Q1 2024 Donnelley Financial Solutions Inc Earnings Call

Operator: Thank you for standing by. My name is Cath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donnelley Financial Solutions first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Kat and I will be your conference operator today at this time I would like to welcome everyone to the Donnelley financial solutions first quarter of 'twenty 'twenty four.

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. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to draw. Your question Press Star One again I would now like to turn to.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Mike Zhao, Head of Investor Relations. Please go ahead.

Call over to Mike Joe Head of Investor Relations. Please go ahead.

Michael Zhao: Thank you. Good morning, everyone.

Mike Joe: Thank you good morning, everyone and thank you for joining Donnelley financial solutions first quarter 2024 results conference call.

Michael Zhao: And thank you for joining Donnelley Financial Solutions' first quarter 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 investor section of our website at dfinsolutions.com. During this call, we'll refer to full or within state, which are subject to risks and uncertainties.

Mike Joe: This morning, we released our earnings report, including a supplemental funding schedule of historical results.

Mike Joe: Copies of which can be found in the investors section of our website at defense solutions Dot com.

Mike Joe: During this call we'll refer to forward looking statements that are subject to risks and uncertainties.

Michael Zhao: For a complete discussion, please refer to the cautionary statements included in our earnings release and further details in our most recent annual report of Form 10-K, quarterly report of Form 10-Q, and other filings with the SEC. In addition, 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-GAF 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.

Mike Joe: For complete discussion please refer to the cautionary statements included in our earnings release.

Mike Joe: And further detailed in our most recent annual report on Form 10-K quarterly report on Form 10-Q, and other filings with the SEC.

Mike Joe: Further we will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted EBITDA margin and organic net sales.

Mike Joe: We believe the presentation of non-GAAP financial information provides you with useful supplementary information concerning the company's ongoing operations.

Mike Joe: And is an appropriate way for you to evaluate the company's performance they.

Michael Zhao: 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 and non-GAAP financial information. I am joined this morning by Dan Leib, Dave Gardella, Craig Clay, Eric Johnson, Boyd Strimley, and Kami Turner. I will now turn the call over to Dan.

Mike Joe: They are however provided for informational purposes only.

Mike Joe: Please refer to the earnings release and related tables for GAAP financial information and reconciliations of GAAP to non-GAAP financial information.

Speaker Change: I am joined this morning by Dan Leib, Dave Gardella correctly, Eric Johnson boy extremely and can be triggered.

Speaker Change: I will now turn the call over to Dan.

Daniel N. Leib: Thank you, Mike. And good morning, everyone.

Daniel N. Leib: Thank you, Mike and good morning, everyone.

Daniel N. Leib: 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 and adjusted EBITDA, adjusted EBITDA margin expansion, and improvements in both operating cash flow and free cash flow. We delivered first quarter net sales of $203.4 million, which increased 2.8% on an organic basis compared to the first quarter of 2023. I am encouraged by the composition of our organic net sales growth, with software solutions net sales increasing 16 percent, tech-enabled services net sales increasing nearly 6 percent, and print and distribution net sales declining approximately 20 percent, as we continue to balance our revenue profile to drive improved profitability.

Daniel N. Leib: We started 2024 by building on the positive momentum in our performance from last year deliver.

Daniel N. Leib: 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.

Daniel N. Leib: We delivered first quarter net sales of $203 4 million, which increased two 8% on an organic basis compared to the first quarter of 2023.

Daniel N. Leib: I am encouraged by the composition of our organic net sales growth with software solutions net sales increasing 16%.

Daniel N. Leib: <unk> 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.

Daniel N. Leib: The combination of the improved revenue profile, modest consolidated net sales growth, and cost management yielded first quarter adjusted EBITDA of $55.2 million, and an adjusted EBITDA margin of 27.1%, both of which are above last year's first quarter and, once again, significantly stronger than historical periods with similar revenue profiles.

Daniel N. Leib: The combination of the improved revenue profile modest consolidated net sales growth and cost management yielded first quarter adjusted EBITDA of $55 $2 million and adjusted EBITDA margin of 27, 1% both of which are above last year's first quarter and once again cigna.

Daniel N. Leib: Difficult lease stronger than historical periods with similar revenue profiles.

Daniel N. Leib: Our first quarter 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 first quarter results was the performance of our software solutions portfolio, which reached $80.3 million 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 first quarter of 2023, an increase from the growth trends over the last few quarters.

Daniel N. Leib: Our first quarter performance highlights the continued progress we are making in our transformation and positions us well to achieve our updated long term financial targets.

