Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein.

Overview

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. With over 50 years of experience, including 15 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.

We operate our business in two reportable segments: Investor Communication Solutions and Global Technology and Operations.

Investor Communication Solutions

We provide the following governance and communications solutions through our Investor Communication Solutions business segment: Regulatory Solutions, Data-Driven Fund Solutions, Corporate Issuer Solutions, and Customer Communications Solutions.

A large portion of our Investor Communication Solutions business involves the processing and distribution of proxy materials to investors in equity securities and mutual funds, as well as the facilitation of related vote processing. ProxyEdge® is our innovative electronic proxy delivery and voting solution for institutional investors and financial advisors that helps ensure the voting participation of the largest stockholders of many companies. We have implemented digital applications to make voting easier for retail investors. We also provide the distribution of regulatory reports, class action and corporate action/reorganization event information, as well as tax reporting solutions that help our clients meet their regulatory compliance needs.

For asset managers and retirement service providers, we offer data-driven solutions and an end-to-end platform for content management, composition, and omni-channel distribution of regulatory, marketing, and transactional information. Our data and analytics solutions provide investment product distribution data, analytical tools, insights, and research to enable asset managers to optimize product distribution across retail and institutional channels globally. Through Matrix Financial Solutions, Inc. (“Matrix”), we provide mutual fund trade processing services for retirement service providers, third-party administrators, financial advisors, banks and wealth management professionals.

In addition, we provide public corporations and mutual funds with a full suite of solutions to help manage their annual meeting process, including registered and beneficial proxy materials distribution, proxy processing and tabulation services, digital voting solutions, proxy and shareholder report document management solutions, virtual shareholder meeting services, and shareholder data services. We also offer financial reporting document composition and management solutions, SEC disclosure and filing services, and registrar, stock transfer and record-keeping services through Broadridge Corporate Issuer Solutions.

We provide omni-channel customer communications solutions, which include print and digital solutions, to modernize technology infrastructures, simplify communications processes, accelerate digital adoption and improve the customer experience. Through one point of integration, the Broadridge Communications CloudSM platform (the “Communications Cloud”) helps companies create, deliver, and manage their communications and customer engagement. The platform includes data-driven composition tools, identity and preference management, omni-channel optimization and digital communication experience, archive and information management, digital and print delivery, and analytics and reporting tools.

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Global Technology and Operations

We are a leading global provider of business solutions for capital markets and wealth and investment management firms. We offer advanced solutions that automate firms’ transaction lifecycle, from desktop productivity tools, data aggregation, performance reporting, and portfolio management to order capture and execution, trade confirmation, margin, cash management, clearance and settlement, asset servicing, reference data management, reconciliations, securities financing and collateral optimization, compliance and regulatory reporting, and portfolio accounting and custody-related services. In addition, we provide business process outsourcing services (“BPO”) that support the entire trade lifecycle operations of our buy- and sell-side clients’ businesses through a combination of our technology and our operations expertise.

For capital markets firms, we help our clients lower their costs and improve the effectiveness of their businesses across the front, middle and back office. Our core post-trade services help financial institutions efficiently and cost-effectively consolidate their books and records, gather and service assets under management and manage risk, thereby enabling them to focus on their core business activities. Provided on a software as a service (“SaaS”) basis within large user communities, our technology is a global solution, processing clearance and settlement in over 100 countries. Our multi-asset, multi-market, multi-entity and multi-currency solutions support real-time global trade processing of equity, fixed income, mutual fund, foreign exchange, and exchange-traded derivatives. With the recent acquisition of Itiviti Holding AB (“Itiviti”), we have strengthened our capabilities with a set of front-office trade order and execution management solutions, connectivity and network offerings which will integrate with our existing middle and back-office solutions.

Our comprehensive wealth management platform offers capabilities across the entire wealth management lifecycle and streamlines all aspects of wealth management services, including account management, fee management and client on-boarding. The wealth management platform enables full-service, regional and independent broker-dealers and investment advisors to better engage with customers through digital marketing and customer communications tools. We also integrate data, content and technology to drive new customer acquisition, support holistic and personalized advice and cross-sell opportunities through the creation of sales and educational content, including seminars as well as customizable advisor websites, search engine marketing and electronic and print newsletters. Our advisor solutions help advisors optimize their practice management through customer and account data aggregation and reporting.

We also offer buy-side technology solutions for the global investment management industry, including portfolio management, compliance and operational workflow solutions for hedge funds, family offices, alternative asset managers, traditional asset managers and the providers that service this space.

Consolidation and Basis of Presentation

The Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”). These Condensed Consolidated Financial Statements present the condensed 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.

Beginning with the first quarter of fiscal year 2022, the Company revised the foreign exchange rates used to present segment revenues, segment earnings (loss) before income taxes, and Closed sales, to further allocate the foreign exchange impact to the individual segment revenue and profit metrics. The presentation of segment revenues and earnings (loss) before income taxes for the prior periods provided has been changed to conform to the current period presentation. Total consolidated revenues and earnings before income taxes were not impacted.

The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements for the fiscal year ended June 30, 2021 in the 2021 Annual Report.

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Critical Accounting Policies

In presenting the Condensed 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 Condensed 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. In management’s opinion, the Condensed 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. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in the “Critical Accounting Policies” section of Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Annual Report.

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 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 earnings per share, and Free Cash flow to the most directly comparable 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 3, “Revenue Recognition” to our Condensed Consolidated Financial Statements in this Form 10-Q.

