Broadridge Financial Solutions Inc (BR) 2026 Q2 法說會逐字稿

Good morning, and welcome to Broadridge's fiscal second-quarter 2026 earnings conference call. (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 and Corporate Communications. Please go ahead.

Thank you, Drew. And good morning, everybody, welcome to Broadridge's second quarter fiscal year 2026 earnings conference 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 Chief Executive Officer; and our Chief Financial Officer, 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 presentation.

Let me now turn the call over to our CEO. Tim?

Thank you, Edings. Good morning. I'm delighted to be here this morning to discuss our strong second quarter results and provide an update on some of our strategic initiatives. Entering the second half of our fiscal year, the market backdrop remains positive.

US equity markets rose 16% in calendar '25, and they largely remained strong in January. Our clients are clearly benefiting from strong capital markets activity, and so are we. I'm especially excited to be here today because the accelerating pace of technology and a pro-innovation regulatory agenda are together creating exciting change, and Broadridge is uniquely positioned to help our industry drive innovation at scale.

A few examples. Tokenizaton continues to gain steam across capital markets, wealth and asset management.

In shareholder engagement, a quiet revolution is transforming how funds and public companies engage shareholders and manage proxy. Digital communications are driving down the cost of interacting with shareholders and increasing investor engagement.

And of course, AI is enabling all this at a faster pace. These are the kinds of transformational changes we have built Broadridge to address. And our ability to drive innovation and scale is creating opportunity for the future, even as it translates into results today.

So let's dig into those results, starting with the headlines on Page 3. First, Broadridge delivered a strong second quarter, including 8% recurring revenue growth constant currency and adjusted EPS of $1.59.

Second, we continue to execute on our strategy to democratize and digitize investing, to simplify and innovate trading, and to modernize wealth management. We're beginning to see positive incremental impact from delivering new forms of shareholder engagement, extending our omnichannel digital capabilities and driving tokenization across governance, capital markets and wealth, all enhanced by our platform and AI capabilities.

Third, we remain committed to balance capital allocation to drive shareholder value. We are on track to deliver another year of 100% plus free cash flow conversion, which gives us ongoing flexibility to pursue additional compelling M&A opportunities while returning capital to shareholders.

Fourth and last, we remain on track to deliver strong results in fiscal '26 and beyond. We are reaffirming our '26 guidance for recurring revenue growth, margins and closed sales, and we are raising our outlook for adjusted EPS growth to 9% to 12%. That outlook keeps us on track to deliver on our three-year top and bottom-line objectives.

Let's move to the drivers of those results on Slide 4. Starting with our governance business, where we continue to drive the democratization and digitization of investing. Governance recurring revenues rose 9% constant currency, driven by revenues from sales and continued position growth.

Investor participation trends remain healthy across both equities and funds. Total equity position growth remained strong at 17%, with revenue position growth at 11%, driven by growth in managed accounts. Looking ahead, we're seeing low teens position growth for the second half, which should drive high single-digit growth in revenue positions.

Fund position growth, which was hurt by timing in Q1, strengthened as expected, from 2% in Q1 to 15% in Q2. Looking through the timing noise, fund position growth was 8% for the first half. Looking ahead, we continue to see fund position growth for the year, trending in the mid- to high single digits, in line with H1.

We've also seen higher-than-expected event-driven activity across both fund elections and corporate events, which gives us the opportunity to accelerate our innovation road map for the benefit of our clients and our shareholders. Beyond position growth, our business is benefiting from our investments in innovation, starting with what we are calling, a quiet revolution in shareholder engagement.

This coming proxy season, we expect more than 600 funds covering $4 trillion of assets to use our voting choice solution, up from 400 funds and $2 trillion last year and fewer than 100 funds two years ago.

We are also rolling out our AI native custom policy engine and vote implementation capabilities for institutional investors like JPMorgan and Wells Fargo who are seeking to reduce their reliance on proxy advisers. This is a powerful example of how our AI capabilities are enabling new revenue.

And we continue to build on our pilot program, first launched with ExxonMobil, to enable retail shareholders to provide standing voting instructions for annual meetings. We also continue to make progress in driving the digitization of communications, closing a significant sale to extend our flagship health and focused platform to cover 1 million additional accounts.

I'm also excited to note the rapid progress we are making in addressing the tokenization opportunity in equities. I said on our last call that we see tokenized equities as an opportunity for Broadridge and recent client and industry conversations have only reinforced that conviction.

The last several weeks have seen announcements by the major changes in the DTCC on their plans to build tokenized trading capabilities for equities as well as the announcements by issuers themselves of tokenized equity offerings.

