Broadridge Financial Soln (NYSE:BR) reported third-quarter financial results on Thursday. The transcript from the company's third-quarter earnings call has been provided below.
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Summary
Broadridge Financial Soln reported strong third quarter results with 6% recurring revenue growth, constant currency, and 11% adjusted EPS growth.
The company is investing in strategic initiatives such as tokenization, digitization, and AI, while maintaining strong free cash flow to fund acquisitions and return capital to shareholders.
Broadridge has raised its fiscal 2026 guidance for recurring revenue growth to at or above 7% and adjusted EPS growth to 10-12%, reflecting strong performance and future growth opportunities.
Full Transcript
OPERATOR
Good day and welcome to the Broadridge fiscal third quarter 2026 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal conference specialists by pressing the Star key. Follow. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your touchtone phone and to withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Eddings Tebow, head of Investor Relations. Please go ahead.
Eddings Thibaut
Thank you Chuck and good morning everybody and welcome to Broadridge Financial Solutions' third quarter fiscal year 2026 earnings conference call. Our earnings release and the slides that accompany this call may be found on the Investor relations section of Broadridge.com joining me on the call this morning are Tim Goeke, our Chief Executive Officer and our Chief Financial Officer, Ashma Ghehi. Before I turn the call over to Tim, I want to make a few standard reminders. 1. 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. 2. We'll also be referring to several non GAAP measures which we believe provide investors with a more complete understanding of Broadridge Financial Solutions' underlying operating results. An explanation of these non GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and presentation. Let me now turn the call over to our CEO Tim.
Tim Goeke (Chief Executive Officer)
Thank you Eddings and good morning. Broadridge delivered strong third quarter financial results and we're on track to deliver a strong fiscal 2026. The market backdrop remains positive. Equity markets have been resilient in the face of geopolitical uncertainty and capital markets remain active, driving strong position growth, higher trading volumes and elevated event driven activity, all of which are benefiting Broadridge. At the same time, we've always been focused on driving steady and sustainable growth by aligning our business with the long term trends that are shaping the financial services industry. And so I'm pleased to report that we're also squarely on track to deliver on our three year financial targets for the fifth consecutive cycle. Looking ahead, we're already investing in the next wave of industry innovation. Broadridge is transforming shareholder engagement, leading in tokenization, driving digitization and scaling our AI capabilities. And we're using our strong free cash flow to return capital to shareholders even as we make tuck in acquisitions that strengthen and extend our value proposition. The Bottom line is that Broadridge is well positioned to drive steady and sustainable growth for a long time to come. As we close out fiscal 2026, we're delivering strong results today including double digits earnings growth and we're putting in place the building blocks for long term growth tomorrow and beyond. To see how all this plays out, let's go to the headlines on Slide 3. First, Broadridge delivered strong third quarter results including 6% recurring revenue growth, constant currency and 11% adjusted EPS growth. Second, our growth is being driven by the execution of our strategy to democratize and digitize governance, simplify and innovate capital markets and modernize wealth management. Third, as I just said, we are taking active steps to address future growth opportunities by leading in tokenization, driving the digitization of communications and scaling AI. Fourth, we are leveraging our strong free cash flow to make growth accretive acquisitions like Ackelon and CQG while returning capital to shareholders with share buybacks at attractive levels. As Ashma will touch on fifth and last, based on our strong performance, we are raising our fiscal 26 guidance for recurring revenue and adjusted EPS growth to at or above 7% for recurring revenue growth, constant currency and to 10 to 12% for adjusted EPS. These results demonstrate the power of our strategy and proven ability to execute. So let's turn to slide 4 to look at the key drivers of that execution starting with our governance business governance. Recurring revenues rose 8% constant currency driven by new sales and continued growth in investor participation. Investor participation trends remained very strong with total equity position growth at 15% and equity revenue position growth of 11%. We continue to benefit from strong growth in managed accounts and steady mid single digit growth in self directed accounts. Mutual fund and ETF position growth was also healthy at 6% driven by demand for passive funds. Beyond position growth, our innovations to power shareholder engagement are building momentum. Our pass-through voting solution is now enabling voting choice for shareholders of 900 funds with assets under management of more than $8 trillion. Our new standing voting instruction solution, which enables retail shareholders to set their default voting instructions is also off to a strong start. Our pilot clients are benefiting from exceptional response rates. Nearly 10% of Exxon's retail shareholder base enrolled in just one year and 30% of respondents had not voted at the prior meeting, highlighting the power of this program to engage new voters. We're also now live and supporting proxy voting for institutional asset managers looking to enhance their voting processes and reduce their reliance on proxy advisors. Beyond voting, our Data driven Fund Solutions business reported strong growth driven in part by our Ackelan acquisition, we're seeing a lot of early interest from our US Fund clients on how they can use the Ackelan capabilities to accelerate their growth in Europe. In our Capital Markets business healthy 6% underlying