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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 daily average 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 three and nine months ended March 31, 2022, and 2021, are as follows:


	Select Operating Metrics

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021


Record Growth
Equity proxy	17	%	20	%	21	%	20	%
Mutual fund interims	10	%	7	%	15	%	9	%

Internal Trade Growth	(6)	%	12	%	(1)	%	16	%

Results of Operations

The following discussions of Analysis of Condensed Consolidated Statements of Earnings and Analysis of Reportable Segments refer to the three and nine months ended March 31, 2022 compared to the three and nine months ended March 31, 2021. The Analysis of Condensed Consolidated Statements of Earnings should be read in conjunction with the Analysis of Reportable Segments, which provides a more detailed discussion concerning certain components of the Condensed Consolidated Statements of Earnings.

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

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

“Real Estate Realignment and Covid-19 Related Expenses” are comprised of two major components: Real Estate Realignment Expenses, and Covid-19 Related Expenses. Real Estate Realignment Expenses are expenses associated with the exit of certain of the Company’s leased facilities in response to the Covid-19 pandemic, which consist of the impairment of certain right of use assets, leasehold improvements and equipment, as well as other related facility exit expenses directly resulting from, and attributable to, the exit of these leased facilities. Covid-19 Related Expense are direct and incremental expenses incurred by the Company to protect the health and safety of Broadridge associates during the Covid-19 outbreak, including expenses associated with monitoring the temperatures for associates entering our facilities, enhancing the safety of our office environment in preparation for workers to return to Company facilities on a more regular basis, ensuring proper social distancing in our production facilities, personal protective equipment, enhanced cleaning measures in our facilities, and other safety related expenses.

“Investment Gains” represents non-operating, non-cash gains on privately held investments.

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

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“Loss on Acquisition-Related Financial Instrument” represents a non-operating loss on a financial instrument designed to minimize the Company's foreign exchange risk associated with the acquisition of Itiviti.

“Net New Business” refers to recurring revenue from Closed sales for the initial twelve-month contract period after which the client goes live with the Company’s service(s), less recurring revenue from client losses.

“Internal Growth” is a component of recurring fee revenue and generally reflects year over year changes in existing services to our existing customers’ multi-year contracts beyond the initial twelve month period in which it was included in Net New Business.

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. For the nine months ended March 31, 2022, mutual fund proxy fee revenues were 62% greater compared to the nine months ended March 31, 2021. During fiscal year 2021, mutual fund proxy fee revenues were 17% greater 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.

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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 three and nine months ended March 31, 2022 and for the fiscal year ended June 30, 2021, we reported Closed sales net of a 5.0% 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.

Closed sales for the three months ended March 31, 2022 were $57.5 million, an increase of $14.2 million or 33%, compared to $43.3 million for the three months ended March 31, 2021. Closed sales for the three months ended March 31, 2022 are net of an allowance adjustment of $3.0 million.

Closed sales for the nine months ended March 31, 2022 were $170.1 million, an increase of $50.7 million or 42%, compared to $119.4 million for the nine months ended March 31, 2021. Closed sales for the nine months ended March 31, 2022 are net of an allowance adjustment of $9.0 million.

Recent Developments

Global Pandemic

The Covid-19 pandemic 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.

The safety and well-being of our associates and our ability to fulfill our client service commitments are our highest priorities. After addressing the initial surge of the Covid-19 pandemic, we are now focused on running our business effectively in the new work from home paradigm while preparing for a more flexible workplace model in the future. Accordingly, the Company has taken several measures and expects to take further actions 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 masking, social distancing and cleaning measures in our production facilities. We are compliant with applicable federal, state and local Covid-19 rules, restrictions, orders and guidance, and are promoting vaccination among our associates.

In fiscal year 2022 to date, 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 our 2021 Annual Report. Given these uncertainties, the global pandemic 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 the global pandemic to our business, consolidated results of operations, and financial condition.

Conflict in Ukraine

We are monitoring the events related to Russia’s invasion of the Ukraine and have been actively managing any exposure we may have through a cross-functional taskforce that includes members of our senior management. We have historically had an extremely limited presence in Russia, and we have no presence in Ukraine. We do not process any client data in Russia. Prior to the conflict, we had approximately 280 associates in St. Petersburg, Russia who provide software development and support services for several of our GTO products, less than 2% of our total associates. We have historically provided services to a very small number of Russian entities and subsidiaries of Russian entities. The revenues from those services represented less than 0.1% of our total revenues in fiscal year 2021 and our outstanding accounts receivable from these entities is de minimis. We are in the process of terminating and winding down these relationships. We are monitoring and believe we are in compliance with all global sanctions arising out of Russia’s invasion of the Ukraine. We are taking steps to move the services provided in Russia to other locations in Europe and Asia. We have taken actions to enhance our information security defenses in response to the Ukraine conflict. We do not expect the Ukraine conflict and the actions we are taking in response to have a material impact on our core operations or financial results.

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Analysis of Condensed Consolidated Statements of Earnings

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021

The table below presents Condensed Consolidated Statements of Earnings data for the three months ended March 31, 2022 and 2021, and the dollar and percentage changes between periods:


	Three Months Ended March 31,
							Change
	2022			2021			$		%
	(in millions, except per share amounts)
Revenues	$	1,533.7		$	1,389.8		$	144.0	10
Cost of revenues	1,077.6			960.5			117.1		12
Selling, general and administrative expenses	210.1			190.0			20.1		11
Total operating expenses	1,287.7			1,150.6			137.1		12

Operating income	246.0			239.2			6.8		3
Margin	16.0		%	17.2		%
Interest expense, net	(20.0)			(11.8)			(8.2)		69
Other non-operating expense, net	(2.7)			(10.6)			7.8		NM
Earnings before income taxes	223.3			216.9			6.5		3
Provision for income taxes	46.8			51.9			(5.1)		(10)
Effective tax rate	21.0		%	23.9		%
Net earnings	$	176.6		$	165.0		$	11.6	7
Basic earnings per share	$	1.51		$	1.42		$	0.09	6
Diluted earnings per share	$	1.49		$	1.40		$	0.09	6

