NYSE:DFIN Donnelley Financial Solutions Q1 2024 Earnings Report $45.07 +0.27 (+0.60%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$44.97 -0.10 (-0.22%) As of 04/25/2025 04:20 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Donnelley Financial Solutions EPS ResultsActual EPS$0.89Consensus EPS $0.64Beat/MissBeat by +$0.25One Year Ago EPSN/ADonnelley Financial Solutions Revenue ResultsActual Revenue$203.40 millionExpected Revenue$214.10 millionBeat/MissMissed by -$10.70 millionYoY Revenue GrowthN/ADonnelley Financial Solutions Announcement DetailsQuarterQ1 2024Date5/1/2024TimeN/AConference Call DateWednesday, May 1, 2024Conference Call Time9:00AM ETUpcoming EarningsDonnelley Financial Solutions' Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Donnelley Financial Solutions Q1 2024 Earnings Call TranscriptProvided by QuartrMay 1, 2024 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Thank you for standing by. My name is Kath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donnelly Financial Solutions First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:30I would now like to turn the call over to Mike Zhao, Head of Investor Relations. Please go ahead. Speaker 100:00:40Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions' Q1 2024 results conference call. This morning, we released our earnings report, including a supplemental trending schedule of historical results, copies of which can be found in the Investors section of our website atdfinsolutions.com. During this call, we'll 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 details in our most recent Annual Report on Form 10 ks, quarterly report on Form 10 Q and other filings with the SEC. Speaker 100:01:24Further, we will discuss certain non GAAP financial information, such as adjusted EBITDA, adjusted EBITDA margin and organic net sales. 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 Gardella, Craig Clay, Eric Johnson, Boyd Strimling and Cammy Turner. Speaker 100:02:11I will now turn the call over to Dan. Speaker 200:02:15Thank you, Mike, and good morning, everyone. We started 2024 by building on the positive momentum in our performance from last year, delivering consolidated organic net sales growth with an improved sales mix, strong year over year growth in adjusted EBITDA, adjusted EBITDA margin expansion and improvements in both operating cash flow and free cash flow. We delivered 1st quarter net sales of $203,400,000 which increased 2.8% on an organic basis compared to the Q1 of 2023. I am encouraged by the composition of our organic net sales growth with software solutions net sales increasing 16%, tech enabled services net sales increasing nearly 6% and print and distribution net sales declining approximately 20% as we continue to balance our revenue profile to drive improved profitability. The combination of the improved revenue profile, modest consolidated net sales growth and cost management yielded 1st quarter adjusted EBITDA of $55,200,000 and adjusted EBITDA margin of 27.1 percent, both of which are above last year's Q1 and once again significantly stronger than historical periods with similar revenue profiles. Speaker 200:03:42Our Q1 performance highlights the continued progress we are making in our transformation and positions us well to achieve our updated long term financial targets. A key driver of our Q1 results is the performance of our software solutions portfolio, which reached $80,300,000 in net sales, a new quarterly record. Software solutions net sales growth accelerated in the first quarter to 16% on an organic basis versus the Q1 of 2023, an increase from the growth trends over the last few quarters. The growth in software solutions net sales was led by the performance of Venue, our virtual data room product, which posted 43% sales growth. We are encouraged by Venue's strong performance, which reflects strong sales execution across Venue's broad application within the M and A ecosystem that serves both announced and unannounced deals as well as across public and private companies alike. Speaker 200:04:44This results in more resilient, stable demand than our transactional offerings. As a further demonstration of the momentum in our software solutions net sales, the growth trends of our recurring compliance software products, ActiveDisclosure and ArcSuite, both improved in the Q1, with each product delivering stronger year over year growth on a sequential basis compared to the Q4 of 2023. Software Solutions made up 39.5 percent of total 1st quarter net sales, up approximately 4 20 basis points from last year's 1st quarter net sales mix. On a trailing 4 quarter basis, software solutions net sales are now in excess of $300,000,000 and represent 37.8 percent of total net sales, an increase of approximately 370 basis points from the Q1 2023 trailing 4 quarter period. Looking ahead, we expect the growth rates for ActiveDisclosure and ArtSuite each to improve further in the second half of this year. Speaker 200:05:48For ActiveDisclosure, this improvement is driven by recent wins combined with overlapping last year's platform transition. In the case of ArcSuite, the improved growth rate is primarily driven by the tailwind from the Tailored Shareholder Reports Regulation. As we continue to evolve toward a higher sales mix of software solutions during the Q1, that mix shift was accelerated by a reduction in print and distribution revenue, which declined by approximately $10,000,000 or 20% compared to the Q1 of 2023. This reduction was evident mostly in the printing and distribution of annual reports and proxy statements aligned with our strategy to manage our sales mix toward a proportionally heavier mix of higher margin tech enabled services and software solutions net sales, while benefiting from the financial profile associated with such a sales mix. Dave will cover our results in more detail, but first I'd like to provide an update on our readiness for the Tailored Shareholder Reports regulation ahead of its July 2024 compliance date. Speaker 200:06:57As I've shared previously, we are making great progress in our technology development and go to market plans aimed to help our mutual fund and exchange traded funds clients operationalize the reporting to comply with this regulation, including being the first to market with the initial release of our TSR SaaS solution during the Q4 of last year. As we continue to mature and scale our TSR offerings, I'm excited by the end to end compliance solutions we have created for the regulation, giving DFID an unmatched ability to serve clients the way they wish to work via either SaaS based solutions or traditional services, all in a one stop shop that eliminates handoffs in the compliance process. In a further demonstration of our software product readiness, last week we announced Deepen successfully test filed a full form NCSR, including an IXBRL tagged TSR to the SEC on behalf of a large asset manager. The test filing was completed via our Arc Reporting SaaS product, the leading financial close software for investment companies and a component of our ARC suite offering. The ARC reporting solution offers clients the ability to execute financial calculations, report generation at the fund and share class level, IXBRL tagging, reviewing and filing all through a single solution. Speaker 200:08:26Further, integrated data flow within Arc Reporting eliminates the need for post production reconciliation and guarantees consistency with the fund's financial results at the share class level. This successful test filing demonstrates the dynamic end to end straight through processing that ArcSuite offers our clients, enabling them to create file web host and distribute complex financial reports all from a single platform. In addition to the functionality offered by ArcReporting, DFIN is also ready to serve clients via traditional services for those who prefer that approach. In early April, we successfully completed the test filing of a full NCSR compliance document based on the new regulatory requirements, including IXBRL tagging of a tailored shareholder report by leveraging our industry leading service capabilities. This test filing to the SEC was done on behalf of another large asset manager and highlights Deepin's deep expertise in the areas of IXPRL tagging and compliance filing. Speaker 200:09:32Our recent successful test filings represent an important milestone in our readiness journey and demonstrate DFIN's leadership in the industry and commitment to deliver a streamlined solution for a complex regulation. With less than 3 months to go until the July 2024 compliance date, EFIN remains very well positioned to serve our clients while capturing the recurring revenue opportunities associated with the Tailored Shareholder Reports regulation. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our Q1 results and our outlook for the Q2. Dave? Speaker 300:10:13Thank you, Dan, and good morning, everyone. Before I discuss our Q1 financial performance, I'd like to recap 2 housekeeping items. First, during the quarter, we completed the sale of land in Phoenix, Arizona, the site of an office which we shut down and demolished in 2021 and was previously reflected on our consolidated balance sheet as an asset held for sale. The sale resulted in net proceeds of $13,200,000 of which $12,400,000 was received in the Q1 of 2024 and $800,000 of non refundable fees were received in 2023. We recognized a net pre tax gain of $10,600,000 related to the sale, of which $9,800,000 was recorded in the Q1 of 2024 and $800,000 was recognized in 2023. Speaker 300:11:11The net pre tax gain was recorded within Speaker 400:11:21This gain is excluded from our non GAAP results. Speaker 300:11:23This gain is excluded from our non GAAP results. 2nd, as discussed on last quarter's earnings call, we completed the sale of our eBrevia business in the Q4 of 2023. For full year 2024, the disposition negatively impacts the year over year total net sales comparison by approximately $4,000,000 with approximately $1,000,000 net sales impact for each quarter. The impact on our gross profit and adjusted EBITDA comparisons is de minimis. For purposes of year over year net sales change discussions, organic net sales change adjust for the impacts of the Ebrevia disposition as well as changes in foreign currency exchange rates. Speaker 300:12:13A reconciliation of reported to organic net sales change is included in our earnings release. Now turning to our Q1 results. As Dan noted, we continue to demonstrate positive momentum in our performance during the Q1 by delivering consolidated net sales growth, a strong year over year increase in adjusted EBITDA and improvements in both operating cash flow and free cash flow compared to the Q1 of 2023. By continuing our shift toward a more profitable sales mix, while also driving operating efficiencies, we expanded our first quarter adjusted EBITDA margin by 580 basis points to 27.1%. On a consolidated basis, total net sales for the Q1 of 2024 were $203,400,000 an increase of $4,800,000 or 2.4% on a reported basis and 2.8% on an organic basis from the Q1 of 2023. Speaker 300:13:23The growth in software solutions net sales, which increased $10,200,000 or 16% on an organic basis, combined with higher capital markets transactional sales more than offset a year over year decline in Capital Markets and Investment Companies compliance revenue with the vast majority of that decline related to print and distribution revenue that Dan highlighted earlier. Excluding print and distribution, net sales grew approximately 10%. 