growth was offset by lower license revenues compared to the prior year. We are seeing good growth in our post trade solutions where a global platform capability is enabling clients to simplify their back office technology stack across multiple geographies and asset classes. We also continue to see robust demand for our front office solutions. Earlier this morning we closed the acquisition of CQG, a leading provider of futures and options trading, execution management and market connectivity. This acquisition accelerates our expansion into futures and options where we are well advanced in building a next generation order management solution with a Tier 1 global bank. CQG will add highly complementary execution management, algorithmic trading and analytics capabilities. Our goal is to create an institutional grade end to end trading suite for global futures and options and CQG is a nice accelerator of that strategy. Turning to wealth management, recurring revenue rose 8% constant currency powered by strong growth in Canada. We acquired SimCorp last year to deepen our relationships with key clients and accelerate the rollout of our platform. Now that strategy is paying off with attractive organic growth. We strengthened our core technology platforms, built connectivity to our wealth components and I'm proud to announce just gone live with the first phase of our wealth platform solution for a leading Canadian wealth manager and as the market continues to evolve, we're leading that change. Two weeks ago we announced the launch of our next generation digital asset platform. Building on our unified suite of solutions, the platform will enable Canadian wealth managers to accelerate their offering of digital assets including crypto and tokenized equities funds and alternatives. I'll close my review of our results with sales year to date, closed sales were $147 million, 16% below last year even as deal origination and pipeline were substantially up. While we like the demand and pipeline we're seeing, based on our progress toward closing, we are updating our sales guidance for the year to 240 to 290 million dollars. We are seeing robust demand that's taking longer to close than we expected due in part to a mix of bigger, larger, more complex deals this year. Some examples include wealth platform sales and GTO and on the ICS side, larger digital transformation sales in customer communications. Those five million dollar plus deals are powering a very strong pipeline and also take longer to close. While we're lowering our outlook for fiscal 26, we feel good about the future. The pipeline I just mentioned is higher than it ever has been, well north of a billion dollars, and we're seeing our product focus driving new demand, we're enhancing our trading solutions and driving the suite of shareholder engagement solutions I highlighted earlier. We're also building a track record of successful wealth platform and digital communication transformations while linking more of our solutions to our data platform layer, all of which are driving active client discussions. Now let's turn from the execution behind today's results to what we're doing to drive long term growth on Slide 5. The Financial Services market is evolving rapidly driven by the accelerating pace of technology and an innovation friendly regulatory environment. Change has always been good for Broadridge as we help our clients adapt with a mutualized approach. We see the current set of changes as a significant opportunity and we're leaning into them. First, we're leading in tokenization. Broadridge is building on our industry leading role in tokenizing more than $350 billion per day on our distributed ledger repo platform. In governance, we're now powering on chain voting and disclosure. In wealth management, we're creating an end to end solution for crypto and tokenized equities funds and alternatives. And in capital markets, we're scaling our market leading digital asset capabilities in multiple directions. In a few weeks, we will be the first to power on chain proxy voting for natively issued tokenized securities for a US Public company. As part of that process, we're consolidating and recording voting for beneficial shares, registered shares and tokenized shares to create a unified view for issuers to see all of their votes in one place. Take the friction out of managing multiple ownership bases. In addition, we announced an agreement earlier this week with a leading global marketplace for tokenized real assets, including US equities to provide proxy voting and other governance activities for their clients. And we're just getting started. Whether shares are tokenized by an issuer or a third party, Broadridge is stepping up to power the governance capabilities for issuers and investors and make tokenized equities real and investors will be able to express their voting preferences across their holdings, including tokenized holdings through Broadridge's Institutional Grade proxy vote platform. We're also working with our wealth management clients to accelerate the launch of crypto and other tokenized assets to their clients. Our Canadian Digital Asset Suite will support the governance and trading of digital assets and in a seamless and integrated environment that includes our own capabilities as well as a growing ecosystem of digital asset partners. And on the capital market side, we're extending the capabilities of our market leading DLR platform to new trade types, geographies and asset classes. And our worldwide trade routing network is transmitting crypto order flow for a growing number of clients. Second, we're driving the digitization of communications. The time is coming to shift the default delivery method for investor communications and we're helping to drive the change. The SEC has indicated is taking a fresh look at moving to a digital default option for investors who do not request paper delivery. We've been working with the industry and our clients to move this forward and while the timing is uncertain, we anticipate a proposal in this area over the coming months. We believe this evolution will be positive for Broadridge and our clients. We've already digitized nearly 90% of proxy and mutual fund communications, saving funds and public companies hundreds of millions of dollars per year. Now, as