Donnelley Financial Solutions Inc

Hello, everyone. Thank you for joining us and welcome to Donnelly Financial Solutions second quarter earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Mike Zhao, head of investor relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining Donnelly Financial Solutions' second 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 detail 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 Leib and Dave Gardella. I will now turn the call over to Dan.

Thank you, Mike, and good morning, everyone. We continue to build on the positive momentum in our operating performance during the second quarter, highlighted by consolidated net sales growth, year-over-year growth in adjusted EBITDA, adjusted EBITDA margin expansion, and increases in both operating cash flow and free cash flow, all in the context of an unsettled environment. We delivered second quarter net sales of $224.2 million, which increased 2.8% compared to the second quarter of 2025 and included a strong mix of revenue with software solutions net sales growing approximately 8%, tech-enabled services net sales increasing nearly 6%, and print and distribution net sales declining 15%. Moving forward, we expect this dynamic to continue With print and distribution representing a smaller component of overall sales, the long-term secular decline in this area will be more than offset by growth elsewhere in our portfolio, resulting in sustained consolidated revenue growth. The combination of our improved revenue profile, modest consolidated net sales growth, and disciplined cost management yielded second quarter adjusted EBITDA of $82.3 million and adjusted EBITDA margin of 36.7%, both of which exceeded last year's second quarter and once again were significantly stronger than historical periods with similar revenue profiles. One area I would like to highlight is the continued momentum in our software offerings, where we delivered record quarterly net sales of nearly $100 million, representing year-over-year net sales growth of approximately 8%. Software Solutions accounted for 44.3% of total net sales in the second quarter, an increase of approximately 200 basis points from last year's Software Solutions net sales mix. As a reminder, the second quarter, largely due to the annual meeting and proxy season, historically represents our largest quarter overall, yet represents a seasonal low for software as a percentage of revenue. On a trailing four-quarter basis, Software Solutions Net Sales comprised 47.9% of total net sales, an increase of approximately 280 basis points from the second quarter 2025 trailing four quarter period. Our second quarter Software Solutions Net Sales growth continues to be led by the performance of active disclosure, which grew approximately 29% year over year, marking the fourth consecutive quarter of 20% plus growth. Active disclosure's strong growth continues to be driven by an increase in net client count and higher average value per client, combined with the migration of activities previously served by our traditional services offerings, including an increase in the number of transactional documents being completed on active disclosure compared to last year's second quarter, a trend we expect to continue going forward. With the most modern technology on the market, improved go-to-market execution, and expanding AI-driven capabilities, including functions powered by active intelligence such as iXBRL tagging for SEC filings, we believe active disclosure is well positioned for future growth. Venu and ArcSuite each delivered modest sales growth in the second quarter. In the case of Venu, our strong sales execution, a resilient level of underlying activity and the continued customer adoption of new Venu combined to more than offset a large deal room that benefited Venu's robust second quarter 2025 performance. We remain encouraged by Venu's performance and expect the adoption of new Venu to continue to contribute to Venu's performance. As it relates to ArcSuite, we delivered approximately 2% sales growth, a continuation of the more modest growth rate from the first quarter of this year, 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 strong growth we have delivered historically, based in part on a dynamic and evolving regulatory environment. In addition to serving regulatory changes as they occur, we remain encouraged by the market opportunities associated with the expansion of private investments. As private investment institutions and administrators face expanding reporting, compliance, and disclosure requirements, DFIN is well positioned to support their evolving needs through software solutions offerings, including ArcFlex. Coupled with our deep domain and service expertise, DFIN offers unparalleled end-to-end financial and regulatory reporting solutions purpose-built to serve the growing private funds market. As we continue to evolve towards a higher sales mix of software solutions during the second quarter, that mix shift was accelerated by a reduction in print and distribution net sales, which declined by approximately $6 million, or 15%, compared to the second quarter of 2025. This decrease was driven primarily by a reduction in the printing and distribution of annual reports and proxy statements. Over a longer horizon, print and distribution net sales have declined from approximately $385 million at the time of our spinoff to approximately $108 million on a second quarter 2026 trailing four-quarter basis, representing a reduction of 72%. While this reduction reflects long-term secular decline in demand and the proactive exit of certain lower margin work, The pace of decline has also been accelerated by regulatory changes, such as SEC Rules 30E3 and 498A in 2021, as well as the recent Tailored Shareholder Reports Regulation in 2024, all of which structurally reduced the market demand for printed products. Looking ahead, the industry is entering another regulatory-driven shift away from print. On July 16th, the SEC proposed Regulation E-Delivery, a new rule that would establish electronic delivery as the default method for a broad range of investor communications materials, including prospectuses, mutual fund annual and semiannual shareholder reports, proxy statements, and other required communications. This new regulation, if enacted, reinforces the long-term trend towards digital distribution of shareholder communication materials and will further accelerate the industry's migration away from print. Based on the SEC's customary rulemaking process, which includes a public comment period, final rule adoption and subsequent implementation and transition periods, we expect the industry-wide impact to take place during 2028. While we continue to refine our estimates, we believe the proposal has the potential to materially reduce demand for printed products over time. Our flexible operating model, and Digital Delivery Capabilities position DFIN to both manage the impact of lower print volumes and support clients as they manage the complexity of content management and digital distribution in an electronic delivery environment. Before turning the call over to Dave, I'd like to highlight a few organizational updates. First, as we continue to evolve towards a software-centric company, we strengthened our leadership team with the appointment of Ken Napolitano as Chief Revenue Officer. In this newly created role, TEN is focusing on accelerating growth by enhancing our go-to-market capabilities and deepening our customer relationships to support our long-term growth strategy. We also strengthened our board of directors with the addition of Joe Binns, a finance leader in the technology industry. Joe brings valuable experience and perspective that will support our long-term strategy and continued focus on creating value for our shareholders. Finally, our efforts to transform our culture and enhance employee experience are once again being recognized in the marketplace. During the second quarter, DFIN was recognized as the number one most loved workplace on the 2026 Global 100 Most Loved Workplaces list published in The Economist. This recognition is a further proof point of the progress we are making transforming DFIN into an employer of choice that attracts, develops, and retains talented professionals who share our culture, which emphasizes accountability, collaboration, and integrity. Creating a strong culture in which the wellbeing of employees is strategic priority has allowed us to transform our business and drive value for clients, employees, and shareholders. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our second quarter results and our outlook for the third quarter.