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, public companies, investors and mutual funds. With over 50 years of experience, including 15 years as an independent public company, we provide 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 a full suite of annual meeting and shareholder engagement solutions such as 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 environmental, social and governance solutions. We also offer disclosure solutions, including annual SEC filing services and capital markets transaction services. We also provide registrar, stock transfer and record-keeping services through our transfer agency services.

We provide omni-channel customer communications solutions, that 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

Our Global Technology and Operations business provides solutions that automate the front-to-back transaction lifecycle of equity, mutual fund, fixed income, foreign exchange and exchange-traded derivatives, from order capture and execution through trade confirmation, margin, cash management, clearing and settlement, reference data management, reconciliations, securities financing and collateral management, asset servicing, compliance and regulatory reporting, portfolio accounting and custody-related services. Our solutions provide automated straight through processing and enable buy- and sell-side financial institutions to efficiently and cost-effectively consolidate their books and records, gather and service assets under management, focus on their core businesses, and manage risk. With our multi-market, multi-asset class, multi-entity and multi-currency capabilities, we provide front-to-back processing on a global basis. In addition, we provide business process outsourcing services for our buy- and sell-side clients’ businesses. These services combine our technology with our operations expertise to support the entire trade lifecycle, including securities clearing and settlement, reconciliations, record-keeping, wealth management asset servicing, and custody-related functions.

For capital markets firms, we provide a set of multi-asset, multi-entity and multi-currency post-trade and trading and connectivity solutions that support processing of securities transactions in equities, options, fixed income securities, foreign exchange, exchange-traded derivatives and mutual funds. 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 solutions enable global capital markets firms to access market liquidity, drive more effective market making and efficient front-to-back trade processing. With the 2021 acquisition of Itiviti Holding AB (“Itiviti”), which is now doing business as Broadridge Trading and Connectivity Solutions (“BTCS”), we offer a set of global front-office trade order and execution management systems, connectivity and network offerings.

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 service the global investment management industry with a range of buy-side technology solutions such as portfolio management, compliance and fee billing and operational support solutions for hedge funds, family offices, alternative asset managers, traditional asset managers and the providers that service this space, including prime brokers, fund administrators and custodians.

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 2023, the Company changed reporting for segment revenues, segment earnings (loss) before income taxes, segment amortization of acquired intangibles and purchased intellectual property, and Closed sales to reflect the impact of actual foreign exchange rates applicable to the individual periods presented. The presentation of these metrics for the prior periods provided in this Form 10-Q 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, 2022 in the 2022 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 2022 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 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, Recurring revenue growth constant currency, 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, Free Cash flow and Recurring revenue growth constant currency 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. Revenues from fees 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 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 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 revenue growth represents the Company’s total annual revenue growth, less growth from event-driven and distribution revenues. We distinguish recurring revenue growth between organic and acquired:

• Organic – We define organic revenue as the recurring revenue generated from Net New Business and Internal Growth.

• Acquired – We define acquired revenue as the recurring 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 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 months ended September 30, 2022, and 2021, are as follows:

			Select Operating Metrics
			Three Months Ended September 30,
			2022						2021
Record Growth
Equity proxy			9		%				39		%
Mutual fund interims			11		%				9		%
Internal Trade Growth			6		%				2		%

Results of Operations

The following discussions of Analysis of Condensed Consolidated Statements of Earnings and Analysis of Reportable Segments refer to the three months ended September 30, 2022 compared to the three months ended September 30, 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 Expenses 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.

“Russia-Related Exit Costs” are direct and incremental costs associated with the Company’s wind down of business activities in Russia in response to Russia’s invasion of Ukraine, including relocation-related expenses of impacted associates.

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“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 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.

“Recurring revenue growth constant currency” refers to our Recurring revenue growth presented on a constant currency basis to exclude the impact of foreign currency exchange fluctuations.

The following definitions describe the Company’s Revenues:

Revenues in the Investor Communication Solutions segment are derived from both recurring and event-driven activity, in addition to distribution revenues. 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 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 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 three months ended September 30, 2022, mutual fund proxy revenues were 42% lower compared to the three months ended September 30, 2021. During fiscal year 2022, mutual fund proxy revenues were 57% greater than the prior fiscal year. Although it is difficult to forecast the levels of event-driven activity, we expect that the portion of 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 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 months ended September 30, 2022 and for the fiscal year ended June 30, 2022, 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 September 30, 2022 were $29.0 million, a decrease of $0.7 million or 2%, compared to $29.7 million for the three months ended September 30, 2021. Closed sales for the three months ended September 30, 2022 and September 30, 2021 are net of an allowance adjustment of $1.5 million and $1.6 million, respectively.