1st quarter adjusted non GAAP gross margin was 60.6%, approximately 5.90 basis points higher than the Q1 of 2023, primarily driven by a favorable sales mix, including lower overall print volume and the impact of ongoing cost control initiatives, partially offset by incremental investments to accelerate our transformation. Adjusted non GAAP SG and A expense in the quarter was $68,100,000 a $1,800,000 increase from the Q1 of 2023. As a percentage of net sales, adjusted non GAAP SG and A was 33.5 percent, an increase of approximately 10 basis points from the Q1 of 2023. Speaker 300:14:47The increase in adjusted non GAAP SG and A was primarily driven by an increase in selling expenses as a result of higher sales, higher bad debt expense and higher incentive compensation expense, partially offset by lower third party expenses and the impact of cost control initiatives. Our first quarter adjusted EBITDA was $55,200,000 an increase of $12,800,000 or 30.2 percent from the Q1 of 2023. 1st quarter adjusted EBITDA margin was 27.1%, an increase of approximately 580 basis points from the Q1 of 2023, primarily driven by a favorable sales mix, higher overall sales and cost control initiatives, partially offset by higher incentive compensation expense. Turning now to our Q1 segment results. Net sales in our Capital Markets Software Solutions segment were $53,000,000 an increase of 23.8% on an organic basis from the Q1 of last year, driven by the strong growth in Venue, our virtual data room product, which was up $10,200,000 or 43.4 percent year over year and achieved record quarterly sales. Speaker 300:16:14Consistent with the recent trend, during the Q1, Venue continued to benefit from an increase in page volume on the platform and higher pricing. In addition, our strong sales execution resulted in several large client wins in the quarter with those projects combined to account for strong recurring demand for our virtual data room platform as well as to our sales execution. Going forward, we expect Venue to continue to deliver solid year over year growth, albeit at a more moderate pace compared to the robust growth rate we achieved in the Q1 of this year, given the outsized impact of the large projects. In addition to overlapping Venue's accelerated growth, which started during the Q2 of 2023. Net sales of our recurring compliance product, ActiveDisclosure, including File 16 increased approximately 2% in the 1st quarter, driven primarily by growth in active disclosure service revenue, partially offset by lower Section 16 filing activity. Speaker 300:17:32The demand for Beneficial ownership filings continues to be impacted by a weak IPO market as well as elevated client churn as we transition to a subscription based model, a trend which we expect to continue in the near term. Following a modest year over year decline in active disclosure subscription revenue in the 4th quarter, 1st quarter subscription revenue increased 4% sequentially and was flat versus the Q1 of last year. During the Q1, we made continued progress to expand the adoption of ActiveDisclosure, resulting in the 3rd consecutive quarter of net client count growth. The improvement in client count combined with higher average price per client is generating a solid foundation for future ActiveDisclosure revenue. To illustrate this in greater detail, ActiveDisclosure's ACV from new logos during the Q1 is approximately double the level we achieved in the Q1 of 2023. Speaker 300:18:35The momentum in client count growth coupled with product enhancements create a strong foundation for future sales growth. As we have stated previously, we expect ActiveDisclosures growth rate in the second half of twenty twenty four to be stronger than in the first half as some of the headwinds we experienced in 2023 continue to play out in the first half of twenty twenty four. Adjusted EBITDA margin for the segment was 29.8%, an increase of approximately 12.90 basis points from the Q1 of 2023, primarily due to higher sales and a favorable sales mix from the growth in our high margin venue data room offering and cost control initiatives, partially offset by incremental investments in sales and marketing. Net sales in our Capital Markets Compliance and Communications Management segment were $91,100,000 a decrease of $3,000,000 or 3.2 percent from the Q1 of 2023, driven by lower capital markets compliance revenue, predominantly in lower margin print and distribution that Dan and I noted earlier, partially offset by higher transactional revenue. In the Q1, we recorded $48,000,000 of capital market and represents the Q1 of year over year revenue growth in this offering following 2 years of decline. Speaker 300:20:19We are encouraged by the year over year improvement in market activity during the Q1, which resulted in increased deal volume across both IPOs and debt offerings compared to the Q1 of 2023, though M and A activity was down on a year over year basis. In short, the deal environment remains soft compared to historical averages. While the outlook for capital markets transactional environment is uncertain, eFIN remains very well positioned to capture a significant share of future demand for transactional related products and services when market activity picks up. Adjusted EBITDA margin for the segment was 34.5%, an increase of approximately 5.90 basis points from the Q1 of 2023. The increase in adjusted EBITDA margin was primarily due to a favorable sales mix featuring growth in high margin capital markets transactional sales and lower print and distribution revenue as well as the impact of cost control initiatives, partially offset by higher incentive compensation expense and higher bad debt expense. Speaker 300:21:34Net sales in our Investment Company Software Solutions segment were $27,300,000 an increase of 3.4% versus the Q1 of 2023, driven by growth in ArcSuite subscription revenue, which increased by approximately 9%, partially offset by lower services revenue compared to the Q1 of 2023, which benefited from higher one time implementation revenue. As we have stated previously, based on the incremental revenue from Taylor shareholder reports, we expect stronger ArcSuite revenue growth starting in the second half of twenty twenty four. We remain well positioned to capture opportunities from regulatory changes to drive future recurring revenue growth. Adjusted EBITDA margin for the segment was 29.3%, a decrease of approximately 180 basis points from the Q1 of 2023. The decrease in adjusted EBITDA margin was primarily due to higher product development and technology investments in support of growth opportunities such as tailored shareholder reports, partially offset by cost control initiatives and higher sales. Speaker 300:22:52Net sales in our Investment Companies Compliance and Communications Management segment were $32,000,000 a decrease of $2,400,000 or 7 percent from Q1 of 2023, driven primarily by a reduction in print and distribution revenue related to the long term secular decline in the demand for printed materials. Adjusted EBITDA margin for the segment was 25.6%, approximately 170 basis points lower than the Q1 of 2023. The decrease in adjusted EBITDA margin was primarily due to lower sales, partially offset by the impact of cost control initiatives. Non GAAP unallocated corporate expenses were $8,200,000 in the quarter, a decrease of $1,300,000 from the Q1 of 2023, primarily driven by lower third party expenses and the impact of cost control initiatives, partly offset by an increase in expenses aimed at accelerating our transformation and higher healthcare costs. Free cash flow in the quarter was negative $40,200,000 an improvement of $21,900,000 compared to the Q1 of 20 23. Speaker 300:24:13The year over year improvement in free cash flow is primarily driven by an increase in adjusted EBITDA and favorable working capital, partially offset by higher capital expenditures related to investments in our software products and the underlying technology to support them. We ended the quarter with $204,500,000 of total debt and $160,800,000 of non GAAP net debt, including $80,000,000 drawn on our revolver. From a liquidity perspective, we had access to the remaining $219,000,000 of our revolver as well as $43,700,000 of cash on hand. As of March 31, 2024, our non GAAP net leverage ratio was 0.7 times. As a reminder, our cash flow is historically seasonal. Speaker 300:25:10We are a user of cash in the Q1, closer to breakeven in the 2nd quarter and generate more than 100 percent of our free cash flow in the second half of the year. Regarding capital deployment, we repurchased approximately 140,000 shares of our common stock during the Q1 for $8,800,000 at an average price of $62.61 per share. As of March 31, 2024, we had $141,200,000 remaining on our $150,000,000 stock repurchase authorization. Going forward, we will continue to take a balanced approach toward capital deployment. We continue to view organic investments to drive our transformation, share repurchases and net debt reduction each as key components of our capital deployment strategy and we'll remain disciplined in this area. Speaker 300:26:11As it relates to our outlook for the Q2 of 2024, we expect the reduction in print and distribution revenue we highlighted earlier to continue in the Q2, which historically is comprised of a heavy mix of print and distribution sales. This component of our sales profile becoming less significant over time continues to improve our overall sales mix and facilitates our long term margin expansion. With that as the backdrop, we expect consolidated second quarter net sales in range of $235,000,000 to $250,000,000 and adjusted EBITDA margin in the low 30% range. Compared to the Q2 of last year, the midpoint of our consolidated revenue guidance, dollars 242,000,000 implies consolidated net sales approximately flat to last year's Q2 as the reduction in print and distribution sales is expected to offset growth in software solution sales. Further, this guidance assumes capital markets transactional sales of approximately $50,000,000 up approximately $5,000,000 from last year's 2nd quarter and up $2,000,000 from the $48,000,000 we recorded in this year's Q1. Speaker 300:27:36With that, I'll now pass it back to Dan. Speaker 200:27:41Thanks, Dave. Our performance in the Q1 offers a further proof point that our strategy and execution continue to make DFIN more durable and structurally resilient than in the past. As we progress on our transformation journey, we will continue to invest in opportunities to drive profitable recurring revenue growth, while also continuing to aggressively manage our cost structure and being disciplined stewards of capital. We are excited by the opportunities created by regulatory changes on the horizon. In the meantime, we are focused on creating best in class regulatory and compliance solutions to help our clients comply with those recurring regulations. Speaker 200:28:23Before we open it up for Q and A, I'd like to thank the DFIN employees around the world who have been working tirelessly to ensure our clients continue to receive the highest quality solutions. Now with that, we're ready for questions. Operator00:28:41Thank you. We will now begin the question and answer session. And your first question comes from the line of Charlie Strauzer with CJS Securities. Your line is Speaker 500:29:18open. Hi, good morning. Speaker 200:29:21Good morning, Charlie. Speaker 600:29:22How are Speaker 500:29:23you guys? I just wanted to touch base on one thing this morning on margin side. EBITDA margin, nice improvement year over year also versus our model. Just the factors that help that kind of drive that along here, are they expected to kind of continue in Q2 when you look at guidance as well? Speaker 300:29:48Yes, Charlie, this is Dave. I'll take it. Thanks for the question. So, a few things driving margin in Q1, most notably the favorable mix that we highlighted in the prepared remarks. And I would point to 2 things there. Speaker 300:30:061 is the tremendous growth that we saw in the Venue Data Room offering and obviously the incremental margin on that are very high. And when you look at the 20% decline or so in the lower