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DFIN Donnelley Financial Solutions

Participants
Justin Ritchie Senior Vice President, Investor Relations
Dan Leib CEO
Dave Gardella CFO
Kami Turner Chief Accounting Officer, Senior VP & Controller
Tom Juhase Chief Operating Officer
Pete Heckmann Davidson
Charlie Strauzer CJS Securities
Raj Sharma B. Riley
Jake Williams Wells Fargo
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Donnelley Financial Solutions Third Quarter Earnings Conference Call [Operator Instructions]. I would now like to hand the conference over to your speaker today, Justin Ritchie, Senior Vice President of Investor Relations. Thank you. Please go ahead, sir.

Justin Ritchie

Thank you. thank XXXX joining results and Solutions Donnelley everyone, quarter third conference morning, you the for Financial Good call. of in This report, morning, Investors found a earnings site section the copy of dfinsolutions.com. we which can released our Web our at be

refer we subject forward-looking statements During to will that uncertainty. this to call, are

They with XX-K, to and For further the annual our refer for purposes call information company's Juhase. non-GAAP details ongoing refer joined GAAP GAAP is now statements by SEC. supplementary quarterly on an over appropriate useful financial the in way to financial XX-Q, the Tom for of the Form Form report complete and I'm will you information Kami filings Turner will related however, you performance. provides the a information only. informational are, financial please our we included tables Dan. other in the We report Please to cautionary concerning to with information. turn and information. financial discussion, I presentation discuss earnings release company's and Dan Further, on release Gardella, non-GAAP earnings and evaluate reconciliations of for to non-GAAP Leib, operations, Dave believe morning and provided this the

Dan Leib

performance year's of morning, software Thank along healthy. of quarter, the and the market. significant safe the more print us in the tech and third resulted our X% at Strong year's higher of with The of of up in were quarter, basis quarter. margin first that you, our by sales, activity third last nearly sales robust since software efforts, resulted enabled I'm you market capital solutions market levels quarter performance IPO our overall with activity to a driven work, all XX.X%, proactive began for quarter accelerated sales, From growth Total families margin both non-GAAP June a margin very good and pruning from Justin quarter boosting staying in transactional offerings of XXX company's sales pickup control as points this of are impact activity IPO cost in DFIN, improvement the in transactional and net low in XXXX. an and third from normalized significant of growth sales ongoing services and increase transactional third influx and everyone. last adjusted EBITDA markets share which the a we your return hope the pleased included growth quarter year-over-year that globally. quarter, robust transactional across of third

compliance for and Software recurring marking an The Solution primarily quarterly the record of growth sales in was rate more combined historical ActiveDisclosure $XX.X led million, Software by in growth growing a line DFIN. all-time Solutions our with totaled sales FundSuiteArc XX.X%. XX% products,

third in initial real and quarter steps quarter organizational our activities in starting addition, since In and our estate this for increase by footprint IPO time reflected XXXX. announced including operations, year-over-year, quarter M&A XXXX. EBITDA all strong third we to the increase late largely adjusted a an our driven our from quarter fourth its with streamlining of earlier contributed growth The achieved was deal the optimize This growth an high to structure X% XX% of data grew the environment. and are quarterly highest year Venue, combined by room in product, took quarter, performance in sales the

debt of These lead $XX.X flow with interest consistent third expense was from working last the lower to of third of quarter diligent million cash conjunction resulting results than non-GAAP a to significant of than capital increased our combined deleveraging our year profitability increase management led net lower $XX quarter higher in turn a in $X.XX net quarter earnings. per million by XXXX. XXXX. with of times, Our quarter share $XX.X lower full leverage in third X.X than the net free of quarter, end, in the million, At

well financial the flexibility considerable our now delivering below The liquidity ever leverage targeted range, economic of and are our current execution We results. providing in positive strategy changing is environment. and

have in not management cost continued year-over-year in positive our expansion We for demonstrating business the the of five quarters, mix. delivered also improvement aggressive EBITDA consecutive margins but only impact

