Donnelley Financial Solutions, Inc. (NYSE:DFIN) Q4 2022 Earnings Conference Call February 21, 2023 9:00 AM ET Company Participants Michael Zhao - Head of IR Daniel N. Leib - President & Chief Executive Officer Dave Gardella - CFO Craig Clay - President, Global Capital Markets Conference Call Participants Stefanos Crist - CJS Securities Peter Heckmann - D.A. Davidson Raj Sharma - B. Riley Securities Operator Good morning. My name is Audra and I will be your conference operator today. At this time, I would li ...

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) DFIN, a global risk and compliance solutions firm, shifts from traditional printing to software and technology services - DFIN provides regulatory filing and transaction solutions, encompassing software, technology-enabled services, and print and distribution, to meet client regulatory and compliance needs[17](index=17&type=chunk) - The company's strategic focus is on concentrating investments and resources in advanced software solutions like ActiveDisclosure®, Arc Suite®, and Venue® virtual data rooms, while making targeted investments to enhance product functionality[19](index=19&type=chunk) 2022 Capital Markets Net Sales Composition | Category | 2022 Percentage | 2021 Percentage | | :--- | :--- | :--- | | Software Solutions | 31% | 24% | | - Venue (Transaction Solutions) | 55% (within software) | 58% (within software) | | - Compliance and Other Software | 45% (within software) | 42% (within software) | | Technology-Enabled Services and Print & Distribution | 69% | 76% | | - Transactional | 58% (within services) | 72% (within services) | | - Compliance | 42% (within services) | 28% (within services) | 2022 Investment Companies Net Sales Composition | Category | 2022 Percentage | 2021 Percentage | | :--- | :--- | :--- | | Software Solutions | 41% | 35% | | Technology-Enabled Services and Print & Distribution | 59% | 65% | | - Compliance | 94% (within services) | 93% (within services) | | - Transactional | 6% (within services) | 7% (within services) | - The company purchased renewable energy credits in 2022 to offset **100%** of the electricity used at its print manufacturing facilities, with climate-related risks and opportunities overseen by the Corporate Responsibility and Governance Committee[81](index=81&type=chunk) [Company Overview](index=5&type=section&id=Company%20Overview) [Capital Markets](index=5&type=section&id=Capital%20Markets) [Investment Companies](index=7&type=section&id=Investment%20Companies) [Segments](index=8&type=section&id=Segments) [Services and Products](index=8&type=section&id=Services%20and%20Products) [Company History](index=8&type=section&id=Company%20History) [Markets and Competition](index=9&type=section&id=Markets%20and%20Competition) [Technology](index=9&type=section&id=Technology) [Market Volatility/Cyclicality and Seasonality](index=10&type=section&id=Market%20Volatility%2FCyclicality%20and%20Seasonality) [COVID-19 Impact](index=10&type=section&id=COVID-19) [Government Regulation and Regulatory Impact](index=10&type=section&id=Government%20Regulation%20and%20Regulatory%20Impact) [Resources](index=11&type=section&id=Resources) [Distribution](index=11&type=section&id=Distribution) [Customers](index=11&type=section&id=Customers) [Cybersecurity and Data Protection](index=11&type=section&id=Cybersecurity%20and%20Data%20Protection) [Human Capital](index=12&type=section&id=Human%20Capital) [Climate](index=14&type=section&id=Climate) [Available Information](index=14&type=section&id=Available%20Information) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks across technology, operations, finance, legal, regulatory, and pandemic factors, potentially impacting performance - The company's systems contain substantial proprietary, confidential, and non-public information, making them targets for cyberattacks, and security breaches could severely harm the company's reputation and business[85](index=85&type=chunk) - A significant portion of the company's net sales relies on financial and strategic business transactions, and market downturns, such as reduced IPO and M&A activity, could negatively impact demand for the company's services and products[95](index=95&type=chunk) Company Debt as of 2022 | Metric | Amount (million USD) | | :--- | :--- | | Outstanding Term Loan A as of December 31, 2022 | 125.0 | | Outstanding Revolving Credit as of December 31, 2022 | 45.0 | | Total Long-Term Debt as of December 31, 2022 | 169.2 | | Total Long-Term Debt as of December 31, 2021 | 124.0 | - The company faces potential funding obligation risks related to multiemployer pension plans, particularly liabilities from former affiliate LSC, for which the company and RRD are jointly and severally liable[124](index=124&type=chunk) - The COVID-19 pandemic and other global public health epidemics could materially adversely affect the company's business, future operating results, and overall financial performance, including customer demand and operational management capabilities[126](index=126&type=chunk) [Technology Risks](index=15&type=section&id=Technology%20Risks) [Business, Economic, Market and Operating Risks](index=17&type=section&id=Business%2C%20Economic%2C%20Market%20and%20Operating%20Risks) [Financial Risks](index=21&type=section&id=Financial%20Risks) [Legal and Regulatory Risks](index=22&type=section&id=Legal%20and%20Regulatory%20Risks) [Benefit, Pension and Other Postretirement Benefits Plans Risk](index=23&type=section&id=Benefit%2C%20Pension%20and%20Other%20Postretirement%20Benefits%20Plans%20Risk) [COVID-19 Pandemic Risk](index=24&type=section&id=COVID-19%20Pandemic%20Risk) [Unresolved Staff Comments](index=25&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments in this report - The company has no unresolved staff comments[129](index=129&type=chunk) [Properties](index=25&type=section&id=Item%202.%20Properties) As of December 31, 2022, the company owned or leased 16 US (0.5M sq ft) and 12 international (0.1M sq ft) facilities - As of December 31, 2022, the company owned or leased **16 US facilities** (approximately **0.5 million square feet**) and **12 international facilities** (less than **0.1 million square feet**)[130](index=130&type=chunk) - The company owns approximately **0.2 million square feet** of facilities globally, with the remaining **0.4 million square feet** leased[130](index=130&type=chunk) - The company holds approximately **3.3 acres** of land for sale[130](index=130&type=chunk) [Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings details are in Note 8, 'Commitments and Contingencies,' of the consolidated financial statements - Details regarding the company's legal proceedings and contingent liabilities are provided in Note 8 to the audited consolidated financial statements[131](index=131&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Mine safety disclosures are not applicable[132](index=132&type=chunk) Part II [Market for Donnelley Financial Solutions, Inc.'s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Donnelley%20Financial%20Solutions%2C%20Inc.%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) DFIN's common stock trades on NYSE; Q4 2022 repurchases totaled $37.27 million, showing strong shareholder return - DFIN's common stock has traded on the New York Stock Exchange (NYSE) under the ticker symbol "DFIN" since **October 3, 2016**[135](index=135&type=chunk) - As of **February 14, 2023**, the company had **3,345** registered stockholders[136](index=136&type=chunk) Issuer Purchases of Equity Securities in Q4 2022 | Period | Total Shares Purchased | Average Price Paid Per Share ($) | Total Shares Purchased as Part of Publicly Announced Program or Plan | Maximum Value of Shares that May Yet Be Purchased Under the Program or Plan ($) | | :--- | :--- | :--- | :--- | :--- | | October 1 - October 31, 2022 | 180,061 | 38.41 | 180,061 | 131,025,550 | | November 1 - November 30, 2022 | 128,526 | 35.61 | 124,612 | 126,593,507 | | December 1 - December 31, 2022 | 61,524 | 37.41 | 61,524 | 124,292,140 | | **Total** | **370,111** | **37.27** | **366,197** | | - The Board of Directors authorized an increase in the stock repurchase program to **$150 million** and extended the expiration date to **December 31, 2023**, in February and August 2022[137](index=137&type=chunk) Cumulative Total Shareholder Return 2017-2022 | Company Name/Index | December 31, 2017 | December 31, 2018 | December 31, 2019 | December 31, 2020 | December 31, 2021 | December 31, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Donnelley Financial Solutions | 100 | 71.99 | 53.72 | 87.07 | 241.87 | 198.31 | | Russell 2000 Index | 100 | 88.99 | 111.70 | 134.00 | 153.85 | 122.41 | | S&P SmallCap 600 Index | 100 | 91.52 | 112.37 | 125.05 | 158.59 | 133.06 | | S&P Composite 1500 Diversified Financials Index | 100 | 89.76 | 111.82 | 124.58 | 168.96 | 149.27 | [Principal Market](index=26&type=section&id=Principal%20Market) [Stockholders](index=26&type=section&id=Stockholders) [Issuer Purchases of Equity Securities](index=26&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) [Equity Compensation