Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion summarizes the significant factors affecting the results of operations and financial condition of Broadridge during the fiscal years ended June 30, 2021 and 2020, and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein. Certain information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words such as “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Our actual results, performance or achievements may differ materially from the results discussed in this Item 7 because of various factors, including those set forth elsewhere herein. See “Forward-Looking Statements” and “Risk Factors” included in Part 1 of this Annual Report on Form 10-K.

The discussion summarizing the significant factors affecting the results of operations and financial condition of Broadridge during the fiscal year ended June 30, 2019 can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year 2020 (the “2020 Annual Report”), which was filed with the Securities and Exchange Commission on August 11, 2020.

DESCRIPTION OF THE COMPANY AND BUSINESS SEGMENTS

Broadridge, a Delaware corporation and a part of the S&P 500® Index, is a global financial technology leader providing investor communications and technology-driven solutions to banks, broker-dealers, asset and wealth managers and corporate issuers. Our services include investor communications, securities processing, data and analytics, and customer communications solutions. With over 50 years of experience, including over 10 years as an independent public company, we provide financial services firms with advanced, dependable, scalable and cost-effective integrated solutions and an important infrastructure that powers the financial services industry. Our solutions enable better financial lives by powering investing, governance and communications and help reduce the need for our clients to make significant capital investments in operations infrastructure, thereby allowing them to increase their focus on core business activities. Our businesses operate in two reportable segments: Investor Communication Solutions and Global Technology and Operations.

ACQUISITIONS

Assets acquired and liabilities assumed in business combinations are recorded on the Company’s Consolidated Balance Sheets as of the respective acquisition date based upon the estimated fair values at such date. The results of operations of the business acquired by the Company are included in the Company’s Consolidated Statements of Earnings since the respective date of acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed is allocated to Goodwill.

The following represents the fiscal year 2021 acquisitions:

Fiscal Year 2021 Acquisitions:

Financial information on each transaction is as follows:


	Itiviti		Advisor-Stream		Total
	(in millions)
Cash payments, net of cash acquired	$	2,580.4	$	23.2	$	2,603.6
Deferred payments, net	—		2.9		2.9
Contingent consideration liability	—		7.3		7.3
Aggregate purchase price	$	2,580.4	$	33.4	$	2,613.8

Net tangible assets acquired / (liabilities assumed)	$	(256.6)	$	(3.0)	$	(259.6)
Goodwill	1,932.4		25.8		1,958.2
Intangible assets	904.6		10.5		915.1
Aggregate purchase price	$	2,580.4	$	33.4	$	2,613.8

Itiviti Holding AB (“Itiviti”)

In May 2021, the Company acquired Itiviti, a leading provider of trading and connectivity technology to the capital markets industry. The acquisition of Itiviti extends the Company’s back-office capabilities into the front-office and deepens its multi-asset class solutions, better enabling the Company to help its clients adapt to a rapidly evolving marketplace. Itiviti is included in the Company’s GTO reportable segment.

Goodwill is not tax deductible.
Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a seven-year life and five-year life, respectively.

The allocation of the purchase price will be finalized upon completion of the analysis of the fair values of the acquired business’ assets and liabilities.

AdvisorStream Ltd. (“AdvisorStream”)

In June 2021, the Company acquired AdvisorStream, a leading provider of digital engagement and marketing solutions for the global wealth and insurance industries. AdvisorStream's advisor marketing platform enables advisors to drive revenue and growth by providing personalized and consistent client communications. AdvisorStream is included in the Company’s GTO reportable segment.

Goodwill is not tax deductible.
Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a five-year life and five-year life, respectively.

The allocation of the purchase price will be finalized upon completion of the analysis of the fair values of the acquired business’ assets and liabilities.

The following represents the fiscal year 2020 acquisitions:

Fiscal Year 2020 Acquisitions:

BUSINESS COMBINATIONS

Financial information on each transaction is as follows:


	Shadow Financial		Fi360		Clear-Structure		Funds-Library		Other Acquisitions		Total
	(in millions)
Cash payments, net of cash acquired	$	35.6	$	116.0	$	59.1	$	69.9	$	17.3	$	298.0
Deferred payments, net	3.0		3.5		2.1		—		1.7		10.4
Contingent consideration liability	—		—		7.0		—				7.0
Aggregate purchase price	$	38.6	$	119.5	$	68.3	$	69.9	$	19.1	$	315.4

Net tangible assets acquired / (liabilities assumed)	$	(0.1)	$	(7.9)	$	0.2	$	(3.1)	$	(2.2)	$	(13.1)
Goodwill	17.6		84.4		44.2		39.2		13.5		198.9
Intangible assets	21.1		43.1		23.9		33.8		7.8		129.6
Aggregate purchase price	$	38.6	$	119.5	$	68.3	$	69.9	$	19.1	$	315.4

Shadow Financial

In October 2019, we acquired Shadow Financial, a provider of multi-asset class post-trade solutions for the capital markets industry. The acquisition builds upon Broadridge’s post-trade processing capabilities by adding a market-ready solution for exchanges, inter-dealer brokers and proprietary trading firms. In addition, the acquisition adds capabilities across exchange-traded derivatives and cryptocurrency.

Goodwill is tax deductible.
Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a seven-year life and five-year life, respectively.

Fi360

In November 2019, we acquired Fi360, a provider of fiduciary and Regulation BI solutions for the wealth and retirement industry, including the accreditation and continuing education for the Accredited Investment Fiduciary® Designation, the leading designation focused on fiduciary responsibility. The acquisition enhances Broadridge’s retirement solutions by providing wealth and retirement advisors with fiduciary tools that will complement its Matrix trust and trading platform. The acquisition also further strengthens Broadridge’s data and analytics tools and solutions suite that enable asset managers to grow their businesses by providing greater transparency into the retirement market.

Goodwill is not tax deductible.
Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a seven-year life and five-year life, respectively.

ClearStructure

In November 2019, we acquired ClearStructure, a global provider of portfolio management solutions for the private debt markets. ClearStructure’s component services enhance Broadridge’s existing multi-asset class, front-to-back office asset management technology suite, providing Broadridge clients with a capability to access the public and private markets.

The contingent consideration liability is payable through fiscal year 2023 upon the achievement by the acquired business of certain revenue targets, and has a maximum potential pay-out of $12.5 million upon the achievement in full of the defined financial targets by the acquired business.
The fair value of the contingent consideration liability at June 30, 2021 is $5.0 million.
Goodwill is primarily tax deductible.
Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a seven-year life and five-year life, respectively.

FundsLibrary

In February 2020, we acquired FundsLibrary, a provider of fund document and data dissemination in the European market. FundsLibrary's solutions enable fund managers to increase distribution opportunities and help them comply with regulations such as Solvency II and MiFID II. The business was combined with FundAssist, Broadridge's existing European funds regulatory communications business. The combination of FundsLibrary's data platform and technology with Broadridge's existing fund calculation, document creation and translation capabilities, creates an end-to-end solution for fund managers and distributors, enabling them to respond to demanding regulatory requirements across multiple jurisdictions.

Goodwill is not tax deductible.
Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a seven-year life and three-year life, respectively.

BASIS OF PRESENTATION

The Consolidated Financial Statements have been prepared in accordance with GAAP in the U.S. and in accordance with the SEC requirements for Annual Reports on Form 10-K. These financial statements present the consolidated position of the Company and include the entities in which the Company directly or indirectly has a controlling financial interest as well as various entities in which the Company has investments recorded under the equity method of accounting as well as certain marketable and non-marketable securities. Intercompany balances and transactions have been eliminated. Amounts presented may not sum due to rounding. Certain prior period amounts have been reclassified to conform to the current year presentation where applicable, except as it relates to ASU No. 2016-02, as amended “Leases” (“ASU No. 2016-02”).

In presenting the Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Management continually evaluates the accounting policies and estimates used to prepare the Consolidated Financial Statements. The estimates, by their nature, are based on judgment, available information, and historical experience and are believed to be reasonable. However, actual amounts and results could differ from those estimates made by management. In management’s opinion, the Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of results reported. The results of operations reported for the periods presented are not necessarily indicative of the results of operations for subsequent periods.

