Broadridge Financial Solutions, Inc. (NYSE:BR) Q2 2024 Earnings Call Transcript

Broadridge Financial Solutions, Inc. (NYSE:BR) Q2 2024 Earnings Call Transcript February 1, 2024

Broadridge Financial Solutions, Inc. beats earnings expectations. Reported EPS is $0.92, expectations were $0.88. Broadridge Financial Solutions, Inc.isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Broadridge Second Quarter and Fiscal Year 2024 Earnings Conference Call. [Operator Instructions]. Also note, today’s event is being recorded. At this time, I’d like to turn the floor over to Edings Thibault, Head of Investor Relations. Please go ahead.

Edings Thibault : Thank you, Jamie, and good morning, everybody, and welcome to Broadridge’s second quarter fiscal year 2024 earnings conference call. Our earnings release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO; and our Chief Financial Officer, Edmund Reese. Before I turn the call over to Tim, a few standard call-outs. One, we will be making forward-looking statements on today’s call regarding Broadridge that involve risks. A summary of these risks can be found on the second page of the slides and a more complete description on our annual report on Form 10-K. Two, we’ll also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge’s underlying operating results.

An explanation of these non-GAAP measures and reconciliations to the comparable GAAP measures can be found in the earnings release and presentation. With that, let me now turn the call over to Tim Gokey. Tim?

Tim Gokey : Thank you, Edings. Good morning, and it was great reconnecting with so many of you at our Investor Day in December. As you heard, we are more optimistic than ever about the near- and long-term growth opportunity that lies ahead. You’ll hear many of those same themes today as I discuss our positive second quarter results and fiscal year outlook. Before I do, let me comment on the unique and complex moment in which we find ourselves. At Davos 2 weeks ago, it was energizing to talk with our senior clients about the opportunities and challenges they see ahead. A lot of the discussion was on the promise of AI and how we move our industry forward. Broadridge’s recent announcement of OpsGPT to leverage generative AI to transform Capital Markets operations was particularly timely.

At the same time, the geopolitical challenges and uncertainties in the environment are clear which makes our highly recurring and resilient business model, all the more attractive. Against this backdrop, it was rewarding to hear our clients continues to think of Broadridge as an important partner for innovation and growth as well as for efficiency and resilience. And with that, let me turn to the quarter. First, Broadridge’s second quarter results marked another step toward our growth plans for both fiscal ’24 and the next 3 years with healthy organic growth across both segments that was in line with our long-term goals. Second, physician growth trends remained positive, with stronger fund position growth and mid-single-digit equity position growth.

Third, we are executing against the growth plan we shared last month at our Investor Day by driving the democratization and digitization of investing, simplifying and innovating trading and modernizing wealth management. Fourth, we generated strong free cash flow in the quarter, keeping us on track to achieve our 100% FY ’24 conversion objective and Edmund will discuss return more capital to shareholders. Finally, as we enter the seasonally larger second half of our fiscal year, we expect to deliver another strong set of results. We are reaffirming our guidance for 6% to 9% recurring revenue growth, 8% to 12% adjusted EPS growth, and importantly, strong closed sales. Now let’s turn from the headlines to Slide 4 to review our results, starting with our governance franchise.

ICS recurring revenue rose 6% in the second quarter. New sales were the biggest driver of growth, a direct result of our focus on delivering innovation across our governance business. We are seeing growth from adding new broker-dealer clients and from sales of our global insights data to asset managers. We’re seeing continued momentum in our regulatory composition and disclosure business, and we’re benefiting from a strong growth in our digital solutions and customer communications. Increasing investor participation remains an important driver for our regulatory revenues, which rose 8% in the second quarter with mid-single-digit position growth across both equities and funds. In a seasonally small quarter, equity position growth was 6%. The biggest driver continues to be managed accounts, which represent just under 50% of physicians and which continues to grow at double digits compared to low single-digit growth for self-directed accounts.

Fund and ETF physician growth increased from last quarter to 5%, and the slowdown in the growth of passive funds was offset by a pickup in the number of active fund positions. Looking ahead, as Edmund will outline, we expect mid-single-digit physician growth in the second half in both equities and funds as investor participation remains healthy. In December, you also heard us discuss the growth opportunities in our other ICS product lines. In Q2, we saw strong growth across issuer and data-driven fund solutions. In customer communications, strong growth in high-margin digital revenue offset lower print. I was particularly pleased with the continued digital transition as you all recall, is a key part of our strategy. In Q2, a significant proportion of this transition was driven by the successful onboarding of one of the largest U.S. wealth managers to our wealth and focused platform.

