Donnelley Financial (DFIN) Earnings Transcript

DATE

Tuesday, Feb. 17, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Daniel N. Leib
• Chief Financial Officer — David A. Gardella
• President, Global Capital Markets & International — Craig D. Clay
• Chief Product Officer — Eric Johnson
• Vice President, Investor Relations — Michael Zhao

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Consolidated Net Sales Growth -- 10.4% year-over-year increase for the quarter to $172,500,000, driven primarily by software solutions and event-driven transactional revenue gains.
• Software Solutions Sales -- Reached a record $358,400,000 for the year, up 8.7%, comprising approximately 47% of total annual net sales.
• Adjusted EBITDA (non-GAAP) -- $45,800,000 for the quarter, up $14,100,000 or about 44% year over year, with a non-GAAP margin of 26.6%, a sequential increase of 630 basis points.
• Full-Year Adjusted EBITDA -- $239,800,000, a 10.4% increase, delivering a record full-year margin of 31.3%, up 350 basis points.
• ActiveDisclosure Sales -- Rose 17% for the year, reaching the highest annual growth rate since 2021, and grew $3,800,000, or 20.2% in Q4, with ongoing net client growth and higher value per client.
• ArcSuite Revenue -- Achieved $128,000,000 annual revenue, up 10.6%, with Q4 net sales declining 2.2% to $30,900,000 due to lapping prior regulatory-driven growth and a large contract renewal.
• Venue Sales -- Grew 3% for the year to $142,000,000, with Q4 growth accelerating to approximately 20% year over year, benefiting from new product adoption and major project wins.
• Capital Markets Transactional Revenue -- Q4 revenue reached $48,600,000, up about 29%, aided by a quick resumption of activity after a U.S. government shutdown and increased deal completions.
• Share Repurchases -- Repurchased 3,563,000 shares -- about 12% of beginning shares -- during 2025 at an average price of $48.36, totaling $172,300,000, with $53,800,000 remaining on the authorization.
• Free Cash Flow -- $47,900,000 in Q4, with the full year totaling $107,800,000, reflecting higher adjusted EBITDA, lower tax, and capex, partially offset by pension settlement outflows.
• Non-GAAP Net Leverage -- Ended the year at 0.6x, with $146,800,000 in net debt and $24,500,000 cash on hand.
• First-Quarter 2026 Guidance -- Consolidated net sales expected at $200,000,000–$210,000,000 (midpoint +2%), adjusted EBITDA margin of 33%–35%, and transactional sales guidance at $45,000,000–$50,000,000 (midpoint flat year over year and sequentially).
• Revenue Mix Evolution -- Recurring and reoccurring revenue approaches 80% of annual total, with event-driven revenues at roughly 20%, supporting greater predictability.
• Capital Spending Outlook -- 2026 projection is $55,000,000–$60,000,000, approximately flat with 2025's $57,100,000.
• AI Deployment -- Management highlighted "Active Intelligence" as a suite of AI tools within ActiveDisclosure, with further AI-driven efficiency gains sought across products and internal operations.

SUMMARY

Donnelley Financial Solutions (NYSE:DFIN) completed a multi-year transformation in 2025, increasing structural profitability and achieving a record consolidated adjusted EBITDA margin of 31.3%. The company now generates nearly 80% of revenues from recurring and reoccurring sources, reducing reliance on cyclical event-driven transactions. Full-year share repurchases reduced outstanding shares by approximately 12%, indicating an aggressive capital return strategy during a period of heightened financial flexibility. Management's guidance anticipates continued margin expansion and sustained high free cash flow, with print and distribution sales expected to decline and be offset by further software growth.

• Daniel N. Leib said, "2025 also marks the end of chapter two, or the fundamental transformation chapter of our journey as an independent company," signaling a new strategic phase focused on sustained growth.
• David A. Gardella confirmed, "Net sales exceeded the high end of our guidance range, aided in part by higher capital markets transactional revenue," reflecting above-guidance performance in market-sensitive segments.
• Eric Johnson emphasized ArcFlex addresses growing private investment reporting requirements, noting over 54,000 private funds reported by the SEC as of early 2025, up 15% from 2023.
• Craig D. Clay stated Donnelley Financial Solutions captured 65% of IPOs over $100,000,000 in Q4 and 70% of billion-dollar offerings for the full year, highlighting maintained dominance in large, complex deals.
• The company confirmed no major SEC regulatory changes are expected in 2026; future recurring revenue growth from ArcSuite will depend on regulatory developments and continued adoption in the private markets.

