you. The work you do is important for us and for our shareholders. With that, let's open the call up to your questions.

Tabitha?.

First question comes from the line of David Togut with Evercore..

Thanks. Good morning, and congratulations, Rich..

Thanks, Dave..

Jim, you indicated that revenue and earnings would be down sequentially in the December quarter. Now that event-driven is actually expected to decline sequentially, could you help us dimension this? Clearly, event-driven was much better than expected in the September quarter.

How should we be thinking about the December quarter in terms of revenue and earnings impact?.

Yeah, event-driven, Dave, it's going to be down off of an awfully big Q2 of last year. That'll certainly put pressure on total revenues for the quarter. We would expect those to contract somewhat off of last year's results. And then that, in turn, will drive the contraction both sequentially and year-over-year in earnings..

Okay.

Do you want to mention that at all?.

Dave, down over last year, obviously, we're much more – or in terms of our (34:58) full-year guidance just given the volatility in event, I want to make sure you are aware of that. But you can think of revenues down in the single-digit to low-double-digit growth rates..

Got it.

And just a quick follow-up, where do you stand with the on-boarding of the largest equity and fixed income trade processing client that you've signed?.

Hi, Dave. It is Tim Gokey. That project is continuing to proceed very well. It has a number of phases. It will not affect revenue this year. It will begin to affect revenue next year..

Understood. Thank you very much..

And, Dave, that's part of that confidence I talk about, about that revenue backlog as we look forward to the future and yet have all these great investments that are continuing to generate new activities..

Got it. Thank you..

Your next question comes from the line of Darrin Peller with Wolfe Research..

All right, guys. Thanks. Rich, I'll say the same. We're going to miss having you on these calls, but thanks for everything. Guys, let me just start off. When I look at the overall growth profile and we back out the event-driven, obviously, higher trading levels and activities is still contributing a lot.

First of all, can you give us some color on your thoughts on that first in terms of the position growth potential and then sustainability around that and what you're seeing in the market and what you expect.

And then, secondly, if we were to just look at the recurring revenue side, either segment, was there anything that surprising you to the upside or downside in terms of the growth rates of either one of them. It looks like they're more or less in line with what you have guided.

But I'd be curious to hear if there's any puts and takes or positives and negatives on each..

Darrin, this is Jim.

What was that? Can you just repeat that last part? The last part of your question?.

Just if you look at pure recurring revenue, putting aside the event-driven revenue, which obviously had a massive swing.

Just purely event – recurring revenue rather than 4% growth in the ICS, was there anything around that in particular that would have – that surprised you either direction?.

Sure. So, as you said, I would say the recurring revenue growth, I think the call-outs are one for us. We're very focused on that sales additions number. And when you get seven points of growth coming from sales, that's right in the ZIP Code, where we want to be. So that's very much in line as we continue to do that sales.

We continue to think on an absolute basis our revenue additions will grow throughout the year. That's the model of the backlog that Rich was just referring to. So that's very much in line. Really no call-out on losses. It's been pretty steady especially with the communications business impact on that number.

As you get to – as you can see, there were ins and outs between the two segments where you had strong internal growth coming from the GTO side largely trade-driven offset by some communications-related volumes in ICS. Now it's early in the year, but obviously, we'd like to see continued high-single-digit growth in the interim stock record growth.

14% equity stock record growth is great. But it's the first quarter, it's a tiny quarter, but I'll take that over the alternative. So we're comfortable there. So as we look at this, internal growth is always going to have puts and takes. And so we've always thought long term, a neutral to one point type of contribution is healthy.

So we're right on track for that type of contribution this year. As always, it's going to come down to our ability to onboard sales throughout the year in increasingly bigger numbers..

Okay. All right. That's helpful. Let me just follow up. On the UBS side, again, a very large and incremental win from a bookings standpoint. I guess, I'm just curious if you can give us a little bit more color on what this is that you're really going to be able to – like how are you going to build around this.

What's the potential for using this as the base client you mentioned and then adding incremental clients to it over time. I know you've talked a lot about wealth as an opportunity for a long time now.

