Donnelley Financial Solutions Q2 Earnings Call Highlights

Key Points

• Q2 performance improved: Net sales rose 2.8% year over year to $224.2 million, while adjusted EBITDA increased 7.9% to $82.3 million and margins reached a record 36.7%. Software solutions grew 7.8% to $99.4 million, representing 44.3% of revenue, led by ActiveDisclosure’s approximately 29% growth.
• Transaction activity offset ongoing print declines: Capital-markets transactional revenue jumped 36% to $47.3 million, helping counter lower compliance, print and distribution revenue. Print and distribution sales fell 15%, and DFIN warned that proposed SEC e-delivery rules could further reduce print demand beginning around 2028.
• DFIN maintains a solid financial position and expects continued growth: Free cash flow rose to $61.2 million, net leverage was 0.7 times, and the company repurchased $34.7 million of shares during the quarter. For Q3, DFIN projects sales of $175 million to $185 million and expects software and transaction growth to offset additional print declines.

Donnelley Financial Solutions NYSE: DFIN reported second-quarter 2026 net sales of $224.2 million, up 2.8% from a year earlier, as growth in software solutions and capital-markets transaction activity more than offset continued declines in print and distribution revenue. The company also posted adjusted EBITDA of $82.3 million, up 7.9% year over year, while adjusted EBITDA margin expanded 170 basis points to a quarterly record of 36.7%.

President and CEO Dan Leib said the results reflected continued momentum in the company’s strategic shift toward a more software-focused business. Software solutions generated record quarterly sales of nearly $100 million and represented 44.3% of total revenue, up about 200 basis points from the prior-year quarter.

Software growth led by ActiveDisclosure

Software solutions revenue rose 7.8% to $99.4 million during the quarter. Capital Markets Software Solutions revenue increased 11.2% to $65.7 million, driven largely by ActiveDisclosure, which grew approximately 29% year over year. The product has now recorded more than 20% growth for four consecutive quarters, according to Leib.

Chief Financial Officer Dave Gardella said subscription revenue in the Capital Markets Software Solutions segment increased about 15%, supported by client-count growth and adoption of service subscription packages. Non-subscription revenue climbed approximately 69%, reflecting activity that is transitioning from traditional services to ActiveDisclosure, particularly transactional filings.

Gardella said higher use of ActiveDisclosure for the creation and filing of S-1 documents tied to certain initial public offerings accounted for roughly one-third of the platform’s total second-quarter growth. He said the company expects that trend to continue as clients use a hybrid model combining software with DFIN’s services and domain expertise.

Venue generated $37.5 million in revenue, up about 1% from the prior year, despite the comparison including a large project in the second quarter of 2025. Revenue at Venue rose approximately 14% sequentially from the first quarter. Arc Suite revenue growth was more modest, increasing roughly 2%, following a stronger year-earlier comparison that included demand associated with the Tailored Shareholder Reports solution.

Leib said DFIN sees an opportunity to support private investment institutions and administrators facing increased reporting, compliance and disclosure requirements through offerings including ArcFlex.

Transaction activity offsets compliance and print pressures

Capital Markets Compliance and Communications Management revenue increased 2.6% to $95.9 million. The segment benefited from $47.3 million in capital-markets transactional revenue, which was $13 million, or 36%, above the prior-year quarter and exceeded the high end of the company’s expectations.

Gardella said the quarter included an increase in the number of U.S. regular-way IPOs raising more than $100 million and completed public-company M&A transactions compared with the second quarter of 2025. He said DFIN maintained its historical market share for transactions completed during the period.

Capital-markets compliance revenue declined $10.1 million, primarily due to lower proxy-statement and annual-report volume as well as related printing and distribution. Investment Companies Compliance and Communications Management revenue fell 10.8% to $28.9 million, with lower print and distribution volume accounting for $2.6 million of the decline.

Overall print and distribution sales declined about $6 million, or 15%, from the prior-year quarter. Leib said print and distribution revenue has fallen from roughly $385 million at the company’s spinoff to approximately $108 million on a trailing four-quarter basis through the second quarter of 2026.

The company also discussed the Securities and Exchange Commission’s July 16 proposal for Regulation E-Delivery, which would make electronic delivery the default method for a broad range of investor communications. Leib said the proposal is broader than prior SEC rules and could materially reduce print demand over time if enacted. Based on the customary rulemaking process, DFIN expects any industrywide impact to occur during 2028.

Leib said DFIN is still assessing the proposal but noted that the company has a flexible operating model, digital-delivery capabilities and has variabilized most of its print requirements.

Margins, cash flow and capital allocation

Adjusted non-GAAP gross margin rose about 230 basis points to 66%, driven by software and capital-markets transactional revenue growth, price increases and cost-control initiatives. Adjusted non-GAAP selling, general and administrative expense increased $3.1 million to $65.7 million, reflecting higher selling costs, bad-debt expense and incentive compensation.

Gardella said the company’s cost discipline includes management of third-party spending, headcount changes, productivity initiatives and the use of artificial intelligence. Leib added that process simplification and improved measurement tools have helped reduce costs while improving the customer experience.

Free cash flow was $61.2 million, an increase of $9.5 million from the prior-year period, aided by higher adjusted EBITDA, lower cash tax payments and lower capital expenditures. DFIN ended the quarter with $204 million of total debt and $178.7 million of non-GAAP net debt, with a non-GAAP net leverage ratio of 0.7 times.

During the quarter, the company repurchased approximately 763,000 shares for $34.7 million at an average price of $45.48 per share. Through June 30, DFIN had repurchased approximately 1.4 million shares for $63 million. The company had $125.4 million remaining under its $150 million repurchase authorization.

Third-quarter outlook

For the third quarter, DFIN expects net sales of $175 million to $185 million and adjusted EBITDA margin of 26% to 28%. At the midpoint, the revenue outlook implies approximately 3% growth from the third quarter of 2025.

The company expects software growth, led predominantly by ActiveDisclosure and Venue, along with higher capital-markets transactional revenue, to offset further print and distribution declines. DFIN projected capital-markets transactional revenue of $45 million to $50 million for the third quarter, with the midpoint about $6 million above the prior-year period.

Gardella said the transaction outlook assumes a market environment similar to the second quarter, adding that conditions had remained consistent through July. He said the range largely reflects the timing of when deals become effective and revenue is recognized.

About Donnelley Financial Solutions (NYSE:DFIN)

Donnelley Financial Solutions NYSE: DFIN offers risk and compliance software and managed services designed to help corporations, financial institutions and legal firms meet regulatory and reporting requirements worldwide. Headquartered in Chicago, the company delivers a cloud-based platform for regulatory filings, content automation, virtual data rooms and board communications. Its solutions are tailored to support public companies with SEC, FCA and other global filing obligations, as well as banks, asset managers and credit unions seeking to streamline compliance workflows.

Among DFIN's flagship products is ActiveDisclosure, a SaaS application that automates the creation, review and filing of disclosure documents.

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