Plans](index=26&type=section&id=Equity%20Compensation%20Plans) [Peer Performance Table](index=27&type=section&id=Peer%20Performance%20Table) [Reserved](index=27&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, net sales decreased 16.1% to $833.6M, operating income fell 33.9%, and adjusted EBITDA declined 26.0% Consolidated Operating Results Overview 2022 vs 2021 | Metric | 2022 (million USD) | 2021 (million USD) | Change (million USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | 833.6 | 993.3 | (159.7) | (16.1%) | | Operating Income | 145.0 | 219.3 | (74.3) | (33.9%) | | Net Income | 102.5 | 145.9 | (43.4) | (29.7%) | | Diluted Earnings Per Share | 3.17 | 4.14 | (0.97) | (23.4%) | Net Sales Change by Service Type 2022 vs 2021 | Service Type | 2022 (million USD) | 2021 (million USD) | Change (million USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Technology-Enabled Services | 380.9 | 519.5 | (138.6) | (26.7%) | | Software Solutions | 279.6 | 270.0 | 9.6 | 3.6% | | Print and Distribution | 173.1 | 203.8 | (30.7) | (15.1%) | Adjusted EBITDA 2022 vs 2021 | Metric | 2022 (million USD) | 2021 (million USD) | Change (million USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | 218.3 | 294.8 | (76.5) | (26.0%) | - The company anticipates capital expenditures of approximately **$60 million** in 2023, an increase from **$54.2 million** in 2022, primarily for investments in its software portfolio[199](index=199&type=chunk) Cash Flow Overview 2022 vs 2021 | Cash Flow Type | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 150.2 | 180.0 | | Net Cash Used in Investing Activities | (50.9) | (45.0) | | Net Cash Used in Financing Activities | (121.1) | (154.9) | | Net Decrease in Cash and Cash Equivalents | (20.3) | (19.1) | - The company completed the disposition of its Edgar Online (EOL) business on **November 9, 2022**, generating **$3.3 million** in net cash proceeds[215](index=215&type=chunk) [Business](index=28&type=section&id=Business) [Segments](index=28&type=section&id=Segments) [Executive Overview](index=28&type=section&id=Executive%20Overview) [Financial Review](index=28&type=section&id=Financial%20Review) [Non-GAAP Measures](index=33&type=section&id=Non-GAAP%20Measures) [Selected Financial Data](index=35&type=section&id=Selected%20Financial%20Data) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) [Critical Accounting Estimates](index=39&type=section&id=Critical%20Accounting%20Estimates) [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest and FX rate risks; a 10% USD rise could cut pre-tax earnings by $0.6M - The company manages market risks from changes in interest rates and foreign exchange rates through its ordinary course of business and financial activities, but held no derivative financial instruments as of **December 31, 2022**[243](index=243&type=chunk) - In 2022, approximately **14%** of the company's net sales were derived from international operations outside the United States, primarily denominated in Hong Kong Dollars, Canadian Dollars, and British Pounds[244](index=244&type=chunk) - A hypothetical **10%** appreciation of the U.S. Dollar against various currencies would result in an approximate **$0.6 million** decrease in the company's pre-tax earnings and a **$5.8 million** decrease in total assets[245](index=245&type=chunk) - A hypothetical **10%** change in interest rates would impact interest expense and cash flows by **$2.5 million**[246](index=246&type=chunk)[247](index=247&type=chunk) - The company mitigates credit risk on accounts receivable through a large and diversified customer base, with no single customer accounting for more than **10%** of net sales[248](index=248&type=chunk) [Market Risk](index=42&type=section&id=Market%20Risk) [Foreign Exchange Risk](index=42&type=section&id=Foreign%20Exchange%20Risk) [Interest Rate Risk](index=43&type=section&id=Interest%20Rate%20Risk) [Credit Risk](index=43&type=section&id=Credit%20Risk) [Financial Statements and Supplementary Data](index=43&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The required financial information for this item begins on page F-1 of this annual report - The financial information required for this item begins on page F-1 of this annual report[249](index=249&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=43&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes or disagreements with accountants on accounting and financial disclosure are reported - The company has no changes in or disagreements with accountants on accounting and financial disclosure[250](index=250&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2022, disclosure controls were effective, with no Q4 changes, and Deloitte issued an unqualified opinion - As of **December 31, 2022**, the company's Chief Executive Officer and Chief Financial Officer assessed and concluded that the company's disclosure controls and procedures were effective[252](index=252&type=chunk) - No changes in the company's internal control over financial reporting occurred during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[253](index=253&type=chunk) - Management has filed an annual report on the effectiveness of internal control over financial reporting as of **December 31, 2022**, concluding that it was effective[254](index=254&type=chunk) - Deloitte, the independent registered public accounting firm, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of **December 31, 2022**[257](index=257&type=chunk)[258](index=258&type=chunk) - Deloitte identified the valuation of unbilled receivables and contract assets as a critical audit matter due to the high volume of transactions, manual processes, and management's judgment required in estimating transaction prices, standalone selling prices, and variable consideration[490](index=490&type=chunk) [Disclosure Controls and Procedures](index=43&type=section&id=%28a%29%20Disclosure%20controls%20and%20procedures.) [Changes in Internal Control Over Financial Reporting](index=43&type=section&id=%28b%29%20Changes%20in%20internal%20control%20over%20financial%20reporting.) [Management's Annual Report on Internal Control Over Financial Reporting](index=43&type=section&id=Management%27s%20Annual%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting.) [Report of Independent Registered Public Accounting Firm](index=44&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) [Other Information](index=45&type=section&id=Item%209B.%20Other%20Information) No other information is required to be disclosed in this report - No other information is required to be disclosed in this report[264](index=264&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=45&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[265](index=265&type=chunk) Part III [Directors and Executive Officers of Donnelley Financial Solutions, Inc. and Corporate Governance](index=46&type=section&id=Item%2010.%20Directors%20and%20Executive%20Officers%20of%20Donnelley%20Financial%20Solutions%2C%20Inc.%20and%20Corporate%20Governance) Director, executive, and governance information is incorporated from the 2023 proxy statement; a CEO/CFO Code of Conduct is adopted - Information regarding the company's directors, executive officers, and corporate governance is incorporated by reference from the **2023** proxy statement[267](index=267&type=chunk) - The company has adopted a Code of Conduct applicable to its Chief Executive Officer and senior financial officers, with any amendments or waivers to be posted on its website[268](index=268&type=chunk) [Executive Compensation](index=47&type=section&id=Item%2011.%20Executive%20Compensation) Executive and director compensation information is incorporated by reference from relevant sections of the 2023 proxy statement - Executive and director compensation information is incorporated by reference from the "Compensation Discussion and Analysis," "Human Resources Committee Report," "Executive Compensation," "Potential Payments Upon Termination or Change in Control," and "Director Compensation" sections of the **2023** proxy statement[272](index=272&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=47&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of December 31, 2022, 2,632 thousand shares were outstanding under equity plans (avg. $18.19), with 3,476 thousand available Equity Compensation Plan Information (as of December 31, 2022) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (thousand shares) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (thousand shares) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 2,632 | 18.19 | 3,476 | [Equity Compensation Plan Information](index=47&type=section&id=Equity%20Compensation%20Plan%20Information) [Certain Relationships and Related Transactions and Director Independence](index=47&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the 2023 proxy statement - Information on certain relationships and related transactions, as well as director independence, is incorporated by reference from the "Certain Transactions," "Board Committees and Their Functions," and "Corporate Governance—Director Independence" sections of the **2023** proxy