we look forward to increasing electronic delivery for other communications including statements and prospectuses, we're helping our clients prepare as they think about how to take advantage of such a change while also maintaining and improving the experience for clients. We expect that the implementation process of any action will would occur over a few years and primarily affect our low to no margin distribution revenue. We expect the impact on recurring revenue and earnings will be broadly neutral. On one hand, migration to a digital default could have an impact on our recurring revenue of a few percent, mostly in our customer communications business. On the other hand, we believe this evolution will create demand for new services such as their wealth in Focus solution which is already enabling omnichannel communications to millions of investors. Like tailored shareholder reports, we expect these new opportunities to more than offset lost recurring revenue. The end result will be a more valuable Broadridge that's growing faster with higher margins. Finally, we're scaling AI by building on top of our common data ontology, shared API architecture and the operating workflows we already run at scale, our AI capabilities are powering new products, accelerating our software development cycle and driving productivity gains. Let me give you three examples. Our new custom policy engine, which is fully AI native, is able to read and analyze source materials and apply clients voting policies across thousands of companies. Today that capability is already enabling asset managers with more than $800 billion AUM to implement their own voting policies without a proxy advisor. Now we're building on that progress to modernize the entire front to back workflow. Supporting Institutional Voting by leveraging agentic AI to enhance our core institutional voting platform. One of our fastest growing products is our AI powered Global Demand model which tracks $120 trillion in global assets and is assisting product and marketing decisions for nearly two dozen and growing leading asset managers. And on the productivity side, our managed services business has already seen a 25% increase in productivity with line of sight to 50%. Going forward, we're extending our Broadridge platform to a growing number of core applications. This platform, with its common data and APIs, positions Broadridge to create an agentic layer our clients can use directly or can leverage to create their own solutions using our embedded services. In sum, AI is enabling Broadridge to deliver new services, become more embedded in our clients agentic workflows and drive our own productivity. Stepping back, we believe that each of tokenization, digitization and AI are growth drivers for Broadridge as we help our clients and industry take advantage of the next wave of transformation in financial services. And we're building that tomorrow while continuing to deliver today with another year of strong steady growth in fiscal 26. Before I turn the call over to Ashma, I want to thank our Broadridge Associates. They're delivering superior service to our clients today while building the products and capabilities that will power the exciting future of governance, capital markets and wealth for a long time to come. On that note, let me turn it over to Ashma asma.
Ashma Ghehi (Chief Financial Officer)
Thanks Tim Good morning. I'm pleased to be here today. Broadridge reported strong third quarter results with 6% recurring revenue growth, constant currency and 11% adjusted EPS growth and we remain well positioned to deliver another year of strong growth in fiscal 26. Before I dive into my discussion of those results and our guidance, I want to make four call outs. First, we now have records for 93% of full year proxy positions which combined with our recurring revenue backlog gives us high visibility into our recurring revenue and adjusted EPS forecast. Second, our strong year to date results are enabling us to increase our investments in long term growth initiatives while positioning us to deliver double digit adjusted EPS growth. Since the beginning of calendar year 26, we have stepped up our level of investment in tokenization, AI and shareholder engagement initiatives. Third, we are using our strong free cash flow to drive shareholder returns. With the close of our acquisition of CQG today, We have completed four tuck in acquisitions in fiscal 26 for 294 million and returned $681 million to shareholders in the form of dividends and buybacks. And given our outlook for free cash flow conversion of greater than 100%, we expect the same balanced approach in the fourth quarter. Fourth and last, we are raising our guidance for recurring revenue growth to at or above 7% and adjusted EPS growth to 10 to 12% now let's go to the numbers on Slide 6. In the quarter, recurring revenues grew 6% on a constant currency basis driven by 5% organic growth. Adjusted operating income margin was 21.5%. As we continue to invest in our growth initiatives, adjusted EPS grew 11% to $2.72 and closed sales were 58 million for the quarter. Let's move to Slide 7 to discuss our segment recurring revenues starting with ICS or our governance segment. ICS recurring revenues rose 8% to $800 million. Organic growth was 6%. Regulatory revenues grew 9% driven by 11% growth in equity revenue positions and fund position growth of 6%. That strong position growth more than offset the two point timing headwind from Q2 I had called out last quarter. Now looking forward to the fourth quarter, we expect another quarter of high single digit regulatory revenue growth. This will be driven by a combination of low double digit equity revenue positions and continued mid to high single digit fund position growth. Data driven Fund Solutions revenue increased 8% driven by a combination of organic growth and the acquisitions of Ijoin and Ackelin. Lower interest income represented a three point headwind to growth. Issuer revenues rose 8% driven by growth in disclosure and shareholder engagement solutions which more than offset a point of headwind from lower interest income. Customer communications revenue growth was 5% driven by another quarter of double digit growth in digital revenues. The acquisition of Signal contributed two points to customer communications