Good morning. My name is Natalia, and I will be your conference operator today. At this time, I would All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Investor Relations.
You may begin, sir.
Thank you, Natalia, and good morning to everybody on our call, and welcome to Wood Broadridge's 2nd quarter 2018 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 Rich Daley, our CEO Tim Goeke, our President and COO and Jim Young, our CFO. Before I turn the call over to the management team, a few standard reminders. During today's conference call, we will be making forward looking statements regarding brokerage that involve risks.
A summary of these risks can be found on the second page of the slides. We encourage participants to refer to our SEC filings, We will also be referring
to several non GAAP financial
measures, We will also be referring to several non GAAP financial measures, including adjusted operating income, adjusted EPS and free cash flow. We believe these non GAAP measures provide investors with a more complete understanding of Broadridge's underlying operating results. An explanation of our use of these non GAAP measures and reconciliations to their comparable GAAP measures can be found in the earnings release and in the earnings presentation. Let me now turn the call over to Rich Daley.
Thanks, taxes and higher guidance make it a really exciting time to be a Broadfish. So let's get into it. I will start off this morning with some of the highlights of our Q2 results. Tim will provide an overview of our 2 segments and then Jim will review our financials and walk you through our revised 2018 guidance and 3 year financial objectives. I would like to close with some of my bullets on steps we are taking to further strengthen and grow our governance and capital markets franchises and even better position the company for future growth.
Broadridge delivered very strong second quarter results. Total revenues rose 13% to just over $11,000,000,000 driven by a $68,000,000 in dollars Adjusted EPS aided by a lower tax rate more than doubled to $0.79 Closed sales were $39,000,000 in the 2nd quarter, down from $56,000,000 in the 2nd quarter of 2017. Our 2017 second quarter numbers benefited from a large sale to a key client and excluding that sale, closed sales would have been up 13%. More important than the sales results of any single quarter, our pipeline is strong and the quality of our dialogues with key clients around transformational initiatives remains high. We continue to be pleased with the strength in our event driven revenues.
During the quarter, Broadridge benefited from both a proxy vote at 1 of the largest global mutual fund complexes as well as activist campaigns at 2 large equity companies. In all of these cases, corporate issuer and mutual funds rely on Broadridge to communicate with millions of investors and accurately count tens of millions of votes, highlighting the importance of our governance franchise to the investment process. By definition, event driven activity does not reoccur on a predictable annual cycle, but the activity behind these results is very much a part of the corporate governance process and brokerage plays a critical role in enabling these They are able to do so because Broadridge built and maintains an infrastructure that enables them to communicate with their fund holders to get the approvals they need on governance matters. Prior to Broadridge consolidating these this was a dramatically more costly and less accurate process. When activist investors want to make sure their voice is heard at the Board level, they too can tap into an on demand infrastructure that enables them to get their message directly to shareholders and which quickly and accurately tabulates votes so that all sides know where they stand and have confidence in the outcome as it relates to the votes processed by Broadridge.
While event driven revenues can vary from year to year, the underlying growth drivers are the same as they are for our recurring revenues, namely mutual fund and ETF interim record growth and equity stock record growth. To give you a sense of this underlying growth rate, our last event driven revenue record was in 2010, when we recorded $256,000,000 of event driven revenues. In that year, driven by exceptional reincorporation and merger activity, 50% of all mutual fund positions went out for a proxy vote. This year, we expect to record an even stronger event driven revenue year on the back of only 28% of fund positions going to proxy. So a much smaller has increased in line with the 8% average annual growth in mutual fund and interim records that we have reported since 2010.
So while event driven revenues can vary from year to year, the underlying activities are a core part of the value we offer to clients and the revenue themselves are very much linked to our long term growth story. The other good news with regards to our financial results is taxes. Approximately 80% of our business is in the United States. So corporate tax cuts will be a big benefit to our earnings and cash flow. Jim will spend more time on the impact of these changes on our results and outlook, but let me share some of my thoughts.
The biggest beneficiary will be our shareholders as these cuts raise our earnings. To reflect that impact, we are raising our 3 year adjusted EPS growth objective to 14% to 18% from 9% to 13%. Keep in mind that our capital allocation policy includes a 45% dividend payout ratio, so investors should also anticipate benefiting directly in the form of higher dividends tied to those earnings. Another benefit that these tax cuts will give us is greater flexibility to invest in our business and our associates. For example, we are taking this opportunity to invest in our associates by raising hourly compensation, non management bonuses and improving our benefits.
