Teleconferencia de resultados del primer trimestre fiscal de 2027 de Broadridge (BR): crecimiento del 11 % en los ingresos recurrentes, previsiones reafirmadas

Puntos clave

• Broadridge registró un crecimiento de los ingresos recurrentes del 11% en moneda constante en el primer trimestre fiscal de 2027, lo que incluye un crecimiento orgánico del 9%.
• Los ingresos totales aumentaron un 5% hasta los 1.700 millones de dólares. El BPA ajustado subió un 3% a 1,56 dólares, mientras que el margen operativo ajustado se redujo 200 puntos básicos hasta el 13,8%.
• Los ingresos recurrentes de Gobernanza crecieron un 10% hasta los 568 millones de dólares. Los ingresos recurrentes de GTO aumentaron un 13%, respaldados por un crecimiento del 17% en los ingresos de mercados de capitales.
• Las ventas cerradas aumentaron un 10% hasta los 36 millones de dólares, y el flujo de caja libre se incrementó a 76 millones de dólares desde los 13 millones de dólares del año anterior.
• La dirección reconfirmó sus previsiones para el ejercicio fiscal 2027 de un crecimiento de los ingresos recurrentes en moneda constante del 6% al 8%, un margen operativo ajustado de aproximadamente el 21% y un crecimiento del BPA ajustado del 8% al 12%.
• Broadridge recompró 200 millones de dólares en acciones y pagó 111 millones de dólares en dividendos durante el trimestre. Los ahorros relacionados con la IA sumaron 6 millones de dólares, y la dirección fijó un objetivo de 25 millones de dólares para todo el año.

Datos financieros principales

Rendimiento empresarial y operativo

Los ingresos de Gobernanza aumentaron un 10% en moneda constante. Los ingresos regulatorios subieron un 17%, impulsados por un crecimiento del 11% en las posiciones de ingresos de renta variable y del 16% en las posiciones de fondos. El calendario de ciertas comunicaciones de fondos aportó tres puntos porcentuales al crecimiento de los ingresos regulatorios.

Las posiciones totales de renta variable aumentaron un 16%, mientras que las posiciones de renta variable generadoras de ingresos crecieron un 11%. Las comprobaciones de la dirección indican un crecimiento del total de posiciones de alrededor del 15% en el segundo trimestre fiscal y de un rango bajo de dos dígitos para el ejercicio fiscal 2027. El crecimiento de las posiciones de fondos alcanzó el 16% en el primer trimestre, aunque el factor temporal contribuyó al resultado. La empresa prevé un crecimiento de las posiciones de fondos en el rango alto de un solo dígito para el resto del año.

Los ingresos de Soluciones de fondos basadas en datos crecieron un 10%, incluyendo un 4% de crecimiento orgánico. Los ingresos de emisores aumentaron un 4%, mientras que los ingresos por comunicaciones con clientes subieron un 3%, ya que el crecimiento digital compensó la debilidad del negocio impreso.

Los ingresos de GTO crecieron un 13%, incluyendo un 10% de crecimiento orgánico. Los ingresos de mercados de capitales aumentaron un 17%, lo que comprende un 12% de crecimiento orgánico y una contribución de cinco puntos porcentuales procedente de adquisiciones. Los ingresos de Gestión de Patrimonio e Inversión aumentaron un 6%, impulsados por la solidez en Canadá. El volumen de operaciones aumentó un 7%, respaldado por una mayor actividad en renta variable.

Broadridge destacó la expansión de su actividad en renta variable tokenizada e infraestructura de valores. La empresa presta servicios de gobernanza para Kraken Payward y prevé proporcionar la capa central de gobernanza y los servicios de agencia de transferencia digital para el mercado proyectado de renta variable tokenizada de la Bolsa de Nueva York. Asimismo, respalda las iniciativas de tokenización de la DTCC.

La plataforma Digital Ledger Repo admite ahora la liquidación atómica transfronteriza para valores del G7 junto con bonos del Tesoro de EE. UU. tokenizados. La dirección prevé un nuevo crecimiento significativo del volumen durante los próximos seis meses a partir de los clientes firmados que se encuentran actualmente en fase de implementación.

Los ahorros de productividad impulsados por IA sumaron 6 millones de dólares en el primer trimestre. Broadridge sigue en camino de lograr 25 millones de dólares en ahorros en el ejercicio fiscal 2027, los cuales la dirección prevé destinar tanto a inversión estratégica como al crecimiento de los beneficios.

Previsiones de la dirección

Broadridge reconfirmó todas sus métricas de previsión para el ejercicio fiscal 2027:

La dirección prevé que el crecimiento de los ingresos recurrentes de GTO se sitúe cerca del límite superior del rango de la empresa (6%–8%), liderado por los mercados de capitales, con un crecimiento más moderado en la gestión patrimonial. Se prevé que el crecimiento de Gobernanza se mantenga dentro del rango general de la empresa.

Se prevé que los ingresos extraordinarios impulsados por eventos se normalicen entre 60 y 70 millones de dólares por trimestre durante el resto del ejercicio fiscal 2027. Se proyecta que el BPA del segundo trimestre fiscal represente aproximadamente entre el 12% y el 14% de los resultados de todo el año, debido a la normalización de los ingresos extraordinarios y al tipo impositivo.

Riesgos y puntos de atención

La presión sobre los márgenes en el primer trimestre reflejó menores ingresos extraordinarios por eventos y una mayor inversión en plataformas, tokenización e IA. La dirección prevé presiones similares en el segundo trimestre antes de que se moderen en el segundo semestre, momento en que la estacionalidad del negocio suele respaldar mayores ingresos y márgenes.

