Good day and welcome to the Broadridge First Quarter 2023 Earnings Conference Call. [Operator Instructions] And please note that this event is being recorded. I would now like to turn the conference over to Edings Thibault, Head of Investor Relations. Please go ahead, sir..

Thank you, Cole. Good morning, everybody and welcome to Broadridge’s first quarter fiscal year 2023 earnings call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO; and our CFO, Edmund Reese.

Before I turn the call over to Tim, a few standard reminders. One, we will be making forward-looking statements on today’s call regarding Broadridge that involve risks. A summary of these risks can be found on the second page of the slides and a more complete description on our annual report on Form 10-K.

Two, we 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.

Additionally, on September 26, we filed an 8-K announcing changes to our segment reporting regarding the impact of foreign exchange rates on our business. This change is the final step in aligning our foreign currency reporting with industry standards and is reflected in our first quarter report.

From this point forward, our earnings materials were referenced recurring revenue growth percentages on a constant currency basis, both for our results and our forward-looking guidance. Please reference our filings and investor materials for the corresponding reconciliations. With that out of the way, let me now turn the call over to Tim Gokey.

Tim?.

Edings, thank you very much. Good morning, everyone. I am pleased to be here to discuss our strong start to fiscal ‘23. There is a lot to cover.

So I’ll walk through our strong results for the quarter, provide a business overview and then share some thoughts on why Broadridge is well-positioned to drive profitable growth over the balance of fiscal ‘23 and beyond. Before I start, I think it’s helpful to provide some context given the volatile conditions the market and economy are experiencing.

Despite market declines, we have seen continued growth in investor positions. Given our forward testing, we have visibility about 6 months ahead, which puts us well into the busy part of proxy season and we see continued solid growth in investor positions over that period.

Our conversations with our large broker-dealer and asset manager clients also continue to be positive as our clients continue to drive to modernize their technology. With that as a backdrop, let’s start with our strong results. Recurring revenues rose 9% on a constant currency basis, with strong growth across both our segments.

Adjusted EPS was $0.84, down year-over-year, but modestly ahead of our expectations. All in all, a strong start to the year. Second, as I mentioned, demand for our solutions remains strong. We continue to benefit from increasing investor participation, which is fueling very healthy stock record growth.

After a record sales year in fiscal ‘22, we are off to a good start to fiscal ‘23, keeping us on track to deliver on our closed sales guidance. Third, we continue to drive long-term growth across our three franchises. In governance, we are enabling increasing shareholder engagement for our fund clients.

In capital markets, we are delivering on trading innovation and global simplification. And in wealth, we are seeing a growing pipeline for a powerful suite of modular solutions. Fourth, remember that our fiscal year extends 6 months into calendar ‘23.

Today, we are reaffirming our guidance for that full period, including 6% to 9% constant currency recurring revenue growth, continued margin expansion and 7% to 11% adjusted EPS growth. That puts us on track to deliver at or above the higher end of our growth objectives for the 3-year period ending next June.

When we do, it will be the fourth consecutive 3-year period covering 12 years in total that we have delivered on our recurring revenue and adjusted EPS objectives. Fifth and last, we remain well positioned to deliver continued growth in the years ahead even as the economy faces growing uncertainty.

Providing mission-critical services that power investing in governance positions us to deliver resilient growth through the ups and downs of the financial cycle.

Our visibility into position growth and our $430 million backlog gives us confidence in our outlook for this year and our investments which are attracting growing interest from clients, positioned Broadridge to deliver increasing returns and long-term growth well into the future. Now, let’s turn to Slide 4 for an update on our business.

I will begin with our ICS or governance business, which had another strong quarter. The biggest driver of that growth was new sales, especially in our Fund Solutions and Customer Communications businesses. Position growth remains robust despite market headwinds, rising 9% for equities in the smallest quarter for equity proxies and 11% for funds.

