Broadridge Financial Solutions Inc (BR) — Q3 2015 Transcript

Thank you. Good morning, everyone, and welcome to the Broadridge quarterly earnings call and webcast for the third quarter 2015 results. This morning, I'm here with Rich Daly, our President and Chief Executive Officer; and Jim Young, our Chief Financial Officer. I trust by now that everyone has had the opportunity to review the earnings release we issued this morning. The news release and slide presentation that accompanied today's earnings call and webcast can be found on the Investor Relations page at broadridge.com. During today's call, we'll discuss some forward-looking statements regarding Broadridge that involve risk. These risks are summarized on Slide 2. We also encourage participants to refer to our SEC filings including our annual report on Form 10-K for a complete discussion of forward-looking statements and the risk factors faced by our business. Our non-GAAP fiscal year 2015 earnings results exclude the impact of acquisition, amortization and other costs. These costs are significant and we believe the non-GAAP information provides investors with a more complete understanding of Broadridge's underlying operating results. A description of these non-GAAP adjustments and reconciliations to the comparable GAAP measures can be found in the earnings release. Now let's turn to Slide 3 and review today's agenda. First, Rich Daly will start today's call with his opening remarks and will provide you with a summary of the financial highlights for the third quarter 2015, followed by a discussion of a few key topics. Next, Jim Young will then review the financial results in further detail. Finally, Rich will provide some closing thoughts before the Q&A portion of the call. So without further delay, let me now turn the call over to Rich. Rich?