El tipo impositivo efectivo del primer trimestre fue del 14% debido al calendario de partidas extraordinarias. La dirección sigue previendo un tipo impositivo para todo el año de aproximadamente el 22%.

Broadridge registró una pérdida contable sin efecto en caja de 40 millones de dólares por la reducción del valor de sus tenencias de activos digitales y prevé que continúe la volatilidad por la valoración a precio de mercado trimestre a trimestre. También contabilizó un cargo por reestructuración de 15 millones de dólares relacionado en parte con iniciativas de IA y productividad.

La dirección señaló que el calendario y el ritmo de adopción de la renta variable tokenizada siguen siendo inciertos. Asimismo, la diversidad de modelos y redes de tokenización podría aumentar la complejidad para emisores e intermediarios.

Puntos destacados de las preguntas y respuestas con analistas

• Rentabilidad de la tokenización: La dirección prevé que las posiciones de renta variable tokenizada generen un rendimiento económico igual o superior al modelo actual de Broadridge, en función de si los activos se mantienen mediante gestores patrimoniales o estructuras dirigidas por emisores.
• Crecimiento de las posiciones en fondos de inversión: La dirección atribuyó parte del aumento del 16% en el primer trimestre al factor temporal, pero señaló que las pruebas respaldan una aceleración estructural hacia un crecimiento de un solo dígito alto durante el resto del año.
• Plataforma de negociación de crédito LTX: Broadridge considera la consolidación del sector como una oportunidad potencial para LTX, pero la dirección subrayó que los volúmenes siguen siendo bajos y la plataforma no es relevante para los resultados ni las previsiones actuales.
• Ahorros por IA y clientes: En Servicios Gestionados, Broadridge ha logrado mejoras de eficiencia de aproximadamente el 25% y ve margen para acercarse al 50%. La empresa prevé compartir parte de estos ahorros con los clientes reteniendo al mismo tiempo una fracción del beneficio.
• Asignación de capital: Con un apalancamiento de 2 veces y una conversión de flujo de caja libre que se prevé por encima del 100%, la dirección afirmó que Broadridge cuenta con capacidad para continuar con las recompras de acciones y adquisiciones complementarias estratégicas, al tiempo que financia el crecimiento orgánico y los dividendos.
• Evolución del margen: La dirección prevé que los márgenes de la primera mitad del año continúen viéndose condicionados por la normalización de los ingresos extraordinarios y el gasto en inversión, seguidos de márgenes más sólidos en el segundo semestre, en consonancia con el patrón estacional de la empresa.

Transcripción completa de la conferencia de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Good morning, and welcome to the Broadridge Fiscal First Quarter 2027 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Edings Thibault, Head of Investor Relations. Please go ahead.

W. Thibault

Thank you, Jamie. Good morning, everybody, and welcome to Broadridge's Fiscal First Quarter 2027 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 CEO; and our CFO, Ashima Ghei. Before I turn the call over to Tim, a few standard reminders. One, we will be making forward-looking statements on today's call regarding Broadridge that involve risks. A summary of these risks can be found on the second page of the slides and a more complete description on our annual report on Form 10-K. Two, we will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results. An explanation of these non-GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and presentation. Let me now turn the call over to Tim Gokey.

Timothy Gokey

Thank you, Edings, and good morning. It's the election day in the U.S., which is a fitting time to talk about shareholder engagement and the importance of giving investors a voice. So thank you to everyone who's already voted, and I encourage everyone eligible who hasn't yet voted to do so later today. Turning to Broadridge. Our business is performing very well. We're benefiting from a positive market backdrop that's translating into momentum for our financial services clients, continued double-digit growth in positions, and rising demand for our solutions.

And that in turn is enabling Broadridge to deliver strong financial results while funding investments in attractive new growth markets. Those investments build on our strong existing positions and are translating into tangible momentum, driving new products and client relationships, supporting increased investor engagement and unlocking productivity. So let's get to those results, starting with the headlines on Slide 3. First, Broadridge delivered a strong financial quarter. Recurring revenues rose 11% on a constant currency basis with double-digit growth across both our governance and ETO segments. Both sales increased by 10%. Second, those results are being driven by the execution of our strategy to democratize and digitize investing simplify and innovate trading and modernize wealth management.

Third, we're also putting in place the building blocks for attractive future growth by driving digital engagement, accelerating tokenization and scaling agentic-AI. Fourth, we continued to deliver strong free cash flow conversion and increased capital returns to our shareholders including repurchasing $200 million of our shares in Q1. And last, we expect to deliver strong fiscal 2027 financial results, and we're reaffirming our full year guidance for all metrics.

Let's move to the drivers of results, starting on Slide 4 with our governance business, where we continue to drive democratization and digitization. Governance revenues rose 10% in constant currency driven in part by continued investor participation and very healthy physician growth. Total equity position growth remained strong at 16%, led by growth in managed accounts and continued growth in self-directed accounts. Revenue position growth was 11%. Fund position growth accelerated to 16% in the quarter compared to 6% for the full year in fiscal '26. While timing contributed to this quarter's numbers, our testing is signaling a sustained pickup to high single-digit growth as Ashima will share in a few minutes.

We're also seeing strong interest globally for our proxy solutions. During the quarter, we closed a sale with a leading Scandinavian wealth manager to enable proxy voting for U.S. equities, building on the strong momentum we saw at the end of last fiscal year, and we're making further inroads in Asia Pacific. Last month, Broadridge signed a memorandum of understanding with the Korean securities depository, to begin collaborating on modernizing the proxy voting process -- modernizing the proxy voting process out there. As newer financial markets, step up their global competition for global asset flows. They are recognizing the importance of corporate governance and with it, efficient, digitized and transparent voting. And no surprise, they see Broadridge as a key partner in that work.