decrease $XX from by software and increased expanded Over these has solutions sales, partially $XX million of the increases in value five the has by and of has of tech of XX enabled million EBITDA software and in by by our of expansion decreases increased $XX combination cash XXX $XX the driving driven print cash strong have $XX million tech by our flow sales our solutions sales in by our million generation. in EBITDA by reinforce services $X sales $XX basis XXXX, our solution The XX year margin quarters, sales. decrease in million, trends million. sales continued in margin our million, the growth services software strategy, specifically offset and XX% in sales, sales is enabled adjusted results related free and Moreover, targeting print decreased our non-GAAP points growth and

our Dave? our I Dave would detail quarter. provide share the over call like fourth financial to for quarter to outlook to a few updates, I the results Before third on more additional turn and

Dave Gardella

Dan, morning, everyone. Thank good you, and

of maintain cash filing year-over-year delivered third non-GAAP a Dan third XXXX. XXXX strength share were strong our quarter third flow. million, software the solution point or second basis EBITDA market to quarter a focus and we grew efficiencies. adjusted cash business. business very all extending half increases operating XXXX, and non-GAAP quarter in of On of efforts earnings further As in basis, These of for adjusted operational non-GAAP of we an in significant from quarter established on million compared sales driving margin $XXX.X our trend in We increase our sales, and the our further per XXXX the share, $XX.X continuing the consolidated X.X% third EBITDA, to while adjusted transactional resulted including the quarter strong demonstrating the results, third improvement mentioned, of in XXX net flow free

quarter an in compared solution $X.X the disclosure Software third in and the compliance million increased of or subscription well primarily by offerings. product other or margin compliance. capital by $XX.X by room activity and active sales XX.X%, million demand solid our sales rule quarter low XXXA. X.X% in where increased third with our distribution revenue million anticipated price of in to in increased changes as XXEX increases venue, and FundSuiteArc, XXXX, have reduction enabled for as lower Tech to including contracts, activity printing rightsizing fund to adoption due Print proactively services within acceleration software $XX.X growth XX.X%, and materials regulatory primarily increased the we in print demand markets, and primarily advance the exited less due to decreased commercial of from investment production or market footprint due transactional printed related certain to

the non-GAAP combined gross enabled the primarily of and basis volume was XXXX, quarter quarter services featuring favorable of initiatives, million, higher increase the SG&A higher third with offset margin the ongoing our expense mix, compensation by performance. million than in solutions was XXXX. by quarter cost than and third tech points $X.X Third Non-GAAP XXX quarter associated partially impact sales, driven control financial software incentive or overall of higher business an in of $XX.X lower margin strength the expense print XX.X% with

primarily points XXX percentage was partially increase an business initiatives. by in basis sales, the from the ongoing to of approximately due in increase of the XX.X%, non-GAAP SG&A related increase offset incentive impacts As of compensation benefits is XXXX. sales, mix, cost The non-GAAP control higher the SG&A of and third quarter a changes costs, in

Our XXXX. from non-GAAP million of $XX.X adjusted an million, quarter third EBITDA quarter the XX.X% increase of third $XX.X or was

XX.X%, of from by third control non-GAAP XXXX. impact by sales XXX adjusted expense. an points was Our EBITDA mix, ongoing operating quarter in of in driven basis increases Again, initiatives, on and cost of leverage compensation the favorable benefits increase offset higher more margin sales third incentive a partially primarily employee the quarter

in market by also to XXXX, the of Venue in our third now higher driven to efficiencies, price offset transactional the leverage as had the other EBITDA markets environment Net active third capital non-GAAP XX.X% quarter, software segment quarter. due the $XX.X as X.X% over XXXX, the third in from the incentive and in for million of the sales primarily primarily Venue XXX from quarter expense. was to increased in Software increases sales in our increased sales of well increase segment of increased in segment the quarter primarily in while activity, X% continued Turning an compensation of communications third an was compliance by of from our an disclosure and as XXXX. on operating of increase data $XX.X basis XXXX, results. XXXX, were third the our from quarter as solid subscriptions, XX.X%, EBITDA Non-GAAP management room margin activities. a to impact the of The margin XXXX, well capital due compliance traditional increased market due M&A compliance capital points benefits increase operating Solutions sales, of partially of million segment disclosure an increase active adjusted quarter solutions. quarter third quarter late improving were adjusted Net the growth