This growth is being driven by continued activity in managed accounts on the equity side and by continued strong demand for passive investments on the fund side. Beyond the first quarter, we are now seeing increasing visibility into position growth for the seasonally more meaningful second half of our fiscal year and the outlook remains very healthy.

As you know, we continue to drive innovation and governance, especially around digital solutions. Last year, we rolled out end-to-end vote confirmation for nearly 3,000 public companies. We pioneered pass-through voting for funds, updated our proxy vote app and delivered nearly 2,500 virtual shareholder meetings.

This year, we are continuing to innovate. Last month, Charles Schwab announced it is leveraging our network capability to query a sample of retail shareholders to help guide Schwab’s voting and select Schwab funds and ETFs.

We are seeing similar interest in past due voting, including for retail fund shareholders from several of our largest asset management clients. Beyond our regulatory solutions, we saw growth across our other product lines. Customer Communications revenue rose 11%, driven by both print and digital.

One digital contributor was the launch of our omnichannel wealth and focused solution, Visterra. Today, wealth clients may receive as many as 120 communications a year from their wealth manager. Wealth and focus consolidates the critical information across various client and regulatory communications.

Creating a single simple communication simplifies the investor experience while providing advisers with new communications opportunities, all at lower cost. Following our early rollout, nearly 90% of participants prefer the new solution. It’s an exciting example of how our digital capabilities are creating increased engagement at lower cost.

Before I leave our governance business, I want to update you on a new SEC regulation on tailored shareholder reports for funds and ETFs that was announced last week. Many of you recall we first highlighted this regulation when it was initially proposed in August 2020 and we have been providing occasional updates since.

The SEC voted 50 last week to implement a measure that replaces the existing long-form annual and semiannual reports with a shorter two to three-page summary document.

The SEC is aiming to use these shorter reports to provide key information in a more digestible format to keep investors better informed and more engaged at lower cost than long-form reports. We are still studying the full implications of the new rule, but let me offer some thoughts.

There is no question that the shorter reports will create a better investor experience overall and especially for digital delivery. They will also create a path to even further digitization, which as you know is currently about 80%. Long-term, that’s positive for funds and for Broadridge.

On the other hand, our fund clients are concerned about the cost and complexity of the new rule, because they will have to compose both long-form and short-form reports. And we estimate the impact on Broadridge assuming no offset from new services would be a $30 million reduction in recurring revenue phasing in over our fiscal ‘25 and ‘26.

Just as we did with 30e-3, which also had its complexities, we will work with our clients to create a cost effective industry solution, which will be good for investors and good for funds. Moving to capital markets, revenues rose 14% constant currency driven by strong growth from Broadridge trading and connected solutions and from new sales.

BTCS continues to perform well, with strong sales and very positive client conversations about simplifying global training and longer term driving front to back. We also saw strong growth in the rest of our capital markets business powered by new sales and increased fixed income trading.

We achieved a key milestone with the implementation of our next-gen global post-trade platform across the North American fixed income operations of a major U.S. based bank and we have already begun the next phase, which will extend to unified global equities and fixed income.

Turning to Wealth Management, revenues rose 5%, driven by revenue from new sales. I am pleased to report that our wealth sales pipeline is growing substantially, up 25% year-on-year as we begin to bring to market completed modular solutions from our new wealth platform.

We are now demoing live solutions to our clients, which is creating a much deeper level of engagement and we are seeing real client interest. We are confident that our sales of module solutions from the new platform are on track to meaningfully contribute to our FY ‘23 closed sales with an even bigger impact in FY ‘24.

These modular solutions are part of the broader wealth platform we are creating with UBS as an anchor client and UBS has been a fantastic partner. We are now making very exciting progress in that broader solutions. We are development complete on 26 of our 29 platform areas, with the remaining 3 to be complete this month.

On the testing side, we are completing the fourth of five integrated testing cycles with integration testing largely complete by the end of the calendar year. So, it’s great progress that keeps us on track for full rollout. And as Edmund will outline, we are now through the peak of our investment in this key program.