Turning next to capital markets, where we are simplifying and innovating trading. We had a very strong quarter with 17% recurring revenue growth, including organic growth of 12%. In the U.S. market, our clients are gearing up for the start of [ 23/5 ] trading, which will begin December 6. In Broadridge, we're fully prepared to enable that transition across our front and back-office applications. further demonstrating the power of an industry solution. In front of us, the acquisition CQG is already strengthening our futures and options offering. During the quarter, we won a mandate for a front office solution for a leading global brokerage platform, providing an equities, futures and options suite across both the U.S. and Europe.

In the back office. We're expanding our relationship with a major Japanese bank seeking to take advantage of our unified global post-trade platform. We're also benefiting from strong demand for our corporate actions platform. Moving now to Wealth Management. Revenues rose 6%. In wealth, we're benefiting from continued growth in Canada, driven in part by the extension of our platform capabilities across Canadian clients. In the U.S. market, we continue to see significant interest in our wealth platform capabilities, aided in part by the progress we're making in onboarding several major wealth managers.

Finally, I want to call out closed sales. After a record finish to fiscal '26 in June, we are pleased to close $36 million in Q1 sales, up 10% on fiscal '26. More importantly, our pipeline continues to strengthen and we are nicely on track to deliver our full year guidance of $290 million to $330 million. In sum, across governance, capital markets and wealth, we are executing well at our current businesses each of which has a long runway and substantial opportunity. At the same time, we're seeing powerful new trends that have the potential change markets over the next 3, 5 and 10 years.

The good news is the change is positive for Broadridge because it increases the need for investment by our clients. And Broadridge is exceedingly well positioned to take advantage of the new market opportunities that are being created. Our successful execution today positions Broadridge as a trusted partner to help our clients adapt to the next phase tomorrow. And we're ready. We've been investing in the core themes of digital engagement, tokenization and agentic AI, in some cases for years, and those efforts are now bearing fruit.

So let's turn to Slide 5 to review our progress on these fronts. First, digital engagement. Our standing voting instructions or SBI capability is gaining real momentum in the marketplace. Over the last few weeks, both Goldman Sachs and Tesla have launched SBI engagement programs to make it easier than ever for retail shareholders to vote their shares. The success of early campaigns from Exxon and others are opening eyes, and we anticipate further announcements on blue-chip remains in the months to come. Furthermore, in late September, the SEC provided guidance as to how mutual funds can implement their version of an SBI program.

The upcoming move to e default is also increasing digital engagement. We submitted our comments to the SEC in September, reiterating our support for the proposals core objectives. The proposal creates new requirements and complexities for intermediaries, and we are actively engaging clients on what they need to stay compliant. At the same time, forward-thinking firms are using the ship as a catalyst to drive deeper and more valuable engagement with their clients. As a result, our wealth and focused platform continues to gain momentum as clients look forward to what they will need to successfully implement the new rules and deliver tailored digital communications at scale.

Turning next to tokenization. Broadridge is building the infrastructure that helps markets support tokenized assets while preserving the governance and servicing that investors, brokers and clients and issuers need. First, in Tokenize equities, the SEC continues to advance its pro innovation agenda with this recently released innovation exemption. That rule is designed to encourage new marketplaces for tokenized equities. Importantly, the commission explicitly reiterated the importance of shareholder rights, including voting as a core feature of tokenize equities. The competition across the multiple models of equity tokenization and across the different level 1 network points to a more diverse and fragmented environment for issuers and intermediaries to navigate. It's now clear that the introduction of tokenized equities will result in increased complexity for issuers, wealth managers and investors.

Broadridge is stepping in to reduce that complexity by stating our scaled and institutional-grade governance layer to cover all models of tokenize equities. Leaders in each of the models know they want strong governance as a feature of their offerings and they're turning to Broadridge to help them deliver. We recently announced an agreement with Kraken Payward to provide governance services, building on our existing relationships with Endo and ElpaCa. Importantly, these new relationships cover both global tokenize equities to largely synthetic as well as the custodial tokenized model that these players are planning to bring to the U.S. market.

We're also working with leading market infrastructure providers. As we announced yesterday, Broadridge will provide the core governance layer for the New York Stock Exchange's planned to tokenize equity marketplace, and we'll support issuers with digital transfer agency services. We're also supporting the DTCC's tokenization efforts across governance and trading infrastructure, and we anticipate further announcements with other market infrastructure providers over time. In sum, tokenizes equities can bring real benefits and also come with new complexities. There's significant growth opportunity for Broadridge as we solve those new needs with the horizontal governance layer that simplifies complexity for issuers, intermediaries and investors.

Outside of equities, we're building the trading infrastructure to support tokenize securities across multiple asset classes. Our Digital Ledger Repo DLR platform now supports cross-border atomic settlement for G7 securities alongside tokenized U.S. Treasuries, enabling us to bring our market-leading collateral management capability to our global clients. Based on clients signed and currently in implementation, we expect further significant increases in our DLR volumes over the next 6 months. Building further on DLR, we launched DLX an end-to-end platform that goes beyond repost to connect tokenized and traditional markets across multiple asset classes through an integrated operating layer.

The first use case is supporting the DTCC's tokenization initiative and we're leading a user group of nearly 2 dozen institutions to help them as they begin to access and use the DTCC's new service. Turning last to AI, where we continue to scale our agentic capabilities. We have now expanded our AI-powered institutional voting solution to include global equities and enhanced workflow to make institutional voting more seamless and independent than ever. Demand remains strong and we signed another Tier 1 wealth manager to our growing client roster in Q1.