growth for the full year. We continue to expect ICS recurring revenue growth to be slightly ahead of our overall recurring revenue growth guidance. Turning to GTO, recurring revenue grew 3% to $488 million. Capital markets revenues were $295 million excluding a 7 point impact from lower license revenue. Capital markets growth was 6%. Digital asset revenues from our role as Canton Network Super Validator were 3.5 million in the quarter. Wealth and investment management grew 8% driven by a combination of strong growth in Canada and higher trading volumes in the US for the year, we continue to expect GTO recurring revenue growth of 5 to 7% in the fourth quarter. That includes a 3 point contribution in our capital markets business from the acquisition of CQG offset by a 5 point license revenue headwind in our wealth management business. Turning to volume Drivers on slide 8, Broadridge continues to benefit from strong growth in investor participation across both equities and funds. Third quarter equity position growth was 15% including revenue position growth of 11%. As Tim noted, we continue to benefit from growth in managed account strategies. We are now in the peak period for annual meetings and as of last week have received records for 93% of proxies expected for the fiscal year. This visibility gives us a high degree of confidence in our outlook for continued low double digit equity revenue. Position growth in Q4 mutual fund and ETF position growth was 6% in the third quarter. We expect mid to high single digit growth in the fourth quarter and in GTO trade volumes rose 16% on a blended basis, driven by double digit growth in both equity and fixed income. I'll wrap up my discussion of recurring revenues on Slide 9. Revenue from closed sales remains the biggest driver of our recurring revenue growth at 4 points. That growth was partially offset by 2 points of losses resulting in a revenue retention rate of 98%. Internal growth contributed 3 points, primarily driven by equity and fund position growth and higher trading volumes. As a result, organic revenue growth was 5%. Acquisitions contributed 1 point and finally, changes in FX contributed 1 point to reported recurring revenue growth. Given the recent strengthening of the dollar, we expect only a modest tailwind from FX in the fourth quarter and an overall benefit of approximately 50 basis points for the full year. Let's close our discussion of revenue on Slide 10. Total revenues increased 8% to approximately 2 billion, driven by a 4 point contribution to growth from recurring revenue. Event driven revenues increased 20 million to 73 million, contributing 1 point to total revenue growth. While there were no singular tentpole events in the quarter, we did benefit from elevated levels of activity across both funds and equities. Low to no Margin distribution revenues grouped 7%, contributing 2 points to growth. Turning to margins on slide 11, adjusted operating income margin was 21.5%. The 90 basis points decreased versus fiscal 25 was driven almost entirely by 80 basis points. Net impact from higher distribution revenues and lower interest rates. Looking ahead, we expect a similar margin dynamic to play out in the fourth quarter. Turning to EPS on Slide 12, Q4 adjusted EPS grew 11% to $2.72. The tax rate was 19% in the third quarter versus 22% in Q25, driven by the timing of discrete tax items. Looking ahead, we expect our full year tax rate will be approximately 22%. Let's turn now to sales on slide 13. Broadridge recorded Q3 closed sales of 58 million versus 71 million in Q3. 25 year to date sales were 147 million. Given our lower sales results through the first three quarters of the year, we're updating our closed sales guidance to 240 to 290 million. Turning to our cash flows on Slide 14, Broadridge generated free cash flow of 591 million in the first three quarters of fiscal 26, up from $393 million in fiscal 25. Our strong cash performance continues to benefit from higher earnings and working capital management, and we remain on track to deliver free cash flow conversion of over 100% in fiscal 26. Turning next to capital allocation on slide 15, we are delivering against our balanced capital allocation policy. Year to date we have deployed 77 million in capital spending and software with an additional 33 million to onboard clients. Onto our solutions. We have invested $294 million in MA in strategic tuck in acquisitions, including the $173 million acquisition of CQG, which closed earlier this morning. We have also returned $681 million in capital to shareholders. Via our dividend and share repurchases through the first three quarters of the year. Looking ahead, our strong balance sheet and free cash flow conversion leaves Broadridge well positioned to fund additional tuck in M and A and repurchase additional shares. Let's conclude by reviewing our full year guidance on Slide 16, followed by closing key messages. With two months left and high visibility into fiscal 26 position growth and with the acquisition of CQG, we are raising our fiscal 26 outlook for recurring revenue growth constant currency to at or above 7% from the higher end of 5 to 7%. We're also raising our guidance for adjusted eps growth to 10 to 12% from 9 to 12% and we also continue to expect fiscal 26 AOI margin of approximately 20 to 21%. As I noted earlier, we are updating our close sales guidance to the 240 to 290 million range. I anticipate this will have only a modest impact to recurring revenue growth over the next 12 to 18 months. The most significant drivers of growth continue to be our existing recurring revenue backlog which began this year at 430 million, as well as the impact of continued position growth, higher trading volumes and ma. I'll wrap by summarizing my key points. First, Broadridge reported strong third quarter results. Second, we remain very much on track to deliver strong fiscal year results with recurring revenue growth at or above 7% and another year of double digit adjusted EPS growth. Third, we are delivering these strong results while investing for the future growth. And last, our strong cash flow and capital position are enabling us to fund share repurchases and our strong dividend as well as make M and A investments. With that, let's open up the line.
Chuck (Operator)
Chuck, thank you.