Effective July 1, 2019, the Company adopted ASU No. 2016-02, “Leases” and its related amendments (collectively referred to as “ASU 2016-02, as amended”) by recognizing a ROU asset and corresponding lease liability, along with a cumulative-effect adjustment to the opening balance of retained earnings, in the period of adoption. Under this method of adoption, the Company has not restated the prior period Consolidated Financial Statements presented to the current period presentation. Additional information about the impact of the Company's adoption of ASU No. 2016-02, as amended is included in Note 2, “Summary of Significant Accounting Policies” and Note 8, “Leases” to the Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements. The estimates, by their nature, are based on judgment, available information, and historical experience and are believed to be reasonable. However, actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed below.

Goodwill*.* We review the carrying value of all our goodwill by comparing the carrying value of our reporting units to their fair values. We are required to perform this comparison at least annually or more frequently if circumstances indicate a possible impairment. When determining fair value of a reporting unit, we utilize the income approach which considers a discounted future cash flow analysis using various assumptions, including projections of revenues based on assumed long-term growth rates, estimated costs and appropriate discount rates based on the particular reporting unit’s weighted-average cost of capital. The principal factors used in the discounted cash flow analysis requiring judgment are the projected future operating cash flows based on forecasted earnings before interest and taxes, and the selection of the terminal value growth rate and discount rate assumptions. The weighted-average cost of capital takes into account the relative weight of each component of our consolidated capital structure (equity and long-term debt). Our estimates of long-term growth and costs are based on historical data, various internal estimates and a variety of external sources, and are developed as part of our routine, long-range planning process. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess not to exceed the total amount of goodwill allocated to that reporting unit. We had $3,720.1 million of goodwill as of June 30, 2021. Given the significance of our goodwill, an adverse change to the fair value of one of our reporting units could result in an impairment charge, which could be material to our earnings.

The Company performs a sensitivity analysis under the goodwill impairment test assuming hypothetical reductions in the fair values of our reporting units. A 10% change in our estimates of projected future operating cash flows, discount rates, or terminal value growth rates used in our calculations of the fair values of the reporting units would not result in an impairment of our goodwill.

Income Taxes*.* The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in addressing the future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws or interpretations thereof). The Company is subject to regular examination of its income tax returns by the U.S. federal, state and foreign tax authorities. A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements. The Company has estimated foreign net operating loss carryforwards of approximately $63.0 million as of June 30, 2021 of which $7.9 million are subject to expiration in the June 30, 2022 through June 30, 2041 period. The remaining $55.1 million of carryforwards has an indefinite utilization period. In addition, the Company has estimated U.S. federal net operating loss carryforwards of approximately $43.5 million of which $24.4 million are subject to expiration in the June 30, 2022 through June 30, 2037 period with the balance of $19.1 million having an indefinite utilization period. U.S. federal net operating loss carryforwards resulting from tax losses beginning with the fiscal year ended June 30, 2019 have an indefinite carryforward under the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The Company did not realize any federal net operating losses for the fiscal year ended June 30, 2021.

Valuation allowances are recognized to reduce deferred tax assets when it is more likely than not that the Company will not be able to utilize the deferred tax assets of certain subsidiaries to offset future taxable earnings. The Company has recorded valuation allowances of $10.5 million and $6.7 million at June 30, 2021 and 2020, respectively. The determination as to whether a deferred tax asset will be recognized is made on a jurisdictional basis and is based on the evaluation of historical taxable income or loss, projected future taxable income, carryforward periods, scheduled reversals of deferred tax liabilities and tax planning strategies. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The assumptions used to project future taxable income requires significant judgment and are consistent with the plans and estimates used to manage the underlying businesses.

Share-based Payments*.* Accounting for stock-based compensation requires the measurement of stock-based compensation expense based on the fair value of the award on the date of grant. We determine the fair value of stock options issued by using a binomial option-pricing model. The binomial option-pricing model considers a range of assumptions related to volatility, dividend yield, risk-free interest rate and employee exercise behavior. Expected volatilities utilized in the binomial option-pricing model are based on a combination of implied market volatilities, historical volatility of our stock price and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The binomial option-pricing model also incorporates exercise and forfeiture assumptions based on an analysis of historical data. The expected life of the stock option grants is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding. Determining these assumptions are subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of our stock options. A hypothetical change of five percentage points applied to the volatility assumption used to determine the fair value of the fiscal year 2021 stock option grants would result in approximately a $2.2 million change in total pre-tax stock-based compensation expense for the fiscal year 2021 grants, which would be amortized over the vesting period. A hypothetical change of one year in the expected life assumption used to determine the fair value of the fiscal year 2021 stock option grants would result in approximately a $0.7 million change in the total pre-tax stock-based compensation expense for the fiscal year 2021 grants, which would be amortized over the vesting period. A hypothetical change of one percentage point in the forfeiture rate assumption used for the fiscal year 2021 stock option grants would result in approximately a $0.1 million change in the total pre-tax stock-based compensation expense for the fiscal year 2021 grants, which would be amortized over the vesting period. A hypothetical one-half percentage point change in the dividend yield assumption used to determine the fair value of the fiscal year 2021 stock option grants would result in approximately a $0.8 million change in the total pre-tax stock-based compensation expense for the fiscal year 2021 grants, which would be amortized over the vesting period.

KEY PERFORMANCE INDICATORS

Management focuses on a variety of key indicators to plan, measure and evaluate the Company’s business and financial performance. These performance indicators include Revenue and Recurring fee revenue as well as not generally accepted accounting principles measures (“Non-GAAP”) of Adjusted Operating income, Adjusted Net earnings, Adjusted Diluted earnings per share, Free Cash flow, and Closed sales. In addition, management focuses on select operating metrics specific to Broadridge of Record Growth and Internal Trade Growth, as defined below.

Refer to the section “Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures” for a reconciliation of Adjusted Operating income, Adjusted Net earnings, Adjusted Diluted earnings per share, and Free Cash flow to the most directly comparable generally accepted accounting principles (“GAAP”) measures, and an explanation for why these Non-GAAP metrics provide useful information to investors and how management uses these Non-GAAP metrics for operational and financial decision-making. Refer to the section “Results of Operations” for a description of Closed sales and an explanation of why Closed sales is a useful performance metric for management and investors.

Revenues

Revenues are primarily generated from fees for processing and distributing investor communications and fees for technology-enabled services and solutions. The Company monitors revenue in each of our two reportable segments as a key measure of success in addressing our clients’ needs. Fee revenues are derived from both recurring and event-driven activity. The level of recurring and event-driven activity the Company processes directly impacts distribution revenues. While event-driven activity is highly repeatable, it may not recur on an annual basis. Event-driven fee revenues are based on the number of special events and corporate transactions the Company processes. Event-driven activity is impacted by financial market conditions and changes in regulatory compliance requirements, resulting in fluctuations in the timing and levels of event-driven fee revenues. Distribution revenues primarily include revenues related to the physical mailing of proxy materials, interim communications, transaction reporting, customer communications and fulfillment services as well as Matrix administrative services.

Recurring fee revenue growth represents the Company’s total annual fee revenue growth, less growth from event-driven fee revenues. We distinguish recurring fee revenue growth between organic and acquired:

Organic – We define organic revenue as the recurring fee revenue generated from Net New Business and internal growth.
Acquired – We define acquired revenue as the recurring fee revenue generated from acquired services in the first twelve months following the date of acquisition. This type of growth comes as a result of our strategy to purchase, integrate, and leverage the value of assets we acquire.

Revenues and Recurring fee revenue are useful metrics for investors in understanding how management measures and evaluates the Company’s ongoing operational performance. See “Results of Operations” as well as Note 2 “Summary of Significant Accounting Policies” and Note 3, “Revenue Recognition” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K.