Good morning, everyone. Thanks Brian and welcome to the team. Brian is new to Broadridge joining us from Gartner. He spent four years as the Head of Investor Relations. Prior to Gartner, Brian was a sell-side analyst for 14 years at Jefferies, UBS and Robertson Stephens. I’m excited to have someone of Brian’s caliber lead our Investor Relations effort. I’d also like to thank David Ng for his efforts and contributions in various investor relations roles over the years. Let's begin on Slide 4 with the key points we hope that you will take away from this call. To start, I am pleased with our financial performance in the third fiscal quarter and on a year-to-date basis. Our performance was led by recurring revenues, primarily growth from net new business, which has continued to provide momentum. I’m very pleased with our recurring revenue closed sales results, which built upon the strong first half start and continued through the third quarter. Growing the business organically remains core to our strategy and this strong performance is key to our future revenue growth. Seeing sustained demand for our products and solutions that are strategically aligned with the growing importance of the key industry trends of mutualization, digitization, and data and analytics gives me continuing confidence that we will achieve our three-year plan. As part of our goal to achieve top quartile, total shareholder returns over any multi-year period, we’ve stated that our priorities include a sound capital stewardship strategy, including a commitment to paying a meaningful dividend, the continuous reinvestment in the business through selective tuck-in acquisitions and internal product development, as well as the repurchase of our stock. In the third quarter, we executed on our capital allocation strategy by deploying $34 million on the Direxxis acquisition and we also repurchased $109 million of our stock. I’m particularly excited about our tuck-in acquisitions, which are accelerating our growth and creating long-term value for our stockholders. Going forward, you can expect that we will continue to focus on executing acquisitions that strategically fit and expand our product and solutions portfolio. In a few minutes, I will talk more about the recent Wilmington Trust Retirement and Institutional Services unit and Direxxis acquisitions, and how well they fit within Broadridge. Given our year-to-date performance, including very strong sales results I am confident we will end the year with solid revenue momentum. We are also on track to achieve our guidance for the full fiscal year, which I'll discuss further on the next slide. So let's move to Slide 5, which covers the financial highlights for our fiscal third quarter. To reiterate, I am pleased with our third quarter financial performance and how these results keep Broadridge on track to hit our three-year performance objectives. Recurring fee revenues were up 5%, mainly from the contribution from net new business and enhanced by higher internal growth. Internal growth was driven by continued position growth in both equities and mutual fund interim communications. Total revenues were also up 5% with higher event-driven and distribution revenues. In the third quarter, our adjusted diluted earnings per share were $0.47, which represents an increase of 7%. Year-to-date our adjusted diluted earnings per share were $1.09 compared to $1.08 a year ago, a modest increase from last fiscal year. Our full-year guidance had anticipated this quarterly phasing, especially given the unusually strong start in fiscal year 2014. As we highlighted at Investor Day, we plan to increase the levels of share repurchases. During the third quarter, we repurchased approximately $109 million worth of our stock at an average price of $52.90 net of proceeds from option exercises. Finally, given the strong year-to-date performance driven by recurring revenue momentum, we are reaffirming our guidance of adjusted diluted EPS of $2.42 to $2.52, and we anticipate adjusted diluted EPS to be around the midpoint of our guidance range, representing about 10% growth for the full fiscal year. We continue to expect recurring fee revenue growth of 5% to 7% and total revenue growth of 4% to 6%. We also expect recurring revenue closed sales to hit the upper half of our $110 million to $150 million range, which would result in another record year. Turning to Slide 6, I want to underscore again that I am very pleased with our recurring revenue closed sales performance, which has been very strong year-to-date. For the quarter, recurring revenue closed sales of $27 million were up 14%. Year-to-date, recurring revenue closed sales were $108 million, and increased 75% over the prior year and remain at record levels. Our clients' continued trust in the Broadridge brand supports sustainable sales growth going forward. Our exceptional client revenue retention rate of 97% is another proof point that we have one of the most trusted brand names in the industry. With a strong pipeline, I remain very enthusiastic about Broadridge’s ability to close new sales and we are also well positioned to drive continued revenue growth with our strong backlog of recurring revenue closed sales currently being implemented. Let's move on to Slide 7, where I will provide some color around our recent tuck-in acquisitions. The successful execution of tuck-in acquisitions and internal product development remains a core component of our growth strategy. Broadridge continues to live by very disciplined acquisitions standards. Any deal we announce has cleared a rigorous strategic review process and a disciplined financial analysis. We set a 20% IRR hurdle rate. We target EPS accretion in about a year, accelerated organic growth and a healthy margin contribution. The most recent transactions fit our tuck-in acquisition strategy to target both assets that are complementary to existing Broadridge businesses and assets that we understand the execution risk to achieve our internal rate of return goals. After the close of the third quarter in April 2015, the Company completed the acquisition of the trade processing business of the Wilmington Trust Retirement and Institutional Services unit of M&T Bank Corporation for about $61 million. To reinforce a couple of important points I discussed on last quarter's earnings call, this acquisition adds additional scale to our successful industry-leading Matrix platform, bringing about 35 new TPA relationships and adding approximately $50 billion of assets under administration or AUA. The combined Matrix entity now has approximately $300 billion of AUA, up from about $125 billion of AUA in fiscal year 2011 when we entered this market with the acquisition of Matrix. The acquisition will expand Broadridge’s suite of solutions for the growing qualified and non-qualified plan services market and the support it provides for third-party administrators, financial advisors, record keepers, and banks. This acquisition further scales the power of Matrix’s open-architecture platform and adds to Broadridge’s overall retirement offering which includes advanced retirement communications capabilities, advisor support, and data analytics. It's great to add Wilmington Trust's trade processing business and their highly skilled associates to the Broadridge team. During the fiscal third quarter in March, we acquired Direxxis for about $33 million. Direxxis is a well-known provider of cloud-based marketing solutions for wealth and asset managers. Direxxis built an innovative marketing management and automation platform, which enables wealth and asset management companies and insurers to manage and implement marketing activities efficiently across field offices and branch locations using consistent standards. The Direxxis platform provides unique analytic capabilities designed to increase marketing and sales effectiveness and has advanced social media tools and a modular architecture. The addition of Direxxis is the latest advancement in Broadridge’s strategy to build market-leading solutions for financial advisors and expands upon our evolving and growing set of advisor-facing product solutions, which already include Forefield and Emerald Connect. The advisor market as a whole is a natural extension of the communications business, which specializes in regulatory and customer communications for brokers and corporate issuers, as well as data-driven solutions for mutual fund and retirement providers. This new Broadridge solution will be offered to our Investor Communication segment. Let me extend a very warm welcome to the Direxxis team whose talents and expertise will make Broadridge an even more valuable business partner to the financial services industry. We are truly excited about this new relationship and are delighted to welcome Direxxis’s highly skilled management team and associates to Broadridge. The integration efforts for both of these acquisitions are moving along as planned. Both acquisitions meet our criteria and we are excited by the prospects. Now I’ll turn the call over to Jim, who will talk more about the financial results.