A global demand model is also gaining momentum. Covering more than 130 trillion of global assets its predictive AI capability is giving our clients unrivaled visibility into future asset flows. We recently signed an agreement with a leading consulting firm replacing their long-standing in-house model. We're also delivering real AI efficiencies as [indiscernible] share and using that capacity to fund investment and drive EPS growth.

Putting it all together, it's an exciting time. Our industry is evolving rapidly, creating significant new opportunity for which no 1 is better positioned than Broadridge. We've been investing to meet that demand, and we're now seeing the beginning of real traction across multiple areas. So let me close with a quick recap of our key headlines. First, we delivered strong first quarter results, including double-digit growth in both ICS and GTO. Second, we're putting our cash flow to work to expand our market grow our dividend and repurchase shares. Third, we're on track to deliver another year of steady and consistent top and bottom line growth, and we're reaffirming our guidance on all metrics.

And last, for translating our growth investments into tangible results. We are widening access with better digital engagement. We're building the governance layer for tokenize or securities and the operating infrastructure to connect traditional and digital assets. And we're delivering new genic products and workflows while using AI to create internal efficiencies that will fund investment and support in growth.

Before I turn it over to Ashima, I want to thank the 16,000 Broadridge associates worldwide who turn our strategy into execution. They're delivering exceptional value to our clients, and in turn, for the tens of millions who rely on our industry to invest in the future. I've never been more confident and excited about Broadridge's ability to serve our clients, engage our associates and create compelling long-term value for shareholders. Ashima?

Ashima Ghei

Thanks, Tim. Good morning. It's great to be here today to share our Q1 results. Before I begin my review, I want to make 5 key callouts. First, Broadridge is off to a strong start in fiscal '27. In our seasonally smallest quarter, recurring revenue grew 11% constant currency, including 9% organic growth. Closed sales also rose 10% to $36 million. Second, underlying growth drivers remain positive with double-digit equity and fund position growth and continued trade volume growth. Third, we continue to be a buyer of Broadridge shares. We repurchased $100 million in Q1, bringing our total since January to $650 million.

Fourth, we are delivering on AI productivity gains. AI savings were $6 million in the first quarter, and we are on track for $25 million for the full year, enabling us to deliver strong bottom line results and fund strategic growth initiatives. And finally, we are reaffirming our full year outlook, delivering 8% to 12% adjusted EPS growth while investing in our future growth. With that, let's go to the numbers on Slide 6. Recurring revenues grew 11% on a constant currency basis, including 9% organic growth. Adjusted operating income margin was 13.8%. The lower year-on-year as we lapped record event-driven revenues in Q1 last year.

Adjusted EPS grew 3% to $1.56, above our expectations driven by timing benefits in our regulatory revenues and a lower effective tax rate. And closed sales were $36 million, up 10% from Q1 last year. Let's move to Slide 7 to discuss our segment recurring revenue, starting with ICS or Governance segment. ICS recurring revenues rose 10% and to $568 million, including a 1 point benefit from acquisitions. Regulatory revenues rose 17% in Q1 driven by 11% growth in equity revenue position and 16% growth in fund positions. The timing of certain fund communications resulted in a 3-point benefit to regulatory revenues.

Data-driven Fund Solutions revenues grew 10%. Organic growth was 4%, and which included a 2-point headwind from lower interest rates. Issuer revenues grew 4%, driven by strong growth in Disclosure Solutions which more than offset a 2-point headwind from lower interest rates. Customer communications revenues rose 3%, with strong growth in Digital Solutions, offset by lower growth in Print. The acquisition of Signal contributed 1 point to growth. For the year, we expect ICS recurring revenue to be within our 6% to 8% total recurring revenue growth guidance. Interest rates, which have been a modest headwind to growth for the last few quarters are expected to be neutral in Q2 and then be a modest tailwind to growth in the second half of the fiscal year.

Turning to GTO. Revenues grew 13% in Q1, including 10% organic growth. Capital markets revenues grew 17% and driven by organic growth of 12% and a 5-point contribution from the acquisition of CTG. Higher term license revenues contributed 4 points to organic growth. Wealth and Investment Management revenues rose 6%, all organic, led by strong growth in Canada. Higher term license revenues contributed 3 points to growth. For the year, we continue to expect GTO recurring revenue growth at the higher end of our 6% to 8% guidance range, led by growth in capital markets with slower growth in wealth.

Let's move to Slide 8 to review our key volume indicators. We continue to see healthy growth in investor participation across both equities and funds. Equity position growth was 16%, including 11% growth in rent positions. Looking ahead, our testing shows mid-teens total position growth in Q2 and low double-digit growth for the full year. Q1 fund position growth was 16%, driven in part by the timing mix of certain jobs in the quarter. Putting time aside, our testing indicates high single-digit growth for the balance of the year, an acceleration from 6% in fiscal '26. In GTO, trade volumes rose 7% for the quarter, driven by growth in equity volumes.

I'll wrap up my discussion of recurring revenue growth on Slide 9. In Q1, recurring revenue growth constant currency was 11%, primarily driven by 9 points of organic growth. Revenue from closed sales contributed 4 points of growth. Our retention rates were 98% for the quarter and internal growth contributed 7 points of growth. Acquisitions contributed 2 points of growth. Let's close our discussion of revenues on Slide 10. Total revenue increased 5% to $1.7 billion, driven by 7 points of growth from recurring revenue. Lower event-driven revenue offset 3 points of growth to total revenue.

As event-driven revenues returned to more normalized levels after a record quarter last year. We expect event-driven revenues to continue to be at our historic average levels of $60 million to $70 million per quarter for the balance of fiscal '27. Low to low margin distribution revenues grew 4% primarily driven by higher postage rates and contributed 1 point to total revenue growth. Turning now to margins on Slide 11. Adjusted operating income margin was 13.8%, a decrease of 200 basis points from Q1 '26 as operating leverage from our scale business, was offset by lower event-driven revenues and higher growth investments.

