CEOs Accelerate Performance Improvement Initiatives, Capital Markets Activity Amid Legislative Disruption Through this research, Capstone has evaluated the health of the middle market in 2025, uncovering recent challenges faced by business owners and the resources required to offset these challenges. The report also provides an analysis of forward-looking growth strategies and initiatives, business owners' outlooks on their respective industries and the broader U.S. economy, and expected revenue changes. To ...

Financial Data and Key Metrics Changes - The company reported total net sales of $218.1 million for Q2 2025, a decrease of $24.6 million or 10.1% from Q2 2024 [12] - Adjusted EBITDA was $76.3 million, a decrease of $10.9 million or 12.5% from the previous year, with an adjusted EBITDA margin of 35%, down approximately 90 basis points from Q2 2024 [15][19] - Free cash flow for the quarter was $51.7 million, an increase of $14.9 million compared to Q2 2024 [23] Business Line Data and Key Metrics Changes - Software Solutions net sales grew approximately 8% year over year, with recurring compliance software offerings growing about 15% [5][12] - Capital Markets Software Solutions segment net sales were $59.1 million, an increase of 3.1% year over year, driven by Active Disclosure [16] - Capital Markets Compliance and Communications Management segment net sales decreased by 17.8% to $93.5 million, primarily due to lower transactional revenue [17] Market Data and Key Metrics Changes - The company experienced a decline in capital markets transactional revenue, which was at the lowest level in its history, with $34.8 million recorded in Q2 [17][18] - The overall transactional activity in Q2 remained well below historical norms, with IPO transactions and large public company M&A deals below last year's levels [18] - The IPO market showed signs of recovery with a total of 14 IPOs greater than $100 million in Q2, but the overall number of IPOs in the first half of 2025 decreased by 14% compared to the same period in 2024 [36][37] Company Strategy and Development Direction - The company is focused on transforming into a leading provider of compliance and regulatory solutions, predominantly through software and services [11] - The strategy includes a shift towards recurring software offerings and improving operational efficiencies while managing costs [11][28] - The company remains committed to its five-year plan updated in February, aiming for a sustainable business model despite ongoing market challenges [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions and a positive trajectory in the second quarter, despite a prolonged downturn in capital markets transactional activity [6][28] - The company anticipates Q3 consolidated net sales in the range of $165 million to $175 million, reflecting a cautious outlook due to lower print and distribution sales [25] - Management highlighted the importance of maintaining a strong balance sheet and robust free cash flow to support long-term value creation [28] Other Important Information - The company repurchased approximately 787,000 shares for $34.3 million during Q2, with a new share repurchase program authorized for up to $150 million [24][25] - Non-GAAP unallocated corporate expenses were $9.7 million, reflecting higher investments in transformation and healthcare expenses [23] Q&A Session Summary Question: Can you provide more detail on the assumptions behind the Q3 guidance? - Management indicated that the guidance for transactional sales in Q3 reflects a cautious optimism based on recent market activity, with a range of $35 million to $40 million [33][34] Question: What is the outlook for the capital markets given the improving pipeline? - Management acknowledged the improving pipeline but emphasized the uncertainty in timing and the need for a conservative outlook [57][58] Question: How does the company view share repurchases moving forward? - Management reiterated that share repurchases are a key component of capital allocation, with a strategy to be more aggressive at lower stock prices [60][62] Question: Any updates on the pension plan annuitization process? - Management confirmed that the annuitization process is underway and expected to occur in Q3, with further updates to be provided [64]