margin print revenue, right, you put those two things together and that really drives a lot of the margin improvement. The third thing I would point to or second thing I would point to, sorry, would be the work we continue to do on the cost structure really being disciplined from a cost perspective. As we look at Q2 and beyond, from a cost perspective, I think you can assume we'll continue to be disciplined there, obviously overlapping some tougher comps as we go forward from overall cost structure perspective. And then as we noted in the prepared remarks, from a mix perspective, a few things there. Speaker 300:31:141, the software growth in particular for ActiveDisclosure and ArcSuite, don't expect much different from a growth perspective in Q2, but really ramping up in the back half of the year. Probably the one thing I would point to in Q2 and we noted some of the large venue data rooms that we had in Q1, which drove about half the growth, it is tough to overcome and then we start to overlap tougher comps in venue. But certainly from a print perspective, which we also noted, would expect that to come down. Overall, we would say margins roughly in Q2 roughly flat to what we delivered last year. And then like I said, as you look to the back half of the year with the incremental software growth starting to improve there. Speaker 500:32:16Got it. And just if you look at kind of the improving IPO market, obviously, a handful of good deals, good aftermarket performance and that could lead to obviously more transactions coming out of the pipeline. When you talk to your clients out there in the legal and banking side, what's the tone there about IPOs? Speaker 700:32:41Hi, it's Craig Clay. I'll take that. I think first, I'll start with a leading indicator on the transactional market. After many quarters of decline, investment banks filing this quarter had fees from new issuance, debt and M and A that were up. So 27% is the highest increase since the Q1 of 'twenty two when the Fed started raising rates. Speaker 700:33:07So if you look at what happened in the quarter, certainly improved IPOs. It feels good to have a little bit of improvement. There were 16 companies that raised more than $50,000,000 $8,000,000,000 in the quarter. We had a 57 percent of that came from the healthcare sector, which is nice to see. DFIN is pleased to have supported 75% of the Q1 IPO filings. Speaker 700:33:34A lot of great names in there, BB Foods, BrightSpring, etcetera. 9 of those 16 are trading well above their IPO price. So this is positive for the IPO market. Our clients are telling us that it's an exciting thing as they look to the future. And I think if you look at April, we had 18 IPOs raised a combined 5,300,000,000 dollars This is just barely above the 10 year historical average by deal count and by proceeds, but I think the market will take it. Speaker 700:34:05It was the busiest month for overall new issuance, greater than $100,000,000 since November of 2021. Nine deals in the month over $100,000,000 Our share was 67% of that. The largest deal in April, we were very happy to support was the $1,000,000,000 offering of Viking. So Viking starts price last night, begins trading during this call. They price during or at the top of their range and they increased the number of shares in the offering several times. Speaker 700:34:38Another positive for the market, large VC tech continued a comeback. So we had Rubrik, which was nice to see. So in April, we also had new filings over $100,000,000 There were $8,000,000 which was a small increase from the prior month of 6. As we previously commented, we remain encouraged, our clients remain encouraged by the process deals that are in process, by the pent up demand. We're working with several highly marquee deals that are publicly filed. Speaker 700:35:11We also have some that are still confidential. And given the steps our clients are taking to remain public or to go public, we think they'll respond when the market opens. The Wall Street Journal mentioned last week that the recent success bodes well and companies potentially would move their IPO up. We haven't seen that publicly, but we're encouraged by the receptivity of the IPOs that have gone out and that the IPO market will continue to normalize into the summer. Speaker 500:35:43Great. Thank you. Operator00:35:47Your next question comes from the line of Pete Heckmann with D. A. Davidson. Your line is open. Speaker 600:36:00Good morning, Pete. Speaker 400:36:01Cher, hey, good morning. We had noticed that ourselves. I think we had counted 73% of the top maybe 15%, I think you said 75% of the top 16%. But what do you attribute that to just better competitive solutions from defin or are there some competitors that have fallen off or just kind of fortunate mix of a high retention rate amongst the IPOs that were going out? Speaker 700:36:31Yes, thanks for the question. I think it's a number of factors. I think our industry leading portfolio of solutions, we're dedicated to our clients' private to public journey. So we have a rich history in this space. I think when the market gets busy, we play an important part serving on their deal team, helping them project manage and providing most importantly the software to make that happen. Speaker 700:36:59So I think it's about our clients in their moment of need turning to somebody who can provide the best solution for them. I think the exciting thing is that these are event driven transactions, but it's providing this pipeline for recurring software subscriptions that support our clients' ongoing compliance, so the defense compliance platform. But also as you heard in the venue results, that's a leading indicator and it also supports the IPO market. Almost every one of these deals has a VDR associated with it as they're dual track. I think what they're getting, what our clients are getting when they come here is the trust that clients have in defense to get their deal done. Speaker 700:37:42And then the support, the services and the software, whether it's active disclosure or venue, that helps them do the work that they do. Speaker 300:37:54Okay, that's helpful. And then Speaker 400:37:55how about on tailored shareholder report as we get 1 quarter closer to the go live, any change in the thought process around the potential incremental benefit to DFIN or any higher confidence in that number? Speaker 200:38:10Yes. Let me this is Dan. I'll start and then I think Dave and Eric may have a few comments. But yes, we with the new regulation, the tailored shareholder report is a financial report. And so, yes, we look at this on the software side and we have great position with funds with our Arc Reporting financial reporting offering within Arc Suite and TSR is now a new module that's integrated within ARC reporting. Speaker 200:38:40And so for those using ARC reporting, it builds upon the existing data flows, generates underlying TSR, the data model creates the TSR itself and then we tag and assemble the TSR into the NCSR and then ultimately file with the SEC. So we've been in the process of onboarding, configuring clients to the TSR module. We've seen good progress. We're really not seeing any more of we're seeing a little, I guess, play out in the marketplace, but that's pretty well set. On the distribution side, for now, the requirement is the documents printed and distributed. Speaker 200:39:24And some of the print continues to play out in the market. As we mentioned on the last call, we're certainly seeing more price pressure on the printing side. And so, let Dave may want to comment on the print as well as Eric. Speaker 800:39:44Yes. Thanks, Dan. And thanks for the question, Pete. Just building on Dan's comment, I would draw your attention to our 2 recent press releases where we've been able to successfully test file 2 full form NCSR and IXBRL tagged TSRs. I think this represents our ability to help our clients and serve our clients in the way they prefer to work, so via traditional services as well as our SaaS solution, ARC Reporting. Speaker 800:40:16And our product team has done a tremendous job getting that type of test filing completed well in advance of the July deadline. So very pleased with the progress from that perspective. Our revenue mix seems to be trending toward software, which does reflect DFIN's position as a leader in the investment company's regulatory reporting software. So that's been somewhat consistent. And as Dan mentioned, we're consistent with our operating plan over the past few years. Speaker 800:40:47We continue to exit low margin print. As it relates to TSR printing, we're operating under that same discipline. And where we have projects that make sense and add value for our clients from a straight through processing perspective, where we can deepen and provide end to end efficiency, we'll certainly take that work. But we will stay true to our operating plan around low margin print and exiting that Speaker 400:41:15where we need to. Okay. All right. That's helpful. Speaker 300:41:19And Pete, I would just jump in on there. Both Dan and Eric talked about some of the our approach to print and how it ties into the bigger strategy and the discipline around pricing. I think if you look at our historical gross margins for print and distribution, there's really a strong trend there. Going back to 2019, we had sales north of $321,000,000 dollars 20 percent gross margin, so $63,000,000 in gross profit dollars. I think you contrast that with where we're currently at on a trailing 4 quarter basis, dollars 158,000,000 of sales, gross margin is 43%, gross profit dollars are $67,000,000 So we've cut our print revenue in half over last 4, 5 years or so, taking out more than $160,000,000 of sales and actually increasing our gross profit dollars by a few $1,000,000 have done a great job with our operating model. Speaker 300:42:35We've out sourced 100% of our offset printing. We've reduced our cost structure and made it more variable. And again, taking the disciplined approach to pricing have really driven this trend. Kind of the high level, right, we know all revenues not created equally. And then I would say even within print and distribution, all revenue is not the same. Speaker 300:43:03And so we'll continue to look at the underlying profitability, not only for print and distribution or at the offering level, but also at the customer level to continue to drive the financial results we have here. Speaker 400:43:20Okay. Thanks, Dave, for that. I mean, while I've got you, if I can just sneak in one more, but I didn't hear it. But in terms of just thinking about second quarter numbers, would you think that print would be down by about the same magnitude as the Q1? Speaker 300:43:38Yes. So print in the second quarter or the second quarter, I should say, is proportionately typically a heavy print quarter. And so roughly about the same as what we saw in Q1. Speaker 400:43:54Okay. All right. That's helpful. I appreciate it. I'll get back in the queue. Speaker 200:43:59Thank you. Operator00:44:01Your next question comes from the line of Kyle Peterson with Needham. Your line is Speaker 900:44:07open. Great. Thanks guys and good morning. I want to touch on Venue a little bit more. The growth was really impressive. Speaker 900:44:18Appreciate some of the color on new clients and such. But just want to see if you could unpack a little bit outside of the new client wins, what you guys kind of the impact of whether it's pricing versus just kind of usage or volume will be really helpful. Speaker 700:44:37Sure. This is Craig. Thanks for the question. I think as you saw and Dave reviewed, great growth 43%. I'll unpack that a little bit. Speaker 700:44:48It was up 10% sequentially from Q4. So record high revenue driven by 3 factors. So we're overlapping Q1's lowest quarter of 2023. As Dave mentioned, we'll have tougher comps as we move into the