INDUSTRY GLOSSARY

• ActiveDisclosure: Donnelley Financial Solutions' SaaS platform for SEC filing and compliance document preparation, supporting IPOs, proxies, and periodic reports.
• ArcSuite: Donnelley Financial Solutions software suite for regulatory compliance and reporting, primarily for investment companies, facilitating electronic submission to regulators.
• Venue: Donnelley Financial Solutions' virtual data room platform supporting due diligence and transactional processes in capital markets operations.
• ArcFlex: Cloud-based reporting and compliance solution targeting alternative investment firms, designed to support private fund disclosure and regulatory needs.
• Tailored Shareholder Reports (TSR): SEC-mandated concise reports for mutual fund shareholders, effective mid-2024, impacting reporting workflows and compliance software demand.
• Transactional Revenue: Revenue driven by event-based market activities such as IPOs, M&A, and debt offerings, typically less predictable than recurring sources.
• Adjusted EBITDA Margin: Non-GAAP profitability metric calculated as adjusted EBITDA divided by net sales, expressing operating profitability as a percentage of revenue.

Full Conference Call Transcript

Michael Zhao: Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions, Inc. fourth quarter and full year 2025 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 investors.dfinsolutions.com. During this call, we will 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 detailed in our most recent annual report on Form 10-K and other filings with the SEC. 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 Daniel N. Leib, David A. Gardella, and other members of management. I will now turn the call over to Daniel N. Leib.

Daniel N. Leib: Thank you, Michael. And good morning, everyone. We finished 2025 by delivering strong fourth quarter results, highlighted by 10.4% consolidated net sales growth, year-over-year growth in adjusted EBITDA, and strong adjusted EBITDA margin. Double-digit growth in both our software solutions and event-driven transactional offerings were key components of our strong top- and bottom-line performance. In addition, given our stock trading levels, strong balance sheet, and perspective on long-term value, we accelerated our share buyback during the fourth quarter and repurchased approximately 1,300,000 shares, bringing the 2025 total share repurchase to approximately 3,600,000 shares, or approximately 12% of the company's outstanding shares from the beginning of the year, at an average price of $48.36 per share.

As a result of focused execution, we grew consolidated adjusted EBITDA by $14,100,000, or approximately 44% year over year, and delivered an adjusted EBITDA margin of 26.6% in the quarter, an increase of approximately 630 basis points from last year's fourth quarter. Our fourth quarter performance is a further validation of our strategy.

Daniel N. Leib: Reflecting on the full year of 2025, against the backdrop of continued economic volatility, we delivered strong full year results, including software solutions net sales growth of 8.7%, growth in adjusted EBITDA, record adjusted EBITDA margin, and higher free cash flow compared to full year 2024. While 2025 marked another year of decline in our transactional revenue, the fourth consecutive year of decline, our strong execution enabled us to deliver consolidated adjusted EBITDA of $239,800,000, an increase of $22,500,000, or 10.4% year over year, and consolidated adjusted EBITDA margin of 31.3%, approximately 350 basis points higher than 2024.

For context, our 2025 full year adjusted EBITDA margin exceeded the previous record, which was 29.7%, despite this year's significantly lower overall and transactional revenues compared to that year. Our long-term focused execution to improve our sales mix and manage our cost structure has resulted in DFIN becoming structurally more profitable, creating the financial flexibility to balance investment in our transformation with smart capital deployment.

Daniel N. Leib: While transformational implementation continues, 2025 also marks the end of chapter two, or the fundamental transformation chapter of our journey as an independent company, a phase that started in 2020. Specifically, during chapter two, we transformed many areas of the company, simplified and improved our business processes, installed more robust tooling across the organization, and increased development velocity to bring new solutions to market more efficiently, all aimed at creating significantly improved client experience while increasing value for our clients, employees, and shareholders. Our performance in 2025 demonstrates much of our progress within chapter two. Let me highlight a few of those examples.

Daniel N. Leib: First, one of the fundamental aspects of our strategy has been the continued transformation of sales mix by increasing the adoption of our software solutions while continuing to serve the market where desired by clients with our tech-enabled services and print and distribution offerings. Our 2025 performance further demonstrated the progress of that strategy. For full year 2025, we delivered record software solutions sales of $358,400,000, an increase of 8.7% from 2024, resulting in software solutions comprising approximately 47% of our total full year net sales. Since our 2016 spin-off, we have grown our annual software solutions net sales by approximately $222,000,000 from $136,000,000 to $358,000,000, representing an annualized growth rate of approximately 11%.

