Core Insights - The company has completed 'Chapter 2' of its corporate transformation, shifting from a legacy print model to a high-margin, software-centric compliance platform [1] - Achieved record adjusted EBITDA margins of 31.3% for the full year, despite lower overall revenue, indicating structural profitability gains from a more favorable sales mix [1] - Software Solutions now account for approximately 47% of total net sales, driven by a 13% aggregate growth in recurring compliance products ActiveDisclosure and Arc Suite [1] Performance Highlights - ActiveDisclosure's performance improved due to higher net client counts and increased value per client following a full product transition completed in 2023 [1] - The company is strategically exiting low-margin print work and managing secular declines in physical distribution to prioritize tech-enabled services [1] - Deployed 'Active Intelligence' AI capabilities to automate research and analysis for SEC filings, aiming to enhance development velocity and client productivity [1] Market Position - Maintained a dominant market share in high-quality IPO and M&A transactions, capturing 65% of IPOs raising over $100 million in the fourth quarter [1]

Core Insights - The company reported solid full-year results for 2025, with adjusted EBITDA of $239.8 million, an increase of 10.4% year-over-year, and a record adjusted EBITDA margin of 31.3% [1][6]. Financial Performance - Full-year consolidated net sales reached $358.4 million in software solutions, representing about 47% of total sales, indicating a shift towards higher-margin recurring software [6][8]. - In Q4 2025, consolidated net sales rose 10.4% year-over-year to $172.5 million, exceeding guidance, driven by strong capital markets transactional revenue and software growth [4][7]. - Free cash flow for the quarter was $47.9 million, with higher operating cash flow compared to the prior year [2]. Margin and Profitability - Adjusted EBITDA for Q4 was $45.8 million, up 44% from the prior year, with an adjusted EBITDA margin of 26.6%, an increase of approximately 630 basis points year-over-year [3][7]. - The company achieved a record adjusted EBITDA margin of 31.3% for the full year, surpassing the previous record of 29.7% [1][6]. Capital Allocation - The company repurchased approximately $172 million of stock in 2025, representing about 12% of outstanding shares, and ended the year with a non-GAAP net leverage ratio of 0.6x [5][16]. - Total debt at year-end was reported at $171.3 million, with $146.8 million in non-GAAP net debt [17]. Growth Drivers - Software solutions net sales grew 11.4% year-over-year in Q4, with capital markets software solutions net sales increasing by 20% [9]. - ActiveDisclosure saw a 20.2% increase in Q4 sales, with total subscription revenue up about 12% [10][14]. - The company introduced new products in 2025, including Venue Virtual Data Room and ArcFlex, which received positive market responses [15]. Future Outlook - For Q1 2026, the company guided consolidated net sales of $200 million to $210 million, with an adjusted EBITDA margin of 33% to 35% [19]. - The company anticipates continued growth in recurring revenue, which is approaching 80% of total revenue, while event-driven revenue is expected to remain around 20% [18].

Core Insights - The company reported strong fourth quarter results for 2025, achieving a consolidated net sales growth of 10.4% year-over-year, alongside an increase in adjusted EBITDA and adjusted EBITDA margin [1][32][35] - The company accelerated its share buyback program, repurchasing approximately 1,300,000 shares in the fourth quarter, totaling about 3,600,000 shares for the year, which is approximately 12% of the outstanding shares [1][47] Financial Performance - Consolidated adjusted EBITDA grew by $14.1 million, or approximately 44% year-over-year, with an adjusted EBITDA margin of 26.6%, up approximately 630 basis points from the previous year [4][35] - For the full year 2025, adjusted EBITDA reached $239.8 million, a 10.4% increase from 2024, with a record adjusted EBITDA margin of 31.3%, up approximately 350 basis points [5][6] - The company reported total net sales of $172.5 million for the fourth quarter, exceeding guidance and reflecting higher capital markets transactional revenue [32][40] Business Segments - The Capital Markets Software Solutions segment saw net sales of $60 million, a 20% increase year-over-year, driven by strong performance from Venue and ActiveDisclosure [36] - ActiveDisclosure sales increased by 20.2% year-over-year, with total subscription revenue up approximately 12%, indicating a strong growth trajectory [37][39] - The Investment Companies Software Solutions segment reported net sales of $30.9 million, a slight decrease of 2.2% year-over-year, attributed to tough comparisons with the previous year's strong performance [43] Strategic Initiatives - The company is transitioning to a new phase of growth, focusing on increasing the mix of recurring revenue, which is approaching 80% of total revenue, while managing costs effectively [25][26] - New product introductions in 2025 included the Venue virtual data room and ArcFlex for alternative investments, which are expected to drive future growth [18][15] - The company is leveraging artificial intelligence across its product offerings and internal operations to enhance efficiency and productivity [21][23] Market Outlook - The company anticipates continued solid growth in its software solutions, particularly in ActiveDisclosure and Venue, while expecting a decline in print and distribution sales due to long-term market trends [48][49] - For the first quarter of 2026, the company projects consolidated net sales between $200 million and $210 million, with an adjusted EBITDA margin of 33% to 35% [50]