second half of twenty twenty four. The increase was driven by page count activity. Speaker 700:45:13So higher activity on existing rooms, new rooms, as well as higher pricing. And these rooms are staying open longer, again, reinforcing the stability of venue. The underlying demand is a little less volatile versus M and A. So the demand we see is becoming reoccurring in nature for this sort of more stable revenue stream in what has been an event driven transactional software product. Dave mentioned the large projects, even when you strip those out, we have some nice growth. Speaker 700:45:52Our clients are telling us the deal making as well as is looking up. And so we're seeing that venue as a precursor to deal making. I think companies are not waiting on the Fed anymore. So the current level of interest rates in and of itself has not been a barrier to deal making in the past. Before sort of a recent zero interest rate area, the prior U. Speaker 700:46:18S. M and A volume peaks came when the average fund rate was about 5%. So we keep seeing demand for high quality assets. There's large amounts of capital that's being looked to put to work. And we're pleased with our pipeline. Speaker 700:46:34You've heard we're executing well. And as Dan stated, venues broad application in the ecosystem, whether it's announced, unannounced, whether it's public or private, as I mentioned in the IPO space, it's just more resilient. So we're going to continue to focus on what's got us here, which is sales execution, share expansion, delivering great product and serving our clients. Speaker 900:47:03That's really helpful. And maybe if I could just get a follow-up on capital allocation here. It seems like you guys were able sell some land and I know you guys have divested some assets over time. But just wanted to pick your brain on kind of how you guys are thinking about putting the proceeds from some of that capital work and how you guys are thinking about balancing, whether it's potential M and A or further buybacks or debt pay down? Speaker 200:47:38Yes. Thank you. Yes, I'll start and if Dave wants to weigh in. So really more of the same. We the highest and best use, we want to make sure we have financial flexibility to execute the strategy. Speaker 200:47:53We have built up ample financial flexibility. And so you've seen us obviously buying back more shares and then paying down debt. And those are the 2 highest priorities along with the organic investment and accelerating the transformation. And that will continue. I mean, the proceeds from the sale of the building in this case or the land will go into the coffers and be targeted towards those three priorities. Speaker 200:48:33But no changes at all in capital priorities. We remain extremely disciplined across all aspects of capital deployment. Speaker 300:48:45Yes. Dan, I would just reiterate, Kyle, you specifically asked about M and A. As Dan pointed out, our view, the best use of capital to drive returns is the organic investment and M Operator00:49:03and Speaker 300:49:05A opportunities, especially for those that are M and A opportunities, especially for those that are purely aligned with our strategy, We think that valuations are still pretty rich, certainly weighed against the opportunities we have from an organic perspective. And so we keep that on the radar, but stay very, very disciplined on driving the best returns. Speaker 900:49:36That's helpful. It makes sense. Thanks guys. Speaker 100:49:39Thank you. Operator00:49:42Your next question comes from the line of Raj Sharma with B. Riley. Your line is open. Speaker 600:49:49Yes, thank you. Congratulations on the good cost cutting and the margins. Next question? Last question. Yes, sure. Speaker 600:49:59I have a couple of questions. 1, a, the revenue contribution from the TSRs, do you have a reasonable idea of what that could be this year and next year? And also, does that push up the gross margin profile of your software business? Speaker 300:50:24Yes, Raj, we said so last quarter, we said $20,000,000 to $25,000,000 on an annualized basis contribution from TSR with roughly half of that coming in 2024. As we talked about earlier, on the print side, I think a lot of that is still in play and we're very happy with where we're at on the software, right, which is to your point delivers higher margins and certainly much higher incremental margins. And so on a go forward basis, yes, that's part of the margin expansion, right, this mix shift with more software proportionately and less print proportionately. The other thing I would say is we're still investing pretty heavily in PSR. And so I think what you'll start to see more of the margin expansion as it specifically relates to TSR starting to hit in 2025s and beyond when we get past this initial product development investment. Speaker 600:51:42Got it. And then on the ActiveDisclosure side, could you help me understand just kind of recap on what's going on earlier? Last year, there were some headwinds. There was a switch to the digital version. What growth rate could we expect from ActiveDisclosure going forward? Speaker 600:52:05I know that you've talked about a second half pickup. Could you what caused the weakness in the Q1? And then how is that transition coming? Speaker 700:52:16Raj, it's Craig. Thanks for the question. So yes, as you mentioned, AD grew 2% in the quarter. So compared to recent trend, declined 2% in Q4. It grew 1% in Q3. Speaker 700:52:31It was up 6% in Q2 and 2% in Q1. So we're continuing to make progress toward the future growth of the platform. It's our 3rd consecutive quarter of net client growth. Within what drove Q1 results, one of the items mentioned, we're excited to have built a leading Section 16 filing platform within active disclosure. So Section 16 beneficial owners publicly disclosing, but within the quarter there was lower Section 16 filing activity driven from the transition to a subscription model in the new product, as well as driven by fewer IPOs. Speaker 700:53:15So we've covered that topic. We're also up against a lower customer count as a result of the 83 churn that was associated in the first half of last year. The continued lack of IPOs, we're not able to keep our own client, also negatively impacting SPAC liquidations. Now we're offsetting that with price increases in service revenue. So to your question, what to expect in Q2 and in the second half of twenty twenty four, we're excited by what we see, but the progress we've been making to expand the adoption of AD is slowly being reflected. Speaker 700:53:53In this quarter's result, we have some perspective metrics that are favorable. So some of them were mentioned. So Q1 2024, our 3rd consecutive quarter of net client growth, which is exciting. It's much better than we've seen in past quarters. Mentioned our average price up in the mid teens versus ActiveDisclosure 3, which we have again migrated off of. Speaker 700:54:20As Dave stated, we had net new logo ACV, which approximately double Q1 of 2023. Again, what's moving on to the platform will start to show in future quarters. So we expect the AD growth in the second half of twenty twenty four to be stronger. We're going to overlap the platform transition and related churn. And the excitement by what we see is we have the newest fit for purpose product in the market and the market wants what we build. Speaker 700:54:51We're able to price it accordingly. It's an opportunity for us, for D VAN. It's also an opportunity for our clients because our clients can pay less than the leading competitor. So our clients are recognizing the value of this better product. They want a choice. Speaker 700:55:08They get to have the newest product in the market with product improvements such as our editor or track changes. It's all driven by our decades in the market in serving SEC clients. So our current clients are using AD for their most important reporting needs and our pipeline is strong because our future clients see DFAN and active disclosure as the compliance leader. Speaker 600:55:37Thank you. Yes, that's very helpful color. And just lastly, on the the print declines were more than expected. Could you help me understand that, Dave? I know you've said they're going Speaker 500:55:50to be Speaker 600:55:50flat. It's a print heavy second quarter, it's a print heavy quarter. Have the print declines bottomed out? We had expect I know you had taken quite a few of the print declines in the last several years and you had expected a 5% ongoing decline in the market. Is that sort of still in line and a little bit more color on that please? Speaker 300:56:21Yes, Raj, I appreciate the follow-up there. And I'd point to a couple of things. One, I think from the 5% perspective is intended to address the secular decline that we just see print becoming smaller and smaller over time. To your point, we've done a really nice job managing not only the cost side and the print, but the overall volume as we talked about in 2021 with Rule 30e3 and 498a saw print volume drop, right, as the distribution default changed from print to electronic. At the same time, we use that as a catalyst to exit some of the lower margin print work and variableize the cost structure, etcetera. Speaker 300:57:22And to my earlier point that's proved to be a good strategy for us. Gross margin in print has gone from 20% to over 40%. And so what I would say is we're continuing to take a look at the economics around certain print jobs, the economics around certain clients and whether or not that print makes sense for us. I think as we saw in the Q1 here, not much revenue change, but pretty significant change in profit and really driven by that mix, right, more software, less print, driving profit dollars, driving margin. We will continue to see that in Q2, because that same dynamic is playing out. Speaker 300:58:19I think as we get into the back half of the year, that certainly starts to temper, but we're going to continue to keep an eye on the overall mix, the overall economics that that component pieces of our offering drive and again the aggregate customer economics as well. Speaker 600:58:43Great. Thank you for all the color again. Great job on the business and running it profitably. Speaker 900:58:51Thank you again. I'll take it offline. Speaker 200:58:53Thank you, Suraj. Operator00:58:56That concludes our Q and A session. I will now turn the conference back to Dan Lee for closing remarks. Speaker 200:59:03Okay. Thank you, and thank you, everyone, for joining. We look forward to speaking with you both on our call in a few months and in the interim. Thanks again. Operator00:59:16Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallDonnelley Financial Solutions Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Donnelley Financial Solutions Earnings HeadlinesDonnelley Financial Solutions price target lowered to $64 from $72 at DA DavidsonApril 19, 2025 | markets.businessinsider.comDFIN to Announce First-Quarter Results and Host Investor Conference Call on April 30, 2025April 16, 2025 | gurufocus.com2025 could be "worse than the dot-com bust", says man who predicted 2008 banking crisisWhat's coming next to the U.S. market could be worse than anything we've ever seen before – worse than the dot-com bust, worse than the COVID crash, and even worse than the Great Depression. What's coming, he says, could soon crash the market by 50% or more – and keep it down for 10, 20, or even 30 years. April 26, 2025 | Stansberry Research (Ad)DFIN to Announce First-Quarter Results and Host Investor Conference Call on April 30, 2025April 16, 2025 | prnewswire.comD.A. Davidson Sticks to Its Buy Rating for Donnelley Financial Solutions (DFIN)April 12, 2025 | markets.businessinsider.com1DFIN : The Analyst Verdict: Donnelley Financial Solns In The Eyes Of 4 ExpertsMarch 28, 2025 | benzinga.comSee More Donnelley Financial Solutions Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Donnelley Financial Solutions? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Donnelley Financial Solutions and other key companies, straight to your email. Email Address About Donnelley Financial SolutionsDonnelley Financial Solutions (NYSE:DFIN) provides innovative software and technology-enabled financial regulatory and compliance solutions in the United States, Asia, Europe, Canada, and internationally. It operates through four segments: Capital Markets Software Solutions (CM-SS); Capital Markets Compliance and Communications Management (CM-CCM); Investment Companies Software Solutions (IC-SS); and Investment Companies Compliance and Communications Management (IC-CCM). The CM-SS segment provides Venue and ActiveDisclosure solutions to public and private companies to manage public and private transactional and compliance processes; collaborate; and tag, validate, and file SEC documents. The CM-CCM segment offers tech-enabled services and print and distribution solutions to public and private companies for deal solutions and SEC compliance requirements. The IC-SS segment provides clients with the Arc Suite platform that contains a comprehensive suite of cloud-based solutions, including ArcDigital, ArcReporting, ArcPro, and ArcRegulatory, as well as services that enable storage and management of compliance and regulatory information in a self-service and central repository for accessing, assembling, editing, translating, rendering, and submitting documents to regulators and investors. The IC-CCM segment offers tech-enabled solutions for creating, filing and distributing regulatory communications, and solutions for investor communications, as well as XBRL and iXBRL-formatted filings pursuant for Investment Company Act through the SEC's EDGAR system. This segment also provides turnkey proxy services, including discovery, planning and implementation, print and mail management, solicitation, tabulation services, stockholder meeting review, and expert support. 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There are 10 speakers on the call. Operator00:00:00Thank you for standing by. My name is Kath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donnelly Financial Solutions First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:30I would now like to turn the call over to Mike Zhao, Head of Investor Relations. Please go ahead. Speaker 100:00:40Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions' Q1 2024 results conference call. This morning, we released our earnings report, including a supplemental trending schedule of historical results, copies of which can be found in the Investors section of our website atdfinsolutions.com. During this call, we'll 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 details in our most recent Annual Report on Form 10 ks, quarterly report on Form 10 Q and other filings with the SEC. Speaker 100:01:24Further, we will discuss certain non GAAP financial information, such as adjusted EBITDA, adjusted EBITDA margin and organic net sales. 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 Gardella, Craig Clay, Eric Johnson, Boyd Strimling and Cammy Turner. Speaker 100:02:11I will now turn the call over to Dan. Speaker 200:02:15Thank you, Mike, and good morning, everyone. We started 2024 by building on the positive momentum in our performance from last year, delivering consolidated organic net sales growth with an improved sales mix, strong year over year growth in adjusted EBITDA, adjusted EBITDA margin expansion and improvements in both operating cash flow and free cash flow. We delivered 1st quarter net sales of $203,400,000 which increased 2.8% on an organic basis compared to the Q1 of 2023. I am encouraged by the composition of our organic net sales growth with software solutions net sales increasing 16%, tech enabled services net sales increasing nearly 6% and print and distribution net sales declining approximately 20% as we continue to balance our revenue profile to drive improved profitability. The combination of the improved revenue profile, modest consolidated net sales growth and cost management yielded 1st quarter adjusted EBITDA of $55,200,000 and adjusted EBITDA margin of 27.1 percent, both of which are above last year's Q1 and once again significantly stronger than historical periods with similar revenue profiles. Speaker 200:03:42Our Q1 performance highlights the continued progress we are making in our transformation and positions us well to achieve our updated long term financial targets. A key driver of our Q1 results is the performance of our software solutions portfolio, which reached $80,300,000 in net sales, a new quarterly record. Software solutions net sales growth accelerated in the first quarter to 16% on an organic basis versus the Q1 of 2023, an increase from the growth trends over the last few quarters. The growth in software solutions net sales was led by the performance of Venue, our virtual data room product, which posted 43% sales growth. We are encouraged by Venue's strong performance, which reflects strong sales execution across Venue's broad application within the M and A ecosystem that serves both announced and unannounced deals as well as across public and private companies alike. Speaker 200:04:44This results in more resilient, stable demand than our transactional offerings. As a further demonstration of the momentum in our software solutions net sales, the growth trends of our recurring compliance software products, ActiveDisclosure and ArcSuite, both improved in the Q1, with each product delivering stronger year over year growth on a sequential basis compared to the Q4 of 2023. Software Solutions made up 39.5 percent of total 1st quarter net sales, up approximately 4 20 basis points from last year's 1st quarter net sales mix. On a trailing 4 quarter basis, software solutions net sales are now in excess of $300,000,000 and represent 37.8 percent of total net sales, an increase of approximately 370 basis points from the Q1 2023 trailing 4 quarter period. Looking ahead, we expect the growth rates for ActiveDisclosure and ArtSuite each to improve further in the second half of this year. Speaker 200:05:48For ActiveDisclosure, this improvement is driven by recent wins combined with overlapping last year's platform transition. In the case of ArcSuite, the improved growth rate is primarily driven by the tailwind from the Tailored Shareholder Reports Regulation. As we continue to evolve toward a higher sales mix of software solutions during the Q1, that mix shift was accelerated by a reduction in print and distribution revenue, which declined by approximately $10,000,000 or 20% compared to the Q1 of 2023. This reduction was evident mostly in the printing and distribution of annual reports and proxy statements aligned with our strategy to manage our sales mix toward a proportionally heavier mix of higher margin tech enabled services and software solutions net sales, while benefiting from the financial profile associated with such a sales mix. Dave will cover our results in more detail, but first I'd like to provide an update on our readiness for the Tailored Shareholder Reports regulation ahead of its July 2024 compliance date. Speaker 200:06:57As I've shared previously, we are making great progress in our technology development and go to market plans aimed to help our mutual fund and exchange traded funds clients operationalize the reporting to comply with this regulation, including being the first to market with the initial release of our TSR SaaS solution during the Q4 of last year. As we continue to mature and scale our TSR offerings, I'm excited by the end to end compliance solutions we have created for the regulation, giving DFID an unmatched ability to serve clients the way they wish to work via either SaaS based solutions or traditional services, all in a one stop shop that eliminates handoffs in the compliance process. In a further demonstration of our software product readiness, last week we announced Deepen successfully test filed a full form NCSR, including an IXBRL tagged TSR to the SEC on behalf of a large asset manager. The test filing was completed via our Arc Reporting SaaS product, the leading financial close software for investment companies and a component of our ARC suite offering. The ARC reporting solution offers clients the ability to execute financial calculations, report generation at the fund and share class level, IXBRL tagging, reviewing and filing all through a single solution. Speaker 200:08:26Further, integrated data flow within Arc Reporting eliminates the need for post production reconciliation and guarantees consistency with the fund's financial results at the share class level. This successful test filing demonstrates the dynamic end to end straight through processing that ArcSuite offers our clients, enabling them to create file web host and distribute complex financial reports all from a single platform. In addition to the functionality offered by ArcReporting, DFIN is also ready to serve clients via traditional services for those who prefer that approach. In early April, we successfully completed the test filing of a full NCSR compliance document based on the new regulatory requirements, including IXBRL tagging of a tailored shareholder report by leveraging our industry leading service capabilities. This test filing to the SEC was done on behalf of another large asset manager and highlights Deepin's deep expertise in the areas of IXPRL tagging and compliance filing. Speaker 200:09:32Our recent successful test filings represent an important milestone in our readiness journey and demonstrate DFIN's leadership in the industry and commitment to deliver a streamlined solution for a complex regulation. With less than 3 months to go until the July 2024 compliance date, EFIN remains very well positioned to serve our clients while capturing the recurring revenue opportunities associated with the Tailored Shareholder Reports regulation. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our Q1 results and our outlook for the Q2. Dave? Speaker 300:10:13Thank you, Dan, and good morning, everyone. Before I discuss our Q1 financial performance, I'd like to recap 2 housekeeping items. First, during the quarter, we completed the sale of land in Phoenix, Arizona, the site of an office which we shut down and demolished in 2021 and was previously reflected on our consolidated balance sheet as an asset held for sale. The sale resulted in net proceeds of $13,200,000 of which $12,400,000 was received in the Q1 of 2024 and $800,000 of non refundable fees were received in 2023. We recognized a net pre tax gain of $10,600,000 related to the sale, of which $9,800,000 was recorded in the Q1 of 2024 and $800,000 was recognized in 2023. Speaker 300:11:11The net pre tax gain was recorded within Speaker 400:11:21This gain is excluded from our non GAAP results. Speaker 300:11:23This gain is excluded from our non GAAP results. 2nd, as discussed on last quarter's earnings call, we completed the sale of our eBrevia business in the Q4 of 2023. For full year 2024, the disposition negatively impacts the year over year total net sales comparison by approximately $4,000,000 with approximately $1,000,000 net sales impact for each quarter. The impact on our gross profit and adjusted EBITDA comparisons is de minimis. For purposes of year over year net sales change discussions, organic net sales change adjust for the impacts of the Ebrevia disposition as well as changes in foreign currency exchange rates. Speaker 300:12:13A reconciliation of reported to organic net sales change is included in our earnings release. Now turning to our Q1 results. As Dan noted, we continue to demonstrate positive momentum in our performance during the Q1 by delivering consolidated net sales growth, a strong year over year increase in adjusted EBITDA and improvements in both operating cash flow and free cash flow compared to the Q1 of 2023. By continuing our shift toward a more profitable sales mix, while also driving operating efficiencies, we expanded our first quarter adjusted EBITDA margin by 580 basis points to 27.1%. On a consolidated basis, total net sales for the Q1 of 2024 were $203,400,000 an increase of $4,800,000 or 2.4% on a reported basis and 2.8% on an organic basis from the Q1 of 2023. Speaker 300:13:23The growth in software solutions net sales, which increased $10,200,000 or 16% on an organic basis, combined with higher capital markets transactional sales more than offset a year over year decline in Capital Markets and Investment Companies compliance revenue with the vast majority of that decline related to print and distribution revenue that Dan highlighted earlier. Excluding print and distribution, net sales grew approximately 10%. 