Daniel N. Leib: A key driver of our first quarter results as the performance of our software solutions portfolio, which reached $83 million in net sales a new quarterly record.

Daniel N. Leib: Software solutions net sales growth accelerated in the first quarter to 16% on an organic basis versus the first quarter 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 four.

Daniel N. Leib: The growth in software solutions net sales was led by the performance of Venu, our virtual data room product, which posted 43% sales growth. We are encouraged by Venu's strong performance, which reflects strong sales execution across Venu's broad application within the M&A ecosystem that serves both announced and unannounced deals, as well as across public and private companies alike. This results in more resilient, stable demand than our transactional options.

Daniel N. Leib: 33% sales growth, we are encouraged by venue or strong performance, which reflects strong sales execution across venues broad application within the M&A ecosystem that serves both announced and unannounced deals as well as across public and private companies alike.

Daniel N. Leib: This results in more resilient stable demand than our transactional offerings.

Daniel N. Leib: As a further demonstration of the momentum in our software solutions net sales, the growth trends of our recurring compliant software products, Active Disclosure, and ArcSuite, both improved in the first quarter, with each product delivering stronger year over year growth on a sequential basis compared to the fourth quarter of 2023. Software Solutions made up 39.5% of total first quarter net sales, up approximately 420 basis points from last year's first quarter net sales.

Daniel N. Leib: As a further demonstration of the momentum in our software solutions net sales the growth trends of our recurring compliant software products active disclosure Anarch suite, both improved in the first quarter with each product delivering stronger year over year growth on a sequential basis compared to the fourth quarter of 2023.

Daniel N. Leib: Software solutions made up 39, 5% of total first quarter net sales up approximately 420 basis points from last year's first quarter net sales mix.

Daniel N. Leib: On a trailing four-quarter basis, Software Solutions net sales are now in excess of $300 million and represent 37.8% of total net sales, an increase of approximately 370 basis points from the first quarter 2023 trailing four-quarter period.

Daniel N. Leib: On a trailing four quarter basis software solutions net sales are now in excess of $300 million and.

Daniel N. Leib: <unk> 37, 8% of total net sales an increase of approximately 370 basis points from the first quarter 2023 trailing four quarter period.

Daniel N. Leib: Looking ahead, we expect the growth rates for Active Disclosure and ArtSuite each to improve further in the second half of this year. For Active Disclosure, 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 first quarter, that mix shift was accelerated by a reduction in print and distribution revenue, which declined by approximately $10 million or 20% compared to the first quarter of 2023.

Daniel N. Leib: Looking ahead, we expect the growth rates for active disclosure in our suite each to improve further in the second half of this year for active disclosure. This improvement is driven by recent wins combined with overlapping last year's platform transition in.

Daniel N. Leib: In the case of arc suite, the improved growth rate is primarily driven by the tailwind from the tailored shareholder reports regulation.

Daniel N. Leib: As we continue to evolve toward a higher sales mix of software solutions. During the first quarter that mixed shift towards accelerated by a reduction in print and distribution revenue, which declined by approximately $10 million or 20% compared to the first quarter of 2023.

Daniel N. Leib: 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, benefiting from the financial profile associated with such a sale 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 implementation.

Daniel N. Leib: 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 proportionately 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.

Daniel N. Leib: 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.

Daniel N. Leib: Head of its July 2024 compliance date.

Daniel N. Leib: As 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 fourth quarter 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 DFIN 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.

Daniel N. Leib: As I've shared previously we are making great progress in our technology development and go to market plan 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 Tsi, our SaaS solution during the.

Daniel N. Leib: The fourth quarter of last year.

Daniel N. Leib: As we continue to mature and scale, our tsi our offerings I am excited by the end to end compliance solutions, we have created for the regulation, giving decent 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 and.

Daniel N. Leib: The compliance process.

Daniel N. Leib: In a further demonstration of our software product readiness, last week, we announced Deepin successfully tested 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 closed 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, IXPRL tagging, reviewing, and filing, all through a single solution.

Daniel N. Leib: Further demonstration of our software product readiness last week, we announced deepened successfully test filed a full form N CSR, including an IX BRL tagged <unk> to the SEC on behalf of a large asset manager.

Daniel N. Leib: The test filing was completed via our arc reporting SaaS product, the leading financial close software for investment companies and a component of our Rx suite offering the arc reporting solution offers clients the ability to execute financial calculations report generation at the fund and share class level.

Daniel N. Leib: <unk> IX BRL tagging reviewing and filing all through a single solution.

Daniel N. Leib: Further, integrated data flow within AHRQ 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 ARC Reporting, DFIN is also ready to serve clients via traditional services for those who prefer that approach.