Weighted-average shares outstanding:
Basic	116.8			115.8
Diluted	118.6			118.0

NM - Not meaningful

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Revenues

The table below presents Condensed Consolidated Statements of Earnings data for the three months ended March 31, 2022 and 2021, and the dollar and percentage changes between periods:


	Three Months Ended March 31,
					Change
	2022		2021		$		%
	($ in millions)
Recurring fee revenues	$	1,011.7	$	873.0	$	138.7	16
Event-driven fee revenues	58.7		73.1		(14.4)		(20)
Distribution revenues	472.4		447.0		25.4		6
Foreign currency exchange	(9.1)		(3.4)		(5.7)		168
Total	$	1,533.7	$	1,389.8	$	144.0	10

	Points of Growth
	Net New Business		Internal Growth		Acquisitions		Total
Recurring fee revenue Growth Drivers	3pts		3pts		9pts		16	%

Revenues increased $144.0 million, or 10%, to $1,533.7 million from $1,389.8 million.

Recurring fee revenues increased $138.7 million inclusive of 3 pts of growth from onboarding of Net New Business, and 3 pts from Internal Growth. The growth in Net New Business contributed to growth in both ICS and GTO recurring fee revenues, while Internal Growth contributed 3 pts driven by higher Record Growth volume in our ICS business from equity positions of 17% and interim positions of 10%. Growth from acquisitions was 9 pts, most notably from our recent Itiviti acquisition which closed in May 2021.
Event-driven fee revenues decreased $14.4 million, or 20%, primarily due to the decrease in volume of equity contest and other communications.
Distribution revenues increased $25.4 million primarily driven by higher revenues from customer communications, including the impact of current year postage rate increase of approximately $25.0 million, offset by lower volumes of regulatory mailings.

Total operating expenses**.** Operating expenses increased $137.1 million, or 12%, to $1,287.7 million from $1,150.6 million as a result of an increase in both cost of revenues and selling, general and administrative expenses:

Cost of revenues - The increase of $117.1 million in cost of revenues primarily reflects (i) the impact of higher operating costs from acquisitions and related amortization expense totaling $69.2 million primarily driven by the Company’s acquisition of Itiviti in May of 2021, and (ii) higher volume related expenses including postage and distribution costs, and Nominees remittances totaling $41.6 million due to higher Investor Communication Solutions segment revenues.
Selling, general and administrative expenses - The increase of $20.1 million in selling, general, and administrative expenses primarily reflects the impact of acquisitions of $16.5 million primarily driven by the Company’s acquisition of Itiviti in May of 2021.

Interest expense, net. Interest expense, net was $20.0 million, an increase of $8.2 million, from $11.8 million for the three months ended March 31, 2021. The increase of $8.2 million was primarily due to an increase in debt outstanding related to the May 2021 acquisition of Itiviti.

Other non-operating expense, net. Other non-operating expense, net for the three months ended March 31, 2022 was $2.7 million, compared to other non-operating expense, net of $10.6 million for the three months ended March 31, 2021. The decreased expense of $7.8 million was primarily due to absence of the unrealized loss on the acquisition-related foreign currency financial instrument of $9.6 million that occurred in the prior year period.

Provision for income taxes**.**

Effective tax rate for the three months ended March 31, 2022: 21.0%

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Effective tax rate for the three months ended March 31, 2021: 23.9%

The decrease in the effective tax rate for the three months ended March 31, 2022 was driven by higher total discrete tax items, inclusive of the excess tax benefits related to equity compensation, compared to the prior year period.

Nine Months Ended March 31, 2022 versus Nine Months Ended March 31, 2021

The table below presents Condensed Consolidated Statements of Earnings data for the nine months ended March 31, 2022 and 2021, and the dollar and percentage changes between periods:


	Nine Months Ended March 31,
							Change
	2022			2021			$		%
	(in millions, except per share amounts)
Revenues	$	3,986.2		$	3,462.1		$	524.1	15
Cost of revenues	2,970.1			2,554.1			416.0		16
Selling, general and administrative expenses	597.9			510.8			87.2		17
Total operating expenses	3,568.0			3,064.8			503.2		16

Operating income	418.2			397.3			20.9		5
Margin	10.5		%	11.5		%
Interest expense, net	(64.0)			(37.3)			(26.7)		72
Other non-operating expense, net	(0.7)			(0.1)			(0.6)		NM
Earnings before income taxes	353.4			359.8			(6.4)		(2)
Provision for income taxes	62.4			72.7			(10.3)		(14)
Effective tax rate	17.7		%	20.2		%
Net earnings	$	291.0		$	287.1		$	3.9	1
Basic earnings per share	$	2.50		$	2.48		$	0.02	1
Diluted earnings per share	$	2.46		$	2.44		$	0.02	1

Weighted average shares outstanding:
Basic	116.5			115.6
Diluted	118.5			117.7

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Revenues

The table below presents Condensed Consolidated Statements of Earnings data for the nine months ended March 31, 2022 and 2021, and the dollar and percentage changes between periods:


	Nine Months Ended March 31,
					Change
	2022		2021		$		%
	($ in millions)
Recurring fee revenues	$	2,560.2	$	2,195.2	$	364.9	17
Event-driven fee revenues	199.8		163.2		36.6		22
Distribution revenues	1,240.9		1,122.0		118.9		11
Foreign currency exchange	(14.6)		(18.3)		3.7		(20)
Total	$	3,986.2	$	3,462.1	$	524.1	15

	Points of Growth
	Net New Business		Internal Growth		Acquisitions		Total
Recurring fee revenue Growth Drivers	4pts		3pts		9pts		17	%

Revenues increased $524.1 million, or 15%, to $3,986.2 million from $3,462.1 million.