Record Growth and Internal Trade Growth

The Company uses select operating metrics specific to Broadridge of Record Growth and Internal Trade Growth in evaluating its business results and identifying trends affecting its business. Record Growth is defined as stock record growth and interim record growth which measure the estimated annual change in total positions eligible for equity proxy materials and mutual fund and exchange-traded fund interim communications, respectively, for equities and mutual fund position data reported to Broadridge in both the current and prior year periods. Internal Trade Growth represents the estimated change in trade volumes for Broadridge securities processing clients whose contracts are linked to trade volumes and who were on Broadridge’s trading platforms in both the current and prior year periods. Record Growth and Internal Trade Growth are useful non-financial metrics for investors in understanding how management measures and evaluates Broadridge’s ongoing operational performance within its Investor Communication Solutions and Global Technology and Operations reportable segments, respectively.

The key performance indicators for the fiscal years ended June 30, 2021, and 2020, are as follows:


	Select Operating Metrics

	Years Ended June 30,
	2021		2020
Record Growth
Equity proxy	26	%	10	%
Mutual fund interims	10	%	2	%

Internal Trade Growth	12	%	9	%

RESULTS OF OPERATIONS

The following discussions of Analysis of Consolidated Statements of Earnings and Analysis of Reportable Segments refer to the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020. The Analysis of Consolidated Statements of Earnings should be read in conjunction with the Analysis of Reportable Segments, which provides more detailed discussions concerning certain components of the Consolidated Statements of Earnings. Discussions of Analysis of Consolidated Statements of Earnings and Analysis of Reportable Segments for the fiscal year ended June 30, 2020 compared to the fiscal year ended June 30, 2019 is disclosed in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2020 Annual Report.

The following references are utilized in the discussions of Analysis of Consolidated Statements of Earnings and Analysis of Reportable Segments:

“Amortization of Acquired Intangibles and Purchased Intellectual Property” and “Acquisition and Integration Costs” represent non-cash amortization expenses associated with the Company’s acquisition activities, as well as certain transaction and integration costs associated with the Company’s acquisition activities, respectively.

“IBM Private Cloud Charges” represent a charge on the hardware assets transferred to IBM and other charges related to the IBM Private Cloud Agreement.

“Real Estate Realignment and Covid-19 Related Expenses” represent costs associated with the Company's real estate realignment initiative, including lease exit and impairment charges and other facility exit costs, as well as certain expenses associated with the Covid-19 pandemic.

“Investment Gain” represents a non-operating, non-cash gain on a privately held investment.

“Software Charge” represents a charge related to an internal use software product that is no longer expected to be used.

“Gain on Acquisition-Related Financial Instrument” represents a non-operating gain on a financial instrument designed to minimize the Company's foreign exchange risk associated with the acquisition of Itiviti (the “Itiviti Acquisition”), as well as certain other non-operating financing costs associated with the Itiviti Acquisition.

“Gain on Sale of a Joint Venture Investment” represents a non-operating, cash gain on the sale of one of the Company’s joint venture investments.

“Net New Business” refers to recurring revenue from Closed sales less recurring revenue from client losses.

The following definitions describe the Company’s Revenues:

Fee revenues in the Investor Communication Solutions segment are derived from both recurring and event-driven activity. In addition, the level of recurring and event-driven activity we process directly impacts distribution revenues. While event-driven activity is highly repeatable, it may not recur on an annual basis. The types of services we provide that comprise event-driven activity are:

Mutual Fund Proxy: The proxy and related services we provide to mutual funds when certain events occur requiring a shareholder vote including changes in directors, sub-advisors, fee structures, investment restrictions, and mergers of funds.
Mutual Fund Communications: Mutual fund communications services consist primarily of the distribution on behalf of mutual funds of supplemental information required to be provided to the annual mutual fund prospectus as a result of certain triggering events such as a change in portfolio managers. In addition, mutual fund communications consist of notices and marketing materials such as newsletters.
Equity Proxy Contests and Specials, Corporate Actions, and Other: The proxy services we provide in connection with shareholder meetings driven by special events such as proxy contests, mergers and acquisitions, and tender/exchange offers.

Event-driven fee revenues are based on the number of special events and corporate transactions we process. Event-driven activity is impacted by financial market conditions and changes in regulatory compliance requirements, resulting in fluctuations in the timing and levels of event-driven fee revenues. As such, the timing and level of event-driven activity and its potential impact on revenues and earnings are difficult to forecast.

Generally, mutual fund proxy activity has been subject to a greater level of volatility than the other components of event-driven activity. During fiscal year 2021, mutual fund proxy fee revenues were 17% greater than the prior fiscal year. During fiscal year 2020, mutual fund proxy revenues were 35% lower than the prior fiscal year. Although it is difficult to forecast the levels of event-driven activity, we expect that the portion of fee revenues derived from mutual fund proxy activity may continue to experience volatility in the future.

Distribution revenues primarily include revenues related to the physical mailing of proxy materials, interim communications, transaction reporting, customer communications and fulfillment services, as well as Matrix administrative services.

Distribution cost of revenues consists primarily of postage-related expenses incurred in connection with our Investor Communication Solutions segment, as well as Matrix administrative services expenses. These costs are reflected in Cost of revenues.

Closed sales represent an estimate of the expected annual recurring fee revenue for new client contracts that were signed by Broadridge in the current reporting period. Closed sales does not include event-driven or distribution activity. We consider contract terms, expected client volumes or activity, knowledge of the marketplace and experience with our clients, among other factors, when determining the estimate. Management uses Closed sales to measure the effectiveness of our sales and marketing programs, as an indicator of expected future revenues and as a performance metric in determining incentive compensation.

Closed sales is not a measure of financial performance under GAAP, and should not be considered in isolation or as a substitute for revenue or other income statement data prepared in accordance with GAAP. Closed sales is a useful metric for investors in understanding how management measures and evaluates our ongoing operational performance.

The inherent variability of transaction volumes and activity levels can result in some variability of amounts reported as actual achieved Closed sales. Larger Closed sales can take up to 12 to 24 months or longer to convert to revenues, particularly for the services provided by our Global Technology and Operations segment. For the fiscal year ended June 30, 2021, we are reporting Closed sales net of a 5.0% allowance adjustment. For the fiscal year ended June 30, 2020, we reported Closed sales net of a 4.0% allowance adjustment. Consequently, our reported Closed sales amounts will not be adjusted for actual revenues achieved because these adjustments are estimated in the period the sale is reported. We assess this allowance amount at the end of each fiscal year to establish the appropriate allowance for the subsequent year using the trailing five years actual data as the starting point, normalized for outlying factors, if any, to enhance the accuracy of the allowance.

For the fiscal years ended June 30, 2021 and 2020, Closed sales were $242.5 million and $238.9 million, respectively. The fiscal years ended June 30, 2021 and 2020, are net of an allowance adjustment of $12.8 million and $10.0 million, respectively.

Recent Developments

In March 2020, the World Health Organization declared the outbreak of Covid-19 as a pandemic, which continues to persist throughout the world including the U.S., India, Canada, Europe and other locations where we operate. To date, the Covid-19 pandemic has negatively impacted the global economy, created significant financial market volatility, disrupted global supply chains, and resulted in a significant number of deaths and infections worldwide. In response, several countries worldwide have enacted fiscal stimulus packages while central banks have increased monetary stimulus, both designed to help mitigate the negative macroeconomic effects of Covid-19. In addition, several national, state and local governments have placed restrictions on people from gathering in groups or interacting within a certain physical distance (i.e. social distancing) and in certain cases, have ordered businesses to close, limit operations or mandate that people stay at home.

The Company’s operations, both our Investor Communication Solutions and Global Technology and Operations segments, are critical components of the overall financial markets infrastructure in the U.S. and globally. As a result, we have been permitted to continue operating in all jurisdictions in which we conduct business (in most cases remotely), including in jurisdictions that have mandated the closure of certain businesses. Accordingly, the Company has taken several measures designed to protect the health of our employees and to minimize our operational disruption and resulting provision of services to our clients from the Covid-19 pandemic, including adopting strict social distancing and cleaning measures in our production facilities, taking the temperature of production-related employees in affected areas on a daily basis as a prerequisite to entering our facilities, load balancing of client jobs between various facilities, and instituting work from home protocols for employees not involved in production operations, amongst other measures.

