Broadridge Earnings Call Highlights Cash, Growth, Tokenization

Broadridge Financial Solutions ((BR)) has held its Q2 earnings call. Read on for the main highlights of the call.

Broadridge Balances Transitory Headwinds With Upgraded Earnings Outlook

Broadridge Financial Solutions’ latest earnings call struck a notably optimistic tone, with management emphasizing resilient recurring growth, surging free cash flow, and accelerating traction in tokenization and wealth platforms. While quarterly margins compressed and some revenue streams face near‑term moderation, leadership framed these as largely timing- and mix-related rather than structural. The company’s decision to raise its adjusted EPS growth outlook, while reaffirming recurring revenue and margin targets, underscored confidence that strong fundamentals and strategic investments outweigh temporary pressures.

Free Cash Flow Surges, Setting Up >100% Conversion Target

Broadridge delivered a powerful improvement in cash generation, reporting $319 million in free cash flow over the first six months, compared with just $56 million in the prior-year period. This step-change reflects both stronger operating performance and improved working-capital dynamics. Management went further, signaling long-term confidence by targeting free cash flow conversion above 100% for fiscal 2026, a key positive for investors focused on cash-backed earnings, capital returns, and the company’s capacity to fund ongoing investments and M&A without stretching the balance sheet.

Governance Segment Fuels Growth With Strong Position Expansion

The company’s Investor Communication Solutions governance segment continued to be a growth engine, with recurring revenues up 9% to $590 million. Underlying operating metrics were particularly robust: total equity positions grew 17%, and revenue positions expanded 11% in the quarter. Fund position growth, a closely watched indicator, rebounded sharply from 2% in the first quarter to 15% in the second quarter, resulting in 8% growth for the first half. These trends highlight Broadridge’s entrenched role at the center of proxy, shareholder communications, and governance workflows, and they suggest a healthy backdrop of underlying market and client activity.

Tokenization and DLT: From Concept to Large-Scale Volumes

Tokenization and distributed ledger initiatives moved firmly into scale territory. Tokenized volumes doubled since June, reaching roughly $384 billion per day in December, or $9 trillion for the month, as Broadridge’s platforms gained traction. The company highlighted the launch of digital bond issuance with a major European bank and outlined a roadmap that includes real-time repo capabilities expected in fiscal 2026 and expansion into new asset classes such as deposits in fiscal 2027. These developments position Broadridge as a key infrastructure player in next-generation capital markets, even as management remained candid about evolving industry models and competitive dynamics around tokenization.

Wealth Platform Builds Momentum With Double-Digit Growth

Wealth management remained a bright spot, with wealth recurring revenues growing 11% in the second quarter, comprising 6% organic growth and 5% from the SIS acquisition. The firm secured a significant new wealth platform mandate that will extend coverage to roughly 1 million additional accounts, bolstering its installed base and long-term revenue visibility. External validation also came as the platform was recognized as a leader by industry analysts, supporting the company’s strategy to offer integrated front-to-back solutions for wealth managers seeking modernization and operational efficiency.

Digital Asset Gains Boost Earnings, Balance Sheet

Broadridge’s digital asset exposure provided a sizable accounting tailwind in the quarter, with a $187 million non-cash mark-to-market gain recorded in Q2. Digital asset holdings rose to $265 million at quarter-end, reflecting the increased value of its coin holdings and its stake in the digital asset treasury. While these gains are non-operational and inherently volatile, they underscore the financial leverage the company has to digital asset markets alongside its operational initiatives in tokenization and digital infrastructure.

Strategic M&A Extends Product and Geographic Reach

The company continued to deploy capital into targeted acquisitions, closing three tuck-in deals in fiscal 2026 totaling $126 million, including the $70 million purchase of Acler. These deals are aimed at deepening Broadridge’s product capabilities and expanding its geographic footprint. Management framed M&A as a complement to organic growth, focusing on assets that plug into existing platforms, enhance data and analytics offerings, or broaden the firm’s reach across key client segments and regions.

Broad-Based Revenue Growth and High Retention

Broadridge’s top-line performance remained solid, with total revenue up 8% to $1.7 billion. Recurring revenue was the primary engine, contributing 5 percentage points of total growth, reinforcing the stability and scalability of the company’s business model. Recurring revenues overall grew 9% year-over-year (8% in constant currency), including 7% organic growth, showing demand across multiple lines of business. Revenue retention stayed exceptionally strong at 98%, a critical indicator of customer stickiness and long-term value in a subscription-driven, infrastructure-heavy model.

Margin Compression Driven by Event-Driven Normalization

Despite healthy revenue trends, profitability stepped back in the quarter. Adjusted operating income margin declined 110 basis points year-over-year to 15.5%. Management attributed the majority of the pressure to lower event-driven revenues versus a record prior-year quarter, as well as the net headwind from lower interest rates and higher distribution revenues, which together weighed on margins by roughly 40 basis points. While disappointing on the surface, the company presented this as a mix issue rather than an underlying deterioration, and reiterated its confidence in hitting full-year margin targets.

