What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-08-08 compared with 2022-08-12 · 186 added, 239 removed, 420 unchanged (50% of the section changed)

11 unchanged sentences

Our services include investor communications, securities processing, data and analytics, and customer communications solutions.

With over 50 years of experience, including 15 years as an independent public company, we provide integrated solutions and an important infrastructure that powers the financial services industry.

With over 60 years of experience, including over 15 years as an independent public company, we provide integrated solutions and an important infrastructure that powers the financial services industry.

Our solutions enable better financial lives by powering investing, governance and communications and help reduce the need for our clients to make significant capital investments in operations infrastructure, thereby allowing them to increase their focus on core business activities.

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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.

During the fiscal year ended June 30, 2022, there were no material acquisitions.

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 — 8.5 8.5

Aggregate purchase price $ 2,580.4 $ 34.5 $ 2,615.0

Net tangible assets acquired / (liabilities assumed) $ (252.9) $ (3.3) $ (256.2)

Goodwill 1,928.7 27.3 1,956.0

Intangible assets 904.6 10.5 915.1

Aggregate purchase price $ 2,580.4 $ 34.5 $ 2,615.0

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.

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.

• The contingent consideration liability is payable through fiscal year 2024 upon the achievement by the acquired business of certain revenue targets, and has a maximum potential pay-out of $12.0 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, 2022 is $8.0 million.

• 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.

During the fiscal years ended June 30, 2023 and June 30, 2022, there were no material acquisitions.

BASIS OF PRESENTATION

The Consolidated Financial Statements have been prepared in accordance with GAAP in the U.S.

and in accordance with the SEC requirements for Annual Reports on Form 10-K.

The Consolidated Financial Statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and in accordance with the SEC requirements for Annual Reports on Form 10-K.

These financial statements present the consolidated position of the Company and include the entities in which the Company directly or indirectly has a controlling financial interest as well as various entities in which the Company has investments recorded under the equity method of accounting as well as certain marketable and non-marketable securities.

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The results of operations reported for the periods presented are not necessarily indicative of the results of operations for subsequent periods.

Beginning with the first quarter of fiscal year 2022, the Company revised the foreign exchange rates used to present segment revenues, segment earnings (loss) before income taxes, and Closed sales, to further allocate the foreign exchange impact to the individual segment revenue and profit metrics.

The presentation of segment revenues and earnings (loss) before income taxes for the prior periods provided has been changed to conform to the current period presentation.

Beginning with the first quarter of fiscal year 2023, the Company changed reporting for segment revenues, segment earnings (loss) before income taxes, and segment amortization of acquired intangibles and purchased intellectual property to reflect the impact of actual foreign exchange rates applicable to the individual periods presented.

The presentation of these metrics for the prior periods provided in this Form 10-K has been changed to conform to the current period presentation.

Total consolidated revenues and earnings before income taxes were not impacted.

Please refer to Note 3, “Revenue Recognition” and Note 21, “Financial Data by Segment” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K.

Processing and distributing proxy materials and annual reports to investors comprises a large portion of our Investor Communication Solutions business.

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The seasonality of our revenues makes it difficult to estimate future operating results based on the results of any specific fiscal quarter and could affect an investor’s ability to compare our financial condition, results of operations, and cash flows on a fiscal quarter-by-quarter basis.

CRITICAL ACCOUNTING POLICIES

CRITICAL ACCOUNTING ESTIMATES

We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements.

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Determining these assumptions are subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of our stock options.

A hypothetical change of five percentage points applied to the volatility assumption used to determine the fair value of the fiscal year 2022 stock option grants would result in approximately a $2.5 million change in total pre-tax stock-based compensation expense for the fiscal year 2022 grants, which would be amortized over the vesting period.

A hypothetical change of one year in the expected life assumption used to determine the fair value of the fiscal year 2022 stock option grants would result in approximately a $1.0 million change in the total pre-tax stock-based compensation expense for the fiscal year 2022 grants, which would be amortized over the vesting period.

A hypothetical change of one percentage point in the forfeiture rate assumption used for the fiscal year 2022 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 2022 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 2022 stock option grants would result in approximately a $1.0 million change in the total pre-tax stock-based compensation expense for the fiscal year 2022 grants, which would be amortized over the vesting period.

A hypothetical change of five percentage points applied to the volatility assumption used to determine the fair value of the fiscal year 2023 stock option grants would result in an approximate $3.1 million change in total pre-tax stock-based compensation expense for the fiscal year 2023 grants, which would be amortized over the vesting period.

A hypothetical change of one year in the expected life assumption used to determine the fair value of the fiscal year 2023 stock option grants would result in an approximate $1.7 million change in the total pre-tax stock-based compensation expense for the fiscal year 2023 grants, which would be amortized over the vesting period.

A hypothetical change of one percentage point in the forfeiture rate assumption used for the fiscal year 2023 stock option grants would result in an approximate $0.2 million change in the total pre-tax stock-based compensation expense for the fiscal year 2023 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 2023 stock option grants would result in an approximate $1.4 million change in the total pre-tax stock-based compensation expense for the fiscal year 2023 grants, which would be amortized over the vesting period.

KEY PERFORMANCE INDICATORS

Management focuses on a variety of key indicators to plan, measure and evaluate the Company’s business and financial performance.