At the same time, we have maintained a strong tech-enabled services offering and successfully managed the decline in print and distribution net sales, a decline driven by regulatory change, our proactive decision to exit certain low-margin work, and the secular decline in the demand for printed materials. Our progress keeps us on the right path toward achieving our long-term financial goals.

Daniel N. Leib: Let me share a few highlights that underpin the growth in our software solutions in 2025. First, we are encouraged by the sales growth in our recurring compliance products, ActiveDisclosure and ArcSuite, which increased by approximately 13% in aggregate. For ActiveDisclosure, sales increased by 17% for the full year, our highest annual growth rate since 2021. Since completing the product transition in 2023, we have realized sequential improvements in ActiveDisclosure's operating performance, including growth in net client count as well as higher value per client. This improved growth trajectory demonstrates that the upgrades we have made across the offering, including technology, services, and support, combined with strong sales execution, are delivering positive results.

With a strong foundation and ongoing momentum, we expect ActiveDisclosure to continue to deliver solid growth in 2026.

Daniel N. Leib: ArcSuite, our market-leading compliance software offering to mutual funds and other regulated investment companies, delivered solid full year net sales growth of approximately 11%, in part due to the Tailored Shareholder Reports regulation. Given the midyear 2024 effective date, the TSR regulation primarily benefited our first half sales growth in 2025, while the second half growth in aggregate was more modest as we overlapped the impact of both TSR and a large client contract renewal.

As I have stated previously, we expect the growth profile of ArcSuite to be more modest during periods outside of regulatory changes, while over the longer term still exhibiting the double-digit growth we have delivered historically, based in part on the dynamic and evolving regulatory environment. We are optimistic about the opportunities created by future regulatory change and believe ArcSuite is well positioned to capture additional demand from new regulations to further accelerate recurring software revenue growth.

Daniel N. Leib: In addition to regulatory changes, ArcSuite is also well positioned to capture additional market-driven demand areas such as private investments. We expect increased reporting and disclosure needs by private investment institutions, including hedge funds, private equity, and business development companies. Our newly launched financial and regulatory reporting offering, ArcFlex, positions DFIN well to capture incremental opportunities in the private investment space. The initial release of ArcFlex has received positive response in the marketplace, and we expect to ramp up in ArcFlex revenue starting in 2027.

Daniel N. Leib: Turning now to Venue. As expected, the growth rate in 2025 was more modest compared to the approximately 26% growth we achieved in 2024, which was aided by several large projects. On a full year basis, Venue delivered approximately $142,000,000 in net sales and grew approximately 3% versus full year 2024. Importantly, Venue's year-over-year growth rate improved sequentially each quarter throughout the year, and we ended the year with positive momentum, having delivered approximately 20% growth in the fourth quarter. In addition, the rollout of new Venue, which was launched in the third quarter, continues to gain traction in the marketplace.

We are pleased with the ongoing commercial adoption of Venue and expect the upgraded product to contribute to Venue's overall growth in 2026.

Daniel N. Leib: Next, 2025 was an important milestone in our product development efforts, having introduced several new solutions to market, including the new Venue virtual data room, ArcFlex, our offering for alternative investments, Active Intelligence, a suite of artificial intelligence capabilities within ActiveDisclosure designed to streamline compliance and reporting for companies. These new products introduced in 2025 are the latest in a series of new software introductions over the last several years, which also include new AD, and within our suite, Total Compliance Management and the Tailored Shareholder Report solutions, and are the result of our efforts to accelerate the modernization, innovation, and growth of our software portfolio.

Over the past several years, these investments have enabled us to launch or modernize the majority of our software products. Our investments have enabled us to increase development velocity, bring new solutions to market more efficiently by leveraging the platform capabilities of our single compliance platform, and empower our clients to adapt quickly to an evolving regulatory environment, all while incorporating the most modern technology.

Daniel N. Leib: Finally, in a business landscape that has become increasingly shaped by the adoption of artificial intelligence, DFIN is deploying AI across both our product offerings as well as our internal operations. As we continue to enhance our compliance platform, we are building an AI framework architecture designed to deliver increased value to our clients through improved efficiency and increased productivity. The AI capabilities embedded in the Active Intelligence are a good example of the higher value we provide to clients. Specifically, during the initial rollout, select ActiveDisclosure clients have access to AI-enhanced capabilities for streamlining the research, comparison, and analysis of draft SEC filings against their own prior filings and those of selected peers.