Recurring fee revenues increased $364.9 million inclusive of 4 pts of growth from onboarding of Net New Business, and 3 pts from Internal Growth. The growth in Net New Business contributed to growth in both ICS and GTO recurring fee revenues, while Internal Growth contributed 3 pts driven by higher Record Growth volume in our ICS business from interim positions of 15% and equity positions of 21%. Growth from acquisitions was 9 pts, most notably from our recent Itiviti acquisition which closed in May 2021.
Event-driven fee revenues increased $36.6 million, or 22%, primarily due to increased mutual fund proxy activity.
Distribution revenues increased $118.9 million primarily driven by an increase in volume of recurring fee revenue mailings, primarily customer communications mailings, of $68.6 million, and the current year postage rate increase which contributed an incremental approximately $50.3 million to distribution revenues.

Total operating expenses**.** Operating expenses increased $503.2 million, or 16%, to $3,568.0 million from $3,064.8 million as a result of an increase in both cost of revenues and selling, general and administrative expenses:

Cost of revenues - The increase of $416.0 million in cost of revenues primarily reflects the impact of higher operating costs from acquisitions and related amortization expense totaling $201.9 million primarily driven by the Company’s acquisition of Itiviti in May of 2021, and higher volume related expenses including postage and distribution costs, and Nominees remittances totaling $154.8 million due to higher Investor Communication Solutions segment revenues.
Selling, general and administrative expenses - The increase of $87.2 million in selling, general and administrative expenses primarily reflects the impact of acquisitions of $47.6 million primarily driven by the Company’s acquisition of Itiviti in May of 2021, and higher compensation of $25.4 million.

Interest expense, net. Interest expense, net was $64.0 million, an increase of $26.7 million, from $37.3 million for the nine months ended March 31, 2021. The increase of $26.7 million was primarily due to an increase in debt outstanding related to the May 2021 acquisition of Itiviti.

Other non-operating expense, net. Other non-operating expense, net for the nine months ended March 31, 2022 was $0.7 million, compared to other non-operating expense, net of $0.1 million for the nine months ended March 31, 2021.

Provision for income taxes**.**

Effective tax rate for the nine months ended March 31, 2022: 17.7%
Effective tax rate for the nine months ended March 31, 2021: 20.2%

The decrease in the effective tax rate for the nine months ended March 31, 2022 was driven by higher total discrete tax items, inclusive of the excess tax benefits related to equity compensation, compared to the prior year period.

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Analysis of Reportable Segments

Broadridge has two reportable 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


	Three Months Ended March 31,							Nine Months Ended March 31,
					Change							Change
	2022		2021		$		%	2022		2021		$		%
	($ in millions)
Investor Communication Solutions	$	1,161.4	$	1,097.1	$	64.3	6	$	2,908.2	$	2,618.6	$	289.6	11
Global Technology and Operations	381.5		296.1		85.4		29	1,092.6		861.8		230.8		27
Foreign currency exchange	(9.1)		(3.4)		(5.7)		168	(14.6)		(18.3)		3.7		(20)
Total	$	1,533.7	$	1,389.8	$	144.0	10	$	3,986.2	$	3,462.1	$	524.1	15

Earnings Before Income Taxes


	Three Months Ended March 31,							Nine Months Ended March 31,
					Change							Change
	2022		2021		$		%	2022		2021		$		%
	($ in millions)
Investor Communication Solutions	$	220.7	$	215.2	$	5.4	3	$	361.9	$	308.5	$	53.3	17
Global Technology and Operations	49.8		55.4		(5.6)		(10)	102.9		173.9		(71.0)		(41)
Other	(44.5)		(51.1)		6.6		(13)	(105.7)		(114.3)		8.5		(8)
Foreign currency exchange	(2.5)		(2.7)		0.1		(7)	(5.6)		(8.3)		2.7		(33)
Total	$	223.3	$	216.9	$	6.5	3	$	353.4	$	359.8	$	(6.4)	(2)

The amount of amortization of acquired intangibles and purchased intellectual property by segment is as follows:


	Three Months Ended March 31,							Nine Months Ended March 31,
					Change							Change
	2022		2021		$		%	2022		2021		$		%
	($ in millions)
Investor Communication Solutions	$	16.2	$	21.2	$	(5.0)	(24)	$	53.3	$	65.6	$	(12.4)	(19)
Global Technology and Operations	47.2		10.7		36.5		NM	143.2		32.1		111.1		NM
Other	—		0.4		(0.4)		(100)	—		1.1		(1.1)		(100)
Foreign currency exchange	(2.6)		(0.3)		(2.3)		NM	(4.5)		(2.0)		(2.5)		125
Total	$	60.8	$	31.9	$	28.9	91	$	192.0	$	96.8	$	95.2	98

NM - Not meaningful

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Investor Communication Solutions

Revenues for the three months ended March 31, 2022 increased $64.3 million to $1,161.4 million from $1,097.1 million, and earnings before income taxes increased $5.4 million to $220.7 million from $215.2 million.

Revenues for the nine months ended March 31, 2022 increased $289.6 million to $2,908.2 million from $2,618.6 million, and earnings before income taxes increased $53.3 million to $361.9 million from $308.5 million.