This is a platform we highlighted at our Investor Day, and it was great to see our printed digital strategy playing out. Four months then, wealth and focus is delivering lower costs and increased investor engagement for our client with industry-leading open rates and click-throughs. Capital markets revenues rose 10% to $262 million. Our focus on optimizing trading and connectivity in the front office continues to pay dividends in the form of strong growth in BTCS. On the post-trade side, we were helping to simplify our clients’ back-office technology. I was pleased to see a new win at a regional bank who will be using multiple Broadridge products to drive their transition to self-clearing. We also continue to drive innovation in capital markets with distributed ledger and AI capabilities.

Early this month, we launched our OpsGPT AI solution. OpsGPT uses generative AI to synthesize complex transactions, settlements and physicians data to enhance clients’ sales resolution. As clients focus on reducing the cost and complexity of their operations, especially in the accelerated world of T+1, they see Broadridge as a natural partner given our deep subject matter expertise and early investment to leverage AI. This progress in innovation, combined with strong BTCS sales in the front office and wins in the back office reinforces how we are successfully helping our clients simplify and innovate in trading. Turning now to wealth and investment management. Revenues rose 4% to $143 million as strong growth from UBS was partially offset by the E-Trade transition.

In early January, we onboarded the first client for alternatives workflow module. As you know, alternatives are one of the fastest-growing asset classes. Wealth managers are offering these products to a rapidly growing set of investors. But many of the back-office processes remain antiquated. We are seeing strong interest in alternatives workflow as wealth firms seek to address this growing opportunity and challenge. Moving to closed sales. Closed sales rose 12% for the first half. As you know, the second half of the year typically accounts for the bulk of our closed sales. And I’m pleased to note that our current pipeline sits at record levels. As important, we’re starting to see more movement within the pipeline, increasing our confidence in the second half.

While our clients remain cautious, we are seeing them invest in products that drive revenue, improve productivity and meet regulatory requirements, which plays to the strength of our solutions. In governance, we have built a strong pipeline around our digital and print solutions for the new tailored shareholder reports. We’re also experiencing increasing demand for our global insight data products from asset managers and we continue to see significant print and digital opportunities in customer communications. Capital markets clients are beginning to look to a world beyond the implementation of T+1, which is driving growing interest in our post-trade capabilities. And in wealth, we saw significant sales in the first half as we begin to convert our strong pipeline.

The net result is that we remain on track to deliver strong closed sales for the year, in line with our guidance of $280 million to $320 million. Let’s move to Slide 5 for some final thoughts on our quarter and outlook. First, I’ll reiterate that Broadridge delivered second quarter results that keep us on track for continued growth with more than 6% recurring revenue growth constant currency and strong free cash flow. Second, those of you who attended our Investor Day last month, heard me talk about how we have made investments over the years to align our business with clear long-term growth trends, including the democratization of investing, the digitization of communications, the acceleration of trading, the growing importance of data in AI and an evolving regulatory environment.

Being aligned with those drivers enables us to help our clients operate, innovate and grow. And in so doing, deliver steady and consistent growth for our investors. This quarter again illustrated how we are executing against those priorities in governance, capital markets and wealth and investment management. Among these drivers, AI, in particular, has the potential to drive step changes in client outcomes. We have committed to be a leader in AI within our space. In the not-distant future, AI will be incorporated into all products, and we are at work doing that across Broadridge. More fundamentally, companies with unique data will be in a differentiated position. And we believe that our position at the center of financial services gives us a unique opportunity to provide industry solutions that will make a difference.

That’s a win-win formula for our clients and our shareholders. The products we’ve already introduced, including BondGPT, OpsGPT and distribution AI are a first step in that direction. Third, based on all that progress, we are reiterating our guidance for both recurring revenue and adjusted EPS growth as well as our outlook for closed sales for the full fiscal year. Fourth, we remain on track to deliver free cash flow conversion of 100% this year, while funding the internal investment we need to continue to deliver innovation to our clients. That’s an approach that will enable us to retain our investment-grade rating, fund internal investment and deliver a strong and growing dividend, while we execute strategic tuck-in M&A and as Edmund will discuss return additional capital to shareholders.

