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

Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements, which are subject to risks and uncertainties, and outlines key risk factors - The report contains forward-looking statements subject to risks and uncertainties, based on the Company's beliefs and assumptions. These statements are not guarantees of future performance and readers should not place undue reliance on them[14][16] - Key risk factors include global economy and financial market volatility, failure to offer high-quality customer support, client retention, data security breaches, inability to adapt to new technologies, competitive market pressures, and effects of operating in international markets[15][18] Part I. Financial Information This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results Item 1: Condensed Consolidated Financial Statements (Unaudited) This section presents DFIN's unaudited condensed consolidated financial statements for periods ended June 30, 2025, and December 31, 2024, including key financial statements and notes Condensed Consolidated Statements of Operations This section details the company's consolidated statements of operations, including net sales, income from operations, and earnings per share Three Months Ended June 30, 2025 vs. 2024 (in millions) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Software solutions | $92.2 | $85.6 | $6.6 | 7.7% | | Tech-enabled services | $85.2 | $102.2 | $(17.0) | (16.6%) | | Print and distribution | $40.7 | $54.9 | $(14.2) | (25.9%) | | Total net sales | $218.1 | $242.7 | $(24.6) | (10.1%) | | Income from operations | $52.8 | $64.5 | $(11.7) | (18.1%) | | Net earnings | $36.1 | $44.1 | $(8.0) | (18.1%) | | Basic EPS | $1.30 | $1.50 | $(0.20) | (13.3%) | | Diluted EPS | $1.28 | $1.47 | $(0.19) | (12.9%) | Six Months Ended June 30, 2025 vs. 2024 (in millions) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Software solutions | $176.8 | $165.9 | $10.9 | 6.6% | | Tech-enabled services | $161.7 | $185.1 | $(23.4) | (12.6%) | | Print and distribution | $80.7 | $95.1 | $(14.4) | (15.1%) | | Total net sales | $419.2 | $446.1 | $(26.9) | (6.0%) | | Income from operations | $98.6 | $109.1 | $(10.5) | (9.6%) | | Net earnings | $67.1 | $77.4 | $(10.3) | (13.3%) | | Basic EPS | $2.38 | $2.63 | $(0.25) | (9.5%) | | Diluted EPS | $2.33 | $2.56 | $(0.23) | (9.0%) | Condensed Consolidated Statements of Comprehensive Income This section presents the condensed consolidated statements of comprehensive income, detailing net earnings and other comprehensive income components Comprehensive Income (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Net earnings | $36.1 | $44.1 | | Other comprehensive income (loss), net of tax | $1.7 | $0.1 | | Comprehensive income | $37.8 | $44.2 | | Six Months Ended June 30, | | | | Net earnings | $67.1 | $77.4 | | Other comprehensive income (loss), net of tax | $2.3 | $(0.2) | | Comprehensive income | $69.4 | $77.2 | Condensed Consolidated Balance Sheets This section provides the condensed consolidated balance sheets, outlining assets, liabilities, and stockholders' equity Balance Sheet Highlights (in millions) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $33.8 | $57.3 | | Total current assets | $266.6 | $232.5 | | Total assets | $874.7 | $841.6 | | Total current liabilities | $207.1 | $224.1 | | Long-term debt | $184.3 | $124.7 | | Total liabilities | $442.6 | $405.5 | | Total equity | $432.1 | $436.1 | Condensed Consolidated Statements of Cash Flows This section presents the condensed consolidated statements of cash flows, summarizing cash movements from operating, investing, and financing activities Cash Flow Summary (Six Months Ended June 30, in millions) | Activity | 2025 (in millions) | 2024 (in millions) | | :-------------------------------- | :----- | :----- | | 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 | Condensed Consolidated Statements of Changes in Stockholders' Equity This section details the condensed consolidated statements of changes in stockholders' equity, including net earnings and share repurchases Changes in Stockholders' Equity (Three Months Ended June 30, in millions) | Metric | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Net earnings | $36.1 | $44.1 | | Other comprehensive income | $1.7 | $0.1 | | Share-based compensation expense | $7.5 | $7.5 | | Common stock repurchases | $(34.6) | $(19.2) | | Total Equity at June 30 | $432.1 | $441.5 | Changes in