What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-08-12 compared with 2020-08-11 · 184 added, 233 removed, 479 unchanged (47% of the section changed)

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Investor Communication Solutions and Global Technology and Operations.

Investor Communication Solutions

We provide governance and communications solutions through our Investor Communication Solutions business segment to the following financial services clients:

banks/broker-dealers, asset management firms/mutual funds, wealth management firms, and corporate issuers.

In addition to financial services firms, our Customer Communications business also serves companies in the healthcare, insurance, consumer finance, telecommunications, utilities and other service industries.

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 also provide the distribution of regulatory reports 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 multi-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, we provide mutual fund trade processing services for retirement service providers, third party administrators, financial advisors, banks and wealth management professionals.

In addition, we provide public corporations and mutual funds with a full suite of solutions to help manage their annual meeting process, including registered and beneficial proxy distribution and processing services, proxy and annual report document management solutions, virtual shareholder meeting services, and solutions that help gain insight into their shareholder base through our shareholder data services.

We also offer financial reporting document composition and management solutions, SEC disclosure and filing services, and registrar, stock transfer and record-keeping services through Broadridge Corporate Issuer Solutions.

We provide customer communications solutions which include print and digital solutions, content management, postal optimization, and fulfillment services.

These services include customer communications management capabilities through the Broadridge Communications Cloud platform.

Through one point of integration, the Communications Cloud helps companies create, deliver, and manage multi-channel communications and customer engagement.

The platform includes data-driven composition tools, identity and preference management, multi-channel optimization and digital communication experience, archive and information management, digital and print delivery, and analytics and reporting tools.

Global Technology and Operations

We are a leading global provider of securities processing solutions for capital markets, wealth management, and asset management firms.

We offer advanced solutions that automate the securities transaction lifecycle, from desktop productivity tools, data aggregation, performance reporting, and portfolio management to order capture and execution, trade confirmation, margin, cash management, clearance and settlement, asset servicing, reference data management, reconciliations, securities financing and collateral optimization, compliance and regulatory reporting, and portfolio accounting and custody-related services.

Our core post-trade services help financial institutions efficiently and cost-effectively consolidate their books and records, gather and service assets under management and manage risk, thereby enabling them to focus on their core business activities.

Our multi-asset, multi-market, multi-entity and multi-currency solutions support real-time global trade processing of equity, fixed income, mutual fund, foreign exchange, and exchange traded derivatives.

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

Through our Managed Services, we provide business process outsourcing services that support the entire trade lifecycle operations of our buy- and sell-side clients’ businesses through a combination of our technology and our operations expertise and we provide support for advisor, investor and compliance workflow.

Assets acquired and liabilities assumed in business combinations are recorded on the Company’s Consolidated Balance Sheets as of the respective acquisition date based upon the estimated fair values at such date.

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The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed is allocated to Goodwill.

Pro forma supplemental financial information for all acquisitions is not provided as the impact of these acquisitions on the Company’s operating results was not material for any acquisition individually or in the aggregate.

The following represents the fiscal year 2021 acquisitions:

Fiscal Year 2021 Acquisitions:

Financial information on each transaction is as follows:

Itiviti Advisor-Stream Total

(in millions)

Cash payments, net of cash acquired $ 2,580.4 $ 23.2 $ 2,603.6

Deferred payments, net — 2.9 2.9

Contingent consideration liability — 7.3 7.3

Aggregate purchase price $ 2,580.4 $ 33.4 $ 2,613.8

Net tangible assets acquired / (liabilities assumed) $ (256.6) $ (3.0) $ (259.6)

Goodwill 1,932.4 25.8 1,958.2

Intangible assets 904.6 10.5 915.1

Aggregate purchase price $ 2,580.4 $ 33.4 $ 2,613.8

Itiviti Holding AB (“Itiviti”)

In May 2021, the Company acquired Itiviti, a leading provider of trading and connectivity technology to the capital markets industry.

The acquisition of Itiviti extends the Company’s back-office capabilities into the front-office and deepens its multi-asset class solutions, better enabling the Company to help its clients adapt to a rapidly evolving marketplace.

Itiviti is included in the Company’s GTO reportable segment.

• Goodwill is not tax deductible.

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

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

AdvisorStream Ltd.

(“AdvisorStream”)

In June 2021, the Company acquired AdvisorStream, a leading provider of digital engagement and marketing solutions for the global wealth and insurance industries.

AdvisorStream's advisor marketing platform enables advisors to drive revenue and growth by providing personalized and consistent client communications.

AdvisorStream is included in the Company’s GTO reportable segment.

• Goodwill is not tax deductible.

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

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

The following represents the fiscal year 2020 acquisitions:

Fiscal Year 2020 Acquisitions:

BUSINESS COMBINATIONS

Financial information on each transaction is as follows:

Shadow Financial Fi360 Clear-Structure Funds-Library Total

Shadow Financial Fi360 Clear-Structure Funds-Library Other Acquisitions Total

(in millions)

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

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

In November 2019, we acquired Fi360, a provider of fiduciary and Regulation BI solutions for the wealth and retirement industry, including the accreditation and continuing education for the Accredited Investment Fiduciary ® Designation, the leading designation focused on fiduciary responsibility.

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

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

ClearStructure

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

The allocation of the purchase price will be finalized upon completion of the analysis of the fair values of the acquired business’ assets and liabilities, and is still subject to a working capital adjustment.

In February 2020, we acquired FundsLibrary, a provider of fund document and data dissemination in the European market.

FundsLibrary's solutions enable fund managers to increase distribution opportunities and help them comply with regulations such as Solvency II and MiFID II.

The business will be combined with FundAssist, Broadridge's existing European funds regulatory communications business.

The combined solution provides funds with a single, integrated provider to manage data, perform calculations, compose documents, manage regulatory compliance and disseminate information across multiple jurisdictions.

The business was combined with FundAssist, Broadridge's existing European funds regulatory communications business.

The combination of FundsLibrary's data platform and technology with Broadridge's existing fund calculation, document creation and translation capabilities, creates an end-to-end solution for fund managers and distributors, enabling them to respond to demanding regulatory requirements across multiple jurisdictions.

• Goodwill is not tax deductible.

• Intangible assets acquired consist primarily of customer relationships and software technology, which are being amortized over a seven-year life and three-year life, respectively.

