Donnelley Financial Solutions(DFIN) - 2025 Q2 - Quarterly Results

Executive Summary Q2 2025 Financial Highlights DFIN achieved record software solutions net sales, strong Adjusted EBITDA margin, and improved cash flows, alongside active share repurchases, despite an overall net sales decrease | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Software Solutions Net Sales | $92.2 | $85.6 | +7.7% | | Software Solutions % of Total Sales | 42.3% | 35.3% | +7.0 pp | | Net Earnings | $36.1 | $44.1 | -18.2% | | Diluted EPS | $1.28 | $1.47 | -12.9% | | Adjusted EBITDA | $76.3 | $87.2 | -12.5% | | Adjusted EBITDA Margin | 35.0% | 35.9% | -0.9 pp | - Operating Cash Flow increased by $12.2 million and Free Cash Flow increased by $14.9 million from Q2 2024[6] - The Company repurchased 787,152 shares for approximately $34.3 million at an average price of $43.56 per share. A new $150 million stock repurchase program was authorized, replacing the previous one[6] | Metric | As of June 30, 2025 | | :----------- | :------------------ | | Gross Leverage | 0.9x | | Net Leverage | 0.7x | CEO Commentary The CEO highlighted successful software-focused strategy and recurring compliance software growth, despite macroeconomic headwinds, emphasizing increased recurring sales and disciplined capital allocation - Software solutions net sales increased by 7.7% compared to Q2 2024, driven by ActiveDisclosure and Arc Suite, which grew approximately 15% in aggregate[4] - Software solutions net sales constituted 42.3% of total net sales in Q2 2025, up from 35.3% in Q2 2024, positioning the company to achieve its long-term target of 60% software revenue by 2028[4] - Encouraged by improving market activity trends as the quarter progressed, despite persistent macroeconomic headwinds and market uncertainty suppressing demand for transactional offerings[5] - Focus for the second half of the year includes investing to drive a more recurring sales mix, aggressively managing the cost structure, and disciplined capital allocation to deliver long-term value[5] Financial Performance Overview Net Sales Total net sales for Q2 2025 decreased by 10.1% year-over-year, driven by lower print and distribution volumes and reduced capital markets transactional revenue, partially offset by software solutions growth | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change ($M) | Change (%) | | :------------ | :----------------- | :----------------- | :---------- | :--------- | | Total Net Sales | $218.1 | $242.7 | -$24.6 | -10.1% | - The decrease in net sales was primarily driven by lower print and distribution volumes within capital markets and investment companies compliance offerings, and a reduction in capital markets transactional revenue[7] - The decline was partially offset by higher software solutions net sales in Arc Suite and ActiveDisclosure[7] Net Earnings Net earnings and diluted EPS decreased in Q2 2025 compared to Q2 2024, influenced by after-tax charges from share-based compensation and restructuring | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change ($M) | Change (%) | | :-------------- | :----------------- | :----------------- | :---------- | :--------- | | Net Earnings | $36.1 | $44.1 | -$8.0 | -18.1% | | Diluted EPS | $1.28 | $1.47 | -$0.19 | -12.9% | - Q2 2025 net earnings included after-tax charges of $6.0 million ($0.21 per diluted share), primarily from share-based compensation and restructuring, impairment, and other charges[8] - Q2 2024 net earnings included after-tax charges of $5.7 million ($0.19 per diluted share) from similar items[8] Adjusted EBITDA and Non-GAAP Net Earnings Adjusted EBITDA and margin decreased in Q2 2025 due to lower capital markets transactional volumes, partially offset by higher software sales and cost control, with Non-GAAP net earnings also declining | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change ($M) | Change (%) | | :--------------------- | :----------------- | :----------------- | :---------- | :--------- | | Adjusted