Donnelley Financial Solutions Q3 Earnings Call Highlights

Key Points

• DFIN’s third-quarter revenue rose 5.5% to $185 million, while adjusted EBITDA increased nearly 10% to $54.4 million and margins expanded to 29.4%. Strong software solutions and capital-markets transaction activity drove the improvement.
• Software solutions continued gaining share, representing 51.5% of quarterly sales. Capital Markets Software Solutions revenue grew 8.6%, led by ActiveDisclosure, which posted approximately 24% growth and exceeded $100 million in trailing four-quarter revenue.
• DFIN generated $85.8 million in third-quarter free cash flow and maintained low net leverage of 0.4 times while repurchasing $6.9 million of shares. For the fourth quarter, it expects revenue of $175 million to $180 million and adjusted EBITDA margins of 26% to 27%.

Donnelley Financial Solutions NYSE: DFIN reported third-quarter 2026 revenue of $185 million, up 5.5% from the prior-year quarter and at the high end of its guidance range, as growth in software solutions and capital-markets transactional activity supported higher profitability.

Adjusted EBITDA increased nearly 10% year over year to $54.4 million, while adjusted EBITDA margin expanded about 120 basis points to 29.4%. President and CEO Dan Leib said the quarter extended the company’s operating momentum from the first half of the year, with sales growth, margin expansion and improved operating and free cash flow.

On a trailing four-quarter basis, DFIN reported sales growth of 4.8%, adjusted EBITDA of $253.1 million and nearly $180 million of free cash flow. Software solutions revenue grew 8% over that period, while tech-enabled services rose 3.4%, more than offsetting a 1.4% decline in print and distribution revenue.

Software mix continues to increase

Software solutions represented 51.5% of third-quarter sales, according to Leib, as the company continued its transition toward a software-led model. Trailing four-quarter software revenue reached approximately $377 million, up 8% from the comparable prior-year period and representing 47.9% of total sales.

Capital Markets Software Solutions revenue rose 8.6% to $64.1 million. The increase was led by ActiveDisclosure, whose sales grew about 24% year over year, marking its fifth consecutive quarter of growth above 20%. ActiveDisclosure has now surpassed $100 million in trailing four-quarter revenue, meaning each of DFIN’s three software offerings generates more than $100 million in annual revenue.

Chief Financial Officer Dave Gardella said growth in ActiveDisclosure reflected higher client counts, increased value per client and the migration of certain activities from DFIN’s traditional services platform to the software platform. Higher use of ActiveDisclosure for creating and filing S-1 documents in IPO transactions accounted for slightly more than half of the product’s third-quarter growth, he said.

Leib said ActiveDisclosure is also being used by private companies that may later pursue IPOs, giving DFIN an opportunity to support customers through registration and subsequent public-company compliance work. The company said its ArcFlex offering for private funds remains in the early stages of commercial adoption, with revenue expected to begin ramping in 2027.

Venue revenue was approximately $36 million, down about 1% from a year earlier. Revenue in the U.S. grew approximately 7%, supported by adoption of New Venue and increased focus on major investment banks, but this was offset by weaker international performance, particularly in Europe, the Middle East and Africa. Leib said the company remains positive on Venue’s product improvements and go-to-market progress.

Investment Company Software Solutions revenue declined 1.9% to $31.1 million. Subscription revenue was flat, while services revenue fell approximately 15% as the company lapped client implementations connected with tailored shareholder-report regulations in the prior-year period. ArcSuite sales declined about 2%.

Transactional activity and segment performance

Capital Markets, Compliance and Communications Management revenue increased 8.2% to $61.9 million, driven by higher transactional revenue and higher compliance volumes. Capital-markets transactional revenue climbed $3.9 million to $45.7 million, the fourth consecutive quarter of year-over-year growth.

Gardella said market conditions were uneven during the quarter. U.S. new-equity issuance activity softened, with regular-way IPOs raising more than $100 million below the prior-year level, while large merger-and-acquisition activity remained strong. DFIN said it maintained its historical market share in transactions completed during the quarter.

Capital Markets, Compliance and Communications Management adjusted EBITDA margin rose about 640 basis points to 40.7%, aided by higher transactional sales, lower bad-debt expense and cost-control efforts. Investment Companies Compliance and Communications Management sales rose 1.8% to $27.9 million, while its adjusted EBITDA margin increased about 400 basis points to 38.7% on favorable sales mix and cost controls.

DFIN said it expects the longer-term decline in demand for printed products to continue to pressure print and distribution revenue. Leib also cited the SEC’s proposed e-delivery rule as a potential driver of further demand toward software-based distribution offerings and away from print. The company expects the impact of any related phase-in to be weighted more toward 2028, pending final regulations.

Cash flow, capital returns and outlook

Third-quarter free cash flow was $85.8 million, up $26.6 million from the prior-year quarter. About half of the improvement reflected the comparison with a pension-plan settlement payment in the prior year, while favorable working capital, higher adjusted EBITDA and lower capital expenditures contributed to the remainder.

DFIN ended the quarter with $127 million in total debt and $99.8 million in non-GAAP net debt, including $21 million drawn on its revolver. Its non-GAAP net leverage ratio was 0.4 times as of Sept. 30.

The company repurchased about 147,000 shares for $6.9 million during the quarter. Through the first nine months, it repurchased approximately 1.5 million shares for $69.9 million. DFIN had $118.5 million remaining under its $150 million share-repurchase authorization at quarter-end.

For the fourth quarter, DFIN forecast consolidated net sales of $175 million to $180 million, with the midpoint implying roughly 3% year-over-year growth. The company expects adjusted EBITDA margin of 26% to 27%. Its outlook assumes capital-markets transactional revenue of approximately $50 million, about $1 million above the prior-year fourth quarter, with stronger IPO activity than in the third quarter and broadly similar M&A activity.

About Donnelley Financial Solutions (NYSE:DFIN)

Donnelley Financial Solutions, Inc NYSE: DFIN provides software, technology-enabled services and communications solutions that help public and private companies, investment firms, financial institutions and other organizations meet regulatory, compliance and reporting requirements.

The company's offerings include cloud-based disclosure and compliance software, filing and reporting services, regulatory data management, virtual data rooms and solutions for capital markets transactions.

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