With that, let me take a step back and put our growth strategy in context. The parts of wealth management technology and operations that we touch are a $16 billion addressable market and wealth managers face a pressing need to modernize and digitize through operations.

We expect that the wealth management platform and the suite of module solutions we are building will put Broadridge in position to be a leading provider in the growing wealth space for the next decade and beyond.

That position taken together with the benefits we are already seeing to our product and technology capability across Broadridge should strengthen our ability to build an increasingly strong, profitable and high return business going forward. I will close my remarks on Slide 5.

As we move from more uncertain macroeconomic outlook, Broadridge’s resilience becomes an even greater strength. Demand for the critical services we provide has remained strong, giving us confidence in this year are forward-looking to investor participation in the next 6 months and our $430 million backlog gives us good visibility.

As a result, we are reaffirming our guidance for fiscal ‘23 and will deliver at the high-end of our 3-year objectives. Longer term, we are serving a $60 billion market with growth driven by long-term secular trends.

Fintech innovation is forcing banks to digitize and innovations like managed accounts, zero commission trading, direct indexing and pass-through voting are continuing to drive investor participation. As our clients seek to reduce costs partly in response to macroeconomic trends their need for Broadridge’s low cost platform solutions increases.

Third, we have built a strong and resilient business model, focusing on recurring revenues and sustained growth. Excluding our distribution revenues, fully 93% of our revenues are recurring, covered by multiyear contracts across all three of our franchises.

This revenue is supported by our long history of putting our clients first, which has driven a 98% revenue retention rate. At the same time, growth enables us to drive scale efficiencies, compelling our margins and funding additional investments to help drive additional growth going forward.

Fourth, as we look beyond fiscal ‘23, the investments we have made and are making in our digital capabilities and our wealth and other technology platforms and extending our capital markets business, leave us better positioned than ever to drive long-term profitable growth with increasing returns through this cycle and beyond.

Finally, to support this long-term growth, we are also driving forward on sustainability. We recently released our latest sustainability report highlighting our commitment to drive sustainable growth, engage our talent and diverse associates and reduce our and our clients’ missions. I encourage you to go to our site and review our progress.

Before I turn the call over to Edmund, let me take a moment to thank our associates. None of what we do is easy and none of it would be possible without their focus on clients, on creating the future and on delivering results today. Thank you. Now, I will turn the call over to Edmund to review our financials.

Edmund?.

first, elevated low to no margin distribution revenue.

For the full year, we expect 45 to 50 basis points impact on adjusted operating income margin with no impact on adjusted EPS; second, rate inflation on our material expense, which we passed through at a 1 to 2-month lag; and finally, the carryover impact of investments that we began in fiscal ‘22.

As we enter the second quarter, we expect to see increased margin expansion from the targeted cost initiatives that we initiated in Q4 ‘22. These actions along with the operating leverage inherent in our business model, give us confidence that we will meet our earnings growth objectives even in this period of macroeconomic uncertainty.

Let’s move ahead to close sales on Slide 13. Closed sales of $29 million were essentially flat year-over-year. We were encouraged to see strong closed sales across both ICS and GTO with strong contribution from BTCS.

And as Tim noted, our pipeline remains strong, and we remain confident in our full year closed sales guidance of between $270 million to $310 million. I’ll now turn to cash flow and capital allocation on Slide 14.

I’ll start with a reminder that Broadridge’s cash flow generation is typically negative in the fiscal first quarter and strengthened throughout the year. Q1 ‘23 free cash flow was negative $218 million, down from negative $151 million last year.

Total client platform spend for Q1 ‘23 was $163 million with the wealth platform accounting for the most significant part of that investment. We expect client platform investment to decline for the balance of fiscal ‘23. And for the full year, we expect client platform investment to be lower than our fiscal ‘22 peak year of investment.