Traditional The to in quarter. offset was basis in increase segment adjusted provided third the were EBITDA non-GAAP X-K in of incentive influx margin accelerated with initiatives, increased earlier and was quarter FAST activity partially mandates impact XXXX. new third quarter of in starting M&A cost primarily up due pickup the was As nearly this the adjusted slow IPO earlier, robust the gaining IPO Debt solid, not remains deals as pricings growth quarter in seen driven transactional resulted June, of we the first saw we've the pickup was sales share. albeit market in not in by September of This has third margin compliance from compensation in which the transactional year this of for quarter control largely Non-GAAP it primarily related the product. Act XXXX, third since to related DFIN effect sales, in quarter, transactional the increase EBITDA Dan filers also the due margin higher that quarter the accelerated the went of we market for in sales X,XXX as corresponding M&A high in increase quarter in sales saw mentioned was activity the filings third tripling XX.X%, the ongoing activity by third growth additional remain to the along yet into an a the lift points announced time that expense. as with with quarter. in year-over-year from XXXX.

We As I quarter share, of large mentioned high IPOs. companies, as or this third and a and earlier in the strong attention complex acquisition transaction. total made in very The direct were up an lead to SPACs continued was large strong started number to of was when prepared transactions filing and a quarter market, the coming IPO the DFIN to recognized more SPACs for special which purpose quarter we market to my large remarks, in quality number respect with SPACs share market. to we significant increasing also maintaining XXXX, of shift especially

increase in our the paid in disclosure. on share SPACs from in XXXX, in the in solutions the disclosure many sales increased the company's number $XX of third quarter segment third active space new of to has were filings platform. segment our off activity quarter, million with increased funds XX.X% of filing focus due leveraging from best investment part quarter software of increase this with the representing significant product existing an adding software clients Net XXXX company's of a third DFIN to a market these Our

ArcRegulatory XXXX. increase basis in sales the Non-GAAP a after We was strong related sales was provided margin third EBITDA points lower from of connection quarter our to segment offering, for the an ArcDigital compliance in EBITDA operating X,XXX cost X.X%, large adjusted EBITDA in-house a performance communications are Net with the in also management XXXX. in the quarter Europe The to release. increase ongoing our to The margin in the print lower new our the margin outsourced our XXX mutual segment to the XXXX, of were of margin from demand volume $XX.X transactional offset of of related lift just from nearly and company, in commercial to of the adjusted on of leverage compliance and in in control XXXX, to EBITDA XX.X%, of overall from strength platform, financial incentive due primarily investment decrease to printing of higher including fund we decrease saw segment was moved one third the print solution and savings impact of decrease an primarily quarter initiatives. an operating we segment primarily companies sales, the sales as impact points the due lower volumes. the compensation partially manufacturing quarter non-GAAP increase exiting of well contracts due to for the non-GAAP adjusted of a by third basis third well the X.X% its million was the as consolidated which as rightsizing expense solution. where efficiencies, as cost quarter adjusted Non-GAAP related

exit in term proactive leverage from print completed causes early planned be not a rightsizing negative of our the process are our margin low scheduled while certain impact print operating to fixed the cost contracts, until reductions near still addition, platform, as In XXXX.

costs, Our is increase million year. quarter in of of higher costs increased year, to partially offset third Free higher EBITDA The compensation corporate due by interest. non-GAAP primarily $X expenses quarter lower benefits an primarily the was control million, the of cash were an impact due related $XX.X million, in the quarter of improvement adjusted cost ongoing last $XX.X quarter of incentive increase the and cash unallocated from million initiatives. from to flow third last third and $XX.X XXXX unallocated corporate

debt, total We focus of with quarter last our ended resulted third of working DSO improvement management and on as on continue million net to cash approximately year's well We one non-GAAP in efforts day revolver. debt to capital from $XXX our of an hand. access liquidity $XX.X of as $XX.X quarter. had our $XXX.X full million and perspective, the million a drawn And million $XXX we including on to revolver, million from

