Donnelley Financial Solutions Q2 2025 Earnings Call Transcript

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Provided by Quartr
July 31, 2025

Key Takeaways

  • Positive Sentiment: Delivered record quarterly Software Solutions net sales with 8% overall growth and ~15% growth in recurring compliance software offerings.
  • Positive Sentiment: Achieved a 35% adjusted EBITDA margin—the second highest in company history—and generated strong sequential improvements in operating and free cash flow.
  • Negative Sentiment: Print and distribution net sales declined by 26% (~$14 million) as the tailored shareholder reports regulation and a broader secular shift reduced print volumes.
  • Negative Sentiment: Capital markets transactional revenue hit a historic low of $34.8 million, and although Q3 guidance assumes a sequential recovery, it remains down year-over-year.
  • Positive Sentiment: The Board authorized a new $150 million share repurchase program and repurchased $76 million year-to-date, reflecting disciplined capital allocation.
AI Generated. May Contain Errors.
Earnings Conference Call
Donnelley Financial Solutions Q2 2025
00:00 / 00:00

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Operator

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donnelly Financial Solutions Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the conference over to Mike Zhao, Head of Investor Relations. You may begin.

Mike Zhao
Mike Zhao
Head - IR at Donnelley Financial Solutions

Thank you. Good morning, everyone, and thank you for joining Donnelly Financial Solutions' second quarter twenty twenty five 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'll 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 details in our most recent annual report on Form 10 ks, quarterly report on Form 10 Q and other filings with the SEC.

Mike Zhao
Mike Zhao
Head - IR at Donnelley Financial Solutions

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, Dave Gardella and other members of management. I will now turn the call over to Dan.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Thank you, Mike, and good morning, everyone. We delivered solid second quarter results highlighted by record quarterly Software Solutions net sales, strong adjusted EBITDA margin and increases in both operating cash flow and free cash flow, all in the context of a challenging yet improving environment. We posted approximately 8% sales growth in our Software Solutions, including approximately 15% sales growth in our recurring compliance software offerings, all while continuing to drive operating efficiencies and investing further in our transformation. Our second quarter results once again demonstrated the resilience of our operating model and the sustainability of our performance as our business mix continues to evolve. As we entered the second quarter, difficult operating conditions persisted for much of April, most acutely in our capital markets transactional offerings due to market uncertainty.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

As the quarter progressed, we saw improving trends not only in market activity, but also with respect to our own results. This stabilization supported a strong sequential rebound in transactional activity and related results from April to May as well as from May to June. We are encouraged by the positive trajectory within the second quarter. A key area that reflects the success of our execution in the second quarter was our strong adjusted EBITDA margin performance. While the second quarter is a continuation of a prolonged multiyear downturn in capital markets transactional activity, our business remains fundamentally and substantially more profitable than it had been historically.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Our second quarter adjusted EBITDA margin of 35% was the second highest quarterly EBITDA margin in our history and trailing four quarter EBITDA margin is 29.1% despite the ongoing headwinds of a weak transactional market. Another area I would like to highlight is continued momentum in our software offerings, where we delivered year over year net sales growth of approximately 8% despite a slight decline in our largest software offering Venue, which faced a tough comparison having grown 38% in last year's second quarter. Software Solutions made up 42.3% of total second quarter net sales, up approximately 700 basis points from last year's second quarter sales mix. As a reminder, the second quarter largely due to the annual meeting and proxy season historically represents our largest quarter overall, yet represents a seasonal low for software as a percentage of revenue. On a trailing four quarter basis, Software Solutions comprised 45.1% of total net sales, an increase of approximately six ten basis points from the second quarter twenty twenty four trailing four quarter period.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Our second quarter Software Solutions net sales growth continues to be led by the performance of our recurring compliance and regulatory driven products Active Disclosure and ArcSuite, which grew approximately 15% year over year in aggregate. Importantly, ActiveDisclosure and ArcSuite each posted double digit sales growth for the third consecutive quarter. For ActiveDisclosure, this growth was driven by the momentum in services revenue as a result of the continued adoption of our service package offerings, combined with the migration of certain traditional compliance activities to software, a trend we expect to continue going forward. In the case of ArcSuite, the improved growth rate was primarily driven by the tailored shareholder reports regulation. Consistent with our expectation, we have realized Software Solutions net sales of approximately $11,000,000 related to the TSR regulation since the effective date of July 2024.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