We project fiscal year ‘23 free cash flow conversion to be higher than fiscal year ‘22 and will return to more historical levels in fiscal year ‘24.

Given the significance of the wealth platform investment and the importance to our franchise growth, I want to share some additional insight on the impact to Broadridge margins and earnings growth as well as the expected return on investment.

As Tim noted, our progress on the platform is strong, and we continue to expect to go live in mid-calendar ‘23. As we previously discussed, we expect to begin to recognize revenue and amortize the investment spend when the platform goes live.

Based on the existing and in-flight client agreements, we project average annualized revenue to be approximately $100 million, with average amortization cost per year of approximately $65 million. The addition of the servicing and infrastructure costs will make the initial platform rollout modestly dilutive to Broadridge AOI margins.

We are confident that the operating leverage and ability to prioritize other investments inherent in our business model will allow us to mitigate the dilution and continue to deliver on our earnings growth objectives.

Beyond the agreements noted above and as Tim noted, our pipeline for wealth management sales is strong and growing, giving us confidence that we will bring on $20 million to $30 million in new wealth sales per year at accretive incremental margins.

Together, we expect the combination of existing clients in new sales will drive a return on invested capital that is higher than our cost of capital and along with the continued performance in our core business, drive Broadridge ROIC to mid to high teens within our next 3-year performance period.

Let’s now turn to Slide 15 to review our fiscal ‘23 guidance, followed by some final thoughts on our first quarter results. We are reaffirming our full year guidance on all of our key financial metrics.

We continue to expect 6% to 9% recurring revenue growth, approximately 50 basis points of adjusted operating income margin expansion, adjusted EPS growth of 7% to 11% and closed sales of between $270 million to $310 million.

Additionally, we expect approximately 75% of our earnings to be generated in the second half of the year, with 25% in the first half, in line with our performance over the last 10 years. As a reminder, our fiscal ‘23 guidance extends into the first half of calendar year 2023.

Despite a challenging macro environment, we have confidence in our guidance given the visibility into our forward-looking recurring revenue.

Our fiscal ‘23 recurring revenue growth will be driven by our strong sales backlog, which was $430 million at the end of fiscal ‘22 and by our equity and fund position growth, where our latest testing supports mid to high single-digit position growth.

And as I noted earlier, the inherent operating leverage in our business and the targeted cost initiatives that we initiated at the end of last year will help us meet our earnings objectives. Finally, let me reiterate my key messages. Broadridge delivered strong Q1 financial results.

Demand for our services remains strong and our testing is showing continued equity and fund position growth into the second half of the fiscal year. We expect our capital investment to decline improved free cash flow conversion in fiscal ‘23 and to return to more historical free cash flow conversion levels in fiscal ‘24.

We have a resilient business and financial model that performs through the economic cycle, and we are confident in reaffirming our fiscal year ‘23 guidance. With that, let’s take your questions.

Operator?.

Thank you [Operator Instructions] And our first question today will come from David Togut with Evercore ISI. Please go ahead..

Thank you. Good morning. Given the divergence between the strong revenue growth of 8% and the 15% decline in operating income, could you dig into your investment spending plans for this year, particularly as they affect both the income statement and the cash flow statement and the pacing of those plans.

So we get a better sense of kind of the margin and quarterly earnings cadence throughout the year..

Sure. I’ll just make a comment here, Dave, and then I will let Edmund take that on in some detail. First of all, good morning, thank you for the question. I think I just want to reiterate that our results today were – this quarter were very much in line with our expectations, a little bit above.

And we made investments at the end of last year that we knew would make the expense growth for this quarter a little bit stronger. And so we don’t see any surprise here. We do see a more evenly paced year this year, but I’ll let Edmund comment on that..

David, thank you for the question. I want to reiterate a few points to add on to what Tim just said. First, if I think specifically about Q1, as Tim said, it was modestly better than our expectations. As you think about the divergence between revenue and the adjusted operating income decline.