For the quarter, margin dilution from lower interest rates was offset by an improved mix of distribution revenue resulting in no material net impact on AOI margins. Let's move on to earnings on Slide 12. Q1 adjusted EPS grew 3% to $1.56 with a lower tax rate and lower share count offsetting lower adjusted operating income. First quarter earnings benefited from a lower tax rate of 14%, reflecting the timing of discrete tax items. Looking ahead, we continue to expect our full year tax rate will be approximately 22%. In addition, Broadridge recorded a $40 million noncash loss driven by the decrease in the value of our digital asset holdings. Net noncash loss is reported in other nonoperating income and was excluded from our calculation of adjusted EPS.

Given the volatile nature of digital assets, we expect to continue to recognize non-GAAP gains and/or losses as we mark our Canton holdings to market every quarter just as we did last year when we recognized a $227 million noncash gain. In addition, we also recorded a $15 million restructuring charge related in part to our AI and productivity initiatives. Let's turn to sales now on Slide 13. Broadridge reported closed sales of $36 million an increase of 10% from the first quarter of fiscal '26. Our pipeline remains strong, and we are reaffirming our guidance for full year closed sales of $290 million to $330 million.

Turning to our cash flow on Slide 14. Broadridge generated free cash flow of $76 million, up from $13 million a year ago. We remain on track to deliver free cash flow conversion of over 100% in fiscal '27. Turning next to capital allocation on Slide 15. We continue to take a balanced approach to capital allocation. In Q1, we invested [indiscernible] clients onto our wealth and capital markets platform. We also took advantage of the compelling value in Broadridge shares, repurchasing an additional 1.1 million shares for $200 million in the first quarter. That brings our total repurchases to 3.9 million shares since the beginning of the calendar year. We also returned an additional $111 million to our shareholders in Q1 via our dividend.

With a leverage ratio of 2x at the end of the quarter, we have a strong balance sheet and are well positioned to repurchase additional shares and/or pursue strategic tuck-in acquisitions. Let's start to wrap by reviewing our fiscal '27 guidance on Slide 16. As I said in my call outs, Broadridge is on track to deliver strong fiscal '27 results, and we are reaffirming our guidance on all measures. We expect fiscal '27 recurring revenue growth constant currency of 6% to 8%, adjusted operating income margin of approximately 21% and adjusted EPS growth of 8% to 12%.

And last, we expect closed sales of $290 million to $330 million. A quick call out regarding our outlook for the second quarter. We expect Q2 EPS to be approximately 12% to 14% of our full year results. As growth in recurring revenue, is offset by more normalized event-driven revenues and tax rate. I'll wrap by summarizing my key points. Broadridge is off to a very good start to the year, delivering strong Q1 results. The demand and secular trends driving our growth remained very healthy, and the testing showed low double-digit equity and high single-digit fund position growth for the year. We're putting our cash flow to work to invest in growth and enhance shareholder returns. And last, we remain very much on track to deliver another strong year of recurring revenue and adjusted EPS growth in fiscal '27.

As we move to Q&A, I just want to remind you that we will be hosting an Investor Day in New York City on December 8 at the event, which will be open to institutional investors in person and to everyone online, we will be updating all of you on our growth strategies and providing our latest set of financial objectives for fiscal year '27 to '29. I hope we'll see many of you there. With that, let's move to Q&A.

Operator

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

Preguntas y respuestas

Daniel Perlin

Good results here. I wanted to ask on the on the tokenization of equities here. Clearly, you've strengthened your position over the last several quarters. I think the question that's a little bit still outstanding is just how does the economics of these future models compare maybe relative to more traditional models that you process for?

Timothy Gokey

Yes, Dan, thank you very much for that. And as you say, we're really excited. We do see tokenization as a significant driver of change across the industry and a significant -- somewhere between a long-term tailwind and generational opportunity for Broadridge. And as I mentioned in my remarks, there are multiple models of tokenization for equities at multiple level 1 networks all of which introduces complexity for brokers and issuers. And as you know, we're not here to pick which model will prevail. What we're doing is building a horizontal governance layer across all those models and networks to simplify complexity for our clients. And there's no better positioned to do that because of the institutional scale, the regulatory knowledge and the network that we bring.

And -- so the most active players in each model are telling us that they believe government is important. They want to partner and they're coming to us. And across the different models, as you think about the economics -- it is really -- it depends a little bit on where things end up being held. We think most of these will end up being held with wealth managers, and that looks very much like our existing beneficial model. To the extent that it is issuer driven, we also are serving 80% of the Fortune 500 at economics that are better than they are on the beneficial side. So we think all of this translates into opportunity for Broadridge that will grow positions as it gathers steam, and we see those positions being processed at economics equal to or superior to today's model.

Operator

Our next question comes from Alex Kramm from UBS.

Alex Kramm

Just actually wanted to come back to the mutual fund position growth, I think that's a positive surprise. I know there were some one-timers in there, but I think the full year outlook this definitely points to acceleration. So any new trends there? Any new clients, anything to point to why this may be a more structural acceleration here? .

Timothy Gokey

Yes. I will. Alex, first of all, thank you for the question. I'll start and then add in. I think we're clearly seeing a pickup there, nice in the first quarter, and there was some timing in there. But as Ashima said, the testing is showing increases over last year. I'm not sure that we are seeing specific drivers. It is -- there's been more success relatively speaking. The long-term trend has been towards passive, but active has done quite well recently as well. And -- so we just see a lot of positivity here. .