OPERATOR
We will now begin the question and answer session to Ask a question. You may press star than one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We also ask that you please limit yourself to one question and one follow up. And today's first question will come from Scott Wurtzel with Wolf Research. Please go ahead.
Scott Wurtzel (Equity Analyst)
Hey, good morning guys. Thank you for taking my question. Just on the closed sales guide, wondering if you can talk a little bit more about how long some of these sales cycles are lengthening by and maybe as 3Q and the first month of 4Q developed when you started to notice this change. Thanks.
Tim Goeke (Chief Executive Officer)
Yes, Scott, thank you very much. And I do want to emphasize that we feel very good about the demand that we're seeing and we're trying to correlate just what you said which is the timing of when all that will close and just a couple of stats that I didn't mention but ideal origination this year is up 25% in dollar terms and at over a billion dollars. Our pipeline is 20% higher right now than it was last year at the same time and we're seeing strong renewals on track to renew over a billion dollars this year. So we do like the demand we're seeing. The pipeline that is happening, it's in the areas we're investing, it's in wealth, it's in digital, it's in shareholder engagement. Platform sales now make up 20% of that. But then as you said we're taking on some larger engagements. They take longer to close and they are harder to predict. So while we're tampering on near term view, we do like the outlook going forward. I think it's very hard to say Q4 versus Q1 that's going to be a bubble and it is hard to predict. But we like what we're seeing out there.
Scott Wurtzel (Equity Analyst)
Got it. That's helpful. And then just would love to hear more on the opportunity with the custom policy voting engine and just the broader opportunity there. And how long could this potential tailwind from selling this into the market last for an impact closed sales over the medium to long term here.
Tim Goeke (Chief Executive Officer)
Yeah, you know we are, we see the custom policy voting engine as one of our most exciting areas. You know I think there is a lot of concern out there about the role of proxy advisors. It has generated a lot of discussion over the years and you know, we think about the value proposition under the current approach. People get you Know, they get very detailed research, but they get it very late, just sometimes a week before the meeting. And so if there's any error, if it's a controversial vote, there's very little time to react. And I think the value proposition that we're offering, which is a clean set of data much earlier, four to six weeks before the meeting, it allows people to run their policies through, see the votes, understand if there are any votes that might be controversial, and then do their own research on that. So we really like the way that it turns the process on its head. We are seeing strong demand from asset managers. As I mentioned, the asset management we did this year is 800 billion under management and we have a nice pipeline for next year. So we would expect to have be significantly ahead next year of where we are this year. Typically with these things it takes a few years for it to build. So I'm not sure that I'd be saying it's going to be dramatically affect our top line next year, but I think over the next three years or so you'll see some nice growth there.
Scott Wurtzel (Equity Analyst)
Great. Thanks guys.
OPERATOR
Our next question will come from Dan Perlin with RBC Capital Markets. Please go ahead. Thanks.
Dan Perlin (Equity Analyst)
Good morning, Tim. I was just hoping you could just kind of elaborate a bit more on kind of your views around tokenization. I know you talked about it in the prepared remarks. Obviously there's a narrative that makes it sound like you guys are in more of a loser camp as opposed to a winner camp. Clearly hearing what you're talking about today sounds like it's a tailwind for you. So I was just hoping maybe you would go a little bit deeper into why you think you guys are in a really good position to win here and it's not going to be problematic going forward in particular again around Pocket Proxy, where obviously you just announced you're doing something with someone now.
Tim Goeke (Chief Executive Officer)
Yeah, look, Dan, thank you. Thank you very much. I'm glad you asked because there's been a lot of discussion around this topic and I think it's important to understand and there are, you know, there are multiple models out there, but a lot of people are talking about an issuer sponsored model for tokenization. You hear NASDAQ and NYSE both talking about this as they seek to serve their issuer clients. And you know, we don't know if that will be the winning model, but we like it for a couple of reasons. First, we are already the leading provider of voting solutions for issuers, even beyond the beneficial shares that we serve on behalf of brokers. 80% of large cap companies use us today to solve the complexity of bringing together the beneficial and registered shares. And they do that really at economics that are more attractive than what we see on the regulated side. In the future with tokenized shares is going to be even more complex because people have their beneficial shares, their registered shares and now their tokenized shares. And we solve all that with a single pane of glass. So we are really pleased to announce that we're going to be providing the first on chain proxy voting in May for Galaxy, who is leading digital asset infrastructure provider. And second, even if shares are tokenized by issuers, they're still very likely to be held at broker dealers who are already our clients. And we believe those brokers will set this up in a way that protects the privacy of their clients. So in this issuer based model, we have two ways to win and we really like it. But that's not the only model. The SEC has talked about three different models and we're putting in place governance capabilities for. So there's the issuer sponsored one that I just talked about. There's also an intermediary LED model where third parties such as brokers and digital exchanges tokenize shares away from the issuer. Again, these intermediaries, they're already our clients. And this is going to work very much like today's model. We're working with multiple parties on this and we're making announcements in the near future. And then the last model is a so called synthetic model often led by digital exchanges for global investors. And we are pleased to announce just earlier this week they were enabling this capability for Ondo, who is the leading provider in this space. So really, regardless of where the