Donnelley Financial Solutions, Inc. Q4 2025 Earnings Call Summary

Completed ‘Chapter 2’ of corporate transformation, shifting the business model from legacy print toward a high-margin, software-centric compliance platform.

Achieved record adjusted EBITDA margins of 31.3% for the full year despite lower overall revenue, demonstrating structural profitability gains from a more favorable sales mix.

Software Solutions now represent approximately 47% of total net sales, driven by 13% aggregate growth in recurring compliance products ActiveDisclosure and Arc Suite.

ActiveDisclosure performance improved through higher net client counts and increased value per client following a full product transition completed in 2023.

Strategic exit from low-margin print work and secular declines in physical distribution are being intentionally managed to prioritize tech-enabled services.

Deployed ‘Active Intelligence’ AI capabilities to automate research and analysis for SEC filings, aiming to increase development velocity and client productivity.

Maintained dominant market share in high-quality IPO and M&A transactions, capturing 65% of IPOs raising over $100 million in the fourth quarter.

Entering ‘Chapter 3’ of the transformation journey, targeting predictable organic top-line growth with recurring and reoccurring revenue approaching 80% of the total mix.

Anticipate more modest growth for Arc Suite in 2026 as the company overlaps the significant impact of the Tailored Shareholder Reports (TSR) regulation.

Expect the new ArcFlex offering for private investments to begin contributing meaningful incremental revenue starting in 2027.

Q1 2026 guidance assumes transactional sales between $45 million and $50 million, reflecting a cautious outlook due to potential market volatility impacting deal timing.

Projected 2026 capital spending of $55 million to $60 million will focus on software development and internal AI productivity tools.

Accelerated share repurchases in Q4, buying back approximately 1.3 million shares; total 2025 repurchases represented about 12% of outstanding shares.

The U.S. government shutdown in late 2025 temporarily paused deal completions, followed by a rapid resumption of activity in mid-November.

Management noted that while tech valuations have contracted, M&A price expectations have not yet fully adjusted to reflect lower market multiples.

Net leverage remains low at 0.6x, providing significant financial flexibility for future capital deployment or strategic investments.