1st quarter adjusted non GAAP gross margin was 60.6%, approximately 5.90 basis points higher than the Q1 of 2023, primarily driven by a favorable sales mix, including lower overall print volume and the impact of ongoing cost control initiatives, partially offset by incremental investments to accelerate our transformation. Adjusted non GAAP SG and A expense in the quarter was $68,100,000 a $1,800,000 increase from the Q1 of 2023. As a percentage of net sales, adjusted non GAAP SG and A was 33.5 percent, an increase of approximately 10 basis points from the Q1 of 2023. Speaker 300:14:47The increase in adjusted non GAAP SG and A was primarily driven by an increase in selling expenses as a result of higher sales, higher bad debt expense and higher incentive compensation expense, partially offset by lower third party expenses and the impact of cost control initiatives. Our first quarter adjusted EBITDA was $55,200,000 an increase of $12,800,000 or 30.2 percent from the Q1 of 2023. 1st quarter adjusted EBITDA margin was 27.1%, an increase of approximately 580 basis points from the Q1 of 2023, primarily driven by a favorable sales mix, higher overall sales and cost control initiatives, partially offset by higher incentive compensation expense. Turning now to our Q1 segment results. Net sales in our Capital Markets Software Solutions segment were $53,000,000 an increase of 23.8% on an organic basis from the Q1 of last year, driven by the strong growth in Venue, our virtual data room product, which was up $10,200,000 or 43.4 percent year over year and achieved record quarterly sales. Speaker 300:16:14Consistent with the recent trend, during the Q1, Venue continued to benefit from an increase in page volume on the platform and higher pricing. In addition, our strong sales execution resulted in several large client wins in the quarter with those projects combined to account for strong recurring demand for our virtual data room platform as well as to our sales execution. Going forward, we expect Venue to continue to deliver solid year over year growth, albeit at a more moderate pace compared to the robust growth rate we achieved in the Q1 of this year, given the outsized impact of the large projects. In addition to overlapping Venue's accelerated growth, which started during the Q2 of 2023. Net sales of our recurring compliance product, ActiveDisclosure, including File 16 increased approximately 2% in the 1st quarter, driven primarily by growth in active disclosure service revenue, partially offset by lower Section 16 filing activity. Speaker 300:17:32The demand for Beneficial ownership filings continues to be impacted by a weak IPO market as well as elevated client churn as we transition to a subscription based model, a trend which we expect to continue in the near term. Following a modest year over year decline in active disclosure subscription revenue in the 4th quarter, 1st quarter subscription revenue increased 4% sequentially and was flat versus the Q1 of last year. During the Q1, we made continued progress to expand the adoption of ActiveDisclosure, resulting in the 3rd consecutive quarter of net client count growth. The improvement in client count combined with higher average price per client is generating a solid foundation for future ActiveDisclosure revenue. To illustrate this in greater detail, ActiveDisclosure's ACV from new logos during the Q1 is approximately double the level we achieved in the Q1 of 2023. Speaker 300:18:35The momentum in client count growth coupled with product enhancements create a strong foundation for future sales growth. As we have stated previously, we expect ActiveDisclosures growth rate in the second half of twenty twenty four to be stronger than in the first half as some of the headwinds we experienced in 2023 continue to play out in the first half of twenty twenty four. Adjusted EBITDA margin for the segment was 29.8%, an increase of approximately 12.90 basis points from the Q1 of 2023, primarily due to higher sales and a favorable sales mix from the growth in our high margin venue data room offering and cost control initiatives, partially offset by incremental investments in sales and marketing. Net sales in our Capital Markets Compliance and Communications Management segment were $91,100,000 a decrease of $3,000,000 or 3.2 percent from the Q1 of 2023, driven by lower capital markets compliance revenue, predominantly in lower margin print and distribution that Dan and I noted earlier, partially offset by higher transactional revenue. In the Q1, we recorded $48,000,000 of capital market and represents the Q1 of year over year revenue growth in this offering following 2 years of decline. Speaker 300:20:19We are encouraged by the year over year improvement in market activity during the Q1, which resulted in increased deal volume across both IPOs and debt offerings compared to the Q1 of 2023, though M and A activity was down on a year over year basis. In short, the deal environment remains soft compared to historical averages. While the outlook for capital markets transactional environment is uncertain, eFIN remains very well positioned to capture a significant share of future demand for transactional related products and services when market activity picks up. Adjusted EBITDA margin for the segment was 34.5%, an increase of approximately 5.90 basis points from the Q1 of 2023. The increase in adjusted EBITDA margin was primarily due to a favorable sales mix featuring growth in high margin capital markets transactional sales and lower print and distribution revenue as well as the impact of cost control initiatives, partially offset by higher incentive compensation expense and higher bad debt expense. Speaker 300:21:34Net sales in our Investment Company Software Solutions segment were $27,300,000 an increase of 3.4% versus the Q1 of 2023, driven by growth in ArcSuite subscription revenue, which increased by approximately 9%, partially offset by lower services revenue compared to the Q1 of 2023, which benefited from higher one time implementation revenue. As we have stated previously, based on the incremental revenue from Taylor shareholder reports, we expect stronger ArcSuite revenue growth starting in the second half of twenty twenty four. We remain well positioned to capture opportunities from regulatory changes to drive future recurring revenue growth. Adjusted EBITDA margin for the segment was 29.3%, a decrease of approximately 180 basis points from the Q1 of 2023. The decrease in adjusted EBITDA margin was primarily due to higher product development and technology investments in support of growth opportunities such as tailored shareholder reports, partially offset by cost control initiatives and higher sales. Speaker 300:22:52Net sales in our Investment Companies Compliance and Communications Management segment were $32,000,000 a decrease of $2,400,000 or 7 percent from Q1 of 2023, driven primarily by a reduction in print and distribution revenue related to the long term secular decline in the demand for printed materials. Adjusted EBITDA margin for the segment was 25.6%, approximately 170 basis points lower than the Q1 of 2023. The decrease in adjusted EBITDA margin was primarily due to lower sales, partially offset by the impact of cost control initiatives. Non GAAP unallocated corporate expenses were $8,200,000 in the quarter, a decrease of $1,300,000 from the Q1 of 2023, primarily driven by lower third party expenses and the impact of cost control initiatives, partly offset by an increase in expenses aimed at accelerating our transformation and higher healthcare costs. Free cash flow in the quarter was negative $40,200,000 an improvement of $21,900,000 compared to the Q1 of 20 23. Speaker 300:24:13The year over year improvement in free cash flow is primarily driven by an increase in adjusted EBITDA and favorable working capital, partially offset by higher capital expenditures related to investments in our software products and the underlying technology to support them. We ended the quarter with $204,500,000 of total debt and $160,800,000 of non GAAP net debt, including $80,000,000 drawn on our revolver. From a liquidity perspective, we had access to the remaining $219,000,000 of our revolver as well as $43,700,000 of cash on hand. As of March 31, 2024, our non GAAP net leverage ratio was 0.7 times. As a reminder, our cash flow is historically seasonal. Speaker 300:25:10We are a user of cash in the Q1, closer to breakeven in the 2nd quarter and generate more than 100 percent of our free cash flow in the second half of the year. Regarding capital deployment, we repurchased approximately 140,000 shares of our common stock during the Q1 for $8,800,000 at an average price of $62.61 per share. As of March 31, 2024, we had $141,200,000 remaining on our $150,000,000 stock repurchase authorization. Going forward, we will continue to take a balanced approach toward capital deployment. We continue to view organic investments to drive our transformation, share repurchases and net debt reduction each as key components of our capital deployment strategy and we'll remain disciplined in this area. Speaker 300:26:11As it relates to our outlook for the Q2 of 2024, we expect the reduction in print and distribution revenue we highlighted earlier to continue in the Q2, which historically is comprised of a heavy mix of print and distribution sales. This component of our sales profile becoming less significant over time continues to improve our overall sales mix and facilitates our long term margin expansion. With that as the backdrop, we expect consolidated second quarter net sales in range of $235,000,000 to $250,000,000 and adjusted EBITDA margin in the low 30% range. Compared to the Q2 of last year, the midpoint of our consolidated revenue guidance, dollars 242,000,000 implies consolidated net sales approximately flat to last year's Q2 as the reduction in print and distribution sales is expected to offset growth in software solution sales. Further, this guidance assumes capital markets transactional sales of approximately $50,000,000 up approximately $5,000,000 from last year's 2nd quarter and up $2,000,000 from the $48,000,000 we recorded in this year's Q1. Speaker 300:27:36With that, I'll now pass it back to Dan. Speaker 200:27:41Thanks, Dave. Our performance in the Q1 offers a further proof point that our strategy and execution continue to make DFIN more durable and structurally resilient than in the past. As we progress on our transformation journey, we will continue to invest in opportunities to drive profitable recurring revenue growth, while also continuing to aggressively manage our cost structure and being disciplined stewards of capital. We are excited by the opportunities created by regulatory changes on the horizon. In the meantime, we are focused on creating best in class regulatory and compliance solutions to help our clients comply with those recurring regulations. Speaker 200:28:23Before we open it up for Q and A, I'd like to