Thank you, Rich. Good morning, everyone. Before moving to Slide 8 and the details of our results, I’ll begin with some callouts. First, our Q3 performance. With recurring revenue growth of 5% for both the quarter and year-to-date, we are performing consistent with our guidance and expectations, which anticipated the tougher comparables in the first part of the year. Similarly, adjusted earnings per share growth of 7% and 1% in the third quarter and year-to-date respectively, reflects the unusually high level of earnings in the first half of fiscal year 2014 relative to our historical quarterly distribution. With our highest earnings and highest margin quarter of the fiscal year yet to come, we remain on track to deliver our full-year earnings per share guidance. Second, acquisitions. We’ve now closed three acquisitions this fiscal year, TwoFour, Direxxis and Wilmington for an aggregate investment of about $125 million. As mentioned previously, TwoFour is about a $10 million a year revenue business. Direxxis is a $15 million plus a year revenue business and Wilmington is a $50 million plus a year revenue business where about half this revenue will be recorded as recurring fee revenue and the other half will be recorded as distribution revenue. The distribution revenue similar to Matrix is primarily our client’s portion of shareholder servicing and 12b-1 fees and as such has no profit contribution. For FY15, these acquisitions will be dilutive to adjusted EPS by about $0.01. In FY16, we expect these acquisitions to be modestly accretive in the aggregate. Third, share repurchases. We repurchased a total of 2.4 million shares in Q3 at an average price of $52.90 representing $129 million. As Rich highlighted, $109 million of the $129 million was net of proceeds from the exercise of options. Again, this activity was consistent with the capital stewardship priorities articulated at our Investor Day. We expect to continue to both invest in the business and return cash to shareholders. With respect to returning cash via share repurchase, we will communicate any activity after the fact. Fourth, debt. We ended the quarter with an additional $105 million in debt. This debt is financed with our $750 million revolving credit facility with a current variable interest rate between 1% and 2%. As we’ve discussed previously, we’re targeting a longer-term adjusted debt to EBITDA ratio of 2x. Subject to a number of factors, we may refinance our revolver balance to a longer-term instrument at some point in the future. Fifth, foreign exchange. As highlighted on our last call, FX continues to impact growth on both the top and bottom line. The FX drag on revenue growth was about a point for the third quarter and year-to-date. And again, we anticipate greater than a point of drag for the full-year. As it relates to adjusted EPS, EPS growth for the quarter and year-to-date were impacted by two points and one point respectively. For the full-year, we expect about a one-point drag on adjusted EPS growth. And finally, full-year guidance. As Rich mentioned, in reaffirming our guidance, we expect adjusted EPS to be around the midpoint of our $2.42 to $2.52 per share guidance range for the full-year. This represents approximately 10% growth and corresponds to adjusted earnings before taxes growth of 12%. I'd like to highlight a few unplanned items that are having an impact on our 2015 results. FX will reduce adjusted EPS by about $0.04. Elevated commissions from what we’re anticipating will be a record sales year, come at a cost of about $0.02 and the acquisitions after accounting for purchase amortization and deal costs are another penny of dilution. On the other side of the ledger, our Q3 share repurchases should add about a penny for the year. So while there are always ins and outs in any given year, and we still have about 50% of our full-year earnings to come in the fourth quarter, these four items create an approximate net $0.06 unplanned headwind to adjusted EPS for the full year 2015. Now focusing on Slide 8, and starting at the top. This page shows the drivers or components of over 5% recurring and total revenue growth for the quarter. Again, recurring revenue closed sales is the dominant contributor to our growth with five points of growth as sales ramp and we onboard new business. Client losses of three points eat into this contribution and reflect a combination of losses contemplated in the beginning of the year and a bit of client turnover. Internal growth added another point as we saw continued strength in equity stock record and mutual fund positions, which grew at 12% and 8% respectively, and healthy post-sale activity. Please remember that previous quarter stock record position growth rates are not necessarily indicative of the growth rate for the fourth quarter proxy season. On the global technology and operation side, trade volumes contributed very modestly with equity trades coming in flat to last year's Q3 and fixed income trades up 6%. Acquisitions accounted for two points of recurring revenue growth as we had a partial quarter of Emerald, which anniversaried in February and a full quarter of TwoFour, which closed on December 31, and a partial quarter of Direxxis which closed in early March. Moving down to total revenue growth, recurring fee growth accounted for three points of the 5% revenue growth. Event-driven revenue contributed two points of revenue growth and was up 25% year-over-year and up 12% year-to-date. All in, we are on track to deliver a revenue growth guidance of 5% to 7% for recurring revenue and 4% to 6% for total revenue. Finally, our EBIT margin was about 14% as we hit the higher margin second half of the year. As we discussed in previous calls, SG&A growth indeed slowed. These expenses contracted by 4% and are now up 12% year-to-date as a few one-time items are now behind us, and we begin to lap investments made in the back half of FY14. Now turning to Slide 9 and the performance of the segments. Investor Communication Solutions, or ICS, continued to perform well with 6% recurring fee growth driven by equal contributions from net new business, internal growth, and acquisitions. Internal growth contributed two points with a healthy position growth in both stock records and mutual funds, and also good post-sale activity. Also the Emerald and Direxxis acquisitions, which are recorded in the ICS segment, contributed a couple of points of revenue growth. As a reminder, the trade processing business of Wilmington Trust will be combined with our Matrix business, which is in the ICS segment and will begin to show up in our financial results in our fiscal fourth quarter. ICS’s total revenue grew 7% in the quarter as we saw good beneficial mutual fund proxy activity, which drove most of the 25% growth in event-driven revenue. ICS’s EBIT grew 10% for the third quarter and 15% year-to-date with healthy contributions from a variety of products and with continued investments in the business. Global technology and operations, or GTO, revenues grew 3% as net new business contributed two points and the TwoFour acquisition contributed another point of growth. With trading volume growth modest, internal growth of the quarter was neutral to the business's overall revenue growth. GTO continues to deliver solid sales results and is on pace for a record sales year where the benefits of these sales will accrue to fiscal year 2016 and beyond. EBIT contracted 7% in the quarter and 11% year-to-date on very tough comparables. As a reminder, GTO’s EBIT a year-ago at this time was up 83% year-to-date. That said, we expect GTO EBIT to grow for the full year and contribute to Broadridge’s overall growth. I'm now on Slide 10. This page shows our current outlook which remains unchanged. Again, we expect adjusted EPS to be around the midpoint of the $2.42 to $2.52 range and we expect to be in the top half of the recurring revenue closed sales range of $110 million to $150 million. In closing, we are on track to deliver our full-year guidance. As Rich said, we are committed to our long-term financial objectives, which target over the next three years through fiscal year 2017 on a compounded annual growth rate basis, recurring revenue growth of 7% to 10%, total revenue growth of 5% to 7%, and earnings growth of 9% to 11%. We are busy developing our operating plan for next year and look forward to updating you on our outlook for fiscal year 2016 on our fourth quarter call in August. Now I'll turn the call back over to Rich.

