Donnelley Financial Solutions Inc DFIN

CHICAGO, July 31, 2024 /PRNewswire/ -- Donnelley Financial Solutions, Inc. (NYSE: DFIN) (the "Company" or "DFIN") today reported financial results for the second quarter of 2024.

Highlights for the second quarter of 2024:

• Record quarterly software solutions net sales of $85.6 million, an increase of 13.1%, or 14.4% on an organic basis^(a), from the second quarter of 2023; Software solutions net sales accounted for 35.3% of total net sales, up from 31.3% in the second quarter of 2023.
• Total net sales of $242.7 million, an increase of 0.2%, or 0.7% on an organic basis^(a), from the second quarter of 2023.
• Net earnings of $44.1 million, or $1.47 per diluted share, as compared to $37.7 million, or $1.24 per diluted share, in the second quarter of 2023.
• Adjusted EBITDA^(a) of $87.2 million, up $12.9 million, or 17.4%, from the second quarter of 2023; Adjusted EBITDA margin^(a) of 35.9%, up approximately 520 basis points from the second quarter of 2023.
• Operating Cash Flow^(b) improvement of $36.0 million and Free Cash Flow^(a) improvement of $29.8 million from the second quarter of 2023.
• Gross leverage^(a) of 0.8x and net leverage^(a) of 0.6x as of June 30, 2024.
• The Company repurchased 317,388 shares for approximately $19.2 million at an average price of $60.65 per share. As of June 30, 2024, the remaining share repurchase authorization was $122.0 million.

"We are pleased with the results for the second quarter, as we continue to make progress in our strategic transformation by delivering an improved sales mix, an increase in Adjusted EBITDA, and Adjusted EBITDA margin expansion compared to the second quarter of 2023. We experienced continued momentum in the growth of our software solutions net sales, which increased 14.4% on an organic basis versus the second quarter of 2023, driven by the performance of Venue, our virtual dataroom product, which recorded sales growth of approximately 38%. The growth in software solutions net sales, combined with lower print and distribution net sales, resulted in software solutions accounting for 35.3% of total second-quarter net sales, up approximately 400 basis points from last year's second quarter sales mix," said Daniel N. Leib, DFIN's president and chief executive officer.

Leib continued, "Our evolving sales mix, combined with permanent changes to our cost structure and disciplined cost control, enabled us to deliver record quarterly Adjusted EBITDA and Adjusted EBITDA margin despite continued softness in the capital markets transactional environment which resulted in approximately flat capital markets transactional revenue year-over-year. We delivered $87.2 million of Adjusted EBITDA, an increase of $12.9 million, or 17.4%, year-over-year, with the corresponding Adjusted EBITDA margin expanding to 35.9%, approximately 520 basis points higher than last year's second quarter. Consistent with our first-quarter performance, our strong Adjusted EBITDA, combined with improved working capital management once again resulted in year-over-year improvements in both operating cash flow and free cash flow."

"As we enter the second half of the year, we remain focused on investing to drive profitable, recurring revenue growth, including realizing opportunities from the Tailored Shareholder Reports regulation, which became mandatory in late July. We are encouraged by the positive market response to our ArcReporting software offering, which is a component of our end-to-end portfolio of solutions helping clients seamlessly comply with the Tailored Shareholder Reports regulation. In addition to this opportunity, the combination of our leading compliance software platform and deep domain service expertise positions DFIN well to capture recurring revenue opportunities from current and future regulations," Leib concluded.

Net Sales

Net sales in the second quarter of 2024 were $242.7 million, an increase of $0.6 million, or 0.2% (an increase of 0.7% on an organic basis), from the second quarter of 2023. Net sales increased primarily due to growth in software solutions net sales driven by Venue, partially offset by lower capital markets and investment companies compliance volumes and the impact of the eBrevia disposition.

Net Earnings

For the second quarter of 2024, net earnings were $44.1 million, or $1.47 per diluted share, as compared to $37.7 million, or $1.24 per diluted share, in the second quarter of 2023. Net earnings in the second quarter of 2024 included after-tax charges of $5.7 million, or $0.19 per diluted share, primarily related to share-based compensation expense and restructuring, impairment and other charges, net. Net earnings in the second quarter of 2023 included after-tax charges of $2.9 million, or $0.10 per diluted share, primarily related to share-based compensation expense, partially offset by a credit in restructuring, impairment and other charges, net. The increase in after-tax charges was primarily related to restructuring, impairment and other charges, net.