EBITDA | $76.3 | $87.2 | -$10.9 | -12.5% | | Adjusted EBITDA Margin | 35.0% | 35.9% | -0.9 pp | | - The decrease in Adjusted EBITDA and margin was primarily attributed to lower capital markets transactional volumes[9] - This decline was partially offset by higher software solutions net sales, cost control initiatives, and lower selling expenses due to decreased sales volumes[9] | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change ($M) | Change (%) | | :--------------------- | :----------------- | :----------------- | :---------- | :--------- | | Non-GAAP Net Earnings | $42.1 | $49.8 | -$7.7 | -15.4% | | Non-GAAP Diluted EPS | $1.49 | $1.66 | -$0.17 | -10.2% | Financial Guidance Third-Quarter 2025 Guidance DFIN provided Q3 2025 guidance, projecting total net sales between $165 million and $175 million, with an Adjusted EBITDA margin of 23% to 25% | Metric | Third-Quarter Guidance (Millions) | | :---------------------------- | :--------------------- | | Total Net Sales | $165 to $175 | | Adjusted EBITDA Margin | 23% to 25% | | Capital Markets Transactional Net Sales | $35 to $40 | - Adjusted EBITDA margin guidance is provided on a non-GAAP basis only, without a GAAP reconciliation due to the impracticality of preparing such a reconciliation without unreasonable efforts[13] Company Information Company Results and Conference Call DFIN's Q2 2025 earnings press release is available on its investor relations website, and a conference call and webcast were held on July 31, 2025, with a replay available online - The earnings press release (Exhibit 99.1 to Form 8-K) and a supplemental trending schedule are available on investor.dfinsolutions.com[14] - A conference call and webcast were held on July 31, 2025, at 9:00 a.m. Eastern time, with a replay available on the investor relations website[15][16] About DFIN DFIN is a global provider of innovative software and technology-enabled financial regulatory and compliance solutions, offering expertise, enterprise software, and data analytics - DFIN provides domain expertise, enterprise software, and data analytics for financial regulatory and compliance solutions[17] - The company aims to deliver confidence with the right solutions amidst fluctuating markets, evolving regulations, and advancing technology[17] Investor Contact For investor inquiries, contact Mike Zhao, Investor Relations, via email at investors@dfinsolutions.com - Investor Relations contact: Mike Zhao, investors@dfinsolutions.com[18] Non-GAAP Financial Measures Use of Non-GAAP Information DFIN uses non-GAAP financial measures like Adjusted EBITDA and Free Cash Flow to provide additional insights into operating results and liquidity, enhancing financial performance assessment and comparability - Non-GAAP measures (e.g., Adjusted EBITDA, Free Cash Flow, organic net sales) are used to provide useful information about operating results and liquidity, and to enhance the overall ability to assess financial performance[19] - These adjusted measures exclude certain costs, expenses, gains, and losses that management believes are not indicative of ongoing operations, such as share-based compensation and restructuring charges[20] - Free Cash Flow is defined as net cash flow provided by operating activities less capital expenditures, providing insight into cash generation after capital investment[21] - Organic net sales adjust reported net sales for changes in foreign currency exchange rates and the impact of dispositions[22] - Non-GAAP measures should be considered in addition to, not as a substitute for, GAAP measures and may not be comparable to similarly-titled measures of other companies[23] Forward-Looking Statements Use of Forward-Looking Statements This news release contains forward-looking statements about DFIN's business, strategy, and future financial performance, subject to risks and uncertainties, with actual results potentially differing materially