Thanks, Jim. Please turn to Slide 11 for my concluding remarks before we open up the call to your questions. I'm pleased with our third quarter and year-to-date financial performance, which was primarily driven by recurring revenues, including net new business gains and the continuation of favorable market-based activities. Recurring revenue closed sales remain at record levels, increasing 14% to $27 million in the third quarter and increasing 75% to $108 million on a year-to-date basis. Given the strong year-to-date performance, we are reaffirming our full-year guidance with $108 million in sales year-to-date. We expect sales to come in at the upper half of our guidance range of $110 million to $150 million, which would be another record. We also expect recurring fee revenue growth of 5% to 7% and total revenue growth of 4% to 6%. Finally, we anticipate adjusted diluted EPS to be around the midpoint of our guidance range which calls for $2.42 to $2.52 per share for the full year. I am very confident that Broadridge will continue to leverage its equities and unique positioning to introduce and develop the next generation of product solutions to further strengthen our existing client relationships and expand into new opportunities in the years ahead. Changes in the regulatory environment have created intense cost pressures, which have challenged firms' ROEs and are driving the need for mutualization of non-differentiating costs and capabilities. Broadridge’s solutions, such as trade and back office processing, including APTP are positioned to address these needs. Broadridge has the opportunity to reduce print communications and create new, more efficient content channels that will allow financial firms to improve communications with their customers, creating a win for both our clients and for Broadridge. I remain enthusiastic about our digital strategy, which has already taken out over 60% of the paper around domestic proxy communications and where we together with our clients have saved the industry about $1.5 billion annually. Our emerging digital solutions like Fluent and Inlet provide Broadridge with an opportunity to continue to lead in this area. Lastly, we believe there is significant opportunity for us in the area of data and analytics. By its very nature, Broadridge has unique data assets like our data on every beneficial equity position for every investor that can add tremendous business intelligence for our clients. Broadridge’s Access Data and Shareholder Data Services are two examples of how our solutions are focused on this opportunity working with our clients. The financial services industry continues to evolve driven by these secular trends of mutualization, digitization, and data and analytics. The Broadridge business model has also evolved from being an entity that simply relied on market-driven transactional volumes to one that is now highly resilient with a balanced portfolio and a reduced reliance on market factors. Enabled by these key trends, we believe that there are multiple paths to achieving our long-term objectives. By executing against these opportunities, we will enable Broadridge to achieve our long-term performance objectives and maintain our trajectory to continue to provide top quartile shareholder returns over any multi-year period. Our business model builds off of a strong and growing base of recurring revenues creating a high level of predictability. Since we held Investor Day in December, our message has not changed. Broadridge remains committed to delivering top quartile stockholder returns over any multi-year period and we are on track to do just that against our current three-year performance objectives. We believe that strong sales performance, a successful tuck-in acquisition strategy, and returning capital to stockholders will enable us to continue to achieve our three-year performance objectives and continue to generate sustainable top quartile stockholder returns over any multi-year period. We were off to a great start towards achieving our three-year performance objectives, which include recurring fee growth of 7% to 10%, and earnings growth of 9% to 11%. Our focus now is on a strong finish to fiscal year 2015 and planning for another solid year’s performance in fiscal 2016. Finally, I’d like to take this opportunity to again personally acknowledge our highly engaged talented associates. Their day-to-day drive and long-term commitment are the foundation of Broadridge’s culture and I remain extremely grateful for all of their efforts. I'll now turn the call over to Janisha, the operator, and we look forward to taking your questions.