As always, we will continue to look for additional ways to deploy your capital to boost long turns. And now our 2018 guidance. On the back of our strong first half results and the positive impact from the U. S. Corporate tax cuts, we are raising our guidance across 3 important metrics.
1, we are raising the top end of our total revenue guidance to 2% to 4% from 2% to 3% on the back of the record first half event driven revenues. 2, we are raising our adjusted EPS guidance to 27% to 31% from 15% to 19% to reflect our strong operating performance and the reduction in the U. S. Corporate tax rate. And 3, we are raising our free cash flow guidance to $500,000,000 to $550,000,000 from $400,000,000 to $450,000,000 Let me now turn it over to Tim for a review of our businesses.
Thank you, Rich. Let's turn to Slide 5 for a brief business update. Both the Broadridge segments, Investor Communications and Mobile Technology and Operations continue to perform very well. ICS total revenues, recurring, event driven and distribution rose 14%. As Rich discussed, event driven activity was very strong across mutual funds where a leading complex went to proxy and also due to continued shareholder activism that capped a very strong first half of the year.
ICS recurring fee revenue growth was 5% in the 2nd quarter, excluding customer communications. The healthy stock market in Q2 helped drive growth across our governance franchise, especially for our recurring equity proxy and mutual fund and ETF interim products. Mutual fund interim volumes rose 10% in the Q2, reflecting the strong levels of inflows into mutual funds and ETFs over the past 15 months. Equity stock record growth was also very strong at 12%. That helped drive 6% growth in regulatory communications revenue.
Other ICS revenues rose 3% as strong demand for our data analytics and our wealth management products was partially offset by revenue delays in our tax product line. Demand for data and analytics products remained strong, including a notable new mandate to provide a regulatory compliance solution for major financial services firm. Declined 1%. These revenues continue to be impacted by the expected roll off from acquired customers. These are the losses that we have flagged from the beginning of the BRCC acquisition.
Before we turn to our GTO segment, I want to circle back to our event driven revenues. As Rich noted, these activities are an integral part for the corporate governance infrastructure that Pfizer provides. At about 9% of our overall fee revenues, in most years, the ebbs and flows of these activities have had only a limited impact on our full year results. That said, in That said, in fiscal 2018, we have proven to be
a strong contributor. So it's worthwhile
to share our outlook for the second half of the year. Roughly 60% of event driven revenues are tied to mutual funds and are driven by the need in fund complexes to seek shareholder approval for changes to their boards as well as for other actions. For the largest fund complexes, these can be huge undertakings. For example, on behalf of
the very large fund company that undertook
a proxy bill in the 2nd quarter, brought it to reach out to more than 35,000,000 beneficial accounts, owing more than 175 funds and processed over 15,000,000 votes on our digital platform. Thanks to the investments we have made, fewer than 20% of these accounts received a physical in, which means that our efforts to enable digital alternatives save that complex tens of 1,000,000 of dollars. The end result within the fund complex was successful in reaching its massive population of shareholders with its proposals. Some companies generally undergo these types of votes every 5 to 7 years. The past three quarters have seen the 2 largest mutual fund ETF complexes in
the world go out for shareholder vote,
which has had a very positive impact on event driven revenues in both the Q4 of fiscal 2017 as well as the Q2 of 2018. As a result, we expect mutual fund proxy activity to be lower in the second half of twenty eighteen than in 2017. Another significant driver of our event driven revenues is contested corporate issue elections. Broadridge's first half results benefited from proxy contests at 2 broadly held companies. Last year's results benefited from similar contests at GM and Arconics.
While these contests will not be repeated, we think the trend towards shareholder activism increases the likelihood of similar campaigns going forward. So while event driven revenues do vary from year to year, I want to echo what Rich said few moments ago. Underlying growth drivers of these revenues, interim record growth and stock record growth are the same drivers that underpin our recurring revenues and are an ongoing part
of our long term growth story.
Let's move to GTO. Our GTO segment American Wealth Management and in Global Capital Markets. Higher trading volumes, especially in North America also contributed to growth. While contributor, investment management grew nicely at over 15% year on year. We had 2 notable capital markets wins during the quarter, made an important sale for Tier 1 Global Investment Bank for Corporate Actions and which will migrate more than a half dozen different platform to our new global multi ethnic platform.
