Donnelley Financial Solutions, Inc. Q1 FY2026 earnings call

• Started 2026 building on positive momentum from Q4 2025, with consolidated net sales growth, adjusted EBITDA growth, margin expansion, and improvements in cash flow. - Software solutions net sales grew 8.4%, representing 44.6% of total net sales in Q1. - Active Disclosure had ~21% sales growth, sixth consecutive quarter of double-digit growth. Active Intelligence became available to all clients in April. - Venue had ~7% YoY sales growth, driven by demand for data rooms, and new venue product is resonating. - ArcFlex signed first contract in Q1, expected to scale through 2026 with incremental revenue from 2027. - Operating model strengths: Regulatory-driven non-discretionary demand, >75% revenue from recurring/reoccurring sources, unique hybrid model with software, services, and print-related output, and responsible AI integration for efficiency and risk reduction.

Capital Markets Software Solution: Net sales $58.6 million, +12.9% YoY, driven by ~21% growth in active disclosure. Subscription revenue +17%, service and support revenue +36%. Venue: Net sales +$2 million, +7% YoY. Adjusted EBITDA margin 32.8%, +600 basis points YoY. Capital Markets Compliance and Communications Management: Net sales $82.8 million, -1.3% YoY. Capital markets transactional revenue $50.8 million, +5% YoY. Compliance revenue -$3.3 million. Adjusted EBITDA margin 40.7%, -300 basis points YoY. Investment Company Software Solution: Net sales $33.1 million, +1.2% YoY. Services revenue increased, subscription revenue flat. Adjusted EBITDA margin 39.6%, +50 basis points YoY. Investment Company's Compliance and Communications Management: Net sales $31 million, -4.9% YoY, driven by lower print and distribution revenue. Adjusted EBITDA margin 39%, +160 basis points YoY.

• Expect unsettled operating environment to continue in Q2 due to market volatility and geopolitical uncertainty. - Consolidated second quarter net sales expected in range of $215 million to $225 million. - Adjusted EBITDA margin expected in range of 34% to 36%. - Capital markets transactional revenue expected in range of $40 million to $45 million, midpoint up ~$8 million YoY. - Compliance-based sales in certain segments expected to have modest year-over-year decline. - Board authorized new share repurchase program of up to $150 million with expiration date of December 31, 2027.

• Volatile market environment with increased macroeconomic uncertainty and escalating geopolitical conflicts. - Secular decline in demand for printed products at 5%-6% annually with fluctuations. - Impact of transactional environment on certain compliance filings like 8Ks. - Uncertainty around SEC proposals on annual reporting and its potential impact.

Q: On guidance, expand on underlying assumptions for Q2 and external markets.

A: Dave mentioned transactional perspective with capital markets transactional revenue guidance range, noting Q1 started nicely but March softened due to geopolitical uncertainty, and April and May cautiously optimistic with IPOs and M&A momentum.

Q: On SEC proposals on annual reporting, color on impact.

A: Craig said SEC proposal is with OMB, likely to be posted for public comment soon, unknown what proposed rule will be, but vast majority of 10Qs prepared in active disclosure which has subscription model.

Q: On softness of 8K filings, color on drivers.

A: Dave said tied to capital markets transactions, lower transactional activity in market affecting 8Ks.

Q: On SG&A, context on extra selling expense and operating leverage.

A: Kyle was told SG&A up modestly YoY, driven by mix of revenue, nothing outsized in quarter, and similar trend expected in Q2.

Q: On client appetite for AI offerings.

A: Craig said interest is high, AI is multifaceted, used internally and in product side, active intelligence is force multiplier in active disclosure.