And that brings me to my last point, which is that Broadridge is well positioned to deliver on the 3-year financial objectives we laid out in December, including 79% recurring revenue growth, constant currency, 5% to 8% of which are organic, 8% to 12% adjusted EPS growth as well as to continue to grow beyond FY ’26 as we attack our $60 billion and growing market opportunity. Before I close, I want to thank our 15,000 talented, knowledgeable and hard-working associates. Yesterday, Broadridge was recognized as one of Fortune’s most admired companies. This is the tenth time we’ve been recognized and that’s a direct result of our associates’ commitment delivering great service, resiliency and innovation that makes our clients and our industry stronger, and that enables better financial lives for millions of investors every day.

Thank you. And with that, let me turn it over to Edmund.

Edmund Reese : Thank you, Tim, and good morning, everyone. I’m really pleased to be here to discuss the results for the second quarter. But before moving into the detailed review, it’s important to highlight with the first half signals. For the seasonally larger second half and full year fiscal ’24. First, we continue to execute the Broadridge Financial model in the second quarter results have us right on track to deliver another strong year of recurring revenue growth, margin expansion and adjusted EPS growth, right in line with our guidance. Second, strong free cash flow of positive $91 million through 2 quarters highlights the capital-light nature of our business and increases our confidence and our 100% free cash flow conversion objective in fiscal ’24.

Third, the combination of strong free cash flow and modest M&A in fiscal ’24, means that we expect higher capital return to shareholders through increased share repurchases in the second half of fiscal ’24. And finally, the demand for our products is strong. First half sales were up 12% over last year, and our pipeline and current client discussions reinforce our conviction that we will meet our full year objectives. Additionally, our equity position testing shows mid-single-digit growth for the full year. So we continue to be encouraged by expanding investor participation in the financial markets, serving as a long-term tailwind for our business. These 4 items are the meaningful and significant signals from our results and the performance through the first half.

So now turning to the financial summary on Slide 6, you see the performance for the second quarter. Recurring revenues rose to $899 million, up 6% on a constant currency basis, all organic. Adjusted operating income increased 1% as we modestly increased growth investments given above-trend event-driven revenue. AOI margin declined 100 basis points to 12.4%. Adjusted EPS was up 1% to $0.92. And finally, we delivered closed sales of $58 million in the quarter, bringing our first half total to $106 million up 12% over the first half of fiscal ’23. Let’s get into the details of these results, starting with recurring revenue on Slide 7. Recurring revenue was within our full year guidance range and grew 6% to $899 million in Q2 ’24. Our recurring revenue growth was driven by a combination of converting our backlog to revenue, fund position growth in ICS and double-digit trade volume growth in GTO.

And on Slide 8, we can see recurring revenue growth across our ICS and GTO segments. ICS recurring revenue grew 6% to $493 million, driven by new sales, position growth and float income. Regulatory revenue grew 8%, led by healthy fund and equity position growth and revenue from new sales. Data-driven Fund Solutions’ revenue increased by 9% due to higher float revenue in our retirement and workplace products as well as growth in our data and analytics products. Issuer revenue was up 15%, driven by higher float income in our registered shareholder solutions and revenue from strong sales of our disclosure solutions. Customer Communications revenue was flat, with strong growth in higher-margin digital business was offset by a decline in lower margin print revenues.

We expect print volumes to increase in the second half of fiscal ’24 as we onboard new clients. And I will again pause here to note that customer communications continues to execute on its print to digital strategy, replacing declining print volumes with higher-margin digital revenues. Over the long term, we expect the combination to result in low single-digit top line growth with expanding margins and continued low double-digit earnings growth. Turning to GTO. Recurring revenue grew 8% to $405 million. Capital markets revenue increased 10%, led by new sales in equity and fixed income trading volume growth. I’ll also note the continued strong performance in our front office BTCS solutions, which again had double-digit recurring revenue growth.

Wealth and investment management revenue grew 4% as revenue from the UBS contract was partially offset by the successful transition of E-Trade to the Morgan Stanley platform. which occurred late in the fiscal first quarter. Looking ahead, we continue to have high confidence in both businesses and full year GTO growth being in line with our 5% to 8% organic growth objective. With second half growth in both capital markets and wealth more weighted to the third quarter, driven by the timing of license revenues relative to last year. Turning to Slide 9 for a discussion of volume trends. Position growth for both equity and funds remained at healthy levels in the second quarter. The long-term trends that we highlighted at Investor Day, more investor participation in financial markets and more positions per investor underpin that growth.