This capability will help to reduce risk and expedite the preparation of quarterly and annual reports, proxy statements, IPO filings. As Active Intelligence and other AI features expand more broadly across the DFIN software platform, we expect more clients will benefit from increased efficiency and actionable insights. This enhancement is part of our end-to-end offering, ensuring clients benefit from both advanced technology and the human expertise required for mission-critical compliance.

Daniel N. Leib: At the center of our approach is an unwavering commitment to security, privacy, and responsible data governance. For example, we never use client data to train large language models, and we architect our systems to ensure sensitive information is protected at every step. Internally, our investments in AI enable us to modernize our business operations by applying automation and AI-driven tools, including commercial AI solutions and our own agentic AI development, to streamline workflows, improve productivity, and support profitable growth. One area where we are realizing meaningful benefits from AI is in product development, where improved processes and increased development velocity are enabling us to bring new solutions to market more quickly.

These internal gains enhance the speed and quality of the solutions we deliver, allowing us to respond quickly to evolving regulatory compliance and client needs. As AI strengthens and expands our capabilities, the value DFIN provides—a unique combination of deep regulatory expertise, an excellent service model, and advanced technology—becomes more evident. We remain a responsible innovator and a trusted partner, dedicated to delivering secure, dependable, and insight-driven solutions for clients' most important regulatory and compliance needs.

Daniel N. Leib: Before turning it over to David, I wanted to provide a quick update on our operating priorities for 2026. In 2026, we will transition to chapter three, or the sustained growth chapter of our transformation. During chapter three, we will continue to realize benefits from our revenue mix shift and historical investments that have resulted in a strong foundation for continued innovation and growth.

With revenue from recurring and reoccurring offerings approaching 80% of our full year total revenue, the remaining approximately 20% being event-driven, we expect the evolution of our revenue profile towards a higher mix of predictable revenue to continue going forward as we accelerate the growth in our recurring and reoccurring offerings, while benefiting from but being less dependent on event-driven revenues. These dynamics result in sustained profitable revenue growth. We look forward to driving value creation by delivering predictable, consistent organic top-line growth, continued strong profitability, and ongoing robust cash flow generation.

Daniel N. Leib: Specific to 2026, our primary focus remains on accelerating our business mix shift by continuing to grow our recurring SaaS revenue base while maintaining share in our core traditional businesses, including transactions. We are encouraged by the momentum in capital markets transactional activities so far in the year and remain well positioned to capture an uptick in deal activity. In addition, we expect print and distribution to continue to decline as a result of the long-term secular reduction in demand for printed products, though at approximately 14% of our 2025 total net sales, the magnitude of the reduction will be more than offset by the growth in software solutions net sales.

Operator: Further,

Daniel N. Leib: it relates to regulatory change, we do not expect major SEC rule changes for 2026. That said, our historic and ongoing investments in our regulatory and compliance software platform position us well to capture the demand from future regulation and non-SEC use cases. In addition, we will continue to aggressively manage our costs and drive operational efficiencies, part of which will be enabled by the increased adoption of artificial intelligence productivity tools. Finally, we will maintain our disciplined approach to investments and capital allocation in our pursuit of profitable growth opportunities to maximize financial return and create long-term value.

I am confident with our continued focus on executing our strategy we will create increased value for our clients, employees, and shareholders. Before I share a few closing remarks, I would like to turn the call over to David to provide more details on our fourth quarter financial results and outlook for 2026. David?

David A. Gardella: Thank you, Daniel, and good morning, everyone. As Daniel noted, we delivered strong fourth quarter results in an uncertain operating environment, including double-digit consolidated year-over-year net sales growth, higher adjusted EBITDA, adjusted EBITDA margin expansion, and an increase in both operating cash flow and free cash flow from last year's fourth quarter. We continue to deliver solid growth in our software solutions offering during the quarter, which grew 11.4% year over year. In addition, we experienced an increase in the level of capital markets transactions compared to last year's fourth quarter, which resulted in higher-than-expected event-driven revenue in the quarter.

The fourth quarter capped off solid full year performance demonstrated by our evolution toward a more favorable sales mix, strong adjusted EBITDA margin expansion, and disciplined capital allocation.

David A. Gardella: On a consolidated basis, total net sales for the fourth quarter 2025 were $172,500,000, an increase of $16,200,000, or 10.4% from the fourth quarter 2024. Net sales exceeded the high end of our guidance range, aided in part by higher capital markets transactional revenue. The 11.4% growth in software solutions net sales combined with higher capital markets transactional revenue more than offset a year-over-year decrease in capital markets and investment companies traditional compliance revenue, with the majority of the reduction related to the secular decline in print and distribution volume, consistent with recent trend.