In fiscal year 2021, there has not been a material impact as a result of Covid-19 on our consolidated revenues and pre-tax income. In addition, all of our production-related facilities remain operational and are continuing to provide ongoing services to our clients. Further, we have not experienced any significant supply-chain issues as our critical vendors have also remained operational and continue to meet their on-going service level requirements. We continue to engage with our clients to assist with their service demands, including our clients’ needs for any supplemental operational services and/or changes to existing service requirements in response to the Covid-19 pandemic.

Notwithstanding the foregoing, we are unable to precisely predict the impact that Covid-19 will have in the future due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact to the business of our clients, and other factors identified in Part I, Item 1A. “Risk Factors” in this Annual Report. Given these uncertainties, Covid-19 could disrupt the business of certain of our clients, decrease our clients’ demand for our services, impact our business operations and our ability to execute on our associated business strategies and initiatives, and adversely impact our consolidated results of operations and/or our financial condition in the future. We will continue to closely monitor and evaluate the nature and extent of the impact of Covid-19 to our business, consolidated results of operations, and financial condition.

On August 5, 2020, the SEC proposed modifications to the mutual fund and exchange-traded fund disclosure framework (the “Proposal”). Under the Proposal, fund companies would send investors streamlined annual and semi-annual shareholder reports instead of long-form shareholder reports. The Proposal would allow fund companies to send investors streamlined and tailored annual and semi-annual shareholder reports instead of long-form shareholder reports The Proposal also would replace the requirement for funds to distribute an annual prospectus to existing shareholders and instead requires timely communication of material changes via supplemental communications. Adoption and implementation of the Proposal as proposed could have an impact on our services, business and financial results. We will closely monitor and evaluate the progress of the Proposal and its potential impact on our business. Please see our “Risk Factors” in Part I, Item 1A. of this Annual Report.

ANALYSIS OF CONSOLIDATED STATEMENTS OF EARNINGS

Fiscal Year 2021 Compared to Fiscal Year 2020

The table below presents Consolidated Statements of Earnings data for the fiscal years ended June 30, 2021 and 2020, and the dollar and percentage changes between periods:


	Years Ended June 30,
	2021			2020			Change
	($)			(%)
	(in millions, except for per share amounts)
Revenues	$	4,993.7		$	4,529.0		$	464.7	10
Cost of revenues	3,570.8			3,265.1			305.6		9
Selling, general and administrative expenses	744.3			639.0			105.2		16
Total operating expenses	4,315.0			3,904.1			410.9		11

Operating income	678.7			624.9			53.8		9
Margin	13.6		%	13.8		%			(0.2)	pts
Interest expense, net	(55.2)			(58.8)			3.5		(6)
Other non-operating income (expenses), net	72.7			13.4			59.3		NM
Earnings before income taxes	696.2			579.5			116.6		20
Provision for income taxes	148.7			117.0			31.6		27
Effective tax rate	21.4		%	20.2		%			1.2	pts
Net earnings	$	547.5		$	462.5		$	85.0	18
Basic earnings per share	$	4.73		$	4.03		$	0.70	17
Diluted earnings per share	$	4.65		$	3.95		$	0.70	18

Weighted average shares outstanding:
Basic	115.7			114.7
Diluted	117.8			117.0

NM - Not meaningful

Revenues

The table below presents Consolidated Statements of Earnings data for the fiscal years ended June 30, 2021 and 2020, and the dollar and percentage changes between periods:


	Years Ended June 30,
	2021		2020		Change
	$		%
	($ in millions)
Recurring fee revenues	$	3,332.9	$	3,036.3	$	296.7	10
Event-driven fee revenues	237.3		178.0		59.3		33
Distribution revenues	1,555.3		1,451.2		104.1		7
Foreign currency exchange	(131.9)		(136.4)		4.6		(3)
Total	$	4,993.7	$	4,529.0	$	464.7	10

	Points of Growth
	Net New Business		Internal Growth		Acquisitions		Total
Recurring fee revenue Growth Drivers	5pts		3pts		2pts		10	%

Revenues increased $464.7 million, or 10%, to $4,993.7 million from $4,529.0 million.

Recurring fee revenues increased $296.7 million primarily by growth from 5pts of new business onboarding, 3pts of internal growth, and 2pts related to the impact of acquisitions. Internal growth of 3pts was driven by increased equity and interim positions in ICS and primarily higher equity trade volumes in GTO, partially offset by lower interest rates on cash balances we hold for retirement accounts, lower customer communication volumes, and lower GTO license revenues.
Event-driven fee revenues increased $59.3 million due to increased equity contests and mutual fund proxy and other communications.
Distribution revenues increased $104.1 million primarily from the increase in the volume of customer and regulatory communications as well as the mix of customer communication mailings.

Total operating expenses. Operating expenses increased $410.9 million, or 11%, to $4,315.0 million from $3,904.1 million as a result of an increase in both cost of revenues and selling, general and administrative expenses:

Cost of revenues - The increase of $305.6 million in cost of revenues primarily reflects (i) higher distribution expenses, (ii) higher operating costs from acquisitions and related amortization expense, and (iii) other higher operating expenses including compensation.
Selling, general and administrative expenses - The increase of $105.2 million in selling, general, and administrative expenses primarily reflects (i) spend on growth and other initiatives, (ii) higher performance-based compensation, and (iii) the impact of acquisitions.

Operating income margin of 13.6% for the fiscal year ended June 30, 2021 declined 20 bps from 13.8% for the fiscal year ended June 30, 2020 partly due to higher acquisition amortization expenses and other acquisition related charges plus charges associated with Real Estate Realignment and Covid-19 Related Expenses. However, Adjusted Operating income margin of 18.1% for the fiscal year ended June 30, 2021 increased 60 bps on higher recurring fee revenues and higher event-driven fee revenues from 17.5% for the fiscal year ended June 30, 2020, which excludes acquisition amortization expense, certain charges associated with Real Estate Realignment and Covid-19 Related Expenses, and certain other Non-GAAP adjustments. See “Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures.”

Interest expense, net. Interest expenses, net, was $55.2 million, a decrease of $3.5 million from $58.8 million in the fiscal year ended June 30, 2020. The decrease of $3.5 million was primarily due to a decrease in interest expense from lower average interest rates on borrowings.

Other non-operating income (expenses), net. Other non-operating income, net for the fiscal year ended June 30, 2021 was $72.7 million, an increase of $59.3 million, compared to $13.4 million of Other non-operating income, net for the fiscal year ended June 30, 2020. The increase of $59.3 million was primarily due to the Gain on Acquisition-Related Financial Instrument.

Provision for income taxes.

Effective tax rate for the fiscal year ended June 30, 2021 - 21.4%.
Effective tax rate for the fiscal year ended June 30, 2020 - 20.2%.

The increase in the effective tax rate for the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020 was driven by the reduced impact of discrete tax items.

ANALYSIS OF REPORTABLE SEGMENTS

Broadridge has two reportable business segments: (1) Investor Communication Solutions and (2) Global Technology and Operations.

The primary component of “Other” are certain gains, losses, corporate overhead expenses and non-operating expenses that have not been allocated to the reportable segments, such as interest expense. Foreign currency exchange is a reconciling item between the actual foreign currency exchange rates and the constant foreign currency exchange rates used for internal management reporting.

Certain corporate expenses, as well as certain centrally managed expenses, are allocated based upon budgeted amounts in a reasonable manner. Because the Company compensates the management of its various businesses on, among other factors, segment profit, the Company may elect to record certain segment-related operating and non-operating expense items in Other rather than reflect such items in segment profit.