The following represents the fiscal year 2019 acquisitions:

Fiscal Year 2019 Acquisitions:

BUSINESS COMBINATIONS

Financial information on each transaction is as follows:

Rockall RPM TD Ameritrade* Total

(in millions)

Cash payments, net of cash acquired $ 34.9 $ 258.3 $ 61.5 $ 354.7

Deferred payments, net

0.5 40.9 — 41.4

Contingent consideration liability

7.0 0.8 — 7.9

Aggregate purchase price

$ 42.4 $ 300.1 $ 61.5 $ 404.0

Net tangible assets acquired / (liabilities assumed)

$ (2.9) $ 6.8 $ — $ 3.9

31.1 181.6 27.1 239.8

Intangible assets

14.2 111.7 34.4 160.3

Aggregate purchase price

$ 42.4 $ 300.1 $ 61.5 $ 404.0

* Broadridge acquired the retirement plan custody and trust assets from TD Ameritrade Trust Company.

In May 2019, we acquired Rockall, a provider of SBL and collateral management solutions for wealth management firms and commercial banks.

The acquisition expands Broadridge's core front-to-back office wealth capabilities, providing innovative SBL and collateral management technology solutions to help firms manage risk and optimize clients' securities lending and financing needs.

• The contingent consideration liability is payable over the next two years upon the achievement by the acquired business of certain revenue targets, and has a maximum potential pay-out of $10.1 million upon the achievement in full of the defined financial targets by the acquired business.

• The fair value of the contingent consideration liability at June 30, 2020 is $7.6 million.

• Goodwill is not tax deductible.

• Intangible assets acquired consist primarily of software technology and customer relationships, which are being amortized over a four-year life and six-year life, respectively.

• In the first quarter of fiscal year 2020, the Company settled deferred payment obligations totaling $0.5 million.

In June 2019, we acquired RPM, a Canadian provider of enterprise wealth management software solutions and services.

The addition of RPM’s state-of-the-art technology platforms builds upon our Canadian wealth management business, providing a solution set for the retail banking sector with enhanced mutual fund and deposit manufacturing capabilities.

• The contingent consideration liability is payable over the next two years upon the achievement by the acquired business of certain revenue targets, and has a maximum potential pay-out of $3.7 million upon the achievement in full of the defined financial targets by the acquired business.

• The fair value of the contingent consideration liability at June 30, 2020 is $0.8 million.

• Goodwill is partially tax deductible.

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

• In the first quarter of fiscal year 2020, the Company settled deferred payment obligations totaling $40.9 million.

Retirement Plan Custody and Trust Assets from TD Ameritrade

In June 2019, Broadridge acquired the retirement plan custody and trust assets from TD Ameritrade Trust Company, a subsidiary of TD Ameritrade Holding Company.

The acquisition expands Broadridge's suite of solutions for the growing qualified and non-qualified retirement plan services market and the support it provides for third-party administrators, financial advisors, record-keepers, banks, and brokers.

• Goodwill is tax deductible.

• Intangible assets acquired consist of customer relationships, which are being amortized over a seven-year life.

BASIS OF PRESENTATION

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Amounts presented may not sum due to rounding.

Certain prior period amounts have been reclassified to conform to the current year presentation where applicable, except as it relates to (i) ASU No.

Certain prior period amounts have been reclassified to conform to the current year presentation where applicable, except as it relates to ASU No.

2016-02, as amended “Leases” (“ASU No.

2016-02”), (ii) ASU No.

2014-09, “Revenue from Contracts with Customers” (“ASU No.

2014-09”), (iii) ASU No.

2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU No.

2016-01”), and (iv) ASU No.

2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU No.

2018-02”), as described further below.

In presenting the Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures.

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2016-02, as amended is included in Note 2, “Summary of Significant Accounting Policies” and Note 8, “Leases” to the Consolidated Financial Statements.

Effective July 1, 2018, we adopted ASU No.

2014-09 using the modified retrospective transition approach applied to all contracts.

Under this transition approach, we have not restated the prior period Consolidated Financial Statements presented to the current period presentation.

Additional information about the Company’s revenue recognition policies and the related impact of the adoption of ASU No.

2014-09 is included in Note 2, “Summary of Significant Accounting Policies” and Note 3, “Revenue Recognition”.

Effective July 1, 2018, we adopted ASU No.

2016-01, which requires changes in the fair value of publicly traded equity securities for which we do not have significant influence to be recorded as part of Net earnings rather than as Other comprehensive income (loss), net.

In addition, equity investments that do not have a readily determinable fair value will be recorded at cost less impairment as further adjusted for observable price changes in orderly transactions for identical or similar investments of the issuer.

We adopted ASU No.

2016-01 using the modified-retrospective transition approach by recording the cumulative effect of previously unrecognized gains or losses on publicly traded equity securities to retained earnings as of July 1, 2018.

The provisions of ASU No.

2016-01 relative to equity investments that do not have a readily determinable fair value have been applied prospectively.

The Consolidated Financial Statements have not been revised for periods prior to July 1, 2018.

The impact of adopting ASU No.

2016-01 resulted in a reclassification of less than $0.1 million in unrealized gains, net from accumulated other comprehensive loss to retained earnings as of July 1, 2018.

Effective July 1, 2018, we adopted ASU No.

2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects associated with the change in the U.S.

federal corporate tax rate resulting from the U.S.

Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017.

The adoption of ASU No.

2018-02 resulted in an increase to retained earnings of $1.5 million.

Effective July 1, 2018, we adopted ASU No.

2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU No.

2017-07”) whereby we revised its presentation in the Consolidated Statements of Earnings to reflect the non-service cost components of net benefit cost as part of Other non-operating income (expenses), net, which were previously recorded as part of Total operating expenses.

All prior period information has been conformed to the current period presentation.

CRITICAL ACCOUNTING POLICIES

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Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods.

If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination is determined.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess not to exceed the total amount of goodwill allocated to that reporting unit.

We had $3,720.1 million of goodwill as of June 30, 2021.

Given the significance of our goodwill, an adverse change to the fair value of one of our reporting units could result in an impairment charge, which could be material to our earnings.

The Company performs a sensitivity analysis under Step 1 of the goodwill impairment test assuming hypothetical reductions in the fair values of our reporting units.

The Company performs a sensitivity analysis under the goodwill impairment test assuming hypothetical reductions in the fair values of our reporting units.

A 10% change in our estimates of projected future operating cash flows, discount rates, or terminal value growth rates used in our calculations of the fair values of the reporting units would not result in an impairment of our goodwill.