Financial Data and Key Metrics Changes - The company achieved a consolidated net sales growth of 10.4% year-over-year in Q4 2025, with adjusted EBITDA increasing by $14.1 million or approximately 44% year-over-year, resulting in an adjusted EBITDA margin of 26.6%, up 630 basis points from the previous year [4][5][24]. - For the full year 2025, consolidated adjusted EBITDA reached $239.8 million, a 10.4% increase year-over-year, with an adjusted EBITDA margin of 31.3%, up 350 basis points from 2024 [6][19]. Business Line Data and Key Metrics Changes - Software solutions net sales grew by 8.7% year-over-year to $358.4 million, comprising approximately 47% of total net sales for 2025 [9][19]. - The capital markets software solutions segment saw net sales of $60 million, a 20% increase from the previous year, driven by strong growth in Venue and ActiveDisclosure, both up approximately 20% year-over-year [27][28]. - The investment company's software solution segment reported net sales of $30.9 million, a decrease of 2.2% compared to Q4 2024, primarily due to tough comparisons with the previous year's strong performance [32]. Market Data and Key Metrics Changes - The company recorded $48.6 million in transactional revenue in Q4 2025, a 29% increase from the previous year, benefiting from a recovery in deal completions following a government shutdown [30]. - The overall equity deal environment showed positive momentum, with a significant increase in the number of IPO transactions raising over $100 million [30][61]. Company Strategy and Development Direction - The company is transitioning to chapter three of its transformation, focusing on sustained growth and increasing the revenue mix towards recurring offerings, which are expected to approach 80% of total revenue [19][20]. - The introduction of new products like ArcFlex and enhancements in existing solutions are aimed at capturing additional market demand, particularly in the private investment space [12][15]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing momentum in capital markets and the potential for increased deal activity in 2026, despite a continued decline in print and distribution sales [20][38]. - The company does not anticipate major SEC rule changes for 2026, but it is well-positioned to capture demand from future regulations [22]. Other Important Information - The company repurchased approximately 3.6 million shares in 2025, representing about 12% of outstanding shares, at an average price of $48.36 per share [4][36]. - Free cash flow for Q4 was $47.9 million, with full-year free cash flow reaching $107.8 million, an increase of $2.6 million over the previous year [35]. Q&A Session Summary Question: How much of the outperformance in Q4 was volume versus price? - Management indicated that the outperformance was predominantly driven by volume, particularly in capital markets transactional revenue, with modest contributions from price [48]. Question: Can you provide more color on the drivers behind the strong margins? - The strong margins were attributed to a favorable sales mix, cost structure improvements, and operating leverage from increased sales, with long-term guidance for margins above 30% [50][51]. Question: How does the potential opportunity in capital allocation look given recent valuation multiples? - Management noted that while valuations have contracted, there may be interesting opportunities as companies seek liquidity, although it may take time for expectations to adjust [52]. Question: Can you discuss the relative TAM for ArcFlex compared to Arc Suite? - ArcFlex can be sold as a standalone product, and there is significant interest in the market for alternative investment solutions, with a growing number of private funds [56][58]. Question: How did DFIN's share of traditional IPOs perform in Q4? - DFIN maintained a strong share of over 65% in IPOs raising over $100 million, with significant activity in the healthcare sector [60][61]. Question: What are the expectations for software growth in 2026? - Continued strong growth is expected from ActiveDisclosure and Venue, while growth in Arc Suite may be more variable due to fewer regulatory changes [68][70].

Investor Presentation February 2026 DFINsolutions.com © 2026 DFIN. All rights reserved This presentation is the intellectual property of DFIN. The ideas expressed in it may not be adopted or reproduced without prior permission from and compensation to DFIN. Forward Looking Statements and Use of Non-GAAP Financial Measures USE OF FORWARD-LOOKING STATEMENTS This presentation includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, Section 21E of the Secur ...