Thank you. Good morning, Rich, and Jim.

Good morning, David.

Hi, Dave.

Good to see the 14% growth in recurring revenue closed sales in the quarter. My question, Rich, is you outlined the three broad drivers of demand, but could you perhaps get a little bit more granular in talking about what drove the booking strength in Q3?

Sure. Dave, what I really appreciate about this trend of mutualization is that it's been a fundamental part of our approach for a long time. I’m not just referring to our current operations at Broadridge or even my previous experience selling my communications business ADP back in 1989. I’m going back to when Henry Taub established the company in 1961 with the Brokerage Group, rather than the Payroll business. This ongoing development has led to an expansion of our products that fit into the mutualization framework. Additionally, mutualization is relevant in the communication sector, where we have seen continued success, as outsourcing often proves to be more efficient. We have also enhanced our data and analytics capabilities, exemplified by our Bonaire acquisition, which provided us with both data and analytics, as well as mutualization features specifically related to expense management, all supported by a sophisticated rules-based engine. As we've discussed, it's not about identifying which product is currently popular, but rather recognizing the strong trends across multiple products that are effective within those trends. In nearly every instance, we empower clients to delegate non-essential functions and sometimes offer them competitive advantages beyond their existing capabilities. Many times, we provide them with reduced costs and, importantly, significantly improved functionality supported by our robust data security standards, which the industry regards as a benchmark. Overall, our products are progressing well, and that’s why we focus on these strategic acquisitions that leverage our brand strength, distribution channels, and trends, ensuring these products are equipped with industrial-grade strength and data security, giving us momentum and confidence in these acquisitions.

Thank you, that’s helpful. Just shifting over to R&D, for the last couple of years Rich you’ve been highlighting a step up in R&D as you’ve seen a number of opportunities to accelerate investments in internal programs. Where do you stand with R&D for the year? And how should we think about R&D beyond this year just quantifying investments?

