What changed in this filing

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Item 1A. Risk Factors

2021-08-12 compared with 2020-08-11 · 55 added, 50 removed, 217 unchanged (33% of the section changed)

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If any of the following risks and uncertainties develop into actual events, they could have a material adverse effect on our business, financial condition, or results of operations.

The current Covid-19 pandemic may negatively impact our business, results of operations and financial performance.

The current Covid-19 pandemic is having a significant effect on the world economy, which has created significant uncertainties.

These uncertainties include, but are not limited to, the adverse effects of the pandemic on the economy, our employees, our clients and our third-party service providers and the general impact of recession in the U.S.

The Covid-19 pandemic has created significant volatility, uncertainty and business and economic disruption.

The Covid-19 pandemic may negatively impact our business, results of operations and financial performance.

The Covid-19 pandemic is having a significant effect on the world economy, which has created significant uncertainties.

These uncertainties include, but are not limited to, the adverse effects of the pandemic on the economy, our employees, our clients and our third-party service providers.

The Covid-19 pandemic has created significant uncertainty and business and economic disruption.

Any of the following factors, or other cascading effects of the Covid-19 pandemic that are not currently foreseeable, could negatively affect our operations and performance of our services, increase our costs, and negatively impact our sales, results of operations and our liquidity position, possibly to a significant degree:

• The Covid-19 pandemic and the stay-at-home orders and quarantine rules resulting from the pandemic have had an impact on our ability to perform our services and the operations of our facilities.

Our ability to provide our services and solutions could continue to be negatively impacted, including as a result of our employees or our clients’ and vendors’ employees working remotely, or due to business slowdown or interruption caused by the illness of our employees or the safety measures implemented to prevent the illness of our employees such as the potential closures of offices and facilities.

• The Covid-19 pandemic and the stay-at-home orders and quarantine rules resulting from the pandemic could have an impact on our ability to perform our services and the operations of our facilities.

Our ability to provide our services and solutions could be negatively impacted, including as a result of our employees or our clients’ and vendors’ employees working remotely, or due to business slowdown or interruption caused by the illness of our employees or the safety measures implemented to prevent the illness of our employees such as the potential closures of offices and facilities.

In addition, a resurgence of the Covid-19 virus in the areas where we operate could result in additional stay-at-home orders being put in place.

Our inability or failure to properly perform our services could cause us to incur expenses including service penalties, lose revenues, lose clients or damage our reputation.

• We have taken several measures in response to Covid-19, including adopting strict social distancing and cleaning measures in our production facilities, taking the temperature of production-related employees in affected areas, and instituting remote work for many of our employees.

We may take further actions in our facilities as may be required by government authorities or as we determine are in the best interests of our employees, clients, and vendors.

We may take further actions in our facilities as may be required by government authorities or as we determine are in the best interests of our employees, clients, and vendors, including as employees return to our offices.

There is no certainty that such measures will be sufficient to mitigate the risks posed by Covid-19 or will be satisfactory to government authorities.

• We are a global company and our business is highly dependent on the financial services industry and exchanges and market centers, particularly in North America.

The current pandemic continues to adversely impact global commercial activity in many countries, including the U.S., and has contributed to significant volatility in financial markets.

An extended period of market disruption or closures, or a prolonged economic downturn (including whether there is a resurgence or second wave of infections) could negatively impact our business and financial results.

We have experienced a decrease in demand for certain of our services and a delay or reduction in our sales which could continue if the economic downturn is prolonged or it causes financial stress for our clients.

• We are a global company and our business is highly dependent on the financial services industry and exchanges and market centers.

The pandemic continues to adversely impact global commercial activity.

An extended period of market disruption or closures, or a prolonged economic downturn, could negatively impact our business and financial results.

We could experience a decrease in demand for our services or a delay or reduction in our sales if a prolonged economic downturn causes financial stress for our clients.

We could also experience a delay in onboarding our clients.

Further, the decline in market activity has resulted in decreased assets under administration negatively impacting our mutual fund processing business.

Further, a sustained decline in market values could result in decreased assets under administration negatively impacting our mutual fund processing business.

In addition, lower interest rates have negatively impacted our mutual fund processing and transfer agency businesses.

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There are no comparable recent events which may provide guidance as to the effect of the Covid-19 pandemic, and, as a result, its ultimate impact is highly uncertain and subject to change.

We do not yet know the full extent of the impacts on our business, our operations or the global economy and the full impact will depend on numerous evolving factors that are outside our control.

We cannot foresee the full extent of the impacts on our business, our operations or the global economy and the full impact will depend on numerous evolving factors that are outside our control.

However, the effects could have a material adverse effect on our business, results of operations and financial performance.