As tokenized equities scale, providers will need to ensure they meet the same governance and disclosure requirements as traditional equities. And for real liquidity, the market will need to access broker-dealers who are our core clients, even as we increasingly serve new intermediaries as well.

For both, the challenge is to gather communications from every issuer and fund, distribute them accurately according to clients' preferences, take back and reconcile votes and ensure regulatory requirements are met and the proxy voting is accurate, transparent and documented. And that's our core competency.

And for issuers, while tokenized equities enable real benefits, they also represent new complexity. Each of which will now have registered shares, beneficial shares and potentially tokenized shares across multiple models of tokenization and multiple layer one networks.

The opportunity for Broadridge is to simplify that complexity for brokers and platforms, issuers, investors and regulators, just like Broadridge simplifies that complexity in traditional models today.

To make this happen, we expect to integrate tokenized and digital assets into our proxy capabilities by the end of this year. From there, we'll extend those capabilities to include other parts of the servicing model, including corporate actions and disclosures. We'll also extend our solutions to digital wallets to create a seamless client experience regardless of where investors hold their equities and other tokenized assets.

Since our last update, we have talked to and worked with dozens of clients, regulators and industry partners. Feedback from them on our road map has been universally positive. There is a clear market need and we are stepping into it, ensuring that governance complexity does not inhibit market growth.

And as we open the market to new investors and new products, that will drive additional position growth, just as innovation has done in the past.

I'll close my review of governance by noting that we also continue to strengthen our business with M&A. In early January, we closed the acquisition of Acolin, which will augment the suite of services we offer to funds in Europe across their life cycle, from creation and registration to ongoing distribution. The acquisition of Acolin, like the tuck-in deals we completed earlier this year for iJoin and Signal, extends our product and geographic reach.

Turning next to capital markets, where we are simplifying and innovating trading. Recurring revenues grew 6% on a constant currency basis. Our capital markets business is benefiting from balanced demand across our front and back-office solutions and from tokenization revenues, including the growing adoption of Distributed Ledger Repo platform and revenue from Canton Coin.

Volumes on our market-leading DLR platform, Distributed Ledger Repo platform continue to grow as we add new clients. We tokenized $384 billion per day in December or $9 trillion for the month. It's more than double where we were in June.

As demand for our tokenized collateral solution grows, we are on track to launch a real-time repo capability in fiscal year '26, which will incorporate Stablecoin to make repos at real trading and financing instrument and further scale volumes. I'm also pleased to note that we completed SocGen's first digital bond issuance in the US during the second quarter. This issuance highlights the flexibility and power of our DLR platform to tokenize a wide range of assets.

So it should be no surprise to know that Broadridge will be extending our tokenization platform to other asset classes, including deposits in fiscal '27.

Beyond DLR, we are also actively working to enable our primary trade processing engines to support digital assets alongside traditional assets by the end of fiscal '26 across both capital markets and wealth management.

And speaking of Wealth Management, recurring revenues grew 11% during the quarter, propelled by strong organic growth and the final month of M&A revenue from the acquisition of SIS.

Our wealth platform continues to gain recognition in the marketplace and was recently named a leader in wealth management technology by IDC. That recognition is contributing to a growing pipeline of platform opportunities.

I'll finish my review this morning with Closed Sales. After a slower start in Q1, a I'm pleased to report that our sales momentum is picking up. Q2 Closed Sales rose 24% to $57 million.

In addition, new pipeline generation, which is our measure of new sales opportunities, rose more than 20% over the first half of fiscal '25 driven in part by the transformational opportunities I just mentioned. Clients are engaging with us on tokenization, shareholder engagement and digital communications as well as more traditional needs by preparing for T+1 in Europe and 23 by 5 trading in the US.

Those conversations are driving multiple exciting pipeline opportunities and keeping us on track to deliver on our Closed Sales guidance.

I'll close my remarks with a few key takeaways on Slide 5. First, Broadridge is delivering strong results today with 8% recurring revenue growth and adjusted EPS of $1.59 in the second quarter.

More importantly, we're on track to deliver a strong fiscal '26 with recurring revenue growth in constant currency at the higher end of 5% to 7% and adjusted EPS growth of 9% to 12%. And with this guidance, we're on track to deliver on our top and bottom-line objectives for the three years ending this June, which will be the fifth consecutive three-year period in which we met our goals.

Second, we're actively put in place the building blocks for continued growth tomorrow. I started my comments this morning by calling out the shifts we are seeing in the financial services industry. In each of those areas, we're investing to create what we believe will be a significant opportunity tomorrow.