from expectations - The news release includes forward-looking statements about DFIN's business, strategy, plans, and future financial condition and performance[24] - These statements involve known and unknown risks and uncertainties, many beyond DFIN's control, which could cause actual results to differ materially from current expectations[24] - DFIN specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements[24] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets DFIN's balance sheet as of June 30, 2025, shows increased total assets and liabilities compared to December 31, 2024, while total equity slightly decreased | Metric (Millions) | June 30, 2025 | December 31, 2024 | Change ($M) | | :-------------------------- | :------------ | :---------------- | :---------- | | Total Current Assets | $266.6 | $232.5 | +$34.1 | | Total Assets | $874.7 | $841.6 | +$33.1 | | Total Current Liabilities | $207.1 | $224.1 | -$17.0 | | Long-Term Debt | $184.3 | $124.7 | +$59.6 | | Total Liabilities | $442.6 | $405.5 | +$37.1 | | Total Equity | $432.1 | $436.1 | -$4.0 | - Cash and cash equivalents decreased from $57.3 million to $33.8 million[26] - Receivables, net, increased significantly from $138.0 million to $202.0 million[26] Condensed Consolidated Statements of Operations For Q2 2025, DFIN experienced decreased total net sales and net earnings compared to Q2 2024, driven by declines in tech-enabled services and print, despite software solutions growth | Metric (Millions) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Software solutions | $92.2 | $85.6 | $176.8 | $165.9 | | Tech-enabled services | $85.2 | $102.2 | $161.7 | $185.1 | | Print and distribution | $40.7 | $54.9 | $80.7 | $95.1 | | Total Net Sales | $218.1 | $242.7 | $419.2 | $446.1 | | Net Earnings | $36.1 | $44.1 | $67.1 | $77.4 | | Diluted EPS | $1.28 | $1.47 | $2.33 | $2.56 | | Gross Profit | $124.3 | $142.4 | $238.7 | $252.4 | | Gross Margin | 57.0% | 58.7% | 56.9% | 56.6% | - Software solutions net sales increased by 7.7% in Q2 2025 YoY, while tech-enabled services decreased by 16.6% and print and distribution decreased by 25.9%[28] - Income from operations decreased from $64.5 million in Q2 2024 to $52.8 million in Q2 2025[28] Reconciliation of GAAP to Non-GAAP Measures (Q2 & H1 2025) This section reconciles GAAP net earnings to adjusted non-GAAP measures for Q2 and H1 2025, detailing adjustments for restructuring and share-based compensation to derive non-GAAP net earnings and diluted EPS | Metric (Millions) | Q2 2025 GAAP | Q2 2025 Adjusted Non-GAAP | | :-------------------------------- | :----------- | :------------------------ | | Net Earnings | $36.1 | $42.1 | | Net Earnings per Diluted Share | $1.28 | $1.49 | | Income from Operations | $52.8 | $61.2 | | Operating Margin | 24.2% | 28.1% | | Total Non-GAAP Adjustments (Net Earnings Impact) | | $6.0 | | Metric (Millions) | H1 2025 GAAP | H1 2025 Adjusted Non-GAAP | | :-------------------------------- | :----------- | :------------------------ | | Net Earnings | $67.1 | $78.7 | | Net Earnings per Diluted Share | $2.33 | $2.73 | | Income from Operations | $98.6 | $115.3 | | Operating Margin | 23.5% | 27.5% | | Total Non-GAAP Adjustments (Net Earnings Impact) | | $11.6 | - Key adjustments for Q2 2025 included $1.0 million for restructuring, impairment and other charges, net, and $7.5 million for share-based compensation expense[31] Reconciliation of GAAP to Non-GAAP Measures (Q2 & H1 2024) This section reconciles GAAP net earnings to adjusted non-GAAP measures for Q2 and H1 2024, detailing adjustments for similar non-recurring items to provide a comparable view of operational performance | Metric (Millions) | Q2 2024 GAAP | Q2 2024 Adjusted Non-GAAP | | :-------------------------------- | :----------- | :------------------------ | | Net Earnings | $44.1 | $49.8 | | Net Earnings per Diluted Share | $1.47 | $1.66 | | Income from Operations | $64.5 | $72.9 | | Operating Margin | 26.6% | 