Stockholders' Equity (Six Months Ended June 30, in millions) | Metric | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Net earnings | $67.1 | $77.4 | | Other comprehensive income (loss) | $2.3 | $(0.2) | | Share-based compensation expense | $13.5 | $12.5 | | Common stock repurchases | $(76.7) | $(28.0) | | Total Equity at June 30 | $432.1 | $441.5 | Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, offering additional context and disclosures Note 1. Overview, Basis of Presentation and Significant Accounting Policies This note outlines DFIN's business, basis of financial statement presentation, significant accounting policies, and impact of new accounting standards - DFIN is a global provider of software and technology-enabled financial regulatory and compliance solutions, serving public and private companies and investment firms. The company's strategy is shifting towards software solutions and tech-enabled services, moving away from physical print and distribution[33][34][35] CECL Reserve Changes (in millions) | Metric | June 30, 2025 (in millions) | June 30, 2024 (in millions) | | :-------------------------- | :------------ | :------------ | | Balance, beginning of year | $25.0 | $18.9 | | Provisions charged to expense | $4.8 | $10.1 | | Write-offs, reclassifications and other | $(4.2) | $(4.5) | | Balance, end of period | $25.6 | $24.5 | - The company is evaluating the impact of new FASB ASUs (2023-09 and 2024-03/2025-01) on income tax and expense disaggregation disclosures, effective for fiscal years beginning after December 15, 2024, and 2026/2027 respectively[43][44] Note 2. Revenue This note details the company's revenue recognition policies and provides disaggregated revenue information by segment and service type - Revenue is recognized upon transfer of control of services or products, which include software solutions (ActiveDisclosure, Arc Suite, Venue), tech-enabled services (document composition, EDGAR filing), and print and distribution offerings[45][46] Disaggregation of Revenue (Three Months Ended June 30, 2025 vs. 2024, in millions) | Segment | 2025 Software Solutions (in millions) | 2025 Tech-enabled Services (in millions) | 2025 Print and Distribution (in millions) | 2025 Total (in millions) | 2024 Software Solutions (in millions) | 2024 Tech-enabled Services (in millions) | 2024 Print and Distribution (in millions) | 2024 Total (in millions) | | :------------------------------------------ | :---------------------- | :------------------------- | :-------------------------- | :--------- | :---------------------- | :------------------------- | :-------------------------- | :--------- | | Capital Markets - Software Solutions | $59.1 | — | — | $59.1 | $57.3 | — | — | $57.3 | | Capital Markets - Compliance and Communications Management | — | $65.6 | $27.9 | $93.5 | — | $81.3 | $32.5 | $113.8 | | Investment Companies - Software Solutions | $33.1 | — | — | $33.1 | $28.3 | — | — | $28.3 | | Investment Companies - Compliance and Communications Management | — | $19.6 | $12.8 | $32.4 | — | $20.9 | $22.4 | $43.3 | | Total net sales | $92.2 | $85.2 | $40.7 | $218.1 | $85.6 | $102.2 | $54.9 | $242.7 | Disaggregation of Revenue (Six Months Ended June 30, 2025 vs. 2024, in millions) | Segment | 2025 Software Solutions (in millions) | 2025 Tech-enabled Services (in millions) | 2025 Print and Distribution (in millions) | 2025 Total (in millions) | 2024 Software Solutions (in millions) | 2024 Tech-enabled Services (in millions) | 2024 Print and Distribution (in millions) | 2024 Total (in millions) | | :------------------------------------------ | :---------------------- | :------------------------- | :-------------------------- | :--------- | :---------------------- | :------------------------- | :-------------------------- | :--------- | | Capital Markets - Software Solutions | $111.0 | — | — | $111.0 | $110.3 | — | — | $110.3 | | Capital Markets - Compliance and Communications Management | — | $125.4 | $52.0 | $177.4 | — | $147.3 | $57.6 | $204.9 | | Investment Companies - Software Solutions | $65.8 | — | — | $65.8 | $55.6 | — | — | $55.6 | | Investment Companies - Compliance and Communications Management | — | $36.3 | $28.7 | $65.0 | — | $37.8 | $37.5 | $75.3 | | Total net sales | $176.8 | $161.7 | $80.7 | $419.2 | $165.9 | $185.1 | $95.1 | $446.1 | Note 3. Goodwill This note presents the goodwill balances by segment, including foreign exchange adjustments, as of June 30, 2025 Goodwill Balances by