Sure. And Dave, we had an unusual year last year as you know, a very unusually successful year. And beyond beating guidance and adjusting guidance up, we also ramped up internal development. And when Jim joined us, we sat down and we said, we’re really where we should be. So given that we’re comfortable where we are, I’d say that we’re executing the year, and there’s always gives and takes, all right. And there are always something that are not exactly what you anticipated at the beginning of the year. But all in all I’m very comfortable with the level of investment we have and that level of investment enabling us to drive to the three-year objectives that we laid out. One simple example of we planned on more cyber capabilities this year and I’m sure when we’re done adding up everything for the year we’re probably going to have spent a little more than that we even planned on. Ultimately I view that as part of being in business. But I also I’m ecstatic that the things we’re doing and investing in the business whether it be product resiliency or capabilities are all things that are further differentiating Broadridge to enable us both to retain the clients we have as well as attract new clients, because we really are a very safe place to do business with from a functionality, reliability, resiliency and security point of view.

Thanks. Just a quick final question, on the balance sheet you highlighted that investor day an interest in lifting leverage, being more opportunistic on acquisitions and you’ve certainly done that in the last couple of months. Should we continue to look for tuck-in acquisitions or are you thinking about doing something larger in scale?

Sure. So, Dave, we’re six months about past investor day and I’d say we’re right on the line of everything we laid out, right down the middle of the fairway. So, I feel good about where we are. I have talked about this many times. Tuck-ins are things that we can generally get our hands around. Tuck-ins are things that we can dive into, we can integrate more easily. And so, again I’ll never say never to a larger transaction. I still can't think of one that I think that the risk is something that I would be comfortable with at this point in time or that the fit is completely comfortable. So, given the success we’ve had with tuck-ins, you should believe that it’s the success we’ve had that more than likely will drive us to stay on that same path and we certainly feel good about the transactions we announced in this quarter.

Good morning, gentlemen.

Hi, Pete.

Yes, so it’s a $125 million weighted average diluted at the end of the period and what you’re observing is, some activity of exercise of options that happened in the December quarter as well as in the March quarter and then think about the share repurchase coming later in our third quarter. So, the waiting isn’t really showing up yet, which shows up more in the fourth quarter and beyond.

Okay, that’s helpful. And then, can you comment on event driven bookings? It looks like for the first half, event driven bookings were up about 45%, good quarter for event driven revenue. Rich, do you think we’re seeing an uptick in mutual fund activities that could be sustainable or do you attribute it just to one or two or three fund families that had to do the proxy?

Okay. So, the answer though is going to be, kind of sort of yes to all of the above. All right, so what do I mean by that? When event-driven went down post the crises, the data and the studies we did without site consultants and ourselves said that although it was unlikely particularly with a lot of the Boston funds reincorporating the Delaware. It was unlikely that we would average between 20% and 22% of fund positions going forward. It seemed just based on the normal mortality of fund directives that we really should be in the 15%, 16% range, and yet for years we were below that. Until the year is over, because the answer that kind of sort of yes, is a couple of funds will always drive this for the larger funds and depending on what quarter they fall in, it will look like either slightly ahead, slightly behind for where we were thinking we’re going to be for the year. So this is one of these things where unlike proxy season and Broadridge overall, well we know, the majority of our year and earnings are going to happen in the last quarter. This is something where it’s going to be driven by the timing of those boards and when they decide to go to market. With all that said, we believe for a long time that the mid-teens is about where the mutual fund activity should be. If we had to guess right now, it kind of looks like that maybe what we’re tracking for this year. And so, I do believe that the data says that on average that’s where we should be going forward. But it will very unlikely be, so if you want to pick the midpoint 15% or mid-teens, it’s very unlikely it will be 15% a year every year. So it could still be 10% or it could be 20% but it’s likely more to be closer to that midpoint separating out any other anomalies. We like the event-driven revenue. We like it because it grows with fund positions. We like it because it’s good revenue that fits very well into our relatively fixed cost infrastructure of the communications machine and so, we are particularly pleased this year to be back to average.

Hi, guys. Good morning. Thanks for taking my question. I wanted to start off on the new sales side, again those continuing to be very strong. I think year-on-year you’re up something like 74%, 75%. Rich, is there any reason why you won't eclipse the $150 million mark you have out there for new sales for the year or is that just timing? Is anything different in the pipeline? Just any color you could provide there.