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In addition, the Company has estimated U.S.

federal net operating loss carryforwards of approximately $37.0 million of which $16.9 million can be utilized through June 30, 2030 with the balance of $20.2 million having an indefinite utilization period.

federal net operating loss carryforwards resulting from tax losses beginning with the fiscal year ended June 30, 2019 have an indefinite carryforward under the Tax Act.

federal net operating loss carryforwards of approximately $43.5 million of which $24.4 million are subject to expiration in the June 30, 2022 through June 30, 2037 period with the balance of $19.1 million having an indefinite utilization period.

federal net operating loss carryforwards resulting from tax losses beginning with the fiscal year ended June 30, 2019 have an indefinite carryforward under the U.S.

Tax Cuts and Jobs Act (the “Tax Act”).

The Company did not realize any federal net operating losses for the fiscal year ended June 30, 2021.

Valuation allowances are recognized to reduce deferred tax assets when it is more likely than not that the Company will not be able to utilize the deferred tax assets attributable to net operating and capital loss carryforwards of certain subsidiaries to offset future taxable earnings.

Valuation allowances are recognized to reduce deferred tax assets when it is more likely than not that the Company will not be able to utilize the deferred tax assets of certain subsidiaries to offset future taxable earnings.

The Company has recorded valuation allowances of $10.5 million and $6.7 million at June 30, 2021 and 2020, respectively.

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The assumptions used to project future taxable income requires significant judgment and are consistent with the plans and estimates used to manage the underlying businesses.

On the same date that the Tax Act was enacted, December 22, 2017, the SEC issued Staff Accounting Bulletin No.

118 (“SAB 118”) which provided the Company with up to one year to finalize accounting for the impacts of the Tax Act.

Under SAB 118, the Company finalized the prior year estimate of the net tax impact to the Company arising from the enactment of the Tax Act, and recognized a tax benefit of approximately $0.5 million in the fiscal year ended June 30, 2019.

Share-based Payments .

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A hypothetical change of one percentage point in the forfeiture rate assumption used for the fiscal year 2021 stock option grants would result in approximately a $0.1 million change in the total pre-tax stock-based compensation expense for the fiscal year 2021 grants, which would be amortized over the vesting period.

A hypothetical one-half percentage point change in the dividend yield

assumption used to determine the fair value of the fiscal year 2020 stock option grants would result in approximately a $0.9 million change in the total pre-tax stock-based compensation expense for the fiscal year 2020 grants, which would be amortized over the vesting period.

A hypothetical one-half percentage point change in the dividend yield assumption used to determine the fair value of the fiscal year 2021 stock option grants would result in approximately a $0.8 million change in the total pre-tax stock-based compensation expense for the fiscal year 2021 grants, which would be amortized over the vesting period.

KEY PERFORMANCE INDICATORS

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Internal Trade Growth 12 % 9 %

Equity 8 % 6 %

Fixed Income 12 % 5 %

RESULTS OF OPERATIONS

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

“Amortization of Acquired Intangibles and Purchased Intellectual Property” and “Acquisition and Integration Costs” represent 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.

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

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

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

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

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

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

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

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

“Covid-19 Related Expenses” represents certain non-recurring expenses associated with the Covid-19 pandemic.

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

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In addition, mutual fund communications consist of notices and marketing materials such as newsletters.

• Proxy Contests and Specials, Corporate Actions, and Other:

• 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.

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Generally, mutual fund proxy activity has been subject to a greater level of volatility than the other components of event-driven activity.

During fiscal year 2020, mutual fund proxy fee revenues were 35% lower than the prior fiscal year while during fiscal year 2019 mutual fund proxy revenues were 14% lower than the prior fiscal year.

During fiscal year 2021, mutual fund proxy fee revenues were 17% greater than the prior fiscal year.

During fiscal year 2020, mutual fund proxy revenues were 35% lower than the prior fiscal year.

Although it is difficult to forecast the levels of event-driven activity, we expect that the portion of fee revenues derived from mutual fund proxy activity may continue to experience volatility in the future.

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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 fiscal years ended June 30, 2020 and 2019, we are reporting Closed sales net of a 4.0% allowance adjustment.

Consequently, our reported Closed sales amounts are not adjusted for actual revenues achieved because these adjustments are estimated in the period the sale is reported.

We assess the allowance amount at the end of each fiscal year to establish the appropriate allowance for the subsequent year using trailing five years actual data as the starting point, normalized for outlying factors, if any, to enhance the accuracy of the allowance.

For the fiscal year ended June 30, 2021, we are reporting Closed sales net of a 5.0% allowance adjustment.

For the fiscal year ended June 30, 2020, we reported Closed sales net of a 4.0% allowance adjustment.

Consequently, our reported Closed sales amounts will not be adjusted for actual revenues achieved because these adjustments are estimated in the period the sale is reported.

We assess this allowance amount at the end of each fiscal year to establish the appropriate allowance for the subsequent year using the trailing five years actual data as the starting point, normalized for outlying factors, if any, to enhance the accuracy of the allowance.

For the fiscal years ended June 30, 2021 and 2020, Closed sales were $242.5 million and $238.9 million, respectively.

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Recent Developments

In March 2020, the World Health Organization declared the outbreak of Covid-19 as a pandemic, which continues to spread throughout the world including the U.S., India, Canada, Europe and other locations where we operate.

Developments have occurred rapidly with respect to the spread of Covid-19 and its impact on human health and businesses.

In March 2020, the World Health Organization declared the outbreak of Covid-19 as a pandemic, which continues to persist throughout the world including the U.S., India, Canada, Europe and other locations where we operate.

To date, the Covid-19 pandemic has negatively impacted the global economy, created significant financial market volatility, disrupted global supply chains, and resulted in a significant number of deaths and infections worldwide.

In response, several countries worldwide enacted fiscal stimulus packages while central banks increased monetary stimulus, both designed to help mitigate the negative macroeconomic effects of Covid-19.

In response, several countries worldwide have enacted fiscal stimulus packages while central banks have increased monetary stimulus, both designed to help mitigate the negative macroeconomic effects of Covid-19.

In addition, several national, state and local governments have placed restrictions on people from gathering in groups or interacting within a certain physical distance (i.e.

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Accordingly, the Company has taken several measures designed to protect the health of our employees and to minimize our operational disruption and resulting provision of services to our clients from the Covid-19 pandemic, including adopting strict social distancing and cleaning measures in our production facilities, taking the temperature of production-related employees in affected areas on a daily basis as a prerequisite to entering our facilities, load balancing of client jobs between various facilities, and instituting work from home protocols for employees not involved in production operations, amongst other measures.

To date, there has not been a material impact as a result of Covid-19 on our consolidated revenues and pre-tax income.

The Company processed above average levels of equity and fixed income trades in the third and fourth quarters of fiscal 2020 for our financial services clients, many of whom themselves have experienced higher levels of trading activity from market volatility caused by the Covid-19 pandemic, partially offset by lower internal growth in certain aspects of our Investor Communication Solutions business.