We're leading in tokenized trading, and we're extending that capability to new uses and asset classes. As tokenized equities begin to emerge, we'll accelerate that adoption by addressing the full suite of proxy and other asset servicing needs so that tokenization platforms can focus on gathering assets, driving liquidity and reducing trading costs.

We're actively enabling the next generation of shareholder engagement. Asset managers and issuers are dramatically changing the way they interact with investors, equity owners and fund owners and Broadridge is enabling that change with the suite of new solutions. We're driving the next generation of digital communications.

Our wealth and focused platform is already making communication between wealth managers and their clients more effective, more engaging and less costly. And we're leveraging our strong AI and platform capabilities to rapidly build these and other new solutions while improving productivity.

With our deep domain knowledge and critical wealth of intersection of financial services, AI will both expand Broadridge's opportunities and drive efficiency improvements.

Third, given all these opportunities, we are managing our investments and capital wisely and with balance to deliver for shareholders today and tomorrow. We're leveraging the unexpected benefit of more event revenue to accelerate our road map in each of one of the key initiatives I just noted, even while delivering higher earnings.

And we're carefully balancing capital allocation in light of the strategic opportunities we see for both share buybacks and for strategic tuck-in M&A. With the pace of industry evolution starting to accelerate, Broadridge has never been better positioned to play a critical role in helping our clients grow and win. And I've never been more excited about the opportunities that we have in front of us.

Before I turn the call over to Ashima, I want to thank our Broadridge associates. We often talk about the importance of culture because we see firsthand how our focus on clients drive success and sets the stage for continued growth.

With that client-focused culture, and unprecedented depth in financial markets, our associates have been and are the key to make Broadridge the trusted and transformative partner for the financial services industry. Thank you. I also want to take a moment to thank Brett Keller, who will be leaving our Board at the end of April. Brett has been an invaluable counselor for nearly 11 years and we'll miss his wisdom and insight. And I want to welcome Trish Moscone and our own Chris Perry to the Board.

Trish brings a wealth of experience from senior consulting roles at both McKinsey and BCG and fromer senior executive positions at BlackRock and Synchrony. And Chris brings a long career in wealth, data and financial services generally, along with intimate knowledge of Broadridge's most important clients. Trish and Chris, welcome. Now let me turn it over to Ashima. Ashima?

Thanks, Tim. Good morning. It's great to be here with you today. I'll begin my discussion this morning with five key call-outs. First, Broadridge delivered strong second quarter results.

Second, we continue to benefit from elevated event-driven activity. We reported $91 million of event-driven revenues in Q2, which contributed to a record $204 million in the first half. As always, we take advantage of periods of elevated event-driven revenues to accelerate our long-term growth investment, and we are investing in key product initiatives around tokenization, shareholder engagement, digital communications and in our core tech infrastructure.

Third, we recorded $187 million noncash mark-to-market gain related to our digital asset holdings. Between our coin holdings and our stake in the digital asset treasury, the value of our digital asset holdings rose to $265 million at quarter end, which represents real value for Broadridge shareholders.

Fourth, our capital position remains strong, and we are actively delivering against our balanced capital allocation policy. We recently closed on the Acolin acquisition and have now completed three tuck-in acquisitions in fiscal '26, totaling $126 million.

As we enter the second half of the fiscal year, we remain on track to deliver free cash flow conversion of greater than 100%, and we are in a strong position to deploy additional capital to drive growth and shareholder returns.

Finally, we expect to deliver strong fiscal '26 results. We are raising our adjusted EPS growth guidance to 9% to 12% from 8% to 12%. Additionally, we are reaffirming our recurring revenue growth outlook at the higher end of the 5% to 7% range and Closed Sales of $290 million to $330 million.

Now let's go to the numbers on Slide 6. Recurring revenues grew 9% or 8% on a constant currency basis, including strong 7% organic growth. Adjusted operating income margin declined by 110 basis points to 15.5% as we lapped record event-driven revenues in Q2 last year. Adjusted EPS grew 2% to $1.59 and Closed Sales grew 24% to $57 million.

Let's move to Slide 7 to discuss our segment recurring revenue, starting with our ICS or governance segment. ICS recurring revenues rose 9% to $590 million, including a 2-point benefit from acquisitions and a 1 point headwind from lower interest rates. As a reminder, the earnings impact of lower rates is functionally hedged by lower interest expense on our variable rate debt.

Regulatory revenues rose 18% in Q2, driven by 11% growth in equity revenue positions and 15% growth in fund positions. Regulatory revenues in Q2 saw a 6-point timing benefit with approximately half coming from Q1 and half being brought forward from Q3.