These performance indicators include Revenue and Recurring fee revenue as well as not generally accepted accounting principles measures (“Non-GAAP”) of Adjusted Operating income, Adjusted Net earnings, Adjusted earnings per share, Free Cash flow, and Closed sales.

These performance indicators include Revenue and Recurring revenue as well as not generally accepted accounting principles measures (“Non-GAAP”) of Adjusted Operating income, Adjusted Net earnings, Adjusted earnings per share, Free Cash flow, Recurring revenue growth constant currency, and Closed sales.

In addition, management focuses on select operating metrics specific to Broadridge of Record Growth and Internal Trade Growth, as defined below.

Refer to the section “Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures” for a reconciliation of Adjusted Operating income, Adjusted Net earnings, Adjusted earnings per share, and Free Cash flow to the most directly comparable generally accepted accounting principles (“GAAP”) measures, and an explanation for why these Non-GAAP metrics provide useful information to investors and how management uses these Non-GAAP metrics for operational and financial decision-making.

Refer to the section “Explanation and Reconciliation of the Company’s Use of Non-GAAP Financial Measures” for a reconciliation of Adjusted Operating income, Adjusted Net earnings, Adjusted earnings per share, Free Cash flow, and Recurring revenue growth constant currency to the most directly comparable GAAP measures, and an explanation for why these Non-GAAP metrics provide useful information to investors and how management uses these Non-GAAP metrics for operational and financial decision-making.

Refer to the section “Results of Operations” for a description of Closed sales and an explanation of why Closed sales is a useful performance metric for management and investors.

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The Company monitors revenue in each of our two reportable segments as a key measure of success in addressing our clients’ needs.

Fee revenues are derived from both recurring and event-driven activity.

Revenues from fees are derived from both recurring and event-driven activity.

The level of recurring and event-driven activity the Company processes directly impacts distribution revenues.

While event-driven activity is highly repeatable, it may not recur on an annual basis.

Event-driven fee revenues are based on the number of special events and corporate transactions the Company processes.

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

Distribution revenues primarily include revenues related to the physical mailing of proxy materials, interim communications, transaction reporting, customer communications and fulfillment services as well as Matrix administrative services.

Recurring fee revenue growth represents the Company’s total annual fee revenue growth, less growth from event-driven fee revenues.

We distinguish recurring fee revenue growth between organic and acquired:

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

• Acquired – We define acquired revenue as the recurring fee revenue generated from acquired services in the first twelve months following the date of acquisition.

Event-driven revenues are based on the number of special events and corporate transactions the Company processes.

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

Recurring revenue growth represents the Company’s total annual revenue growth, less growth from event-driven and distribution revenues.

We distinguish recurring revenue growth between organic and acquired:

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

• Acquired – We define acquired revenue as the recurring revenue generated from acquired services in the first twelve months following the date of acquisition.

This type of growth comes as a result of our strategy to purchase, integrate, and leverage the value of assets we acquire.

Revenues and Recurring fee revenue are useful metrics for investors in understanding how management measures and evaluates the Company’s ongoing operational performance.

Revenues and Recurring revenue are useful metrics for investors in understanding how management measures and evaluates the Company’s ongoing operational performance.

See “Results of Operations” as well as Note 2, “Summary of Significant Accounting Policies” and Note 3, “Revenue Recognition” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K.

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The Company uses select operating metrics specific to Broadridge of Record Growth and Internal Trade Growth in evaluating its business results and identifying trends affecting its business.

Record Growth is defined as stock record growth and interim record growth which measure the estimated annual change in total positions eligible for equity proxy materials and mutual fund and exchange-traded fund interim communications, respectively, for equities and mutual fund position data reported to Broadridge in both the current and prior year periods.

Record Growth is comprised of stock record growth and interim record growth.

Stock record growth (also referred to as “SRG” or “equity position growth”) measures the estimated annual change in positions eligible for equity proxy materials.

Interim record growth (also referred to as “IRG” or “mutual fund/ETF position growth”) measures the estimated change in mutual fund and exchange traded fund positions eligible for interim communications.

These metrics are calculated from equity proxy and mutual fund/ETF position data reported to Broadridge for the same issuers or funds in both the current and prior year periods.

Internal Trade Growth represents the estimated change in daily average trade volumes for Broadridge securities processing clients whose contracts are linked to trade volumes and who were on Broadridge’s trading platforms in both the current and prior year periods.

4 unchanged sentences

Record Growth

Equity proxy 18 % 26 %

Mutual fund interims 14 % 10 %

Equity positions (Stock records) 9 % 18 %

Mutual fund / ETF positions (Interim records) 8 % 14 %

Internal Trade Growth 4 % 1 %

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“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.

“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.

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

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

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

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

“Real Estate Realignment and Covid-19 Related Expenses” are comprised of two major components:

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Covid-19 Related Expenses are direct and incremental expenses incurred by the Company to protect the health and safety of Broadridge associates during the Covid-19 outbreak, including expenses associated with monitoring the temperatures for associates entering our facilities, enhancing the safety of our office environment in preparation for workers to return to Company facilities on a more regular basis, ensuring proper social distancing in our production facilities, personal protective equipment, enhanced cleaning measures in our facilities, and other safety related expenses.

“Restructuring Charges” represent severance costs associated with the Company’s initiative to streamline our management structure, reallocate work to lower cost locations, and reduce headcount in deprioritized areas.

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

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

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

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

The following definitions describe the Company’s Revenues:

Fee revenues in the Investor Communication Solutions segment are derived from both recurring and event-driven activity.