we approximately non-GAAP our of ratio price was XXXX, times, for remaining last an per $X.X authorization. repurchase at X.X repurchased third XX, September per just million average stock million over at of shares common the down repurchased of the XXX,XXX turn for price $XX.XX stock have share. $XX.X million quarter of As $X.XX million on full a X net common average million share of shares $XX during quarter We leverage from stock $X.X approximately Year-to-date, and an year. our

transactional it relates in activity October. quarter, As the robust markets to throughout capital remained fourth

impact However, global business in ongoing limited. the and given recent of of market volatility, on of geopolitical this uncertainty all items the landscape, visibility pandemic and economic areas the unknown these remains

In in for we margin continue upcoming demand exit regulatory that to print print XXXX. beginning changes will in low as noted preparation I earlier, the contracts addition, impact

approximately that $XXX expecting these our factors, down to X% in Given half fourth taking are quarter million, to from conservative we roughly of outlook, be approach anticipated quarter low range to of related XX% Venue transactional fourth revenue sales the of a print the our impact XXXX, to to in the with the $XXX million margin landscape we've macro decrease related customer remaining exited on portion markets economic and capital a offerings. to to proactively due the printing contracts

For size activity or quarter in approximately generated XXXX. of context, Venue $XX total our XX% the in transactional fourth million of sales

last now we in the Regarding to year's EBITDA Dan? XX%, pass our than point. slightly at of be mid higher adjusted range XX% margin expect to back fourth to the non-GAAP profitability, Dan. quarter quarter I'll fourth it

Dan Leib

I'd open like items up then Q&A. it highlight Dave. few to Thanks, and for a we'll

well print in reduce will Regarding change we that the are prepared. demand XXXX, upcoming regulatory for

EBITDA approximately change. $XX $XXX expect net million million We of reduction $XXX to to related continue to non-GAAP a related the XXXX, million of million in in print $X and adjusted sales regulatory reduction to in approximately

ahead delivering platform, We as to confident plan. plan exceed our remain in savings the are in I and some meet associated cost ability our on cases of plan to the it rightsizing relates or and with

software and for solutions. In demand addition, development of of the I'm excited our pace about

relationship As of contract key we This largest multiyear basis, a expansion we contract solutions customer investor the global in a further leveraging reporting dollar software represents our company’s capabilities earnings company's signed mentioned client release, solutions. financial our and the an on deepens investment end history. their ever multimillion in ArcReporting

investment significant clients to workflows look to a as defend recently clients our printed a saw be distribution ArcDigital our and where Venue documents will The announced transition company's help also solutions, team recently virtual obligations demand privacy offering. We for composition data to information. from their professionals redact empowers environment room released diminished. post XXe-X identifying for to of distribution document potential first automatically personally identifiable data. data to data tool Venue now their instantly content continues sensitive data assessment our transform room scanning After privacy and companies to kind how Venue visualizing by its meet find exposure, of significantly

job them. some it leading constant the demonstrate In are transform the excited tech next opportunity DFIN ahead makes easier for next high we competition. approach Venue the financial for third financial the in their other AI our the tool, sales along demonstrate rapid This financial prototype the community to the profile results, eBrevia, Our them room. will FDIC's we get both produced prototype virtual a a operational other quarter clients addressing with regulatory In various develop compete about XX to sprint designed an problem. that Among to develop our us reporting, companies to of and phase banks. is wins selected and technology premier the that closing, market FDIC allows our Elsewhere, the against providers, has awarded to thrilled are leveraging agency's that this technological for and data tool way was stage, and business extensive A about domain near this recently reporting. innovative of prototyping new technology will an particularly our announced initial partnership to exciting expertise significantly of an leaders, financial contract changes.

four a the are great build committed company and achieving to way as to have strategies. to XX years We part our XX on worked of and our over the objectives last well we

service thank ready employees highest Lastly, around clients working who've receive Stay our I safe the Operator, DFIN to and continues want healthy. disruption. our operations the we're world quality questions. maintain to the ensure for been to and tirelessly without

Operator

Instructions]. [Operator you Thank

comes Heckmann Your first Davidson. Pete from question of

Pete Heckmann

you have was activity in the October's in I comments it comparisons Certainly, capital large year looks that last the with on appreciate might particular terms Can the of or you outlook. the about IPO strong. really any like markets either talk investment projects side?