Equity position growth was 6%, driven primarily by double-digit managed account growth and more modest growth in self-directed accounts. As we approach the spring proxy season, which typically generates over 80% of our equity communications, our testing is now extending into the second half of the year, giving us insight on the full year relative to our mid- to high single-digit range. Equity position testing shows mid-single-digit growth for the second half of the year. As a result, we now expect mid-single-digit position growth for the full year of fiscal ’24 keeping us on track to deliver our guidance of 6% to 9% recurring revenue growth. Mutual fund and ETF position growth improved from Q1 ’23 to 5%, again driven by passive funds. We expect to see continued mid-single-digit growth for the second half of the year.

And turning now to trade volumes on the bottom of the slide. Trade volumes rose 12% on a blended basis with strong growth in fixed income trading volumes, which benefited our capital markets revenue. And let’s now move to Slide 10 for the recurring revenue growth drivers. Recurring revenue growth of 6% constant currency was all organic and in line with our 5% to 8% 3-year organic growth objective. As I mentioned during Investor Day, we have a decade-long history of delivering 6 points or better of revenue from closed sales each year. In Q2 ’24 had 8 points of contribution with 6 points in ICS and 10 points in GTO, including a boost from wealth management. With continued high retention from existing customers, revenue from net new business contributed 4 points of growth.

Internal growth contributed 2 points to recurring revenue growth, including 1 point from position growth. Foreign exchange had a 0.5 point benefit on recurring revenue growth. So I’ll wrap up the revenue discussion with a view of total revenue on Slide 11. Total revenues grew 9% in Q2 to $1.4 billion, with recurring revenue being the largest contributor powering 4 points of growth. Low to no margin distribution revenues contributed 3 points to total revenue growth. Distribution revenue grew 9%, primarily due to postal rate increases which are a headwind to our adjusted operating income margin. We continue to expect distribution revenue to grow in the high single to low double-digit range, driven by further postal rate increases. Event-driven revenue was $55 million and added 1 point to growth.

As anticipated, we saw more normalized levels of mutual fund proxy activity compared to lower levels in Q2 ’23, driving a 47% increase in event-driven revenue over last year. I will also note that while contest activity is immaterial through the first half of the year, we expect the combination of increased mutual fund proxy activity and higher contest activity will now have us trending modestly above our historical $230 million to $250 million level for the full year. As I mentioned earlier, we have the flexibility to ramp up or ramp down investments based on performance, and we modestly increased growth investments in Q2 based on the above trend event-driven revenue. We are well positioned to stay committed to investing in long-term growth while still delivering our short-term fiscal ’24 adjusted EPS guidance.

Turning now to margins on Slide 12. Adjusted operating income margin was down 100 basis points from prior year to 12.4%. Adjusted operating income margin continued to benefit from the operating leverage on our higher recurring in event revenue and the benefit from the Q4 ’23 restructuring initiative to realign some of our businesses, and streamline our management structure. The net impact of higher distribution revenue and higher float income, which have an immaterial impact on earnings growth as I detailed at the Investor Day, contributed the positive impact of 45 basis points in the quarter. Those benefits were offset by the timing of other expense items and the impact of our growth investments as our outlook on the full year gave us the confidence to invest in product enhancements in our digital technology platforms.

Looking ahead, we continue to expect adjusted operating income margin to increase year-over-year to approximately 20%. And I’ll remind you that we remain focused on disciplined expense management and creating investment capacity. So we continue to expect to complete the restructuring initiative that began in Q4 ’23 and have the remaining restructuring charge by the end of the fiscal year. This restructuring charge will be excluded from our calculation of adjusted operating income and adjusted EPS. Let’s move ahead to close sales on Slide 13. Closed sales were $58 million in the quarter, bringing the first half total to $106 million, up 12% from the first half of 2023. I was also pleased to see a strong start to the second half with continued sales growth in January.

More importantly, the pipeline momentum that Tim mentioned gives us increased confidence in meeting our full year objective. And I’ll turn now to free cash flow on Slide 14. Q2 ’24 free cash flow was $168 million, $64 million better than last year. For the first half, free cash flow is a positive $91 million relative to the negative $115 million in the first half of 2023. These results are being driven by our continued strong earnings growth and lower client platform spend. Free cash flow conversion, calculated this trailing 12-month free cash flow over adjusted net earnings was 110% in Q2 ’24 up from 51% last year. This is consistent with our expectations and has us on track for free cash flow conversion of 100% for fiscal year ’24. On Slide 15, you can see that we remain committed to a balanced capital allocation policy.