	Three Months Ended March 31,										Nine Months Ended March 31,
							Change										Change
	2022			2021			$		%		2022			2021			$		%
	($ in millions)
Revenues
Recurring fee revenues	$	630.2		$	576.9		$	53.3	9		$	1,467.5		$	1,333.4		$	134.1	10
Event-driven fee revenues	58.7			73.1			(14.4)		(20)		199.8			163.2			36.6		22
Distribution revenues	472.4			447.0			25.4		6		1,240.9			1,122.0			118.9		11
Total	$	1,161.4		$	1,097.1		$	64.3	6		$	2,908.2		$	2,618.6		$	289.6	11

Earnings Before Income Taxes
Earnings before income taxes	$	220.7		$	215.2		$	5.4	3		$	361.9		$	308.5		$	53.3	17
Pre-tax Margin	19.0		%	19.6		%					12.4		%	11.8		%

	Points of Growth										Points of Growth
	Net New Business			Internal Growth			Acquisitions		Total		Net New Business			Internal Growth			Acquisitions		Total
Recurring fee revenue Growth Drivers	4pts			6pts			0pts		9	%	5pts			5pts			0pts		10	%

For the three months ended March 31, 2022:

Recurring fee revenues grew 9% driven by Net New Business and Internal Growth. Internal Growth contributed 6 pts driven by higher Record Growth volume in equity positions of 17% and interim positions of 10%.
Event-driven fee revenues declined 20% primarily due to the decrease in volume of equity contest and other communications.
Higher distribution revenues of $25.4 million were primarily driven by higher revenues from customer communications, including the impact of current year postage rate increase of approximately $25.0 million, offset by lower volumes of regulatory mailings.
Earnings grew by $5.4 million, or 3% to $220.7 million driven by higher recurring fee revenues. Segment operating expenses rose 7%, or $58.9 million, to $940.7 million, primarily driven by distribution and other revenue related expenses. Amortization expense from acquired intangibles decreased by $5.0 million to $16.2 million in the third quarter of fiscal year 2022 from $21.2 million in the prior period. Pre-tax margins decreased by 0.6 percentage points to 19.0% from 19.6%.

For the nine months ended March 31, 2022:

Recurring fee revenues grew 10% driven by Net New Business and Internal Growth. Internal Growth contributed 5 pts driven by higher Record Growth volume in interim positions of 15% and equity positions of 21%.
Event-driven fee revenues grew 22% primarily due to increased volume of mutual fund proxy activity.
Higher distribution revenues of $118.9 million were primarily driven by an increase in volume of recurring fee revenue mailings, primarily customer communications mailings, of $68.6 million, and the current year postage rate increase which contributed an incremental approximately $50.3 million to distribution revenues.

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Earnings grew by $53.3 million, or 17% to $361.9 million driven by higher recurring and event-driven fee revenues. Segment operating expenses rose 10%, or $236.2 million, to $2,546.3 million, primarily driven by distribution and other revenue related expenses. Amortization expense from acquired intangibles decreased by $12.4 million to $53.3 million in the nine months ended March 31, 2022 from $65.6 million in the prior period. Pre-tax margins increased by 0.6 percentage points to 12.4% from 11.8%.

Global Technology and Operations

Revenues for the three months ended March 31, 2022 increased $85.4 million to $381.5 million from $296.1 million, and earnings before income taxes decreased $5.6 million to $49.8 million from $55.4 million.

Revenues for the nine months ended March 31, 2022 increased $230.8 million to $1,092.6 million from $861.8 million, and earnings before income taxes decreased $71.0 million to $102.9 million from $173.9 million.


	Three Months Ended March 31,										Nine Months Ended March 31,
							Change										Change
	2022			2021			$		%		2022			2021			$		%
	($ in millions)
Revenues
Recurring fee revenues	$	381.5		$	296.1		$	85.4	29		$	1,092.6		$	861.8		$	230.8	27

Earnings Before Income Taxes
Earnings before income taxes	$	49.8		$	55.4		$	(5.6)	(10)		$	102.9		$	173.9		$	(71.0)	(41)
Pre-tax Margin	13.1		%	18.7		%					9.4		%	20.2		%

	Points of Growth										Points of Growth
	Net New Business			Internal Growth			Acquisitions		Total		Net New Business			Internal Growth			Acquisitions		Total
Recurring fee revenue Growth Drivers	3pts			-1pt			27pts		29	%	3pts			0pts			23pts		27	%

For the three months ended March 31, 2022:

Recurring fee revenues increased $85.4 million, or 29%, to $381.5 million. The growth was driven by 27pts of growth from acquisitions, primarily Itiviti, as well as 3pts of Net New Business from onboarding of new clients, partially offset by a 1 pt reduction in Internal Growth primarily driven by a decline in Internal Trade Growth compared to the prior year period.
The earnings decrease of $5.6 million was driven primarily by an increase of $85.7 million in operating costs from acquisitions primarily as a result of the Itiviti acquisition, as compared to revenue from acquisitions of $80.6 million. Pre-tax margins decreased by 5.6 percentage points to 13.1% from 18.7%. Amortization expense from acquired intangibles increased by $36.5 million to $47.2 million in the third quarter of fiscal year 2022 from $10.7 million in the prior year period primarily as a result of the Itiviti acquisition.

For the nine months ended March 31, 2022:

Recurring fee revenues increased $230.8 million, or 27%, to $1,092.6 million. The growth was driven by 23pts of growth from acquisitions, primarily Itiviti, as well as 3pts of Net New Business from onboarding of new clients.
The earnings decrease of $71.0 million was primarily driven by an increase of $249.6 million in operating costs from acquisitions primarily as a result of the Itiviti acquisition, as compared to revenue from acquisitions of $198.5 million, as well as increased investments to implement and support new business. Pre-tax margins decreased by 10.8 percentage points to 9.4% from 20.2%. Amortization expense from acquired intangibles increased by $111.1 million to $143.2 million in the first nine months of fiscal year 2022 from $32.1 million in the prior year period.

Other

Loss before income taxes was $44.5 million for the three months ended March 31, 2022, a decrease of $6.6 million compared to $51.1 million for the three months ended March 31, 2021.

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The decreased loss before income taxes was primarily due to $18.8 million in lower acquisition-related costs driven by the fiscal year 2021 acquisition of Itiviti, partially offset by $8.2 million in higher interest expense due to an increase in average debt outstanding related to the fiscal 2021 acquisition of Itiviti.

Loss before income taxes was $105.7 million for the nine months ended March 31, 2022, a decrease of $8.5 million compared to $114.3 million for the nine months ended March 31, 2021.