Event-Driven Revenues Normalizing After Record Run

The call highlighted a sharp reset in event-driven activity, which includes corporate actions and special events that generate non-recurring fees. Event-driven revenues came in at $91 million in Q2, down $34 million from the prior year’s record quarter, although the first half still totaled a robust $204 million. Management guided investors to expect a normalization toward a longer-term average of about $60 million per quarter. This shift has a notable impact on quarterly comparisons and margins, but is viewed as cyclical and not indicative of weakness in the core recurring franchise.

Digital Asset Revenue to Moderate Despite Growth Contribution

While tokenization volumes are ramping, revenue recognition will be more uneven. Digital asset revenues were $7 million in the second quarter, but management warned that this line item is expected to moderate significantly in the second half, due to scheduled changes in the Canton network minting curve. For fiscal 2026, digital assets are still projected to contribute roughly one percentage point to Capital Markets segment growth. Investors were effectively cautioned to separate structural progress in digital infrastructure from the near-term lumpiness of associated revenue streams.

Timing and License Dynamics Add Quarterly Volatility

Quarterly results were also influenced by timing-related factors, particularly in regulatory and license revenues. Second-quarter results gained a six-point timing benefit from regulatory revenues pulled forward from the third quarter, effectively boosting Q2 at the expense of Q3. Looking ahead, management expects license timing to impose about a four-point headwind to Global Technology & Operations growth in the third quarter and a modest one-point drag on wealth in the fourth quarter. These swings add noise to quarter-to-quarter performance but are not expected to alter the full-year trajectory.

Data-Driven Fund Solutions Under Pressure

Not all parts of the portfolio are growing. Data Driven Fund Solutions revenues declined 2% in the quarter, as healthy expansion in Data & Analytics was offset by weakness in retirement and workplace solutions and a two-point headwind from lower interest rates. This segment remains an area of pressure, reflecting both macro factors and client-specific dynamics. Management will likely need to lean on product enhancements, cross-selling, and possibly further M&A to reignite growth and restore momentum in this line of business.

Closed Sales YTD Lag, Despite Strong Q2 Rebound

Sales execution told a mixed story. Second-quarter closed sales jumped 24% to $57 million, signaling improved momentum and validating the strength of Broadridge’s pipeline. However, year-to-date closed sales stood at $89 million versus $103 million a year earlier, leaving a considerable gap to close to meet full-year guidance. Management reaffirmed its closed sales target and pointed to more than 20% year-over-year growth in pipeline generation, but investors will be watching conversion closely in coming quarters as a leading indicator of future recurring revenue growth.

Capital Markets Growth Dampened by Business Exit

Within Capital Markets, underlying growth was partially offset by the lingering impact of a prior business exit, which shaved about one percentage point from segment revenue growth. This exit reduces near-term contribution from that area but reflects the company’s willingness to prune non-core or lower-return operations as it reallocates capital toward higher-growth, higher-margin opportunities, particularly in digital trading, post-trade services, and tokenization infrastructure.

Tokenization Market Structure Risks Recognized

Management acknowledged that the long-term economics of tokenization are not without risk. Industry debate continues around whether tokenization could enable more direct issuer–investor engagement or introduce new intermediaries, potentially altering fee models and competitive dynamics. Broadridge believes its scale, regulatory expertise, and existing client relationships will allow it to adapt to shifting market structures, but it openly flagged this as a market-level risk that could influence pricing power and profit pools over time.

Earnings and EPS Outlook Trend Higher

On the bottom line, Broadridge reported adjusted EPS of $1.59 in the second quarter, up 2% year-over-year despite the margin drag from lower event-driven activity and mix shifts. More importantly for investors, management raised its fiscal 2026 adjusted EPS growth guidance to a range of 9% to 12%, up from 8% to 12% previously. This upgrade, delivered alongside reaffirmed revenue and margin targets, suggests continued confidence that the combination of recurring revenue growth, operational leverage, and disciplined capital allocation can drive double-digit earnings growth over the planning horizon.

Guidance: Higher-End Growth, Stable Margins, Strong Cash

Looking ahead, Broadridge tightened and largely improved its fiscal 2026 outlook. The company now expects constant-currency recurring revenue growth at the higher end of its 5% to 7% range, adjusted operating income margin between 20% and 21%, and adjusted EPS growth of 9% to 12%. Closed sales are guided to $290 million to $330 million, implying a strong back half for bookings, and free cash flow conversion is targeted at more than 100%. The quarter’s metrics – including 9% reported recurring revenue growth, $1.7 billion in total revenue, a 15.5% adjusted operating margin, $57 million of closed sales, and $319 million year-to-date free cash flow – serve as the new baseline for achieving these goals, with tokenization, wealth, and governance all expected to underpin future expansion.

Broadridge’s earnings call painted a picture of a company in transition from cyclical event-driven peaks toward a more durable, recurring- and platform-led growth profile. While margin compression, event-driven normalization, and digital-asset revenue volatility may introduce near-term noise, the underlying story of solid recurring growth, rising cash generation, strategic progress in tokenization and wealth, and an upgraded EPS outlook will reassure investors focused on long-term value. For market participants tracking financial infrastructure providers, Broadridge continues to position itself as a key beneficiary of ongoing digitization and regulatory complexity across capital markets and wealth management.