Sure. So, George it is 75% and we are very pleased and I jokingly say, my cardiologist is very pleased. Because for whatever reason we always seem to be back-ended on the sales and this year we started right out of the gate strong. We had a record, first half record year-to-date where we are right now. Timing always comes into play. To me the most important thing is, is what you heard me say earlier today, we’ve got a lot of product that aligns with what the industry needs. And so, larger deals this year have certainly helped us. We’ve got lots of things that fit into I’ll call it the blocking and tackling category as well and so, even at this point I can't tell you with certainty what the number will be at the end of the year and I can't tell you with certainty if it would be above or beyond the high end of that range. And I’m never going to raise guidance on anything unless there are no guarantees but unless I can say with a high level of certainty. We feel good about sales, but it’s not the year, we feel good about sales momentum overall and what it means to our three-year objectives we laid out on investor day and George that’s what's driving this management team. If there’s an opportunity to do something in this plan that we think enhances our ability to deliver a number next year and beyond, you should expect us to do that rather than jamming something into this year even given the fact that it is so much fun if and when you ever get to beat guidance to announce it.

That right, George. We continue to be very happy with the GTO performance especially as we see the sales growth and the sales growth that Rich was just talking about, GTO is every part of that story. Specifically to your margin question year-to-date sitting at 17.8% which is very consistent with kind of the outlook we provided in the beginning of the year which was mid 17%, so we think with the type of revenue growth that we’re looking at, that long-term that GTO will continue to be part of our margin accretion story. So we don’t have specific guidance but absolutely a part of the overall Broadridge margin accretion story.

Good morning, gentlemen.

Good morning.

Hi, Chris.

So, Rich I know you already answered one question by saying you never say never to a large acquisition or about a large acquisition. Just because it’s in the press this week with SunGard potentially considering an IPO, potentially considering the sale. On your potential appetite for a very large acquisition, can you put that in context of your willingness to, I mean; you already mentioned you don’t see anything that has the fit or the risk that you would like. Also, even your willingness to extend your debt to EBITAR ratio above two times. Is that sort of you won't go above that or is that more flexible for the right unique opportunity?

Okay. I want to clarify that you shouldn't read too much into my thoughts. At 61 years old, reflecting on all the things I believed I would never do at 18, I’ve adopted "never say never" as part of my life and business philosophy. However, let's focus on the key reason why Broadridge is successful. We have outlined clear three-year guidance during Investor Day, and we believe we can create shareholder value while navigating reasonable risks and challenges. We aim to deliver top quartile shareholder returns during this period. When it comes to considering a significant or transformative transaction, I find it difficult to communicate to our shareholders what I just shared about our current path. To date, no one has presented any substantial transaction to me. I meet with many bankers whom I respect, and they often present impressive synergy numbers. I like to understand how they arrived at those figures. If they claim there’s a potential $200 million benefit that doesn't align with the usual financial risk criteria, I have concerns. Similarly, while I appreciate potential product and tax synergies, I often leave those discussions feeling unsatisfied regarding the answers I receive. Given our intense focus on a tuck-in acquisition, it's highly unlikely that we could find the comfort needed for a deal that would completely disrupt our three-year plan and necessitate a new strategy. If we were a company aiming to transform ourselves due to lack of market growth or insufficient products, that would be a different story, but that is not the case for Broadridge. Our narrative is that we have a tangible, understandable, and executable plan presented at Investor Day, and that should be the takeaway from this call. We are always looking for ways to enhance value, but we do not see a need to take on significant risk, especially with the substantial market opportunities available to us currently.

Good morning, Rich. Good morning, Jim. Thank you for taking my question.

Stephanie.

You have been achieving really solid new sales in the past few quarters. How much of that is driven by the new sales force investments versus maybe better execution or a better selling environment?