statement[276](index=276&type=chunk) [Principal Accounting Fees and Services](index=47&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2023 proxy statement - Information on principal accounting fees and services is incorporated by reference from the "Company's Independent Registered Public Accounting Firm" section of the **2023** proxy statement[277](index=277&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, exhibits, and schedules, including consolidated statements of operations, balance sheets, and notes - The financial statements, exhibits, and financial statement schedules are included in this annual report[279](index=279&type=chunk)[280](index=280&type=chunk) [Financial Statements](index=48&type=section&id=Financial%20Statements) [Exhibits](index=48&type=section&id=Exhibits) [Financial Statement Schedules Omitted](index=48&type=section&id=Financial%20Statement%20Schedules%20omitted) [Form 10-K Summary](index=48&type=section&id=Form%2010-K%20Summary) [Index to Consolidated Financial Statements](index=49&type=section&id=Index%20to%20Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=50&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Key Data (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Net Sales | 833.6 | 993.3 | 894.5 | | Operating Income | 145.0 | 219.3 | 3.6 | | Net Income (Loss) | 102.5 | 145.9 | (25.9) | | Basic Earnings (Loss) Per Share | 3.33 | 4.36 | (0.76) | | Diluted Earnings (Loss) Per Share | 3.17 | 4.14 | (0.76) | [Consolidated Statements of Comprehensive Income (Loss)](index=51&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Consolidated Statements of Comprehensive Income (Loss) Key Data (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Net Income (Loss) | 102.5 | 145.9 | (25.9) | | Other Comprehensive Income (Loss), Net of Tax | (4.9) | 2.5 | 3.8 | | Comprehensive Income (Loss) | 97.6 | 148.4 | (22.1) | [Consolidated Balance Sheets](index=52&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets Key Data (as of December 31, 2022 and 2021) | Metric | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 34.2 | 54.5 | | Accounts Receivable, Net of Allowance for Expected Credit Losses | 163.5 | 199.1 | | Total Current Assets | 228.4 | 279.7 | | Software, Net | 75.6 | 63.7 | | Goodwill | 405.8 | 410.0 | | Total Assets | 828.3 | 883.3 | | Total Current Liabilities | 224.8 | 261.4 | | Long-Term Debt | 169.2 | 124.0 | | Total Equity | 329.5 | 377.0 | [Consolidated Statements of Cash Flows](index=53&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Key Data (2020-2022) | Cash Flow Type | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 150.2 | 180.0 | 154.2 | | Net Cash Used in Investing Activities | (50.9) | (45.0) | (19.8) | | Net Cash Used in Financing Activities | (121.1) | (154.9) | (77.5) | | Net (Decrease) Increase in Cash and Cash Equivalents | (20.3) | (19.1) | 56.4 | | Cash and Cash Equivalents at End of Period | 34.2 | 54.5 | 73.6 | [Consolidated Statements of Equity](index=54&type=section&id=Consolidated%20Statements%20of%20Equity) Consolidated Statements of Equity Key Data (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Common Stock | 0.4 | 0.4 | 0.3 | | Treasury Stock | (221.8) | (57.1) | (16.0) | | Additional Paid-in Capital | 280.2 | 260.6 | 238.8 | | Retained Earnings | 353.9 | 251.4 | 105.5 | | Accumulated Other Comprehensive Loss | (83.2) | (78.3) | (80.8) | | **Total Equity** | **329.5** | **377.0** | **247.8** | [Notes to the Audited Consolidated Financial Statements](index=55&type=section&id=Notes%20to%20the%20audited%20Consolidated%20Financial%20Statements) [Note 1. Overview, Basis of Presentation and Significant Accounting Policies](index=55&type=section&id=Note%201.%20Overview%2C%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines DFIN's business, reporting segments, basis of presentation, and significant accounting policies, including revenue recognition, cash, receivables, inventory, long-lived assets, goodwill, intangibles, share-based compensation, pensions, income taxes, commitments, contingencies, and restructuring, noting the adoption of ASU 2016-13 and no significant impact from ASU 2021-08 - DFIN is a global risk and compliance solutions company serving clients through software, technology-enabled services, and print and distribution solutions[297](index=297&type=chunk) - The company operates with four operating and reportable segments: Capital Markets - Software Solutions (CM-SS), Capital Markets - Compliance and Communications Management (CM-CCM), Investment Companies - Software Solutions (IC-SS), and Investment Companies - Compliance and Communications Management (IC-CCM)[299](index=299&type=chunk) - The company adopted ASU 2016-13 on **January 1, 2020**, recording a **$0.5 million** cumulative-effect adjustment to retained earnings[314](index=314&type=chunk) Allowance for Expected Credit Losses Rollforward (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Balance at Beginning of Year | 12.7 | 10.5 | 7.7 | | Charged to Expense | 8.4 | 2.8 | 3.8 | | Write-offs, Reclassifications, and Other | (4.0) | (0.6) | (1.5) | | ASU 2016-13 Adoption | — | — | 0.5 | | Balance at End of Year | 17.1 | 12.7 | 10.5 | - The adoption of ASU 2021-08, regarding the accounting for contract assets and contract liabilities in a business combination, is not expected to have a material impact on the company's consolidated financial statements[343](index=343&type=chunk) [Note 2. Revenue](index=61&type=section&id=Note%202.%20Revenue) Company revenue from software solutions, technology-enabled services, and print and distribution is recognized based on control transfer, with software typically recognized over time and services/print at a point in time, and as of 2022, unbilled receivables were $33.2 million, contract assets were $20.1 million, and 43% of long-term contract revenue is expected within the next year - The company recognizes revenue when control of promised services or products is transferred to customers, in an amount reflecting the consideration the company expects to be entitled to receive[346](index=346&type=chunk) - Revenue from software solutions is primarily recognized over time during the contract period, while revenue from technology-enabled services and print and distribution is primarily recognized at a point in time[348](index=348&type=chunk)[349](index=349&type=chunk) Net Sales by Segment and Revenue Type (2020-2022) | Segment | Revenue Type | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | :--- | | Capital Markets - Software Solutions | Software Solutions | 180.2 | 181.0 | 133.2 | | Capital Markets - Compliance and Communications Management | Technology-Enabled Services | 305.1 | 443.1 | 314.4 | | | Print and Distribution | 105.2 | 118.4 | 109.6 | | Investment Companies - Software Solutions | Software Solutions | 99.4 | 89.0 | 67.0 | | Investment Companies - Compliance and Communications Management | Technology-Enabled Services | 75.8 | 76.4 | 94.8 | | | Print and Distribution | 67.9 | 85.4 | 175.5 | | **Total Net Sales** | | **833.6** | **993.3** | **894.5** | - As of **December 31, 2022**, contract assets totaled **$20.1 million**, and unbilled receivables were **$33.2 million**[358](index=358&type=chunk)[359](index=359&type=chunk) - As of **December 31, 2022**, the estimated future revenue from unsatisfied or partially satisfied performance obligations for contracts with original durations exceeding one year was approximately **$128.6 million**, with approximately **43%** expected to be recognized as revenue within the next twelve months[360](index=360&type=chunk) [Note 3. Acquisition and Disposition](index=63&type=section&id=Note%203.%20Acquisition%20and%20Disposition) On November 9, 2022, the company disposed of its EdgarOnline (EOL) business for $3.3 million net cash proceeds, recognizing a $0.7 million loss, and on December 13, 2021, acquired the remaining Guardum equity for $3.6 million to enhance Venue product functionality - The company disposed of its EdgarOnline (EOL) business on **November 9, 2022**, receiving **$3.3 million** in net cash proceeds and recognizing a **$0.7 million** loss[363](index=363&type=chunk) - On **December 13, 2021**, the company completed the acquisition of Guardum, purchasing the remaining equity for **$3.6 million** (net of cash acquired) to enhance Venue product functionality[362](index=362&type=chunk) [Note 4. Goodwill and Other Intangible Assets, Net](index=64&type=section&id=Note%204.