In addition, the level of recurring and event-driven activity we process directly impacts distribution revenues.

Revenues in the Investor Communication Solutions segment are derived from both recurring and event-driven activity, in addition to distribution revenues.

The level of recurring and event-driven activity we process directly impacts revenues.

While event-driven activity is highly repeatable, it may not recur on an annual basis.

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The proxy services we provide in connection with shareholder meetings driven by special events such as proxy contests, mergers and acquisitions, and tender/exchange offers.

Event-driven fee revenues are based on the number of special events and corporate transactions we process.

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

Event-driven revenues are based on the number of special events and corporate transactions we process.

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

As such, the timing and level of event-driven activity and its potential impact on revenues and earnings are difficult to forecast.

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

During fiscal year 2022, mutual fund proxy fee revenues were 57% greater than the prior fiscal year.

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

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

Distribution cost of revenues consists primarily of postage-related expenses incurred in connection with our Investor Communication Solutions segment, as well as Matrix administrative services expenses.

During fiscal year 2023, mutual fund proxy revenues were 51% lower than the prior fiscal year.

During fiscal year 2022, mutual fund proxy revenues were 57% greater than the prior fiscal year.

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

Distribution cost of revenues consists primarily of postage-related expenses incurred in connection with our Investor Communication Solutions segment, as well as Broadridge Retirement and Workplace administrative services expenses.

These costs are reflected in Cost of revenues.

Closed sales represent an estimate of the expected annual recurring fee revenue for new client contracts that were signed by Broadridge in the current reporting period.

Closed sales represent an estimate of the expected annual recurring revenue for new client contracts that were signed by Broadridge in the current reporting period.

Closed sales does not include event-driven or distribution activity.

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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 the fiscal year ended June 30, 2022, we are reporting Closed sales net of a 5.0% allowance adjustment.

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

For the fiscal years ended June 30, 2023 and June 30, 2022, we reported Closed sales net of a 5.0% allowance adjustment.

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

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Recent Developments

Global Pandemic

The Covid-19 pandemic continues to persist throughout the world including the U.S., India, Canada, Europe and other locations where we operate.

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

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

In fiscal year 2022, there has not been a material impact as a result of Covid-19 on our consolidated revenues and pre-tax income.

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

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

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

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

New SEC Rule on Tailored Shareholder Reports

On October 26, 2022, the SEC adopted a rule modifying mutual fund and exchange-traded fund investor communications.

The SEC rule requires that shorter summary documents, referred to as tailored shareholder reports, be distributed in lieu of long-form annual and semi-annual fund reports or notices of the availability of such reports, which the SEC had permitted under Rule 30e-3.

The rule went into effect on January 24, 2023 and includes an 18-month transition period for implementation by mutual funds and exchange-traded funds, with a final compliance date of July 24, 2024.

We are reviewing the full impact of the new rule, however we currently estimate a reduction in our annual Recurring revenues of approximately $30 million phasing in over fiscal years 2025 and 2026, assuming no offset from new services.

See the risk factor titled “ Our clients are subject to complex laws and regulations, and new laws or regulations and/or changes to existing laws or regulations could impact our clients and, in turn, adversely impact our business or may reduce our profitability.

” in Part I, Item 1A.

“Risk Factors” in this Annual Report.

Conflict in Ukraine

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Prior to the conflict, we had approximately 280 associates in St.

Petersburg, Russia who provide software development and support services for several of our GTO products, less than 2% of our total associates.

Petersburg, Russia who provided software development and support services for several of our GTO products, less than 2% of our total associates.

As of June 30, 2023, we do not have any associates remaining in Russia.

We have historically provided services to a very small number of Russian entities and subsidiaries of Russian entities.

The revenues from those services represented less than 0.1% of our total revenues in fiscal year 2021 and our outstanding accounts receivable from these entities is de minimis.

We are in the process of terminating and winding down these relationships and closing our operations in Russia.

The revenues from those services represented less than 0.1% of our total revenues in fiscal year 2022 and 2023 and our outstanding accounts receivable from these entities is de minimis.

We are in the process of terminating and winding down these relationships and have closed our operations in Russia.

We have moved the services provided in Russia to other locations in Europe and Asia.

We are monitoring and believe we are in compliance with all global sanctions arising out of Russia’s invasion of Ukraine.

We are taking steps to move the services provided in Russia to other locations in Europe and Asia.

We have taken actions to enhance our information security defenses in response to the Ukraine conflict.

We do not expect the Ukraine conflict and the actions we are taking in response to have a material impact on our core operations or financial results.

At present, we do not expect the Ukraine conflict and the actions we are taking in response to have a material impact on our core operations or financial results.