The decreased loss before income taxes was primarily due to (i) lower real estate realignment charges related to the Company’s closure of certain real estate facilities in response to the Covid-19 pandemic of $32.5 million, and (ii) $17.9 million in lower acquisition-related costs driven primarily by the fiscal 2021 acquisition of Itiviti, partially offset by (iii) higher interest expense of $26.7 million due to an increase in average debt outstanding related to the fiscal 2021 acquisition of Itiviti, and (iv) $9.9 million in lower net investment gains.

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

The Company’s results in this Quarterly Report on Form 10-Q are presented in accordance with U.S. GAAP except where otherwise noted. In certain circumstances, Non-GAAP results have been presented. 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, and for internal planning and forecasting purposes. 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, each as adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items the exclusion of which management believes provides insight regarding our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of certain of the following items: (i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) Real Estate Realignment and Covid-19 Related Expenses, (iv) Investment Gains, (v) Software Charge, and (vi) Loss on Acquisition-Related Financial Instrument. Amortization of Acquired Intangibles and Purchased Intellectual Property represents 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. Real Estate Realignment and Covid-19 Related Expenses are comprised of two major components: Real Estate Realignment Expenses, and Covid-19 Related Expenses. Real Estate Realignment Expenses are expenses associated with the exit of certain of the Company’s leased facilities in response to the Covid-19 pandemic, which consist of the impairment of certain right of use assets, leasehold improvements and equipment, as well as other related facility exit expenses directly resulting from, and attributable to, the exit of these leased facilities. Covid-19 Related Expense are direct and incremental expenses incurred by the Company to protect the health and safety of Broadridge associates during the Covid-19 outbreak, including expenses associated with monitoring the temperatures for associates entering our facilities, enhancing the safety of our office environment in preparation for workers to return to Company facilities on a more regular basis, ensuring proper social distancing in our production facilities, personal protective equipment, enhanced cleaning measures in our facilities, and other safety related expenses. Investment Gains represent non-operating, non-cash gains on privately held investments. Software Charge represents a charge related to an internal use software product that is no longer expected to be used. Loss on Acquisition-Related Financial Instrument represents a non-operating loss on a financial instrument designed to minimize the Company's foreign exchange risk associated with the acquisition of Itiviti.

We exclude Acquisition and Integration Costs, Real Estate Realignment and Covid-19 Related Expenses, Investment Gains, the Software Charge and the Loss on Acquisition-Related Financial Instrument 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

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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 Flow

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):


	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
	(in millions)
Operating income (GAAP)	$	246.0		$	239.2		$	418.2		$	397.3
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property	60.8			31.9			192.0			96.8
Acquisition and Integration Costs	3.1			9.2			13.8			11.6
Real Estate Realignment and Covid-19 Related Expenses (a)	3.3			3.3			6.8			41.1
Software Charge	—			—			—			6.0
Adjusted Operating income (Non-GAAP)	$	313.3		$	283.6		$	630.8		$	552.7
Operating income margin (GAAP)	16.0		%	17.2		%	10.5		%	11.5		%
Adjusted Operating income margin (Non-GAAP)	20.4		%	20.4		%	15.8		%	16.0		%


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
	(in millions)
Net earnings (GAAP)	$	176.6	$	165.0	$	291.0	$	287.1
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property	60.8		31.9		192.0		96.8
Acquisition and Integration Costs	3.1		9.2		13.8		11.6
Real Estate Realignment and Covid-19 Related Expenses (a)	3.3		3.3		6.8		41.1
Investment Gains	—		—		(7.5)		(8.7)
Software Charge	—		—		—		6.0
Loss on Acquisition-Related Financial Instrument	—		9.6		—		9.6
Subtotal of adjustments	67.2		54.0		205.1		156.3
Tax impact of adjustments (c)	(15.4)		(10.9)		(44.1)		(35.0)
Adjusted Net earnings (Non-GAAP)	$	228.4	$	208.1	$	452.0	$	408.4

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	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Diluted earnings per share (GAAP)	$	1.49	$	1.40	$	2.46	$	2.44
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property	0.51		0.27		1.62		0.82
Acquisition and Integration Costs	0.03		0.08		0.12		0.10
Real Estate Realignment and Covid-19 Related Expenses (b)	0.03		0.03		0.06		0.35
Investment Gains	—		—		(0.06)		(0.07)
Software Charge	—		—		—		0.05
Loss on Acquisition-Related Financial Instrument	—		0.08		—		0.08
Subtotal of adjustments	0.57		0.46		1.73		1.33
Tax impact of adjustments (c)	(0.13)		(0.09)		(0.37)		(0.30)
Adjusted earnings per share (Non-GAAP)	$	1.93	$	1.76	$	3.81	$	3.47

(a) Real Estate Realignment Expenses were $0.7 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively, and $0.5 million and $33.0 million for the nine months ended March 31, 2022 and 2021, respectively. Covid-19 Related Expenses were $2.6 million and $2.1 million for the three months ended March 31, 2022 and 2021, respectively, and $6.3 million and $8.1 million for the nine months ended March 31, 2022 and 2021, respectively.

(b) Real Estate Realignment Expenses impacted Adjusted earnings per share by $0.01 and $0.01 for the three months ended March 31, 2022 and 2021, respectively, and less than $0.01 and $0.28 for the nine months ended March 31, 2022 and 2021, respectively. Covid-19 Related Expenses impacted Adjusted earnings per share by $0.02 and $0.02 for the three months ended March 31, 2022 and 2021, respectively, and $0.05 and $0.07 for the nine months ended March 31, 2022 and 2021, respectively.

(c) Calculated using the GAAP effective tax rate, adjusted to exclude $2.2 million and $13.6 million of excess tax benefits associated with stock-based compensation for the three and nine months ended March 31, 2022, respectively, and $1.7 million and $14.6 million of excess tax benefits associated with stock-based compensation for the three and nine months ended March 31, 2021, respectively. The tax impact of adjustments also excludes approximately $8.5 million of Acquisition and Integration Costs for the three and nine months ended March 31, 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.