Dan Leib

nothing it as large we might relates Pete, to that had transactions specific year. last have

I the outlook October commented, think you as at quarter, strong. IPO when we very the market was for look fourth

the I you the the think the market, landscape, at more low that election, see slowdown at that to typically taking look uncertainty on happen a around economic margin period of a this QX. comes when saw in it, results print the the uncertainty et of and more exiting, a the then top QX be we're just little the of we're just We approach in And out it’d softer election across around to cautious QX. related so work we some whether of expectation cetera. transactional point, addition to in

perspective, continue expectation what's to that really with see behind And so that's the guidance we'll a growth. from the software

Pete Heckmann

How some you world shape investment enhanced And is playing that, enhanced trying how designed? the in it, work looking in to a disclosures DFIN if investor discussion part to of may these you could you of, disclosures do see be the then terms but are on that missed the I mentioned just of this at. proactively and in the have SEC

Dan Leib

the allow experience offers XXXX software products. proposal enhanced needs proceeding XXXA, us in relationships solve are reduction via going It we for of now behind We and efforts So further on what investor that the new that's disclosure to XX two it effective does print within Suite. when which opportunity similarly us deepen Arc to are and distribution in would in of client's sits sales our a software products content and digital well. in opportunity front those view process and think our the in large and us management about and

Operator

Charlie Your CJS from next question comes of Strauzer Securities.

Charlie Strauzer

a Just of things. couple

transactional could better deeper, pickup in you if in First, year-over-year a drill out was related expense the kind a of get related terms kind of look little the expenses this just maybe in the thing? of quarter just of into really that much coming that margin of how other, sense pure equation versus or at much expansion software was versus how of of mix that that margin

Dave Gardella

I'll then if wants to start Dan Charlie, in. jump and

earnings permanent. cost obviously and obviously that are year. when of and just through was that performance benefiting I was form the I biggest tremendous the comp should majority mostly from the cost reiterate the came you We're cost to takeout that's XXX(k) IPOs, bit $XX equity significant very And expense a the bit from probably of year-over-year at little travel side up comes revenue the and that and as in also million. think out virus, I offset And margin. we most given high of delta look up incremental a little typically the perspective a takeout. vast an the obviously revenue is And there think of through some have relates entertainment does by for that transactional, the space, incentive a numbers permanent. given get it perspective take performance also but is a That plan that the

profitability, which And gives you then so $X that's range probably in that. to increased the million is savings back some the to larger quarter that in earlier of $X comment than million that my cost sense the

Charlie Strauzer

pandemic kind the or what obviously good or you've think are to leverage do need costs But of prior can out and in to taken out, more expenses now how place? the a then So good much the kind of that nicely you’ve that. done to yet you but taking identified to costs you job of through you come, put

Dan Leib

question. to on bit Dave's a as of this and add address well comment Just

big been we've stay always dollars. have managing our the your efficiencies been toward. incremental that of plan then and we've see partner side perspective continue coming from there. would comments, on margin in good to software with year. be a look given gained, But growth. which see of efforts And profit just at the see and to front the do aggressively last within the side, higher through off the from to very have as Feel collected effect software. getting put very in through expect his side sales If we're do. from some sales, with you this as the that margins coincident the on good demand the about We've it, disciplined is the replaced that really and reservation We mentioned efficiency strong as on efficiencies print flow led in throughout through question, development you higher into managing to Dave level, driving actions us the that will look on own in growth going we And software it's our we'll we've we relationship Regard negative investment and cost much sales. some biggest the software, follow we place. at capabilities the that's we the velocity our software very on to And we side XX great much thing operating it's in towards