ANALYSIS OF CONSOLIDATED STATEMENTS OF EARNINGS

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Interest expense, net (135.5) (84.7) (50.9) 60

Other non-operating income (expenses), net (3.0) 72.7 (75.7) NM

Other non-operating income (expenses), net (6.0) (3.0) (3.0) 100

Earnings before income taxes 794.9 672.2 122.7 18

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Diluted 119.0 118.5

NM - Not meaningful

The table below presents Consolidated Statements of Earnings data for the fiscal years ended June 30, 2023 and 2022, and the dollar and percentage changes between periods:

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($ in millions)

Recurring fee revenues $ 3,749.3 $ 3,228.3 $ 521.1 16

Event-driven fee revenues 269.6 235.5 34.1 14

Recurring revenues $ 3,986.7 $ 3,722.7 $ 264.0 7

Event-driven revenues 211.0 269.4 (58.3) (22)

Distribution revenues 1,863.1 1,717.0 146.2 9

Foreign currency exchange (27.4) (19.5) (7.9) 41

Total $ 6,060.9 $ 5,709.1 $ 351.8 6

Points of Growth

Net New Business Internal Growth Acquisitions Total

Recurring fee revenue Growth Drivers 4pts 5pts 7pts 16 %

Net New Business Internal Growth Acquisitions Foreign Exchange Total

Recurring revenue Growth Drivers 4pts 4pts 0pts -1pt 7 %

Revenues increased $351.8 million, or 6%, to $6,060.9 million from $5,709.1 million.

• Recurring fee revenues increased $521.1 million inclusive of 4pts of growth from onboarding of Net New Business, and 5pts from Internal Growth.

The growth in Net New Business contributed to growth in both ICS and GTO recurring fee revenues, while Internal Growth contributed 5pts driven by higher volumes in our ICS business from equity proxy Record Growth of 18% and mutual fund interims Record Growth of 14%.

Growth from acquisitions was 7pts, most notably from our recent Itiviti Acquisition which closed in May 2021.

• Event-driven fee revenues increased $34.1 million, or 14%, primarily due to increased mutual fund proxy activity.

• Higher distribution revenues of $168.1 million were primarily driven by increased mail volumes of $93.9 million, primarily customer communications, and $74.2 million driven by higher postage rates.

• Recurring revenues increased $264.0 million, or 7%, to $3,986.7 million.

Recurring revenue growth constant currency (Non-GAAP) was 9%, all organic, driven by Net New Business growth and Internal Growth in both ICS and GTO.

• Event-driven revenues decreased $58.3 million, or 22%, primarily due to the decrease in volume of mutual fund proxy communications.

• Distribution revenues increased $146.2 million, or 9%, driven by the impact of postage rate increases of $120.8 million and the impact of modestly higher mail volumes, primarily in Customer Communications Solutions.

Total operating expenses.

Operating expenses increased $634.2 million, or 15%, to $4,949.2 million from $4,315.0 million as a result of an increase in both cost of revenues and selling, general and administrative expenses:

• Cost of revenues - The increase of $546.2 million in cost of revenues primarily reflects the impact of operating costs from acquisitions and related amortization expense totaling $235.2 million primarily driven by the Itiviti Acquisition in May of 2021, and higher volume related expenses including postage and distribution costs, and Nominees remittances, totaling $209.2 million due to higher Investor Communication Solutions segment revenues.

• Selling, general and administrative expenses - The increase of $88.0 million in selling, general, and administrative expenses primarily reflects the impact of acquisitions of $55.5 million primarily driven by the Itiviti Acquisition in May of 2021, and higher compensation of $38.2 million.

Operating expenses increased $175.3 million, or 4%, to $5,124.5 million from $4,949.2 million primarily as a result of the increase in Cost of revenues:

• Cost of revenues - The increase of $158.6 million in Cost of revenues primarily reflects the impact of higher postage and distribution expenses in our Investor Communication Solutions segment of $169.4 million, offset by lower acquisition amortization of $35.8 million.

• Selling, general and administrative expenses - The increase of $16.7 million in Selling, general, and administrative expenses primarily reflects higher compensation expenses of $21.8 million and higher technology related expenses of $4.3 million, offset by lower external labor costs.

Interest expense, net.

Interest expenses, net, was $84.7 million, an increase of $29.4 million from $55.2 million in the fiscal year ended June 30, 2021.

The increase of $29.4 million was primarily due to an increase in debt outstanding related to the Itiviti Acquisition.

Interest expense, net, was $135.5 million, an increase of $50.9 million from $84.7 million in the fiscal year ended June 30, 2022 primarily due to an increase in interest expense from higher borrowing costs.

Other non-operating income (expenses), net.

Other non-operating expense, net for the fiscal year ended June 30, 2022 was $3.0 million, a decrease of $75.7 million, compared to $72.7 million of Other non-operating income, net for the fiscal year ended June 30, 2021.

The decrease was primarily due to the Gain on Acquisition-Related Financial Instrument of $62.1 million in the prior year period.

Other non-operating expense, net for the fiscal year ended June 30, 2023 was $6.0 million, compared to $3.0 million of Other non-operating expense, net for the fiscal year ended June 30, 2022.

The increased expense was primarily due to higher net gains on investments in the prior year period.

Provision for income taxes .

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• Effective tax rate for the fiscal year ended June 30, 2022 - 19.8%.

The decrease in the effective tax rate for the fiscal year ended June 30, 2022 compared to the fiscal year ended June 30, 2021 was driven by higher total discrete tax items, in addition to higher excess tax benefits related to equity compensation, compared to the prior year period.

The increase in the effective tax rate for the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022 was driven by the lower excess tax benefit related to equity compensation as compared to the prior year.

ANALYSIS OF REPORTABLE SEGMENTS

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The primary component of “Other” are certain gains, losses, corporate overhead expenses and non-operating expenses that have not been allocated to the reportable segments, such as interest expense.

Foreign currency exchange is a reconciling item between the actual foreign currency exchange rates and the constant foreign currency exchange rates used for internal management reporting.

Certain corporate expenses, as well as certain centrally managed expenses, are allocated based upon budgeted amounts in a reasonable manner.