Summary of Donnelley Financial Solutions (NYSE:DFIN) FY Conference Call Company Overview - Donnelley Financial Solutions specializes in helping clients comply with SEC regulations, serving public corporations, pre-IPO corporations, mutual funds, ETFs, and regulated insurance companies [2][4] - The company has transitioned to a business model where nearly 50% of its revenue comes from software solutions, with the remainder from tech-enabled services [2][7] Core Business Segments Compliance and Transactions - The business is divided into compliance (e.g., 10-Ks, 10-Qs, proxy statements) and transactions, with compliance now accounting for 75% of revenue [4][5] - Event-driven revenue is approximately 25% of the overall business, indicating a strong recurring revenue base [4] Software Products - Key software products include: - **ActiveDisclosure**: Focused on corporate compliance - **Venue**: A data room solution for completing deals - **ArcSuite**: Targeted at mutual funds and ETFs for financial reporting [4][5] Tech-Enabled Services - This segment involves providing traditional services where the company prepares compliance and transactional documents for clients, which remains a competitive advantage [9][10] Print and Distribution - Print services now account for about 15% of total revenue, down from 40% in 2016, with gross margins improving from low 20% to mid-40% [12][13] Market Dynamics and Growth Opportunities - The company aims to derive 60% of total sales from software solutions by 2028, with ongoing market share growth and price increases as key strategies [7][8] - The capital markets activity is expected to rebound, potentially increasing revenue by over $100 million, with incremental margins projected at 50%-60% [16][17] Regulatory Changes - Recent regulations, such as the Tailored Shareholder Reports, have positively impacted revenue, with ongoing opportunities from new SEC regulations [20][21] Artificial Intelligence Integration - The company is leveraging AI to enhance product offerings and internal operations, with a balanced approach to opportunities and risks [23][24] - AI initiatives include the Active Intelligence tool for benchmarking and document management [24] Margin Improvement - EBITDA margins have increased from mid-teens to nearly 30%, with a long-term goal of exceeding 30% [28][29] - Factors contributing to margin improvement include a shift towards software, disciplined cost management, and pricing strategies [30][32] Capital Allocation Strategy - The company maintains a balanced approach to capital allocation, focusing on organic investments while remaining open to M&A opportunities that align with strategic goals [33][34] Future Outlook - Excitement surrounds the transition to sustained growth, with a focus on expanding capabilities and addressing new market opportunities, particularly in private markets [36][38] - The company is well-positioned to benefit from larger clients and regulatory changes, enhancing its value proposition [45][46] Key Takeaways - Donnelley Financial Solutions is transitioning towards a software-centric business model, with significant growth potential in compliance and capital markets - The integration of AI and a disciplined approach to cost management are expected to drive future profitability - The company is strategically positioned to capitalize on regulatory changes and market dynamics, with a focus on sustainable growth and client relationships

Core Thesis - Donnelley Financial Solutions, Inc. (DFIN) is facing significant challenges in its software-led growth strategy, with deteriorating retention rates and competitive pressures impacting its revenue projections [2][5][6] Financial Performance - As of December 1st, DFIN's share price was $47.98, with a trailing P/E ratio of 43.80 [1] - The company's stock price has depreciated approximately 19.27% since a previous bullish coverage due to unmet software targets [6] Software and Revenue Challenges - DFIN has repeatedly pushed out its long-term software revenue targets from 2026 to 2028, indicating a weakening core software business [2] - The company is projected to see a shift in its revenue mix to 60% software, which is increasingly deemed unrealistic due to declining gross and net retention rates [2][3] Customer Retention and Competition - DFIN is experiencing structurally worsening churn, losing recurring 10-K clients to competitors like Workiva, which retains customers at significantly higher rates [4] - The customer base primarily consists of sub-$100 million market-cap companies, leading to increased attrition driven by bankruptcies [4] Margin and Investment Trade-offs - Management faces a trade-off between preserving margins through limited R&D investment or accelerating investment at the cost of margin pressure [3] - Recent margin gains have been primarily driven by price hikes, which are nearing exhaustion, indicating limited future pricing power [3][5] Future Outlook - With regulatory tailwinds fading and retention deteriorating, software growth is expected to decelerate sharply, leading to a potential compression of DFIN's valuation multiple [5] - The company’s ability to achieve its original $500 million software revenue goal appears increasingly unattainable, raising concerns about its future performance [3][5]