Alex Kramm

Okay. Good. And then just a very quick follow-up, and this may be a little bit too much in the weeds, but -- you haven't talked about your credit trading platform in a while, LTX. And I bring it up because there's been some consolidation here in the space recently with obviously ICP market access and trade by buying Trumid. So just wondering that consolidation may allow for maybe more players to surface again. So I was just wondering you're spending more time on that? I know it's small, but so specifically, are you getting, I guess, incoming calls from dealers or the buy side, we're wondering what this consolidation means and if there's maybe a new player that needs to evolve here?

Timothy Gokey

Yes, Alex, thank you for the question. And just a reminder for everyone else, LTX is our next-generation fixed income trading platform, and it leverages enhanced AI tools to help investors and dealers find liquidity and counterparties to trade more efficiently. And it's been a long time coming. We are pleased with the recent progress. And just bringing everyone back on the history, I think the most exciting development was last spring when we announced 5 Tier 1 banks, including Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America and TD has signed on as liquidity players. And then over the summer, we launched agentic capabilities to really help our buy-side clients trade.

Now with the consolidation, Alex, you talked about between Trumid and Tradeweb and ICE and Market Access, Trumid really was that sort of third player in the market. And so I think it's an interesting question as to whether with them now becoming part of Tradeweb as that happens, will institutions be looking for a different third alternative. So I do think it creates a time of opportunity. We're certainly talking to our dealer co-investors about that and about the way forward.

Obviously, it's very low volumes at this stage. So that task now is to really build those volumes and continue with both the buy side and the sell side. We do think there's a long runway of growth in credit trading and that there's a gap here. But we'll just have to see where it goes. And I would just remind you that it's very much in launch phase. It's immaterial to our results, it's immaterial to our outlook, but I would view it really is a nice option for our shareholders.

Operator

Our next question comes from Scott Wurtzel from Wolfe Research.

Scott Wurtzel

Just wondering if you can talk a little bit about the client policy or custom policy engine product but more maybe some of the early demand that you're seeing out of that?

Timothy Gokey

Yes, Scott, thank you very much. This is 1 that we're really excited about because it's been a long-standing issue in the industry. And there's been a lot of stuff sort of talked about in terms of are the major proxy advisers to into scales 1 way or the other. But just completely separate from that. When you look at just from the asset manager perspective, the challenge that they have today is -- there are lots of data points out there. They have many, many things to vote. And the current approach brings together all of that into a pretty comprehensive report, but because of the work to create that comprehensive report, they don't get it until literally like about a week before the election. And so at least no time to react. And it also leaves the issuers are very unhappy because they don't have any time to get in touch with asset managers if there's something in there that they don't agree with.

And so we're really turning that model on its head. We're using AI to bring in the data points much, much earlier. We're not producing that report, but what we're doing is letting the asset managers with their policies, say, what would their vote be? They get that now something like 6 weeks ahead of time, so they then can have time to say, yes, that's fine. Or this is a controversial one. I want to do more work. And then at the same time, those data points not this year, but beginning next year, we'll also go to the corporate issuers. So they'll have the opportunity to comment on them right within the application. The asset managers will see that. And so it really provides a much smoother workflow for the industry.

And so -- we really like the value proposition, it's taking a different angle on it. And we're seeing a lot of interest from asset managers. So as you know, we had through last proxy season, signed asset managers was just under $1 trillion in assets, and we're seeing continued momentum in that pipeline. We're really pleased with the win we had this first quarter with a very large wealth manager and wealth managers here, they do vote for they often have a sort of a house policy for voting the managed accounts. And so that will bring a nice set of additional assets, and we expect to have further announcements as we move forward.

Scott Wurtzel

Great. That's helpful. And then just as a quick follow-up. Just on the internal trading volume growth. I know there was maybe a little bit of a tougher compare from 4Q to 1Q, but anything to call out on the deceleration there just given some of the kind of consistent double-digit growth that we had seen over the past couple of years?

Ashima Ghei

Not much to call out there, Scott. We were happy with the internal trade growth of 7%. That was supported by higher equity volumes. And we continue to see good growth around that area. .

Operator

Our next question comes from Patrick O'Shaughnessy from Raymond James. .

Patrick O'Shaughnessy

What's your current thinking on sharing AI cost savings with your clients? And to what extent are you using that capability to drive new sales activity?

Timothy Gokey

Yes, Patrick, thank you very much. It is -- it's a great question. And it's -- as we just -- I'm going to step back for a second, as we think about AI -- there's the revenue opportunity, there's a speed to market opportunity. There's the internal product -- internal productivity opportunity. And I will touch on those. But let me start with where you are on sharing savings with clients. I think the place that is most relevant is in our Managed Services business, where we serve over 70 clients with doing the operations in addition to providing the technology and we are applying AI there. We've gotten a lot of efficiencies, about 25% so far with clear line of sight to getting and near 50% and the conversations today we're having with clients about that is we're not really talking about managed services. We're talking about AI partnership and talking about -- it doesn't make sense for each of those clients to invest independently in AI for operations. That's something we can do on our side and then give them immediate savings and then share in the savings as we go forward.

So I think that's 1 where it's very explicit. I think in some of the technology-based products, it's a little bit less clear as to how that will work out over time. But what we are seeing is the ability to introduce products faster to onboard clients more quickly. And we like the demand that we're seeing for our AI-driven products. Now -- so I wouldn't -- I'd be remiss if I didn't have to talk about some of the internal efficiencies that we're getting. There's the $25 million that we talked about last quarter. I really like the way we're seeing that come in. If you look at -- it's fully built into our run rate, if you look at this quarter, we realized roughly 1/4 of that amount. And that's something that will certainly continue as we move forward and look at other areas. And as we have now, we'll use that as a mix of delivering earnings to shareholders but also investing because there's so much opportunity right now.