Fourth quarter adjusted non-GAAP gross margin was 63.5%, approximately 360 basis points higher than the fourth quarter 2024, primarily driven by higher net sales and a favorable sales mix, the impact of cost control initiatives, and price uplifts.

David A. Gardella: Adjusted non-GAAP SG&A expense in the quarter was $63,800,000, a $1,700,000 increase from the fourth quarter 2024. As a percentage of net sales, adjusted non-GAAP SG&A was 37%, a decrease of approximately 270 basis points from the fourth quarter 2024 as a result of operating leverage on higher net sales. The increase in adjusted non-GAAP SG&A was primarily driven by an increase in selling expense as a result of higher sales volume and higher incentive compensation expense relative to last year's fourth quarter, though full year incentive compensation expense was less than last year, partially offset by the impact of ongoing cost control initiatives. Our fourth quarter adjusted EBITDA was $45,800,000, an increase of $14,100,000 from the fourth quarter 2024.

Fourth quarter adjusted EBITDA margin was 26.6%, an increase of approximately 630 basis points from the fourth quarter 2024. The increases in adjusted EBITDA and adjusted EBITDA margin were primarily due to higher net sales, a favorable sales mix, and cost control initiatives, partially offset by higher incentive compensation expense and higher selling expense as a result of the increase in sales volume.

David A. Gardella: Turning now to our fourth quarter segment results. Net sales in our Capital Markets Software Solutions segment were $60,000,000, an increase of 20% from the fourth quarter of last year, with each offering within the segment, Venue and ActiveDisclosure, growing approximately 20% year over year. Specifically, Venue sales were up $6,200,000 from last year's fourth quarter while also increasing sequentially from the third quarter. Venue sales growth accelerated in the fourth quarter, driven by increases in activity across both the United States and Europe. In addition, we benefited from several large projects in this year's fourth quarter, which combined to account for approximately half of Venue's year-over-year sales growth.

As Daniel noted earlier, we are encouraged by the in-market performance of new Venue and believe we are well positioned to capture additional share going forward.

David A. Gardella: As it relates to ActiveDisclosure, we posted another quarter of strong sales growth, increasing by $3,800,000, or 20.2%, compared to the fourth quarter 2024 and a continuation of the stronger growth rate we delivered in the third quarter. Total subscription revenue increased by approximately 12%, an acceleration compared to recent trend, primarily driven by the continued growth in client count. In addition, we continue to make progress in the migration of certain activities historically performed on our traditional services platform to ActiveDisclosure, including the use case for IPOs. During the fourth quarter, we experienced higher usage of ActiveDisclosure in the drafting and filing of S-1 documents for certain IPO transactions.

We remain encouraged by ActiveDisclosure's solid foundation for future revenue growth, part of which will be influenced by the amount of event-driven transactional activity taking place on the platform. The combination of ActiveDisclosure, our strong service offering, and the related domain expertise remains a strategic differentiator for DFIN. Adjusted EBITDA margin for the segment was 30.2%, an increase of approximately 360 basis points from the fourth quarter 2024, primarily due to higher net sales and cost control initiatives, partially offset by higher selling expenses as a result of increased net sales.

David A. Gardella: Net sales in our Capital Markets Compliance and Communications Management segment were $61,600,000, an increase of $8,300,000, or 15.6%, from the fourth quarter 2024, driven by higher event-driven transactional revenue. During the fourth quarter, we recorded $48,600,000 in transactional revenue, which exceeded the high end of our expectations and was up approximately $11,000,000, or 29%, from the fourth quarter 2024. While the U.S. government shutdown temporarily paused certain transactions from being completed, once the shutdown ended in mid-November we experienced a quick resumption of deal completions, driven by both the backlog of delayed deals as well as from increased market activity.

Operator: Overall,

David A. Gardella: the positive momentum in the equity deal environment, which had been building throughout 2025, continued in the fourth quarter, resulting in increases in the number of regular-way IPO transactions that raised over $100,000,000 and completed public company M&A deals in the U.S. compared to the fourth quarter 2024. Consistent with our historical track record, we continue to maintain high market share for large, high-quality IPO and M&A transactions completed in the quarter. DFIN remains very well positioned to capture future demand for transactional-related products and services as market activity normalizes.

Capital markets compliance revenue was down $2,400,000, or 15.5% year over year, driven by a lower volume of compliance work, including the related print and distribution, consistent with the trend from the first three quarters of the year. Adjusted EBITDA margin for the segment was 33.6%, an increase of approximately 810 basis points from the fourth quarter 2024. The increase in adjusted EBITDA margin was primarily due to higher transactional revenue and cost control initiatives, partially offset by lower compliance selling.