Data-driven Fund Solutions revenues declined 2%, with healthy growth in our data and analytics business, offset by a decline in our Retirement and Workplace Solutions. Lower interest rates represented a 2-point headwind to growth.

Looking forward, we expect to see Data-driven Fund revenue growth to accelerate, driven by stronger organic growth and an approximately 5-point contribution from the iJoin and Acolin acquisitions in the second half.

Issuer revenues grew 8% driven by growth in our shareholder engagement solutions, including revenues from outstanding voting instruction solution. And customer communications revenues rose 5% driven by double-digit growth in our digital communications revenues as we continue to execute on our print to digital strategy and a 4-point contribution from the acquisition of Signal.

For the year, we expect ICS recurring revenue growth to be in line with our guidance for total recurring revenue and in line with the first half.

Turning to GTO. Recurring revenues grew 8% in Q2, including 6% organic. Starting with Capital Markets, revenues grew 6%. Our Q2 revenue growth benefited from a balanced mix of sales, digital asset revenues and growth in trade volumes which more than offset a point of losses related to the business exit that we discussed at the end of last year.

Digital asset revenues were $7 million in the second quarter. Looking to the second half of the year, we expect digital asset revenues to moderate significantly as a result of scheduled changes in the Canton network minting curve. Overall, we expect digital asset revenues to contribute approximately 1 point to capital markets growth in fiscal '26.

Moving to Wealth and Investment Management. Revenues grew 11%, driven by 6% organic growth and a 5% contribution from the SIS acquisition. As a reminder, we have now lapped the November 1, 2024, close date of the acquisition. For the year, we continue to expect GTO recurring revenue growth of 5% to 7% with higher growth in wealth.

As a reminder, timing of license revenues can have an impact on quarterly revenue growth rates in both our GTO businesses. We expect lower license revenue to result in a 4-point headwind to GTO growth in the third quarter, largely in our Capital Markets business.

Now let's move to Slide 8 to review our key volume indicators. We saw strong growth in investor participation across both equities and funds. Equity position growth was 17%, including 11% growth in revenue position. Looking ahead to the seasonally more significant second half of the year, our testing indicates low teens growth in total equity positions, which we expect will generate high single-digit revenue position growth.

Q2 fund position growth of 15% was partially impacted by the timing of fund communications in the quarter. First half position growth was 8%. Our testing continues to indicate mid- to high single-digit position growth in the second half of the year. In GTO, trade volumes rose 11% for the quarter, driven by growth in both equities and fixed income volumes.

I'll wrap up my discussion of recurring revenue growth on Slide 9. In Q2, recurring revenue growth was 9%, primarily driven by 7 points of organic growth. Revenue from Closed Sales remained the biggest driver of our organic growth at 5 points as we onboarded revenues from our $430 million fiscal '25 year-end backlog.

Our revenue retention rate was 98% for the quarter. Internal growth contributed 4 points driven by position and trade growth, timing of fund communications in the quarter, and digital asset revenues. Acquisitions, primarily SIS and Signal contributed 2 points to growth. And finally, changes in FX contributed 1 point.

Let's close our discussions of revenues on Slide 10. Total revenue increased 8% to $1.7 billion, driven by 5 points of growth from recurring revenue. Lower event-driven revenues accounted for a 2 point headwind. While event-driven revenues of $91 million declined $34 million versus the prior year's quarterly record, they remain elevated relative to long-term averages.

Strong event-driven revenue was driven by a combination of healthy mutual fund proxy activity and higher levels of corporate actions, including the M&A context for a major media company. Looking ahead to the second half of the year, we expect quarterly event-driven revenues to return to closer to the seven-year average of approximately $60 million.

Low to no margin distribution revenues grew 14% driven by a balance of higher postage rates and higher volumes and contributed 4 points to total revenue growth.

Turning now to margins on Slide 11. Adjusted operating income margin was 15.5%, a decrease of 110 basis points from Q2 '25. The decline was driven by a year-over-year reduction in event-driven revenues, which more than offset the operating leverage from higher recurring revenues. Additionally, the net impact of lower interest rates and higher distribution revenues reduced AOI margins by 40 basis points.

Looking ahead, we remain on track to deliver full year adjusted operating income margin of 20% to 21%.

Let's move on to earnings on Slide 12. Q2 adjusted EPS grew 2% to $1.59. As I noted in my call outs, in Q2, Broadridge recorded $187 million noncash gain, driven by the increase in the value of our digital asset holdings in the quarter from $0.04 at the end of September to $0.15 on December 31. That noncash gain was reported in other non-operating income and was excluded from our calculation of adjusted EPS.

Due to the volatility of digital asset prices, we will continue to exclude quarter-to-quarter noncash gains or losses in the value of our digital assets from our calculation of adjusted EPS.