%20Goodwill%20and%20Other%20Intangible%20Assets%2C%20net) As of December 31, 2022, total goodwill was $405.8 million, primarily across CM-SS, CM-CCM, and IC-SS segments, with no impairment in 2022 or 2021 but a $40.6 million impairment in IC-CCM in 2020, and other net intangible assets totaled $7.8 million with an average remaining useful life of 11 years Goodwill Balances by Reportable Segment (as of December 31, 2022 and 2021) | Segment | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Capital Markets - Software Solutions | 100.1 | 103.7 | | Capital Markets - Compliance and Communications Management | 252.7 | 253.1 | | Investment Companies - Software Solutions | 53.0 | 53.2 | | Investment Companies - Compliance and Communications Management | — | — | | **Total** | **405.8** | **410.0** | - No goodwill impairment occurred in **2022** or **2021**; however, the IC-CCM reportable segment recorded a **$40.6 million** goodwill impairment in **2020**[366](index=366&type=chunk) Other Intangible Assets, Net (as of December 31, 2022 and 2021) | Category | 2022 Net Book Value (million USD) | 2021 Net Book Value (million USD) | | :--- | :--- | :--- | | Customer Relationships | 7.6 | 8.3 | | Trademarks | 0.2 | 0.4 | | **Total** | **7.8** | **8.7** | - As of **December 31, 2022**, the weighted-average remaining useful life of unamortized intangible assets was approximately **11 years**[367](index=367&type=chunk) [Note 5. Leases](index=65&type=section&id=Note%205.%20Leases) The company holds operating and finance leases for facilities and IT equipment, recognizing right-of-use assets and liabilities based on future minimum payments, with net operating lease expense of $13.4 million and finance lease expense of $2.0 million in 2022, and total future operating and finance lease liabilities of $47.4 million and $7.4 million, respectively, as of December 31, 2022 - The company holds operating leases for service centers, office space, warehouses, and equipment, as well as finance leases primarily for IT equipment[372](index=372&type=chunk)[373](index=373&type=chunk) Lease Expense (2020-2022) | Lease Type | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Net Operating Lease Expense | 13.4 | 14.9 | 22.1 | | Finance Lease Expense | 2.0 | 0.9 | — | Future Lease Liability Maturities (as of December 31, 2022) | Year | Operating Leases (million USD) | Finance Leases (million USD) | | :--- | :--- | :--- | | 2023 | 17.6 | 2.2 | | 2024 | 14.8 | 2.2 | | 2025 | 9.5 | 2.0 | | 2026 | 3.4 | 1.0 | | 2027 | 0.7 | — | | 2028 and thereafter | 1.4 | — | | **Total Lease Payments** | **47.4** | **7.4** | [Note 6. Restructuring, Impairment and Other Charges, Net](index=67&type=section&id=Note%206.%20Restructuring%2C%20Impairment%20and%20Other%20Charges%2C%20net) In 2022, the company recorded $7.7 million in net restructuring, impairment, and other charges, primarily $6.8 million in employee termination costs affecting approximately 130 employees, following $13.6 million in 2021 (including $9.2 million impairment) and $79.2 million in 2020 (including $40.6 million goodwill impairment and $18.2 million operating lease right-of-use asset impairment) Restructuring, Impairment and Other Charges, Net (2020-2022) | Year | Employee Termination (million USD) | Restructuring Charges (million USD) | Impairment Charges (million USD) | Other Charges (million USD) | Total (million USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | 2022 | 6.8 | 0.4 | 0.1 | 0.4 | 7.7 | | 2021 | 3.4 | 0.8 | 9.2 | 0.2 | 13.6 | | 2020 | 15.6 | — | 60.6 | 3.0 | 79.2 | - Restructuring actions in **2022** were primarily related to the reorganization of certain Capital Markets businesses and the relocation of a digital print facility, resulting in the termination of approximately **130** employees[380](index=380&type=chunk) - In **2020**, the company recorded a **$40.6 million** goodwill impairment in the IC-CCM segment and an **$18.2 million** impairment of operating lease right-of-use assets[385](index=385&type=chunk)[386](index=386&type=chunk) Employee Termination Reserve Rollforward (2021-2022) | Metric | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Balance at Beginning of Year | 2.4 | 8.5 | | Restructuring Charges | 7.1 | 3.4 | | Reversal of Restructuring Charges | (0.3) | — | | Cash Paid | (4.1) | (9.5) | | Balance at End of Year | 5.1 | 2.4 | [Note 7. Retirement Plans](index=69&type=section&id=Note%207.%20Retirement%20Plans) The company's primary pension plan was frozen on December 31, 2011, with net pension income of $0.9 million in 2022, an underfunded status of $43.6 million, and plan assets of $193.5 million as of December 31, 2022, while 401(k) matching contributions totaled $5.6 million and multiemployer pension plan liabilities were $11.0 million, including $9.4 million related to LSC MEPP - The company's primary pension plan was frozen on **December 31, 2011**, no longer accepting new employees or allowing participants to accrue additional benefits[390](index=390&type=chunk) Net Pension Plan Income (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Interest Cost | 7.4 | 6.2 | 8.8 | | Expected Return on Assets | (11.6) | (14.2) | (13.9) | | Amortization, Net | 3.3 | 3.8 | 3.1 | | **Net Pension Plan Income** | **(0.9)** | **(4.2)** | **(2.0)** | Pension Benefit Plan Funded Status (as of December 31, 2022 and 2021) | Metric | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Benefit Obligation at End of Period | 237.1 | 314.0 | | Fair Value of Plan Assets at End of Period | 193.5 | 273.1 | | **Underfunded Status at End of Period** | **(43.6)** | **(40.9)** | - In **2022**, the company's 401(k) matching contribution expense was **$5.6 million**[409](index=409&type=chunk) - As of **December 31, 2022**, the company's total multiemployer pension plan (MEPP) liabilities amounted to **$11.0 million**, with **$9.4 million** related to LSC MEPP liabilities[414](index=414&type=chunk) [Note 8. Commitments and Contingencies](index=73&type=section&id=Note%208.%20Commitments%20and%20Contingencies) As of December 31, 2022, the company had approximately $54 million in non-cancelable contractual commitments, primarily for IT, professional, maintenance, and other outsourced services, and management does not expect litigation and priority matters to materially impact consolidated operating results, financial position, or cash flows - As of **December 31, 2022**, the company had approximately **$54 million** in non-cancelable contractual commitments, primarily for information technology, professional, maintenance, and other outsourced services[416](index=416&type=chunk) - Management believes that the ultimate resolution of litigation and priority matters will not have a material adverse effect on the company's consolidated operating results, financial position, or cash flows[417](index=417&type=chunk) [Note 9. Income Taxes](index=74&type=section&id=Note%209.%20Income%20Taxes) Income tax expense for 2022 was $36.8 million, with an effective tax rate of 26.4% influenced by increased valuation allowances and non-deductible expenses, and as of December 31, 2022, net deferred tax assets were $33.4 million, valuation allowance was $5.4 million, unrecognized tax benefits were $2.5 million, and the company anticipates no significant impact from the Inflation Reduction Act on its financial performance Income Tax Expense (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Current Income Tax Expense | 37.3 | 52.2 | 34.8 | | Deferred Income Tax (Benefit) Expense | (0.5) | (0.3) | (26.4) | | **Total Income Tax Expense** | **36.8** | **51.9** | **8.4** | Reconciliation of Effective Income Tax Rate to Federal Statutory Rate (2020-2022) | Reconciling Item | 2022 (%) | 2021 (%) | 2020 (%) | | :--- | :--- | :--- | :--- | | Federal Statutory Rate | 21.0 | 21.0 | 21.0 | | State and Local Income Taxes, Net of Federal Income Tax Benefit | 6.8 | 5.9 | (8.7) | | Change in Valuation Allowance | 1.2 | (1.5) | (10.5) | | Non-Deductible Expenses | 1.0 | 0.5 | (17.0) | | **Effective Income Tax Rate** | **26.4** | **26.2** | **(48.0)** | Deferred Tax Assets and Liabilities (as of December 31, 2022 and 2021) | Category | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Total Deferred Tax Assets | 61.1 | 69.2 | | Valuation Allowance | (5.4) | (4.8) | | Total Deferred Tax Liabilities | (27.7) | (37.5) | | **Net Deferred Tax Assets** | **33.4** | **31.7** | - As of **December 31, 2022**, the company had **$2.5 million** in unrecognized tax benefits[427](index=427&type=chunk) - The company currently anticipates that the **15%** corporate alternative minimum tax in the Inflation Reduction Act will not have a material impact on its financial results[422](index=422&type=chunk) [Note 10. Debt](index=77&type=section&id=Note%2010.%20Debt) As of December 31, 2022, total long-term debt was $169.2 million, comprising a $125 million Term Loan A and $45.0 million in revolving credit, with weighted-average interest rates of 3.7% and 4.3% respectively, and the company redeemed its 8.25% Senior Notes due 2024 in 2021, remaining in compliance with all debt covenants Company Debt Composition (as of December 31, 2022 and 2021) | Debt Type | 2022 (million USD) | 2021 (million USD) | | :--- | :--- | :--- | | Term Loan A | 125.0 | 125.0 | | Revolving Credit Borrowings | 45.0 | — | | Unamortized Debt Issuance Costs | (0.8) | (1.0) | | **Total Long-Term Debt** | **169.2** | **124.0** | - The weighted-average interest rate for Term Loan A was **3.7%** in 2022 and **2.1%** in 2021, while for revolving credit borrowings, it was **4.3%** in 2022 and **2.8%** in 2021[434](index=434&type=chunk)[435](index=435&type=chunk) - On **October 15, 2021**, the company redeemed its remaining **$233 million** outstanding Senior Notes, recognizing a **$6.8 million** pre-tax loss on extinguishment of debt[439](index=439&type=chunk) - As of **December 31, 2022**, the company was in compliance with all debt covenants and expects to remain so[213](index=213&type=chunk) [Note 11. Earnings (Loss) per Share](index=78&type=section&id=Note%2011.