David A. Gardella: Net sales in our Investment Companies Software Solutions segment were $30,900,000, a decrease of $700,000, or 2.2%, versus the fourth quarter 2024. As expected, during the fourth quarter, ArcSuite faced tough comparisons as we overlapped a very strong fourth quarter 2024, during which sales increased approximately 23% year over year. The robust fourth quarter 2024 sales growth was aided by an increase in revenue associated with onboarding clients to the Tailored Shareholder Report solution as well as the favorable impact related to the renewal of a large customer contract. As such, we overlapped both impacts during this year's fourth quarter, resulting in a modest decline in services revenue while subscription revenue was flat year over year.

On a full year basis, total ArcSuite delivered approximately $128,000,000 in revenue and grew 10.6% year over year, driven by growth in subscription revenue. As Daniel noted earlier, with demand normalizing following the adoption of Tailored Shareholder Reports, we expect more modest growth related to this offering in 2026, while ArcFlex, our alternative investment solution, is expected to drive incremental revenue starting in 2027. Adjusted EBITDA margin for the segment was 37.9%, an increase of approximately 90 basis points from the fourth quarter 2024. The increase in adjusted EBITDA margin was primarily due to price uplifts and cost control initiatives, partially offset by the impact of lower sales volume.

David A. Gardella: Net sales in our Investment Companies Compliance and Communications Management segment were $20,000,000, a decrease of $1,400,000 from the fourth quarter 2024, driven primarily by lower print and distribution revenue. The reduction in print and distribution revenue is a result of the secular decline in the demand for printed materials, a trend we expect to continue going forward. Adjusted EBITDA margin for the segment was 26.5%, an increase of approximately 410 basis points from the fourth quarter 2024. The increase in adjusted EBITDA margin was primarily due to cost control initiatives, partially offset by the impact of lower sales volume.

David A. Gardella: Non-GAAP unallocated corporate expenses were $10,000,000 in the quarter, a decrease of $1,700,000 from the fourth quarter 2024, primarily driven by lower health care expense and cost control initiatives, partially offset by higher incentive compensation expense. Free cash flow in the fourth quarter was $47,900,000 and full year free cash flow was $107,800,000, an increase of $2,600,000 over full year 2024. The improvement in full year free cash flow was primarily due to the flow-through of higher adjusted EBITDA, lower cash tax payments, and lower capital expenditures, partially offset by working capital and the one-time cash contribution related to the pension plan settlement, which occurred during the third quarter.

David A. Gardella: We ended the year with $171,300,000 of total debt and $146,800,000 of non-GAAP net debt. At year end 2025, we had $61,000,000 of outstanding borrowings under our revolver and had $24,500,000 of cash on hand. As of 12/31/2025, our non-GAAP net leverage ratio was 0.6 times. Regarding capital deployment, we repurchased approximately 1,255,000 shares of common stock during the fourth quarter for $60,700,000 at an average price of $48.38 per share. For full year 2025, we repurchased approximately 3,563,000 shares for $172,300,000 at an average price of $48.36 per share. As of 12/31/2025, we had $53,800,000 remaining on our current $150,000,000 stock repurchase authorization. Going forward, we will continue to take a balanced approach toward capital deployment.

David A. Gardella: As it relates to our outlook for 2026, we are encouraged by both the level of transactional activity as well as the pipeline so far in the first quarter, though overall deal volume still remains below the historical average. In addition, we expect a continued decline in print and distribution sales, which will impact our traditional compliance offerings consistent with the recent trend. Given the first and second quarters are the peak periods for compliance activities, such as corporate proxies and annual reports, and the associated printing and distribution, the rate of decline in print and distribution sales is expected to be greater during the first half of the year compared to the second half.

Further, we expect continued solid growth in Venue and ActiveDisclosure, while ArcSuite will overlap the stronger growth we delivered in last year's first quarter.

David A. Gardella: With that as the backdrop, we expect consolidated first quarter net sales in the range of $200,000,000 to $210,000,000 and consolidated adjusted EBITDA margin in the range of 33% to 35%. Compared to the first quarter of last year, the midpoint of our consolidated revenue guidance, $205,000,000, implies an increase of approximately 2%, as the decline in print and distribution volume will be more than offset by software solution sales growth. I will also provide a bit more color on our assumptions for the capital markets transactional sales.