Let's turn to sales now on Slide 13. Broadridge recorded Q2 Closed Sales of $57 million, an increase of $11 million from Q2, '25. Year-to-date sales were $89 million, down from $103 million last year. As Tim noted, we are seeing higher levels of client engagement which is translating into a more than 20% increase in pipeline creation and giving us confidence in our full year Closed Sales guidance of $290 million to $330 million.

Turning to our cash flows on Slide 14. Broadridge generated free cash flow of $319 million in the first six months of fiscal '26, up from $56 million in fiscal '25. Our strong cash performance continues to benefit from higher earnings and working capital management, and we remain on track to deliver free cash flow conversion of over 100% in fiscal '26.

Turning next to capital allocation on Slide 15. We are delivering against our balanced capital allocation policy. Year-to-date, we have deployed $49 million in capital spending and software with an additional $17 million to onboard clients onto our solutions. We have invested $126 million in M&A in three strategic tuck-in acquisitions, including the acquisition of Acolin on January 5 for $70 million.

We have also returned $367 million in capital to shareholders via our dividend and share repurchases through the first six months of the year. Separately, in the second quarter, we contributed 342 million Canton coins valued at $53 million, for an approximately 8% stake in the Tharimmune digital asset treasury. Looking forward, our strong balance sheet and free cash flow conversion leaves Broadridge well positioned to fund additional tuck-in M&A and repurchase additional shares over the balance of the year.

Let's start to wrap by reviewing our fiscal '26 guidance on Slide 16. We are reaffirming our guidance for recurring revenue growth constant currency to be at the higher end of the 5% to 7% range. We continue to expect adjusted operating income margin of 20% to 21%. We are raising our adjusted EPS guidance to 9% to 12%. And and we continue to expect Closed Sales of $290 million to $330 million.

I'll wrap by summarizing my key points. Broadridge reported strong second quarter results, Second, our key revenue drivers remain healthy, giving us incremental confidence that we will continue to deliver strong results in the second half. As a result, we remain on track to deliver another strong year of recurring revenue and adjusted EPS growth in fiscal '26 while funding additional investment in key growth initiatives.

And that, in turn, should enable Broadridge to deliver again on our top and bottom-line three-year objectives.

And finally, our strong balance sheet and cash flow generation positions us to continue to fund additional share repurchases and pursue attractive M&A opportunities as we focus on driving shareholder value.

With that, let's move to Q&A.

(Operator Instructions) Alex Kramm, UBS.

Tim, thanks very much for all the color on tokenization and how you think you're going to benefit from that. I will have to obviously note though that, as you're probably aware, there's a -- there's a big debate out there, and you've seen this in your share price that tokenization is actually something that's going to work against you.

I think there's a lot of different ways of this narrative, but I think in its purest form, it's basically, hey, in a tokenized world, companies can directly engage with shareholders, maybe through smart contracts, they're going to cut you out of the process or at the very least, it's going to drive pricing down. So maybe you can just respond to that and see -- give us your view on maybe that side of the debate.

Great, Alex. Well, look, thank you very much for that question. And obviously, as you heard from the script, we see tokenized equities as a significant opportunity. We think they represent the next wave of democratization. We think they're going to create new sources of demand for US equities and that's going to drive position growth.

When you think about -- and I think implicit in your comment is the agreement that tokenized securities are still subject to all the core regulatory principles, including governance. So the question is really how that's going to happen.

We see the vast majority of tokenized equities in the future, irrespective of the model, whether they're tokenized directly by the issuer or they're tokenized by an intermediary or by a depository or wrapped in some way. We see the vast majority of those are going to be purchased through a broker-dealer or through a digital trading platform.

And those intermediaries are going to have the same asset servicing obligations that they have today, including proxy, but also corporate actions, class actions, tax and all the other things that are actually big opportunities for us.

And it's not -- we think about are those intermediaries going to give knowledge to the underlying corporate issuers as to who the shareholders are. It's not at all clear that they're going to want to turn over their client list that way. When you think about the Oboe and Oboe protections, the ability of investors to keep their identity and their private information separate.

So we do think that it is going to remain a complex situation between issuers, brokers and other intermediaries and managing that complexity is what we do irrespective of the model of tokenization.

And obviously, there are multiple models out there. It is not clear which one is going to win as we talk to the SEC, they're clearly going to let the market decide.

And I would also comment just on the new entrants in the market, the Coinbase and Krakken of the world. We think they are drawing in new investors. We think that expands the market, and that's going to contribute to long-term growth.