Recent Developments

New SEC Rule on Tailored Shareholder Reports

On October 26, 2022, the SEC adopted a rule modifying mutual fund and exchange-traded fund investor communications. The SEC rule requires that shorter summary documents, referred to as tailored shareholder reports, be distributed in lieu of long-form annual and semi-annual fund reports, as well as the notice of the availability of such reports, which the SEC had permitted under Rule 30e-3. The SEC is providing an 18-month transition period for mutual funds and exchange-traded funds to implement the new rule. We are reviewing the full impact of the new rule, however we currently estimate a reduction in our annual Recurring revenues of approximately $30 million phasing in over fiscal years 2025 and 2026, assuming no offset from new services. See the risk factor titled “Our clients are subject to complex laws and regulations, and new laws or regulations and/or changes to existing laws or regulations could impact our clients and, in turn, adversely impact our business or may reduce our profitability.” in Part I, Item 1A. “Risk Factors” in the 2022 Annual Report.

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. 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 to the Covid-19 pandemic, we have taken, and expect to continue to take, measures designed to protect the health of our employees and to minimize our operational disruption and resulting provision of services to our clients.

In fiscal year 2023 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. See the risk factor titled “The Covid-19 pandemic may negatively impact our business, results of operations and financial performance” in Part I, Item 1A “Risk Factors” in the 2022 Annual Report.

Conflict in Ukraine

We are monitoring the events related to Russia’s invasion of 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 a limited presence in Russia, and we have no presence in Ukraine. We do not store 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 2022 and our outstanding accounts receivable from these entities is de minimis. We are in the process of terminating and winding down these relationships and closing our operations in Russia. We are monitoring and believe we are in compliance with all global sanctions arising out of Russia’s invasion of 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 September 30, 2022 versus Three Months Ended September 30, 2021

The table below presents Condensed Consolidated Statements of Earnings data for the three months ended September 30, 2022 and 2021, and the dollar and percentage changes between periods:

			Three Months Ended September 30,
															Change
			2022						2021						$						%
			(in millions, except per share amounts)
Revenues			$	1,283.3					$	1,192.9					$	90.4					8
Cost of revenues			990.4						914.1						76.3						8
Selling, general and administrative expenses			205.3						175.5						29.8						17
Total operating expenses			1,195.7						1,089.6						106.1						10
Operating income			87.5						103.3						(15.7)						(15)
Margin			6.8		%				8.7		%
Interest expense, net			(26.9)						(22.6)						(4.2)						19
Other non-operating expense, net			(5.2)						(2.4)						(2.8)						117
Earnings before income taxes			55.4						78.2						(22.8)						(29)
Provision for income taxes			5.0						11.0						(6.0)						(55)
Effective tax rate			9.0		%				14.1		%
Net earnings			$	50.4					$	67.2					$	(16.8)					(25)
Basic earnings per share			$	0.43					$	0.58					$	(0.15)					(26)
Diluted earnings per share			$	0.42					$	0.57					$	(0.15)					(26)
Weighted-average shares outstanding:
Basic			117.5						116.2
Diluted			118.9						118.3

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Revenues

The table below presents Condensed Consolidated Statements of Earnings data for the three months ended September 30, 2022 and 2021, and the dollar and percentage changes between periods:

			Three Months Ended September 30,
															Change
			2022						2021						$						%
			($ in millions)
Recurring revenues			$	805.8					$	749.6					$	56.2					7
Event-driven revenues			62.7						76.3						(13.6)						(18)
Distribution revenues			414.8						367.0						47.8						13
Total			$	1,283.3					$	1,192.9					$	90.4					8

			Points of Growth
			Net New Business						Internal Growth						Acquisitions						Foreign Exchange						Total
Recurring revenue Growth Drivers			5pts						5pts						0pts						-2pts						7		%

Revenues increased $90.4 million, or 8%, to $1,283.3 million from $1,192.9 million.