thank the DFIN employees around the world who have been working tirelessly to ensure our clients continue to receive the highest quality solutions. Now with that, we're ready for questions. Operator00:28:41Thank you. We will now begin the question and answer session. And your first question comes from the line of Charlie Strauzer with CJS Securities. Your line is Speaker 500:29:18open. Hi, good morning. Speaker 200:29:21Good morning, Charlie. Speaker 600:29:22How are Speaker 500:29:23you guys? I just wanted to touch base on one thing this morning on margin side. EBITDA margin, nice improvement year over year also versus our model. Just the factors that help that kind of drive that along here, are they expected to kind of continue in Q2 when you look at guidance as well? Speaker 300:29:48Yes, Charlie, this is Dave. I'll take it. Thanks for the question. So, a few things driving margin in Q1, most notably the favorable mix that we highlighted in the prepared remarks. And I would point to 2 things there. Speaker 300:30:061 is the tremendous growth that we saw in the Venue Data Room offering and obviously the incremental margin on that are very high. And when you look at the 20% decline or so in the lower margin print revenue, right, you put those two things together and that really drives a lot of the margin improvement. The third thing I would point to or second thing I would point to, sorry, would be the work we continue to do on the cost structure really being disciplined from a cost perspective. As we look at Q2 and beyond, from a cost perspective, I think you can assume we'll continue to be disciplined there, obviously overlapping some tougher comps as we go forward from overall cost structure perspective. And then as we noted in the prepared remarks, from a mix perspective, a few things there. Speaker 300:31:141, the software growth in particular for ActiveDisclosure and ArcSuite, don't expect much different from a growth perspective in Q2, but really ramping up in the back half of the year. Probably the one thing I would point to in Q2 and we noted some of the large venue data rooms that we had in Q1, which drove about half the growth, it is tough to overcome and then we start to overlap tougher comps in venue. But certainly from a print perspective, which we also noted, would expect that to come down. Overall, we would say margins roughly in Q2 roughly flat to what we delivered last year. And then like I said, as you look to the back half of the year with the incremental software growth starting to improve there. Speaker 500:32:16Got it. And just if you look at kind of the improving IPO market, obviously, a handful of good deals, good aftermarket performance and that could lead to obviously more transactions coming out of the pipeline. When you talk to your clients out there in the legal and banking side, what's the tone there about IPOs? Speaker 700:32:41Hi, it's Craig Clay. I'll take that. I think first, I'll start with a leading indicator on the transactional market. After many quarters of decline, investment banks filing this quarter had fees from new issuance, debt and M and A that were up. So 27% is the highest increase since the Q1 of 'twenty two when the Fed started raising rates. Speaker 700:33:07So if you look at what happened in the quarter, certainly improved IPOs. It feels good to have a little bit of improvement. There were 16 companies that raised more than $50,000,000 $8,000,000,000 in the quarter. We had a 57 percent of that came from the healthcare sector, which is nice to see. DFIN is pleased to have supported 75% of the Q1 IPO filings. Speaker 700:33:34A lot of great names in there, BB Foods, BrightSpring, etcetera. 9 of those 16 are trading well above their IPO price. So this is positive for the IPO market. Our clients are telling us that it's an exciting thing as they look to the future. And I think if you look at April, we had 18 IPOs raised a combined 5,300,000,000 dollars This is just barely above the 10 year historical average by deal count and by proceeds, but I think the market will take it. Speaker 700:34:05It was the busiest month for overall new issuance, greater than $100,000,000 since November of 2021. Nine deals in the month over $100,000,000 Our share was 67% of that. The largest deal in April, we were very happy to support was the $1,000,000,000 offering of Viking. So Viking starts price last night, begins trading during this call. They price during or at the top of their range and they increased the number of shares in the offering several times. Speaker 700:34:38Another positive for the market, large VC tech continued a comeback. So we had Rubrik, which was nice to see. So in April, we also had new filings over $100,000,000 There were $8,000,000 which was a small increase from the prior month of 6. As we previously commented, we remain encouraged, our clients remain encouraged by the process deals that are in process, by the pent up demand. We're working with several highly marquee deals that are publicly filed. Speaker 700:35:11We also have some that are still confidential. And given the steps our clients are taking to remain public or to go public, we think they'll respond when the market opens. The Wall Street Journal mentioned last week that the recent success bodes well and companies potentially would move their IPO up. We haven't seen that publicly, but we're encouraged by the receptivity of the IPOs that have gone out and that the IPO market will continue to normalize into the summer. Speaker 500:35:43Great. Thank you. Operator00:35:47Your next question comes from the line of Pete Heckmann with D. A. Davidson. Your line is open. Speaker 600:36:00Good morning, Pete. Speaker 400:36:01Cher, hey, good morning. We had noticed that ourselves. I think we had counted 73% of the top maybe 15%, I think you said 75% of the top 16%. But what do you attribute that to just better competitive solutions from defin or are there some competitors that have fallen off or just kind of fortunate mix of a high retention rate amongst the IPOs that were going out? Speaker 700:36:31Yes, thanks for the question. I think it's a number of factors. I think our industry leading portfolio of solutions, we're dedicated to our clients' private to public journey. So we have a rich history in this space. I think when the market gets busy, we play an important part serving on their deal team, helping them project manage and providing most importantly the software to make that happen. Speaker 700:36:59So I think it's about our clients in their moment of need turning to somebody who can provide the best solution for them. I think the exciting thing is that these are event driven transactions, but it's providing this pipeline for recurring software subscriptions that support our clients' ongoing compliance, so the defense compliance platform. But also as you heard in the venue results, that's a leading indicator and it also supports the IPO market. Almost every one of these deals has a VDR associated with it as they're dual track. I think what they're getting, what our clients are getting when they come here is the trust that clients have in defense to get their deal done. Speaker 700:37:42And then the support, the services and the software, whether it's active disclosure or venue, that helps them do the work that they do. Speaker 300:37:54Okay, that's helpful. And then Speaker 400:37:55how about on tailored shareholder report as we get 1 quarter closer to the go live, any change in the thought process around the potential incremental benefit to DFIN or any higher confidence in that number? Speaker 200:38:10Yes. Let me this is Dan. I'll start and then I think Dave and Eric may have a few comments. But yes, we with the new regulation, the tailored shareholder report is a financial report. And so, yes, we look at this on the software side and we have great position with funds with our Arc Reporting financial reporting offering within Arc Suite and TSR is now a new module that's integrated within ARC reporting. Speaker 200:38:40And so for those using ARC reporting, it builds upon the existing data flows, generates underlying TSR, the data model creates the TSR itself and then we tag and assemble the TSR into the NCSR and then ultimately file with the SEC. So we've been in the process of onboarding, configuring clients to the TSR module. We've seen good progress. We're really not seeing any more of we're seeing a little, I guess, play out in the marketplace, but that's pretty well set. On the distribution side, for now, the requirement is the documents printed and distributed. Speaker 200:39:24And some of the print continues to play out in the market. As we mentioned on the last call, we're certainly seeing more price pressure on the printing side. And so, let Dave may want to comment on the print as well as Eric. Speaker 800:39:44Yes. Thanks, Dan. And thanks for the question, Pete. Just building on Dan's comment, I would draw your attention to our 2 recent press releases where we've been able to successfully test file 2 full form NCSR and IXBRL tagged TSRs. I think this represents our ability to help our clients and serve our clients in the way they prefer to work, so via traditional services as well as our SaaS solution, ARC Reporting. Speaker 800:40:16And our product team has done a tremendous job getting that type of test filing completed well in advance of the July deadline. So very pleased with the progress from that perspective. Our revenue mix seems to be trending toward software, which does reflect DFIN's position as a leader in the investment company's regulatory reporting software. So that's been somewhat consistent. And as Dan mentioned, we're consistent with our operating plan over the past few years. Speaker 800:40:47We continue to exit low margin print. As it relates to TSR printing, we're operating under that same discipline. And where we have projects that make sense and add value for our clients from a straight through processing perspective, where we can deepen and provide end to end efficiency, we'll certainly take that work. But we will stay true to our operating plan around low margin print and exiting that Speaker 400:41:15where we need to. Okay. All right. That's helpful. Speaker 300:41:19And Pete, I would just jump in on there. Both Dan and Eric talked about some of the our approach to print and how it ties into the bigger strategy and the discipline around pricing. I think if you look at our historical gross margins for print and distribution, there's really a strong trend there. Going back to 2019, we had sales north of $321,000,000 dollars 20 percent gross margin, so $63,000,000 in gross profit dollars. I think you contrast that with where we're currently at on a trailing 4 quarter basis, dollars 158,000,000 of sales, gross margin is 43%, gross profit dollars are $67,000,000 So we've cut our print revenue in half over last 4, 5 years or so, taking out more than $160,000,000 of sales and actually increasing our gross profit dollars by a few $1,000,000 have done a great job with our operating model. Speaker 300:42:35We've out sourced 100% of our offset printing. We've reduced our cost structure and made it more variable. And again, taking the disciplined approach to pricing have really driven this trend. Kind of the high level, right, we know all revenues not created equally. And then I would say even within print and distribution, all revenue is not the same. Speaker 300:43:03And so we'll continue to look at the underlying profitability, not only for print and distribution or at the offering level, but also at the customer level to continue to drive the financial results we have here. Speaker 400:43:20Okay. Thanks, Dave, for that. I mean, while I've got you, if I can just sneak in one more, but I didn't hear it. But in terms of just thinking about second quarter numbers, would you think that print would be down by about