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A large percentage of our revenues are derived from a small number of clients in the financial services industry.

In fiscal year 2020, we derived approximately 20 % of our consolidated revenues from our five largest clients and approximately 52% of the revenues of our Global Technology and Operations segment from the 15 largest clients in that segment.

In fiscal year 2021, we derived approximately 51% of the revenues of our Global Technology and Operations segment from the 15 largest clients in that segment.

Our largest single client accounted for approximately 6% of our consolidated revenues in fiscal year 2021.

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We also handle personal information of our employees in connection with their employment.

We maintain systems and procedures including encryption, authentication technology, data loss prevention technology, entitlement management, access control and anti-malware software, and transmission of data over private networks to protect against unauthorized access to physical and electronic information, including by cyber-attacks.

In certain circumstances, our third-party vendors may have access to sensitive data including personal information.

It is also possible that a third-party vendor could intentionally or inadvertently disclose sensitive data, including personal information.

We require our third-party vendors to have appropriate security controls if they have access to the personal information of our clients’ customers.

We require our third-party vendors to have appropriate security controls if they have access to the personal information of our clients’ customers or our employees.

However, despite those safeguards, it is possible that unauthorized individuals could improperly access our systems or those of our vendors, or improperly obtain or disclose the sensitive data including personal information that we or our vendors process or handle.

Many of our services are provided through the Internet which increases our exposure to potential cybersecurity attacks.

We have experienced cybersecurity threats to our information technology infrastructure and have experienced non-material cyber-attacks, attempts to breach our systems and other similar incidents.

We have experienced cybersecurity threats to our information technology infrastructure and have experienced non-material cybersecurity attacks, attempts to breach our systems and other similar incidents.

Future threats could cause harm to our business and our reputation and challenge our ability to provide reliable service, as well as negatively impact our results of operations materially.

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As a provider of services to financial institutions and issuers of securities, our services are provided in a manner designed to assist our clients in complying with the laws and regulations to which they are subject.

Therefore, our services, such as our proxy and shareholder report distribution and processing and customer communications services, are particularly sensitive to changes in laws and regulations governing the financial services industry and the securities markets.

Our services and the fees we charge our clients for certain services are subject to change if applicable SEC or stock exchange rules or regulations are amended, or new laws or regulations are adopted, which could result in a negative impact on our business and financial results.

Therefore, our services, such as our proxy services, shareholder report distribution, and customer communications services, are particularly sensitive to changes in laws and regulations governing the financial services industry and the securities markets.

Changes in laws and regulations could require changes in the services we provide or the manner in which we provide our services, or they could result in a reduction or elimination of the demand for our services.

Our investor communications services and the fees we charge our clients for certain services are subject to change if applicable SEC or stock exchange rules or regulations are amended, or new laws or regulations are adopted, which could result in a material negative impact on our business and financial results.

For example, the SEC’s recently proposed modifications to the mutual fund and exchange-traded fund disclosure framework could have an impact on our services, business and financial results if adopted and implemented as proposed.

In addition, new regulations governing our clients could result in significant expenditures that could cause them to reduce their use of our services, seek to renegotiate existing agreements, or cease or curtail their operations, all of which could adversely impact our business.

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The legislative and regulatory environment of the financial services industry is continuously changing.

The SEC, FINRA, DOL and various stock exchanges, and other U.S.

and foreign governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations.

These legislative and regulatory initiatives may adversely affect the way in which we conduct our business and may make our business less

Also, changes in the interpretation or enforcement of existing laws and regulations by those entities may adversely affect our business.

The SEC, FINRA, DOL, various stock exchanges and other U.S.

and foreign governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations or provide revised interpretations or they may change the enforcement priorities with respect to existing laws and regulations.

These legislative and regulatory initiatives may impact the way in which we conduct our business, requiring changes to the way we provide our services or additional investment which may make our business less profitable.

Further, as a provider of technology services to financial institutions, certain aspects of our U.S.

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A sufficiently unfavorable review from the FFIEC could have a material adverse effect on our business.

With an increased focus on vendor risk management, the FFIEC and other regulatory agencies provide guidelines for overseeing technology service providers, increasing the contractual requirements with our clients and the cost of providing our services.

Our business process outsourcing, mutual fund processing and transfer agency solutions as well as the entities providing those services are subject to regulatory oversight.

Our provision of these services must comply with applicable rules and regulations of the SEC, FINRA, DOL and various stock exchanges, and other regulatory bodies charged with safeguarding the integrity of the securities markets and other financial markets and protecting the interests of investors participating in these markets.

