CHICAGO

,

Feb. 25, 2021

/PRNewswire/ —

Donnelley Financial Solutions, Inc. (NYSE: DFIN), (

the “Company”

)

today reported financial results for the fourth quarter and full year 2020.

Fourth-quarter 2020 Financial Highlights:

• Net sales of
  
  $210.3 million
  
  , up
  
  $20.0 million
  
  , or 10.5%, from the fourth quarter of 2019, driven by a strong IPO market and continued growth in software solutions
• Record quarterly software solutions net sales of
  
  $54.2 million
  
  , up 8.0% from the fourth quarter of 2019; software solutions net sales accounted for 25.8% of total fourth-quarter 2020 net sales
• Record quarterly operating cash flow of
  
  $101.7 million
  
  , an increase of
  
  $43.0 million
  
  , or 73.3%, from the fourth quarter of 2019; record quarterly Free Cash Flow of
  
  $95.1 million
  
  , an increase of
  
  $46.1 million
  
  , or 94.1%, from the fourth quarter of 2019
• Non-GAAP gross leverage of 1.3x and non-GAAP net leverage of 0.9x, down 0.9x and 1.1x respectively, from
  
  December 31, 2019
  
  ; total debt and non-GAAP net debt of
  
  $230.5 million
  
  and
  
  $156.9 million
  
  , respectively

Other Business Highlights:

• The Company announced a
  
  $50 million
  
  common stock repurchase program that expires
  
  December 31, 2022
  
  , replacing its existing
  
  $25 million
  
  plan, which was set to expire on
  
  December 31, 2021
  
  .
• The Company announced the launch of new AD, its purpose-built software product for corporate SEC filing.

“We are pleased with the excellent performance in the quarter, which included solid consolidated net sales growth of over 10% and quarterly records for both software solutions net sales and Free Cash Flow. Fourth-quarter net sales excluding Print and Distribution, grew 20% year over year, driven by strong capital markets transactional activity as well as continued client adoption of our software solutions across the portfolio,” said

Daniel N. Leib

, DFIN’s president and chief executive officer.

Leib continued, “We are excited about the recent launch of our new ActiveDisclosure platform (new AD), a key component in delivering on our “44 in ’24” strategy. Born in the cloud and reimagined from the ground up, this new platform transforms financial and regulatory reporting with seamless integration, simple and fast onboarding, and an array of intelligent core tagging and filing tools. Easy to get started, intuitive to use, and backed by the unparalleled support of DFIN experts, new AD includes the collaboration tools and fast financial data linking our clients need without extra add-ons and hidden costs and represents a significant step forward for the marketplace in SEC compliance.”

“Despite the impacts of the COVID-19 pandemic on our business earlier in the year, we delivered strong 2020 financial results, demonstrating the resilience of both our team and business model. For the full year, our continued cost discipline, combined with an improving sales mix, drove 370 basis points of year-over-year Adjusted EBITDA margin improvement when compared to 2019. Strategic capital allocation enabled us to repurchase both debt and equity at attractive prices during 2020, while also reducing year-end non-GAAP net leverage to 0.9x, down 1.1x, year over year. Heading into 2021, our capital markets business continues to accelerate as the robust IPO activity we saw in the second half of 2020 continues into early 2021. In our investment companies business, we are capturing the opportunity presented by SEC rules 30e-3/498A via our ArcDigital platform, helping our clients succeed in a digital-first operating environment. We are proud of what we accomplished in 2020, as well as the continued progress we are making toward our “44 in ’24” strategic objectives,” Leib concluded.

Net Sales

Net sales in the fourth quarter of 2020 were

$210.3 million

, an increase of

$20.0 million

, or 10.5%, from the fourth quarter of 2019. Net sales increased primarily due to higher capital markets transactional and compliance activity, increased sales in both our compliance and transactional software offerings and higher mutual fund transactional volume, partially offset by lower print volume in the Company’s mutual fund compliance and commercial offerings.