%20Earnings%20%28Loss%29%20per%20Share) In 2022, basic earnings per share were $3.33 and diluted earnings per share were $3.17, compared to $4.36 and $4.14 respectively in 2021, and basic and diluted losses per share were $0.76 in 2020 due to a net loss Earnings (Loss) Per Share Calculation (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Basic Earnings (Loss) Per Share | 3.33 | 4.36 | (0.76) | | Diluted Earnings (Loss) Per Share | 3.17 | 4.14 | (0.76) | | Net Income (Loss) (million USD) | 102.5 | 145.9 | (25.9) | | Basic Weighted-Average Common Shares Outstanding (million shares) | 30.8 | 33.5 | 33.9 | | Diluted Weighted-Average Common Shares Outstanding (million shares) | 32.3 | 35.2 | 33.9 | [Note 12. Share-based Compensation](index=79&type=section&id=Note%2012.%20Share-based%20Compensation) In 2022, total share-based compensation expense was $19.3 million, with $22.6 million in unrecognized compensation expense expected to be recognized over the next 1.6 years, and the equity incentive plans include stock options, RSUs, and PSUs, with no stock options granted in 2022, and weighted-average fair values of $30.42 for RSUs and $26.96 for PSUs granted - In **2022**, total share-based compensation expense was **$19.3 million**, and **$22.6 million** of unrecognized compensation expense is expected to be recognized over a weighted-average period of **1.6 years**[447](index=447&type=chunk) - No stock options were granted in **2022**; the weighted-average fair value of RSUs granted in 2022 was **$30.42**, and for PSUs, it was **$26.96**[452](index=452&type=chunk)[454](index=454&type=chunk) Restricted Stock Units (RSUs) Rollforward (2022) | Metric | Number of Shares (thousand shares) | Weighted-Average Grant-Date Fair Value ($) | | :--- | :--- | :--- | | Unvested at December 31, 2021 | 1,159 | 17.71 | | Granted | 412 | 30.42 | | Vested | (558) | 15.74 | | Forfeited | (24) | 26.68 | | **Unvested at December 31, 2022** | **989** | **23.91** | Performance Stock Units (PSUs) Rollforward (2022) | Metric | Number of Shares (thousand shares) | Weighted-Average Grant-Date Fair Value ($) | | :--- | :--- | :--- | | Unvested at December 31, 2021 | 953 | 16.77 | | Granted | 359 | 26.96 | | Vested | (409) | 13.49 | | **Unvested at December 31, 2022** | **903** | **22.31** | [Note 13. Capital Stock](index=81&type=section&id=Note%2013.%20Capital%20Stock) The company is authorized to issue 65 million shares of common stock and 1 million shares of preferred stock, and in 2022, repurchased 4,733,875 common shares for $152.5 million at an average price of $32.21 per share, with $124.3 million remaining under the authorized repurchase program as of December 31, 2022 - The company is authorized to issue **65 million** shares of common stock and **1 million** shares of preferred stock, both with a par value of **$0.01** per share[461](index=461&type=chunk) - In **2022**, the company repurchased **4,733,875** shares of common stock for a total of **$152.5 million**, at an average price of **$32.21** per share[464](index=464&type=chunk) - As of **December 31, 2022**, the remaining authorized repurchase amount was **$124.3 million**[464](index=464&type=chunk) [Note 14. Comprehensive Income (Loss)](index=82&type=section&id=Note%2014.%20Comprehensive%20Income%20%28Loss%29) In 2022, comprehensive income (loss) was $97.6 million, comprising net income of $102.5 million and other comprehensive loss (net of tax) of $4.9 million, primarily influenced by pension and other postretirement benefit plan costs and foreign currency translation adjustments Other Comprehensive Income (Loss) and Income Tax Effects (2020-2022) | Metric | 2022 Pre-Tax (million USD) | 2022 Income Tax (million USD) | 2022 Net of Tax (million USD) | | :--- | :--- | :--- | :--- | | Foreign Currency Translation Adjustments | (1.6) | (0.2) | (1.4) | | Pension and Other Postretirement Benefit Plan Adjustments | (4.8) | (1.3) | (3.5) | | **Other Comprehensive Income (Loss)** | **(6.4)** | **(1.5)** | **(4.9)** | Accumulated Other Comprehensive Loss Rollforward (2020-2022) | Metric | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | Balance at Beginning of Year | (78.3) | (80.8) | (84.6) | | Other Comprehensive (Loss) Income | (4.9) | 2.5 | 3.8 | | **Balance at End of Year** | **(83.2)** | **(78.3)** | **(80.8)** | [Note 15. Segment Information](index=83&type=section&id=Note%2015.%20Segment%20Information) The company reports performance through four operating segments: CM-SS, CM-CCM, IC-SS, and IC-CCM, with total operating segment net sales of $833.6 million and operating income of $202.5 million in 2022, and CM-CCM contributing the highest net sales ($410.3 million) and operating income ($131.4 million) - The company operates through four operating and reportable segments: CM-SS, CM-CCM, IC-SS, and IC-CCM[469](index=469&type=chunk) Net Sales and Operating Income by Segment (2022) | Segment | Net Sales (million USD) | Operating Income (million USD) | | :--- | :--- | :--- | | Capital Markets - Software Solutions | 180.2 | 13.5 | | Capital Markets - Compliance and Communications Management | 410.3 | 131.4 | | Investment Companies - Software Solutions | 99.4 | 21.9 | | Investment Companies - Compliance and Communications Management | 143.7 | 35.7 | | **Total Operating Segments** | **833.6** | **202.5** | | Corporate Level | — | (57.5) | | **Total** | **833.6** | **145.0** | Assets and Capital Expenditures by Segment (2022) | Segment | Assets (million USD) | Capital Expenditures (million USD) | | :--- | :--- | :--- | | Capital Markets - Software Solutions | 187.4 | 27.0 | | Capital Markets - Compliance and Communications Management | 387.7 | 5.0 | | Investment Companies - Software Solutions | 98.4 | 15.6 | | Investment Companies - Compliance and Communications Management | 36.7 | 3.0 | | **Total Operating Segments** | **710.2** | **50.6** | | Corporate Level | 118.1 | 3.6 | | **Total** | **828.3** | **54.2** | [Note 16. Geographic Area Information](index=85&type=section&id=Note%2016.%20Geographic%20Area%20Information) In 2022, the company's net sales primarily originated from the US ($718.5 million), with international sales totaling $115.1 million (14% of total net sales) mainly from Asia, Europe, and Canada, and long-lived assets also predominantly located in the US Net Sales by Geographic Area (2020-2022) | Region | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | United States | 718.5 | 856.5 | 778.9 | | Asia | 48.2 | 55.5 | 51.1 | | Europe | 31.4 | 42.0 | 34.3 | | Canada | 33.7 | 38.0 | 28.6 | | Other | 1.8 | 1.3 | 1.6 | | **Consolidated Total** | **833.6** | **993.3** | **894.5** | Long-Lived Assets by Geographic Area (2020-2022) | Region | 2022 (million USD) | 2021 (million USD) | 2020 (million USD) | | :--- | :--- | :--- | :--- | | United States | 135.3 | 130.6 | 127.5 | | Asia | 11.5 | 8.9 | 8.0 | | Europe | 5.6 | 13.3 | 8.7 | | Canada | 0.5 | 0.4 | 0.5 | | **Consolidated Total** | **152.9** | **153.2** | **144.7** | [Report of Independent Registered Public Accounting Firm](index=86&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) [Unaudited Quarterly Financial Information](index=88&type=section&id=Unaudited%20Interim%20Financial%20Information) Unaudited Quarterly Financial Information 2022 | Metric | Q1 (million USD) | Q2 (million USD) | Q3 (million USD) | Q4 (million USD) | Full Year (million USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | 211.0 | 266.2 | 188.7 | 167.7 | 833.6 | | Operating Income | 35.3 | 65.9 | 26.7 | 17.1 | 145.0 | | Net Income | 26.4 | 46.0 | 19.2 | 10.9 | 102.5 | | Basic Earnings Per Share | 0.80 | 1.46 | 0.64 | 0.37 | 3.33 | | Diluted Earnings Per Share | 0.77 | 1.42 | 0.62 | 0.36 | 3.17 | [Signatures](index=93&type=section&id=SIGNATURES) This report was signed on February 21, 2023, by authorized representatives, including the CEO, CFO, and Board members - This report was signed by authorized representatives of Donnelley Financial Solutions, Inc. on **February 21, 2023**[503](index=503&type=chunk) - Signatories include President and CEO Daniel N. Leib, Executive Vice President and CFO David A. Gardella, Senior Vice President and Chief Accounting Officer Kami S. Turner, and members of the Board of Directors[505](index=505&type=chunk)