In fiscal year 2021, there has not been a material impact as a result of Covid-19 on our consolidated revenues and pre-tax income.

In addition, all of our production-related facilities remain operational and are continuing to provide ongoing services to our clients.

Further, we have not experienced any significant supply-chain issues as our critical vendors have also remained operational and continue to meet their on-going service level requirements.

We continue to actively 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.

We continue to engage with our clients to assist with their service demands, including our clients’ needs for any supplemental operational services and/or changes to existing service requirements in response to the Covid-19 pandemic.

Notwithstanding the foregoing, we are unable to precisely predict the impact that Covid-19 will have in the future due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact to the business of our clients, and other factors identified in Part I, Item 1A.

“Risk Factors” in this Form 10-K.

“Risk Factors” in this Annual Report.

Given these uncertainties, Covid-19 could disrupt the business of certain of our clients, decrease our clients’ demand for our services, impact our business operations and our ability to execute on our associated business strategies and initiatives, and adversely impact our consolidated results of operations and/or our financial condition in the future.

We will continue to closely monitor and evaluate the nature and extent of the impact of Covid-19 to our business, consolidated results of operations, and financial condition.

On August 5, 2020, the SEC proposed modifications to the mutual fund and exchange-traded fund disclosure framework (the “Fund Disclosure Proposal”).

The Fund Disclosure Proposal is intended to provide a disclosure framework that would better serve the needs of retail investors.

Among the modifications proposed are the requirement for streamlined shareholder reports with concise and visually engaging content which would replace prospectus updates, and improvements to prospectus disclosure.

Adoption and implementation of the Fund Disclosure Proposal amendments as proposed could have an impact on our services, business and financial results.

We will closely monitor and evaluate the progress of the Fund Disclosure Proposal and its potential impact on our business.

On August 5, 2020, the SEC proposed modifications to the mutual fund and exchange-traded fund disclosure framework (the “Proposal”).

Under the Proposal, fund companies would send investors streamlined annual and semi-annual shareholder reports instead of long-form shareholder reports.

The Proposal would allow fund companies to send investors streamlined and tailored annual and semi-annual shareholder reports instead of long-form shareholder reports The Proposal also would replace the requirement for funds to distribute an annual prospectus to existing shareholders and instead requires timely communication of material changes via supplemental communications.

Adoption and implementation of the Proposal as proposed could have an impact on our services, business and financial results.

We will closely monitor and evaluate the progress of the Proposal and its potential impact on our business.

Please see our “Risk Factors” in Part I, Item 1A.

of this Form 10-K for more information.

of this Annual Report.

ANALYSIS OF CONSOLIDATED STATEMENTS OF EARNINGS

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Distribution revenues 1,555.3 1,451.2 104.1 7

Foreign currency exchange (136.4) (102.4) (34.0) NM

Foreign currency exchange (131.9) (136.4) 4.6 (3)

Total $ 4,993.7 $ 4,529.0 $ 464.7 10

NM - Not meaningful

Points of Growth

Net New Business Internal Growth Acquisitions Total

Recurring fee revenue Growth Drivers 4pts 1pt 6pts 10 %

Recurring fee revenue Growth Drivers 5pts 3pts 2pts 10 %

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

• Recurring fee revenue growth was primarily driven by acquisitions that were not in the prior year period, as well as 4pts of Organic growth primarily from Net New Business.

Internal growth was slightly positive with positive growth in our Global Technology and Operations segment driven by higher trading volumes resulting from market volatility, partially offset by negative internal growth in our Investor Communication Solutions segment.

• Event-driven fee revenues decreased $66.5 million, or 27%, primarily due to decreased activity in mutual fund proxy, equity special meetings, and equity contests.

• Distribution revenues decreased $8.6 million, or 1%, to $1,451.2 million primarily due to the decrease in Event-driven fee revenues.

• Currencies negatively impacted revenues by $34.0 million due to a combination of foreign acquisitions, continued international revenue growth, and the strengthening of the U.S.

dollar against other currencies.

• Recurring fee revenues increased $296.7 million primarily by growth from 5pts of new business onboarding, 3pts of internal growth, and 2pts related to the impact of acquisitions.

Internal growth of 3pts was driven by increased equity and interim positions in ICS and primarily higher equity trade volumes in GTO, partially offset by lower interest rates on cash balances we hold for retirement accounts, lower customer communication volumes, and lower GTO license revenues.

• Event-driven fee revenues increased $59.3 million due to increased equity contests and mutual fund proxy and other communications.

• Distribution revenues increased $104.1 million primarily from the increase in the volume of customer and regulatory communications as well as the mix of customer communication mailings.

Total operating expenses.

Operating expenses increased $194.7 million, or 5%, to $3,904.1 million from $3,709.5 million as a result of:

• Cost of revenues - The increase of $133.2 million in cost of revenues primarily reflected higher operating costs from acquisitions and related amortization expense and charges associated with the IBM Private Cloud Agreement, partially offset by certain lower operational expenses.

• Selling, general and administrative expenses - The increase of $61.5 million in selling, general, and administrative expenses primarily reflected the impact of acquisitions and higher compensation expense.

• Currencies positively impacted total operating expenses by $31.3 million due to a combination of foreign acquisitions, the strengthening of the U.S.

dollar against other currencies, and continued international operating expense growth.

Operating income margin of 13.8% for the fiscal year ended June 30, 2020 declined 120 bps from 15.0% for the fiscal year ended June 30, 2019 partly due to charges associated with the IBM Private Cloud Agreement.

However, Adjusted Operating income margin of 17.5% for the fiscal year ended June 30, 2020 increased 40 bps on higher recurring revenues from 17.1% for the fiscal year ended June 30, 2019, which excludes certain charges associated with the IBM Private Cloud Agreement and certain other Non-GAAP adjustments.

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

• Cost of revenues - The increase of $305.6 million in cost of revenues primarily reflects (i) higher distribution expenses, (ii) higher operating costs from acquisitions and related amortization expense, and (iii) other higher operating expenses including compensation.

• Selling, general and administrative expenses - The increase of $105.2 million in selling, general, and administrative expenses primarily reflects (i) spend on growth and other initiatives, (ii) higher performance-based compensation, and (iii) the impact of acquisitions.

Operating income margin of 13.6% for the fiscal year ended June 30, 2021 declined 20 bps from 13.8% for the fiscal year ended June 30, 2020 partly due to higher acquisition amortization expenses and other acquisition related charges plus charges associated with Real Estate Realignment and Covid-19 Related Expenses.