the same magnitude as the Q1? Speaker 300:43:38Yes. So print in the second quarter or the second quarter, I should say, is proportionately typically a heavy print quarter. And so roughly about the same as what we saw in Q1. Speaker 400:43:54Okay. All right. That's helpful. I appreciate it. I'll get back in the queue. Speaker 200:43:59Thank you. Operator00:44:01Your next question comes from the line of Kyle Peterson with Needham. Your line is Speaker 900:44:07open. Great. Thanks guys and good morning. I want to touch on Venue a little bit more. The growth was really impressive. Speaker 900:44:18Appreciate some of the color on new clients and such. But just want to see if you could unpack a little bit outside of the new client wins, what you guys kind of the impact of whether it's pricing versus just kind of usage or volume will be really helpful. Speaker 700:44:37Sure. This is Craig. Thanks for the question. I think as you saw and Dave reviewed, great growth 43%. I'll unpack that a little bit. Speaker 700:44:48It was up 10% sequentially from Q4. So record high revenue driven by 3 factors. So we're overlapping Q1's lowest quarter of 2023. As Dave mentioned, we'll have tougher comps as we move into the second half of twenty twenty four. The increase was driven by page count activity. Speaker 700:45:13So higher activity on existing rooms, new rooms, as well as higher pricing. And these rooms are staying open longer, again, reinforcing the stability of venue. The underlying demand is a little less volatile versus M and A. So the demand we see is becoming reoccurring in nature for this sort of more stable revenue stream in what has been an event driven transactional software product. Dave mentioned the large projects, even when you strip those out, we have some nice growth. Speaker 700:45:52Our clients are telling us the deal making as well as is looking up. And so we're seeing that venue as a precursor to deal making. I think companies are not waiting on the Fed anymore. So the current level of interest rates in and of itself has not been a barrier to deal making in the past. Before sort of a recent zero interest rate area, the prior U. Speaker 700:46:18S. M and A volume peaks came when the average fund rate was about 5%. So we keep seeing demand for high quality assets. There's large amounts of capital that's being looked to put to work. And we're pleased with our pipeline. Speaker 700:46:34You've heard we're executing well. And as Dan stated, venues broad application in the ecosystem, whether it's announced, unannounced, whether it's public or private, as I mentioned in the IPO space, it's just more resilient. So we're going to continue to focus on what's got us here, which is sales execution, share expansion, delivering great product and serving our clients. Speaker 900:47:03That's really helpful. And maybe if I could just get a follow-up on capital allocation here. It seems like you guys were able sell some land and I know you guys have divested some assets over time. But just wanted to pick your brain on kind of how you guys are thinking about putting the proceeds from some of that capital work and how you guys are thinking about balancing, whether it's potential M and A or further buybacks or debt pay down? Speaker 200:47:38Yes. Thank you. Yes, I'll start and if Dave wants to weigh in. So really more of the same. We the highest and best use, we want to make sure we have financial flexibility to execute the strategy. Speaker 200:47:53We have built up ample financial flexibility. And so you've seen us obviously buying back more shares and then paying down debt. And those are the 2 highest priorities along with the organic investment and accelerating the transformation. And that will continue. I mean, the proceeds from the sale of the building in this case or the land will go into the coffers and be targeted towards those three priorities. Speaker 200:48:33But no changes at all in capital priorities. We remain extremely disciplined across all aspects of capital deployment. Speaker 300:48:45Yes. Dan, I would just reiterate, Kyle, you specifically asked about M and A. As Dan pointed out, our view, the best use of capital to drive returns is the organic investment and M Operator00:49:03and Speaker 300:49:05A opportunities, especially for those that are M and A opportunities, especially for those that are purely aligned with our strategy, We think that valuations are still pretty rich, certainly weighed against the opportunities we have from an organic perspective. And so we keep that on the radar, but stay very, very disciplined on driving the best returns. Speaker 900:49:36That's helpful. It makes sense. Thanks guys. Speaker 100:49:39Thank you. Operator00:49:42Your next question comes from the line of Raj Sharma with B. Riley. Your line is open. Speaker 600:49:49Yes, thank you. Congratulations on the good cost cutting and the margins. Next question? Last question. Yes, sure. Speaker 600:49:59I have a couple of questions. 1, a, the revenue contribution from the TSRs, do you have a reasonable idea of what that could be this year and next year? And also, does that push up the gross margin profile of your software business? Speaker 300:50:24Yes, Raj, we said so last quarter, we said $20,000,000 to $25,000,000 on an annualized basis contribution from TSR with roughly half of that coming in 2024. As we talked about earlier, on the print side, I think a lot of that is still in play and we're very happy with where we're at on the software, right, which is to your point delivers higher margins and certainly much higher incremental margins. And so on a go forward basis, yes, that's part of the margin expansion, right, this mix shift with more software proportionately and less print proportionately. The other thing I would say is we're still investing pretty heavily in PSR. And so I think what you'll start to see more of the margin expansion as it specifically relates to TSR starting to hit in 2025s and beyond when we get past this initial product development investment. Speaker 600:51:42Got it. And then on the ActiveDisclosure side, could you help me understand just kind of recap on what's going on earlier? Last year, there were some headwinds. There was a switch to the digital version. What growth rate could we expect from ActiveDisclosure going forward? Speaker 600:52:05I know that you've talked about a second half pickup. Could you what caused the weakness in the Q1? And then how is that transition coming? Speaker 700:52:16Raj, it's Craig. Thanks for the question. So yes, as you mentioned, AD grew 2% in the quarter. So compared to recent trend, declined 2% in Q4. It grew 1% in Q3. Speaker 700:52:31It was up 6% in Q2 and 2% in Q1. So we're continuing to make progress toward the future growth of the platform. It's our 3rd consecutive quarter of net client growth. Within what drove Q1 results, one of the items mentioned, we're excited to have built a leading Section 16 filing platform within active disclosure. So Section 16 beneficial owners publicly disclosing, but within the quarter there was lower Section 16 filing activity driven from the transition to a subscription model in the new product, as well as driven by fewer IPOs. Speaker 700:53:15So we've covered that topic. We're also up against a lower customer count as a result of the 83 churn that was associated in the first half of last year. The continued lack of IPOs, we're not able to keep our own client, also negatively impacting SPAC liquidations. Now we're offsetting that with price increases in service revenue. So to your question, what to expect in Q2 and in the second half of twenty twenty four, we're excited by what we see, but the progress we've been making to expand the adoption of AD is slowly being reflected. Speaker 700:53:53In this quarter's result, we have some perspective metrics that are favorable. So some of them were mentioned. So Q1 2024, our 3rd consecutive quarter of net client growth, which is exciting. It's much better than we've seen in past quarters. Mentioned our average price up in the mid teens versus ActiveDisclosure 3, which we have again migrated off of. Speaker 700:54:20As Dave stated, we had net new logo ACV, which approximately double Q1 of 2023. Again, what's moving on to the platform will start to show in future quarters. So we expect the AD growth in the second half of twenty twenty four to be stronger. We're going to overlap the platform transition and related churn. And the excitement by what we see is we have the newest fit for purpose product in the market and the market wants what we build. Speaker 700:54:51We're able to price it accordingly. It's an opportunity for us, for D VAN. It's also an opportunity for our clients because our clients can pay less than the leading competitor. So our clients are recognizing the value of this better product. They want a choice. Speaker 700:55:08They get to have the newest product in the market with product improvements such as our editor or track changes. It's all driven by our decades in the market in serving SEC clients. So our current clients are using AD for their most important reporting needs and our pipeline is strong because our future clients see DFAN and active disclosure as the compliance leader. Speaker 600:55:37Thank you. Yes, that's very helpful color. And just lastly, on the the print declines were more than expected. Could you help me understand that, Dave? I know you've said they're going Speaker 500:55:50to be Speaker 600:55:50flat. It's a print heavy second quarter, it's a print heavy quarter. Have the print declines bottomed out? We had expect I know you had taken quite a few of the print declines in the last several years and you had expected a 5% ongoing decline in the market. Is that sort of still in line and a little bit more color on that please? Speaker 300:56:21Yes, Raj, I appreciate the follow-up there. And I'd point to a couple of things. One, I think from the 5% perspective is intended to address the secular decline that we just see print becoming smaller and smaller over time. To your point, we've done a really nice job managing not only the cost side and the print, but the overall volume as we talked about in 2021 with Rule 30e3 and 498a saw print volume drop, right, as the distribution default changed from print to electronic. At the same time, we use that as a catalyst to exit some of the lower margin print work and variableize the cost structure, etcetera. Speaker 300:57:22And to my earlier point that's proved to be a good strategy for us. Gross margin in print has gone from 20% to over 40%. And so what I would say is we're continuing to take a look at the economics around certain print jobs, the economics around certain clients and whether or not that print makes sense for us. I think as we saw in the Q1 here, not much revenue change, but pretty significant change in profit and really driven by that mix, right, more software, less print, driving profit dollars, driving margin. We will continue to see that in Q2, because that same dynamic is playing out. Speaker 300:58:19I think as we get into the back half of the year, that certainly starts to temper, but we're going to continue to keep an eye on the overall mix, the overall economics that that component pieces of our offering drive and again the aggregate customer economics as well. Speaker 600:58:43Great. Thank you for all the color again. Great job on the business and running it profitably. Speaker 900:58:51Thank you again. I'll take it offline. Speaker 200:58:53Thank you, Suraj. Operator00:58:56That concludes our Q and A session. I will now turn the conference back to Dan Lee for closing remarks. Speaker 200:59:03Okay. Thank you, and thank you, everyone, for joining. We look forward to speaking with you both on our call in a few months and in the interim. Thanks again. Operator00:59:16Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by