Financial Data and Key Metrics Changes - The company reported third quarter net sales of $188.7 million, a decrease of $59 million or 23.8% from the same quarter in 2021 [43] - Adjusted EBITDA for the third quarter was $45.3 million, a decrease of $37.2 million or 45.1% from the third quarter of 2021, with an adjusted EBITDA margin of 24%, down approximately 930 basis points from the previous year [50][52] - Non-GAAP gross margin was 55.5%, approximately 690 basis points lower than the third quarter of 2021, primarily due to lower sales volume and an unfavorable business mix [48] Business Line Data and Key Metrics Changes - Software Solutions net sales for the quarter were $69.5 million, a slight increase of 0.3%, with recurring compliance offerings showing positive sales momentum [44] - ActiveDisclosure grew 10.6% in the quarter, marking the seventh consecutive quarter of double-digit sales growth, while Arc Suite net sales grew 11.8% driven by subscription revenue growth [45][66] - Venue sales were down 11.4% year-over-year due to a weak capital markets transaction environment, although it grew sequentially from the second quarter [26][28] Market Data and Key Metrics Changes - The capital markets transactional environment saw a nearly 50% reduction in transactional revenue compared to the previous year, with IPO activity down more than 90% year-over-year [8][34] - The M&A market was down more than 30% year-over-year, with very few large deals being completed [34][59] - The company noted that the IPO market was largely frozen, with only five priced IPOs over $100 million taking place on US exchanges compared to 150 in the same quarter last year [59] Company Strategy and Development Direction - The company is focused on transforming into a software-centric business, aiming to achieve 55% to 60% of revenue from software solutions by 2026 [12][13] - Cost management actions have been taken to optimize the cost structure, including downsizing print production and reducing the global real estate footprint [14][15] - The company is well-positioned to leverage its software offerings and domain expertise to address market needs related to future regulatory changes [25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging operating environment but expressed confidence in the company's strong market position and client relationships to support future capital markets transactional needs [35][85] - The company expects market volatility to continue impacting the capital markets transactions environment in the near term, with fourth quarter net sales guidance in the range of $170 million to $190 million [77][78] - Management remains optimistic about the opportunities ahead to generate increased value for customers, employees, and shareholders [85] Other Important Information - Free cash flow in the quarter was $68.7 million, a decrease of $31.7 million compared to the third quarter of 2021, reflecting lower adjusted EBITDA and additional capital expenditures [73] - The company repurchased approximately one million shares of common stock during the third quarter for $32.3 million [76] - The company was recognized as a great place to work and named to Newsweek's list of the 2022 Top 100 most loved workplaces in America [37][38] Q&A Session Summary Question: Was the shortfall in the quarter primarily related to transactions? - Management confirmed that the shortfall was substantially driven by transactional revenue declines [88] Question: How can the company maintain margins in the mid-20s range going forward? - Management indicated that maintaining margins will involve disciplined cost management, shifting sales mix towards software, and exiting lower-margin print work [90][91] Question: What are the cash flow expectations for Q4? - Management expects cash flow to be similar to last year's level, with lower tax and interest payments offsetting lower EBITDA [93] Question: What was the impact of foreign exchange in the quarter? - The foreign exchange impact was small, with reported sales down 23.8% and organic sales down about 23% [96] Question: How does the company view the new SEC rule on tailored fund reports? - Management believes the new rule aligns with their existing tech-enabled solutions and will not significantly impact print revenue [100][101] Question: How did the company perform compared to the overall industry in transactions? - Management noted that the company performed better than the market, with a robust pipeline of IPOs and M&A despite the overall decline [106]

Financial Performance - Total net sales for the three months ended September 30, 2022, were $247.7 million, a decrease from $760.5 million for the nine months ended September 30, 2021[17]. - Net earnings for the three months ended September 30, 2022, were $42.2 million, compared to $120.3 million for the nine months ended September 30, 2021[17]. - The company reported a comprehensive income of $18.0 million for the three months ended September 30, 2022, down from $122.1 million for the same period in 2021[19]. - Net earnings for the nine months ended September 30, 2022, were $91.6 million, a decrease of 23.9% compared to $120.3 million for the same period in 2021[27]. - Total net sales for the nine months ended September 30, 2022, were $665.9 million, compared to $394.6 million for the same period in 2021, representing a 68.7% increase[54]. - Total operating segments for the nine months ended September 30, 2022, reported net sales of $665.9 million, compared to $760.5 million for the same period in 2021, a decrease of approximately 12.4%[106]. - Income from operations for the nine months ended September 30, 2022, was $127.9 million, down from $177.9 million in the same period of 2021, reflecting a decline of about 28.1%[106]. Expenses and Costs - The cost of sales for tech-enabled services was $39.6 million for the three months ended September 30, 2021, compared to $113.2 million for the nine months ended September 30, 2021[17]. - Selling, general and administrative expenses were $77.0 million for the three months ended September 30, 2021, down from $225.6 million for the nine months ended September 30, 2021[17]. - The company reported a total cost of sales of $93.1 million for the three months ended September 30, 2022, compared to $320.9 million for the nine months ended September 30, 2021, indicating a reduction of 71.0%[17]. - Income from operations for the three months ended September 30, 2022, was $26.7 million, down from $65.0 million in the same period of 2021, reflecting a decrease of about 58.9%[104]. - Depreciation and amortization increased to $33.6 million from $29.9 million year-over-year, reflecting a rise of 22.8%[27]. Assets and Liabilities - Total assets decreased to $850.8 million as of September 30, 2022, down from $883.3 million at December 31, 2021, representing a decline of approximately 3.0%[23]. - Long-term debt increased to $191.7 million as of September 30, 2022, compared to $124.0 million at December 31, 2021, indicating a rise of 54.5%[23]. - Total liabilities rose to $519.3 million, up from $506.3 million at the end of 2021, marking an increase of 2.9%[23]. - The company’s total assets held for sale included land with a carrying value of $2.6 million, with an agreement to sell for $13.0 million[45]. Cash Flow and Investments - Cash and cash equivalents significantly decreased to $10.8 million at the end of the period, down from $54.5 million at the beginning of the year, reflecting a decline of 80.2%[27]. - The company reported a net cash provided by operating activities of $76.9 million for the nine months ended September 30, 2022, down from $103.2 million in the prior year, a decrease of 25.4%[27]. - Net cash used in investing activities was $39.4 million, compared to $27.3 million in the prior year, indicating a 44.4% increase[27]. - Net cash used in financing activities increased to $83.6 million from $27.5 million, reflecting a significant rise of 203.6%[27]. Shareholder Actions - The company repurchased treasury shares amounting to $150.0 million during the period, compared to $26.5 million in the previous year[27]. - The company repurchased 959,579 shares for $32.3 million at an average price of $33.72 per share during the three months ended September 30, 2022[91]. - The total remaining authorized amount for stock repurchases as of September 30, 2022, was $137.9 million[91]. - The company’s stock repurchase program has been extended through December 31, 2023, with a total remaining repurchase authorization of $150 million[88]. Future Outlook - The company anticipates continued challenges due to the volatility of the global economy and financial markets affecting transactional volume[12]. - The company is focused on maintaining client referrals and attracting additional clients to support future growth[12]. - The company anticipates ongoing demand for its software solutions and services as clients prepare for regulatory changes and compliance requirements[11]. Segment Performance - DFIN's software solutions segment generated $69.3 million in net sales for the three months ended September 30, 2021, compared to $196.2 million for the nine months ended September 30, 2021[17]. - Capital Markets - Compliance and Communications Management segment generated net sales of $83.3 million in Q3 2022, compared to $142.5 million in Q3 2021, indicating a decline of approximately 41.5%[104]. - Investment Companies - Software Solutions segment reported net sales of $23.7 million for Q3 2022, down from $21.2 million in Q3 2021, showing an increase of about 11.8%[104]. - The Investment Companies segment offers software solutions and services to mutual fund companies and other investment entities to ensure compliance with SEC regulations[100].