We assume first quarter transactional sales in the range of $45,000,000 to $50,000,000, the midpoint of which is approximately flat compared to the first quarter 2025, as well as flat on a sequential basis. While we remain very encouraged by the ongoing improvement in underlying market activity, recent market volatility has the potential to impact the timing of certain transactions between quarters. As it relates to the full year, our 2026 operating plan reflects the continued execution of our strategy and associated investments aimed toward accelerating our transformation.

Our capital spending, which is predominantly related to development in our software products and the underlying technology to support them, is projected to be between $55,000,000 and $60,000,000, approximately flat from the $57,100,000 that we spent in 2025. With that, I will now pass it back to Daniel.

Daniel N. Leib: Thanks, David. Our performance in 2025 serves as a further proof point that our strategic transformation is enabling DFIN to become more profitable and resilient. We executed well in a challenging market environment, delivering strong financial results while also continuing to invest in and execute our strategic transformation. The combination of our market position, cost structure, and financial flexibility create a solid foundation as we progress in chapter three of our transformation journey. Before we open it up for Q&A, I would like to thank the DFIN employees around the world. Now, with that, operator, we are ready for questions.

Operator: We will now begin the question and answer session. In order to ask a question, simply press star, then the number one on your telephone keypad. Our first question will come from the line of Charles S. Strauzer with CJS Securities. Please go ahead.

Charles S. Strauzer: Hi. Good morning. Morning. Morning, Charlie. Couple of quick questions for you guys. Sorry. How much of the outperformance in Q4 was volume versus price? And any more color behind the performance there would be great.

David A. Gardella: Yeah. Charlie, it is David. I will take that one. I would say price was not significant, I would say a modest driver. Really, when we think about the outperformance, much of it was on the capital markets transaction revenue, and then I think both Venue and AD showed that 20% growth which was a little bit better than we expected. So predominantly volume, and I would say as it relates specifically to the capital markets transactional activity, you know, we had the government shutdown for the first half of the quarter. Mid-November, the recovery was quicker than we had expected.

And then you combine that with the strong underlying activity level in transaction, you know, made for a nice quarter in terms of the top and bottom line relative to our guidance.

Charles S. Strauzer: Great. And then your margins were very strong, obviously, in Q4 and for the year. Any more color on the drivers behind the performance on that side as well?

David A. Gardella: Yeah. I would say more of the same of what we have seen over the long term. I think when you look at how the mix of sales is changing, what we are doing with the cost structure, and then certainly the growth, especially on the software sales and then, in particular this quarter with the nice growth in transactional. That operating leverage, right? So the incremental margin on the sales growth has really pushed margin higher. And, again, I would say in line with what we have talked about in terms of going forward, certainly in line with the trajectory that we have seen. Our long-term guidance is for margins north of 30%.

We are probably, frankly, ahead of what we had projected. And so, you know, feel really good about the direction where we are going with profitability.

Charles S. Strauzer: Great. Thanks. Daniel, just a quick one for you. Just when you look at capital allocation, your valuation multiples have contracted across a number of technology stocks. You look at the potential opportunity in your purview, are you seeing anything more interesting than you would have seen maybe a couple months ago?

Daniel N. Leib: Yeah. It is a great question. I think expectations probably have not followed as quickly. And as we see the disruption even over the past week or two, it will take a bit of time. Obviously, for public companies, everyone has had a bit of a rerate. I think most folks are thinking or hoping it is not permanent. So I do not think the expectation side of it yet has adjusted. But, you know, if valuations persist at a lower level, with the AI overhang, then I think they will. And, you know, folks are sitting on assets for a fairly long amount of time and looking for liquidity in some cases.

So, you know, it will take longer, but something that we continue to watch.

Charles S. Strauzer: Great. Thank you.

David A. Gardella: Thank you.

Operator: Our next question will come from the line of Peter Heckmann with D.A. Davidson. Please go ahead.

Peter Heckmann: As regards to ArcFlex, the platform designed for alternative investment managers, can you talk a little bit about how you think about the relative TAM for ArcFlex relative to ArcSuite and are those two solutions designed to be sold together to investment managers that do both, or is ArcFlex a stand-alone product sold to purely alternative managers?

Daniel N. Leib: Yeah. Thank you, Peter. It can definitely be sold as stand-alone. We do see synergy with existing relationships, certainly on the TPA side. And it is a good example of an offering that we were able to build much more quickly, efficiently, given the platform that we have been developing and talked about for a few years. But we see the market, and we see the interest being really high as assets continue to grow in the private space. People need more robust solutions in the market. And so, you know, getting a lot of interest and discussions. There is not as much of a regulatory framework around that.