As we overlap the incremental year over year benefit from the tailored shareholder reports regulation in the third quarter, we expect ArcSuite to exhibit a more normalized growth profile beginning in the third quarter. As an end to end software solution for investment company financial and regulatory reporting, ArcSuite is well positioned to capture additional growth as the industry increasingly looks to improve efficiency, automate processes and comply with evolving regulatory requirements. As it relates to Venue, following a moderate decline in the first quarter, sales accelerated in the second quarter and were nearly flat compared to last year's second quarter. The resilient level of underlying activity taking place in the platform including activity from a large project combined with improved go to market execution enabled Venue to mostly offset the impact of several large projects which benefited last year's second quarter results. We remain encouraged by Venue's strong performance which reflects strong sales execution across Venue's broad application within the M and A ecosystem that serves both announced and unannounced deals across public and private companies.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

This results in more resilient, stable demand than our transactional offerings, which primarily serve public company M and A, IPO and debt transactions. Our continued revenue mix shift towards software solutions was by a reduction in print and distribution net sales, which declined by approximately $14,000,000 or 26 percent compared to the 2024. This reduction was mostly realized in the printing and distribution of corporate proxy statements and annual reports as well as lower print volumes as a result of the tailored shareholder reports regulation, which significantly reduced page counts for mutual fund reports. On a trailing four quarter basis, print and distribution revenue is $170,000,000 and makes up approximately 16% of our trailing four quarter sales. As we continue to execute our strategy to transform DFIN into the leading provider of compliance and regulatory solutions, served predominantly via software and services, we remain on target to deliver our latest five year plan, which was updated in February.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our second quarter results and our outlook for the third quarter. Dave?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Thanks, Dan, and good morning, everyone. As Dan noted, we continue to experience positive momentum in the adoption of our software solutions for its sales increased approximately 8% year over year, including approximately 15% net sales growth in our recurring compliance software products. Despite a very weak capital markets transactional environment, our software performance enabled us to deliver another quarter of improved sales mix, strong adjusted EBITDA margin and year over year improvements in both operating cash flow and free cash flow. As Dan commented earlier, following a very soft start to the quarter driven by heightened market volatility and economic uncertainty, our results improved sequentially throughout the quarter as market conditions gradually stabilized and deal activity began to recover. On a consolidated basis, total net sales for the 2025 were $218,100,000 a decrease of $24,600,000 or 10.1% from the 2024.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

The decrease in consolidated net sales was driven by lower volume in our Compliance and Communications Management segments, which decreased by 31,200,000 in aggregate with compliance revenue across the capital markets and investment companies businesses accounting for approximately $19,000,000 of that decline. The reduction in compliance revenue was mostly reflected in lower print and distribution volume related to both the ongoing decline in this area consistent with recent trend as well as the timing impact of certain investment companies' print volume that shifted from the second quarter into the first quarter of this year. In addition, total event driven transactional revenue declined approximately $13,000,000 year over year, primarily a result of the depressed level of capital markets transactional activity during the quarter. These declines were partially offset by growth in Software Solutions net sales, which increased $6,600,000 or 7.7% compared to the second quarter of last year. Second quarter adjusted non GAAP gross margin was 63.7, approximately 70 basis points lower than the 2024, primarily driven by lower capital markets transactional volume, partially offset by higher Software Solutions net sales, the impact of cost control initiatives and price uplifts.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Adjusted non GAAP SG and A expense in the quarter was $62,600,000 a $6,400,000 decrease from the 2024. As a percentage of net sales, adjusted non GAAP SG and A was 28.7%, an increase of approximately 30 basis points from the 2024. The decrease in adjusted non GAAP SG and A expense was primarily driven by a reduction in selling expense related to lower sales in certain areas, the impact of cost control initiatives and lower bad debt expense which continued to normalize in the second quarter. Our second quarter adjusted EBITDA was $76,300,000 a decrease of $10,900,000 or 12.5% from the 2024. Second quarter adjusted EBITDA margin was 35%, a decrease of approximately 90 basis points from the 2024, primarily driven by lower capital markets transactional volume, partially offset by higher Software Solutions net sales, cost control initiatives and lower selling expense as a result of the decrease in sales volume.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Turning now to our second quarter segment results. Net sales in our Capital Markets Software Solutions segment were $59,100,000 an increase of $1,800,000 or 3.1% from the second quarter of last year driven by Active Disclosure, which was up $2,200,000 year over year partially offset by a slight decline in Venue. During the second quarter, Disclosure sales grew approximately 11%, a continuation of the stronger growth trend we experienced over the last two quarters, primarily driven by the continued adoption of Active Disclosure services packages and the ongoing migration of certain activities historically performed on our traditional services platform to ActiveDisclosure. We remain encouraged by ActiveDisclosure's solid foundation for future revenue growth. During the second quarter, Venue posted $37,300,000 in revenue aided by a large project that partially offset last year's several large projects and was down approximately one percent year over year against the robust performance from last year's second quarter when Venue achieved record quarterly revenue and grew approximately 38%.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