I'm just curious what this does to change that if anything?.

Sure, Darrin. It is Tim Gokey. And as you know, we think the opportunity in wealth is that the industry is changing quite a bit. It is creating a lot of needs for the brokerage industry, particularly the top 25 broker dealers. And there's no real skill technology player serving to wealth industry.

And so as people think about evolving their technology, you're in a position of either having to build it yourself or of buying a bunch of point solutions and having to integrate those together and keep them in synchrony with each other and make them work and that is very extensive.

So we think the opportunity over time to build an ecosystem – and not everyone is going to want to do a transformation the way UBS is. But to build an ecosystem over time, we can buy a part. But the more you buy, the better it is, because it all works together already, it is already integrated.

As we talk to people in the industry about that value proposition, we get very, very positive feedback..

Okay..

So with this UBS announcement, obviously, we've had a lot of interest. In terms of transformational conversations, those conversations are long and the timing is difficult.

But the real benefit is that with this investment, we'll be able to bring all of our different solutions closer together, so they interoperate and it actually helps sales across our entire suite..

Okay. Just last quick one, and I'll turn it back to the queue.

But, Jim, the customer communication side, are you still on track for – after those couple of clients go their way and you anniversary that to be able to grow that business in the low-single-digits again or?.

Yeah. So, Darrin, we talked about our expectation for this year contraction again for that business. We remain optimistic about our ability to sell our way into growth as we burn off some of these losses, the market opportunity remains large.

But as we think back to our goals in terms of achieving synergies, we've done that and are going to exceed that. And then, that second pillar that we're really tackling is winning larger in-house deals. And that's still in progress although we've been meeting our sales plans out of the gate.

So the goal is to convert that and then similarly we think we can get this back to a point of low-single-digit growth with the longer-term goal of really making this a strong digital play..

Okay. That's great to hear, guys. All right. Thanks very much..

Your next question comes from the line of Peter Heckmann with Davidson..

Hey, good morning, everyone. Just following up on UBS, real important anchor client. In terms of talking about the total investments there, have you quantified that number? And do you anticipate partnering with anyone? I know you have a number of point solutions right now.

But in terms of areas like portfolio reporting, rebalancing, are you really looking to build your own or rely on some partnerships?.

Yeah, Pete. This is Tim Gokey. We have definitely quantified the investment in extreme detail, and it was definitely a lot of the work that we have done with UBS to get to this point.

I think because it is a multiyear build and because we are partnering with them, I don't think you will see really measurable or a significant impacts on our cash flows as a result of this. It is a significant investment, but it's something that I think you'll see absorbed sort of within the business more broadly.

In terms of the different components and which things are building versus leveraging, I do think that with the advanced technology, the ability to have an open API-driven architecture allows people to really have the best of all world. So we are definitely going to be supplying some of the core components and container and data fabric.

UBS is going to be building some components and will be integrating third-party components. And I think that creates a future for wealth managers where they can really assemble a suite of things that interoperate because the integration framework has provided itself. That's something that we're very excited about. We think we played very well..

Pete, this is Rich. This goes to my comments and I specifically put in my script about I feel arguably best about the long-term way we've run this business and our focus on investing in the future. So a lot of what Tim is talking about is under his leadership things that we've been doing already.

And so this platform that Tim and the team have presented and will execute against for UBS is so dramatically different than the company we started with over a decade ago and the offering we started with over a decade ago.

And a good part of what we're doing to get here, we together with our shareholders have had in our run rate to create a company this strong with opportunities going forward this strong across all of Broadridge..

That's great. That's great. Thanks. And then, just a follow-up on – can you just maybe outline and maybe there's not enough precedent to totally outline the timeline for the SEC review, the twin reviews of mutual fund fees and the overall proxy process.

And how long do you think that will take to play out? And then, is there a way to quantify the range of outcomes between cuts in fees in existing services, new services with new fees, potential introduction of partnerships.

Is there any way to quantify the range of outcomes from the SEC review?.