So -- and then let's not actually forget, you talked about issuers and there are benefits, if they do end up with a little more direct access. But don't forget, this also creates significant complexity for issuers also because now, and I've said this in the script, but in addition to their regular shares, they have registered shares, beneficial shares, tokenized shares across multiple models across multiple L1.

So trying to get materials and distributions and events to all those different end points, take it back, reconcile it. That's a lot of work. And we think that's a great opportunity for Broadridge to help issuers.

For 80% -- nearly 80% of the Fortune 500 engages Broadridge today to reduce the complexity of proxy when they only have to worry about registered and beneficial. And so in the future world, we see that even more value created there. So whether it's creating value directly with issuers or really through the intermediaries where we think the vast majority of investors will go, we think there's a great opportunity here.

Excellent. All right. And then maybe staying on topical items. Clearly, a lot happening on the proxy advisory side. You mentioned JPMorgan.

I think you hadn't disclosed that one before and also Wells Fargo, which I think we've heard about. So you're clearly helping, I guess, drive change. Can you just talk a little bit more what that means financially? I mean, is there a big pipeline behind the JPMorgan and Wells Fargos of the world? How do you view the TAM?

How quickly do you think this can ramp? I know it's all just beginning, but just curious how you see that opportunity because it is, I guess, a very specific item where you're winning in the marketplace right now?

Yes. And look, we can do different things for different people. Sometimes it will be the full AI-driven custom policy engine. Sometimes it will be helping more in the vote execution side. We think that this is -- when you look across all the different things in shareholder engagement and this is one of the needs that we're talking about with helping with data-driven and objective voting.

But we think collectively, this is a multi-hundred million dollar market. So it's an opportunity to expand the services. Obviously, it will take time to grow into that. But we think collectively, this could add as much as a point of growth to our governance business over the next few years, really creating more revenue position -- per position.

And I just -- I think there are multiple topics here. And collectively, we really love what's happening as we work with our clients to create what I would call really the next generation of shareholder engagement. It's deepening our role, and as I just said, it's a substantial business opportunity because there are multiple industry issues that have been building and are reaching a critical mass.

There's the -- what we just talked about in terms of the concern about proxy advisory firms. There's also a growing concern about the concentration of power with passive asset managers and this concern that retail participation has been lower.

And each of those are opportunities for us to work with our clients to bring market-driven technology to help solve those. Obviously, we're asset managers like JPMorgan and Wells Fargo, but we're also working with the large passive funds that I mentioned in the script.

And we see a big opportunity to work with public companies to make retail shareholder voting more convenient through standing instructions. We launched that with Exxon, but there's a lot of demand behind that one. So collectively, all of those we think really create a significant opportunity financially, but also just strategically as we deepen our role.

Patrick O'Shaughnessy, Raymond James.

So going back to the topic of tokenized equities, what do you see as some of the main obstacles that need to be worked through by the SEC as the SEC considers various exemptive relief requests?

Yes. Thanks, Patrick. I think the -- one of the questions that SEC has is this all going to be too complex, and therefore, how much event relief do they need? And I think in our conversations with them, we've really stressed that we're here to solve that complexity and that irrespective of the tokenization model it is completely feasible for there to be really good front-to-back communication and connectivity.

So I actually don't think there's a need for exemptive relief in this area. And I think that -- I think they see that, too. So we'll see how it all plays out. But I think the conversations that we're having with each of the others -- whether it is with issuers, whether it's with the DTCC, whether it's with the exchanges and the digital trading platforms, I think it's pretty clear how this model can work and work really well.

Got you. Appreciate that. And then staying with the topic of tokenized equities, if they were to clear and settle on the blockchain, how would you see that impacting the range of services that you provide to your post-trade processing clients?

Patrick, I think part of this is we have to expect to have a significant role in that. We are one of the largest trading platforms today. And when you think about our DLR platform, it is designed as a multi-asset platform, and we'll be extending that to additional asset classes. I think the other thing is that there's all the other complexity around asset servicing that needs to take place. And when you think about what takes place today, there's a trade.

And then what happens after that. There is -- obviously, we've been talking about proxy, corporate actions, but let's talk about tax, let's talk about margin, talk about SEG, talk about securities lending. The idea that all of that is going to happen through some sort of smart contract is, I don't think people are really thinking through all the implications of a tax, for instance, it's not just the instrument. It's the person and what position the person is and what are the other things that they have and where are they? So it's really -- there's a lot of complexity there.

I think one of the concerns that many players have is actually that in the very -- as long as they can foresee, the costs could go up instead of down because they could have a whole infrastructure around the digital assets and a separate infrastructure around their regular assets. And that's one of the things when we talk about enabling digital assets in all of our core engines.