The key drivers there, as I noted in my earlier script, was the year-over-year growth in event-driven revenue. We had a very strong quarter, higher than our 7-year average at $63 million, but we’re coming off an unusually high Q1 ‘22. That’s the first item.

And the second item was the carryover of the investments, which we will continue to do as we think about driving revenue growth in each of our businesses, the carryover of those investments into fiscal ‘23.

As you look out for the rest of the year, first – the key point that I want to make is that – as you know, over 75% of our earnings have historically come in the second half of the year.

The first half is a much smaller portion of our overall earnings, that we are an annual business, the noise in between the quarters, I do not think – we certainly run the company as an annual company. We think about our earnings overall. That said, I do expect margin expansion into second, third and fourth quarters.

And I will reiterate the 50 basis points of margin expansion that we have as part of our guidance. We are coming off a very tough economic environment in the last 2 years and drove 60 basis points of margin expansion. So, I continue to be very confident in our ability to hit the margin expansion and to deliver earnings growth in the 7% to 11% range..

And I just might add on all of that, which is the – that we are expecting 25% of earnings in the first half..

Appreciate that. Just as a quick follow-up. Edmund, you talked about the client platform investments, and that’s really the number one incoming investor question I get on Broadridge, which is expected returns on the large investments in the wealth management tech business.

Can you shed any additional light on the pipeline? Any line of sight you have into other large signings beyond UBS a few years ago?.

That’s a great question. Let me make one or two comments, and I will turn it over to Tim to maybe talk about the pipeline because as he said, we have a strong pipeline here.

First, I think the key thing for me David, is that when we make these types of investments, particularly large platform investments to grow the franchise, they are initially going to come on dilutive to the margins.

But we have a track record of making these types of investments and using our scale and other levers in our business to be able to ensure that they become accretive and drive towards Broadridge’s returns.

That is what gives me confidence that we are making the right investment in this platform and the progress that we have seen with it going live and the pipeline that Tim can speak about is giving me confidence in being accretive to Broadridge and driving us back to the types of historical returns that we have had before.

But let me turn it over to Tim..

Yes. Look, we continue to see the wealth platform as very much as a long-term positive for Broadridge. It’s doing three things for us. First of all, it’s definitely deepening our relationship with UBS, who we view as a long-term global winner. They have been a long-term partner.

It says a lot about the work that we are doing together that at this point in the work the relationship is deeper than ever. That’s not always the case. It’s really setting us up to be a leading provider in the $16 billion wealth tech market, which obviously is why we are doing this. Wealth tech is a rapidly growing space.

I saw some recent research in which 70% of wealth management firms are planning to increase their technology spend in the next 2 years. Others are investing, but we believe we have some real advantages. And it’s key part of our transformation as a company to being a modern SaaS provider. All this work is in the cloud.

The key components like the workstation, API gateway integration layer are foundational to our overall tech roadmap. So, that’s we are excited about the progress that we are reporting today. And David, we really are seeing this as client discussions move from talking to showing.

And when you are able to show real live software, it makes us very much of a difference in the conversation. I am just – I am thinking of a client conversation we are involved with now where the clients asked us to set up a sandbox with their data to have them be able to play with the applications, and we are able to do that in a matter of weeks.

And that makes a big difference in the conversations. That’s why we are seeing the 25% increase in pipeline. And so as we look forward here, I think the markers of success are going to be going live with UBS, seeing sustained growth over time in our wealth management business. Now, these sales will start to convert to revenue not in this year.

So, we are not talking about this year, we are talking about beginning next year and then also, the progress in our overall technology roadmap. I think those are some of the markers that investors should look for, and we are confident we are going to get good returns here..

Thank you..

And our next question will come from Puneet Jain with JPMorgan. Please go ahead..

Hello. Thanks for taking my question.

Can you comment on velocity of deals in the pipeline, specifically for large deals? Are you seeing any kind of pause or delays from clients given like that the macro uncertainty in signing on new work?.