However, Adjusted Operating income margin of 18.1% for the fiscal year ended June 30, 2021 increased 60 bps on higher recurring fee revenues and higher event-driven fee revenues from 17.5% for the fiscal year ended June 30, 2020, which excludes acquisition amortization expense, certain charges associated with Real Estate Realignment and Covid-19 Related Expenses, and certain other Non-GAAP adjustments.

See “Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures.”

Interest expense, net.

Interest expenses, net, was $58.8 million, an increase of $17.0 million from $41.8 million in the fiscal year ended June 30, 2019.

The increase of $17.0 million was primarily due to an increase in interest expense from higher borrowings primarily related to acquisitions.

Interest expenses, net, was $55.2 million, a decrease of $3.5 million from $58.8 million in the fiscal year ended June 30, 2020.

The decrease of $3.5 million was primarily due to a decrease in interest expense from lower average interest rates on borrowings.

Other non-operating income (expenses), net.

Other non-operating income, net for the fiscal year ended June 30, 2020 was $13.4 million, an increase of $17.1 million, compared to $3.7 million of Other non-operating expenses, net for the fiscal year ended June 30, 2019.

The increase of $17.1 million was primarily due to higher investment gains as compared to the prior year period.

Other non-operating income, net for the fiscal year ended June 30, 2021 was $72.7 million, an increase of $59.3 million, compared to $13.4 million of Other non-operating income, net for the fiscal year ended June 30, 2020.

The increase of $59.3 million was primarily due to the Gain on Acquisition-Related Financial Instrument.

Provision for income taxes .

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

The decrease in the effective tax rate for the fiscal year ended June 30, 2020 compared to the fiscal year ended June 30, 2019 was primarily driven by higher discrete tax benefits, partially offset by lower excess tax benefits of $15.6 million for the fiscal year ended June 30, 2020 compared to $19.3 million for the fiscal year ended June 30, 2019.

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

ANALYSIS OF REPORTABLE SEGMENTS

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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.

In connection with an organizational change made in the first quarter of fiscal year 2020, in order to further align and enhance our portfolio of services, the results for the Company’s wealth management Advisor Solutions services that were previously reported in our Investor Communication Solutions reportable segment are now reported within the Global Technology and Operations reportable segment.

As a result, our prior period segment results for the fiscal year ended June 30, 2019 have been revised to reflect this change, which resulted in transferring $42.8 million of revenues and $2.2 million of earnings before income taxes between reportable segments, respectively.

Years Ended June 30,

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Global Technology and Operations 1,258.1 1,174.2 83.9 7

Foreign currency exchange (136.4) (102.4) (34.0) NM

Foreign currency exchange (131.9) (136.4) 4.6 (3)

Total $ 4,993.7 $ 4,529.0 $ 464.7 10

NM - Not meaningful

Earnings Before Income Taxes

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Other (153.0) (146.3) (6.6) 5

Foreign currency exchange 16.8 19.4 (2.7) NM

Foreign currency exchange 20.3 16.8 3.5 21

Total $ 696.2 $ 579.5 $ 116.6 20

NM - Not meaningful

Investor Communication Solutions

Fiscal Year 2021 Compared to Fiscal Year 2020

Revenues increased $23.0 million to $3,491.3 million from $3,468.3 million, and earnings before income taxes decreased $42.1 million to $464.1 million from $506.2 million as a result of:

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

Years Ended June 30,

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Net New Business Internal Growth Acquisitions Total

Recurring fee revenue Growth Drivers 4pts -1pt 2pts 6 %

Recurring fee revenue Growth Drivers 5pts 5pts 1pts 11 %

For the fiscal year ended June 30, 2021:

• Recurring fees grew 6% driven by Organic growth and growth from acquisitions.

Organic growth reflected continued growth from new sales.

Internal growth was down 1pt as 10% position growth in annual equity proxy communications and 2% for mutual fund and exchange traded funds interims was offset by lower customer communications volumes and lower revenue from other services.

• Lower event-driven fee revenues were due to decreased activity in mutual fund proxy, equity special meetings, and equity contests.

• Lower distribution revenues resulted from the decrease in event-driven fee revenues, which more than offset the impact of higher recurring fee revenues.

• The earnings decrease of $42.1 million was due to lower event-driven activity more than offsetting the contribution from higher recurring fee revenues.

• Pre-tax margins decreased by 1.3 percentage points to 13.3% from 14.6%.

• Recurring fee revenues grew 11% driven primarily by Net New Business and Internal Growth.

The 5pt contribution from Internal Growth was from increased equity and interim positions with a partial offset from the impact of lower interest rates on retirement cash accounts and lower volumes in customer communications.

Net New Business also contributed 5pts mainly from the revenue on-boarding of Closed sales.

Acquisitions contributed 1pt from the carry-over impact of Funds Library and Fi360 acquisitions in fiscal year 2020.

• Event-driven fee revenues grew 33% due to increased equity contests and mutual fund proxy and other communications.

• Higher distribution revenues resulted primarily from the increase in the volume of customer and regulatory communications as well as the mix of customer communication mailings.

• The earnings increase of $141.5 million was due to higher recurring and event-driven fee revenues.

• Pre-tax margins increased by 2.4 percentage points to 15.7% from 13.3%.

Global Technology and Operations

Fiscal Year 2021 Compared to Fiscal Year 2020

Revenues increased $177.9 million to $1,174.2 million from $996.3 million, and earnings before income taxes increased $32.5 million to $245.0 million from $212.5 million as a result of:

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

Years Ended June 30,

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For the fiscal year ended June 30, 2021:

• Recurring fees grew 18% driven by growth from acquisitions, including software license sales, and Organic growth.

Organic growth was driven by both Net New Business and Internal growth, as internal growth was driven by higher trading volumes resulting from market volatility.

• The earnings increase was due to higher revenues from acquisitions and higher organic revenues, partially offset by the impact of expenditures to implement and support new business and the amortization of acquired intangibles.

• Recurring fee revenues grew 7% driven primarily by Net New Business.

Internal growth was impacted by higher equity trading volumes offset by lower license sales.

Acquisitions contributed 3 points to growth primarily from the Itiviti Acquisition.

• The earnings decrease was due to expenditures to implement and support new business, increased amortization of acquired intangibles and spending on growth initiatives more than offsetting higher organic revenues and higher revenues from acquisitions.

Pre-tax margins decreased by 3.2 percentage points to 17.7% from 20.9%.