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Global Technology and Operations 1,525.2 1,452.4 72.8 5

Foreign currency exchange (27.4) (19.5) (7.9) 41

Total $ 6,060.9 $ 5,709.1 $ 351.8 6

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Other (200.5) (191.9) (8.6) 4

Foreign currency exchange (4.7) (10.1) 5.4 (53)

Total $ 794.9 $ 672.2 $ 122.7 18

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Global Technology and Operations 158.9 181.5 (22.6) (12)

Other — 1.5 (1.5) (100)

Foreign currency exchange (8.4) (2.3) (6.1) NM

Total $ 214.4 $ 250.2 $ (35.8) (14)

NM - Not meaningful

Investor Communication Solutions

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($ in millions)

Recurring fee revenues $ 2,275.0 $ 2,042.1 $ 232.9 11

Event-driven fee revenues 269.6 235.5 34.1 14

Recurring revenues $ 2,461.4 $ 2,270.3 $ 191.1 8

Event-driven revenues 211.0 269.4 (58.3) (22)

Distribution revenues 1,863.1 1,717.0 146.2 9

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Points of Growth

Net New Business Internal Growth Acquisitions Total

Recurring fee revenue Growth Drivers 5pts 7pts 0pts 11 %

Net New Business Internal Growth Acquisitions Foreign Exchange Total

Recurring revenue Growth Drivers 4pts 5pts 0pts 0pts 8 %

For the fiscal year ended June 30, 2023:

• Recurring fee revenues grew 11% driven by 5pts from Net New Business and 7pts of Internal Growth.

Internal Growth was driven by higher volumes including equity proxy Record Growth of 18% and mutual fund interims Record Growth of 14%.

• Event-driven fee revenues grew 14% primarily due to increased volume of mutual fund proxy activity.

• The earnings increase of $130.2 million, or 22% to $726.3 million was driven by higher recurring and event-driven fee revenues.

Segment operating expenses rose 9%, or $304.8 million, to $3,535.8 million, primarily driven by distribution and other revenue related expenses.

• Recurring revenues increased $191.1 million, or 8%, to $2,461.4 million.

Recurring revenue growth constant currency (Non-GAAP) was 9%, all organic, driven by Internal Growth and Net New Business.

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

◦ Regulatory rose 6% and 7%, respectively, driven by equity position growth of 9% and mutual fund/ETF position growth of 8%;

◦ Data-Driven Fund Solutions rose 11% and 12%, respectively, driven by growth in our mutual fund trade processing business and continued growth in our data and analytics solutions;

◦ Issuer rose 12% and 13%, respectively, driven by growth in our registered shareholder solutions and disclosure solutions;

◦ Customer Communications rose 9% and 10%, respectively, driven by higher print and digital communications.

• Event-driven revenues decreased $58.3 million, or 22% primarily due to the decrease in volume of mutual fund proxy communications.

• Earnings before income taxes increased $86.8 million, or 12.0%.

The earnings benefit from higher Recurring revenue was partially offset by lower event-driven revenues.

Operating expenses rose 5%, or $192.2 million, to $3,724.2 million, primarily driven by distribution and other revenue related expenses.

Amortization expense from acquired intangibles decreased by $13.2 million to $55.5 million from $68.7 million in the prior period.

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Fiscal Year 2023 Compared to Fiscal Year 2022

Revenues increased $288.2 million to $1,474.4 million from $1,186.2 million, and earnings before income taxes decreased $60.8 million to $139.5 million from $200.3 million.

Revenues increased $72.8 million to $1,525.2 million from $1,452.4 million, and earnings before income taxes increased $44.5 million to $183.9 million from $139.4 million.

Years Ended June 30,

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($ in millions)

Recurring fee revenues $ 1,474.4 $ 1,186.2 $ 288.2 24

Recurring revenues $ 1,525.2 $ 1,452.4 $ 72.8 5

Earnings before Income Taxes

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Points of Growth

Net New Business Internal Growth Acquisitions Total

Recurring fee revenue Growth Drivers 4pts 1pt 19pts 24 %

Net New Business Internal Growth Acquisitions Foreign Exchange Total

Recurring revenue Growth Drivers 4pts 4pts 0pts -3pts 5 %

For the fiscal year ended June 30, 2023:

• Recurring fee revenues increased $288.2 million, or 24%, to $1,474.4 million.

The growth was driven by 19pts of growth from acquisitions, primarily Itiviti, as well as 4pts of Net New Business from onboarding of new clients.

• The earnings decrease of $60.8 million was primarily driven by $290.7 million in operating costs from acquisitions primarily as a result of the Itiviti Acquisition, as compared to revenue from acquisitions of $228.2 million.

Amortization expense from acquired intangibles increased by $121.7 million to $189.3 million in fiscal year 2022 from $67.6 million in the prior year period.

• Pre-tax margins decreased by 7.4 percentage points to 9.5% from 16.9%.

• Recurring revenues increased $72.8 million, or 5.0%, to $1,525.2 million.

Recurring revenue growth constant currency (Non-GAAP) was 8%, all organic, driven by Net New Business and Internal Growth.

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

◦ Capital markets rose 7% and 11%, respectively, driven by a combination of Internal Growth and Net New Business;

◦ Wealth and investment management rose 2% and 4%, respectively, primarily driven by Net New Business.