• Recurring revenues increased $56.2 million. Organic growth of 9% was driven by 5pts of Net New Business and 5pts of Internal Growth. The growth in Net New Business contributed to growth in both ICS and GTO Recurring revenues. Internal Growth was driven primarily by growth within our GTO business. Recurring revenue growth constant currency (Non-GAAP) was 9% as changes in foreign currency reduced Recurring revenue growth by 2pts.

• Event-driven revenues decreased $13.6 million, or 18%, primarily due to the decrease in volume of mutual fund proxy communications.

• Distribution revenues increased $47.8 million primarily driven by the impact of current year postage rate increase of approximately $38.3 million, as well as an increase from higher volumes of mailings in our Customer Communications business.

Total operating expenses**.** Operating expenses increased $106.1 million, or 10%, to $1,195.7 million from $1,089.6 million as a result of an increase in both cost of revenues and selling, general and administrative expenses:

• Cost of revenues - The increase of $76.3 million in cost of revenues primarily reflects the impact of higher postage and distribution expenses in our Investor Communications Solutions segment of $53.0 million.

• Selling, general and administrative expenses - The increase of $29.8 million in selling, general, and administrative expenses primarily reflects higher compensation expenses of $19.0 million, and higher technology related expenses of $5.9 million.

Interest expense, net. Interest expense, net was $26.9 million, an increase of $4.2 million, from $22.6 million for the three months ended September 30, 2021. The increase of $4.2 million was primarily due to an increase in interest expense from higher borrowing costs, partially offset by savings from the Company’s cross-currency swap transaction.

Other non-operating expense, net. Other non-operating expense, net for the three months ended September 30, 2022 was $5.2 million, compared to other non-operating expense, net of $2.4 million for the three months ended September 30, 2021. The increased expense of $2.8 million was primarily due to higher losses on investments associated with our retirement plans compared to the prior year period.

Provision for income taxes**.**

• Effective tax rate for the three months ended September 30, 2022: 9.0%

• Effective tax rate for the three months ended September 30, 2021: 14.1%

The decrease in the effective tax rate for the three months ended September 30, 2022 was driven by the excess tax benefits related to equity compensation and other discrete tax benefits, relative to pre-tax income 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.

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 September 30,
															Change
			2022						2021						$						%
			($ in millions)
Investor Communication Solutions			$	920.6					$	853.4					$	67.1					8
Global Technology and Operations			362.7						339.4						23.3						7
Total			$	1,283.3					$	1,192.9					$	90.4					8

Earnings Before Income Taxes

			Three Months Ended September 30,
															Change
			2022						2021						$						%
			($ in millions)
Investor Communication Solutions			$	60.0					$	82.4					$	(22.5)					(27)
Global Technology and Operations			40.3						18.6						21.7						117
Other			(44.8)						(22.8)						(22.1)						96
Total			$	55.4					$	78.2					$	(22.8)					(29)

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

			Three Months Ended September 30,
															Change
			2022						2021						$						%
			($ in millions)
Investor Communication Solutions			$	15.5					$	20.9					$	(5.4)					(26)
Global Technology and Operations			40.4						47.8						(7.5)						(15)
Total			$	55.9					$	68.7					$	(12.8)					(19)

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Investor Communication Solutions

Revenues for the three months ended September 30, 2022 increased $67.1 million to $920.6 million from $853.4 million, and earnings before income taxes decreased $22.5 million to $60.0 million from $82.4 million.

			Three Months Ended September 30,
															Change
			2022						2021						$						%
			($ in millions)
Revenues
Recurring revenues			$	443.1					$	410.2					$	33.0					8
Event-driven revenues			62.7						76.3						(13.6)						(18)
Distribution revenues			414.8						367.0						47.8						13
Total			$	920.6					$	853.4					$	67.1					8
Earnings Before Income Taxes
Earnings before income taxes			$	60.0					$	82.4					$	(22.5)					(27)
Pre-tax Margin			6.5		%				9.7		%

			Points of Growth
			Net New Business						Internal Growth						Acquisitions						Foreign Exchange						Total
Recurring revenue Growth Drivers			6pts						3pts						0pts						-1pt						8		%

For the three months ended September 30, 2022:

• Recurring revenues grew 8%. Organic growth contributed 9pts of growth from a combination of new sales and Internal Growth. Recurring revenue growth constant currency (Non-GAAP) was 9% as changes in foreign currency reduced Recurring revenue growth by 1pt.