What we're talking to clients about is actually mirroring the positions in the core engines so that they can use all their existing technology for margin, tax, all those other things, so they don't end up with that duplication of cost. And that's something that they are finding really attractive because it is -- it's complicated to handle all of those downstream activities.

James Faucette, Morgan Stanley.

It's Michael Infante on for James. I just wanted to ask about obviously, the reaffirmed closed sales outlook. But can you maybe just speak to how you're thinking about your visibility into the second half? Like how much is already sort of late-stage from a contracting perspective or sort of time line of expected renewals versus truly jump on net new logos? I'm just curious how you would describe confidence levels on being able to deliver on the full year.

Yes. Thank you. Thank you very much. And look, first of all, I'll just say with $89 million year-to-date, we clearly have wood to chop in the second half. That's not uncommon for us given the seasonality of business, and we do really like the momentum that we're seeing.

I think one of the things that I talked about in the remarks is how we've seen origination pick up in the first half of the year, up more than 20%. And that's a really nice indicator for us, for clients.

I think maybe as implicitly in your question that you rightly pointed out, is that things that we've just originated in the first half, maybe those aren't necessarily things. Some of those are things that will close this year. Some of them are things that will close next year.

But when I look at that, we're seeing growth driven by our strategic initiatives around shareholder engagement, digital communications, platform, wealth and tokenization. And we have really nice things in each of those areas that we originated some time ago.

I mean, just last week, we closed strategically significant DLR sale to a Tier 1 global bank. That's the largest sale to date for that. So we really see continued momentum there. And we're really seeing as I was just in Dallas a couple of weeks ago, talked to more than a dozen client CEOs, and it's clear that they welcome our help in contributing to the transformation of our business.

As we look deep into our pipeline and look at what stage things are in and which of those are solidly on track to close this year versus could close this year, we really like that mix, and that's why we are reaffirming our guidance of $290 million to $330 million because that's what we think we're going to finish by the end of the year.

That's helpful, Tim. Just one housekeeping follow-up for me. Just on the sort of spread between equity position growth and equity revenue position growth, you obviously gave some helpful commentary on the forward look.

But it looks like the spread there is widening at least marginally. Like how do you think about sort of the underlying mechanics of that spread and, or whether or not you expect the spread to sort of remain consistent with recent levels or perhaps widen or compress?

Yes. I think it's an interesting question. And I think it's one we're still figuring out ourselves as the growth of this is really new. And I think of it a little bit more as a little bit less than the top line number from which you're taking away some things and a little bit more as there's growth in equity revenue positions. And then on top of that, there's this additional growth in fractional shares and sort of small dollar managed accounts.

And so it's really -- I tend to come back to sort of say, what's just the driver of the core revenue positions, which is around good sort of single name growth and then continued growth in managed accounts, which remains very healthy. So I think that spread, so to speak, will go up and down a little bit, but what we're really monitoring is the core drivers of the revenue positions.

Yes. And I'll just add on to that a little bit, right? If you think about the revenue position growth that we're seeing 11%, of course, for the quarter, it is still higher than our long-term history, right? We typically talk about mid- to high single-digit position growth. So this is still elevated versus those levels.

And like Tim alluded to the additional is incremental on top of it, which I would akin to almost position backlog that we might see converting at a later point, but even the base level is higher than what they have been.

Kyle Peterson, Needham.

I wanted to start off on some of these on chain progress that you guys have had on the Canton network, the DLR stuff, seems to really be making some good milestones. I wanted to see if you had an update or pipeline on potentially moving some other asset classes to this platform and how we should think about the potential for this to expand both in the near and medium term?

Yes. Kyle, thank you very much for that question. It's one that I'd love to talk about. As you know, as I said, this has doubled since last June. And we have a nice road map of additional significant clients that we're looking at and talking to.

I think about the road map for this platform, and as I said, it is multi-asset and has a lot of capabilities built into it, including, as I noted in the script, that we did our first issuance of a corporate bond for SocGen in the second quarter. I think the next real thing is taking it real time. When we think about repos, today, they're sort of largely a financing function carried out by treasury on an overnight basis.

And as we move that to -- and largely a lot of the volume we're doing is intra institution, as we move that to bilateral and to real time, this can become -- we see -- it's very unclear, where the volumes could go, but it becomes less -- it can be more than a financing function but really a trading function to -- and allowing desks to do trades and finance them simultaneously. That we expect to be doing in the first half of the calendar year within this fiscal year.

And then going to other asset classes, other things in fixed income, deposits, we're talking to a number of institutions about that. And so I think that over the course of this year, you'll see us continue to advance both the speed and the breadth. I think the other factor to think about here is moving this into the -- I'm going to call it, main net of Canton.