Patrick O'Shaughnessy

All right. Terrific. I appreciate that comprehensive answer. And then on the regulation e-delivery effort that the SEC is working on, is there a risk, I guess, that, that could expand into a review of preference management processing fees that the ICI is pushing for?

Timothy Gokey

Yes, it is -- Patrick, it is -- when you look across the more than 100,000 comments, that was definitely was not a theme. Certainly, it's something is ICI's job to advocate on behalf of their members. We're not hearing that actually from individual funds. We hear from ICI, not from individual funds. And as we talk to the SEC, this is just not something that's on the horizon. And if it were on the horizon, until we collectively see what the -- what the penetration is, how brokers, how quickly they move, what the investor uptake is, what the opt back is. We don't really know where all that settles out for a number of years. So if there were a review, it would be more appropriate in the future.

And as you know, we've really argued that thinking about this on a per communication basis is not really the right way to think about it. When you look at the activities that we do from agenda sourcing, keeping track of investor preferences, bringing all that to -- sending the notices but taking them back, tabulating voting, providing a unified bill across the industry. It's a 24/7 365 platform, and it really should be more like a per position per year kind of thing because none of those activities they get paid for, we only get paid for the communication. So that's something that we've talked to our industry partners about as things evolve, but I think it's pretty far in the future.

Operator

Our next question comes from Peter Heckmann from D.A. Davidson.

Peter Heckmann

A lot of my questions have been already addressed. I just want to check in on -- thoughts on the M&A pipeline and allocating excess cash between share repurchase and M&A. You've had a couple of decent sized deals so far rather last fiscal year, but -- how are you thinking about M&A is adding capability and adding scale? .

Timothy Gokey

I'll let Ashima comment on share repurchase, and I'll jump in on M&A. .

Ashima Ghei

Sure. Let me start off, Peter. So as you know, we completed a $200 million share repurchase in the first quarter. And that was directly linked to the compelling valuation that we see on our shares. More broadly, we're expecting another strong year, like I said, with free cash flow conversion over 100% we're sitting at a 2x leverage ratio. So that essentially gives us the capacity to do both repurchase shares and fund attractive M&A that -- all of that while continuing to fund organic growth and dividend. And as we do that, we will continue to look at M&A and making the trade-off given the compelling value that we have with our shares but find the right strategic in that regard.

Timothy Gokey

Yes. And I'll just add on. This is another chapter in our long history of very balanced capital allocation. Starting with an investment-grade credit rating, making internal investments to drive organic growth, paying a strong dividend, pursuing attractive M&A when it's out there and then using the rest to buy back shares. And it's been the same algorithm for a long time. It gives different results at different times, depending on what the conditions are. Over a long period, it's resulted in about half of that final being put to share repurchase versus tuck-in M&A. .

As Ashima said, we do see our shares right now as a very strong value, which is why we've been leaning into that. And as we move through '27, we expect continued healthy levels of share repurchase. That said, we do continue to look at tuck-in opportunities and there are some very attractive ones that are out there. So if the right property presents itself, we have the flexibility to do both. Given the compelling value in our shares, if you see us do something, you'll know that we think it is something very special. So we're feeling good about it.

And then last thing, and I know you know this, but we can't overlook the dividend. We've always viewed a strong and growing dividend as a pillar of long-term value creation, and we've increased it every year we've been a public company in almost all years by double digits. So that's another pillar that we also think about.

Operator

Our next question comes from Kyle Peterson from Needham.

Unknown Analyst

This is Ross Cole on for Kyle Peterson. I know you touched on this a bit earlier in terms of the AI savings going back to clients through price. But could you maybe touch a little bit more on GTO pricing and what you're seeing in terms of renewal pricing and win rates compared to competitors?

Timothy Gokey

Yes. As we look at GTO, it's been a strong year, a strong start to the year, and we really like what we're seeing going forward. When we look, I don't have a GTO number for renewals in front of me. But when we look at across providers, we renewed nearly $800 million last fiscal year. Literally 0 losses to AI, 0 losses in proxy. When you look at the upsells versus any concessions that would come in, the net renewal numbers are always positive as a net renewal number is over 100%. So we feel good about things. Our model, though, is not to -- you look at software companies, you'll see a lot of them growing by pushing price lever, and that has not been our business model. Our business model is to have happy clients that want to do the next thing with us. And so we always have a healthy discussion at renewal time and generally results in something positive with some additional services to the client. And so we really like that model. And we really like the way that continues to make us systemically more important for our clients and to continue to deepen the relationship that we have.

Unknown Analyst

And then switching gears a little bit. So just to confirm, with the Q1 margin dropped a couple of percentage points versus last year, which seems but it also seems to be relatively in line with prior years. Do you see the adjusted operating margin kind of playing out similarly as it has in prior years where the first 2 quarters tend to go to lower before increasing in the final 2 quarters probably just due to mix changes, thus getting to that 21% guide. Is that a good way to think about it, like kind of like the previous years?

Ashima Ghei

Yes, Ross, I'll take that. The short answer to your question is, yes. The longer answer is, yes, our margins declined about 200 basis points, but that conversion was driven by, like I said in my remarks, the combination of lower event revenues and remember, these lower event revenues typically carry higher incremental margins. So it was a combination of that and higher investments that we've been making on platform, tokenization, AI, some of the initiatives we spoke about, which essentially offset the leverage in our recurring revenues. .

We do expect a similar trend in the second quarter as we'll have pretty much the same story. We will lap elevated levels of event-driven and higher investment spend. But as we move to the second half of the year, we expect both of these pressures to moderate exactly the way you said it, which will keep us well on track to deliver on full year margins of 21%.

