CHICAGO, May 1, 2024 /PRNewswire/ -- Donnelley Financial Solutions, Inc. (NYSE:DFIN) (the "Company" or "DFIN") today reported financial results for the first quarter of 2024. First-quarter 2024 First-quarter 2023 $ Change % Change Net Sales $203.4 million $198.6 million $4.8 million 2.4 % Net Earnings $33.3 million $15.8 million $17.5 million 110.8 % Adjusted EBITDA(a) $55.2 million $42.4 million $12.8 million 30.2 % Operating Cash Flow (b) ($27.9 million) ($51.5 million) $23.6 million 45.8 % Free Cash Flow (a) ($40.2 million) ($62.1 million) $21.9 million 35.3 % Highlights for the first quarter of 2024: Total net sales of $203.4 million, an increase of 2.4%, or 2.8% on an organic basis(a), from the first quarter of 2023, driven by growth in software solutions and tech-enabled services, partially offset by lower print and distribution net sales. Record quarterly software solutions net sales of $80.3 million, an increase of 14.6%, or 16.0% on an organic basis(a), from the first quarter of 2023; Software solutions net sales accounted for 39.5% of total net sales, up from 35.3% in the first quarter of 2023. Net earnings of $33.3 million, or $1.09 per diluted share, as compared to $15.8 million, or $0.52 per diluted share, in the first quarter of 2023. Adjusted EBITDA of $55.2 million, up $12.8 million, or 30.2%, from the first quarter of 2023; Adjusted EBITDA margin(a) of 27.1%, up approximately 580 basis points from the first quarter of 2023. Operating Cash Flow improvement of $23.6 million and Free Cash Flow improvement of $21.9 million from the first quarter of 2023. Gross leverage(a) of 0.9x and net leverage(a) of 0.7x as of March 31, 2024. During the first quarter, the Company repurchased 139,893 shares for approximately $8.8 million at an average price of $62.61 per share. As of March 31, 2024, the remaining share repurchase authorization was $141.2 million. (a) Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, organic net sales, gross leverage and net leverage are non-GAAP financial measures that exclude the impact of certain items noted in the reconciliation tables below. The tables below provide reconciliations to the most comparable GAAP measures. (b) Defined as net cash used in operating activities "We are pleased with the continued momentum in our performance during the first quarter, including consolidated net sales growth and an improved sales mix, an increase in Adjusted EBITDA, and Adjusted EBITDA margin expansion compared to the first quarter of 2023. Software solutions net sales increased 16.0% on an organic basis versus the first quarter of 2023, driven by the performance of Venue, our virtual dataroom product, which grew approximately 43%. The growth in software solutions net sales, combined with lower print and distribution net sales, resulted in software solutions accounting for 39.5% of total first-quarter net sales, up approximately 420 basis points from last year's first quarter sales mix. In addition, capital markets transactional revenue increased approximately $7 million, or 17%, compared to last year's first quarter, a result of improving market activity, though still softer than historical averages," said Daniel N. Leib, DFIN's president and chief executive officer. Leib continued, "Adjusted EBITDA increased by $12.8 million, or 30.2%, and Adjusted EBITDA margin expanded to 27.1%, approximately 580 basis points higher than last year's first quarter, reflecting not only the growth in our high-margin Venue and capital market transactional offerings, but also the benefits from the improved mix of sales and permanent changes we have made to our cost structure. Additionally, our strong Adjusted EBITDA, combined with improved working capital, helped to deliver year-over-year improvements in both operating cash flow and free cash flow. Our first-quarter performance highlights the continued progress we are making in our transformation." "Moving forward, our focus remains on investing to drive toward a more recurring sales mix, aggressively managing our cost structure, and allocating capital in a disciplined manner – all aimed toward delivering sustainable, long-term