The second was the sale of our managed services capabilities to a large North American bank. At are great examples of how we continue to grow our Capital Markets franchise by helping leading clients simplify and improve their technology and operations support the market leadership of our key franchises during the Q2. To support our governance franchise, we continue to invest in 3 areas. 1st, we're continuing to push the envelope on bringing blockchain capabilities to the proxy market. Broadridge recently completed the second phase of a pilot This in This in turn drove benefits throughout enhanced transparency and remove the need for reconciliations.
The success of the second stage brings us one step closer towards the implementation of a global
proxy and proxy change solution.
We also completed the build of a U. S. Proxy platform using blockchain technology. We have a first client in production on that platform, which we will run-in parallel with a traditional platform this proxy season. 2nd, we invested in our digital capabilities, extending our interactive digital communications capabilities into transaction reporting and creating a focused digital sales team.
3rd, we continue to make progress in working with mutual funds and regulators on enhanced reporting solutions. We think we'll increase engagement between investors and funds while significantly reducing funds communication costs. We're also investing in our capital markets franchise with continued investment in our global post rate management platform, on which we completed a major go live for a major Tier 1 bank in Europe and are now facing in additional markets. I'm very proud of our worldwide team that completed this unique global mutualization capability. We also initiated the Global Corporate Actions investment I mentioned earlier.
On the fixed income side, we are working with market leaders by utilizing our broad market reach to create network value by increasing liquidity, shortening settlement times and improving sales matching. Finally, on the global front, we took another step forward in formalizing our commitment to our global clients by formally creating Broadridge International headed by Tom Carey. Many of you met Tom at our Investor Day to better serve our global and key regional clients by bringing together all our efforts outside North America. I will now turn the call over to Jim to provide a review of our financial results. Jim?
Thanks, Tim, and
good morning, everyone. I'll make a few call outs to begin and then start my comments with a review of the Tax Cuts and Jobs Act impact to our tax rate. First, we had a very strong second quarter. Total revenues were up 13% and adjusted EPS was up 103%. Event driven activity powered the very strong results in our ICS segment and our GTO business continued to perform very well.
2nd, taxes. The TaxAct will generate an approximately 10 percentage point reduction in our effective tax rate comparing fiscal year 2017 to fiscal 2019, on our on our reported earnings in the 2nd quarter driving 0 point flow. Broadridge had a very strong free cash flow quarter driven in large part by the elevated event driven activity in the first half of the fiscal year and client prepayments. 4th, guidance. As Rich noted, we are raising our total revenue guidance from 2% to 3% to 2% to 4% to account for the big event driven activity.
We're also raising our adjusted EPS growth guidance to 27% to 31 percent to reflect the impact of a lower U. S. Federal tax rate and the strength of our operating performance. Embedded in our guidance is our expectation for a record year of event driven revenues. We are also raising our free cash flow guidance by $100,000,000 to $500,000,000 to 5 $50,000,000 for the year.
Finally, we are updating our objective for our 3 year compounded annual growth rate for adjusted EPS. We are increasing the range from 9% to 13% to 14% to 18% to reflect the lower tax rate. Turning to the slides, I'll start my comments with a review of the expected impact of the Tax Act on Broadridge's financials. I'll use Slide 6 as an aid as I review the impact. In here, I will highlight 3 different adjusted for the non recurring charges and the excess tax benefit.
As I review the impact, please remember that Broadridge's pre tax earnings are approximately 80% U. S.-based. The headline is as follows: Broadridge's tax rate will drop approximately 10 percentage points. Using the GAAP rate excluding net charges fiscal
2019.
Our 1st full year of the fiscal 2019, our 1st full year of the Tax Act benefit. In fiscal 2018, we expect the same rate to be around 28% as we get a half year's benefit from the Tax Act. Including an assumption for the excess tax benefit and still excluding the non recurring charges, we expect a fiscal 2018 tax rate of around 25 percent. It is this rate of 25 percent which is embedded in our fiscal 2018 adjusted EPS guidance. I'll now explain by period the various components and their impacts.