Net Loss

For the fourth quarter of 2020, net loss was

$35.8 million

, or

$1.07

loss per diluted share, as compared to net earnings of

$7.0 million

, or

$0.20

per diluted share, in the fourth quarter of 2019. Net loss in the fourth quarter of 2020 included after-tax charges of

$47.7 million

(including a pre-tax

$40.6 million

non-cash goodwill impairment charge in the Investment Companies – Compliance and Communications Management segment), or

$1.43

per diluted share, primarily related to restructuring, impairment and other charges, net and share-based compensation. Net earnings in the fourth quarter of 2019 included an after-tax unrealized and realized gain of

$9.7 million

, or

$0.28

per diluted share, in part related to the sale of a portion of the Company’s investment in AuditBoard; an after-tax loss of

$3.1 million

related to the extinguishment of the term loan, or

$0.09

loss per diluted share; and other items totaling

$7.2 million

or

$0.21

loss per diluted share. Additional details regarding the amount and nature of these and other items are included in the attached schedules.

Adjusted EBITDA and Non-GAAP Net Earnings

For the fourth quarter of 2020, Adjusted EBITDA was

$34.9 million

, an increase of 33.7%, or

$8.8 million

, as compared to the fourth quarter of 2019. For the fourth quarter of 2020, Adjusted EBITDA margin was 16.6%, an improvement of approximately 290 basis points versus the fourth quarter of 2019, primarily driven by the impact of cost control initiatives, operating leverage on higher sales volume and improved sales mix, partially offset by increases in incentive compensation and employee benefits expense.

For the fourth quarter of 2020, non-GAAP net earnings were

$11.9 million

, or

$0.36

per diluted share, compared to

$7.6 million

, or

$0.22

, per diluted share from the fourth quarter of 2019. Reconciliations of net earnings to Adjusted EBITDA, non-GAAP net earnings and Adjusted EBITDA margin, are presented in the attached schedules.

Regulatory Impacts

As previously disclosed in a Current Report on Form 8-K on

July 22, 2020

, the implementation of SEC Rule 30e-3 (elimination or reduction of print annual and semi-annual reports), Rule 498A (elimination or reduction of print summary prospectus) and the Company’s exiting of certain printing and distribution relationships is expected to reduce the Company’s print-related 2021 net sales by approximately

$130 million

to

$140 million

, and the associated reduction in net earnings and Adjusted EBITDA is expected to be approximately

$4 million

to $7 million and approximately

$5 million

to $10 million, respectively, in 2021. The Company reaffirms these estimates at this time.

Reconciliations of the net earnings to Adjusted EBITDA impact are presented in the attached tables.

Share Repurchase Program

Today the Company announced that its board of directors authorized the repurchase of up to

$50 million

of the Company’s outstanding common stock from time to time in one or more transactions on the open market or in privately negotiated purchases. This stock repurchase program replaces the existing

$25 million

plan which was set to expire on

December 31

, 2021 and will be effective through

December 31, 2022

.

The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time.

Conference Call Details

DFIN will hold a conference call and webcast on

February 25, 2021

at

9:00 a.m. Eastern time

to discuss financial results for the fourth-quarter and full year 2020, 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 risk and compliance solutions company. 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 Twitter

@DFINSolutions

or on

LinkedIn

.

Use of non-GAAP Information

This news release may contain certain non-GAAP measures, including non-GAAP gross profit, selling, general, and administrative expenses (“SG&A”), non-GAAP income from operations, non-GAAP operating margin, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP net earnings, non-GAAP diluted earnings per share, Free Cash Flow and organic net sales. The Company believes that these non-GAAP 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, non-GAAP gross profit, SG&A, non-GAAP SG&A as % of total net sales, non-GAAP income from operations, non-GAAP operating margin, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP net earnings and 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 acquisition activities, COVID-19 related sales surcharges and expenses, LSC multiemployer pension plan obligations, pension settlement charges, non-income tax charges, accelerated rent expense, spin-off related expenses, non-recurring investor-related fees, 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 and gain or loss on certain equity investments 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 exchange rates.

These non-GAAP 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 “Risk Factors” in DFIN’s Form 10-K for the fiscal year ended

December 31, 2020

, those discussed under “Cautionary Statement” in DFIN’s quarterly Form 10-Q filings, 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.

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SOURCE Donnelley Financial Solutions