For the first half of the year, we invested $66 million on our technology platforms in converting clients to our platforms. Additionally, through the first 6 months, before option proceeds, we returned $330 million in capital to shareholders due to dividend and share repurchases. Given our expectations for 100% free cash flow conversion, we are positioned to return additional capital to shareholders. Based on our current outlook for limited M&A in fiscal 2024, we estimate $350 million to $450 million in total share repurchases, which includes an additional $200 million to $300 million in the second half. So moving to guidance on Slide 16, along with some concluding thoughts. We are successfully executing the Broadridge financial model in fiscal ’24 and therefore, reaffirming our full year guidance on all of our key financial metrics.

We continue to expect 6% to 9% recurring revenue growth, constant currency, adjusted operating income margin of approximately 20%, adjusted EPS growth of 8% to 12% and closed sales of between $280 million to $320 million. And I’ll note that embedded in that full year guidance is high single-digit year-over-year adjusted EPS growth for both Q3 and Q4. In addition to the guidance for fiscal ’24, it’s important that I highlight our high free cash flow business model. We are investing for the long term beyond 2024. And after 6 months in our fiscal year of strong free cash flow conversion, we are confident in our ability to consistently generate 100% free cash flow conversion. That free cash flow conversion, combined with our current outlook for limited M&A in the next 2 quarters, positions our capital return through dividends and share repurchases to reach a total of $700 million to $800 million in fiscal 2024.

And finally, the drivers of growth, both strong demand and investor participation, combined with the investments that I mentioned earlier, give us confidence in meeting our 2024 to 2026 objectives in driving sustainable long-term growth. So with that, let’s take your questions. Operator?

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Q&A Session

Operator: [Operator Instructions]. Our first question today comes from James Faucette from Morgan Stanley.

James Faucette : Great. I just want to check some quick math on the Wealth segment. It looks like client losses were about a 3-point drag to constant currency recurring revenue growth. And if I presume that those losses were concentrated in the wealth business, without them that business probably would have grown about 6% to 7%. Are we kind of looking at that arithmetic about right?

Edmund Reese: So James, first, and thanks for the question on wealth. I think there’s a couple of points to make in your question there. First, just generally for Broadridge. As I talked about during Investor Day, and as you see here, we just have a long history of retaining 97% to 98% of our existing recurring revenue. And when I set aside transitioning E-Trade to Morgan Stanley, I think we’re right in line with that. And even with it, we’re 3 points of contribution. So that’s sort of the first point. I think that you can do the math on the wealth segment, we gave a good sense about exactly what the incremental wealth revenue would be for the year, just over $75 million. We said that would largely be offset by transitioning E-Trade. And so it gives you some sense about what the losses would be with — knowing those 2 components.

James Faucette : Got it. Got it. Okay. That’s helpful. And then more broadly, I guess, obviously, constructive to see the year-to-date closed sales number. And I think you had previously spoken about some of that being adversely impacted by European tech discretionary weakness. But you’ve now reiterated the closed sales outlook. Your tone seems particularly bullish on that. So can you give a little more insight into maybe if there is an improvement in the overall demand environment, what you think is motivating that? And how Broadridge is — are there incremental opportunities for Broadridge to take advantage of?

Tim Gokey: Yes, James, it’s Tim. I’ll take that one. And first of all, thanks for the question because I think we do feel really good about where we are on this. And as a reminder, obviously, closed sales don’t have much impact on this year. This year is really supported by the conversion of our strong backlog, the $400 million we talked about at the beginning of the year. So this is all a question about future growth. And we saw a strong first half. January was strong. The — and the one thing I just want to point out for you and our listeners is that, that growth that we’ve seen so far really came from the areas that we’ve been investing in, like the front office and like wealth management, which is really nice to see. And as we look at the second half, we’re having really good conversations around tailored shareholder reports, around digital communications, continued front-office discussions, continued wealth discussions.

And it’s true that we’ve heard caution from other tech companies and that we have been seeing weakness in Europe previously and that sales cycles remain extended. I think partly what we’re seeing now is, as we said, those conversations were extended, but they didn’t go away and some of those are now coming through. And we’re seeing that clients really are willing to spend on areas that drive revenue, that lower costs, that have specific regulatory needs, all of those really fit very well. So we are seeing that conversion of that strong pipeline improving. And you should have heard in the tone, and we do feel a lot — some very good confidence in achieving our sales guidance of $280 million to $320 million, which is obviously a nice uptick on last year and really returns us to the long-term growth trend there.

Operator: Our next question comes from David Togut from Evercore ISI.

David Togut : Tim and Edmund. I’ll combine my 2 questions upfront. The first is really on headwinds and tailwinds. The first part is really on revenue. Edmund, you talked about event-driven revenue likely coming in above the historical trend line average of $230 million to $250 million. So that seems like a nice tailwind and then the other, you seem to be guiding more toward the bottom half of your range on record growth mid-single digit versus the 6% to 9%. So maybe you could just walk through those walk through those 2 dynamics and how they might balance out in the guide? And then the second is really on expenses. SG&A, as you called out in your remarks, was up more than revenue in support of the ramp in event driven. Can you talk about the evolution of operating expenses in the back half of the year?

Edmund Reese: Yes, thanks for the question. I think it’s an important one and gives us an opportunity to emphasize our confidence in being in line with the full year guidance that we have. Your first question is really on headwinds and tailwinds relative to the overall guidance and how we think about event as part of that. Let me first maybe make a comment on the event and then talk about the overall recurring revenue guidance itself and the headwinds and the tailwinds. On event, thus far, as we talked about in the prepared remarks, through the first half of the year, we have seen strong event. And while headlines might suggest sort of higher contest activity, it was really driven by a recovery in the mutual fund proxy activity given the low levels that we saw in Q4 ’23, we expect that to continue in the back half of the year.

And there could likely be some more contest activity. But I did mention that we started increasing investments in Q2 in this current quarter because of the outlook on the full year, including the outlook on the event-driven revenue. And it’s good when we have these types of transparency earlier in the year, because, as you know, we have a number of unfunded investments that when we are performing above our expectations. We go deeper in that list and increase those investments. We’re able to do that because it drives long-term growth and still allows us to be within our overall guidance of 8% to 12%. And so I think as we think about strength and event being above those levels, we’ll continue to look for opportunities to invest while we have the opportunity to do it.

Overall, on the recurring revenue guidance, as I’ve said before, I think it really comes down to 3 items in those 3 items are our ability to be able to convert our revenue backlog to revenue and as you know, we’ve had a long history of being able to do that, driving over 6 points of growth from that, and we had a very, very strong quarter. So I continue to feel very confident that we will be right in line with our expectations there. We had included in our guidance, mid- to high single-digit position growth. The testing is now showing mid-single-digit growth. So that allows us to stay right in line with the guidance. And I think the third item that I’ll mention here has been float income, which really is a first half event and no change to that thinking.

So I think halfway through the year, we’re still very comfortable about where we are and still being within that 6% to 9% range. On expenses, look, I am really, really pleased about not just the long history of being able to drive margin expansion here. I know you know very well, 50 basis points over the last 10 years, including 77 basis points in our last 3-year objectives. But we have been able to execute based on the operating leverage that we have in the business based on our move to digital, based on the initiatives that we have been taking to realign our businesses and not only deliver margin expansion but create investment capacity. I do not get hung up in any particular quarter when it comes to margin expansion. As I think about the full year, it is playing out just as we expected.

We still expect to be approximately at 20% AOI margin. But more importantly, we’re creating that capacity to be able to invest in the items that Tim mentioned in his prepared remarks. So we’ll be right there as the year completes.

Operator: Our next question comes from Dan Perlin from RBC Capital.

Dan Perlin : I just wanted to maybe revisit the wealth expectation as we just go into kind of the third and fourth quarters here. So you said that E-Trade kind of came off, I think you said late in the quarter. And so I don’t want to get over our skis kind of jumping into the March quarter. So the expectation is that the 143 that you printed, it could step down from there despite the fact that new sales look pretty robust in that area? Is that a fair assumption? As we think about modeling that second half?

Tim Gokey: Yes. Dan, it’s Tim. No, we don’t see it stepping down. It is — E-Trade was off for pretty much the entire quarter. And so I think the balance you saw in this quarter will be similar going forward. There may be some other factors up and down, but the net of those 2 is positive.

Dan Perlin : Okay. Got it. That’s super helpful.