As you know, the Tax Act lowers the federal rate from 35% to 21%. This rate naturally excludes the impact of state and local taxes, foreign taxes and discrete items. Given our June 30 fiscal year end, we apply a blended rate of 28% to fiscal 2018, which represents a 50% weighting of the old and new rates. In fiscal 2019, we will see a full year rate at 21%. With respect to our 2nd quarter, we applied the blended rate of 28% to the quarter's U.
S. Earnings and we recorded a tax reduction catch up for the Q1, which we reported at the old higher rate. More than offsetting this lower rate and the 1st full quarter catch up was a non recurring $16,000,000 net tax charge. The TaxAct repatriation transition tax triggered $32,000,000 in U. S.
And foreign withholding charges related to the earnings of certain foreign subsidiaries and earnings deemed repatriated for U. S. Tax purposes. These charges were offset by a $16,000,000 tax benefit from the remeasurement of our net deferred tax liabilities. These items netted out to a $16,000,000 expense and have been excluded from our calculation of adjusted EPS.
The corresponding tax rate with this exclusion is 24.3%. Last but not least, the impact of the excess tax benefit related to equity compensation. We now expect a full year excess tax benefit of $20,000,000 We previously expected a $25,000,000 benefit with the difference being driven by the new lower rate. Through the 1st 6 months, we've recorded only a $3,000,000 benefit, so we expect a bigger impact in the second half of the year. All in, the Tax Act accounts for approximately $0.08 of adjusted EPS growth in both Q2 and Q2 year to date.
I will briefly recap all this. We expect our full year effective tax rate for fiscal 2018 excluding the $16,000,000 charge to be approximately 25%, with roughly 4 percentage points coming from the excess tax benefit. For fiscal 2019, we preliminarily expect our full year tax rate to be around 24%, excluding any excess tax benefit. With a placeholder assumption for an excess tax benefit, our rate could be around 23% in fiscal year flexibility. We do not hold significant cash balances in our international locations.
We will be able to bring back available funds to the U. S. At some point in the future. However, we do not expect to repatriate meaningful funds from our international locations back to the U. S.
During this fiscal year. For completeness, please note that there are many provisions in the Tax Act that are relevant to Broadridge, but the other provisions while involved effectively net to a neutral impact. To wrap up this review, I think one important caveat. Our tax team has done done 2nd quarter 2018 recurring fee revenues rose 5 2nd quarter 2018 recurring fee revenues rose 5% to $562,000,000 and total revenues rose 13% to $1,013,000,000 Adjusted operating income rose 63 percent to $137,000,000 and adjusted EPS rose 103 percent to $0.79 per share. As I said at the outset, very strong numbers.
Let's turn to Slide 7 for a quick review of our 2nd quarter revenue drivers, starting with total revenues and then recurring fee revenues. Total revenues grew 13% to over $1,000,000,000 with growth across the board event driven, distribution and 2nd quarter, rising 2 27 percent to $97,000,000 as a result of the very large mutual fund proxy that Rich referenced and continued strong contest activity. In total, event driven revenues added 8 points to our total revenue growth in the quarter. Recurring fee revenues grew 5% in the 2nd quarter. Organic recurring fee revenue growth was 4%.
Onboarding of new business or closed sales as shown here was the largest organic contributor. Internal growth was also a positive contributor. Distribution revenues rose $25,000,000 in the quarter, mainly driven by higher event driven activity. Turning to Slide 8 or 9, adjusted operating income rose 63% to $137,000,000 in the Q2 of fiscal 2018. The increase in adjusted operating income flow through to our margins, which rose 4 20 basis points year over year to 13.6%.
Most of that growth was driven by $68,000,000 increase in event driven revenues with a smaller portion attributable to the increase in recurring revenues. As I noted last quarter, changes in event driven revenues like recurring proxy revenues typically generate higher levels of marginal profitability because they leverage an existing cost infrastructure. So a sharp uptick in event driven activity like the levels we have seen in Q1 and Q2 tends to flow through to our adjusted operating income line at a high marginal rate relative to our overall profitability. And alignment initiatives that we implemented over the past 2 quarters. We're pleased with the results of these initiatives.