	Nine Months Ended March 31,
	2022		2021
	(in millions)
Net cash flows provided by (used in) operating activities (GAAP)	$	(13.9)	$	189.5
Capital expenditures and Software purchases and capitalized internal use software	(54.4)		(71.2)
Proceeds from asset sales	—		18.0
Free cash flow (Non-GAAP)	$	(68.4)	$	136.3

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Financial Condition, Liquidity and Capital Resources

Cash and cash equivalents consisted of the following:


	March 31, 2022		June 30, 2021
	(in millions)
Cash and cash equivalents:
Domestic cash	$	71.3	$	40.9
Cash held by foreign subsidiaries	142.7		159.8
Cash held by regulated entities	63.3		73.8
Total cash and cash equivalents	$	277.2	$	274.5

At March 31, 2022, Cash and cash equivalents were $277.2 million and Total stockholders’ equity was $1,821.0 million. 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 March 31, 2022		Carrying value at March 31, 2022		Carrying value at June 30, 2021		Unused Available Capacity		Fair Value at March 31, 2022
				(in millions)




Long-term debt
Fiscal 2021 Revolving Credit Facility:
U.S. dollar tranche	April 2026	$	365.0	$	365.0	$	20.0	$	735.0	$	365.0
Multicurrency tranche	April 2026	25.1		25.1		94.4		374.9		25.1
Total Revolving Credit Facility		390.1		390.1		114.4		1,109.9		390.1

Fiscal 2021 Term Loans	May 2024	1,550.0		1,545.2		1,543.4		—		1,550.0

Fiscal 2016 Senior Notes	June 2026	500.0		497.2		496.7		—		503.5
Fiscal 2020 Senior Notes	December 2029	750.0		743.2		742.5		—		712.8
Fiscal 2021 Senior Notes	May 2031	1,000.0		991.3		990.6		—		907.6
Total Senior Notes		2,250.0		2,231.7		2,229.8		—		2,123.8



Total debt		$	4,190.1	$	4,167.0	$	3,887.6	$	1,109.9	$	4,064.0

Future principal payments on our outstanding debt are as follows:

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Years ending June 30,						2022						2023						2024						2025						2026						Thereafter						Total
(In millions)						$	—					$	—					$	1,550.0					$	—					$	890.1					$	1,750.0					$	4,190.1

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, as amended on December 23, 2021, (“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 $1.0 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 10, “Borrowings” to our Condensed Consolidated Financial Statements in Item 1. of Part I of this Quarterly Report on Form 10-Q for a more detailed discussion.

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Cash Flows


	Nine Months Ended March 31,
					Change
	2022		2021		$
	(in millions)
Net cash flows provided by (used in) operating activities	$	(13.9)	$	189.5	$	(203.5)
Net cash flows used in investing activities	(81.0)		(65.0)		(16.0)
Net cash flows provided by (used in) financing activities	103.6		(255.1)		358.7
Effect of exchange rate changes on Cash and cash equivalents	(6.0)		9.7		(15.7)
Net change in Cash and cash equivalents	$	2.7	$	(120.8)	$	123.5

Free cash flow:
Net cash flows provided by (used in) operating activities (GAAP)	$	(13.9)	$	189.5	$	(203.5)
Capital expenditures and Software purchases and capitalized internal use software	(54.4)		(71.2)		16.8
Proceeds from asset sales	—		18.0		(18.0)
Free cash flow (Non-GAAP)	$	(68.4)	$	136.3	$	(204.7)

The increase in cash used in operating activities of $203.5 million in the nine months ended March 31, 2022, as compared to the nine months ended March 31, 2021, was primarily due to higher cash used in working capital and increased scaling of client-related platform implementation and development as compared to the prior year period, partially offset by higher net earnings and higher non-cash add-backs including higher amortization of acquired intangibles and purchased intellectual property driven by recent acquisitions.

The increase in cash used in investing activities of $16.0 million in the nine months ended March 31, 2022, as compared to the nine months ended March 31, 2021, primarily reflects higher acquisition activity and the absence of the $18 million in proceeds from asset sales which occurred in the prior year period, partially offset by lower capital expenditures.

The increase in cash provided by financing activities of $358.7 million in the nine months ended March 31, 2022, as compared to the nine months ended March 31, 2021, primarily reflects higher borrowings net of repayments in the current year period as compared to the prior year period.

Seasonality

Processing and distributing proxy materials and annual reports to investors comprises a large portion of our Investor Communication Solutions business. We process and distribute the greatest number of proxy materials and annual reports during our third and fourth fiscal quarters. The recurring periodic activity of this business is linked to significant filing deadlines imposed by law on public reporting companies. This has caused our revenues, operating income, net earnings, and cash flows from operating activities to be higher in our third and fourth fiscal quarters. Notwithstanding, the seasonality of our revenues makes it difficult to estimate future operating results based on the results of any specific fiscal quarter and could affect an investor’s ability to compare our financial condition, results of operations, and cash flows on a fiscal quarter-by-quarter basis.

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Contractual Obligations

Data Center Agreements

In March 2010, the Company and International Business Machines Corporation (“IBM”) entered into an Information Technology Services Agreement (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. In December 2019, the Company and IBM amended and restated the IT Services Agreement (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. On July 28, 2021, the Company entered into a novation agreement with IBM (the “U.S. Novation Agreement”) pursuant to which IBM novated the Amended IT Services Agreement to Kyndryl, Inc., an entity formed in connection with IBM’s spin-off of its managed infrastructure services business (“Kyndryl”), effective September 1, 2021. Fixed minimum commitments remaining under the Amended IT Services Agreement at March 31, 2022 are $145.8 million through fiscal year 2027, the final year of the Amended IT Services Agreement.