In addition, Venue delivered strong sequential improvement in revenue increasing approximately 22% from the first quarter. Adjusted EBITDA margin for the segment was 37.9%, an increase of approximately 90 basis points from the 2024, primarily due to the increased sales and cost control initiatives. Net sales in our Capital Markets Compliance and Communications Management segment were $93,500,000 a decrease of $20,300,000 or 17.8% from the 2024 driven by lower transactional revenue as well as a reduction in compliance volume part of which was related to lower print and distribution consistent with recent trend. In the second quarter, we recorded $34,800,000 of capital markets transactional revenue which was at the low end of our expectation and down $10,400,000 from last year's second quarter resulting in the lowest level of quarterly transactional revenue in our history. Following a modest rebound in the first quarter, global equity deal volume declined sharply in April as a result of escalating market volatility and macroeconomic uncertainty.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Following the slow start to the quarter, market conditions gradually improved with modest upticks in activity levels during May and June resulting in sequential improvement as the quarter progressed. That said, overall transactional activity in the second quarter remained well below historical norms with regular way IPO transactions that raised over $100,000,000 and large public company M and A deals below last year's levels. Capital Markets Compliance revenue decreased by $9,900,000 primarily due to lower proxy statement and annual report volume and the related printing and distribution consistent with our experience during last year's proxy and annual meeting season. In addition, the weak transactional environment resulted in lower market demand for certain event driven filings such as eight ks and special proxies associated with corporate transactions. Finally, as I commented earlier, certain traditional compliance activity shifted to active disclosure during the second quarter.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Adjusted EBITDA margin for the segment was 39.4%, a decrease of approximately 80 basis points from the 2024. The decrease in adjusted EBITDA margin was primarily due to lower sales volume, partially offset by lower bad debt expense, lower selling expense and cost control initiatives. Net sales in our Investment Company Software Solutions segment were $33,100,000 an increase of $4,800,000 or 17% versus the 2024, primarily driven by incremental revenue from our tailored shareholder report solution. On a trailing four quarter basis, total ARC suite reached approximately $126,000,000 in net sales and grew approximately 17% compared to the trailing four quarters as of last year's second quarter driven by growth in subscription revenue including the impact of the tailored shareholder report solution. As Dan noted, based on the mid year twenty twenty four effective date, we will overlap the growth from this new regulation in the second half of the year and as such we expect a more normalized growth rate beginning in the third quarter.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Adjusted EBITDA margin for the segment was 42.9%, an increase of approximately three seventy basis points from the 2024. The increase in adjusted EBITDA margin was primarily due to operating leverage on the increase in net sales and price uplifts, partially offset by higher service related costs associated with the tailored shareholder reports offering. Net sales in our investment companies Compliance and Communications Management segment were $32,400,000 a decrease of $10,900,000 or 25.2% from the 2024, primarily driven by lower print and distribution volume, which accounted for $9,600,000 of the year over year decline. Second quarter print and distribution revenue within this segment was impacted by the timing shift into this year's first quarter of certain volume related to tailored shareholder reports for the regulated insurance market as well as lower page counts related to tailored shareholder reports for the mutual fund industry. As a reminder, the tailored shareholder reports regulation eliminated the demand for full length shareholder reports at the fund level and replaced them with two to four page summary documents at the share class level resulting in a net reduction in print.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