Segment (in millions) | Segment | Net book value at Dec 31, 2024 (in millions) | Foreign exchange adjustments (in millions) | Net book value at June 30, 2025 (in millions) | | :------------------------------------------ | :----------------------------- | :--------------------------- | :------------------------------ | | Capital Markets - Software Solutions | $99.9 | $0.1 | $100.0 | | Capital Markets - Compliance and Communications Management | $252.5 | $0.3 | $252.8 | | Investment Companies - Software Solutions | $53.0 | $0.1 | $53.1 | | Investment Companies - Compliance and Communications Management | — | — | — | | Total | $405.4 | $0.5 | $405.9 | Note 4. Leases This note provides details on cash paid for leases and the components of lease expense for operating and finance leases Cash Paid Related to Leases (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Operating leases | $2.6 | $3.8 | | Finance leases | $0.8 | $0.8 | | Six Months Ended June 30, | | | | Operating leases | $5.5 | $7.7 | | Finance leases | $1.7 | $1.4 | Lease Expense Components (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Net operating lease expense | $0.9 | $1.4 | | Total finance lease expense | $0.6 | $0.7 | | Six Months Ended June 30, | | | | Net operating lease expense | $1.9 | $2.7 | | Total finance lease expense | $1.2 | $1.4 | Note 5. Restructuring, Impairment and Other Charges, net This note details restructuring, impairment, and other charges, primarily related to employee terminations and reorganization efforts Restructuring, Impairment and Other Charges, net (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Employee Terminations | $0.9 | $1.2 | | Other Charges | $0.1 | $0.1 | | Total | $1.0 | $1.3 | | Six Months Ended June 30, | | |\ | Employee Terminations | $3.7 | $2.9 |\ | Other Charges | $0.2 | $0.2 |\ | Total | $3.9 | $3.1 | - For the three months ended June 30, 2025, $0.9 million in restructuring charges related to approximately 10 employee terminations. For the six months, $3.7 million related to approximately 50 employee terminations, primarily due to reorganization in capital markets and investment companies operations[59] Note 6. Retirement Plans This note outlines net pension plan expense and discusses the ongoing termination process for the company's primary defined benefit plan Net Pension Plan Expense (Income) (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Interest cost | $2.5 | $2.7 | | Expected return on assets | $(2.5) | $(3.3) | | Amortization, net | $0.4 | $0.3 | | Net pension plan expense (income) | $0.4 | $(0.3) | | Six Months Ended June 30, | | | | Interest cost | $5.1 | $5.5 | | Expected return on assets | $(5.0) | $(6.7) | | Amortization, net | $0.8 | $0.6 | | Net pension plan expense (income) | $0.9 | $(0.6) | - The Company commenced the termination process for its primary defined benefit plan in August 2024, expecting settlement through lump sum distributions and annuity purchases. A cash contribution to fully fund the Plan is anticipated in 2025, with pension settlement charges expected in the second half of 2025[63] Note 7. Commitments and Contingencies This note addresses the company's involvement in legal proceedings and other commitments, which are not expected to materially impact financial results - The Company is involved in various legal proceedings and preference items in the ordinary course of business. Management believes that the final resolution of these matters will not have a material effect on the Company's consolidated results of operations, financial position, or cash flows[64] Note 8. Debt This note details the company's debt composition, including the Term Loan A and Revolving Facilities, and related interest expense Debt Composition (in millions) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :------------ | :---------------- | | Term Loan A Facility | $113.6 | $125.0 | | Borrowings under the Revolving Facility | $77.0 | — | | Unamortized debt issuance costs | $(0.5) | $(0.3) | | Total debt | $190.1 | $124.7 | | Less: current portion of long-term debt | $5.8 | — | | Long-term debt | $184.3 | $124.7 | - On March 13, 2025, the Company amended its credit agreement, establishing a $115.0 million Term Loan A Facility and a $300.0 million Revolving Facility. Proceeds were used to retire the $125.0 million Delayed Draw Term Loan A Facility[65][66] Interest Expense, net (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Interest incurred | $4.1 | $4.3 | | Interest