Right now, we're on a private version, which is separate from that, which is -- makes interoperability not as high as it will be when we're on the main version. There are some things for that version that still need to take place for it to be ready for that.

DTCC has a statement of work with DAH and is looking towards this sort of the second half of the calendar year for that to all be ready, and we're committed to move on to that when it's ready. And of course, we are -- we stated that we will be multiple L1s beyond the Canton network as well.

So a lot to do, a lot of road map. That's one of the reasons why we're really excited to be able to accelerate the investment that we've talked about and really move up and accelerate some of these things on our road map.

Great. That's really helpful. And then maybe as a follow-up on to ask about kind of the plans for the balance sheet, as you guys are continuing to accumulate more of the Canton coins here, I guess, like the mark-to-market gains, it's a little bit material now.

And assuming you guys will continue to get more even if the minting curve slows a little bit. But wanted to see like are there additional opportunities such as Tharimmune out there that you guys would consider?

Are there other avenues you guys would take to potentially create some more liquid assets from that? Or just any thoughts on that as you guys continue to accumulate more, especially it would be great to hear about.

Yes. Kyle, thank you. Well, we are continuing as a Super Validator. As you mentioned, the minting curve has changed. That was sort of something that's sort of built into it, change as of January 1.

So we will be accumulating at a lower rate in the future just to be level set for everyone. And I said on the last call, we're an operating company, not an investment company. So we're not going to be the next micro strategy. And on the other hand, when you look at the value of these network coins versus others, they are -- there's argument they could be a lot more valuable than this. So we'll see, but I think our intent is to really sort of over some time dollar cost average out of these, but that's probably over multiple years.

And that's -- I don't see us sort of trying to get immediate liquidity or things like that from it, but I think it's something that will be on the balance sheet. And but could be a nice source of value in the future. We're not looking for particular investments like Tharimmune that was sort of -- it came up because the key actors around Canton were just trying to make sure that they were sort of multiple ways for people to access that.

Matthew Roswell, RBC Capital Markets.

Congratulations on a nice quarter. There's been a lot of talk about the innovation that's been going on in the whole space. And I'm thinking specifically the capital markets piece. Are you seeing any changes among clients looking at their legacy systems and kind of the competition with either them doing it in-house or your more traditional competitors? Hopefully, that question made sense.

Yes, yes, it does, Matt. I think the -- when we think about competition in capital markets and you think about our traditional competitors, one of the things that we have really liked, Matt, is just how we're positioned relative to competition because really our legacy competitors have been disinvesting in this area for some time. And it's an area where we have continued sort of good regular investment as we have globalized our platform as we are evolving onto the new platform architecture that we've talked about.

And so we think that the functionality and utility of our platform relative to legacy competitors within -- certainly within cash securities is significantly higher, and that's why I think we continue to see nice competitive wins. We haven't seen anyone looking at internalizing or doing self-builds in this area in capital markets.

There are a few players that have that internally and they're saying where they are, but we haven't seen any broad new efforts.

Okay. And if I could sneak in a modeling question. Are there any timing differentials we should think about between the fiscal third and fourth quarter? Like if I remember correctly, last year, the timing of the Easter caused a flip in the proxy business. Is there anything that we should be thinking about?

Yes. There's just two things I'll call out in terms of what we are aware of right now. One, when I spoke about in my prepared remarks, I spoke about a timing in our regulatory business, half of which you should expect to see in Q3. So that's one timing impact that you'll see, not so much between Q3 and Q4.

And two, I also called out in my remarks, term license, the impact of term license on our GTO business, specifically in capital markets.

So you will see a 7 point headwind in our capital markets in Q3 and a more modest about a 1 point impact in wealth in Q4, but those are just term license swings to be aware of. The only other thing I'll call out is event, as you know, varies from quarter-to-quarter. Where we sit right now, we're not aware of any large mutual fund proxy or any large tentpole event that would lead us to believe that it will be anything higher than the $60-ish million average that we see in terms of long-term averages.

And anything hitting the margin other than the revenue switches?

Nothing hitting the margins, except for what we called out already. The strong growth that we've seen in the first half of the year is allowing us to increase our investments, you will see the impact of some of those investments come through in Q3 and Q4.

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

Thank you, operator, and thank you for everyone on the call today. As we wrap up, I hope you hear how excited that we are about the transformation we're seeing in the industry, the opportunities that it's creating for Broadridge, the opportunity for us to add value for our clients and our industry and to really take that innovation and scale it and through that, to deliver returns to you, our shareholders. Thank you for investing in our company and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.