30.0% | | Total Non-GAAP Adjustments (Net Earnings Impact) | | $5.7 | | Metric (Millions) | H1 2024 GAAP | H1 2024 Adjusted Non-GAAP | | :-------------------------------- | :----------- | :------------------------ | | Net Earnings | $77.4 | $77.6 | | Net Earnings per Diluted Share | $2.56 | $2.57 | | Income from Operations | $109.1 | $114.2 | | Operating Margin | 24.5% | 25.6% | | Total Non-GAAP Adjustments (Net Earnings Impact) | | $0.2 | - Key adjustments for Q2 2024 included $1.3 million for restructuring, impairment and other charges, net, and $7.4 million for share-based compensation expense[36] Segment Adjusted EBITDA and Supplementary Information DFIN's segment performance for Q2 and H1 2025 shows varied results, with Capital Markets and Investment Companies Software Solutions growing in net sales and Adjusted EBITDA, while other segments declined | Segment (Millions) | Q2 2025 Net Sales | Q2 2024 Net Sales | Q2 2025 Adj. EBITDA | Q2 2024 Adj. EBITDA | | :------------------------------------------------ | :---------------- | :---------------- | :------------------ | :------------------ | | Capital Markets - Software Solutions | $59.1 | $57.3 | $22.4 | $21.2 | | Capital Markets - Compliance and Communications Management | $93.5 | $113.8 | $36.8 | $45.8 | | Investment Companies - Software Solutions | $33.1 | $28.3 | $14.2 | $11.1 | | Investment Companies - Compliance and Communications Management | $32.4 | $43.3 | $12.6 | $18.3 | | Consolidated | $218.1 | $242.7 | $76.3 | $87.2 | - Capital Markets - Software Solutions saw a 3.1% increase in net sales and a 5.7% increase in Adjusted EBITDA in Q2 2025 YoY[40] - Investment Companies - Software Solutions reported a 17.0% increase in net sales and a 27.9% increase in Adjusted EBITDA in Q2 2025 YoY[40] - Consolidated Adjusted EBITDA margin for Q2 2025 was 35.0%, a slight decrease from 35.9% in Q2 2024[40] Condensed Consolidated Statements of Cash Flows For H1 2025, DFIN generated positive net cash from operating activities but experienced net cash outflows from investing and financing, resulting in a net decrease in cash and cash equivalents | Cash Flow Activity (Millions) | H1 2025 | H1 2024 | | :---------------------------- | :------ | :------ | | Net cash provided by operating activities | $30.7 | $28.3 | | Net cash used in investing activities | ($29.9) | ($19.1) | | Net cash (used in) provided by financing activities | ($25.5) | $3.5 | | Net (decrease) increase in cash and cash equivalents | ($23.5) | $11.9 | | Cash and cash equivalents at end of period | $33.8 | $35.0 | | Metric (Millions) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :---------------- | :------ | :------ | :------ | :------ | | Free Cash Flow | $51.7 | $36.8 | $0.7 | ($3.4) | - Capital expenditures for H1 2025 were $30.0 million, slightly down from $31.7 million in H1 2024[43] Reconciliation of Reported to Organic Net Sales - By Segment This reconciliation shows foreign exchange impact on segment net sales, revealing organic net sales changes largely mirrored reported changes, with software solutions segments growing organically while compliance and communications management segments declined | Segment | Q2 2025 Reported Net Sales Change (%) | Q2 2025 Organic Net Sales Change (%) | | :------------------------------------------------ | :------------------------------------ | :----------------------------------- | | Capital Markets - Software Solutions | 3.1% | 2.8% | | Capital Markets - Compliance and Communications Management | (17.8%) | (17.8%) | | Investment Companies - Software Solutions | 17.0% | 16.3% | | Investment Companies - Compliance and Communications Management | (25.2%) | (25.2%) | | Consolidated | (10.1%) | (10.3%) | | Segment | H1 2025 Reported Net Sales Change (%) | H1 2025 Organic Net Sales Change (%) | | :------------------------------------------------ | :------------------------------------ | :----------------------------------- | | Capital Markets - Software Solutions | 0.6% | 0.6% | | Capital Markets - Compliance and Communications Management | (13.4%) | (13.3%) | | Investment Companies - Software Solutions | 18.3% | 18.1% | | Investment Companies - Compliance and Communications Management | (13.7%) | (13.6%) | | Consolidated | (6.0%) | (5.9%) | - Foreign exchange rates had a minimal impact on consolidated net sales change, with a 0.2% positive impact in Q2 2025 and a 0.1% negative impact in H1 2025[45] Reconciliation of Reported to Organic Net Sales - By Services and Products This reconciliation details reported and organic net sales changes by service and product type, highlighting strong organic growth in software solutions, while tech-enabled services and print experienced significant organic declines | Product/Service | Q2 2025 Reported Net Sales Change (%) | Q2 2025 Organic Net Sales Change (%) | | :------------------- | :------------------------------------ | :----------------------------------- | | Software Solutions | 7.7% | 7.2% | | Tech-enabled Services | (16.6%) | (16.7%) | | Print and Distribution | (25.9%) | (25.7%) | | Consolidated | (10.1%) | (10.3%) | | Product/Service | H1 2025 Reported Net Sales Change (%) | H1 2025 Organic Net Sales Change (%) | | :------------------- | :------------------------------------ | :----------------------------------- | | Software Solutions | 6.6% | 6.5% | | Tech-enabled Services | (12.6%) | (12.5%) | | Print and Distribution | (15.1%) | (14.9%) | | Consolidated | (6.0%) | (5.9%) | - Foreign exchange rates had a minor impact on organic net sales changes across all product/service categories[47] Reconciliation of Net Earnings to Adjusted EBITDA This section provides a detailed reconciliation of net earnings to Adjusted EBITDA for various periods, outlining adjustments for restructuring charges, share-based compensation, depreciation, and amortization | Metric (Millions) | TTM June 30, 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | | :-------------------------------- | :---------------- | :------ | :------ | :------ | :------ | | Net Earnings | $82.1 | $36.1 | $31.0 | $6.3 | $8.7 | | Total Non-GAAP Adjustments | $137.3 | $40.2 | $37.2 | $25.4 | $34.5 | | Adjusted EBITDA | $219.4 | $76.3 | $68.2 | $31.7 | $43.2 | | Adjusted EBITDA Margin % | 29.1% | 35.0% | 33.9% | 20.3% | 24.1% | | Metric (Millions) | TTM June 30, 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | | :-------------------------------- | :---------------- | :------ | :------ | :------ | :------ | | Net Earnings | $106.1 | $44.1 | $33.3 | $10.6 | $18.1 | | Total Non-GAAP Adjustments | $127.0 | $43.1 | $21.9 | $30.7 | $31.3 | | Adjusted EBITDA | $233.1 | $87.2 | $55.2 | $41.3 | $49.4 | | Adjusted EBITDA Margin % | 29.0% | 35.9% | 27.1% | 23.4% | 27.4% | - Adjustments include restructuring, impairment and other charges, share-based compensation expense, depreciation and amortization, interest expense, and income tax expense[49][50] Debt and Liquidity Debt and Liquidity Summary As of June 30, 2025, DFIN maintained significant liquidity with $255.3 million in net available liquidity, though total debt increased, leading to higher gross and net leverage ratios | Metric (Millions) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------- | :------------ | :---------------- | :------------ | | Availability under Revolving Facility | $221.5 | $299.0 | $244.0 | | Cash and cash equivalents | $33.8 | $57.3 | $35.0 | | Net Available Liquidity | $255.3 | $356.3 | $279.0 | | Total Debt | $190.1 | $124.7 | $179.6 | | Non-GAAP Gross Leverage | 0.9x | 0.6x | 0.8x | | Non-GAAP Net Debt | $156.3 | $67.4 | $144.6 | | Non-GAAP Net Leverage | 0.7x | 0.3x | 0.6x | - Borrowings under the Revolving Facility increased to $77.0 million as of June 30, 2025, from $0 million at December 31, 2024[53] - The company had the ability to utilize the remaining $221.5 million of its $300.0 million Revolving Facility without violating terms as of June 30, 2025[53]