income, net of loss on debt extinguishment | $(0.3) | $(0.6) | | Interest expense, net | $3.8 | $3.7 | | Six Months Ended June 30, | | | | Interest incurred | $7.4 | $8.6 | | Interest income, net of loss on debt extinguishment | $(0.5) | $(1.3) | | Interest expense, net | $6.9 | $7.3 | Note 9. Earnings per Share This note provides details on basic and diluted net earnings per share and the weighted average number of common shares outstanding Net Earnings Per Share | Period | 2025 Basic (per share) | 2025 Diluted (per share) | 2024 Basic (per share) | 2024 Diluted (per share) | | :-------------------------- | :--------- | :----------- | :--------- | :----------- | | Three Months Ended June 30, | | | | | | Net earnings per share | $1.30 | $1.28 | $1.50 | $1.47 | | Six Months Ended June 30, | | | | | | Net earnings per share | $2.38 | $2.33 | $2.63 | $2.56 | Weighted Average Number of Common Shares Outstanding (in millions) | Period | 2025 Basic (in millions) | 2025 Diluted (in millions) | 2024 Basic (in millions) | 2024 Diluted (in millions) | | :-------------------------- | :--------- | :----------- | :--------- | :----------- | | Three Months Ended June 30, | | | | | | Weighted-average shares outstanding | 27.7 | 28.2 | 29.4 | 30.0 | | Six Months Ended June 30, | | | | | | Weighted-average shares outstanding | 28.2 | 28.8 | 29.4 | 30.2 | Note 10. Capital Stock This note discusses the company's share repurchase program, including the new $150 million authorization and details of common stock repurchases - The Board authorized a new $150 million share repurchase program on May 15, 2025, replacing the previous program, with an expiration date of December 31, 2026. As of June 30, 2025, the remaining authorized amount was $150.0 million[72] Common Stock Repurchases (in millions, except per share data) | Period | 2025 Repurchases (in millions) | 2025 Shares | 2025 Avg Price (per share) | 2024 Repurchases (in millions) | 2024 Shares | 2024 Avg Price (per share) | | :-------------------------- | :--------------- | :------------ | :------------- | :--------------- | :------------ | :------------- | | Three Months Ended June 30, | | | | | | | | Common stock repurchases | $34.3 | 787,152 | $43.56 | $19.2 | 317,388 | $60.65 | | Six Months Ended June 30, | | | | | | | | Common stock repurchases | $76.1 | 1,648,453 | $46.18 | $28.0 | 457,281 | $61.25 | Note 11. Comprehensive Income This note provides a breakdown of other comprehensive income and changes in accumulated other comprehensive loss, including translation adjustments Other Comprehensive Income (Loss), Net of Tax (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | | | | Translation adjustments | $1.4 | $(0.1) | | Adjustment for net periodic pension and other postretirement benefits plans | $0.3 | $0.2 | | Other comprehensive income (loss) | $1.7 | $0.1 | | Six Months Ended June 30, | | | | Translation adjustments | $1.7 | $(0.6) | | Adjustment for net periodic pension and other postretirement benefits plans | $0.6 | $0.4 | | Other comprehensive income (loss) | $2.3 | $(0.2) | Changes in Accumulated Other Comprehensive Loss (Six Months Ended June 30, in millions) | Component | Balance at Dec 31, 2024 (in millions) | Net change in accumulated other comprehensive loss (in millions) | Balance at June 30, 2025 (in millions) | | :------------------------------------------ | :---------------------- | :------------------------------------------------- | :----------------------- | | Pension and Other Postretirement Benefits Plans | $(66.4) | $0.6 | $(65.8) | | Translation Adjustments | $(15.5) | $1.7 | $(13.8) | | Total | $(81.9) | $2.3 | $(79.6) | Note 12. Segment Information This note outlines DFIN's four reportable segments and provides detailed financial performance data, including net sales and Adjusted EBITDA - DFIN operates through four 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). Corporate includes unallocated SG&A and employee benefits plan costs[78][79][80][81][82] Segment Net Sales and Adjusted EBITDA (Three Months Ended June 30, 2025 vs. 2024, in millions) | Segment | 2025 Net Sales (in millions) | 2024 Net Sales (in millions) | % Change Net Sales | 2025 Adj EBITDA (in millions) | 2024 Adj EBITDA (in millions) | % Change Adj EBITDA | | :------------------------------------------ | :------------- | :------------- | :----------------- | :-------------- | :-------------- | :------------------ | | Capital Markets - Software Solutions | $59.1 | $57.3 | 3.1% | $22.4 | $21.2 | 5.7% | | Capital Markets - Compliance and Communications Management | $93.5 | $113.8 | (17.8%) | $36.8 | $45.8 | (19.7%) | | Investment Companies - Software Solutions | $33.1 | $28.3 | 17.0% | $14.2 | $11.1 | 27.9% | | Investment Companies - Compliance and Communications Management | $32.4 | $43.3 | (25.2%) | $12.6 | $18.3 | (31.1%) | | Total | $218.1 | $242.7 | (10.1%) | $86.0 | $96.4 | (10.8%) | Segment Net Sales and Adjusted EBITDA (Six Months Ended June 30, 2025 vs. 2024, in millions) | Segment | 2025 Net Sales (in millions) | 2024 Net Sales (in millions) | % Change Net Sales | 2025 Adj EBITDA (in millions) | 2024 Adj EBITDA (in millions) | % Change Adj EBITDA | | :------------------------------------------ | :------------- | :------------- | :----------------- | :-------------- | :-------------- | :------------------ | | Capital Markets - Software Solutions | $111.0 | $110.3 | 0.6% | $36.3 | $37.0 | (1.9%) | | Capital Markets - Compliance and Communications Management | $177.4 | $204.9 | (13.4%) | $73.5 | $77.2 | (4.8%) | | Investment Companies - Software Solutions | $65.8 | $55.6 | 18.3% | $27.0 | $19.1 | 41.4% | | Investment Companies - Compliance and Communications Management | $65.0 | $75.3 | (13.7%) | $24.8 | $26.5 | (6.4%) | | Total | $419.2 | $446.1 | (6.0%) | $161.6 | $159.8 | 1.1% | Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of DFIN's financial performance, condition, and outlook, covering key metrics, segment results, and influencing factors Company Overview This section provides an overview of DFIN's business as a global provider of financial regulatory and compliance solutions, emphasizing its shift towards software - DFIN is a leading global provider of innovative software and technology-enabled financial regulatory and compliance solutions. The company's strategy focuses on investing in advanced software solutions (ActiveDisclosure, Arc Suite, Venue) and maintaining market leadership in tech-enabled services and print/distribution[91][92][93] - A prevailing trend shows clients increasingly utilizing software solutions in conjunction with tech-enabled services, while shifting away from physical print and distribution, except where regulatorily required[91] Market Volatility/Cyclicality and Seasonality This section discusses the impact of market volatility and seasonality on DFIN's segments and the company's strategies to mitigate these effects - The Capital Markets segments are highly susceptible to market volatility, with demand for transactional and Venue offerings dependent on global IPOs, M&A, and debt offerings. Compliance offerings and Investment Companies segments are less impacted[94] - The company experiences seasonality due to quarterly/annual public company reporting cycles and semi-annual/annual filings for investment companies, leading to peak periods requiring increased staffing[95] - DFIN aims to mitigate market volatility by driving annual recurring revenue and offering services in demand during down markets, such as bankruptcy/restructuring tools and upstream transactional products like Venue[94][95] Services and Products This section outlines DFIN's diverse service and product offerings, including software solutions, tech-enabled services, and print and distribution - DFIN's offerings include software solutions (ActiveDisclosure, Arc Suite, Venue), tech-enabled services (document composition, SEC EDGAR filing, transactional solutions), and print and distribution (conventional and digital printed products)[96] Government Regulations and Regulatory Impact This section addresses the impact of new SEC regulations and the demand for structured data on DFIN's business and transition to software solutions - New and amended SEC rules, along with increased demand for structured, machine-readable data (e.g., iXBRL), are driving significant changes in the regulatory environment. These changes enable DFIN to offer new value-added functionality and accelerate its transition from print to software solutions[97] Segments This section describes DFIN's four operating segments: Capital Markets Software Solutions, Capital Markets Compliance, Investment Companies Software Solutions, and Investment Companies Compliance - The company's four operating segments are 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). Corporate handles unallocated SG&A and employee benefits costs[98] - CM-SS provides Venue and ActiveDisclosure subscriptions for transactional