Yes. Puneet, it’s Tim. Thanks for that question and it is an interesting one. I think that we are seeing a strong appetite for continued digitization and for moving platforms forward. I think we are also seeing a real healthy balance between internal builds versus mutualization.

I think that as the world moves to more agile, people are thinking less about large-scale multiyear transformational projects and more about how they can step into things in ways that take – are quicker to come on and add value in a way that they can see. And I think we are seeing that both in North America and in Europe.

When you look at our mix of sales last year, which was a record. It didn’t have any of those large transformational deals in it. So, I think we are – and I think that’s what we are seeing now is some nice chunky deals. But we are seeing not large-scale transformational ones.

I think the exception to that a little bit is in customer communications where there are still significant players that have in-house platforms that where they are trying to think about that. And those – some of those could be larger.

But on the technology side, it tends to be a sequence of really nice deals, and we like the velocity of that versus the bigger ones..

I will just add one point to quantify and help emphasize the point that Tim made, Puneet and that is that roughly about three quarters of our deals are less than $2 million deals, and that’s been a trend that we have seen stay consistent over the past couple of years.

And I think as Tim just said, we feel good about the velocity, the fact that it shows interest across our different product lines. So, nothing has changed there..

Got it.

And how is your appetite to do large deals changed, especially the deals that require costs sitting on your balance sheet? How has your appetite changed as a result of rising rate environment? Should we expect any changes in number or types of deals you pursue as a result of that?.

Yes. I think Puneet, what I would say is, certainly, if you think about the work we are doing with UBS, I think that is something that is truly exceptional is to put us into a whole space and not something that we are thinking about something that is like that.

It is and having built the platform and built the technology, we see additional deals being able to come on with much, much lower incremental investment..

Got it. Thank you..

[Operator Instructions] Our next question will come from Darrin Peller with Wolfe Research. Please go ahead..

Hey guys. Listen, maybe we start off just with the growth in the regulatory side and the position growth trends. I guess first of all, I was a little confused, maybe I missed it in the beginning of the call to see the revenue growth rate on the regulatory side at 4% versus position growth, which was I think it was 9% for equity or 11% for mutual fund.

It looks pretty decent on the side on that trend line. And I would love to hear your latest thoughts on the sustainability of position growth. I know it’s always hard to tell for sure. But given what we are seeing with retail investors and some of the changing trends. Just curious your thoughts medium-term on that for us. Thanks guys..

Yes. On the – just on the variance between physician growth and revenue, there is just some timing in there. And I will let Edmund expound on that, but that’s not, Darrin, I think something that is anything significant inside that.

But on the bigger question around position growth, it remains robust based on long-term trends and recent innovations that we believe are here to stay.

So, it certainly starts with the long-term trend of increasing investor participation and diversification, which as you know, is based on historically falling costs, ongoing innovation, including ETFs, managed accounts, and that’s what’s driven sort of the high-single digit growth that we have seen over the last decade.

Obviously, we have seen in the last couple of years, innovations around free trading and app-based investing in a new generation of investors, which has caused a real step change in the past 2 years. We do think that’s a change that is here to stay.

And now we see the next generation of innovation like direct indexing and pass-through voting to support continued albeit what we think will be a more normalized growth going forward. So, it is – I think we have – all have had a question about as we move into a different investing environment, what would we see with the position growth.

But as we have increasing visibility into the second half of the fiscal year, we are seeing this very normalized mid to high-single digit growth..

Just tactically on the first part of your question, in terms of the position growth at 9% in the regulatory have a lower percentage, the way I think about position growth, Derek, is – Darrin, is same-store sales. If you went to proxy in Q1 last year and you went Q1 this year, then you are in that position growth number.

If you went Q1 last year, but Q2 this year, you are not in the quarterly position number you would be in the full year position growth number. And that’s what matters to us because from a revenue standpoint, it doesn’t matter which quarter you are coming in, we are going to have the benefit from that.