tokenization is taking place, what's clear is that people are coming to us to talk about how to solve their governance requirements. And as and when tokenized equities begin to get traction, it's going to be because it's drawing in new investors, coin holders, global investors, and that's going to grow investor positions. So that increases the market opportunity for us and we're leaning into that. So that's the governance side. I'd be remiss if I just didn't point out the other opportunities here because really, frankly we think the biggest opportunity is in capital markets. That's where we've been doing quite a bit of investing. When you think about the capital savings from better collateral from faster settlement, it's going to create higher trading at higher roes. We're the leader there today, tokenizing more than $350 billion a day on a DLR platform that's larger than the entire crypto market. We'll be introducing additional enhancements this year, including real time repo. We just made an investment in HQLAX to extend our relationships in Europe. So good head of steam there. And then in wealth management. And our wealth clients are increasingly seeing money market funds, privates and alternatives in tokenized form as something that could be very interesting for their clients. And I think the key here is how do you prevent people having to put on a lot of costs with a dual infrastructure? How do you enable those tokenized and crypto assets alongside the traditional assets without blowing up the cost? And as you know, we just launched an end to end solution in Canada. We'll be bringing that to the U.S. and I think that's going to really help wealth managers solve that. So whether it's wealth management, capital markets or importantly governance, we think that there's just a lot of opportunity for us here. And you know, as you know, change is good for Broadridge. You know, what we do is we mutualize the cost of change. We help our clients adapt faster. And this is just another example of that.
Dan Perlin (Equity Analyst)
That is a very comprehensive answer. Thank you Tim for that. I really appreciate it. Just a quick one on margins, which I think will probably be a lot shorter is just thinking through the dynamics, as you say, similar dynamics going into the next quarter. But as Tim just pointed out, there's a lot of good things happening and therefore the investment cycle, is it accelerating in terms of investment dollars that are going to be required to capture all these opportunities and how might that play into our views of how the margin profile of the company might go, let's say, over the next several quarters. Thank you.
Ashma Ghehi (Chief Financial Officer)
Absolutely. So I'll start with this year, right, by reiterating that we remain very much on track to deliver on our full year AOI margin guidance, which is between 20 to 21% from a margin basis. You've heard me say this before, right? We think about margins more as a means to an end. Our goal has been to take advantage of periods of elevated event activity and strong results to accelerate our investments in growth initiatives. While we continue to deliver double digit EPS growth. This year is a great example of that. Our strong results enabled us to accelerate some of these investments in the areas you heard Tim talk about, shareholder engagement, tokenization and AI, especially in the second half of the year, all while working within our 10 to 12% adjusted EPS growth. Now remember, with regards to the fourth quarter, you should expect us to do more of that in Q4 as well. And if you look at our updated EPS guidance, that would imply low to mid single digit adjusted EPS growth in Q4, which would lead us to a strong 10 to 12% for the full year. That reflects the impact of our expected investments in the quarter.
Tim Goeke (Chief Executive Officer)
And I'll just add on that, you'll hear us this morning talking about a lot of opportunities and the investments behind those. But those investments are baked into all of the forecasts that we're giving. And as we particularly as we think about the productivity from AI going forward and other things, it's really a matter of how do we get the right mix between investment and delivering to shareholders. But we don't see anything that's going to prevent us from continuing to drive double digit earnings growth. That's great.
Dan Perlin (Equity Analyst)
Thank you so much.
OPERATOR
The next question will come from Kyle Peterson with Needham. Please go ahead.
Kyle Peterson (Equity Analyst)
Great. Good morning guys. Thank you for taking the questions. I wanted to start off on some of the work you guys are doing, the repo front with dlr. Obviously you guys have disclosed the Canton Network stats and some of the revenue coming in from that. You know, it's growing nicely but still small. But just wanted to see like what some of the other products or capabilities you guys are looking at and kind of how we should think about the evolution of your work on repo and potentially the other asset classes and potential other ways to monetize the Canton Network.
Tim Goeke (Chief Executive Officer)
Cal, thank you very much. So we are, we're really excited about this product and what it means for the broader theme of tokenized securities and really optimizing collateral. And as we said we did a little over $350 billion a day in March which is 4x what our volume was last year. We're clearly the leading at scale platform and we have a series of signed clients that are in the process of being onboarded. As I think about our roadmap, we have a pretty well defined roadmap here in terms of moving from intercompany to intercompany, moving on to Canton Mainnet will enable that and we'll be on other networks as well bringing in real time capability and we think the opportunity there with real time capabilities to enable new trade types that don't exist today. And you think about today repos largely funds sort of as a Treasury function that funds the company, funds the balance sheet and we think about the possibility of that moving to a desk level function that could fund individual trades is pretty exciting. So we think that sort of the functional dimension in terms of intercompany and real time. Then there's, there's the geographic dimension in terms of Europe and Asia and we're seeing nice demand in both those geographies as well. And then there's the asset class dimension and our investment in hqlax is an example there to move to other types of collateral. So we think this is going to be really an area where we can help our capital markets clients for a long time to come. It's just gaining traction. But as we said, between this and Canton, it added two points of growth to our capital markets business this year. And so we think that's just the beginning.