Sure. Pete, it's Tim Gokey. So when we went through this just to talk about the range of what the timeline looks like. When we went through this previously, the topic opened before 2010, when I arrived here and when I arrived here in 2010, it was in full swing.

The Proxy Fee Advisory Committee that was appointed by the New York Stock Exchange did the work over a few years then went back to the SEC. The final rules came in place in January 2014. So that was a four-year process in that case. So these processes can go on. In this case, the SEC is looking for comment, whether they should even initiate a process.

So we don't know whether there will be a process or not. So that is a part of what the discussion was. And when you look at the timeline around 30e-3, that was also a three- to four-year process. So these things do tend to go on.

In terms of quantification of the impact – and this is in our letter to the SEC that the total fee for the portion that they have asked for comment on that we invoiced last year was the $150 million. So there could be some up or down on that $150 million, you can put your own percentages on that.

I will note that with the implementation of 30e-3, we are expecting to see additional fees as we help the industry with a new notice fee. So I think, again, for us, the real goal here is to continue to apply digitization and to apply technology to improve the investor experience and to reduce costs for the industry overall.

And it's interesting, because we can see very clearly before us, probably the next $500 million of opportunity in annual savings for the industry, which is more than three times the fees that are being generated today.

So we think that power of continuing to take cost out across the entire ecosystem really demonstrates the value that we can create as a central player here..

Think about going into a budget meeting, call it the biggest one in the world for the country, okay, where we went from trillions in deficit to trillions in surplus. That's what Broadridge has achieved in this process over the last decade.

We went from being more expensive with true recognition that it was more complicated, but that technology mattered and we could probably drive cost out.

We've driven cost out to the point where it is dramatically cheaper and will continue to be dramatically cheaper than the people who are paying the bills are achieving on the cost of servicing their own accounts.

This is one heck of a position of strength, all right? The real opportunity and the thing that I'm excited to be doing as we go forward, let's now move this to the next phase of the dialogue of how do we make investors more knowledgeable, more engaged, participate more in governance, okay? And as Tim pointed out, we're going to do that all at a lower cost still.

So we're really looking forward to whether it be roundtables or these dialogues, all right? And this isn't new for us. We're proud of what we've done. But the investments I talked about earlier position us, okay, as Tim showed, to take this to the next level of cost savings.

But, as importantly to someone like Jay Clayton and his goals for retail engagement, we can lower the cost and raise the engagement levels with technology as we go forward. And let me be clear. We are the only ones I see with the level of technology that we're rolling out right now despite some hearsay from other people..

Okay. Your next question comes from the line of Oscar Turner with SunTrust..

Hey. Good morning, guys..

Hey, Oscar..

So another question – follow-up question on wealth management.

I was wondering at a high level, can you provide any color into what kind of long-term revenue opportunity this wealth management partnership represents? And how do you think about this new platform as a revenue opportunity relative to the size of your wealth management business today?.

Sure, Oscar. This is Tim Gokey. We dimensioned our overall wealth management business when we spoke at our Investor Day last year on the order of $400 million. And this opportunity is definitely relevant in the context of that. We don't comment on individual contracts. And so I can't give a specific number, but it is definitely a relevant number.

I think what is more relevant is how it sets the stage for other transformational opportunities like this and for increasing the sales of our overall wealth management suite by bringing things more together. Wealth management has been one of our faster growing areas over the past few years. We've had that revenue growth.

And that has been definitely in the above overall Broadridge and – in the low-double-digits. So we feel good about our ability to grow this overall part of our business, and when we're at our next Investor Day to be talking about the progress that we've made there..

Okay. Thank you. And second question is just on the Other ICS segment within ICS.

Can you provide any color on the organic growth in that sub-segment this quarter and then also color into what drove that strength? Seems to be – continuing to be additive to growth and not really reliant – or not as reliant on trading levels as some of your other segments..

Oscar, this is Jim. Remember, in that Other area, you've got a lot of our data and analytics business that Tim talked about, that's been driving the lion's share of the growth and the organic piece of that. There obviously are some inorganic pieces in there.