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

• The increased loss before income taxes was primarily due to charges associated with the IBM Private Cloud Agreement and higher interest expense versus the prior year period, partially offset by lower compensation expense and gain on sale of investments.

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

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

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

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These Non-GAAP measures reflect Operating income, Operating income margin, Net earnings, and Diluted earnings per share, as adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operating performance.

These adjusted measures exclude the impact of:

(i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) IBM Private Cloud Charges, (iv) the Gain on Sale of a Joint Venture Investment, and (v) Covid-19 Related Expenses.

Amortization of Acquired Intangibles and Purchased Intellectual Property represents non-cash amortization expenses associated with the Company's acquisition activities.

Depending on the period presented, these adjusted measures exclude the impact of:

(i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) IBM Private Cloud Charges, (iv) Real Estate Realignment and Covid-19 Related Expenses, (v) Investment Gain, (vi) Software Charge, (vii) Gain on Acquisition-Related Financial Instrument, and (viii) Gain on Sale of a Joint Venture Investment.

Amortization of Acquired Intangibles and Purchased Intellectual Property represent non-cash amortization expenses associated with the Company’s acquisition activities.

Acquisition and Integration Costs represent certain transaction and integration costs associated with the Company’s acquisition activities.

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

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

Covid-19 Related Expenses represents certain non-recurring expenses associated with the Covid-19 pandemic.

We exclude IBM Private Cloud Charges, Gain on Sale of a Joint Venture Investment, and Covid-19 Related Expenses from our Adjusted Operating income and other earnings measures because excluding such information provides us with an understanding of the results from the primary operations of our business and these items do not reflect ordinary operations or earnings.

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

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

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

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

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

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

We exclude Acquisition and Integration Costs, IBM Private Cloud Charges, Real Estate Realignment and Covid-19 Related Expenses, the Investment Gain, the Software Charge, the Gain on Acquisition-Related Financial Instrument, and the Gain on Sale of a Joint Venture Investment from our Adjusted Operating income (as applicable) and other adjusted earnings measures because excluding such information provides us with an understanding of the results from the primary operations of our business and enhances comparability across fiscal reporting periods, as these items are not reflective of our underlying operations or performance.

We also exclude the impact of Amortization of Acquired Intangibles and Purchased Intellectual Property, as these non-cash amounts are significantly impacted by the timing and size of individual acquisitions and do not factor into the Company's capital allocation decisions, management compensation metrics or multi-year objectives.

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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.

Free cash flow is a Non-GAAP financial measure and is defined by the Company as Net cash flows provided by operating activities plus Proceeds from asset sales, less Capital expenditures as well as Software purchases and capitalized internal use software.

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

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IBM Private Cloud Charges — 32.0

Covid-19 Related Expenses 2.4 —

Real Estate Realignment and Covid-19 Related Expenses 45.3 2.4

Software Charge 6.0 —

Adjusted Operating income (Non-GAAP) $ 901.8 $ 794.8

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IBM Private Cloud Charges — 32.0

Covid-19 Related Expenses 2.4 —

Real Estate Realignment and Covid-19 Related Expenses 45.3 2.4

Software Charge 6.0 —

Investment Gain (8.7) —

Gain on Acquisition-Related Financial Instrument (62.1) —

Gain on Sale of a Joint Venture Investment — (6.5)

Taxable adjustments 163.4 93.8

Subtotal of adjustments 152.2 163.4

Tax impact of adjustments (a) (33.2) (37.4)

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IBM Private Cloud Charges — 0.27

Covid-19 Related Expenses 0.02 —

Real Estate Realignment and Covid-19 Related Expenses 0.38 0.02

Software Charge 0.05 —

Investment Gain (0.07) —

Gain on Acquisition-Related Financial Instrument (0.53) —

Gain on Sale of a Joint Venture Investment — (0.06)

Taxable adjustments 1.40 0.79

Subtotal of adjustments 1.29 1.40

Tax impact of adjustments (a) (0.28) (0.32)

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(a) Calculated using the GAAP effective tax rate, adjusted to exclude $16.9 million of excess tax benefits (“ETB”) associated with stock-based compensation for the fiscal year ended June 30, 2021, and $15.6 million of ETB associated with stock-based compensation for the fiscal year ended June 30, 2020.

The tax impact of adjustments also excludes approximately $10.6 million of Acquisition and Integration Costs for the fiscal year ended June 30, 2021, which are not tax-deductible.

For purposes of calculating the Adjusted earnings per share, the same adjustments were made on a per share basis.

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Capital expenditures and Software purchases and capitalized internal use software (100.7) (98.7)

Proceeds from asset sales 18.0 —

Free cash flow (Non-GAAP) $ 557.3 $ 499.5

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Current portion of long-term debt

Fiscal 2014 Senior Notes (a) September 2020 $ 400.0 $ 399.9 $ — — $ 402.1

Fiscal 2014 Senior Notes September 2020 $ — $ — $ 399.9 — $ —

Total $ — $ — $ 399.9 — $ —

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Fiscal 2021 Revolving Credit Facility:

dollar tranche March 2024 $ — $ — $ 360.0 $ 1,100.0 $ —

Multicurrency tranche March 2024 149.8 149.8 215.7 250.2 149.8

dollar tranche April 2026 $ 20.0 $ 20.0 $ — $ 1,080.0 $ 20.0

Multicurrency tranche April 2026 94.4 94.4 149.8 305.6 94.4

Total Revolving Credit Facility $ 114.4 $ 114.4 $ 149.8 $ 1,385.6 $ 114.4

Fiscal 2014 Senior Notes (a) September 2020 — — 399.2 — —

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

Fiscal 2016 Senior Notes June 2026 $ 500.0 $ 496.7 $ 496.1 $ — $ 549.0

Fiscal 2020 Senior Notes December 2029 750.0 742.5 741.7 — 791.3

Fiscal 2021 Senior Notes May 2031 1,000.0 990.6 — — 1,021.1

Total Senior Notes $ 2,250.0 $ 2,229.8 $ 1,237.8 $ — $ 2,361.4

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

(a) The Fiscal 2014 Senior Notes were reclassified from Long-term debt to Current portion of long-term debt in September 2019 to reflect the remaining maturity of less than a year.

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

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dollar tranche and a $400.0 million multicurrency tranche.

Borrowings under the Fiscal 2019 Revolving Credit Facility bear interest at LIBOR plus 101.5 basis points.

In addition, the Fiscal 2019 Revolving Credit Facility has an annual facility fee equal to 11.0 basis points on the entire facility.

The Fiscal 2019 Revolving Credit Facility and senior notes are senior unsecured obligations of the Company and are ranked equally in right of payment.