But even without that, we are seeing some firms transact and purchase ArcFlex. And, Eric, I do not know if you wanted to add to that.

Eric Johnson: Yeah. Thanks, Daniel. Hey, Peter. The data that we have from the SEC shows that the private fund number, the number of private funds, so early 2025, was over 54,000, up 15% from the prior period, 2023, or same time frame. So there is a significant increase in the number of funds, but what is really happening is this retail access is driving an expansion in the number of investors, which is really pushing the industry to need efficient production at scale. And with the introduction of ArcFlex, we can handle the alternative investment reporting requirements at the same time.

With the horsepower of ARC reporting, we can help these clients manage the scale that is required to manage this influx of reporting activity due to the increased demand and especially driven from the retail side of the market.

Peter Heckmann: Okay.

Peter Heckmann: That is really helpful. And then just in terms of the IPO activity in the quarter, it looked like DFIN’s share of traditional IPOs was very, very strong, and I guess, would you characterize that as anything beyond just a good mix towards the larger and more complex IPOs versus smaller deals?

Craig D. Clay: Hi. It is Craig Clay. Thank you for the question. I think as you saw in Q4, there were 41 companies that priced, 17 raised over $100,000,000. Our share of that over $100,000,000 was 65%, which is certainly on the higher side. I think what is awesome is Q4's volume was up 70% year over year in the $100,000,000 category. So these 17 companies raised a total of $13,000,000,000. Health care dominated across a number of deals. Medline raised $6,000,000,000 and that was a DFIN-supported deal. There was one other billion-plus deal, Beta Technologies, that we also supported. I think to your question, we certainly play to the larger deals.

In the full year 2025, there were 10 offerings greater than a billion, and we had 70% share of that. So, certainly, we are prepared and ready to work the way that our clients want to work. You saw in the prepared remarks how we are supporting IPOs on ActiveDisclosure, which is really a terrific opportunity for us to move into that space. We look at that hybrid solution as a way for our companies to work across the boundaries of having access to our customer service and having access to our regulatory experts. And I think just an opportunity to touch on Active Intelligence.

It demonstrates, as Daniel said, we are delivering a higher value to our clients across this. So our success with implementing that into ActiveDisclosure, which has 10-Ks, 10-Qs, proxies, IPOs, also validates us as a core member of our client's team, which is embedded at the moment they need accuracy and speed and regulatory confidence. So thank you for the question.

Peter Heckmann: Great. I appreciate it.

Operator: And our next question comes from the line of Ross Cole with Needham & Company. Please go ahead.

Ross Cole: Congratulations on a strong quarter. I was wondering if you could dive in a little deeper in terms of the double-digit software growth you are seeing for 2026 and maybe how do you see that broken up between product, or maybe between capital markets versus investment companies, especially given the dynamic of fewer regulatory changes in the year and possibly a slower IPO market? Thank you.

David A. Gardella: Yeah, Ross. Just to be clear, on 2026, I think what we said was we expect continued strong growth from ActiveDisclosure and Venue heading into 2026, and certainly have that momentum coming out of Q4 here. And then exactly to your point as it relates to ArcSuite, you know, we have seen the growth in ArcSuite really be more lumpy, I guess, over the course of time and a lot of that tied to new regulation, whether it be Tailored Shareholder Reports and the Total Compliance Management solution that we launched a few years ago, and then more recently, with Tailored Shareholder Reports, those regulations.

And so we would say that it will continue to be lumpy going forward, the outsized growth the coming years with new regulatory changes. And then to the earlier question, as it relates to private markets, you know, continue to view that as an opportunity and more to come as it relates to ArcFlex and serving the private market side.

Daniel N. Leib: Yeah. And just to build on that to 2026 specifically, to David's point and then on ArcFlex, our comments were we expect benefit in 2027. You know, it is possible there is tail-end or some benefit in 2026, but it will be very tail-end, but definitely more predominant in 2027.

Ross Cole: Great. Thank you. That was really helpful.

Operator: And as a reminder, to ask a question, simply press star followed by the number one on your telephone keypad. And that will conclude our question and answer session. I will turn the call back over to Daniel N. Leib for closing comments.

Daniel N. Leib: Thank you very much, and thank you, everyone, for joining us. We will look forward to seeing you very soon. Thank you.

Operator: This concludes today's call. Thank you all for joining. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has positions in and recommends Donnelley Financial Solutions. The Motley Fool has a disclosure policy.