That's where we've added some additional data and analytics businesses last year as well as some investments in the issuer space, which has added growth to that area. But if you look at the organic piece of that, it really is a data and analytics story, which is terrific. That's been an area of real investment for us. So that's the source..

Thank you..

I'll just – I will add on to that, which is we are very excited about the data and analytics business that we're building, largely serving the fund industry, but really serving asset management more broadly, there's a whole opportunity out there.

Because today the data that asset managers need to manage their overall business in terms of sales and product management, they have to stitch together different pieces from institutional channels, from retail channels, from North America, from the rest of the world.

And the vision (54:58) leader that has is to really create that a universal dataset that covers all of those and really save large institutions a lot of cost. So I'm trying to stitch different pieces together. So we think that's a vision with a lot of (55:14) over time..

Okay. That's helpful. Thank you..

Your next question comes from the line of Chris Donat with Sandler O'Neill..

Good morning. Thanks for taking my questions. Wanted to ask one more on UBS – for Tim.

Just in terms of thinking about how the milestones look going forward like how we can track success, should we be thinking about looking for things like new partners joining the platform like other banks and brokers or completed pieces of it, or expansion outside the United States.

Just what sort of qualitative things should we expect as indicators of success?.

Chris, that's a great question. Thank you very much for asking. I think always in a long-term project of this nature, having those interim markers is important, having those that are externally available is more challenging. I think this is something we will definitely keep you up-to-date on as we go through in terms of our progress.

And in terms of new partners, that is on the nature of what I mentioned in terms of the other people looking for a transformational approach and those conversations are always long, and in fact, the timing is always hard. Certainly, if we were to announce an additional partner that would definitely be a very positive indicator.

But if we don't announce one before this goes live, I wouldn't take that as an indication that we're not having the success we want to because of what I said before about the increase we expect in the sales of our individual point solutions that's becoming of late (57:11)..

Okay. That's helpful.

And then, for Jim, just in terms of the guidance that you gave in August for Closed sales, at that point when you gave it, did that incorporate UBS being signed? Or was that something that was just in a broader mix?.

Chris, this is Jim. Just a brief comment and Tim can add on, which is clearly UBS didn't sneak up us. So we had contemplated this type of deal in the year, but you always got to look at large deals that move or change shape or the like.

So all that we take into account as we think about the full year, but obviously starting a year with this type of opportunity gives us better visibility, but we're still a long ways to go..

Okay..

And Chris, it's Tim. Just adding on to that, just as Jim says, given the timing of these things, I mean you think it's close, and then it takes an additional entire year. So you always do have to have some sort of discount factor in there even when you think you're very close.

What we do know is we feel very good about our overall pipeline for the remainder of the year. We never really address sales guidance until it happens. So we're not making any comments about that. But we feel solid about the year and this certainly increases our confidence..

Okay. And then, just wanted to give my best wishes for Rich on the next phase here, but to also point out that now, Rich, you've set the bar kind of lower for us analysts, it's been frustrating for Tim. We came in below but....

I meant what I said, Chris. I really enjoyed the interface. And look, we have and will continue to have great transparency. We respect what you guys do and I thought it was terrific. So thank you..

All right. Take care, Jim. Or Jim and Tim, especially..

Thanks, Chris..

Your next question comes from the line of Patrick O'Shaughnessy with Raymond James..

Hey. Good morning and congratulations, Rich. Maybe a question on the SEC comments that were filed. The ICI is proposing that the SEC allow funds to hire the vendors that fill their regulatory communications instead of the current infrastructure where the higher decision is up to the broker dealers.

Is that even a feasible alternative to the current infrastructure?.

Hey, Patrick. It's Tim. Thank you very much for asking that question. And before I answer that, one thing I do want to say is that we are pleased that there are some important areas of agreement between us and ICI in your letter. We both agree in the value to investors of summary content and how that can lead to a higher level of engagement.

And that's an important shared view. And we were pleased that they recognized although it wasn't until deep in the report, but they recognized in their report that the total unit cost is lower on the beneficial side. And so we're pleased with that.