• By product line, Recurring revenue growth and Recurring revenue growth constant currency (Non-GAAP) were as follows:

◦Regulatory rose 3% and 4%, respectively, driven by higher volumes of mutual fund interims from mutual fund interims record growth of 11%. Higher Equity proxy record growth of 9% was offset by the timing of proxy distributions in the quarter;

◦Data-driven fund solutions rose 11% and 13%, respectively, driven by growth in our mutual fund trade processing business and continued growth in our data and analytics solutions;

◦Issuer rose 16% and 16%, respectively, driven by our disclosure solutions products; and

◦Customer communications rose 11% and 11%, respectively, driven by higher print and digital communications.

• Event-driven revenues decreased $13.6 million, or 18%, primarily due to the decrease in volume of mutual fund proxy communications.

• Distribution revenues increased $47.8 million primarily driven by the impact of current year postage rate increase of approximately $38.3 million, as well as an increase from higher volumes of mailings in our Customer communications business.

• Earnings declined by $22.5 million, or 27% to $60.0 million as segment operating expenses rose 12%, or $89.6 million, to $860.6 million. The earnings benefit from higher recurring revenue was offset by lower event-driven revenue, higher postage and distribution expenses, and increased costs from prior year investments. Amortization expense from acquired intangibles decreased by $5.4 million to $15.5 million in the first quarter of fiscal year 2023 from $20.9 million in the prior period. Pre-tax margins decreased by 3.2 percentage points to 6.5% from 9.7%.

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Global Technology and Operations

Revenues for the three months ended September 30, 2022 increased $23.3 million to $362.7 million from $339.4 million, and earnings before income taxes increased $21.7 million to $40.3 million from $18.6 million.

			Three Months Ended September 30,
															Change
			2022						2021						$						%
			($ in millions)
Revenues
Recurring revenues			$	362.7					$	339.4					$	23.3					7
Earnings Before Income Taxes
Earnings before income taxes			$	40.3					$	18.6					$	21.7					117
Pre-tax Margin			11.1		%				5.5		%

			Points of Growth
			Net New Business						Internal Growth						Acquisitions						Foreign Exchange						Total
Recurring revenue Growth Drivers			4pts						7pts						0pts						-4pts						7		%

For the three months ended September 30, 2022:

• Recurring revenues increased $23.3 million, or 7%, to $362.7 million. The increase was attributable to 10pts of organic growth driven by a combination of Internal Growth and new sales. Recurring revenue growth constant currency (Non-GAAP) was 10% as changes in foreign currency reduced Recurring revenue growth by 4pts.

• By product line, Recurring revenue growth and Recurring revenue growth constant currency (Non-GAAP) were as follows:

◦Capital markets rose 9% and 14%, respectively, driven by higher BTCS revenues, new sales, and higher trading volumes; and

◦Wealth and Investment management rose 4% and 5%, respectively, driven primarily by revenue from new sales.

• The earnings increase of $21.7 million was driven primarily by the $23.3 million growth in Recurring revenues compared to the prior year period. Pre-tax margins increased by 5.6 percentage points to 11.1% from 5.5%. Amortization expense from acquired intangibles decreased by $7.5 million to $40.4 million in the first quarter of fiscal year 2023 from $47.8 million in the prior year period due to a combination of the impact of foreign exchange and the run-off of older acquisitions.

Other

Loss before income taxes was $44.8 million for the three months ended September 30, 2022, an increase of $22.1 million compared to $22.8 million for the three months ended September 30, 2021.

• The increased loss before income taxes was primarily due to $8.5 million of higher general and administrative expenses, $7.6 million in higher net interest expense and investment losses, and $2.6 million in Russia-Related Exit Costs.

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, Free cash flow and Recurring revenue growth constant currency. These Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results.

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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 are 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, and (iv) Russia-Related Exit Costs. 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 Expenses 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. Russia-Related Exit Costs are direct and incremental costs associated with the Company’s wind down of business activities in Russia in response to Russia’s invasion of Ukraine, including relocation-related expenses of impacted associates.