With the second quarter being a peak period for mutual fund compliance, the year over year reduction on the overall page count was significant in the second quarter as a result of the TSR regulation. We expect this dynamic will become less meaningful in the second half of the year as we overlap last year's second half impact of this regulation. Going forward, we expect a broader secular decline in the demand for printed products will continue to result in lower print and distribution revenue within this segment. Adjusted EBITDA margin for the segment was 38.9%, approximately three forty basis points lower than the 2024. The decrease in adjusted EBITDA margin was primarily due to the impact of lower sales volume, partially offset by cost control initiatives.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Non GAAP unallocated corporate expenses were $9,700,000 in the quarter, an increase of $500,000 from the 2024, primarily due to higher investments aimed at accelerating our transformation and higher healthcare expense, partially offset by cost control initiatives. Free cash flow in the quarter was $51,700,000 $14,900,000 higher than the 2024. The year over year increase in free cash flow was primarily driven by favorable working capital and lower capital expenditures, partially offset by lower adjusted EBITDA. On a year to date basis, the strong free cash flow generation during the second quarter enabled us to achieve positive free cash flow through the first half of the year. For reference, our cash flow is seasonal with the majority of it generated in the second half of the year.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

We ended the quarter with $190,100,000 of total debt and $156,300,000 of non GAAP net debt including $77,000,000 drawn on our revolver. As of 06/30/2025, our non GAAP net leverage ratio was 0.7 times. Regarding capital deployment, we repurchased approximately 787,000 shares of our common stock during the second quarter for $34,300,000 at an average price of $43.56 per share. Year to date through June 30, we've repurchased approximately 1,600,000.0 shares for $76,100,000 at an average price of $46.18 per share. During the second quarter, the Board of Directors authorized a new share repurchase program of up to $150,000,000 with an expiration date of 12/31/2026.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

This repurchase authorization, which commenced on 05/16/2025, replaced the prior authorization which was nearly fully utilized. As of 06/30/2025, we had the full $150,000,000 remaining on the new authorization. We continue to view organic investments to drive our transformation, share repurchases and net debt reduction as key components of our capital deployment strategy and we'll remain disciplined in this area. As it relates to our outlook for the 2025, we expect consolidated third quarter net sales in the range of $165,000,000 to $175,000,000 and adjusted EBITDA margin in the range of 23% to 25%, which at the midpoint is similar to last year's third quarter where we posted adjusted EBITDA margin of approximately 24%. Compared to the third quarter of last year, the midpoint of our consolidated revenue guidance $170,000,000 implies a reduction of $9,500,000 or 5.3% as lower print and distribution sales and lower capital markets transactional sales are expected to more than offset growth in Software Solutions.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

We expect Venue to be approximately flat to last year's third quarter similar to the year over year change we recorded in the second quarter. Further, our estimates assume Capital Markets transactional net sales in the range of $35,000,000 to $40,000,000 which at the midpoint is down approximately $8,000,000 from last year's third quarter. And with that, I'll pass it back to Dan.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Thanks, Dave. Our performance in the second quarter offers a further proof point that DFIN continues to become more durable and structurally resilient as we execute our strategy. The stability of our revenue base, driven by a high proportion of recurring and reoccurring compliance related offerings, provides a solid foundation even in turbulent times. Although capital markets transactions remain well below historical levels, we are encouraged by the recent uptick in activity levels. With a strong balance sheet, robust free cash flow and disciplined capital allocation, we are confident in our ability to execute our strategy and deliver long term value to all stakeholders.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Before we open it up for Q and A, I'd like to thank the DFIN employees around the world. Now with that, operator, we're ready for questions.

Operator

Your first question comes from the line of Charlie Strauzer with CJS Securities, Inc. You may go ahead.

Charles Strauzer
Senior Managing Director at CJS Securities

Hi, good morning.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Good morning.