value for our clients, employees, and shareholders," Leib concluded. Net Sales Net sales in the first quarter of 2024 were $203.4 million, an increase of $4.8 million, or 2.4% (an increase of 2.8% on an organic basis), from the first quarter of 2023. Net sales increased primarily due to growth in software solutions net sales in Venue and Arc Suite and higher capital markets transactional volumes, partially offset by lower print and distribution volume within the capital markets and investment companies compliance offerings and the impact of the eBrevia disposition. Net Earnings For the first quarter of 2024, net earnings were $33.3 million, or $1.09 per diluted share, as compared to $15.8 million, or $0.52 per diluted share, in the first quarter of 2023. Net earnings in the first quarter of 2024 included after-tax benefits of $5.5 million, or $0.18 per diluted share, primarily related to a gain on the sale of land, partially offset by restructuring, impairment and other charges, net. Net earnings in the first quarter of 2023 included after-tax charges of $3.2 million, or $0.10 per diluted share, primarily related to restructuring, impairment and other charges, net, partially offset by a net realized gain on the sale of an investment in an equity security. Adjusted EBITDA and Non-GAAP Net Earnings For the first quarter of 2024, Adjusted EBITDA was $55.2 million, an increase of $12.8 million as compared to the first quarter of 2023. Adjusted EBITDA margin was 27.1%, an increase of approximately 580 basis points as compared to the first quarter of 2023. The increase in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to higher sales volumes, a favorable sales mix, and cost control initiatives, partially offset by higher selling expenses as result of increased sales volumes and higher incentive compensation expense. For the first quarter of 2024, non-GAAP net earnings were $27.8 million, or $0.91 per diluted share, as compared to $19.0 million, or $0.62 per diluted share, in the first quarter of 2023. Reconciliations of net sales to organic net sales, net earnings to Adjusted EBITDA, Adjusted EBITDA margin and non-GAAP net earnings are presented in the tables. Company Results and Conference Call DFIN's earnings press release for the first quarter of 2024, which is included as Exhibit 99.1 to the Company's Current Report on Form 8-K that has been furnished to the SEC on May 1, 2024, is available on the Company's investor relations website at investor.dfinsolutions.com. A supplemental trending schedule of historical results, including additional breakouts of segment-level net sales, is also available on the Company's investor relations website. DFIN will hold a conference call and webcast on May 1, 2024, at 9:00 a.m. Eastern time to discuss financial results for the first quarter of 2024, provide a general business update and respond to analyst questions. A live webcast of the call will also be available on the Company's investor relations website. Please visit investor.dfinsolutions.com at least fifteen minutes prior to the start of the event to register, download and install any necessary audio software. If you are unable to participate live, a replay of the webcast will be available following the conference call on the Company's investor relations website, along with the earnings press release and related financial tables. About DFIN DFIN is a leading global provider of innovative software and technology-enabled financial regulatory and compliance solutions. We provide domain expertise, enterprise software and data analytics for every stage of our clients' business and investment lifecycles. Markets fluctuate, regulations evolve, technology advances, and through it all, DFIN delivers confidence with the right solutions in moments that matter. Learn about DFIN's end-to-end risk and compliance solutions online at DFINsolutions.com or you can also follow us on X (formerly Twitter) @DFINSolutions or on LinkedIn. Use of Non-GAAP Information This news release contains certain non-GAAP financial measures, including non-GAAP gross profit, adjusted non-GAAP gross profit, non-GAAP