Timothy Gokey

Yes. I think just to give sort of a way to think about it, there are some factors, and you'll see these repeat in each year, and we'll talk about them. But factor one is just the seasonality of our business in which -- we get a lot of our revenue in the second half and -- but there are fixed costs to go throughout the year. So you generally see across all the years, higher margins in the second half than in the first half. Then you layer on top of that, the timing of event-driven revenue, which comes in at -- again, because the fixed cost is already there, it comes into higher margins. So based on the timing that would affect the margin in the quarter.

And then the last piece is the timing of our investments. And as you know, when we're having a good year, we often use that to reinvest and pull forward our road map and the timing of when we do that can also affect our margins. So we manage the company on an annual basis. targeting that sort of annual increase in operating margin. And we always try to tell you about those factors as we go through so that you can try to disentangle that.

Operator

[Operator Instructions] Our next question comes from James Faucette from Morgan Stanley.

James Faucette

And thanks for all the detail. I know we've kind of gone around and we talked a little bit about timing, but I want to go back to margin -- margin expansion you guys are looking for a little bit of acceleration in expansion here. Can you -- and I apologize for this, but can you just recap for us what we should be paying attention to as kind of the key drivers for the -- a bit of margin expansion acceleration expected for the coming fiscal year? .

Ashima Ghei

Absolutely. I'll just reiterate what we just spoke about. If you think about the business, we have a seasonal business. The second half is the much larger portion of our entire revenue. So even in a BAU setup, we do see our margins increasing year-on-year. Second, if you remember, we had a record event-driven fee last year. A lot of it was concentrated in Q1 and Q2. So as we grow over that and this year, we're expecting much more normalized levels of event-driven fee, call it $60 million to $70 million every quarter. And if you compare to the compares that we had last year, you would automatically see the margins continue to increase more in the second half of the year versus the first half of the year. .

And I will also point out we have been ramping up our investments in our growth areas, platform, AI, tokenization, et cetera which we started doing more of in the second half of last year. So again, if you think about the seasonality of that, we -- you will see more of the grow-over on those investments in the first half of the year before they get to more normalized levels that we saw in the past year. So those -- all of those factors will lead to our margins just increasing as we go through the year. .

Yes. I do want to -- we are talking about margins, I gave you the answer. But I do want to remind you, with all this, margins to us are a means to an end, right? What we are making sure is that we are in a good position to deliver on our full year EPS guidance of 8% to 12%. You might see volatility in event fee as we go through we will moderate our investments, as we always do. The important message I want to leave you with is we will deliver on our 8% to 12% earnings guidance. .

James Faucette

Got it. And then I want to ask about the opportunity set. We've had -- and really I would like to get your perspective on innovation exemption. We saw the announcements, but from -- that they're going to be permitted. But I think a lot of people felt like in a lot of ways, there's still restrictions there that could encumber a lot of really innovation being attempted. So from your perspective, do you think that we're likely to see meaningful benefit from the innovation exemption? And is it happening, not happening? And how should we think about the impact on record growth?

Timothy Gokey

Yes, I'll take this one. I think with the regulatory change that the SEC is making here. They are collectively beginning to pave the way for a long-term framework in the absence of congressional action. And -- what we liked about the exemptive relief is very specific about preserving shareholder rights, including voting and dividends. And so we like that reinforces our focus on governance and investor communications for tokenize assets. I think the innovation exemption specifically allows for these tokenized security venues, that will be 1 of the models that are out there. and there are limits on the volumes of that. So I think there will be some good experimentation there. But I'd like to just remind you that that's not the only model out there. .

There's what people like Kraken and Endo are doing globally. They have also announced that they're going to be bringing that to the U.S. with a custodial model is what the DTCC is doing, and we're working specifically with them. There's what the New York Stock Exchange is doing and just the announcement yesterday, where we're partnering with the New York Stock Exchange to bring on chain governance and integrated bill transfer agency services into their infrastructure for tokenizes equity, which is separate from the TSP, they're going to have an ATS, so it will be fully rented. It will be under the National Market System. So there are lots of different models out there and we are playing in all of them.

I do think, by the way, the fact there are so many models does make it a bit poses challenge for issuers in terms of how they bring all those votes back and give an integrated view. The fact that we are already serving 80% of the Fortune 500 to provide that integrated view for registered and beneficial. We're extending that all the different permutations of tokenized equities that will really simplify that complexity and provide a great value proposition to corporate issuers.

So we think all this translates into opportunity. How fast it comes is -- it's unclear. But what we do think that as it comes, the faster it comes what it's going to do is drive physician growth because these are bringing additional investors from outside the U.S. here is bringing new ways of holding shares. And so we see more positions at economics that I said earlier that are equal to or superior to what we're doing today. And it's really just we talked about physician growth and how different ways of innovation have spurred physician growth, and we see this as the next wave and really getting on to the next S curve. We'll see how quickly it develops. But I think it really bodes well for the long-term health of U.S. Capital Markets and Broadridge.

Operator

And with that, ladies and gentlemen, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Timothy Gokey

Well, I just wanted to thank you all for joining us today and just reiterate 3 key messages from today. We delivered a strong first quarter. It is our smallest quarter, but the strength of that quarter makes us feel incrementally better about the full year. Second, that the investments that we're making in tokenization, in AI and digital assets are really beginning to really beginning to play out in terms of results, and we like the returns that we're seeing on those. And finally, third, that we're on track for a good year for fiscal '27 and beyond. Thank you again for joining us, and we look forward to seeing you at our Investor Day in December. .

Operator

And with that, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.