Charles Strauzer
Senior Managing Director at CJS Securities

So if we look at the Q3 guidance and the granularity of the transactional guidance within that. Maybe you can shed a little bit more light on the assumptions behind that and kind of like what the deal environment is looking like currently for both IPOs and M and A, especially M and A given the change in administration?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yes. Thanks, Charlie. It's Dave. I'll start and Craig may want to add a little bit of color here. I think when you look at our guidance for transactional sales for Q3, right, the range of 35,000,000 to $40,000,000 that sequential growth over Q2 and up to about 15% at the high end of that range.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

As you know and we've talked about before, this is the area where we have the least visibility in terms of timing of getting the deals done. So while we feel good about the underlying trend in market activity, I'd say, as it relates to the guidance, trying not to get too far over our skis here. I think probably the most positive is, regardless where transactional revenue comes in, we're very happy with the margins and cash flow that we're delivering. Obviously, could see that the Q2 results, the year to date results as well as our guidance for Q3. With respect to the market activity, M and A, IPO, Craig, I'll let you comment there.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

Yes. Charlie, thank you for the question. I'll provide some context on Q2 and then talk about what we're seeing in July in relation to the guidance. Transactional offerings are always subject to uncertainty and the market backdrop varied materially over the course of the quarter, as you heard us discuss. The tariff announcement had a significant short term impact followed by the sequential improvement.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

This bears out in the flow of IPOs in the quarter. Of the 14 total IPOs greater than $100,000,000 there was one in April, there were five in May, there were eight in June. This was the same number, 14 of IPOs in Q1, so there was no growth quarter to quarter. DFIN was happy to support Circle, which was the largest IPO over $1,000,000,000 a huge pop, the largest increase ever for $1,000,000,000 IPO, and it was the largest certainly of the first half year. We supported many others.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

For the 2025, there were 30 IPOs compared to 35 in the first half of the prior of 2024, so a decrease of 14%. Defense supported four of the five largest in the first half. But then to your point, you see the resurgence. So the IPO index, Renaissance's IPO index was up 16%. So there is a renewed investor appetite.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

So I'll talk about July for IPOs. Assuming Figma and Shoulder price today, there'll be 27 IPOs pricing in the quarter compared to 14 in July '4. But if you exclude small international deals, there's 10. So this compares to seven. And if you cut that to 100,000,000 IPOs and above, both this year and last July had seven.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

So July will have fewer IPOs than the prior month of June. And one theme we're seeing is that the IPO market rebounding is at lower valuations. So companies are accepting down rounds. Hinge Health is an example of that. And the final note on shoulder, again, pricing today below their range at $15.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

Another metric we'd watch is the number of companies that are publicly filed. So that stands at 19. So these are on file and communicating publicly with the SEC. This is not a robust number by historical standards. And then as well, DFIN has a robust pipeline of companies who've felt confidentially, but not publicly, as well as a pipeline of RFPs.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

So the market is continuing to build. If I think about, M and A, certainly, it was building kind of same thing without with throughout Q2. So you had fewer deals but larger deals, on a year over year basis. There's a lot of optimism in M and A as well, whether that's spends, whether it's consolidation, with companies who are looking to cut costs, such as Union Pacific, Norfolk, whether it's AI, we're certainly seeing that from an opportunity perspective. So I think if you wrap it all together, it's building momentum, but risks remain.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

We have rate pressures. We have trade policy shifts, headline risks. We've seen a tweet can change things very quickly. And then as well, q three is a headwind because of the calendar. The summer months of August and Labor Day have not historically been favorable to deals.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

So we're planning on a modest increase. We are going to continue to see the stabilization that we think we saw in May and June. And our guidance balances the enthusiasm for the second half with the realities of building a pipeline and revenue recognition. As Dave said, we demonstrated we're ready for any market. We're gonna deliver no matter what the market means for us.

Charles Strauzer
Senior Managing Director at CJS Securities

Great. That's very helpful. Thank you. And just looking at the the non transactional segments, as you think about guidance in general, what assumptions should we be using when we model out the quarter?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yes, Charlie, I think and we didn't give too much detail here. But I think when you look at some of the software products, right, which is where we've seen the growth in the first two quarters, right, active disclosure has posted 11% year to date growth. And so that's been a really strong area for us, and we expect that to continue to grow going forward. As we mentioned in the prepared remarks, the growth in ARC Suite has been outsized in the first part of the year, in part because of the timing of the launch of the tailored shareholder reports regulation, right? So that started in Q3 of last year.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

We'll be overlapping some of the growth we achieved last year in ARC Suite, so that'll be tempered a bit. And then Venue's got pretty tough comps throughout the year, right? We saw some outsized growth, as we mentioned, even Q2 was down a bit, but that's coming off a quarter that grew at 38% last year. And so I think when you look at kind of the venue being flattish in Q2 sorry, in Q3 relative to last year is probably a reasonable assumption there. And then on the traditional compliance, right, so the compliance and communications management non transactional piece, That will continue to be challenged from a print count perspective.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

As you know, we've seen that trend for a while and would expect that trend to continue. But there again, even as it relates to tailored shareholder reports where we saw a drop in overall print demand related to that regulation, That impact started in the back half of last year, the growth on the software side.