• Earnings before income taxes increased $44.5 million, driven primarily by the $72.8 million growth in Recurring revenues, partially offset by increased labor costs.

Amortization expense from acquired intangibles decreased by $22.6 million to $158.9 million in fiscal year 2023 from $181.5 million in the prior year period due to the impact of changes in foreign currency exchange rates and certain intangible assets now being fully amortized.

• Pre-tax margins increased by 2.5 percentage points to 12.1% from 9.6%.

Loss before income taxes was $200.5 million for the fiscal year ended June 30, 2023, an increase of $8.6 million, or 4%, compared to $191.9 million for the fiscal year ended June 30, 2022.

• The increased loss before income taxes was primarily due to (i) the absence of the Gain on Acquisition-Related Financial Instrument of $62.1 million in the prior year period, and (ii) higher interest expense of $29.4 million due to an increase in average debt outstanding related to the Itiviti Acquisition.

The impact of a $50.9 million increase in net interest expense and higher severance costs related to the corporate restructuring initiative were partially offset by the absence of the prior year $30.5 million in Real Estate Realignment and Covid-19 related expenses and lower compensation related expenses.

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

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In certain circumstances, Non-GAAP results have been presented.

These Non-GAAP measures are Adjusted Operating income, Adjusted Operating income margin, Adjusted Net earnings, Adjusted earnings per share, and Free cash flow.

These Non-GAAP measures are Adjusted Operating income, Adjusted Operating income margin, Adjusted Net earnings, Adjusted earnings per share, Free cash flow, and Recurring revenue growth constant currency.

These Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results.

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Management believes that Non-GAAP measures provide consistency in its financial reporting and facilitates investors’ understanding of the Company’s operating results and trends by providing an additional basis for comparison.

Management uses these Non-GAAP financial measures to, among other things, evaluate our ongoing operations, for internal planning and forecasting purposes and in the calculation of performance-based compensation.

Management uses these Non-GAAP financial measures to, among other things, evaluate our ongoing operations and for internal planning and forecasting purposes.

In addition, and as a consequence of the importance of these Non-GAAP financial measures in managing our business, the Company’s Compensation Committee of the Board of Directors incorporates Non-GAAP financial measures in the evaluation process for determining management compensation.

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

(i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) Real Estate Realignment and Covid-19 Related Expenses, (iv) Russia-Related Exit Costs, (v) Investment Gains, (vi) Software Charge, and (vii) Gain on Acquisition-Related Financial Instrument.

(i) Amortization of Acquired Intangibles and Purchased Intellectual Property, (ii) Acquisition and Integration Costs, (iii) Restructuring Charges, (iv) Real Estate Realignment and Covid-19 Related Expenses, (v) Russia-Related Exit Costs, and (vi) Investment Gain.

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

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

Restructuring Charges represent severance costs associated with the Company’s initiative to streamline our management structure, reallocate work to lower cost locations, and reduce headcount in deprioritized areas.

Real Estate Realignment and Covid-19 Related Expenses are comprised of two major components:

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

Investment Gains represent non-operating, non-cash gains on privately held investments.

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

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.

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

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

We exclude Acquisition and Integration Costs, Restructuring Charges, Real Estate Realignment and Covid-19 Related Expenses, Russia-Related Exit Costs, and Investment Gain 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 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):

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

Recurring Revenue Growth Constant Currency

As a multi-national company, we are subject to variability of our reported U.S.

dollar results due to changes in foreign currency exchange rates.

The exclusion of the impact of foreign currency exchange fluctuations from our Recurring revenue growth, or what we refer to as amounts expressed “on a constant currency basis,” is a Non-GAAP measure.

We believe that excluding the impact of foreign currency exchange fluctuations from our Recurring revenue growth provides additional information that enables enhanced comparison to prior periods.

Changes in Recurring revenue growth expressed on a constant currency basis are presented excluding the impact of foreign currency exchange fluctuations.

To present this information, current period results for entities reporting in currencies other than the U.S.

dollar are translated into U.S.

dollars at the average exchange rates in effect during the corresponding period of the comparative year, rather than at the actual average exchange rates in effect during the current fiscal year.

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

Years ended June 30,

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Acquisition and Integration Costs 15.8 24.5

Restructuring Charges 20.4 —

Real Estate Realignment and Covid-19 Related Expenses (a) — 30.5

Russia-Related Exit Costs 1.4 —

Software Charge — 6.0

Russia-Related Exit Costs (c) 12.1 1.4

Adjusted Operating income (Non-GAAP) $ 1,199.1 $ 1,066.4

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Acquisition and Integration Costs 15.8 24.5

Restructuring Charges 20.4 —

Real Estate Realignment and Covid-19 Related Expenses (a) — 30.5

Russia-Related Exit Costs 1.4 —

Software Charge — 6.0

Russia-Related Exit Costs (c) 10.9 1.4

Investment Gains — (14.2)

Gain on Acquisition-Related Financial Instrument — (62.1)

Subtotal of adjustments 261.6 292.3

Tax impact of adjustments (c) (65.7) (33.2)

Tax impact of adjustments (d) (57.5) (65.7)

Adjusted Net earnings (Non-GAAP) $ 834.6 $ 765.7

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Acquisition and Integration Costs 0.13 0.21

Restructuring Charges 0.17 —

Real Estate Realignment and Covid-19 Related Expenses (b) — 0.26

Russia-Related Exit Costs 0.09 0.01

Software Charge — 0.05

Investment Gains — (0.12)

Gain on Acquisition-Related Financial Instrument — (0.53)

Subtotal of adjustments 2.20 2.47

Tax impact of adjustments (c) (0.55) (0.28)

Tax impact of adjustments (d) (0.48) (0.55)

Adjusted earnings per share (Non-GAAP) $ 7.01 $ 6.46

(a) Real Estate Realignment Expenses were $23.0 million and $29.6 million for the fiscal years ended June 30, 2022 and 2021, respectively.