The combination of the 63% increase in adjusted operating income and the lower tax rate drove 103% increase in our adjusted EPS to 0.7 $9 We also received a slight boost from a 1% reduction in our diluted weighted average share count resulting from the shares we repurchased over the course of fiscal 2017. The share repurchase benefit was partially offset by the increase in the diluted share count due to the adoption of the new stock based compensation accounting guidance. I'm moving to Slide 11 and before diving into our segment results, I'll make an administrative note about a change to our segment reporting. As part of our ongoing efforts to align our businesses more effectively around the needs of our clients, we have moved 2 small buy side focused product lines from our ICS business to GTO. These two lines accounted for $6,000,000 in revenues and a small operating loss in the Q2 of 2018.
This internal reorganization had no impact on our reported consolidated results. In the appendix of the webcast presentation, you will find our quarterly segment results for fiscal 2017 and the first and second quarter of fiscal 2018 shown on this basis. Now I'll discuss the second quarter performance of our ICS and GTO segments. Our ICS segments had a very strong quarter with revenue up 14% and earnings up 2 55%. As Tim highlighted, much of this growth was from event driven revenues, which in turn led to an increase in distribution revenues.
ICS recurring fee revenues rose 2% to $334,000,000 On an organic basis, recurring revenues rose 1% as an increase in sales driven growth was partially offset by lower internal growth. The decline in internal growth was from some expected decline in customer communications revenues and from the tax product line item that Tim referenced. Both of these factors more than offset strong mutual fund and ETM interposition growth of 10% and stock record growth of 12%. ITS earnings before taxes rose $52,000,000 to $72,000,000 mainly from elevated levels of event driven activity. Our GTO segment continued its strong performance, growing its 2 points of growth coming from acquisitions made in fiscal 2017.
Much of that organic growth resulted from net new business as Broadridge continued to extend the reach of its capital markets and wealth businesses and work through the implementation backlog created by the record sales in recent years. Equity trading volumes remained strong contributing to internal growth. GTO earnings before taxes rose 14% to $51,000,000 as we continue to realize positive operating leverage driven by organic growth. Moving to Slide 12. Broadridge generated $219,000,000 of free cash flow in the 2nd quarter, which more than offset the 1st quarter seasonal cash outflow, resulting in $89,000,000 year to date free cash flows.
Increased event driven revenues were a major contributor to the growth in the year to date free cash flows as were the notable client prepayments. Turning to capital deployment, Broadridge invested $17,000,000 in capital expenditures in the Q2. We acquired Summit Financial in October for $26,000,000 net of cash acquired. As a reminder, Summit is an approximately $15,000,000 per year revenue financial document management business and contributed modestly to our 2nd quarter ICS revenues. We also made a very small tuck in acquisition to strengthen our mutual fund board advisory unit by acquiring Morningstar's fund advisory business.
That acquisition closed on January 2, so it's not in our quarterly numbers. We returned $43,000,000 to shareholders through our quarterly dividend. We did not undertake any significant share repurchase activity in the quarter. Given the recurring theme of the Tax Act today, I'll spend just a moment on its cash flow implications before finishing off with guidance. We expect the Tax Act will result in $50 plus 1,000,000 less in taxes annually.
In many respects, there is no change to our modus operandi. We are always evaluating investment participate in the tax reduction through our dividend equating to 45% of adjusted earnings and possible incremental share repurchase.
Let's turn
to guidance. We are raising our guidance to reflect the impact of the new tax law as well as our strong year to date results. The revised fiscal year 2018 guidance can be found on Slide 13. Our recurring revenue guidance is unchanged. We continue to expect recurring fee revenue growth to be in the range of 4% to 6%.
We expect total revenue growth to be 2% to 4%, up from 2% to 3%. The primary driver of the strong event driven activity that has helped power our year to date results and that should be offset by contraction and low margin distribution revenues.
We
are now projecting a record event driven year of around $260,000,000 to $270,000,000 After a record first half, we expect second half event driven revenues to be approximately 25% to 30% lower versus fiscal 2017 for the reasons Tim cited. We continue to expect our adjusted operating income margin to be approximately 16% as we expect to meet our margin expansion goals while maintaining disciplined investment in the business as Rich discussed.
We are
raising our outlook for adjusted EPS to 27% to 31%, up from our 15% to 19%. Roughly 2 thirds of that increase is related to the Tax Act with the balance being driven by operating performance. We now expect the impact of the excise tax benefit to be $20,000,000 or about 5 percentage points of adjusted EPS growth versus our prior assumption of $25,000,000 and 6 points of growth under the previous higher tax rate. We are raising our guidance for free cash flow by $100,000,000 to $500,000,000 to 550,000,000 dollars Finally, we continue to expect closed sales to be in the range of $170,000,000 to $210,000,000 Before I turn it back to Rich, I'd like to quickly revisit the 3 year growth objectives we laid out on our Investor Day on December 5. They can be found on Slide 14.