Revenues


	Years Ended June 30,
2021			2020			Change
$			%
	($ in millions)
Investor Communication Solutions	$	3,867.5		$	3,491.3		$	376.2	11
Global Technology and Operations	1,258.1			1,174.2			83.9		7
Foreign currency exchange	(131.9)			(136.4)			4.6		(3)
Total	$	4,993.7		$	4,529.0		$	464.7	10

Earnings Before Income Taxes


	Years Ended June 30,
2021			2020			Change
$			%
	($ in millions)
Investor Communication Solutions	$	605.6		$	464.1		$	141.5	30
Global Technology and Operations	223.3			245.0			(21.7)		(9)
Other	(153.0)			(146.3)			(6.6)		5
Foreign currency exchange	20.3			16.8			3.5		21
Total	$	696.2		$	579.5		$	116.6	20

Investor Communication Solutions

Fiscal Year 2021 Compared to Fiscal Year 2020

Revenues increased $376.2 million to $3,867.5 million from $3,491.3 million, and earnings before income taxes increased $141.5 million to $605.6 million from $464.1 million as a result of:


	Years Ended June 30,
2021				2020				Change
$				%
	($ in millions)
Revenues
Recurring fee revenues	$	2,074.8			$	1,862.0			$	212.8	11
Event-driven fee revenues	237.3				178.0				59.3		33
Distribution revenues	1,555.3				1,451.2				104.1		7
Total	$	3,867.5			$	3,491.3			$	376.2	11

Earnings before Income Taxes
Earnings before income taxes	$	605.6			$	464.1			$	141.5	30
Pre-tax Margin	15.7		%		13.3		%

	Points of Growth
	Net New Business				Internal Growth				Acquisitions		Total
Recurring fee revenue Growth Drivers	5pts				5pts				1pts		11	%

For the fiscal year ended June 30, 2021:

Recurring fee revenues grew 11% driven primarily by Net New Business and Internal Growth. The 5pt contribution from Internal Growth was from increased equity and interim positions with a partial offset from the impact of lower interest rates on retirement cash accounts and lower volumes in customer communications. Net New Business also contributed 5pts mainly from the revenue on-boarding of Closed sales. Acquisitions contributed 1pt from the carry-over impact of Funds Library and Fi360 acquisitions in fiscal year 2020.
Event-driven fee revenues grew 33% due to increased equity contests and mutual fund proxy and other communications.
Higher distribution revenues resulted primarily from the increase in the volume of customer and regulatory communications as well as the mix of customer communication mailings.
The earnings increase of $141.5 million was due to higher recurring and event-driven fee revenues.
Pre-tax margins increased by 2.4 percentage points to 15.7% from 13.3%.

Global Technology and Operations

Fiscal Year 2021 Compared to Fiscal Year 2020

Revenues increased $83.9 million to $1,258.1 million from $1,174.2 million, and earnings before income taxes decreased $21.7 million to $223.3 million from $245.0 million.


	Years Ended June 30,
2021				2020				Change
$				%
	($ in millions)
Revenues
Recurring fee revenues	$	1,258.1			$	1,174.2			$	83.9	7

Earnings before Income Taxes
Earnings before income taxes	$	223.3			$	245.0			$	(21.7)	(9)
Pre-tax Margin	17.7		%		20.9		%

	Points of Growth
	Net New Business				Internal Growth				Acquisitions		Total
Recurring fee revenue Growth Drivers	4pts				0pts				3pts		7	%

For the fiscal year ended June 30, 2021:

Recurring fee revenues grew 7% driven primarily by Net New Business. Internal growth was impacted by higher equity trading volumes offset by lower license sales. Acquisitions contributed 3 points to growth primarily from the Itiviti Acquisition.
The earnings decrease was due to expenditures to implement and support new business, increased amortization of acquired intangibles and spending on growth initiatives more than offsetting higher organic revenues and higher revenues from acquisitions. Pre-tax margins decreased by 3.2 percentage points to 17.7% from 20.9%.

Other

Loss before income taxes was $153.0 million for the fiscal year ended June 30, 2021, an increase of $6.6 million, or 5%, compared to $146.3 million for the fiscal year ended June 30, 2020.

The increased loss before income taxes was primarily due to (i) costs associated with the Company’s real estate realignment initiative including lease exit and impairment charges and other facility exit costs of $29.6 million, (ii) higher performance-based compensation expense, (iii) higher spending on growth initiatives, and (iv) certain expenses associated with the Covid-19 pandemic, partially offset by (v) a non-operating gain on a financial instrument designed

to minimize the Company's foreign exchange risk associated with the Itiviti Acquisition net of acquisition-related costs and (vi) charges associated with the IBM Private Cloud Agreement that occurred in the prior year period.

Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures

The Company’s results in this Annual Report on Form 10-K are presented in accordance with U.S. GAAP except where otherwise noted. In certain circumstances, results have been presented in Non-GAAP measures. These Non-GAAP measures are Adjusted Operating income, Adjusted Operating income margin, Adjusted Net earnings, Adjusted earnings per share, and Free cash flow. These Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results.

The Company believes our Non-GAAP financial measures help investors understand how management plans, measures and evaluates the Company’s business performance. Management believes that Non-GAAP measures provide consistency in its financial reporting and facilitates investors’ understanding of the Company’s operating results and trends by providing an additional basis for comparison. Management uses these Non-GAAP financial measures to, among other things, evaluate our ongoing operations, for internal planning and forecasting purposes and in the calculation of performance-based compensation. In addition, and as a consequence of the importance of these Non-GAAP financial measures in managing our business, the Company’s Compensation Committee of the Board of Directors incorporates Non-GAAP financial measures in the evaluation process for determining management compensation.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Earnings and Adjusted Earnings Per Share

These Non-GAAP measures reflect Operating income, Operating income margin, Net earnings, and Diluted earnings per share, as adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of: (i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) IBM Private Cloud Charges, (iv) Real Estate Realignment and Covid-19 Related Expenses, (v) Investment Gain, (vi) Software Charge, (vii) Gain on Acquisition-Related Financial Instrument, and (viii) Gain on Sale of a Joint Venture Investment. Amortization of Acquired Intangibles and Purchased Intellectual Property represent non-cash amortization expenses associated with the Company’s acquisition activities. Acquisition and Integration Costs represent certain transaction and integration costs associated with the Company’s acquisition activities. IBM Private Cloud Charges represent a charge on the hardware assets transferred to IBM and other charges related to the IBM Private Cloud Agreement. Real Estate Realignment and Covid-19 Related Expenses represent costs associated with the Company's real estate realignment initiative, including lease exit and impairment charges and other facility exit costs, as well as certain expenses associated with the Covid-19 pandemic. Investment Gain represents a non-operating, non-cash gain on a privately held investment. Software Charge represents a charge related to an internal use software product that is no longer expected to be used. Gain on Acquisition-Related Financial Instrument represents a non-operating gain on a financial instrument designed to minimize the Company's foreign exchange risk associated with the Itiviti Acquisition, as well as certain other non-operating financing costs associated with the Itiviti Acquisition. Gain on Sale of a Joint Venture Investment represents a non-operating, cash gain on the sale of one of the Company’s joint venture investments.

We exclude Acquisition and Integration Costs, IBM Private Cloud Charges, Real Estate Realignment and Covid-19 Related Expenses, the Investment Gain, the Software Charge, the Gain on Acquisition-Related Financial Instrument, and the Gain on Sale of a Joint Venture Investment from our Adjusted Operating income (as applicable) and other adjusted earnings measures because excluding such information provides us with an understanding of the results from the primary operations of our business and enhances comparability across fiscal reporting periods, as these items are not reflective of our underlying operations or performance. We also exclude the impact of Amortization of Acquired Intangibles and Purchased Intellectual Property, as these non-cash amounts are significantly impacted by the timing and size of individual acquisitions and do not factor into the Company's capital allocation decisions, management compensation metrics or multi-year objectives. Furthermore, management believes that this adjustment enables better comparison of our results as Amortization of Acquired Intangibles and Purchased Intellectual Property will not recur in future periods once such intangible assets have been fully amortized. Although we exclude Amortization of Acquired Intangibles and Purchased Intellectual Property from our adjusted earnings measures, our management believes that it is important for investors to understand that these intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.