Kyle Peterson (Equity Analyst)
Awesome. That's great to hear. And then maybe a follow up on use of cash flow. Historically you guys have been extremely consistent between whether it's capex and shareholder return and ma, but with cash, especially free cash flow generation trending towards the higher end of the ranges this year. Just want to see are you guys willing to be opportunistic and maybe step up at the buyback, given the market does seem to be misunderstanding your role in tokenization and some of these other growth initiatives, or do you guys think you'll just continue to stick to this Oracle plan? Just want to gauge on how opportunistic you'd be willing to be on the buyback.
Ashma Ghehi (Chief Financial Officer)
Yeah. So you know, I'll start off with agreeing with exactly what you said. We have strong cash flow, we're in a great capital position. That's a great place to be right now. Right. I will also say we do remain committed to balanced capital allocation. And just as a reminder what that means for us is maintaining our investment grade credit rating, making internal investments to drive organic growth, paying a strong dividend, growing in line with our earnings, pursuing attractive M&A and then share buybacks in that order. And fiscal 2026 has been a great example of that approach in action for us. Since the beginning of the year, we've already invested close to 300 million to make four strategic tuck in acquisitions. We've returned 681 million to shareholders which included 350 million in buybacks that we have done already. And we continue to be in a strong capital position. Right. We're sitting at a leverage ratio of 1.9, which is below our target range of 2 to 2.5x. Right now, given our forecast for free cash flow, we're on track to deliver more than $1.1 billion for the full year, which essentially leaves us with ample capacity to do both potential MA and share buyback in Q4, which I agree with you, the share buyback levels are quite compelling right now.
Tim Goeke (Chief Executive Officer)
I'll just add Cal, you know, I think, you know, we have stepped up this year. You know, it's likely to be record for us in share buybacks. And at the same time we've seen some very unique opportunities on the M and A side that really add to our franchise and have represented also unique value. So you know, we're looking at each MA opportunity pretty keenly relative to our own shares and we do see our shares as being attractive at current levels. So stay tuned. And again, as, as said, you'll probably continue to see a mix, but we're keenly aware of the value of our shares right now.
Kyle Peterson (Equity Analyst)
Okay, great. Thank you. And nice results.
OPERATOR
The next question will come from Punit Jain with JPMorgan. Please go ahead.
Punit Jain (Equity Analyst)
Hey, thanks for taking my question. So I wanted to ask about delays that you are seeing in closed sales. Is evolution of AI also contributing to those delays in any way as your clients take like build versus buy decisions? Does AI change any of those dynamics, specifically in gto?
Tim Goeke (Chief Executive Officer)
Yeah, Puneet, thank you. Thank you for that question. You know, it's interesting. I had dinner a couple nights ago with the head of technology of one of our largest clients and he was, he was talking about how what a different position he sees us in relative to other SaaS vendors that he works with. And he's really talking about the network and the way that we connect hundreds of brokers or dealers to thousands of public companies, to tens of millions of investors, but also the technology difference and that really deeply embedded way that, that we are relative to the other things that he see and they're obviously talking to him about an opportunity. So we're not seeing AI affecting things and if anything we're seeing interest in the AI enabled products that we do. So if I think about looking forward, we are seeing positive trends for next year. As I mentioned, our pipeline origination are both substantially up, but beyond that we're seeing the benefit from organic product development beginning to bear fruit. I think we will see some benefit from the tuck in M and A that we just talked about and we're starting to see benefits from the ongoing investments in our go to market capabilities, especially international. So we like the demand going forward. We're not seeing AI or sort of self builds taking over. And I think people are really liking our platform story too, which becomes a sort of a build and buy where you're being able to leverage the identic layer that we're Creating. So all in all, we sort of like the way it's working out.
Ashma Ghehi (Chief Financial Officer)
And Puneet, I'll just add, I want to be clear. We see minimal impact of this on next year, right? The math would say 10 to 30 bps. But what I do see is positive momentum from the factors I called out, position growth, higher trading volumes, faster conversion from our existing backlog and what Tim mentioned, the growth accretive M and A. So we'll talk more about next year in August, but I'm feeling pretty positive right now.
Punit Jain (Equity Analyst)
Got it, got it. No, yeah, I understand. Like many of those deals are long cycle deals and second, like somewhat related to the first question, like as AI generates productivity in software development as well as in managed services expenses, are any of those dynamics driving any pricing pressure for you?