Covid-19 Related Expenses were $7.5 million and $15.7 million for the fiscal years ended June 30, 2022 and 2021, respectively.

(b) Real Estate Realignment Expenses impacted Adjusted earnings per share by $0.19 and $0.25 for the fiscal years ended June 30, 2022 and 2021, respectively.

Covid-19 Related Expenses impacted Adjusted earnings per share by $0.06 and $0.13 for the fiscal years ended June 30, 2022 and 2021, respectively.

(c) Calculated using the GAAP effective tax rate, adjusted to exclude $18.1 million of excess tax benefits (“ETB”) associated with stock-based compensation for the fiscal year ended June 30, 2022, and $16.9 million of ETB associated with stock-based compensation for the fiscal year ended June 30, 2021.

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.

(a) Real Estate Realignment Expenses and Covid-19 Related Expenses were $23.0 million and $7.5 million for the fiscal year ended June 30, 2022, respectively.

(b) Real Estate Realignment Expenses and Covid-19 Expenses impacted Adjusted earnings per share by $0.19 and $0.06 for the fiscal year ended June 30, 2022, respectively.

(c) Russia-Related Exit Costs were $10.9 million and $1.4 million for the fiscal years ended June 30, 2023 and June 30, 2022, comprised of $12.1 million of operating expenses, offset by a gain of $1.2 million in non-operating income for the fiscal year ended June 30, 2023, and $1.4 million of operating expenses for the fiscal year ended June 30, 2022.

(d) Calculated using the GAAP effective tax rate, adjusted to exclude $10.4 million of excess tax benefits (“ETB”) associated with stock-based compensation for the fiscal year ended June 30, 2023, and $18.1 million of ETB associated with stock-based compensation for the fiscal year ended June 30, 2022.

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 (75.2) (73.1)

Proceeds from asset sales — 18.0

Free cash flow (Non-GAAP) $ 748.2 $ 370.4

Year Ended June 30, 2023

Investor Communication Solutions Regulatory Data-Driven Fund Solutions Issuer Customer Communications Total

Recurring revenue growth (GAAP) 6 % 11 % 12 % 9 % 8 %

Impact of foreign currency exchange — % 1 % — % — % — %

Recurring revenue growth constant currency (Non-GAAP) 7 % 12 % 13 % 10 % 9 %

Year Ended June 30, 2023

Global Technology and Operations Capital Markets Wealth and Investment Management Total

Recurring revenue growth (GAAP) 7 % 2 % 5 %

Impact of foreign currency exchange 4 % 2 % 3 %

Recurring revenue growth constant currency (Non-GAAP) 11 % 4 % 8 %

Year Ended June 30, 2023

Consolidated Total

Recurring revenue growth (GAAP) 7 %

Impact of foreign currency exchange 1 %

Recurring revenue growth constant currency (Non-GAAP) 9 %

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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At the current time, and in future periods, we expect cash generated by our operations, together with existing cash, cash equivalents, and borrowings from the capital markets, to be sufficient to cover cash needs for working capital, capital expenditures, strategic acquisitions, dividends and common stock repurchases.

Given the volatility in the rapidly changing market and economic conditions related to the Covid-19 pandemic, we will continue to evaluate the nature and extent of the impact of the Covid-19 pandemic on our business and financial position.

We expect existing domestic cash, cash equivalents, cash flows from operations and borrowing capacity to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends, debt repayment schedules, and material capital expenditures, for at least the next 12 months and thereafter for the foreseeable future.

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(in millions)

Long-term debt

Current portion of long-term debt

Fiscal 2021 Term Loans (a) May 2024 $ 1,180.0 $ 1,178.5 $ — $ — $ 1,180.0

Total $ 1,180.0 $ 1,178.5 $ — $ — $ 1,180.0

Long-term debt, excluding current portion

Fiscal 2021 Revolving Credit Facility:

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Total Revolving Credit Facility $ — $ — $ 25.0 $ 1,500.0 $ —

Fiscal 2021 Term Loans May 2024 $ 1,540.0 $ 1,535.8 $ 1,543.4 $ — $ 1,540.0

Fiscal 2021 Term Loans (a) May 2024 $ — $ — $ 1,535.8 $ — $ —

Fiscal 2016 Senior Notes June 2026 $ 500.0 $ 498.0 $ 497.4 $ — $ 471.4

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Total Senior Notes $ 2,250.0 $ 2,234.7 $ 2,232.3 $ — $ 1,929.8

Total long-term debt $ 2,250.0 $ 2,234.7 $ 3,793.0 $ 1,500.0 $ 1,929.8

Total debt $ 3,430.0 $ 3,413.3 $ 3,793.0 $ 1,500.0 $ 3,109.8

(a) The Fiscal 2021 Term Loans were reclassified from Long-term debt to Current portion of long-term debt in May 2023 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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(in millions) $ 1,180.0 $ — $ 500.0 $ — $ — $ 1,750.0 $ 3,430.0

The Company has a $1.5 billion five-year revolving credit facility (the “Fiscal 2021 Revolving Credit Facility”), which is comprised of a $1.1 billion U.S.