These objectives remain unchanged except for adjusted EPS, which we have reset to incorporate the new lower corporate tax rate. Accordingly, we are raising our adjusted EPS growth objective to 14% to 18% from 9% to 13%. We are on track to achieve all of these objectives. With that, I'll hand the call back to Rich for his closing remarks.
Thanks, Jim. I'm on Slide 15 of the presentation. Let's review again the key points from our call. 1st, Broadridge reported very strong second quarter results. Total revenues rose 13%, recurring revenues rose 5% and strong event driven activity contributed to 63% growth and adjusted operating income.
That growth and the impact of a lower tax rate drove 103% growth and adjusted EPS to $0.79 We are on track to hit our full year sales guidance of $170,000,000 to $210,000,000 We closed some important sales in the quarter. Our pipeline is strong and I am very encouraged by the quality of our dialogues with key clients around how Broadridge can help them to transform their businesses. After a record first half for event driven revenues and with a cut in corporate taxes, we are raising our guidance for total revenue growth, adjusted EPS growth and free cash flow. And finally, 4th, we are raising our 3 year adjusted EPS growth 2 months ago was Ready for Next. Ready for Next is a statement of our commitment to clients that Broadridge is well positioned to help them pursue targeted and meaningful opportunities to transform their businesses across governance, capital markets and wealth management.
A central tenant in that commitment is our willingness to invest in and grow our core governance and capital market franchises to drive value for our clients and shareholders. At Broadridge, we define a franchise as a business with a truly differentiated value proposition and which creates network value. In order to sustain those value propositions and expand the network value we can deliver, we continue to reinvest for the benefit of our clients and shareholders. To support our governance clients, we are investing to expand our digital capabilities so that we can enable both our governance and communication clients to enhance the effectiveness and reduce the cost of communicating with shareholders and customers. We are also investing in ways to enhance regulatory reporting for our mutual fund clients to do the same for their communications with fundholders.
Consistent reinvestment has been absolutely critical to reinventing our GTO business and building our Capital Markets franchise. Over the past several years, we invested in the underlying technology, increased our engagement with clients and invested in our leadership. The addition of new clients to our multi client managed services platform and this quarter's sale of a new corporate action solution to a major bank that Tim mentioned, a more proof point that this strategy is creating value for clients. We're also making progress in extending our fixed income product suite to drive increased network value. As always, we have balanced the imperative to reinvest with the need to deliver attractive returns to our shareholders.
This year, we will be deploying some of the upside from our record event driven revenues back into our business, making additional targeted investments to boost growth as well as drive operational improvements. On the growth side, we'll be making investments to enhance our data and analytics products and to accelerate client onboarding among other uses. In addition, we will step up certain In addition, we will step up certain investments in our digital capabilities, our cloud initiatives and in strengthening our suite of tools for the wealth management front office. We expect all of these investments to drive additional value to our clients and shareholders.
We will also be investing
in our associates. Given our strong results, clear plan for long term growth and the benefits we expect from the changes to our tax rates, the time is right to adjust our compensation and benefits policies to ensure we continue to attract and retain highly engaged, hardworking and the highest First, we are implementing First, we are implementing a $15 minimum wage this year for our U. S. Associates. Next, we are raising the bonus target to $17.50 for our non management North American associates and by 40% for associates elsewhere around the world.
These bonuses are paid based on client satisfaction scores and create a direct link between client satisfaction and employee compensation. Finally, we will be making enhancements to our family leave and vacation benefits as well as doubling the company match for charitable giving. Broadridge is committed to remaining an employer of choice and a key attraction of working here is our incredible culture, where committed, caring and ethical associates treat each other with respect, take pride in the important work we do and do the right thing. That's why I was not surprised when an independent survey showed our associate engagement scores increased again last year. I am confident that these changes will further increase employee engagement, enhance client satisfaction and deliver positive returns for our shareholders.
