Donnelley Financial Solutions, Inc. 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining Donnelley Financial Solutions' third quarter 2026 results conference call. This morning, we released our earnings report, including a set of supplemental trending schedules of historical results, copies of which can be found in the investors section of our website at dfinsolutions.com. During this call, we will refer to forward-looking statements that are subject to risks and uncertainties. For a complete discussion, please refer to the cautionary statements included in our earnings release and further detailed in our most recent annual report on Form 10-K, quarterly report on Form 10-Q, and other filings with the SEC. Further, we will discuss certain non-GAAP financial information such as adjusted EBITDA and adjusted EBITDA margin.

We believe the presentation of non-GAAP financial information provides you with useful supplementary information concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance. They are, however, provided for informational purposes only. Please refer to the earnings release and related tables for GAAP financial information and reconciliations of GAAP to non-GAAP financial information. I am joined this morning by Dan Leib and Dave Gardella. I will now turn the call over to Dan.

Thank you, Mike, and good morning, everyone. Our third quarter results continued the solid performance we achieved during the first half of 2026, demonstrating the progress we are making towards sustained profitable growth by delivering another quarter of sales growth, an increase in adjusted EBITDA, adjusted EBITDA margin expansion, and improvements in both operating cash flow and free cash flow. We delivered third quarter sales of $185 million, which was at the high end of our guidance range and increased 5.5% compared to the third quarter of 2025. The combination of sales growth and focused execution yielded third quarter adjusted EBITDA of $54.4 million and adjusted EBITDA margin of 29.4%, both of which are significantly stronger than comparable historical periods.

On a trailing four-quarter basis, sales increased 4.8%, driven by software solutions which increased 8% and tech-enabled services growth of 3.4%, more than offsetting a modest decline in print and distribution of 1.4%. Excluding print and distribution, sales grew 5.9%. During the trailing four-quarter period, we delivered an adjusted EBITDA of $253.1 million, adjusted EBITDA margin of 32.2%, and generated nearly $180 million of free cash flow, combined representing the strongest trailing four-quarter performance in DFIN's history. This performance and associated financial profile represent a good beginning to DFIN's next chapter to deliver consistent consolidated sales growth supported by a more favorable business mix with continued strong profitability and cash flow. Specific to our third quarter performance, I am pleased with the continued demand for our software offerings, where we delivered year-over-year sales growth of 5%.

Software solution sales represented 51.5% of total sales in the quarter as we continue to transform into a software-led company. On a trailing four-quarter basis, software solution sales reached approximately $377 million, growing 8% from the third quarter 2025 trailing four quarters, and accounted for 47.9% of trailing four-quarter sales, an increase of approximately 140 basis points from the third quarter 2025 trailing four-quarter sales. Our third quarter software solution sales growth continues to be led by the performance of ActiveDisclosure, which grew approximately 24% year over year, marking the fifth consecutive quarter of 20% plus growth. Importantly, our strong growth over the past year has propelled ActiveDisclosure beyond $100 million in revenue on a trailing four-quarter basis. As such, each of our three software solutions offerings now generates more than $100 million in annual revenue, underscoring the growth and scale of our software portfolio.

We are encouraged by the continued growth in ActiveDisclosure net client count and higher average value per client. In addition, as I discussed previously, we are serving additional use cases via a hybrid model that combines our software solution with an unmatched service offering. Within this context, ActiveDisclosure has been increasingly chosen by our clients for their IPO registrations, which historically were managed in a traditional model. In the third quarter, we saw higher ActiveDisclosure sales associated with IPO registrations being completed on the platform compared to last year's third quarter, a trend we expect to continue going forward. With the most modern technology in the market, improved go-to-market execution, and expanding AI-driven capabilities, ActiveDisclosure is well-positioned for future growth. In the case of Venue, sales in the third quarter were approximately flat compared to the third quarter of last year.

We delivered solid growth in the U.S., where we continue to see encouraging commercial adoption of New Venue and benefit from our increased focus on key investment banks within the deal ecosystem. This growth was offset by softer performance internationally, particularly in EMEA, reflecting a more tempered deal environment in those markets.

We remain encouraged by the progress we are making with New Venue and continue to believe the combination of the upgraded product and our go-to-market execution provides a strong foundation for growth. As it relates to ArcSuite, we experienced a modest sales decline of approximately 2%, consistent with the year-over-year sales trajectory over the last three quarters, during which we overlapped stronger growth as a result of the tailored shareholder reports regulation. As I commented previously, we expect the growth profile of ArcSuite over the longer term to produce the strong growth we have delivered historically, based in part on a dynamic and evolving regulatory environment.

In addition to serving regulatory changes as they occur, we continue to see attractive long-term market opportunities associated with the expansion of private investments, for which we developed ArcFlex to extend DFIN's financial and regulatory reporting capabilities into the growing private funds market. Built on the DFIN compliance software platform, ArcFlex shares many of the core capabilities of ActiveDisclosure. While we continue to develop and expand purpose-built functionality to meet the needs of private funds and other alternative investment clients. Positioning ArcFlex as a module within ActiveDisclosure reflects our broader platform strategy of leveraging common technology and capabilities across our software offerings to serve distinct client needs and markets. Over time, we believe this approach will provide a path to bring together additional capabilities across the DFIN platform and serve a broader range of financial and regulatory reporting needs.

ArcFlex remains in the early stages of its commercial adoption, and we expect the ramp-up to continue in 2027. Before I turn the call over to Dave, I would like to recognize an important milestone. October marks DFIN's 10-year anniversary as a public company. Over the past decade, we have successfully transformed the business by strengthening our portfolio and upgrading our talent and business processes, resulting in a stronger financial foundation. From our origins as a predominantly print and services provider, we have evolved into a software-centric regulatory and compliance company while maintaining the domain expertise, service capabilities, and client relationships that have differentiated DFIN throughout our history. Since 2016, we have more than tripled software solutions net sales, excluding the impact of divestitures, while successfully navigating the migration away from print.

As a result, software solutions have increased from approximately 14% of our revenue in 2016 to nearly 50% today. While print and distribution has declined from approximately 40% to approximately 14% over the same period. This significant shift toward higher-margin software solutions has fundamentally increased DFIN's value proposition to clients, creating a business with significantly higher profitability and stronger cash generation. We expect our business mix to continue to evolve in the same direction, driven by changing client preferences towards software solutions, complemented by services where needed. In addition, new regulations such as the SEC's proposed e-delivery rule will redirect demand toward our software-based solutions for eDelivery and away from print and distribution. We will continue to monitor developments in the rulemaking process and provide more specific plans and expectations if and when the ruling is finalized.

Looking forward, we remain focused on building on the progress we have made over the past decade and identifying new opportunities to deliver sustained profitable growth. We are focused on identifying and scaling opportunities across our portfolio, including greater adoption of our existing offerings, new capabilities and solutions, and expansion into new markets and use cases, all supported by our differentiated combination of software and tech-enabled services, domain and service expertise, and trusted client relationships. We believe our opportunities ahead are greater than we have accomplished so far, and we remain very well-positioned to drive increased value for our clients, employees, and shareholders in the years to come. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our third quarter results and our outlook for the fourth quarter.

Dave? Thanks, Dan, and good morning, everyone.