Charles Strauzer
Senior Managing Director at CJS Securities

Great. Thanks on that. And looking at your long term goals that you've had out there, can you just remind us some of the assumptions behind that those goals?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yes. So it's really, I think, at the highest level, it's continuing to execute the change in mix, right, growing the recurring and reoccurring software offerings, continuing to expand margin in large part due to the operating leverage on that growth. And then from a capital markets transactional perspective, we at the time we made the assumption that there would be not much of a change in the overall level of capital markets transactional revenue. Obviously, that's come down quite a bit actually since last February. And so that's an area that it's cyclical.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

It's we do a good job in terms of maintaining or growing our market share, but can't really impact the overall demand there. And then I would say the last thing in terms of the revenue mix, we do assume and we talked a little bit about it today, some of the sales that are currently in the Compliance and Communications Management segments transitioning to software. And we've seen that happen over the last several quarters, whether it be some of the structured forms, proxy work, etcetera, continuing to migrate toward, we would say, the near term, a hybrid model that would be leveraging the software and then also the tech enabled services behind that. But eventually migrating to software, continuing to expand margins and then probably from a cash flow perspective converting EBITDA to free cash flow at about 45% or greater.

Charles Strauzer
Senior Managing Director at CJS Securities

Got it. And just speaking of cash flow, when you look at the strong performance of cash flow in the quarter and then look at the full year, are you expecting full year free cash flow to be up year over

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

We're we're obviously ahead of where we were on a year to date basis. I think when you look at we've talked about over the last several years really as the top line is proportionately more software solution sales, more long term contracts, more pay in advance that our cash flow would become less seasonal than it has been historically. And so I think what we're starting to see is the cash flow being less seasonal, which is giving us a bit of a head start. At the highest level, if I had to say what would cash flow look like on a full year basis, I'd say pretty similar to last year.

Charles Strauzer
Senior Managing Director at CJS Securities

Got it. And then just lastly, just going back to the deal environment, are you maintaining a good share of the deals that are out there? And you lose a deal to another competitor, what are the reasons behind that? Maybe you're working with them, the companies or the issuers to, you know, know that they they use a different vendor for the print and distribution and formation of the documents. And then on the back end, you pick up the software side. Are you seeing any kind of situations like that?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yes. I'll start and then Craig, if you want to jump in. I think I would describe it as we're happy with our overall share performance. I think and Craig could get into some of the nuances here as Craig commented on even with the overall improving market backdrop in terms of the number of deals. I think when you start to look at some of the characteristics of the deals that have been in the market, smaller foreign deals or even smaller domestic deals, SPACs, etcetera, our market share in some of the lower end deals isn't typically as high as it is for the larger high profile deals.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

And so I think when you look at overall share, it's about what we would expect, but we're really happy with how we're performing in our sweet spot. Greg?

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

To build on that, transfer is going to fluctuate quarter to quarter. Our strength is in 1,000,000,002 billion dollars M and A deals, large IPOs raising over 100,000,000 even these backs that have upgraded to have a substantive acquisition, and the upgrade includes an upgraded deal team. So where we really win is when these deal teams that are familiar with DFIN or service or technology, whether that's traditional or software, come into play on these deals, we're really doing well. So you saw that play out in the first half of the year. If you look at priced IPOs as a barometer, $171.63 were SPACs.

Craig Clay
Craig Clay
President - Global Capital Markets at Donnelley Financial Solutions

So of the 108 total priced excluding SPACs, there were only 30 that were over $100,000,000 So there were still a lot of fundraise like deals in there. Our share of those over 100,000,000 was our historic average, which is around 60%. So you unpack what's happened in the first half of the year and even in Q2, it is comprised of a lot of nano company, international, smaller places that we don't play.

Charles Strauzer
Senior Managing Director at CJS Securities

Great. Thank you very much.