gross margin, adjusted non-GAAP selling, general and administrative expenses ("SG&A"), adjusted non- GAAP income from operations, adjusted non-GAAP operating margin, Adjusted EBITDA, Adjusted EBITDA margin, non- GAAP effective tax rate, adjusted non-GAAP net earnings, adjusted non-GAAP diluted earnings per share, Free Cash Flow and organic net sales. The Company believes that these non-GAAP financial measures, when presented in conjunction with comparable GAAP measures, provide useful information about the Company's operating results and liquidity and enhance the overall ability to assess the Company's financial performance. The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. The Company's non-GAAP statement of operations measures, which include non-GAAP gross profit, adjusted non-GAAP gross profit, non-GAAP gross margin, adjusted non-GAAP SG&A, adjusted non-GAAP income from operations, adjusted non- GAAP operating margin, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP effective tax rate, adjusted non-GAAP net earnings and adjusted non-GAAP diluted earnings per share, are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operations. These adjusted measures exclude the impact of expenses associated with the Company's non-income tax, net, accelerated rent expense, share-based compensation and eliminate potential differences in results of operations between periods caused by factors such as historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges, net and gain or loss on certain investments, business sales and asset sales. Free Cash Flow is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities less capital expenditures. By adjusting for the level of capital investment in operations, the Company believes that free cash flow can provide useful additional basis for understanding the Company's ability to generate cash after capital investment and provides a comparison to peers with differing capital intensity. Organic net sales is a non-GAAP financial measure and is defined by the Company as reported net sales adjusted for the changes in foreign currency exchange rates and the impact of dispositions. These non-GAAP financial measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies. Use of Forward-Looking Statements This news release includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, strategy and plans of DFIN and its expectations relating to future financial condition and performance. Statements that are not historical facts, including statements about DFIN management's beliefs and expectations, are forward-looking statements. Words such as "believes," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will," "would," "could," "considered," "likely," "estimate" and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. While DFIN believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond DFIN's control. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from DFIN's current expectations depending upon a number of factors affecting the business and risks associated with the performance of the business. These factors include such risks and uncertainties detailed in DFIN periodic public filings with the SEC, including but not limited to those discussed under "Special Note Regarding Forward-Looking Statements" and in Part I, Item 1A. Risk Factors of DFIN's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, those discussed under "Special Note Regarding Forward-Looking Statements" in DFIN's Quarterly Reports on Form 10-Q and in other investor communications of DFIN's from time to time. DFIN does not undertake to and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. Donnelley Financial Solutions, Inc. and Subsidiaries ("DFIN") Condensed Consolidated Balance Sheets  (UNAUDITED)  (in millions, except per share data) March 31, 2024 December 31, 2023 Assets Cash and cash equivalents $ 43.7 $ 23.1 Receivables, less allowances for expected losses of $20.7 in 2024 (2023 - $18.9) 194.2 151.8 Prepaid expenses and other current assets 30.2 31.0 Assets held for sale — 2.6 Total current assets 268.1 208.5 Property, plant and equipment, net 12.7 13.5 Operating