We exclude Acquisition and Integration Costs, Real Estate Realignment and Covid-19 Related Expenses, and Russia-Related Exit Costs 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 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 less Capital expenditures as well as Software purchases and capitalized internal use software.

Recurring revenue growth constant currency

As a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. The exclusion of the impact of foreign currency exchange fluctuations from our Recurring revenue growth, or what we refer to as amounts expressed “on a constant currency basis,” is a Non-GAAP measure. We believe that excluding the impact of foreign currency exchange fluctuations from our Recurring revenue growth provides additional information that enables enhanced comparison to prior periods.

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Changes in Recurring revenue growth expressed on a constant currency basis are presented excluding the impact of foreign currency exchange fluctuations. To present this information, current period results for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the corresponding period of the comparative year, rather than at the actual average exchange rates in effect during the current fiscal year.

Reconciliation of Non-GAAP measures to the most directly comparable GAAP measures (unaudited)

			Three Months Ended September 30,
			2022						2021
			(in millions)
Operating income (GAAP)			$	87.5					$	103.3
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property			55.9						68.7
Acquisition and Integration Costs			4.1						2.9
Real Estate Realignment and Covid-19 Related Expenses (a)			—						1.8
Russia-Related Exit Costs			2.6						—
Adjusted Operating income (Non-GAAP)			$	150.1					$	176.7
Operating income margin (GAAP)			6.8		%				8.7		%
Adjusted Operating income margin (Non-GAAP)			11.7		%				14.8		%

			Three Months Ended September 30,
			2022						2021
			(in millions)
Net earnings (GAAP)			$	50.4					$	67.2
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property			55.9						68.7
Acquisition and Integration Costs			4.1						2.9
Real Estate Realignment and Covid-19 Related Expenses (a)			—						1.8
Russia-Related Exit Costs			2.6						—
Subtotal of adjustments			62.5						73.4
Tax impact of adjustments (c)			(13.2)						(14.4)
Adjusted Net earnings (Non-GAAP)			$	99.7					$	126.3

			Three Months Ended September 30,
			2022						2021
Diluted earnings per share (GAAP)			$	0.42					$	0.57
Adjustments:
Amortization of Acquired Intangibles and Purchased Intellectual Property			0.47						0.58
Acquisition and Integration Costs			0.03						0.02
Real Estate Realignment and Covid-19 Related Expenses (b)			—						0.02
Russia-Related Exit Costs			0.02						—
Subtotal of adjustments			0.53						0.62
Tax impact of adjustments (c)			(0.11)						(0.12)
Adjusted earnings per share (Non-GAAP)			$	0.84					$	1.07

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(a) Real Estate Realignment and Covid-19 Related Expenses were ($0.1 million) and $1.9 million, respectively, for the three months ended September 30, 2021.

(b) Real Estate Realignment Expenses impacted Adjusted earnings per share by $0.00 for the three months ended September 30, 2021. Covid-19 Related Expenses impacted Adjusted earnings per share by $0.02 for the three months ended September 30, 2021.

(c) Calculated using the GAAP effective tax rate, adjusted to exclude $6.7 million and $4.3 million of excess tax benefits associated with stock-based compensation for the three months ended September 30, 2022 and 2021, respectively. For purposes of calculating the Adjusted earnings per share, the same adjustments were made on a per share basis.

			Three Months Ended September 30,
			2022						2021
			(in millions)
Net cash flows used in operating activities (GAAP)			$	(204.5)					$	(135.4)
Capital expenditures and Software purchases and capitalized internal use software			(13.6)						(15.9)
Free cash flow (Non-GAAP)			$	(218.1)					$	(151.4)

			Three Months Ended September 30, 2022
Investor Communication Solutions			Regulatory						Data-Driven Fund Solutions						Issuer						Customer Communications						Total
Recurring revenue growth (GAAP)			3		%				11		%				16		%				11		%				8		%
Impact of foreign currency exchange			—		%				2		%				—		%				—		%				1		%
Recurring revenue growth constant currency (Non-GAAP)			4		%				13		%				16		%				11		%				9		%

			Three Months Ended September 30, 2022
Global Technology and Operations			Capital Markets						Wealth and Investment Management						Total
Recurring revenue growth (GAAP)			9		%				4		%				7		%
Impact of foreign currency exchange			5		%				2		%				4		%
Recurring revenue growth constant currency (Non-GAAP)			14		%				5		%				10		%