Interest on the senior notes due 2020 is payable semiannually on March 1 st and September 1 st of each year based on a fixed per annum rate equal to 3.95%.

Interest on the senior notes due June 2026 is payable semiannually on June 27 th and December 27 th of each year based on a fixed per annum rate equal to 3.40%.

Interest on the senior notes due 2029 is payable semiannually on June 1st and December 1st each year based on a fixed per annum rate equal to 2.90%.

Under the Fiscal 2021 Revolving Credit Facility, revolving loans denominated in U.S.

Dollars, Canadian Dollars, Euro, Yen, and Swedish Kronor initially bear interest at LIBOR, CDOR, EURIBOR, TIBOR and STIBOR, respectively, plus 1.015% per annum (subject to step-ups to 1.175% and step-downs to 0.805% based on ratings) and revolving loans denominated in Sterling initially bear interest at SONIA plus 1.0476% per annum (subject to step-ups to 1.2076% and step-downs to 0.8376% based on ratings).

The Fiscal 2021 Revolving Credit Facility also has an annual facility fee equal to 11.0 basis points on the entire facility (subject to step-ups to 20.0 basis points and step-downs to 7.0 basis points based on ratings).

In March 2021, the Company entered into a term credit agreement (“Term Credit Agreement”) providing for term loan commitments in an aggregate principal amount of $2.55 billion, comprised of a $1.0 billion tranche (“Tranche 1”) and a $1.55 billion tranche (“Tranche 2,” together with Tranche 1, the “Fiscal 2021 Term Loans”).

The Tranche 1 Loans were repaid in full in May 2021.

The Tranche 2 Loans will mature in May 2024 on the third anniversary of the Funding Date.

The proceeds of the Fiscal 2021 Term Loans were used by the Company to solely finance the Itiviti Acquisition and pay certain fees and expenses in connection therewith.

Interest on the outstanding portion of the Fiscal 2021 Term Loans bears interest at LIBOR plus 0.875% per annum (subject to step-ups to LIBOR plus 1.250% or a step-down to LIBOR plus 0.750% based on ratings).

In June 2016, the Company completed an offering of $500.0 million in aggregate principal amount of senior notes (the “Fiscal 2016 Senior Notes”).

Interest on the Fiscal 2016 Senior Notes is payable semiannually on June 27 and December 27 of each year based on a fixed per annum rate equal to 3.40%.

In December 2019, the Company completed an offering of $750.0 million in aggregate principal amount of senior notes (the “Fiscal 2020 Senior Notes”).

Interest on the Fiscal 2020 Senior Notes is payable semiannually on June 1 and December 1 of each year based on a fixed per annum rate equal to 2.90%.

In May 2021, the Company completed an offering of $1 billion in aggregate principal amount of senior notes (the “Fiscal 2021 Senior Notes”).

Interest on the Fiscal 2021 Senior Notes is payable semi-annually in arrears on May 1 and November 1 of each year based on a fixed per annum rate equal to 2.60%.

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

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

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

Net cash flows provided by (used in) financing activities $ 51.2 $ (173.1) $ 224.3

The decrease in cash provided by operating activities of $18.7 million primarily reflects increased scaling of client-related platform implementation and development, partially offset by cash flows from higher revenues, cash collections and working capital.

The increase in cash used in investing activities of $8.1 million primarily reflects an increase in capital expenditures and software purchases, partially offset by lower acquisition spend in fiscal year 2020.

The increase in cash provided by financing activities of $224.3 million primarily reflects a decrease in the repurchase of common stock, partially offset by a decrease in net proceeds from borrowings and an increase in dividends paid.

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

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

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

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

The Company, headquartered in the U.S., is routinely examined by the IRS and is also routinely examined by the tax authorities in the U.S.

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Once established, reserves are adjusted when there is more information available, when an event occurs necessitating a change to the reserves or the statute of limitations for the relevant taxing authority to examine the tax position has expired.

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

The resolution of tax matters

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

Defined Benefit Pension Plans

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Other Post-employment Benefit Obligations

In accordance with the Payment of Gratuity Act of 1972, the Company sponsors a post-employment defined benefit plan (the “Gratuity Plan”) covering all employees in India who are eligible under the terms of their employment.

The Gratuity Plan is required by local law and provides a lump sum payment to vested employees upon retirement, death, incapacitation, or termination of employment based on the respective employee’s salary and the tenure of employment.

The Gratuity Plan is currently unfunded.

The benefit obligation to the Company under this plan at June 30, 2020 and 2019 was:

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

These plans are generally unfunded.

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

Years ended June 30,

(in millions)

The Gratuity Plan $ 6.4 $ 5.8

Other Non-US Benefits-Related Plans $ 9.1 $ 6.4

Contractual Obligations

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Purchase obligations(4) 580.7 133.5 210.3 123.2 113.7

Acquisition deferred payments(5) 2.9 — 2.9 — —

Capital commitment to fund investment(6) 7.0 7.0 — — —

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See Note 8, “Leases” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for additional information about our Leases and related matters.

(4) Purchase obligations relate to payments to IBM related to the Amended IT Services Agreement that expires in June 2027, the IBM Private Cloud Agreement that expires in March 2030, and the Amended EU IT Services Agreement that expires in June 2029, as well as software license agreements including hosted software arrangements, and software and hardware maintenance and support agreements.

(5) The Company has a future commitment to fund $3.5 million to an investee.

(4) Purchase obligations relate to payments to IBM related to the Amended IT Services Agreement that expires in fiscal year 2027, the IBM Private Cloud Agreement that expires in fiscal year 2030, and the Amended EU IT Services Agreement that expires in fiscal year 2029, as well as software license agreements including hosted software arrangements, and software and hardware maintenance and support agreements, and certain other related arrangements.

Purchase obligations also includes $29.0 of other liabilities recorded on the Company’s Consolidated Balance Sheet as of June 30, 2021.

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

(6) Represents the Company’s funding commitment to an equity method investee.

In addition, the Company also has a future commitment to fund $2.0 million to an investee that is not included in the table above due to the uncertainty of the timing of this future payment.

(7) Due to the uncertainty related to the timing of the reversal of uncertain tax positions, only uncertain tax benefits related to certain settlements have been provided in the table above.

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Data Center Agreements

In March 2010, the Company and IBM entered into the IT Services Agreement, under which IBM provides certain aspects of the Company’s information technology infrastructure.

Under the IT Services Agreement, IBM provides 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 the data center processing to IBM was completed in August 2012.

In March 2010, the Company and IBM entered into the IT Services Agreement, under which IBM provided certain aspects of the Company’s information technology infrastructure.