We were – I think we were a bit surprised with their proposed approach and we were surprised that they really chose to take on their broker dealer distribution partners so absolutely strongly. I'll hit both of those.

So in terms of the approach of not having a central distribution party, something like this was proposed by The Stock Transfer Association in 2010 at the beginning of the last process.

And the Processes Advisory Committee looked at that in some detail and really determined that it was not workable and that it would be disruptive for the industry, and so really recommended going into different direction.

I think the other surprise was that ICI is sort of taking on their broker distribution partner – broker dealer distribution partners by first of all suggesting that they share their entire client list with the funds.

That when they give those client list over to funds and the mailing houses that the brokers remain responsible for the cyber risk and that the brokers would no longer be reimbursed for substantial cost that they incur on the funds behalf. So that was, in fact, surprising to us. We don't think that's workable.

But irrespective, our approach is to really look forward to work for our fund clients, our broker clients, mission to move things more positively. And as we said, we believe through technology we can increase investor engagement.

We can build on the 40% savings that we've already created in the past 10 years and we see savings for the industry – annual savings of another $500 million, which is more than 3 times the total fees today..

Great. That's very helpful. Thanks, Tim. And then, from my follow-up, I guess, I should also ask a question about UBS.

Was that when an open and competitive RFP process?.

Yes, Patrick. It was a very extended process with ourselves and a number of others. Some others that are in our industry, some other technology firms that are not in the industry today.

And UBS really looked at very extensively – and I think this is one of the things that really pleases us is that after an extensive process they looked at really everything that is out there and everything that's available. After that extensive process, they chose to partner with us.

We thought that was a very strong endorsement of our track record, our capabilities and our strategy..

Great. Thanks so much..

Your next question comes from the line of Puneet Jain with JPMorgan..

Hey. Thanks for taking my question. And I'm not going to ask about UBS now.

So on Closed sales, are you seeing any impact from the recent stock market weakness and overall uncertainty on pipeline and business specifically in the GTO business there?.

Puneet, hi. It's Tim. Thank you for asking. No, we really are not seeing any impact from the volatility in the market. I think that obviously is helping our internal growth in terms of increased trading activity.

But, in terms of the conversations that we are having with our clients and our prospects, they continue to see the need for ongoing transformation for mutualization. And so our conversations remain really very strong..

Great. And then, on slide 15 of the deck, it seems like overall accounting adjustment was $59 million. Understand recurring adjustment was about a point of headwind.

But is it fair to say much of the remaining was related to earlier recognition of Vanguard proxy last year?.

I would just comment – I think you're right to call out that is event-driven. And remember, we had a convention where we would recognize the revenue about 30 days after we had mailed it. And so that's what you're seeing is the change and that assumption would have been recognized more immediately.

And it can be equity or mutual fund proxy where that takes effect, which is why I said, I don't think it's really all that valuable to do this comparison. Because depending on the month, a proxy event falls can change this. There's no seasonality – underlying seasonality to our event business. So that's what you're seeing.

That's why we've chosen to focus on the recurring fee driver impact just because the event there's really little to be learned from that..

And let me quickly ask there.

So for the full year, you do not expect much revenue impact, margin and EPS impact will also be minimal, then?.

Correct. All very minimal. You can even see that in last year's – at least from a revenue standpoint, pretty modest all in. And we expect immaterial for the full year on revenue and earnings..

Got it. Thank you. And congrats on new roles, Rich and Tim..

Thanks, Puneet..

And at this time, there are no questions. I'll turn the call back over to Rich..

Okay. I told Edings today, I got the last word. I want to again thank everyone. It's really been a privilege for me, and also static that I get to be part of the organization going forward, whether it be as Chairman or in an Executive capacity to work with and assisting Tim.

The potential for Broadridge to transform our industry is greater today than it's ever been before.

The opportunities in retail engagements that come from roundtables, the opportunities that will have on governance going forward, and capital markets where we continue to grow and the importance of what we do every day and now on wealth really, really of tangible proof points that the best is yet to come for Broadridge.

Again, thank you and chose to have a great day..

Thank you. That concludes this conference call. You may now disconnect..