So, that’s the difference between the position growth and the revenue that we see..

Okay. That’s really helpful. Thanks. Just one quick follow-up on the earlier question on margins and really just free cash as well. Some of the dynamics on distribution, obviously, is a lower margin and I guess event-driven revenue timing could have an impact as well.

But what do you see really changing other than the timing of investments, and it’s a small seasonal quarter. So, it’s probably not worth extrapolating too much.

But what do you see changing that really helps the operating margin from here when considering that distribution costs will remain high, but I guess the scale, the operating leverage of some of the business should kick in also. So, maybe you could just help us with the puts and takes..

Yes. I do – and remember, distribution, we have elevated distribution revenue last year. Again, that impacted the margins by nearly 50 basis points last year. The same thing we expect this year here with double-digit growth in distribution. I think what you will see is exactly what you just said.

First, the initiatives that we initiated at the end of last quarter, we have executed on those, so we will see benefit from that.

And then the scale, the natural operating leverage in our business as we go through the quarter and get into our seasonally heavier quarters with more revenue coming on, those things are coming on with incremental margins, and we see the expansion in the overall adjusted operating income margin as we move forward through the three quarters..

Got it. Thanks guys..

And our next question will come from Patrick O’Shaughnessy with Raymond James. Please go ahead..

Hey. Good morning guys.

So, the wealth management sales pipeline that you have been speaking to, can you give some more color on how much of that pipeline is for the entire comprehensive wealth management tech stack versus some of these component solutions that you are bringing to market?.

Sure, Patrick. It’s a mix of both. I would say it is more on the component side. There are some firms that aren’t of the same size and scale of someone like the UBS that are looking at full solutions. And we would imagine those, again, stepping in more in a sequential kind of way than in the past.

But then there are also larger firms looking at the components. And I think if you are to look across the entire pipeline, it would be much more weighted to the component side..

Got it..

And I think – and if I can just add on to that, which is I think one of our real learnings over the couple of years, the years we have been building this is, as we have built this in a very open way with all API-driven.

And the original vision, as you recall, was really to create based on our back office, very open data layer being able to then take modules on top of that that would be built either by us, by our client or by other third-parties and be able to have that work seamlessly together.

And so that vision is really more and more appropriate for what people want today. And so the ability for us to – whether it’s the back office or whether it’s the integration layer out to help people tie together what they are doing and then take some of our applications on top of that is, I think a real opportunity..

Got it. Appreciate that detail.

And then as free cash flow improves over the remainder of fiscal 2023, how are you guys thinking about deploying that cash, whether it’s debt reduction, share repurchases, M&A, etcetera?.

Yes. I mean we continue to have a very consistent capital allocation policy, where we are balancing return to – return of capital to shareholders with our investments for growth, with continuing to maintain an investment-grade credit rating.

So, as I think about the near-term with leverage rates that are higher than where we have historically been, we obviously stay very close to the rating agencies and have an objective to bring that debt down to a more sustainable leverage ratio, I would say, in the near-term, we are focused on that.

But as free cash flow conversion increases going into fiscal ‘24, I think it gives us more capacity to return capital to shareholders to think about other investments, whether internal or external on the – back in line with what our historical practice has been smaller types of acquisitions, I think that’s going to be the focus for us with the free cash flow conversion..

Great. Thank you..

And this will conclude our question-and-answer session. I would like to turn the conference back over to management for any closing remarks..

End of Q&A:.

Yes. It is Tim, I just want to thank everyone for joining today. I want to just reiterate how pleased we are with the strong results for the first quarter, strong outlook for the remaining of the year, the fact we are making good progress on our key investments that our business is resilient in an uncertain environment.

And really just most important, our confidence in long-term growth, strong cash flows and strong returns for our shareholders. So, thank you very much. We look forward to continuing the conversation and seeing you next quarter..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time..