Financial Data and Key Metrics Changes - The company reported total net sales of $175.3 million for Q3 2025, a decrease of $4.2 million or 2.3% from Q3 2024 [17] - Adjusted EBITDA was $49.5 million, an increase of $6.3 million or 14.6% from the previous year, with an adjusted EBITDA margin of 28.2%, up approximately 410 basis points [21] - Free cash flow for the quarter was $59.2 million, $8.1 million lower than Q3 2024, primarily due to unfavorable working capital and a one-time cash contribution related to the pension plan settlement [31] Business Line Data and Key Metrics Changes - Software solutions net sales grew by 10.3% year-over-year, accounting for approximately 52% of total sales in the quarter [5][17] - ActiveDisclosure, a recurring compliance software product, saw sales growth of approximately 26%, marking the third consecutive quarter of double-digit growth [7][22] - Venue's sales increased by approximately 3% year-over-year, benefiting from stable demand across public and private companies [9][23] Market Data and Key Metrics Changes - Capital markets transactional revenue was recorded at $41.8 million, down $3.5 million from last year's Q3, despite a 25% year-over-year increase in U.S. IPO activity [25][26] - Compliance revenue decreased by $2.8 million or 15.4% compared to Q3 2024, driven by lower volume of compliance work [26] Company Strategy and Development Direction - The company is focused on transforming into a software-centric business, aiming to derive approximately 60% of total sales from software solutions by 2028 [6] - Continued investments in modernization and innovation of software products are expected to drive future growth [11] - The company is preparing its 2026 operating plan and extending its long-range plan through 2030, with an emphasis on growing the software solutions portfolio [37] Management's Comments on Operating Environment and Future Outlook - The ongoing U.S. government shutdown has impacted capital markets deal activity, delaying many transactions [12][13] - Despite the shutdown, the company remains well-positioned to capture latent demand when market activity normalizes [14][37] - The company expects Q4 2025 consolidated net sales in the range of $150 million to $160 million, reflecting a slight reduction compared to the previous year [33] Other Important Information - The company completed the termination of its primary defined benefit pension plan, resulting in a non-cash pre-tax settlement charge of $82.8 million [15][16] - The company repurchased approximately 659,000 shares of common stock during Q3 for $35.5 million [32] Q&A Session Summary Question: Impact of government shutdown on Q4 margins - Management indicated that the lower transactional revenue would negatively impact margins, but a recovery from healthcare expenses would help offset this [42][43] Question: SEC reporting frequency changes - Management is monitoring developments regarding the proposal to reduce reporting frequency and believes their subscription model provides insulation from potential impacts [50][52] Question: Resurgence of SPAC IPOs and DFIN's participation - Management noted a decline in market share due to the nature of recent SPAC deals but emphasized participation in quality deals [55][56] Question: Venue performance and timing of M&A deals - Management expressed optimism about Venue's performance and indicated that while the government shutdown has delayed some M&A deals, underlying activity remains strong [62][64] Question: Capital allocation strategy - Management reiterated that maintaining financial flexibility and being opportunistic with share repurchases are top priorities [76]

Financial Data and Key Metrics Changes - The company reported total net sales of $175.3 million for Q3 2025, a decrease of $4.2 million or 2.3% from Q3 2024 [17] - Adjusted EBITDA was $49.5 million, an increase of $6.3 million or 14.6% from the previous year, with an adjusted EBITDA margin of 28.2%, up approximately 410 basis points from Q3 2024 [21] - Free cash flow for the quarter was $59.2 million, $8.1 million lower than Q3 2024, primarily due to unfavorable working capital and a one-time cash contribution related to the pension plan settlement [31] Business Line Data and Key Metrics Changes - Software solutions net sales grew by 10.3% year-over-year, accounting for approximately 52% of total sales in the quarter [5][17] - ActiveDisclosure saw a significant sales growth of approximately 26%, while ArcSuite's growth was more modest at around 10% due to overlapping benefits from previous regulatory changes [7][9] - Venue's sales increased by approximately 3% compared to the same quarter last year, benefiting from stable demand across public and private companies [9][10] Market Data and Key Metrics Changes - The capital markets transactional revenue was reported at $41.8 million, down $3.5 million from Q3 2024, primarily due to lower foreign issuer transaction volumes [25][26] - The company experienced a 25% year-over-year increase in U.S. IPO activity, although this was offset by a soft market for foreign issuance transactions [25][26] - The ongoing government shutdown has impacted capital markets deal activity, delaying many planned transactions [12][13] Company Strategy and Development Direction - The company is focused on transforming into a software-centric business, aiming to derive approximately 60% of total sales from software solutions by 2028 [6] - Continued investments in modernization and innovation of software products are expected to drive future growth [11] - The company is preparing its 2026 operating plan and extending its long-range plan through 2030, with an emphasis on growing software solutions and operational transformation [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to perform well despite the uncertainty caused by the government shutdown, highlighting strong client relationships and market leadership [14][37] - The outlook for Q4 2025 includes expected consolidated net sales in the range of $150 million to $160 million, reflecting a slight reduction compared to the previous year [33] - Management anticipates that the government shutdown will lead to a temporary softening in capital markets transactional revenue, with expectations for recovery once operations resume [34][36] Other Important Information - The company completed the termination of its primary defined benefit pension plan, resulting in a non-cash pre-tax settlement charge of $82.8 million [15][16] - The company repurchased approximately 659,000 shares of common stock during Q3 for $35.5 million, with $114.5 million remaining on its current stock repurchase authorization [32] Q&A Session Summary Question: Impact of government shutdown on Q4 margins - Management indicated that the lower transactional revenue would negatively impact margins, but a healthcare recovery would help offset this [42][43] Question: SEC reporting frequency changes - Management is monitoring developments regarding potential changes to SEC reporting frequency and believes their subscription model provides insulation from most impacts [50][52] Question: Resurgence of SPAC IPOs - Management noted a decline in share of SPAC deals due to increased competition and a focus on quality deals [55][56] Question: Venue performance and timing of M&A deals - Management expressed optimism about Venue's performance and indicated that while the government shutdown has delayed some M&A deals, underlying activity remains strong [62][64] Question: Capital allocation priorities - Management reiterated that maintaining financial flexibility and being opportunistic with share repurchases are top priorities [76]