			Three Months Ended September 30, 2022
Consolidated			Total
Recurring revenue growth (GAAP)			7		%
Impact of foreign currency exchange			2		%
Recurring revenue growth constant currency (Non-GAAP)			9		%

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Financial Condition, Liquidity and Capital Resources

Cash and cash equivalents consisted of the following:

			September 30, 2022						June 30, 2022
			(in millions)
Cash and cash equivalents:
Domestic cash			$	34.3					$	43.4
Cash held by foreign subsidiaries			114.0						114.3
Cash held by regulated entities			78.7						67.0
Total cash and cash equivalents			$	227.1					$	224.7

At September 30, 2022, Cash and cash equivalents were $227.1 million and Total stockholders’ equity was $1,903.7 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.

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 September 30, 2022						Carrying value at September 30, 2022						Carrying value at June 30, 2022						Unused Available Capacity						Fair Value at September 30, 2022
															(in millions)
Long-term debt
Fiscal 2021 Revolving Credit Facility:
U.S. dollar tranche			April 2026						$	295.0					$	295.0					$	25.0					$	805.0					$	295.0
Multicurrency tranche			April 2026						—						—						—						400.0						—
Total Revolving Credit Facility									295.0						295.0						25.0						1,205.0						295.0
Fiscal 2021 Term Loans			May 2024						1,540.0						1,536.3						1,535.8						—						1,540.0
Fiscal 2016 Senior Notes			June 2026						500.0						497.5						497.4						—						468.2
Fiscal 2020 Senior Notes			December 2029						750.0						743.6						743.4						—						624.4
Fiscal 2021 Senior Notes			May 2031						1,000.0						991.8						991.5						—						790.7
Total Senior Notes									2,250.0						2,232.9						2,232.3						—						1,883.3
Total debt									$	4,085.0					$	4,064.2					$	3,793.0					$	1,205.0					$	3,718.3

Future principal payments on our outstanding debt are as follows:

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Years ending June 30,						2023						2024						2025						2026						2027						Thereafter						Total
(In millions)						$	—					$	1,540.0					$	—					$	795.0					$	—					$	1,750.0					$	4,085.0

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

			Three Months Ended September 30,
															Change
			2022						2021						$
			(in millions)
Net cash flows used in operating activities			$	(204.5)					$	(135.4)					$	(69.1)
Net cash flows used in investing activities			(13.6)						(36.4)						22.8
Net cash flows provided by financing activities			222.8						217.0						5.7
Effect of exchange rate changes on Cash and cash equivalents			(2.3)						(3.1)						0.8
Net change in Cash and cash equivalents			$	2.4					$	42.2					$	(39.8)
Free cash flow:
Net cash flows used in operating activities (GAAP)			$	(204.5)					$	(135.4)					$	(69.1)
Capital expenditures and Software purchases and capitalized internal use software			(13.6)						(15.9)						2.4
Free cash flow (Non-GAAP)			$	(218.1)					$	(151.4)					$	(66.7)

The increase in cash used in operating activities of $69.1 million in the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, was primarily due to increased scaling of client-related platform implementation and development as well as lower net earnings and non-cash add-backs including lower amortization of acquired intangibles and purchased intellectual property, as compared to the prior year period.

The decrease in cash used in investing activities of $22.8 million in the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, primarily reflects higher acquisition activity in the prior year.

The increase in cash provided by financing activities of $5.7 million in the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, primarily reflects higher proceeds from the exercise of stock options compared to the prior year period, partially offset by lower net debt proceeds.

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. 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 September 30, 2022 are $127.0 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 September 30, 2022 are $166.1 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 September 30, 2022 are $15.7 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 minimum commitments remaining under the AWS Cloud Agreement at September 30, 2022 are $214.9 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 $41.2 million as of September 30, 2022, which represents the carrying value of the Company's investments.

In addition, as of September 30, 2022, the Company has a future commitment to fund $0.9 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 September 30, 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 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 September 30, 2022, our position on the cross-currency swaps was an asset of $156.3 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 May 2021, we settled a forward treasury lock agreement that was designated as a cash flow hedge, for a pre-tax loss of $11.0 million, after which the final settlement loss is being 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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