The investments we have made and will continue to make in our products, technology and people are key reason why we, the Broadridge management team, firmly believe that we are better positioned than ever to drive long term and sustainable growth. Before I conclude, I want to welcome Pam Carter, who was elected to our Board of Directors at our November Annual Meeting. Her deep and varied experience in both the private and public sector will complement our already strong Board, and I look forward to working with her. My last comments, as always, are directed to my fellow associates. It's worth remembering that behind the strong financial results we reported this morning is a tremendous amount of hard work by more than 10,000 Broadridge associates.
I want to thank all of them for their commitment to delivering value to our clients. It really is a great time to be at Broadridge. Let me now turn the call over to you for your questions. Natalia, the operator, will take those questions.
Your first question is from the line of Peter Heckmann with Davidson.
Good morning, everyone. Nice results. Thanks for the update on the guidance.
Good morning, Pete. Good morning.
I didn't hear it in the prepared comments. Could you give an update on the acquisition of Scottrade and the disposition of that
Tim here. Hi, Tim. As you know that transaction closed in September and we have ongoing dialogue with TD on this. There hasn't really been any change in strategy. I would say the dialogues are very positive.
We have a variety of solutions that they may choose to employ going forward. And we would expect to conclude something around this sometime in the next 12 months.
Okay. And then just remind me, Scottrade did go live on Broadridge platform, correct?
It did not go live, but contractually TD is paying minimums during this time period.
That's right. That's right. Okay. I appreciate that. And then just a quick follow-up on bookings.
I know bookings can be lumpy. How do you think about market sentiment in terms of I mean, it sounds like the market continues to move towards the areas that you've been moving towards in terms of utilities, large outsourcing deals. But how does the large deal pipeline look for potential deals to be signed here in the next couple of quarters?
Pete, I specifically tried to give you a sense in the call. Let me elaborate on that. So overall, the quality of dialogues and the level within the organization we're having these dialogues continues to improve. The reality is that with 33 clients on the managed service platform, we've crossed the chasm from going for early adapters into the mass market. And when you have a proven model and an industry that's continued to say they're looking to mutualize cost, Broadridge is proven with live and working out there.
And everything else is pretty much a theoretical dialogue. So we're in many active dialogues. Now as you know, these dialogues are not if you want to have a cup of coffee, but they're it's very, very One of the things I find encouraging for the long term is that the more successful we become at this, the larger the scope the client wants to have in the dialogue to make it even more transformative than it already is. So I view the long term position to be very, very good and we remain encouraged about where we are for this year and even looking forward to next year based on the current dialogues. You're right, it is lumpy.
I always say though, it will mean something in a headline if a deal closes in June versus July. Given the onboarding time, it really doesn't mean anything to Broadridge and our long term results. So but we will clearly keep you posted. But the pipeline is as healthy as ever and the dialogues are better than ever.
Great. That's a fair point. Thanks for the update.
Your next question is from the line of David Togut with Evercore ISI.
Good morning and congrats on the strong results. I have two questions. The first really relates to the rise in activism as we seen in the P and G and ADP proxy fights. And I'm wondering, if you're assuming any continued increase in activism in your long term growth objectives?
Dave, I've been doing this a real long time. And the reality is that activism has become an asset class. And the reality is that an activist can create gains for their investments even when they don't win the contest. So although it's very difficult to plan, all right, and we're probably not going to put anything into our numbers until something is announced. And by the way, the announced team, they actually enter into a contest, not threatening to enter into a contest.
We're not going to be putting anything into our thinking about the near term results. With that said, I do expect activism just based on the trend we've seen to continue. And I do think it's going to be adding to event driven overall over any multiyear period. And David, this is Jim. As you recall, we gave our multiyear growth objective is that assumed in the neighborhood of a
couple of $100,000,000 a year in event driven revenue, which is kind of in line with the historical average. And as Rich said, it doesn't assume the type of contest activity we've seen, but we're also somewhat optimistic that that's a real possibility.
Got it. And then as a follow-up, any update on the timing of conversion of the 1 bank you signed both to fixed income trade processing and equity trade processing about a year ago?
Yes. Dave, this is Tim Gokke. We have gone live with a major milestone with the European Bank that we talked about and that is now in multiple markets. We are continuing to including their largest market and now we're continuing to roll that out to other markets over the next few months. And with respect to the fixed income project we talked about, that is scheduled to go live sometime in this next quarter.
Yes. And going back to the sales question earlier, that's another proof point to the market that the industry is looking to mutualize cost, Broadridge has the clear, tangible and live solution.
Understood. Thank you.
Your next question is from the line of Chris Donat with Sandler O'Neill.
Good morning. Thanks for taking my questions and thanks for all the detail on the taxes. Rich, I wanted to ask one question on your prepared remarks related to the pipeline and the quality discussions you're having. I was
just curious if
with the in a whatever 6 weeks since the Tax Act passed, Has that changed anything in how clients are looking at the world and thinking about investments? Or is it too soon to tell? Or is it no change?
Chris, it's a good question. One of the things that you have to look at and I feel it every day is that although our industry is doing better, it's not that ROE is at a record levels. In many cases, it's still not where they want it to be, where they need it to be. There's 2 types of dialogues going on. At the execution level on these organizations, the cost pressure on the senior management, keeping the lights on every day is as high as it's ever been.
So it does 2 things. The willingness for them to look at ways to cut cost is very high and there's still continued pricing discussion, which I just consider SOP. As interesting though, at the more senior level, given the fact that it's no longer the out wires or the early adapters that have gone to our full scale solutions. At the C suite level, there's more dialogue about help me understand more how this would work in my organization. So I don't see
related to the pipeline, curious, because your closed sales are for the first half of the year at only $62,000,000 dollars The target is $170,000,000 to $210,000,000 So it seems sort of back end loaded. Is that your confidence in that closed sales, does that reflect the strength of the pipeline or stuff you've closed in the last few weeks that weren't part of the quarter?
So Chris, the sales generally tend historically to be back end loaded, all right. We have lots of people who work very hard to make their numbers and we generally have a pretty strong Q4. Large sales can make the year smoother,
all right.
And as we noted, we really haven't had any significant large sales year to date versus last year, all right. So I am looking at this as we expect to be in the range, all right. If we could bring in some large sales that could certainly help us be even stronger, all right. But as I said earlier, whether a sale closes in June or July or August, whatever it is, I'm more concerned is it a 12 month month implementation or is it a 24 month implementation, candidly than I am if the sale closes a month or 2 earlier one way or the other. So all in all, let me put it to you this way because I know you ask me about this all the time.
My cardiologist right now doesn't have any concerns about where we are.
That's good. So it's just a little different cadence from last year and maybe last year was more the exception and this is more the normal back end loaded?
Chris, if I have the choice of getting things earlier in the year or later in the year. We're always going to pick earlier in the year, whether it be sales, event driven revenues or beating plan, right? With that said, I'm very pleased where brokerage is at this point in time.
Okay. Thanks very much, Rich.
Your next question is from the line of Puneet Jain with JPMorgan.
Yes. Hi. Great quarter, guys. Is there any change in your M and A focus given the cash upside from the Tax Act? And which areas you will look for potential targets, acquisition targets?
Got it. Our M and A activities, as you know, we take very seriously. We have very disciplined criteria. We need to be a better owner, okay? So why would brokerage be a better owner?
So that means that we need to fit very much within our clear strategy. So we are so confident in the strength of our governance and capital markets franchises that we continue to look very hard at opportunities in there. We're still in a tuck in buy versus build mode because there really doesn't seem to be anything meaningfully that would fit clearly in there. If we could identify something that clearly fit in there that met the other criteria of us being a better owner and a strong IRR capability, we would consider that as well. Let me be clear for anyone who's going to ask the next question.
There's no change in anything I just said other than continued confidence in the execution that we've already done.
Got it. And can you also talk about how this new accounting standard 606 might impact your financials next year?
Hey, this
is Jim. The answer is really modestly. We pretty neutral on earnings. Just as you recall, our model is already kind of long term contracts recognized ratably. So really not a material change to what we're doing.
So no change?
Correct.
At this time, there are no further questions. Are there any closing remarks?
This is Rich. Before Eddings tells you about all the things we want you to do and come visit us, I really do want to comment here. I've been doing this a very, very long time and we'd rather be in a healthy economy than a weak economy and right now it still feels pretty healthy to us. And we're really pleased at the way the pieces have come together. And so I want to thank everyone for their support over this, starting with our associates who absolutely exceeded customer expectations and enabled us to deliver these strong results.
And I also want to thank our shareholders, because I know many of our shareholders have been with us for a very long time and we're delighted to report these results to you.