Financial Data and Key Metrics Changes - Total net sales for Q3 2025 were $175.3 million, a decrease of $4.2 million or 2.3% from Q3 2024 [16] - Adjusted EBITDA was $49.5 million, an increase of $6.3 million or 14.6% from Q3 2024, with an adjusted EBITDA margin of 28.2%, up approximately 410 basis points from the previous year [19] - Free cash flow in the quarter was $59.2 million, $8.1 million lower than Q3 2024, primarily due to unfavorable working capital and a one-time cash contribution related to the pension plan settlement [29] Business Line Data and Key Metrics Changes - Software solutions net sales grew by 10.3% year-over-year, accounting for approximately 52% of total sales in the quarter [5][16] - Capital markets software solution segment net sales were $59 million, an increase of $5.7 million or 10.7% from the previous year, driven by ActiveDisclosure, which saw a 26% sales growth [20][21] - Net sales in the capital markets compliance and communications management segment decreased by $6.3 million or 9.9% from Q3 2024, primarily due to lower transactional revenue [22] Market Data and Key Metrics Changes - Event-driven transactional revenue declined by $4.4 million year-over-year, primarily due to lower volume for foreign issuer transactions on U.S. exchanges, partially offset by stronger U.S. IPO volume [17][23] - The government shutdown has impacted capital markets deal activity, delaying many planned transactions [12][13] Company Strategy and Development Direction - The company continues to focus on transforming into a software-centric business, aiming to derive approximately 60% of total sales from software solutions by 2028 [5] - The launch of new products like Venue and ArcFlex is part of the strategy to modernize and expand offerings in the marketplace [10][11] - The company is preparing its 2026 operating plan and extending its long-range plan through 2030, focusing on growing its software solutions portfolio and operational transformation [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capture latent demand once market activity normalizes post-government shutdown [13][35] - The outlook for Q4 2025 anticipates consolidated net sales in the range of $150 million to $160 million, reflecting a reduction compared to the previous year due to lower print and distribution sales [31] - The company expects capital markets transactional revenue to be temporarily soft due to the government shutdown, estimating net sales in this segment to be between $30 million to $40 million [32] Other Important Information - The company completed the termination of its primary defined benefit pension plan, resulting in a non-cash pre-tax settlement charge of $82.8 million [14][15] - The company repurchased approximately 659,000 shares of common stock during Q3 for $35.5 million, with $114.5 million remaining on its current stock repurchase authorization [30] Q&A Session Summary Question: Impact of government shutdown on Q4 margins - Management indicated that the margin impact of lower transactional revenue has been contemplated in their guidance, expecting a 300 basis point increase in margins compared to last year [38][39] Question: SEC reporting frequency changes - The company is monitoring developments related to the proposal to reduce corporate reporting frequency, noting that most of its 10-Qs are on ActiveDisclosure, which operates as a subscription business [46][47] Question: Resurgence of SPAC IPOs and DFIN's participation - Management acknowledged a decline in market share in SPAC deals due to increased competition and the nature of the deals, but emphasized participation in quality SPAC and D-SPAC deals [49][50] Question: Venue performance and product impact - Management noted that the growth in Venue is primarily driven by sales execution, with expectations for more significant impacts from the new product in future quarters [60][62] Question: Capital allocation strategy - The company maintains a focus on financial flexibility, prioritizing strategic transformation and being opportunistic with share repurchases while considering organic and inorganic investments [64]