Tim Goeke (Chief Executive Officer)
Yeah, we haven't seen that yet. We are, you know, it is, as we talked about it is the improvements in SDLC are certainly helping us innovate faster and bring new products forward faster, as you did with custom policy Engine, the global demand model, the institutional voting platform, all of which are leveraging AI in the way they work, but also in how we develop them. I think the managed services one is interesting because there, as we talk to clients about that capability today, we're largely talking about AI partners. You know, we'll do an AI partnership, we'll guarantee you a level of savings and we'll share the savings above that. And it really changes the conversation because we're going into it together, their AI plus our AI and the APIs I talked about and we can really create. We've seen increases in demand as a result of that and our managed services sales this past year have really, that formula has been, you know, it's been pretty powerful with clients. So it's leading to a lot of good conversations and I would say really helping to drive demand. Got it. Thank you.
OPERATOR
The next question will come from Michael Infante with Morgan Stanley. Please go ahead.
Michael Infante (Equity Analyst)
Hi everyone, thanks for taking our question. Ashermai, you alluded to the fact that you feel comfortable about fiscal year 27 recurring revenue even with the lower closed sales outlook based on backlog composition and conversion of revenue, along with some of the position growth factors you cited. But if we just think about the contribution of closed sales to recurring revenue historically being around that six point range, how should we be thinking about your conviction and the durability of recurring revenue growth on a go forward basis if closed sales performance doesn't inflect? Thank you.
Ashma Ghehi (Chief Financial Officer)
Yeah. So Michael, I'll answer in two parts right I'll talk about what gives me conviction of well one, I'm not giving you any guidance for fiscal 27 right now. I want to be very clear about that. We'll come and have that call in August. My aim was to give you a little bit more color on the drivers that we see as allowing us to to continue to see strength in recurring revenue growth. And those drivers specifically were we have early indication on volume trends which continue to look good even for our first half position testing for next year. Our backlog continues to look good. And in addition, I expect the acquisitions that we've made this year to contribute to both reported growth and organic growth over the course of next year. Specifically on sales. If you look at, you know, even if you look at the difference in guidance that we had previously versus what we have right now, that implies only a, from a midpoint perspective, that implies only a 40 to 45 million delta. Given our conversion cycles across our ICS and GTO products, you would expect only a fraction of that to convert over the next year, which was my, which is why I called out the impact of that would be 10 to 30 basis points at most. Right. Which is why given all the other positive drivers that we're seeing with volume trends, backlog acquisitions and the internal growth in the business, I feel good about where we will be for next year.
Michael Infante (Equity Analyst)
That's helpful. And then just on the Galaxy announcement, what's a gating item to seeing more Galaxy like announcements in terms of your on chain efforts, how closely are other corporates, including non crypto oriented businesses, monitoring that and are there other parts of their infrastructure stack or other businesses like them in terms of their infrastructure stack that you intend to leverage over time? Thank you guys.
Tim Goeke (Chief Executive Officer)
Yeah, thank you on that. I think first of all, just the last part of it, will there be others that we leverage? Absolutely. We'll be partnering with everyone. We'll be integrating into all the various wallets. So I think this, when you think about how this will work, there will be, I think a pretty broad ecosystem of partners. And the great news as I talked about earlier, is that pretty much everyone we talk to in this area, when we talk to them about how we can help make this real, they're very interested in talking to us, very interested in integrating and partnering. And so we've really been pushing on open doors in terms of that. So I think the gating factor on more announcements is just really how fast we can talk to people. And we're doing that and we're expanding our capacity to talk to partners to make sure that we can basically meet all the demand for that. I think in terms of how fast this will go with other companies, it is a little bit less clear. We do know of some companies that are in the pipeline that we're in discussion with so far. They do tend to be other companies that are in the sort of digital asset ecosystem. They're more focused on this than others. I think it will really be a matter of if they're not in the digital asset ecosystem themselves. They do this to raise capital at good rates. And so it's a chicken and egg question in terms of is there supply from corporates, is there demand from investors? And you could imagine as a sleeve, if you're able to attract global investors through this, having a sleeve of this and things, I think it'll be. And I don't have any knowledge of this at all, but I think there's some very large IPOs that are coming later this year. I haven't heard any hint that any of those are going to have a tokenized sleeve, but if they did, that
OPERATOR
would certainly be an impetus to the market.
Tim Goeke (Chief Executive Officer)
And this will conclude our question and answer session. I would like to turn the conference back over to Mr. Tim Goecke for any closing remarks. Please go ahead. Yeah, I just want to thank everyone for joining us this morning. We're really excited about the story that we have right now, the way we're delivering results today, but also how we are really helping our industry at a moment of key change. And as I said a couple times on the call, we think change is good for Broadridge. We help our clients mutualize, making it happen, help them adapt faster. And so we're really excited about the opportunities that we're seeing and that we talked about this morning. Thank you.
OPERATOR
And this will conclude our conference call for today. Thank you for attending today's presentation. You may now disconnect.
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