The Company has a $1.5 billion five-year revolving credit facility (as amended on December 23, 2021 and May 23, 2023, the “Fiscal 2021 Revolving Credit Facility”), which is comprised of a $1.1 billion U.S.

dollar tranche and a $400.0 million multicurrency tranche.

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

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

Dollars, Canadian Dollars, Euro, Swedish Kronor, and Yen initially bear interest at Adjusted Term SOFR, CDOR, EURIBOR, TIBOR and STIBOR, respectively, plus 1.200% (subject to step-ups to 1.275% and step-downs to 0.905% based on public debt ratings) and revolving loans denominated in Sterling bears interest at SONIA plus 1.1326% 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 15.0 basis points on the entire facility (subject to step-ups to 20.0 basis points and step-downs to 7.0 basis points based on ratings).

In March 2021, the Company entered into a term credit agreement, as amended on December 23, 2021 (“Term Credit Agreement”), providing for term loan commitments in an aggregate principal amount of $2.55 billion, comprised of a $1.0 billion tranche (“Tranche 1”) and a $1.55 billion tranche (“Tranche 2,” together with Tranche 1, the “Fiscal 2021 Term Loans”).

On May 23, 2023, we amended the interest rate index from LIBOR to Adjusted SOFR.

All other terms remained unchanged.

In March 2021, the Company entered into a term credit agreement (as amended on December 23, 2021 and May 23, 2023, “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.

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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).

Interest on the outstanding portion of the Fiscal 2021 Term Loans bears interest at Adjusted Term SOFR plus 1.100% per annum (subject to step-ups to Adjusted Term SOFR plus 1.350% or a step-down to SOFR plus 0.850% based on ratings).

On May 23, 2023, we amended the interest rate index from LIBOR to Adjusted SOFR.

All other terms remained unchanged.

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

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

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

Please refer to Note 14, “Borrowings” to our Consolidated Financial Statements under Item 8 of Part II of this Annual Report on Form 10-K for a more detailed discussion.

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Net cash flows used in investing activities (80.4) (110.4) 30.0

Net cash flows provided by (used in) financing activities (370.8) 1,797.8 (2,168.5)

Net cash flows used in financing activities (714.7) (370.8) (344.0)

Effect of exchange rate changes on Cash and cash equivalents (0.6) (12.2) 11.6

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Capital expenditures and Software purchases and capitalized internal use software (75.2) (73.1) (2.1)

Proceeds from asset sales — 18.0 (18.0)

Free cash flow (Non-GAAP) $ 748.2 $ 370.4 $ 377.8

The decrease in cash provided by operating activities of $196.6 million was primarily due to increased scaling of client-related platform implementation and development as well as higher cash used in working capital, partially offset by higher net non-cash add-backs including higher amortization of acquired intangibles and purchased intellectual property.

The decrease in cash used in investing activities of $2,543.3 million primarily reflects lower acquisition spend in fiscal year 2022 compared to the prior year period, most notably the Itiviti Acquisition, partially offset by the fiscal year 2021 $66.7 million forward foreign exchange derivative inflow associated with the Itiviti Acquisition that did not recur in fiscal year 2022.

The increase in cash used in financing activities of $2,168.5 million primarily reflects lower borrowings net of repayments, most notably to finance the Itiviti Acquisition in the prior year period.

The increase in cash provided by operating activities of $379.9 million was primarily due to an increase in advance client billings as well as a decrease in client-related platform implementation and development, partially offset by higher cash used in working capital.

The decrease in cash used in investing activities of $30.0 million primarily reflects lower acquisition spend in the current fiscal year compared to the prior year period.

The increase in cash used in financing activities of $344.0 million primarily reflects higher repayments net of borrowing.

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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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

The Company sponsors a Supplemental Officer Retirement Plan (the “SORP”).

The SORP is a nonqualified ERISA defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key officers upon retirement based upon the officers’ years of service and compensation.

The SORP was closed to new participants beginning in fiscal year 2015.

The Company also sponsors a Supplemental Executive Retirement Plan (the “SERP”).

The SERP is also a nonqualified ERISA defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key executives upon retirement based upon the executives’ years of service and compensation.

The SERP was closed to new participants beginning in fiscal year 2015.

The SORP and SERP are effectively funded with assets held in a Rabbi Trust.

The assets invested in the Rabbi Trust are to be used in part to fund benefit payments to participants under the terms of the plans.

The Rabbi Trust is irrevocable and no portion of the trust funds may be used for any purpose other than the delivery of those assets to the participants, except that assets held in the Rabbi Trust would be subject to the claims of the Company’s general creditors in the event of bankruptcy or insolvency of the Company.

The SORP and SERP are nonqualified plans for federal tax purposes and for purposes of Title I of ERISA.

The Rabbi Trust assets had a value of $55.6 million at June 30, 2022 and $62.6 million at June 30, 2021 and are included in Other non-current assets in the accompanying Consolidated Balance Sheets.

The benefit obligation to the Company under these plans at June 30, 2022 and 2021 was:

Years ended June 30,

(in millions)

SORP $ 51.6 $ 59.5

Total $ 57.0 $ 65.9

What changed 10-K

Item 7. Management’s Discussion and Analysis