lease right-of-use assets 14.3 16.4 Software, net 90.5 87.6 Goodwill 405.7 405.8 Deferred income taxes, net 47.0 45.8 Other noncurrent assets 29.5 29.3 Total assets $ 867.8 $ 806.9 Liabilities Accounts payable $ 44.0 $ 33.9 Operating lease liabilities 13.0 14.0 Accrued liabilities 122.9 153.7 Total current liabilities 179.9 201.6 Long-term debt 204.5 124.5 Deferred compensation liabilities 13.4 13.1 Pension and other postretirement benefits plans liabilities 33.4 34.4 Noncurrent operating lease liabilities 9.4 12.1 Other noncurrent liabilities 18.3 19.0 Total liabilities 458.9 404.7 Equity Preferred stock, $0.01 par value Authorized: 1.0 shares; Issued: None — — Common stock, $0.01 par value Authorized: 65.0 shares; Issued and outstanding: 38.8 shares and 29.4 shares in 2024 (2023 - 38.0 shares and 29.1 shares) 0.4 0.4 Treasury stock, at cost: 9.4 shares in 2024 (2023 - 8.9 shares) (293.4) (262.1) Additional paid-in capital 310.7 305.7 Retained earnings 469.4 436.1 Accumulated other comprehensive loss (78.2) (77.9) Total equity 408.9 402.2 Total liabilities and equity $ 867.8 $ 806.9   Donnelley Financial Solutions, Inc. and Subsidiaries ("DFIN") Condensed Consolidated Statements of Operations (UNAUDITED) (in millions, except per share data) Three Months Ended March 31, 2024 2023 Net sales Tech-enabled services $ 82.9 $ 78.4 Software solutions 80.3 70.1 Print and distribution 40.2 50.1 Total net sales 203.4 198.6 Cost of sales (a) Tech-enabled services 30.6 33.3 Software solutions 27.3 28.4 Print and distribution 22.2 28.6 Total cost of sales 80.1 90.3 Selling, general and administrative expenses (a) 72.8 70.5 Depreciation and amortization 13.9 12.4 Restructuring, impairment and other charges, net 1.8 10.9 Other operating income, net (9.8) (0.3) Income from operations 44.6 14.8 Interest expense, net 3.6 3.5 Investment and other income, net (0.4) (6.9) Earnings before income taxes 41.4 18.2 Income tax expense 8.1 2.4 Net earnings $ 33.3 $ 15.8 Net earnings per share: Basic $ 1.14 $ 0.54 Diluted $ 1.09 $ 0.52 Weighted average number of common shares outstanding: Basic 29.3 29.2 Diluted 30.5 30.5 (a)   Exclusive of depreciation and amortization Three Months Ended March 31, Components of depreciation and amortization: 2024 2023 Cost of sales $ 13.3 $ 11.5 Selling, general and administrative expenses 0.6 0.9 Total depreciation and amortization $ 13.9 $ 12.4 Additional information: Gross profit (b) $ 110.0 $ 96.8 Exclude: Depreciation and amortization 13.3 11.5 Non-GAAP gross profit $ 123.3 $ 108.3 Gross margin (b) 54.1 % 48.7 % Non-GAAP gross margin 60.6 % 54.5 % SG&A as a % of total net sales (a) 35.8 % 35.5 % Operating margin 21.9 % 7.5 % Effective tax rate 19.6 % 13.2 % (b)  Inclusive of depreciation and amortization   Donnelley Financial Solutions, Inc. and Subsidiaries ("DFIN") Reconciliation of GAAP to Non-GAAP Measures For the Three Months Ended March 31, 2024 and 2023 (UNAUDITED) (in millions, except per share data) For the Three Months Ended March 31, 2024 Gross profit SG&A (a) Income (loss)fromoperations Operatingmargin Netearnings (loss) Netearnings (loss)per dilutedshare GAAP basis measures $ 110.0 $ 72.8 $ 44.6 21.9 % $ 33.3 $ 1.09 Exclude: Depreciation and amortization 13.3 Non-GAAP measures 123.3 Non-GAAP % of total net sales 60.6 % Non-GAAP adjustments: Restructuring, impairment and other charges, net — — 1.8 0.9 % 1.3 0.04 Share-based compensation expense — (5.1) 5.1 2.5 % 0.6 0.02 Gain on sale of long-lived assets — — (9.8) (4.8) % (7.0) (0.23) Non-income tax, net — 0.4 (0.4) (0.2) % (0.3) (0.01) Gain on investments in equity securities (c) — — — — (0.1) — Total Non-GAAP adjustments (b) — (4.7) (3.3) (1.6) % (5.5) (0.18) Adjusted Non-GAAP measures (b) $ 123.3 $ 68.1 $ 41.3 20.3 % $ 27.8 $ 0.91 Adjusted Non-GAAP % of total net sales 60.6 % 33.5 %   For the Three Months Ended March 31, 2023 Gross profit SG&A (a) Income (loss)fromoperations Operatingmargin Netearnings (loss) Net earnings (loss)per dilutedshare GAAP basis measures $ 96.8 $ 70.5 $ 14.8 7.5 % $ 15.8 $ 0.52 Exclude: Depreciation and amortization 11.5 Non-GAAP measures 108.3 Non-GAAP % of total net sales 54.5 %