In December 2019, the Company and IBM entered into an information technology agreement for private cloud services (the “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 Private Cloud Agreement has an initial term of approximately 10 years and three months, expiring on March 31, 2030. As a result of the Private Cloud Agreement, the Company transferred certain of its employees in April 2020 to IBM and its affiliates, and that such transferred employees are expected to continue providing services to the Company on behalf of IBM under the Private Cloud Agreement. Pursuant to the Private Cloud Agreement, the Company agreed to transfer the ownership of certain Company-owned hardware (the “Hardware”) located at Company facilities worldwide to IBM. The transfer of the Hardware and Maintenance Contracts to IBM closed on September 30, 2020 for a selling price of $18.0 million. On July 28, 2021, IBM novated the Private Cloud Agreement to Kyndryl, effective September 1, 2021, pursuant to the U.S. Novation Agreement. Fixed minimum commitments remaining under the Private Cloud Agreement at March 31, 2022 are $189.6 million through March 31, 2030, the final year of the contract.

In March 2014, the Company and IBM United Kingdom Limited (“IBM UK”) entered into an Information Technology Services Agreement (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 whereby the Company will migrate from the existing dedicated on-premises 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 “Amended EU IT Services Agreement”). 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. On August 19, 2021, the Company entered into a novation agreement with IBM UK pursuant to which IBM UK novated the EU IT Services Agreement to Kyndryl UK Limited, effective September 1, 2021. Fixed minimum commitments remaining under the Amended EU IT Services Agreement at March 31, 2022 are $29.4 million through fiscal year 2029, the final year of the contract.

Cloud Services Resale Agreement

On December 31, 2021, the Company and Presidio Networked Solutions LLC (“Presidio”), a reseller of services of Amazon Web Services, Inc. and its affiliates (collectively, “AWS”), entered into an Order Form and AWS Private Pricing Addendum, dated December 31, 2021 (the “Order Form”), to the Cloud Services Resale Agreement, dated December 15, 2017, as amended (together with the Order Form, the “AWS Cloud Agreement”), whereby Presidio will resell to the Company certain public cloud infrastructure and related services provided by AWS for the operation, management and support of the Company’s cloud global distributed platforms and products. The AWS Cloud Agreement expires on December 31, 2026. Fixed minimums remaining under the AWS Cloud Agreement at March 31, 2022 are $238.6 million through December 31, 2026.

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 its unconsolidated investments in this variable interest entity totaled $34.0 million as of March 31, 2022, which represents the carrying value of the Company's investments.

In addition, as of March 31, 2022, the Company also has a future commitment to fund $1.1 million to one of the Company’s other investees.

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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 March 31, 2022.

Off-balance Sheet Arrangements

It is not our business practice to enter into off-balance sheet arrangements. However, we are exposed to market risk from changes in foreign currency exchange rates that could impact our financial position, results of operations, and cash flows. We manage our exposure to these market risks through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. In January 2022, we entered into a series of cross-currency swap transactions which were designated as a net investment hedge against a portion of our net investment in our Euro functional subsidiaries. We were not a party to any outstanding derivative financial instruments at June 30, 2021.

In January 2022, we executed a series of cross-currency swap derivative contracts with an aggregate notional amount of EUR 880 million which are designated as net investment hedges to hedge a portion of our net investment in our subsidiaries whose functional currency is the Euro. The cross-currency swap derivative contracts are agreements to pay fixed-rate interest in Euros and receive fixed-rate interest in U.S. Dollars, thereby effectively converting a portion of our U.S. Dollar denominated fixed-rate debt into Euro denominated fixed-rate debt. The cross-currency swaps mature in May 2031 to coincide with the maturity of the Fiscal 2021 Senior Notes. Accordingly, foreign currency transaction gains or losses on the qualifying net investment hedge instruments are recorded as foreign currency translation within other comprehensive income (loss), net in the Condensed Consolidated Statements of Comprehensive Income and will remain in Accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheets until the sale or complete liquidation of the underlying foreign subsidiary. At March 31, 2022, our position on the cross-currency swaps was an asset of $28.1 million, and is recorded as part of Other non-current assets on the Condensed Consolidated Balance Sheets with the offsetting amount recorded as part of Accumulated other comprehensive income (loss), net of tax. We have elected the spot method of accounting whereby the net interest savings from the cross-currency swaps is recognized as a reduction in interest expense in our Condensed Consolidated Statements of Earnings.

In connection with the acquisition of Itiviti in March 2021 we entered into two derivative instruments designed to mitigate the Company’s exposure to the impact of (i) changes in foreign exchange rates on the acquisition of Itiviti purchase consideration, and (ii) changes in interest rates on the Fiscal 2021 Senior Notes.

In March 2021, we 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 our purchase consideration for the acquisition of Itiviti. We recorded changes in fair value of the Forward as part of Other non-operating income (expenses), net in the Consolidated Statement of Earnings. As of March 2021, our position on the Forward was an unrealized pre-tax loss of $9.6 million. In May 2021, we settled the Forward derivative for a cumulative pre-tax gain of $66.7 million.

In March 2021, we 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 amortized into Interest expense, net ratably over the ten year term of the Fiscal 2021 Senior Notes. The expected amount of the existing loss that will be amortized into earnings before income taxes within the next twelve months is approximately $1.1 million.

In the normal course of business, we also enter into contracts in which it makes representations and warranties that relate to the performance of our products and services. We do not expect any material losses related to such representations and warranties, or collateral arrangements.

Recently-issued Accounting Pronouncements

Please refer to Note 2, “New Accounting Pronouncements” to our Condensed Consolidated Financial Statements under Item 1. of Part I of this Quarterly Report on Form 10-Q, for a discussion on the impact of new accounting pronouncements.

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