Charlie Strauzer

me, for one last one just then I could. if And

Software you solutions, in history. largest signed deal said, you a

you pickup that kind of in all looking kind a that? to from of people of outsourcing? guys terms new related kind are and more Are house of inbound you in the an Just pandemic driving sales at seeing has calls at sales, helped

Dan Leib

interesting. it's So

-- recurring contract we're pandemic in XXXX. year, type business that really has some bit full referenced will product, five Venue of a it's move growth. deal from the bigger M&A on relative willingness clients an then height some compliance now. little go a our negative have height did product sales starting but -- the improve of in see now And impact it's software pandemic announced years Part that's even the the year the us perspective. So We in we And on impact seen to of did was our you at passed the see deeper an contract. this that lines in to of environment that the on to we've largely it's that of the of slower given three impact of September, or at

use amount to help your discussions digitize to their to the ways without your clients move term that the outsourcing and you now point, or software so And business we increasing can place our start solutions. where take on of see forward

Operator

next comes B. Riley. Sharma Raj from Your question of

Raj Sharma

then or in that up on assuming wanted seeing drill I little a to the the just per this pricing transactional guiding change Are quarter And projecting that you fourth or follow a I side. question or then bit at are And you little understand a in print. difference get transaction revenues down any versus are the you bit quarter? about, changed into you the a to have you're transaction? first that transaction there. all? the or Are revenues you about per assuming a flat Has wanted

Dave Gardella

a at of look well the are like of when bit think when as you little outlook year. fourth expecting you your I by into transactions the be decline, quarter, question it's with from side. I regarding low look think software So that on on third quarter total again, this exiting, growth down transactions, again transactional, we decline here, work of and the what's part as we're baked the this said, to driven in at margin the I And the print

Dan Leib

pricing, to on your to On not just change seeing Dave's a really on And question a point. on add Raj, basis. we're unit pricing

mixed more. think impact. There is I a much, it's much

the we We're example about how And on the And in environment. virtually. the out hopper, seeing is of adapted in things pricing to an not bit continue what's back that's seeing But process. the our a impact. we've person. demand some a depending been basis were with So but a last get that interest virtual one to call. a great just in of doing still majority adjusted the talked queue, on upon We first IPO unit -- we've vast

Raj Sharma

the then QX a similar on is QX? that decline And you decline that in in had in print,

Dave Gardella

accelerates QX little It a QX. what we more to saw actually bit in in relative probably

Raj Sharma

does side? Speakers] side? business I compliance the how And assume compliance the side that split [Multiple would and/or between the of transaction

Dave Gardella

No.

So most have the of rolling business it will commercial up there. printing show we companies global in where up investment

Operator

Your next of Fargo. Wells from Williams comes question Jake

Jake Williams

drivers. focus kind the company, that five I subscription? investment or sort escalators price obviously just contract, of revenue any next flat to that of software on there on years a the on annual is large with contract wanted the Are

Dan Leib

We it. wouldn't with what systems do more adds on perspective. get as it tremendous And clients, pricing efficiency value importantly into but we're comfortable particulars from an for on these I a cost the very think and does contract, our

we're comfortable that with the we've so achieve. been to And price able

Jake Williams

Is any is or model more it model? to component kind pure subscription that there revenue of there, volume

Dan Leib

volume are components. There

So about well. number price then in loaded part in the that business, a fund this of the is the funds we've snd as are past there there's of talked per implementation and

Jake Williams

show sounds And like XQ, contract little will there was impact bit revenue XXXX? but maybe of contributions most the it in probably a XQ in no from that

Dan Leib

Correct.

Jake Williams

very you Thank much… Great.

Dan Leib

let just clarify Jake, me there.

with an existing So that customer. contract was

a it's not net So new.

for revenue, mission the for will Some but the of net of of client us we're and mix work be that impact the today. growth aspects new doing in the on of it terms

Operator

call back There further the at questions this are time. the to presenter. turn I no over

Dan Leib

the Okay. to Thank you. following February look forward we'll you. the Thank fourth quarter with interim. in you and And in speaking

Operator

Thank concludes for Ladies this participating. conference today's and call. you gentlemen,

disconnect. now may You