Donnelley Financial Solutions, Inc. (NYSE:DFIN) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET Company Participants Michael Zhao - Head, IR Daniel Leib - President and CEO David Gardella - CFO Craig Clay - President, Global Capital Markets Eric Johnson - President, Global Investment Companies Conference Call Participants Charles Strauzer - CJS Securities, Inc. Pete Heckmann - D.A. Davidson Raj Sharma - B. Riley Securities Operator Good morning. My name is Joseph and I'll be your conference opera ...

[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements subject to numerous risks and uncertainties, including pandemics, economic volatility, and regulatory changes, which could cause actual results to differ materially - The report contains forward-looking statements subject to numerous risks and uncertainties, including pandemics, economic volatility, and regulatory changes, which could cause actual results to differ materially[10](index=10&type=chunk)[11](index=11&type=chunk) - The Company explicitly states it does not undertake any obligation to update or revise these forward-looking statements, except as required by law, cautioning readers against undue reliance[12](index=12&type=chunk)[13](index=13&type=chunk) [Part I: Financial Information](index=4&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) [Item 1: Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201%3A%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, highlighting Q2 2022 net sales of **$266.2 million** and net earnings of **$46.0 million**, with total assets at **$925.2 million** as of June 30, 2022 [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements show Q2 2022 net sales of **$266.2 million** and net earnings of **$46.0 million**, with diluted EPS at **$1.42**, reflecting year-over-year changes Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total Net Sales** | $266.2 | $267.5 | $477.2 | $512.8 | | Income from Operations | $65.9 | $62.0 | $101.2 | $112.9 | | **Net Earnings** | **$46.0** | **$42.9** | **$72.4** | **$78.1** | | Diluted EPS | $1.42 | $1.24 | $2.17 | $2.26 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets reached **$925.2 million**, driven by increased receivables and long-term debt, while total equity decreased to **$341.4 million** due to share repurchases Balance Sheet Summary (in millions) | Metric | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $17.8 | $54.5 | | Total current assets | $318.4 | $279.7 | | **Total Assets** | **$925.2** | **$883.3** | | Long-term debt | $234.1 | $124.0 | | **Total Liabilities** | **$583.8** | **$506.3** | | **Total Equity** | **$341.4** | **$377.0** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first half of 2022, net cash used in operating activities was **$6.4 million**, with a **$36.7 million** net decrease in cash and equivalents, primarily due to share repurchases funded by new borrowings Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6.4) | $(7.7) | | Net cash used in investing activities | $(24.8) | $(17.7) | | Net cash used in financing activities | $(7.2) | $(9.9) | | **Net decrease in cash** | **$(36.7)** | **$(33.7)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosure on the company's accounting policies and financial items, including revenue disaggregation, restructuring charges, debt structure, and significant stock repurchase activities - DFIN's business model involves regulatory filing and deal solutions, with a notable client shift towards **software solutions** and away from physical print[38](index=38&type=chunk) Revenue Disaggregation - Six Months Ended June 30 (in millions) | Revenue Type | 2022 | 2021 | | :--- | :--- | :--- | | Tech-enabled services | $225.0 | $252.5 | | Software solutions | $141.4 | $126.9 | | Print and distribution | $110.8 | $133.4 | | **Total net sales** | **$477.2** | **$512.8** | - Net restructuring charges of **$1.7 million** were recorded for employee termination costs affecting approximately **70 employees** in the first half of 2022[69](index=69&type=chunk) - The company repurchased **3,408,099 shares** for **$106.5 million** in the first six months of 2022, with **$58.6 million** remaining authorized under the program as of June 30, 2022[85](index=85&type=chunk) [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 6.9% year-to-date revenue decline due to lower capital markets activity and print demand, partially offset by software growth, while maintaining sufficient liquidity [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Consolidated net sales for Q2 2022 decreased 0.5% YoY to **$266.2 million**, with YTD sales down 6.9% to **$477.2 million**, driven by lower capital markets activity and print services, partially offset by software growth Net Sales Change by Offering (Q2 2022 vs Q2 2021) | Offering | Q2 2022 Sales (M) | Change (M) | Change (%) | | :--- | :--- | :--- | :--- | | Tech-enabled services | $133.3 | $(0.7) | (0.5%) | | Software solutions | $71.6 | $5.0 | 7.5% | | Print and distribution | $61.3 | $(5.6) | (8.4%) | Net Sales Change by Offering (Six Months 2022 vs 2021) | Offering | Six Months 2022 Sales (M) | Change (M) | Change (%) | | :--- | :--- | :--- | :--- | | Tech-enabled services | $225.0 | $(27.5) | (10.9%) | | Software solutions | $141.4 | $14.5 | 11.4% | | Print and distribution | $110.8 | $(22.6) | (16.9%) | - SG&A expenses decreased by **$6.9 million**, or **4.6%**, for the six months ended June 30, 2022, primarily due to reduced LSC multiemployer pension plan obligations and lower incentive compensation[151](index=151&type=chunk) [Information by Segment](index=32&type=section&id=Information%20by%20Segment) Segment performance for the first half of 2022 shows **Capital Markets - Software Solutions** sales grew 10.6%, while **Investment Companies - Software Solutions** sales rose 13.0%, with significant operating income increases in Investment Companies segments Segment Performance - Six Months Ended June 30, 2022 (in millions) | Segment | Net Sales | % Change YoY | Income from Ops | % Change YoY | | :--- | :--- | :--- | :--- | :--- | | Capital Markets - Software Solutions | $91.0 | 10.6% | $7.4 | (53.2%) | | Capital Markets - Compliance & Comms | $253.6 | (13.0%) | $89.4 | (27.7%) | | Investment Companies - Software Solutions | $50.4 | 13.0% | $12.1 | 120.0% | | Investment Companies - Compliance & Comms | $82.2 | (12.8%) | $21.8 | 159.5% | [Non-GAAP Measures](index=36&type=section&id=Non-GAAP%20Measures) The company uses non-GAAP Adjusted EBITDA to assess financial performance, reporting **$82.6 million** for Q2 2022 and **$133.7 million** for the six months ended June 30, 2022 Reconciliation of Net Earnings to Adjusted EBITDA (in millions) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $46.0 | $42.9 | $72.4 | $78.1 | | **Adjusted EBITDA** | **$82.6** | **$79.9** | **$133.7** | **$151.0** | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity with **$17.8 million** cash on hand and **$190.0 million** available under its revolving credit facility as of June 30, 2022, with expected capital expenditures of **$50-55 million** for 2022 - As of June 30, 2022, the company had **$110.0 million** of borrowings outstanding under its Revolving Facility, with **$190.0 million** of availability remaining[220](index=220&type=chunk)[222](index=222&type=chunk) - Total net available liquidity as of June 30, 2022 was **$207.8 million**, consisting of **$190.0 million** in revolver availability and **$17.8 million** in cash[222](index=222&type=chunk) - Expected capital expenditures for the full year 2022 are approximately **$50 million to $55 million**, primarily for software development investments[213](index=213&type=chunk) [Item 3: Quantitative and Qualitative Disclosure About Market Risk](index=40&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) There were no significant changes to the company's market risk profile during the quarter, consistent with prior disclosures - There were no significant changes to the Company's market risk profile during the quarter[227](index=227&type=chunk) [Item 4: Controls and Procedures](index=41&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2022[230](index=230&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[231](index=231&type=chunk) [Part II: Other Information](index=41&type=section&id=Part%20II%20OTHER%20INFORMATION) [Item 1: Legal Proceedings](index=41&type=section&id=Item%201%3A%20Legal%20Proceedings) The company is involved in ordinary course litigation, with expected outcomes not materially affecting its financial condition or position - The company is involved in ordinary course litigation and does not expect the outcomes to have a material effect on its financial condition[73](index=73&type=chunk)[232](index=232&type=chunk) [Item 1A: Risk Factors](index=41&type=section&id=Item%201A%3A%20Risk%20Factors) No material changes to the company's risk factors were identified during the three months ended June 30, 2022 - No material changes to the risk factors disclosed in the Annual Report occurred during the second quarter of 2022[233](index=233&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased **2,180,796 shares** at an average price of **$29.54**, with **$58.6 million** remaining authorized under the program Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | 626,560 | $30.75 | | May 2022 | 802,367 | $28.74 | | June 2022 | 755,302 | $29.38 | | **Total Q2** | **2,184,229** | **$29.54** | - The Board authorized an increase to the stock repurchase program on February 17, 2022, bringing the available authorization to **$150 million** and extending it through December 31, 2023. As of June 30, 2022, **$58.6 million** remained[82](index=82&type=chunk)[234](index=234&type=chunk) [Item 6: Exhibits](index=42&type=section&id=Item%206%3A%20Exhibits) This section lists all exhibits filed with the 10-Q report, including required certifications by the CEO and CFO, and Inline XBRL documents - The report includes required certifications by the CEO (Daniel N. Leib) and CFO (David A. Gardella) pursuant to the Securities Exchange Act of 1934[241](index=241&type=chunk)[243](index=243&type=chunk) - The filing includes Inline XBRL instance, schema, and other related documents for interactive data[243](index=243&type=chunk)[244](index=244&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales of $211 million for Q1 2022, a decrease of 14% from the previous year [12][19] - Non-GAAP adjusted EBITDA was $51.1 million, down 28% year-over-year, with a margin of 24.2%, reflecting a decline of approximately 480 basis points [13][22] - Non-GAAP net debt decreased by $30.5 million year-over-year, resulting in a non-GAAP net leverage of 0.7x, down 0.3 times from the first quarter of 2021 [14][35] Business Line Data and Key Metrics Changes - Software sales reached $69.8 million, representing a year-over-year growth of 15.8%, with compliance software offerings growing 19% [19][31] - The Capital Markets Software Solutions segment saw net sales of $44.7 million, an increase of 16.1% from the previous year, driven by strong performance in ActiveDisclosure and Venue [24] - The Investment Companies Software Solutions segment reported net sales of $25.1 million, an increase of 15.1% year-over-year, attributed to strong demand for digital compliance solutions [31] Market Data and Key Metrics Changes - Global IPO activity was down 85%, significantly impacting capital markets transactions [10][11] - The company noted a robust pipeline of in-process IPOs comparable to 2021 levels, indicating potential for future activity when market conditions improve [11][12] - The SPAC market has seen a significant decline, affecting new issuances and De-SPAC transactions [10][11] Company Strategy and Development Direction - The company aims to become a leading provider of compliance and regulatory solutions, with a target of software sales making up nearly 60% of total sales by 2026 [16][41] - The strategy includes a focus on recurring revenue from compliance software, which is expected to constitute over 70% of software sales by 2026 [16][41] - The company plans to continue investing in technology and development while maintaining a disciplined approach to capital allocation [45][46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging capital markets environment but expressed confidence in the company's ability to adapt and capture future opportunities [11][12] - The outlook for Q2 2022 anticipates continued market volatility, with expected net sales between $220 million and $240 million [38][39] - Management remains optimistic about the growth trajectory of software solutions, particularly in recurring compliance offerings [38][39] Other Important Information - The company repurchased approximately 1.2 million shares for $42.1 million during Q1 2022, with $123 million remaining on its share repurchase authorization [35][36] - Free cash flow for the quarter was -$62.1 million, primarily due to elevated performance-based payments [34] Q&A Session Summary Question: Can you provide more details on efforts to maintain margins despite lower volumes? - Management highlighted permanent changes to the cost structure, including headcount reductions and outsourcing, which have improved margins despite lower transactional revenue [50][51] Question: What is the competitive environment in the software business? - Management expressed confidence in their product offerings, noting strong growth in ActiveDisclosure and Venue, and emphasized their ability to meet client needs across different stages of their lifecycle [52][54] Question: Can you clarify the expected decline in print sales? - Management confirmed that approximately $30 million in print sales decline is expected over the next three quarters, with the largest portion occurring in Q2 [69]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-37728 | --- | --- | --- | |---------------------------------------------------------------------------------------------------------------------------------------------------- ...

Financial Data and Key Metrics Changes - In Q4 2021, consolidated net sales reached $232.8 million, an increase of 10.7% year-over-year, marking the highest fourth quarter in the company's history [37] - Non-GAAP adjusted EBITDA for Q4 2021 was $61.3 million, up 75.6% from Q4 2020, with an adjusted EBITDA margin of 26.3%, reflecting a year-over-year improvement of approximately 970 basis points [42][54] - For the full year 2021, non-GAAP adjusted EBITDA totaled $294.8 million, a 70% increase compared to 2020, with a record adjusted EBITDA margin of 29.7% [19][28] Business Line Data and Key Metrics Changes - Software solutions net sales in Q4 2021 were $73.8 million, growing 36.2% year-over-year and accounting for nearly 32% of total net sales [8][37] - The Virtual Data Room software, Venue, experienced a 48% increase in sales, driven by strong M&A activity [43] - Recurring compliance software offerings, including ActiveDisclosure, grew by approximately 40% in Q4 2021, marking the highest growth quarter of the year [38][44] Market Data and Key Metrics Changes - The capital markets environment remained strong in Q4 2021, with transactional sales reaching $106 million, the second highest quarter of the year [36][46] - The company noted a robust pipeline of approximately 600 SPACs looking for merger targets, which is expected to generate future deals [48] Company Strategy and Development Direction - The company aims to derive 44% of its sales from software solutions by 2024, with a focus on accelerating software growth and enhancing its market-leading position in regulatory and compliance solutions [20][64] - A strategic shift has been made to reduce low-margin print and distribution revenue, with print sales declining significantly, allowing for a healthier revenue mix [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future demand for M&A activity as market volatility subsides, positioning the company well to capture significant portions of future De-SPAC activity [48][59] - The company expects continued strength in recurring compliance software offerings, while print and distribution sales are anticipated to decline with minimal adjusted EBITDA impact [59] Other Important Information - The company repurchased approximately 973,000 shares in 2021 for $32.4 million, demonstrating confidence in its strategy and intrinsic value [55][56] - The company has reduced its net debt by approximately $500 million since its spin-off in 2016, enhancing financial flexibility for future investments [28] Q&A Session Summary Question: Can you provide more color on the assumptions behind Q1 margins? - Management indicated that the improvement in margins is driven by an evolving revenue mix with more software and less print, alongside permanent cost reductions [66][67] Question: Are you seeing growth in backlog from SPACs? - Management confirmed that they are converting clients from initial SPAC registrations and seeing opportunities for ongoing recurring compliance revenue [70][71] Question: What was the full year transactional revenue? - The full year transactional revenue was just under $405 million, with significant contributions from SPAC and IPO activities [76] Question: How should we think about interest expense going into '22? - Interest expense is expected to drop due to refinancing efforts that will reduce interest by about $14 million per year [84] Question: What is the expected impact of print declines? - The expected print decline for 2022 is approximately $40 million, primarily occurring in the first half of the year [88]

Financial Performance and Risks - The Company reported that approximately 14% of its net sales for the year ended December 31, 2021, were earned outside of the U.S., exposing it to foreign currency exchange risk [312]. - A hypothetical 10% strengthening of the U.S. dollar would decrease the Company's earnings before income taxes by approximately $2.4 million and total assets by about $6.4 million [313]. - A hypothetical 10% change in yield would alter the fair value of the Term Loan A Facility by approximately $12.4 million, or 10.0% [315]. - The Company has not been a party to any derivative financial instruments as of December 31, 2021, indicating a conservative approach to market risk management [310]. - Price increases in raw materials like paper and ink could be passed onto the Company, but a hypothetical 10% change in these prices would not significantly affect operations or cash flows [318]. Workforce and Diversity - As of December 31, 2021, the Company had approximately 2,185 employees, with a voluntary turnover rate of under 8.5% per year [66]. - The Company achieved a workforce total recordable incident rate of 0.32 (per 200,000 hours worked) in 2021, reflecting its commitment to health and safety [80]. - In 2021, approximately 59% of all U.S. hires and promotions at the manager level and above were women or people of color, indicating progress in diversity initiatives [73]. - The Company implemented a 401(k) match of 50 cents for every dollar an employee contributes up to 6% of eligible compensation starting in 2022 [71]. Environmental and Supply Chain - The Company sourced 100% of the electricity used by its print manufacturing facilities from renewable energy credits in 2021 [83]. - The Company anticipates continued challenges in sourcing paper in 2022 due to global supply chain issues, which may lead to increased pricing [58]. Customer and Credit Risk Management - The Company has a diverse customer base with no single customer accounting for more than 10% of net sales for the years ended December 31, 2021, 2020, and 2019, mitigating credit risk [316]. - The Company maintains provisions for potential credit losses, which have historically been within expectations, but significant economic disruptions could lead to additional charges [316]. Cybersecurity - The Company maintains a cybersecurity program based on industry-leading frameworks, ensuring compliance with regulatory requirements [62].