Free Cash Flows

In addition to the Non-GAAP financial measures discussed above, we provide Free cash flow information because we consider Free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated that could be used for dividends, share repurchases, strategic acquisitions, other investments, as well as debt servicing. Free cash flow is a Non-GAAP financial measure and is defined by the Company as Net cash flows provided by operating activities plus Proceeds from asset sales, less Capital expenditures as well as Software purchases and capitalized internal use software.

Set forth below is a reconciliation of such Non-GAAP measures to the most directly comparable GAAP measures (unaudited):


	Years ended June 30,
	2021			2020
	(in millions)
Operating income (GAAP)	$	678.7		$	624.9
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property	153.7			122.9
Acquisition and Integration Costs	18.1			12.5
IBM Private Cloud Charges	—			32.0
Real Estate Realignment and Covid-19 Related Expenses	45.3			2.4
Software Charge	6.0			—
Adjusted Operating income (Non-GAAP)	$	901.8		$	794.8
Operating income margin (GAAP)	13.6		%	13.8		%
Adjusted Operating income margin (Non-GAAP)	18.1		%	17.5		%


	Years ended June 30,
	2021		2020
	(in millions)
Net earnings (GAAP)	$	547.5	$	462.5
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property	153.7		122.9
Acquisition and Integration Costs	18.1		12.5
IBM Private Cloud Charges	—		32.0
Real Estate Realignment and Covid-19 Related Expenses	45.3		2.4
Software Charge	6.0		—
Investment Gain	(8.7)		—
Gain on Acquisition-Related Financial Instrument	(62.1)		—
Gain on Sale of a Joint Venture Investment	—		(6.5)
Subtotal of adjustments	152.2		163.4
Tax impact of adjustments (a)	(33.2)		(37.4)
Adjusted Net earnings (Non-GAAP)	$	666.5	$	588.5


	Years ended June 30,
	2021		2020

Diluted earnings per share (GAAP)	$	4.65	$	3.95
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property	1.30		1.05
Acquisition and Integration Costs	0.15		0.11
IBM Private Cloud Charges	—		0.27
Real Estate Realignment and Covid-19 Related Expenses	0.38		0.02
Software Charge	0.05		—
Investment Gain	(0.07)		—
Gain on Acquisition-Related Financial Instrument	(0.53)		—
Gain on Sale of a Joint Venture Investment	—		(0.06)
Subtotal of adjustments	1.29		1.40
Tax impact of adjustments (a)	(0.28)		(0.32)
Adjusted earnings per share (Non-GAAP)	$	5.66	$	5.03

(a) Calculated using the GAAP effective tax rate, adjusted to exclude $16.9 million of excess tax benefits (“ETB”) associated with stock-based compensation for the fiscal year ended June 30, 2021, and $15.6 million of ETB associated with stock-based compensation for the fiscal year ended June 30, 2020. The tax impact of adjustments also excludes approximately $10.6 million of Acquisition and Integration Costs for the fiscal year ended June 30, 2021, which are not tax-deductible. For purposes of calculating the Adjusted earnings per share, the same adjustments were made on a per share basis.


	Years ended June 30,
	2021		2020
	(in millions)
Net cash flows provided by operating activities (GAAP)	$	640.1	$	598.2
Capital expenditures and Software purchases and capitalized internal use software	(100.7)		(98.7)
Proceeds from asset sales	18.0		—
Free cash flow (Non-GAAP)	$	557.3	$	499.5

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents consisted of the following:


	June 30,
	2021		2020
	(in millions)

Cash and cash equivalents:
Domestic cash	$	40.9	$	291.2
Cash held by foreign subsidiaries	159.8		118.6
Cash held by regulated entities	73.8		66.8
Total cash and cash equivalents	$	274.5	$	476.6

At June 30, 2021 and 2020, Cash and cash equivalents were $274.5 million and $476.6 million, respectively. Total stockholders’ equity was $1,809.1 million and $1,346.5 million at June 30, 2021 and 2020, respectively. At the current time, and in future periods, we expect cash generated by our operations, together with existing cash, cash equivalents, and borrowings from the capital markets, to be sufficient to cover cash needs for working capital, capital expenditures, strategic acquisitions, dividends and common stock repurchases. Given the volatility in the rapidly changing market and economic conditions related to the Covid-19 pandemic, we will continue to evaluate the nature and extent of the impact of the Covid-19 pandemic on our business and financial position.

We expect existing domestic cash, cash equivalents, cash flows from operations and borrowing capacity to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends, debt repayment schedules, and material capital expenditures, for at least the next 12 months and thereafter for the foreseeable future. In addition, we expect existing foreign cash, cash equivalents, cash flows from operations and borrowing capacity to continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next 12 months and thereafter for the foreseeable future. If these funds are needed for our operations in the U.S., we may be required to pay additional foreign taxes to repatriate these funds. However, while we may do so at a future date, the Company does not need to repatriate future foreign earnings to fund U.S. operations.

Outstanding borrowings and available capacity under the Company’s borrowing arrangements were as follows:


	Expiration Date	Principal amount outstanding at June 30, 2021		Carrying value at June 30, 2021		Carrying value at June 30, 2020		Unused Available Capacity		Fair Value at June 30, 2021
				(in millions)
Current portion of long-term debt
Fiscal 2014 Senior Notes	September 2020	$	—	$	—	$	399.9	—		$	—
Total		$	—	$	—	$	399.9	—		$	—

Long-term debt, excluding current portion
Fiscal 2021 Revolving Credit Facility:
U.S. dollar tranche	April 2026	$	20.0	$	20.0	$	—	$	1,080.0	$	20.0
Multicurrency tranche	April 2026	94.4		94.4		149.8		305.6		94.4
Total Revolving Credit Facility		$	114.4	$	114.4	$	149.8	$	1,385.6	$	114.4

Fiscal 2021 Term Loans	May 2024	$	1,550.0	$	1,543.4	$	—	$	—	$	1,550.0

Fiscal 2016 Senior Notes	June 2026	$	500.0	$	496.7	$	496.1	$	—	$	549.0
Fiscal 2020 Senior Notes	December 2029	750.0		742.5		741.7		—		791.3
Fiscal 2021 Senior Notes	May 2031	1,000.0		990.6		—		—		1,021.1
Total Senior Notes		$	2,250.0	$	2,229.8	$	1,237.8	$	—	$	2,361.4

Total long-term debt		$	3,914.4	$	3,887.6	$	1,387.6	$	1,385.6	$	4,025.9

Total debt		$	3,914.4	$	3,887.6	$	1,787.5	$	1,385.6	$	4,025.9

Future principal payments on the Company’s outstanding debt are as follows:


Years ending June 30,						2022						2023						2024						2025						2026						Thereafter						Total
(in millions)						$	—					$	—					$	1,550.0					$	—					$	614.4					$	1,750.0					$	3,914.4

The Company has a $1.5 billion five-year revolving credit facility (the “Fiscal 2021 Revolving Credit Facility”), which is comprised of a $1.1 billion U.S. dollar tranche and a $400.0 million multicurrency tranche. Under the Fiscal 2021 Revolving Credit Facility, revolving loans denominated in U.S. Dollars, Canadian Dollars, Euro, Yen, and Swedish Kronor initially bear interest at LIBOR, CDOR, EURIBOR, TIBOR and STIBOR, respectively, plus 1.015% per annum (subject to step-ups to 1.175% and step-downs to 0.805% based on ratings) and revolving loans denominated in Sterling initially bear interest at SONIA plus 1.0476% per annum (subject to step-ups to 1.2076% and step-downs to 0.8376% based on ratings). The Fiscal 2021 Revolving Credit Facility also has an annual facility fee equal to 11.0 basis points on the entire facility (subject to step-ups to 20.0 basis points and step-downs to 7.0 basis points based on ratings).