Adjusted EBITDA and Non-GAAP Net Earnings

For the second quarter of 2024, Adjusted EBITDA was $87.2 million, an increase of $12.9 million as compared to the second quarter of 2023. Adjusted EBITDA margin was 35.9%, an increase of approximately 520 basis points as compared to the second quarter of 2023. The increase in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to higher software solutions net sales, a favorable sales mix, and cost control initiatives, partially offset by lower capital markets and investment companies compliance volumes and higher selling expense as result of changes in the business mix.

For the second quarter of 2024, non-GAAP net earnings were $49.8 million, or $1.66 per diluted share, as compared to $40.6 million, or $1.34 per diluted share, in the second quarter of 2023.

Reconciliations of net sales to organic net sales, net earnings to Adjusted EBITDA, Adjusted EBITDA margin and non-GAAP net earnings are presented in the tables.

Company Results and Conference Call

DFIN's earnings press release for the second quarter of 2024, which is included as Exhibit 99.1 to the Company's Current Report on Form 8-K that has been furnished to the SEC on July 31, 2024, is available on the Company's investor relations website at investor.dfinsolutions.com. A supplemental trending schedule of historical results, including additional breakouts of segment-level net sales, is also available on the Company's investor relations website.

DFIN will hold a conference call and webcast on July 31, 2024, at 9:00 a.m. Eastern time to discuss financial results for the second quarter of 2024, provide a general business update and respond to analyst questions.

A live webcast of the call will also be available on the Company's investor relations website. Please visit investor.dfinsolutions.com at least fifteen minutes prior to the start of the event to register, download and install any necessary audio software.

If you are unable to participate live, a replay of the webcast will be available following the conference call on the Company's investor relations website, along with the earnings press release and related financial tables.

About DFIN

DFIN is a leading global provider of innovative software and technology-enabled financial regulatory and compliance solutions. We provide domain expertise, enterprise software and data analytics for every stage of our clients' business and investment lifecycles. Markets fluctuate, regulations evolve, technology advances, and through it all, DFIN delivers confidence with the right solutions in moments that matter. Learn about DFIN's end-to-end risk and compliance solutions online at DFINsolutions.com or you can also follow us on X (formerly Twitter) @DFINSolutions or on LinkedIn.

Use of Non-GAAP Information

This news release contains certain non-GAAP financial measures, including non-GAAP gross profit, adjusted non-GAAP gross profit, non-GAAP gross margin, adjusted non-GAAP selling, general and administrative expenses ("SG&A"), adjusted non- GAAP income from operations, adjusted non-GAAP operating margin, Adjusted EBITDA, Adjusted EBITDA margin, non- GAAP effective tax rate, adjusted non-GAAP net earnings, adjusted non-GAAP diluted earnings per share, Free Cash Flow and organic net sales. The Company believes that these non-GAAP financial measures, when presented in conjunction with comparable GAAP measures, provide useful information about the Company's operating results and liquidity and enhance the overall ability to assess the Company's financial performance. The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business.

The Company's non-GAAP statement of operations measures, which include non-GAAP gross profit, adjusted non-GAAP gross profit, non-GAAP gross margin, adjusted non-GAAP SG&A, adjusted non-GAAP income from operations, adjusted non- GAAP operating margin, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP effective tax rate, adjusted non-GAAP net earnings and adjusted non-GAAP diluted earnings per share, are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operations. These adjusted measures exclude the impact of expenses associated with the Company's non-income tax, net, accelerated rent expense, share-based compensation and eliminate potential differences in results of operations between periods caused by factors such as historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges, net and gain or loss on certain investments, business sales and asset sales.

Free Cash Flow is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities less capital expenditures. By adjusting for the level of capital investment in operations, the Company believes that free cash flow can provide useful additional basis for understanding the Company's ability to generate cash after capital investment and provides a comparison to peers with differing capital intensity.

Organic net sales is a non-GAAP financial measure and is defined by the Company as reported net sales adjusted for the changes in foreign currency exchange rates and the impact of dispositions.

These non-GAAP financial measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies.

Use of Forward-Looking Statements

This news release includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, strategy and plans of DFIN and its expectations relating to future financial condition and performance. Statements that are not historical facts, including statements about DFIN management's beliefs and expectations, are forward-looking statements. Words such as "believes," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will," "would," "could," "considered," "likely," "estimate" and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. While DFIN believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond DFIN's control. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from DFIN's current expectations depending upon a number of factors affecting the business and risks associated with the performance of the business. These factors include such risks and uncertainties detailed in DFIN periodic public filings with the SEC, including but not limited to those discussed under "Special Note Regarding Forward-Looking Statements" and in Part I, Item 1A. Risk Factors of DFIN's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, those discussed under "Special Note Regarding Forward-Looking Statements" in DFIN's Quarterly Reports on Form 10-Q and in other investor communications of DFIN's from time to time. DFIN does not undertake to and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

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