If we fail to comply with any applicable regulations in performing those services, we could lose our clients, be subject to suits for breach of contract or to governmental proceedings, censures and fines, our reputation could be harmed, and we could be limited in our ability to obtain new clients.

In addition, in connection with the offering of CITs, Matrix Trust acts as a discretionary trustee and ERISA fiduciary.

ERISA and the applicable provisions of the federal tax laws impose a number of duties on persons who are fiduciaries under ERISA.

As a result, we may face the risk of lawsuits and regulatory proceedings resulting from a breach of Matrix Trust’s fiduciary responsibilities.

For a description of the aspects of our business that are subject to regulatory compliance or oversight, please refer to Part I, “Item 1.

Business - Regulation” of this Annual Report on Form 10-K for a more detailed discussion.

Our provision of these services must comply with applicable rules and regulations of the SEC, FINRA, DOL, various stock exchanges and other regulatory bodies charged with safeguarding the integrity of the securities markets and other financial markets and protecting the interests of investors participating in these markets.

If we fail to comply with any applicable regulations in performing these services, we could be subject to suits for breach of contract or to governmental proceedings, censures and fines.

In addition, we could lose clients and our reputation could be harmed, negatively impacting our ability to attract new clients.

As a provider of data and business processing solutions, our systems contain a significant amount of sensitive data, including personal information, related to our clients, customers of our clients, and our employees.

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While we believe that Broadridge is compliant with its regulatory responsibilities, information security threats continue to evolve resulting in increased risk and exposure and increased costs to protect against the threat of information security breaches or to respond to or alleviate problems caused by such breaches.

For a description of privacy and information security regulations affecting us, please refer to Part I, “Item 1.

Business - Regulations - Privacy and Information Security Regulations” of this Annual Report on Form 10-K for a more detailed discussion.

Our ability to comply with regulations depends largely upon the maintenance of an effective compliance system which can be time consuming and costly, as well as our ability to attract and retain qualified compliance personnel.

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Volatility in the securities markets and sudden sharp or gradual but sustained declines in market participation and activity can result in reduced investor communications activity, including reduced proxy and event-driven communications processing such as mutual fund proxy, mergers and acquisitions and other special corporate event communications processing, and reduced trading volumes.

In addition, our event-driven fee revenues are based on the number of special events and corporate transactions we process.

In addition, our event-driven fee revenues are based on the number of special corporate events and transactions we process.

Event-driven activity is impacted by financial market conditions and changes in regulatory compliance requirements, resulting in fluctuations in the timing and levels of event-driven fee revenues.

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Changes in the business condition (financial or otherwise) of these service providers or vendors could impact their provision of services to us or they may no longer be able to provide services to us at all, which could have a material adverse effect on our business and financial results.

In such circumstances, we cannot be certain that we will be able to replace our key third-party vendors in a timely manner or on terms commercially reasonable to us given, among other reasons, the scope of responsibilities undertaken by some of our providers, the depth of their experience and their familiarity with our operations generally.

If we change a significant vendor, an existing provider makes significant changes to the way it conducts its operations, or is acquired, or we seek to bring in-house certain services performed today by third parties, we may experience unexpected disruptions in the provision of our solutions, which could have a material adverse effect on our business and financial results.

Furthermore, certain third-party services providers or vendors may have access to sensitive data including personal information, valuable intellectual property and other proprietary or confidential data provided to us by our clients.

In such circumstances, we cannot be certain that we will be able to replace our key third-party vendors in a timely manner or on terms commercially reasonable to us given, among other reasons, the scope of responsibilities undertaken by some of our service providers, the depth of their experience and their familiarity with our operations generally.

If we change a significant vendor, an existing service provider makes significant changes to the way it conducts its operations, or is acquired, or we seek to bring in-house certain services performed today by third parties, we may experience unexpected disruptions in the provision of our solutions, which could have a material adverse effect on our business and financial results.

Furthermore, certain third-party service providers or vendors may have access to sensitive data including personal information, valuable intellectual property and other proprietary or confidential data provided to us by our clients.

It is possible that a third-party vendor could intentionally or inadvertently disclose sensitive data including personal information, which could have a material adverse effect on our business and financial results and damage our reputation.

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In addition, we may not be able to prevent cybersecurity attacks on our systems.

Moreover, because we have outsourced our data center operations and use third-party cloud services for storage of certain data, the operation, performance and security functions of the data center and the cloud system involve factors beyond our control.

Moreover, because we have outsourced our data center operations and use third-party cloud services providers for storage of certain data, the operation, performance and security functions of the data center and the cloud system involve factors beyond our control.

Any significant degradation or failure of our computer systems, communications systems or any other systems in the performance of our services could cause our clients or their customers to suffer delays in their receipt of our services.