and compliance processes. CM-CCM offers tech-enabled services and print/distribution for deal solutions and SEC compliance[99][100] - IC-SS provides the Arc Suite platform for managing compliance and regulatory information. IC-CCM offers tech-enabled services and print/distribution for regulatory and investor communications, including iXBRL filings and proxy services[101][102] Executive Overview This section provides an executive summary of DFIN's financial performance, highlighting changes in net sales and income from operations - For the three months ended June 30, 2025, net sales decreased by 10.1% to $218.1 million, primarily due to lower tech-enabled services and print/distribution sales, partially offset by a 7.7% increase in software solutions sales. Income from operations decreased by 18.1% to $52.8 million[103][104] - For the six months ended June 30, 2025, net sales decreased by 6.0% to $419.2 million, driven by declines in tech-enabled services and print/distribution, partially offset by a 6.6% increase in software solutions sales. Income from operations decreased by 9.6% to $98.6 million[105][106] - The decline in income from operations was partially mitigated by lower cost of sales and SG&A expenses, driven by reduced sales volumes, lower bad debt expense, and cost control initiatives[104][106] Financial Review This section discusses the financial statements' GAAP conformity and the use of Segment Adjusted EBITDA as a key non-GAAP performance measure - Financial statements are prepared in conformity with GAAP, requiring extensive use of management's estimates. The chief operating decision maker reviews segment net sales and Segment Adjusted EBITDA to assess performance and allocate resources[107][108] - Segment Adjusted EBITDA is a non-GAAP measure, defined as earnings before interest, taxes, depreciation, and amortization, adjusted for certain non-recurring items. It is used to monitor budget, analyze trends, and identify profitability improvement actions[108] Results of Operations for the Three and Six Months Ended June 30, 2025 as Compared to the Three and Six Months Ended June 30, 2024 This section analyzes the consolidated financial performance for the three and six months ended June 30, 2025, compared to the prior year Consolidated Financial Performance (Three Months Ended June 30, in millions) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Software solutions | $92.2 | $85.6 | $6.6 | 7.7% | | Tech-enabled services | $85.2 | $102.2 | $(17.0) | (16.6%) | | Print and distribution | $40.7 | $54.9 | $(14.2) | (25.9%) | | Total net sales | $218.1 | $242.7 | $(24.6) | (10.1%) | | Total cost of sales | $79.2 | $86.5 | $(7.3) | (8.4%) | | SG&A expenses | $70.0 | $76.1 | $(6.1) | (8.0%) | | Income from operations | $52.8 | $64.5 | $(11.7) | (18.1%) | | Net earnings | $36.1 | $44.1 | $(8.0) | (18.1%) | Consolidated Financial Performance (Six Months Ended June 30, in millions) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Software solutions | $176.8 | $165.9 | $10.9 | 6.6% | | Tech-enabled services | $161.7 | $185.1 | $(23.4) | (12.6%) | | Print and distribution | $80.7 | $95.1 | $(14.4) | (15.1%) | | Total net sales | $419.2 | $446.1 | $(26.9) | (6.0%) | | Total cost of sales | $152.2 | $166.6 | $(14.4) | (8.6%) | | SG&A expenses | $135.8 | $148.9 | $(13.1) | (8.8%) | | Income from operations | $98.6 | $109.1 | $(10.5) | (9.6%) | | Net earnings | $67.1 | $77.4 | $(10.3) | (13.3%) | - Software solutions net sales increased due to higher sales from TSR, Arc Suite, and ActiveDisclosure. Tech-enabled services and print and distribution net sales decreased primarily due to lower capital markets transactional and compliance volumes, and lower investment companies compliance volumes[111][112][113][123][124][125] Information by Segment This section provides a detailed breakdown of net sales and Adjusted EBITDA performance for each of DFIN's four operating segments - Capital Markets – Software Solutions (CM-SS): * 3 Months: Net sales increased 3.1% to $59.1 million, driven by ActiveDisclosure. Segment Adjusted EBITDA increased 5.7% to $22.4 million, with margin up 90 bps to 37.9% * 6 Months: Net sales increased 0.6% to $111.0 million, driven by ActiveDisclosure, offset by lower Venue sales. Segment Adjusted EBITDA decreased 1.9% to $36.3 million, with margin down 80 bps to 32.7% due to higher SG&A[137][139][140][141][142][143][144] - Capital Markets – Compliance and Communications Management (CM-CCM): * 3 Months: Net sales decreased 17.8% to $93.5 million due to lower tech-enabled services, transactional, and compliance volumes. Segment Adjusted EBITDA decreased 19.7% to $36.8 million, with margin down 80 bps to 39.4% * 6 Months: Net sales decreased 13.4% to $177.4 million due to lower tech-enabled services, transactional, and compliance volumes. Segment Adjusted EBITDA decreased 4.8% to $73.5 million, but margin increased 370 bps to 41.4% due to lower SG&A[145][146][147][148][149][150][151] - Investment Companies – Software Solutions (IC-SS): * 3 Months: Net sales increased 17.0% to $33.1 million, driven by TSR offering and ArcReporting. Segment Adjusted EBITDA increased 27.9% to $14.2 million, with margin up 370 bps to 42.9% due to price increases * 6 Months: Net sales increased 18.3% to $65.8 million, driven by TSR offering and ArcReporting. Segment Adjusted EBITDA increased 41.4% to $27.0 million, with margin up 660 bps to 41.0% due to price increases[152][154][155][156][157][158] - Investment Companies – Compliance and Communications Management (IC-CCM): * 3 Months: Net sales decreased 25.2% to $32.4 million due to lower print and distribution compliance volumes. Segment Adjusted EBITDA decreased 31.1% to $12.6 million, with margin down 340 bps to 38.9% * 6 Months: Net sales decreased 13.7% to $65.0 million due to lower print and distribution compliance volumes. Segment Adjusted EBITDA decreased 6.4% to $24.8 million, but margin increased 300 bps to 38.2% due to lower cost of sales[159][160][161][162][163][164][165] - Corporate Unallocated Expenses: * 3 Months: Increased 5.4% to $9.7 million due to higher healthcare expense * 6 Months: Decreased 1.7% to $17.1 million due to lower incentive compensation expense, partially offset by higher consulting expense[166][167][168] Non-GAAP Measures This section defines Adjusted EBITDA as a non-GAAP measure and provides reconciliations to net earnings for the reported periods - Adjusted EBITDA is a non-GAAP measure used to assess operating results and financial performance, providing a more meaningful comparison of core business operations by excluding certain non-recurring or non-cash items[169][170] Adjusted EBITDA Reconciliation (Three Months Ended June 30, in millions) | Metric | 2025 (in millions) | 2024 (in millions) | | :-------------------------------------- | :----- | :----- | | Net earnings | $36.1 | $44.1 | | Restructuring, impairment and other charges, net | $1.0 | $1.3 | | Share-based compensation expense | $7.5 | $7.4 | | Depreciation and amortization | $15.1 | $14.3 | | Interest expense, net | $3.8 | $3.7 | | Income tax expense | $12.6 | $17.1 | | Adjusted EBITDA | $76.3 | $87.2 | Adjusted EBITDA Reconciliation (Six Months Ended June 30, in millions) | Metric | 2025 (in millions) | 2024 (in millions) | | :-------------------------------------- | :----- | :----- | | Net earnings | $67.1 | $77.4 | | Restructuring, impairment and other charges, net | $3.9 | $3.1 | | Share-based compensation expense | $13.5 | $12.5 | | Gain on sales of long-lived assets | $(0.5) | $(9.8) | | Depreciation and amortization | $29.2 | $28.2 | | Interest expense, net | $6.9 | $7.3 | | Income tax expense | $23.8 | $25.2 | | Adjusted EBITDA | $144.5 | $142.4 | Liquidity and Capital Resources This section discusses DFIN's liquidity, capital resources, cash flow activities, debt structure, and compliance with debt covenants - DFIN believes it has sufficient liquidity from cash on hand, operating cash flows, and its Revolving Facility to support operations, invest in growth, service debt, and fund share repurchases[176] Cash Flow Summary (Six Months Ended June 30, in millions) | Activity | 2025 (in millions) | 2024 (in millions) | | :-------------------------------- | :----- | :----- | | 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 | - Net cash provided by operating activities increased by $2.4 million to $30.7 million for the six months ended June 30, 2025, primarily due to timing of supplier payments and receivables collections, partially offset by higher employee-related compensation payments[183][188] - Net cash used in investing activities was $29.9 million, primarily for $30.0 million in capital expenditures for software development. Net cash used in financing activities was $25.5 million, including $88.7 million in treasury share repurchases and debt payments, partially offset by revolving facility borrowings[183][185] Debt Structure (in