You don’t want to add in there the brilliant vision of the CEO, Stephanie? I’ll start with that and Jim you can go in there as well. I’m very pleased with the momentum of sales. I’m very pleased with the momentum in the sales organization, and I’m very pleased with the changes in the organization in particularly Chris Perry joining us as the leader of these revenue activities. That momentum is going to continue to build. But we laid out clearly we wanted to transform and this starts when Tim Gokey was doing double duty for us and Tim identified a need for us to have a more consultative approach. And so, Tim started those efforts. Chris is doing double duty on those efforts. But I particularly on some of the larger transactions and some of the larger dialogues we’re in, the investments that we made in sales, one would say we’re getting a very good return on. And as we all know, when you make an investment into something intangible like that, it’s normally pretty difficult to say whether you’re getting the return that you’d hope to get or not. In this case it’s not difficult. It's pretty clear we’re getting a pretty nice return and we fully intend for this momentum to continue and that also ties to product management, that also ties to ensuring that we have more product whether it be building or acquiring with tuck-ins to drive to the market and take advantage of our brand distribution channel and the industry’s need to mutualize non-differentiating cost and create better functionality through vendors they can trust. Sure. It is a transaction that the world is watching, certainly the international world. The operations piece has gone live. The processing pieces are taking a little longer than originally hoped. It is very complicated. One thing about Broadridge, they’re usually very clearly. So in terms of the processing piece, it’s our technology and Broadridge has been at this for 50 plus years, I’ve been at this for 25 plus years. We have never not successfully completed a conversion and we’re well on the path to doing that. This was to some degree uncharted waters because of the new nature of what we’re doing in Europe, Asia, the Middle East, et cetera. And having an announced second transaction 2016 is going to be a pretty big year for all of this activity and the dialogues that we’re still having with entities out there as they watch to see these transactions go live and as they recognize with their pressured ROEs and the need to mutualize costs, non-differentiating costs of this nature. We think that this, the timing and the importance of this utility is going to serve Broadridge, Accenture and our clients extraordinarily well. It has been a lot of work and I think it’s work and by the way it’s been a lot of work in this cost related to that work. But as work and cost that we think also adds to our confidence as we look at our three-year objectives as we go forward.

Hi, this is Niamh Alexander. Thank you for taking my questions. I want to revisit the GTO business. Regarding your international customers in the U.S., this has traditionally been a significant aspect of your business. We've been hearing that international banks and the capital markets business are pulling back, particularly Deutsche Bank, Barclays, and RBS are pulling back noticeably in this area. How should we assess the potential risks to your processing business? Are you confident that your current closed sales will meet your guidance?

There is pressure on return on equity and regulatory requirements that are driving significant activity for us, prompting a reevaluation of business models. In particular, areas like high-frequency trading and certain program activities have seen risks emerge. Historically, these areas have not generated substantial revenue for us, despite our involvement in the processing. The processing that doesn't necessitate asset servicing tends to yield low revenue and minimal contribution. We've often received questions during these calls from clients in these sectors about why our trading volumes remain stable despite their declines. The reality is that while their trading volumes may be diminishing, the revenue we generate from those trades has also significantly decreased, resulting in a smaller financial impact compared to their trading activity. Consequently, our trading and Global Technology Operations revenue has sometimes appeared counterintuitive relative to the lower volumes at our clients. As we focus on streamlining functions, which is part of this year's strategy, we're observing that the same pressures affecting these businesses are making them more open to considering outsourcing, even if they’re already employing our technology under an Application Service Provider model. They are looking for ways to reduce costs amid revenue challenges imposed by regulators and the operational costs of running their businesses, all contributing to the ongoing discussions about return on equity. Ideally, I would prefer a scenario where those looking to outsource also experience rising volumes. Historically, there has been less interest in outsourcing when volumes are increasing and profits are up across the board. While the environment won't ever be perfect, the current willingness to hand over certain activities to us feels at its highest in my career, even as these organizations will still need to remain operational. I don't foresee them completely exiting the equities or fixed income markets, and the areas they will likely relinquish are those from which we anticipate earning the full fees for required asset servicing and additional activities. It's not an ideal situation, but it is a reality we've been managing since the financial crisis.

All right. Well, first of all thank you for questions and certainly thank you for your participation. I got to find my date here for our Investor Day. So on Tuesday, May 12 in New York City we’re going to have our Investor lunch-in. Jim, Brian, and I look forward to meeting with you hopefully at that lunch-in or if not, in the near future, and again thanks so much. Choose to have a great day. We’re certainly going to do that here at Broadridge.