Operator

Question comes from the line of Kyle Peterson with Needham. You may go ahead.

Kyle Peterson
Senior Analyst at Needham & Company

Great. Thanks, guys. Good morning. Yes, I just wanted to, I guess, follow-up a little bit on the outlook with the capital markets guide. I guess it was a little softer than we were expecting, given that there does seem to be an improving pipeline.

Kyle Peterson
Senior Analyst at Needham & Company

I know you mentioned that the confidential filings seem like they're they do seem to be picking up. Is some of that activity converting and closing, is some of that in the outlook Or are you guys taking a more conservative outlook in the guide for cap markets?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yes, Kyle. As I said earlier, I think when you look at that 35,000,000 to $40,000,000 range, at $40,000,000 that's up roughly 15% relative to the Q2 number. I guess I would describe it this way without getting into the details of any particular deal would be to say that if the trend that we saw in Q2 in terms of the intra quarter improvement from month to month, if that trend continues, I would say we would be at the high end of the guidance potentially above if that trend continues. So we're just taking a look at the improvement, again, given that lack of visibility in terms of the exact timing. As I said to Charlie, you know, just try try not to get too far over our skis there.

Kyle Peterson
Senior Analyst at Needham & Company

Okay. Okay. That is is helpful. And then I I guess, you know, as a follow-up on, you know, capital allocation from the sounds of based on the the authorization, sounds like it's still full after it's authorized, like, halfway through the quarter. So it seems like you guys kind of front loaded buybacks this quarter.

Kyle Peterson
Senior Analyst at Needham & Company

Do you still think that that'll be an important part of the the toolkit moving forward? Or are you guys being sensitive around, you know, valuation and and where the stocks at? Like, how how should we think about, the buyback, especially given that, you know, we haven't bounced off the, the post liberation day lows?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yeah. So I think as we said in the prepared remarks that we view share repurchases as a key component of capital allocation. To your point and also consistent with what we've done historically and said that our path would be forward, right, is that at the higher prices, we're less aggressive, at the lower prices, we're more aggressive, and that'll continue to be the path forward.

Kyle Peterson
Senior Analyst at Needham & Company

Okay.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

And I think it's one thing to add there, as we've said before, you know, with the the highest and and best use of capital is for us to execute and or, you know, where possible, the transformation. That said, the business generates quite a bit of cash. And so to Dave's point, we consider the organic investment into growth in the transformation as the highest use and then we look at the buybacks given stock price with employing a grid. So even I think the Q2 is a great example where we were extremely aggressive early on at much lower prices. And then the third is debt paydown.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

And in that context, making sure that we're not getting out and levering up too much on the buyback side as we see performance over time. And so the program over time, and we go back to when we initiated this several years ago, we bought obviously much more aggressively at significantly lower prices than where we are today. And that's how we think about it going forward.

Kyle Peterson
Senior Analyst at Needham & Company

Okay. That's helpful. And then last one for me, I guess, just do you have any update on the pension? I think you guys were planning on doing kind of annuitization and kind of converting that over just to clean up the balance sheet a little bit. Any update on either the expected timing or cash impact or anything that we should be mindful of as that process continues?

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

Yes. So the update on timing, that process is underway. Things are coming out, I'd say, generally in line with kind of the assumptions we made going into it. We still haven't gone out to annuitize the plan and work with the insurers to take that over. That will happen during the third quarter.

David Gardella
David Gardella
CFO at Donnelley Financial Solutions

And so on the Q3 call, potentially before then, we'll have additional news to share in terms of the cash outlay and what that looks like.

Operator

We have no more questions. This concludes our Q and A session. I would now like to turn the conference over to Dan Leap for closing remarks.

Daniel Leib
Daniel Leib
President, CEO & Director at Donnelley Financial Solutions

Great. Thank you, Lacey, and thank you everyone for joining. We'll look forward to talking to you in a few months and seeing you in the interim.

Operator

That concludes today's call. You may disconnect.

Executives
    • Mike Zhao
      Mike Zhao
      Head - IR
    • Daniel Leib
      Daniel Leib
      President, CEO & Director
    • David Gardella
      David Gardella
      CFO
    • Craig Clay
      Craig Clay
      President - Global Capital Markets
Analysts
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