Donnelley Financial Solutions(DFIN) - 2025 Q1 - Quarterly Results

Financial Performance - Adjusted EBITDA for Q1 2025 was $68.2 million, an increase of $13.0 million, or 23.6%, year-over-year, with an Adjusted EBITDA margin of 33.9%, up approximately 680 basis points from Q1 2024 [3]. - Total net sales for Q1 2025 were $201.1 million, a decrease of $2.3 million, or 1.1%, from Q1 2024, with organic net sales decreasing by 0.8% [5]. - Net earnings for Q1 2025 were $31.0 million, or $1.05 per diluted share, compared to $33.3 million, or $1.09 per diluted share, in Q1 2024 [7]. - The company reported non-GAAP net earnings of $36.6 million, or $1.24 per diluted share, compared to $27.8 million, or $0.91 per diluted share, in Q1 2024 [9]. - For the three months ended March 31, 2025, net earnings decreased to $31.0 million from $33.3 million in the same period of 2024, representing a decline of 6.9% [34]. - For the twelve months ended March 31, 2025, net earnings were $90.1 million, a decrease from $99.7 million for the same period in 2024 [38]. - Total net sales for the twelve months ended March 31, 2025, were $779.6 million, compared to $802.0 million for the twelve months ended March 31, 2024, reflecting a decline of approximately 2.9% [38]. Revenue Breakdown - Software solutions net sales reached a record $84.6 million, an increase of 5.4%, or 5.8% on an organic basis, accounting for 42.1% of total net sales, up from 39.5% in Q1 2024 [5]. - Software solutions revenue increased to $84.6 million, up 4.0% from $80.3 million year-over-year [24]. - Software solutions revenue for the twelve months ended March 31, 2025, was $334.0 million, compared to $302.9 million for the same period in 2024, reflecting an increase of approximately 10.2% [38]. - Tech-enabled services revenue for the twelve months ended March 31, 2025, was $314.4 million, up from $341.4 million for the same period in 2024, indicating a decline of about 7.9% [38]. Cost and Expenses - Total cost of sales decreased to $73.0 million, down 8.8% from $80.1 million in the previous year [24]. - Gross profit for Q1 2025 was $114.4 million, representing a gross margin of 56.9%, compared to 54.1% in Q1 2024 [24]. - SG&A expenses as a percentage of total net sales improved to 32.7% in Q1 2025 from 35.8% in Q1 2024 [24]. - The effective tax rate for Q1 2025 was 26.5%, an increase from 19.6% in Q1 2024 [24]. Cash Flow and Liquidity - Net cash used in operating activities increased to $(37.7) million in Q1 2025 from $(27.9) million in Q1 2024, reflecting a 35.5% increase in cash outflow [34]. - Free cash flow for the three months ended March 31, 2025, was $(51.0) million, compared to $(40.2) million in the same period of 2024, reflecting a 27.8% increase in cash outflow [34]. - The cash and cash equivalents at the end of the period decreased to $16.2 million from $43.7 million at the end of Q1 2024 [34]. - The company reported $240.2 million in net available liquidity as of March 31, 2025, down from $262.7 million as of March 31, 2024 [40]. Debt and Financing - The company amended its credit agreement to provide for a $115 million term loan A facility and established a $300 million revolving facility with a maturity date of March 13, 2030 [5]. - Total debt as of March 31, 2025, was $189.5 million, an increase from $124.7 million as of December 31, 2024 [40]. - Revolving facility borrowings increased to $143.5 million in Q1 2025 from $138.5 million in Q1 2024, a rise of 3.6% [34]. - Payments on long-term debt in Q1 2025 amounted to $125.0 million, with no payments reported in Q1 2024 [34]. - Non-GAAP gross leverage ratio was 0.8x as of March 31, 2025, compared to 0.6x as of December 31, 2024, indicating an increase in leverage [40]. Strategic Initiatives - The company aims to increase its recurring sales mix, manage costs aggressively, and allocate capital in a disciplined manner to enhance shareholder value [4]. - Sales of recurring compliance software products, ActiveDisclosure and Arc Suite, increased approximately 16% in aggregate, with each product delivering double-digit growth in the quarter [4].