Under the IT Services Agreement, IBM provided a broad range of technology services to the Company including supporting its mainframe, midrange, network and data center operations, as well as providing disaster recovery services.

The migration of data center processing to IBM was completed in August 2012.

The IT Services Agreement would have expired on June 30, 2022, but a two-year extension was signed in March 2015, amending the expiration date to June 30, 2024.

In December 2019, the Company and IBM amended and restated the IT Services Agreement and entered into the Amended IT Services Agreement, which now expires on June 30, 2027.

The Company has the option of incorporating additional services into the Amended IT Services Agreement over time.

has the option of incorporating additional services into the Amended IT Services Agreement over time.

The Company may renew the term of the Amended IT Services Agreement for up to one additional 12-month period.

Fixed minimum commitments remaining under this agreement at June 30, 2021 are $208.9 million through fiscal year 2027, the final year of the Amended IT Services Agreement.

In December 2019, the Company and IBM entered into an information technology agreement for private cloud services (“the IBM Private Cloud Agreement”) under which IBM will operate, manage and support the Company’s private cloud global distributed platforms and products, and operate and manage certain Company networks.

In December 2019, the Company and IBM entered into the IBM Private Cloud Agreement under which IBM will operate, manage and support the Company’s private cloud global distributed platforms and products, and operate and manage certain Company networks.

The IBM Private Cloud Agreement has an initial term of approximately 10 years and three months, expiring on March 31, 2030.

As a result of the IBM Private Cloud Agreement, the Company transferred certain of its employees in April 2020 to IBM and its affiliates, and such transferred employees are expected to continue providing services to the Company on behalf of IBM under the IBM Private Cloud Agreement.

Pursuant to the IBM Private Cloud Agreement, the Company has agreed to transfer the ownership of certain Company-owned hardware (the “Hardware”) located at Company facilities worldwide along with the Company’s maintenance agreements (“Maintenance Contracts”) associated with the Hardware to IBM.

The transfer of the Hardware and Maintenance Contracts to IBM is expected to close no later than September 30, 2020.

The Company concluded that the Hardware qualifies as assets held for sale since the Company has committed to a plan of disposal expected to be completed within a year, and therefore, has recorded the Hardware at fair value less costs to dispose based on the expected selling price to IBM (a Level 3 fair value measurement as defined in Note 7, “Fair Value of Financial Instruments” to the Company's Consolidated Financial Statements).

Accordingly, the Company has recorded a non-cash pre-tax charge of $30.4 million for the fiscal year ended June 30, 2020, equal to the difference between the Hardware’s carrying value and estimated fair value less costs to dispose, included as part of Cost of revenues on the Company’s Consolidated Statements of Earnings and is included in Other for purposes of the Company's segment reporting.

As of June 30, 2020, the Hardware classified as assets held for sale has a carrying amount of $18.0 million and is included in the Company’s Other current assets line item on the Consolidated Balance Sheets.

Pursuant to the IBM Private Cloud Agreement, the Company agreed to transfer the ownership of certain Company-owned hardware (the “Hardware”) located at Company facilities worldwide to IBM.

As of June 30, 2020, the Hardware was classified as assets held for sale with a carrying amount of $18.0 million and was included in the Company’s Other current assets line item on the Consolidated Balance Sheets.

The transfer of the Hardware to IBM closed on September 30, 2020 for a selling price of $18.0 million.

Fixed minimum commitments remaining under the IBM Private Cloud Agreement at June 30, 2021 are $207.0 million through March 31, 2030, the final year of the contract.

In March 2014, the Company and IBM United Kingdom Limited (“IBM UK”) entered into the EU IT Services Agreement, under which IBM UK provides data center services supporting the Company’s technology outsourcing services for certain clients in Europe and Asia.

In March 2014, the Company and IBM UK entered into the EU IT Services Agreement, under which IBM UK provides data center services supporting the Company’s technology outsourcing services for certain clients in Europe and Asia.

The EU IT Services Agreement would have expired in October 2023.

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Net Deferred IBM Costs $ 19.4 $ 3.5 $ 23.0

At June 30, 2020, the Company has a future commitment to fund $3.5 million to one of the Company’s investees.

The Company has an equity method investment that is a variable interest in a variable interest entity, the Company is not the primary beneficiary and therefore does not consolidate the investee.

The Company’s potential maximum loss exposure related to this unconsolidated investment totaled $25.3 million as of June 30, 2021, which represents the carrying value of the Company's investment and is recorded in Other non-current assets in the Company’s Consolidated Balance Sheets.

In addition, as of June 30, 2021, the Company has a future commitment to fund this investee for up to an additional $7.0 million if certain future funding milestones are met.

Additional funding provided by the Company to the investee as a result of meeting the future funding milestones would increase the Company’s corresponding potential maximum loss exposure by that amount.

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

Other Commercial Agreements

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The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.

The Company was not a party to any derivative financial instruments at June 30, 2020 and 2019.

The Company was not a party to any outstanding derivative financial instruments at June 30, 2021 or June 30, 2020.

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

The Company executed a forward foreign exchange derivative instrument (“Forward”) with an aggregate notional amount of EUR 1.955 billion.

The Forward acted as an economic hedge against the impact of changes in the Euro on the Company’s purchase consideration for the Itiviti Acquisition.

The Company recorded changes in fair value of the Forward as part of Other non-operating income (expenses), net in the Consolidated Statement of Earnings.

In May 2021, the Company settled the Forward derivative for a cumulative pre-tax gain of $66.7 million.

Also, the Company executed a forward treasury lock agreement (“Treasury Lock”), designated as a cash flow hedge, in the aggregate notional amount of $1.0 billion to manage exposure to fluctuations in the benchmark interest rate associated with the Fiscal 2021 Senior Notes, which were used to pay down a portion of the Term Credit Agreement associated with the Itiviti Acquisition.

Accordingly, changes in the fair value of the Treasury Lock were recorded as part of Other comprehensive income (loss), net each period up to when the Treasury Lock was settled.

In May 2021, the Treasury Lock was settled for a pre-tax loss of $11.0 million, after which the final settlement loss will be reclassified into Interest expense, net ratably over the ten year term of the Fiscal 2021 Senior Notes.

The expected amount of the existing loss that would be reclassified into earnings before income taxes within the next twelve months is approximately $1.1 million.

In the normal course of business, the Company also enters into contracts in which it makes representations and warranties that relate to the performance of the Company’s products and services.

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Recently-issued Accounting Pronouncements

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

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

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 7. Management’s Discussion and Analysis