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These factors are in turn affected by general national and international economic and political conditions, and broad trends in business and finance that result in changes in participation and activity in the securities markets.

For example, the Covid-19 pandemic continues to adversely impact global commercial activity and has contributed to a general economic recession, adversely impacting our clients and the markets.

For example, the Covid-19 pandemic continues to adversely impact global commercial activity and has contributed to a general economic recession, adversely impacting our clients.

These factors include:

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If we fail to compete effectively, our market share could decrease and our business, financial condition, and results of operations could be materially harmed.

Our business, financial position, and results of operations could be harmed by adverse rating actions by credit rating agencies.

If the credit ratings of our outstanding indebtedness are downgraded, or if rating agencies indicate that a downgrade may occur, our business, financial position, and results of operations could be adversely affected and perceptions of our financial strength could be damaged.

A downgrade would have the effect of increasing our borrowing costs and could decrease the availability of funds we are able to borrow, adversely affecting our business, financial position, and results of operations.

In addition, a downgrade could adversely affect our relationships with our clients.

For further information with respect to our borrowing costs, see Note 13, “Borrowings” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K.

We may be unable to attract and retain key personnel.

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The core risks are in the areas of:

• valuation :

finding suitable businesses to acquire at affordable valuations or on other acceptable terms;

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• borrowing money from lenders or selling equity or debt securities to the public to finance future acquisitions on terms that may be adverse to us;

• additional debt incurred to finance an acquisition could impact our liquidity and may cause a credit downgrade;

• loss of clients of the acquired business;

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• general economic and political conditions.

We have incurred additional debt in connection with the Itiviti acquisition, which could have a negative impact on our financing options and liquidity position, which could in turn adversely affect our business.

As of June 30, 2021, we had $3,914.4 million in aggregate principal amount of total debt.

Additionally, our revolving credit facility has a remaining borrowing capacity of $1,385.6 million as of June 30, 2021.

Our overall leverage and the terms of our financing arrangements could:

• limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity;

• make it more difficult for us to satisfy the terms of our debt obligations;

• limit our ability to refinance our indebtedness on terms acceptable to us, or at all;

• limit our flexibility to plan for and to adjust to changing business and market conditions and increase our vulnerability to general adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements;

• increase our vulnerability to adverse economic or industry conditions.

Our ability to meet expenses and debt service obligations will depend on our future performance, which could be affected by financial, business, economic and other factors.

If we are not able to pay our debt service obligations, we may be required to refinance all or part of our debt, sell assets, borrow more money or raise additional equity capital.

In addition, if the credit ratings of our outstanding indebtedness are downgraded, or if rating agencies indicate that a downgrade may occur, our business, financial position, and results of operations could be adversely affected and perceptions of our financial strength could be damaged.

A downgrade would also have the effect of increasing our borrowing costs and could decrease the availability of funds we are able to borrow, adversely affecting our business, financial position, and results of operations.

Further, a downgrade could adversely affect our relationships with our clients.

We may incur non-cash goodwill impairment charges in the future.

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dollar and non-U.S.

For example, the United Kingdom’s withdrawal from the European Union (“Brexit”) became effective on January 31, 2020.

A transition period will apply until the end of 2020 (or later, if extended) during which the pre-Brexit legal regime will continue to apply while the United Kingdom and European Union negotiate rules that will apply to their future relationship.

It is unknown how that future relationship will be structured which is likely to lead to differing laws and regulations in the United Kingdom and European Union and further global economic, trade and regulatory uncertainty.

This continued uncertainty surrounding the withdrawal, has caused, and may continue to cause, economic uncertainty including volatility in global stock markets and currency exchange rate fluctuations, resulting in a decline in the value of the British pound relative to the U.S.

Brexit may also negatively impact our clients with operations in the United Kingdom, which may cause them to reduce their spending on our solutions and services.

In addition, our operations and our ability to deliver our services to our clients could be adversely impacted if there is instability, disruption or destruction in certain geographic regions including as a result of natural or man-made disasters, wars, terrorist activities, or any widespread outbreak of an illness, pandemic or other local or global health issue.

For example, the United Kingdom’s withdrawal from the European Union (“Brexit”) became effective on January 31, 2020 and on December 24, 2020, the United Kingdom and the European Union entered into the EU-UK Trade and Cooperation Agreement, which governs bilateral relations in areas such as trade, intellectual property, and energy.

However, the post-Brexit relationship between the United Kingdom and the European Union is new and evolving, and any continuing legal or economic disruptions resulting from Brexit may negatively impact our clients with operations in the United Kingdom, which may cause them to reduce their spending on our solutions and services.

Certain of our services may be exposed to risk from our counterparties and third parties.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors