Donnelley Financial Solutions Inc

Greetings and welcome to Donnelly Financial Solutions' first quarter earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Mike Hsiao, Head of Investor Relations.

Thank you. Good morning, everyone, and thank you for joining Donnelly Financial Solutions' first quarter 2026 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 DFINSolutions.com. During this call, we'll refer to forward-looking statements that are subject to risks and uncertainties. For complete discussion, please refer to the cautionary statements included in our earnings release and further details in our most recent annual report on Form 10-K, quarterly report on Form 10-Q, 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 Dan Lieb, Dave Bardella, and other members of management. I will now turn the call over to Dan.

Thank you, Mike, and good morning, everyone. We started 2026 by building on the positive momentum in our performance from the fourth quarter of last year, delivering consolidated net sales growth, year over year growth and adjusted EBITDA, adjusted EBITDA margin expansion and improvements in both operating cash flow and free cash flow. We delivered first quarter net sales of 205.5 million dollars. which increased 2.2% compared to the first quarter of 2025. The combination of consolidated net sales growth and cost management yielded first quarter adjusted EBITDA of $70.6 million and adjusted EBITDA margin of 34.4%, both of which are significantly stronger than historical periods with similar revenue profiles. Importantly, our strong operating performance was in the context of a volatile market environment during the first quarter, shaped by increased macroeconomic uncertainty and escalating geopolitical conflicts. Our first quarter results are further proof points to the progress of our transformation and demonstrate the resiliency of our operating model across various market conditions as our business mix continues to transform. I am encouraged by the continued growth in our software solutions offerings, where we delivered year-over-year net sales growth of 8.4%. Software solutions net sales represented 44.6% of total net sales in the first quarter, an increase of approximately 250 basis points from last year's software solutions net sales mix, despite a moderate increase in print and distribution net sales in the first quarter related to a large special proxy project. Despite this deal-related increase in print and distribution sales in the first quarter, our view on the long-term secular decline in the demand for printed products remains consistent, which we expect to be in the range of 5% to 6% annually, with fluctuations based on transactional volumes. On a trailing four-quarter basis, Software Solutions net sales made up 47.4% of total net sales, An increase of approximately 460 basis points from the first quarter 2025 trailing four quarter period. This continued positive mix shift positions us well to achieve our long term target of deriving approximately 60% of total net sales from software solutions by 2028. A major driver of the first quarter software solutions net sales growth was the performance of our recurring compliance software product active disclosure. which posted approximately 21% sales growth, marking the sixth consecutive quarter of double-digit sales growth. The sustained momentum reflects the continued growth in net client count and increases in average value per client, both of which are positive outcomes of our transition from the legacy Active Disclosure platform to new AD, as well as improved sales execution. In addition, we continue to experience the migration of certain traditional activities to Active Disclosure, including an increase in the number of transactional documents and proxy statements being completed on the platform compared to last year's first quarter, a trend we expect to continue going forward. Further, active intelligence, a suite of artificial intelligence capabilities we introduced to select active disclosure clients in the fourth quarter of last year, became available to all clients in April. representing a step forward in our mission to responsibly deploy AI to increase productivity and efficiency for our clients. Active Disclosure's intelligent, fit-for-purpose capabilities, combined with the domain expertise and 24-7 support of our services organization, remains a strategic differentiator for DFIN. Venue delivered solid year-over-year sales growth of approximately 7% in the first quarter, driven by a resilient demand for data rooms. I am encouraged by the momentum in the commercial adoption of our new venue product, which was introduced in the third quarter of last year, as the upgraded product continues to resonate with both current and prospective clients for its speed and simplicity. The rebuilt product redefines efficiency in data room initiation and management, is easier to govern access and permissions, and is more intuitive for deal teams to use. The improvements we have delivered in new venue combined with our strong go-to-market execution have allowed us to access a broader range of clients and increase the size of our serviceable market. As the adoption of new venue continues to ramp up, we expect the upgraded product to contribute to venue's growth in 2026. In addition, we remain excited by opportunities for ArcFlex, the newest module within ArcSuite, which was also launched in the third quarter of 2025. As the momentum toward private investments increases and with it more robust reporting and disclosure management needs, we are seeing increased interest from private investment institutions, including hedge funds, private equity, and business development companies. As a financial and regulatory reporting solution purpose-built for private investment institutions, ArcFlex positions DFIN well to capture incremental market demand in the private investment space. In a demonstration of our progress in this area, During the first quarter, we signed our first ArcFlex contract with an alternative asset manager utilizing ArcFlex to modernize its financial and regulatory reporting workflows. We expect the commercial activities around ArcFlex to continue to scale through 2026, resulting in more meaningful incremental revenue starting in 2027. Before I turn the call over to Dave, I'd like to provide some perspective on DFIN's operating characteristics as we navigate an evolving external environment. Over the past several months, global markets have been impacted by elevated volatility driven by a combination of AI-driven uncertainty and geopolitical tensions. In that context, DFIN's operating model continues to be a point of strength and a source of differentiation. Let me highlight a few items behind our relatively stable performance amid the turmoil. First, we serve markets where demand is regulatory-driven and non-discretionary. centered on mission-critical compliance and deal-related workflows for corporations and investment companies. As a result, more than 75% of our revenue is based on recurring and reoccurring sources, the majority of which is related to ongoing SEC compliance for corporations and investment companies, with the remainder, specifically Venue, serving a wide market that encompasses both announced and unannounced deals across public and private companies which is inherently more stable than the market for completed M&A transactions. Our strong mix of recurring and reoccurring offerings provides stability during times of market volatility. Next, our unique hybrid model features a combination of software solutions, tech-enabled services, and print-related output, underpinned by DFIN's deep regulatory knowledge and domain and service expertise. The hybrid model differentiates from seat-based pricing models and emphasizes domain expertise and execution. which contrasts with more narrowly focused point solution and pure play software providers. While we continue to invest in the growth of our software products, our traditional services and output related offerings supplement defense ability to work in ways our clients prefer, whether through software led service enabled or hybrid workflows backed by capabilities to produce outputs where needed, providing multiple ways to serve their needs as the regulatory landscape evolves. Finally, Amid the AI-induced market volatility, DFIN's strong position as a leading regulatory and compliance provider and our hybrid offerings are important differentiators in the marketplace. During times of market volatility and technological disruption, our clients increasingly recognize AI as a productivity enhancer within DFIN's workflows, not a substitute for the platform itself or the expertise behind it. Compliance and disclosure remain mission critical, highly regulated activities that require accuracy and accountability, and AI is most effective when deployed within that framework. As we responsibly integrate AI across both our products and internal operations, our focus remains on improving efficiency, reducing risk, and enhancing productivity, while maintaining rigorous standards around security, privacy, and data governance. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our first quarter results and our outlook for the second quarter.