millions) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :------------ | :---------------- | | Term Loan A Facility | $113.6 | $125.0 | | Borrowings under the Revolving Facility | $77.0 | — | | Total debt | $190.1 | $124.7 | | Current availability under Revolving Facility | $221.5 | N/A | | Net Available Liquidity | $255.3 | N/A | - The company was in compliance with its debt covenants as of June 30, 2025, and expects to remain so. Capital expenditures for fiscal year 2025 are projected to be approximately $60 million to $65 million[183][194] Item 3: Quantitative and Qualitative Disclosure About Market Risk This section confirms no significant changes to the company's market risk disclosures since the latest Annual Report on Form 10-K - No significant changes to the Company's market risk disclosures were identified during the period[199] Item 4: Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with a new quote-to-cash process being implemented - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[200] - The Company is implementing a new quote-to-cash (QTC) process, including new systems, to improve the efficiency and effectiveness of business transactions, invoicing, reporting, and underlying systems, which is a significant component of internal control over financial reporting[201] Part II. Other Information This part includes other required disclosures such as legal proceedings, risk factors, equity security sales, and exhibits Item 1: Legal Proceedings This section refers to Note 7 of the Condensed Consolidated Financial Statements for details on the company's legal proceedings - For details on legal proceedings, refer to Note 7, Commitments and Contingencies, in the Unaudited Condensed Consolidated Financial Statements[202] Item 1A: Risk Factors This section confirms no material changes to the risk factors previously identified in the Annual Report on Form 10-K - No material changes to the risk factors identified in the Annual Report occurred during the three months ended June 30, 2025[203] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchases during the quarter and highlights the new $150 million share repurchase program authorized in May 2025 Issuer Purchases of Equity Securities (April 1, 2025 - June 30, 2025) | Period | Total Number of Shares Purchased (shares) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (shares) | Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (dollars) | | :-------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :----------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | 682,271 | $42.34 | 682,271 | $20,574,060 | | May 1, 2025 - May 31, 2025 | 106,224 | $51.53 | 104,881 | $150,000,000 | | June 1, 2025 - June 30, 2025 | 410 | $57.01 | — | $150,000,000 | | Total | 788,905 | $43.58 | 787,152 | | - On May 15, 2025, the Board authorized a new $150 million share repurchase program, replacing the previous one, with an expiration date of December 31, 2026. Repurchases may occur on the open market or privately, in compliance with Rule 10b-18 or under a Rule 10b5-1 plan[204] Item 3: Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[205] Item 4: Mine Safety Disclosures This section states that the disclosure requirements for mine safety are not applicable to the company - Mine safety disclosures are not applicable to the Company[206] Item 5: Other Information This section discloses that the company's President and CEO, Daniel N. Leib, adopted a Rule 10b5-1 trading plan for the sale of 35,000 shares of common stock - On June 11, 2025, Daniel N. Leib, President and CEO, adopted a Rule 10b5-1 trading plan to sell up to 35,000 shares of common stock between November 13, 2025, and December 31, 2025, if the market price is within a specified range[207] Item 6: Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents and executive certifications - Key exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated By-laws, and certifications by the CEO and CFO (Rule 13a-14(a), Rule 15d-14(a), Rule 13a-14(b), Rule 15d-14(b), and Section 1350)[209] - The report also includes Inline XBRL Instance Document, Taxonomy Extension Schema, and the cover page formatted in Inline XBRL[209] Signatures This section confirms the official signing of the report by the Executive Vice President and Chief Financial Officer - The report was duly signed on behalf of Donnelley Financial Solutions, Inc. by David A. Gardella, Executive Vice President and Chief Financial Officer, on July 31, 2025[211][212][213]