In March 2021, the Company entered into a term credit agreement (“Term Credit Agreement”) providing for term loan commitments in an aggregate principal amount of $2.55 billion, comprised of a $1.0 billion tranche (“Tranche 1”) and a $1.55 billion tranche (“Tranche 2,” together with Tranche 1, the “Fiscal 2021 Term Loans”). The Tranche 1 Loans were repaid in full in May 2021. The Tranche 2 Loans will mature in May 2024 on the third anniversary of the Funding Date. The proceeds of the Fiscal 2021 Term Loans were used by the Company to solely finance the Itiviti Acquisition and pay certain fees and expenses in connection therewith. Interest on the outstanding portion of the Fiscal 2021 Term Loans bears interest at LIBOR plus 0.875% per annum (subject to step-ups to LIBOR plus 1.250% or a step-down to LIBOR plus 0.750% based on ratings).

In June 2016, the Company completed an offering of $500.0 million in aggregate principal amount of senior notes (the “Fiscal 2016 Senior Notes”). Interest on the Fiscal 2016 Senior Notes is payable semiannually on June 27 and December 27 of each year based on a fixed per annum rate equal to 3.40%. In December 2019, the Company completed an offering of $750.0 million in aggregate principal amount of senior notes (the “Fiscal 2020 Senior Notes”). Interest on the Fiscal 2020 Senior Notes is payable semiannually on June 1 and December 1 of each year based on a fixed per annum rate equal to 2.90%. In May 2021, the Company completed an offering of $1 billion in aggregate principal amount of senior notes (the “Fiscal 2021 Senior Notes”). Interest on the Fiscal 2021 Senior Notes is payable semi-annually in arrears on May 1 and November 1 of each year based on a fixed per annum rate equal to 2.60%.

The Fiscal 2021 Revolving Credit Facility, Fiscal 2021 Term Loans, Fiscal 2016 Senior Notes, Fiscal 2020 Senior Notes and Fiscal 2021 Senior Notes are senior unsecured obligations of the Company and are ranked equally in right of payment.

Our liquidity position may be negatively affected by changes in general economic conditions, regulatory requirements and access to the capital markets, which may be limited if we were to fail to renew any of the credit facilities on their renewal dates or if we were to fail to meet certain ratios.

Please refer to Note 13, “Borrowings” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for a more detailed discussion.

Cash Flows

Fiscal Year 2021 Compared to Fiscal Year 2020


	Years Ended June 30,
	2021		2020		$ Change
	(in millions)

Net cash flows provided by operating activities	$	640.1	$	598.2	$	41.8

Net cash flows used in investing activities	$	(2,653.7)	$	(441.7)	$	(2,212.0)

Net cash flows provided by financing activities	$	1,797.8	$	51.2	$	1,746.6

The increase in cash provided by operating activities of $41.8 million primarily reflects higher net earnings and higher cash provided by working capital, partially offset by increased scaling of client-related platform implementation and development as compared to the prior year period.

The increase in cash used in investing activities of $2,212.0 million primarily reflects higher acquisition spend in fiscal year 2021 compared to the prior year period, most notably the Itiviti Acquisition.

The increase in cash provided by financing activities of $1,746.6 million primarily reflects higher borrowings net of repayments, most notably to finance the Itiviti Acquisition.

Income Taxes

The Company, headquartered in the U.S., is routinely examined by the IRS and is also routinely examined by the tax authorities in the U.S. states and foreign countries in which it conducts business. The tax years under audit examination vary by tax jurisdiction. The Company regularly considers the likelihood of assessments in each of the jurisdictions resulting from examinations. To the extent the Company determines it has potential tax assessments in particular tax jurisdictions, the Company has established tax reserves which it believes are adequate in relation to the potential assessments. Once established, reserves are adjusted when there is more information available, when an event occurs necessitating a change to the reserves or the statute of limitations for the relevant taxing authority to examine the tax position has expired. The resolution of tax matters

should not have a material effect on the financial condition of the Company or on the Company’s Consolidated Statements of Earnings for a particular future period.

Defined Benefit Pension Plans

The Company sponsors a Supplemental Officer Retirement Plan (the “SORP”). The SORP is a nonqualified ERISA defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key officers upon retirement based upon the officers’ years of service and compensation. The SORP was closed to new participants beginning in fiscal year 2015. The Company also sponsors a Supplemental Executive Retirement Plan (the “SERP”). The SERP is also a nonqualified ERISA defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key executives upon retirement based upon the executives’ years of service and compensation. The SERP was closed to new participants beginning in fiscal year 2015.

The SORP and SERP are effectively funded with assets held in a Rabbi Trust. The assets invested in the Rabbi Trust are to be used in part to fund benefit payments to participants under the terms of the plans. The Rabbi Trust is irrevocable and no portion of the trust funds may be used for any purpose other than the delivery of those assets to the participants, except that assets held in the Rabbi Trust would be subject to the claims of the Company’s general creditors in the event of bankruptcy or insolvency of the Company. The SORP and SERP are nonqualified plans for federal tax purposes and for purposes of Title I of ERISA. The Rabbi Trust assets had a value of $62.6 million at June 30, 2021 and $54.5 million at June 30, 2020 and are included in Other non-current assets in the accompanying Consolidated Balance Sheets.

The benefit obligation to the Company under these plans at June 30, 2021 and 2020 was:


	Years ended June 30,
	2021		2020
	(in millions)
SORP	$	59.5	$	53.8
SERP	6.4		6.0
Total	$	65.9	$	59.8

Other Post-retirement Benefit Plan

The Company sponsors an Executive Retiree Health Insurance Plan. It is a post-retirement benefit plan pursuant to which the Company helps defray the health care costs of certain eligible key executive retirees and qualifying dependents, based upon the retirees’ age and years of service, until they reach the age of 65. The plan is currently unfunded.

The benefit obligation to the Company under this plan at June 30, 2021 and 2020 was:


	Years ended June 30,
	2021		2020
	(in millions)
Executive Retiree Health Insurance Plan	$	3.7	$	4.5

Other Post-employment Benefit Obligations

The Company sponsors certain non-US benefits-related plans covering certain eligible international employees who are eligible under the terms of their employment in their respective countries. These plans are generally unfunded.

The benefit obligation to the Company under these plans at June 30, 2021 and 2020 was:


	Years ended June 30,
	2021		2020
	(in millions)
Other Non-US Benefits-Related Plans	$	9.1	$	6.4

Contractual Obligations

The following table summarizes our contractual obligations to third parties as of June 30, 2021 and the effect such obligations are expected to have on our liquidity and cash flows in future periods:


	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
					(in millions)
Debt(1)	$	3,914.4	$	—	$	1,550.0	$	614.4	$	1,750.0
Interest and facility fee on debt(2)	581.5		82.7		163.5		135.3		200.1
Facility and equipment operating leases(3)	347.3		49.0		87.4		65.7		145.3
Purchase obligations(4)	580.7		133.5		210.3		123.2		113.7
Acquisition deferred payments(5)	2.9		—		2.9		—		—
Capital commitment to fund investment(6)	7.0		7.0		—		—		—
Uncertain tax positions(7)	—		—		—		—		—
Total(8)	$	5,433.9	$	272.1	$	2,014.0	$	938.7	$	2,209.1

(1)These amounts represent the principal repayments of Long-term debt and are included on our Consolidated Balance Sheets. See Note 13, “Borrowings” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for additional information about our Borrowings and related matters.

(2)Includes estimated future interest payments on our long-term debt and interest and facility fee on the revolving credit facility.

(3)We enter into operating leases in the normal course of business relating to facilities and equipment. The majority of our lease agreements have fixed payment terms based on the passage of time. Certain facility and equipment leases require payment of maintenance, real estate taxes and related executory costs, and contain escalation provisions based on future adjustments in price indices. Our future operating lease obligations could change if we exit certain contracts and if we enter into additional operating lease agreements. See Note 8, “Leases” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for additional information about our Leases and related matters.

(4)Purchase obligations relate to payments to IBM related to the Amended IT Services Agreement that expires in fiscal year 2027, the IBM Private Cloud Agreement that expires in fiscal year 2030, and the Amended EU IT Services Agreement that expires in fiscal year 2029, as well as software license agreements including hosted software arrangements, and software and hardware maintenance and support agreements, and certain other related arrangements. Purchase obligations also includes $29.0 of other liabilities recorded on the Company’s Consolidated Balance Sheet as of June 30, 2021.

(5)Deferred payment obligation associated with the Company’s acquisition of AdvisorStream.

(6)Represents the Company’s funding commitment to an equity method investee. In addition, the Company also has a future commitment to fund $2.0 million to an investee that is not included in the table above due to the uncertainty of the timing of this future payment.

(7)Due to the uncertainty related to the timing of the reversal of uncertain tax positions, only uncertain tax benefits related to certain settlements have been provided in the table above. The Company is unable to make reasonably reliable estimates related to the timing of the remaining gross unrecognized tax benefit liability of $54.3 million (inclusive of interest). See Note 17, “Income Taxes” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for further detail.

(8)Certain post-employment benefit obligations reported in our Consolidated Balance Sheets in the amount of $78.6 million as of June 30, 2021 were not included in the table above due to the uncertainty of the timing of these future payments.

Data Center Agreements

In March 2010, the Company and IBM entered into the IT Services Agreement, under which IBM provided certain aspects of the Company’s information technology infrastructure. Under the IT Services Agreement, IBM provided a broad range of technology services to the Company including supporting its mainframe, midrange, network and data center operations, as well as providing disaster recovery services. The migration of data center processing to IBM was completed in August 2012. The IT Services Agreement would have expired on June 30, 2022, but a two-year extension was signed in March 2015, amending the expiration date to June 30, 2024. In December 2019, the Company and IBM amended and restated the IT Services Agreement and entered into the Amended IT Services Agreement, which now expires on June 30, 2027. The Company

has the option of incorporating additional services into the Amended IT Services Agreement over time. The Company may renew the term of the Amended IT Services Agreement for up to one additional 12-month period. Fixed minimum commitments remaining under this agreement at June 30, 2021 are $208.9 million through fiscal year 2027, the final year of the Amended IT Services Agreement.

In December 2019, the Company and IBM entered into the IBM Private Cloud Agreement under which IBM will operate, manage and support the Company’s private cloud global distributed platforms and products, and operate and manage certain Company networks. The IBM Private Cloud Agreement has an initial term of approximately 10 years and three months, expiring on March 31, 2030. As a result of the IBM Private Cloud Agreement, the Company transferred certain of its employees in April 2020 to IBM and its affiliates, and such transferred employees are expected to continue providing services to the Company on behalf of IBM under the IBM Private Cloud Agreement. Pursuant to the IBM Private Cloud Agreement, the Company agreed to transfer the ownership of certain Company-owned hardware (the “Hardware”) located at Company facilities worldwide to IBM. As of June 30, 2020, the Hardware was classified as assets held for sale with a carrying amount of $18.0 million and was included in the Company’s Other current assets line item on the Consolidated Balance Sheets. The transfer of the Hardware to IBM closed on September 30, 2020 for a selling price of $18.0 million. Fixed minimum commitments remaining under the IBM Private Cloud Agreement at June 30, 2021 are $207.0 million through March 31, 2030, the final year of the contract.

In March 2014, the Company and IBM UK entered into the EU IT Services Agreement, under which IBM UK provides data center services supporting the Company’s technology outsourcing services for certain clients in Europe and Asia. The EU IT Services Agreement would have expired in October 2023. In December 2019, the Company amended the existing EU IT Services Agreement and entered into the Amended EU IT Services Agreement whereby the Company will migrate from the existing dedicated on-premise solution to a managed Broadridge private cloud environment provided by IBM, as well as extended the term of the EU IT Services Agreement to June 2029. The Company has the right to renew the term of the Amended EU IT Services Agreement for up to one additional 12-month period or one additional 24-month period. Fixed minimum commitments remaining under the Amended EU IT Services Agreement at June 30, 2021 are $30.8 million through fiscal year 2029, the final year of the contract.

The following table summarizes the capitalized costs related to these agreements as of June 30, 2021:


	Amended IT Services Agreement		Amended EU IT Services Agreement		Total
	(in millions)
Capitalized costs, beginning balance	$	62.6	$	6.3	$	68.9
Capitalized costs incurred	0.2		1.7		1.9
Impact of foreign currency exchange	—		0.9		0.9
Total capitalized costs, ending balance	62.8		9.0		71.8
Total accumulated amortization	(43.3)		(5.5)		(48.8)
Net Deferred IBM Costs	$	19.4	$	3.5	$	23.0

Investments

The Company has an equity method investment that is a variable interest in a variable interest entity, the Company is not the primary beneficiary and therefore does not consolidate the investee. The Company’s potential maximum loss exposure related to this unconsolidated investment totaled $25.3 million as of June 30, 2021, which represents the carrying value of the Company's investment and is recorded in Other non-current assets in the Company’s Consolidated Balance Sheets. In addition, as of June 30, 2021, the Company has a future commitment to fund this investee for up to an additional $7.0 million if certain future funding milestones are met. Additional funding provided by the Company to the investee as a result of meeting the future funding milestones would increase the Company’s corresponding potential maximum loss exposure by that amount.

In addition, as of June 30, 2021, the Company also has a future commitment to fund $2.0 million to one of the Company’s other investees.

Other Commercial Agreements

Certain of the Company’s subsidiaries established unsecured, uncommitted lines of credit with banks. There were no outstanding borrowings under these lines of credit at June 30, 2021.

Off-Balance Sheet Arrangements

It is not the Company’s business practice to enter into off-balance sheet arrangements. However, the Company is exposed to market risk from changes in foreign currency exchange rates that could impact its financial position, results of operations, and cash flows. The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company was not a party to any outstanding derivative financial instruments at June 30, 2021 or June 30, 2020. In connection with the Itiviti Acquisition, in March 2021 the Company entered into two derivative instruments designed to mitigate the Company’s exposure to the impact of (i) changes in foreign exchange rates on the Itiviti Acquisition purchase consideration, and (ii) changes in interest rates on the Fiscal 2021 Senior Notes.

The Company executed a forward foreign exchange derivative instrument (“Forward”) with an aggregate notional amount of EUR 1.955 billion. The Forward acted as an economic hedge against the impact of changes in the Euro on the Company’s purchase consideration for the Itiviti Acquisition. The Company recorded changes in fair value of the Forward as part of Other non-operating income (expenses), net in the Consolidated Statement of Earnings. In May 2021, the Company settled the Forward derivative for a cumulative pre-tax gain of $66.7 million.

Also, the Company executed a forward treasury lock agreement (“Treasury Lock”), designated as a cash flow hedge, in the aggregate notional amount of $1.0 billion to manage exposure to fluctuations in the benchmark interest rate associated with the Fiscal 2021 Senior Notes, which were used to pay down a portion of the Term Credit Agreement associated with the Itiviti Acquisition. Accordingly, changes in the fair value of the Treasury Lock were recorded as part of Other comprehensive income (loss), net each period up to when the Treasury Lock was settled. In May 2021, the Treasury Lock was settled for a pre-tax loss of $11.0 million, after which the final settlement loss will be reclassified into Interest expense, net ratably over the ten year term of the Fiscal 2021 Senior Notes. The expected amount of the existing loss that would be reclassified into earnings before income taxes within the next twelve months is approximately $1.1 million.

In the normal course of business, the Company also enters into contracts in which it makes representations and warranties that relate to the performance of the Company’s products and services. The Company does not expect any material losses related to such representations and warranties, or collateral arrangements.

Recently-issued Accounting Pronouncements

Please refer to Note 2, “Summary of Significant Accounting Policies” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for a discussion on the impact of the adoption of new accounting pronouncements.

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