Daniel N. Leib: Further integrated data flow within the arc reporting eliminates the need for post production reconciliation and guarantees consistency with our funds financial results at the share class level.

Daniel N. Leib: This successful test filing demonstrates the dynamic end to end straight through processing that arc suite offers our clients, enabling them to create file web hosts and distribute complex financial reports all from a single platform.

Daniel N. Leib: In addition to the functionality offered by our reporting deepen 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 and CSR compliance document based on the new regulatory requirements, including IX BRL tagging of E Tailers.

Daniel N. Leib: In early April, we successfully completed the test filing of a full NCSR compliance document based on the new regulatory requirements, including IXPRL 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 DFIN's deep expertise in the areas of IXPRL tagging and compliance filing. Our recent successful test filings represent an important milestone in our readiness journey and demonstrate defense leadership in the industry and commitment to deliver a streamlined solution for a complex regulatory environment. With less than three 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. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our first quarter results and our outlook for the second quarter. Dave

Daniel N. Leib: Our 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 highlight steepens deep expertise in the areas of I explorer, all tagging and compliance filing.

Daniel N. Leib: Our recent successful test filings represent an important milestone in our readiness journey and demonstrate <unk> leadership in the industry and commitment to deliver a streamlined solution for a complex regulation with less than three months to go until the July 2024 compliance date, deepen remains very well positioned to serve our COO.

Daniel N. Leib: Clients, while capturing the recurring revenue opportunities associated with the tailored shareholder reports regulation.

Daniel N. Leib: Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our first quarter results and our outlook for the second quarter Dave.

David A. Gardella: Thank you, Dan, and good morning, everyone. Before I discuss our first quarter financial performance, I'd like to recap two 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 $13.2 million, of which $12.4 million was received in the first quarter of 2024, and $0.8 million of non-refundable fees were received in 2023.

David A. Gardella: Thank you Dan and good morning, everyone.

David A. Gardella: Before I discuss our first quarter financial performance I'd like to recap two housekeeping items first during the quarter. We completed the sale of land in Phoenix, Arizona, The site of an office, which we shutdown and demolished in 2021 and was previously reflected on our consolidated balance sheet as an asset held for.

David A. Gardella: Sale.

David A. Gardella: The sale resulted in net proceeds of $13 2 million of which $12 $4 million was received in the first quarter of 2024.

David A. Gardella: 0.8 million of non refundable fees were received in 2023.

David A. Gardella: We recognize a net pre-tax gain of $10.6 million related to the sale, of which $9.8 million was recorded in the first quarter of 2024, and $0.8 million was recognized in 2023. The net pre-tax gain was recorded within the capital markets compliance and communications management operating segment under other operating income net line items. This game is excluded from our non-GAAP results.

David A. Gardella: We recognized a net pre tax gain of $10 $6 million related to the sale of which $9 8 million was recorded in the first quarter of 2024 and zero point $8 million was recognized in 2023.

David A. Gardella: The net pre tax gain was recorded within the capital markets compliance and communications management operating segment under other operating income net line item.

David A. Gardella: This gain is excluded from our non-GAAP results.

David A. Gardella: Second, as discussed on last quarter's earnings call, we completed the sale of our eBrevia business in the fourth quarter of 2023. For full year 2024, the disposition negatively impacts the year-over-year total net sales comparison by approximately $4 million, with approximately $1 million net sales impact for each quarter. The impact on our gross profit and adjusted EBITDA comparisons is minimal.

David A. Gardella: Second as discussed on last quarter's earnings call. We completed the sale of our <unk> business in the fourth quarter of 2023.

David A. Gardella: For full year 2020 for the disposition negatively impacts the year over year total net sales comparison by approximately $4 million with approximately $1 million net sales impact for each quarter.

David A. Gardella: The impact on our gross profit and adjusted EBITDA comparisons is de Minimis.

David A. Gardella: For purposes of year-over-year net sales change discussions, organic net sales change adjusts for the impacts of the E-Brevia disposition, as well as changes in foreign currency exchange rates. A reconciliation of reported to organic net sales change is included in our earnings release. Now, we turn to our first quarter results.

David A. Gardella: For purposes of year over year net sales changed discussions organic net sales change adjusts for the impacts of the <unk> disposition as well as changes in foreign currency exchange rates.

David A. Gardella: Conciliation of reported to organic net sales change is included in our earnings release.

David A. Gardella: Now turning to our first quarter results as Dan noted, we continued to demonstrate positive momentum in our performance during the first quarter by delivering consolidated net sales growth our strong year over year increase in adjusted EBITDA and improvements in both operating cash flow and free cash flow compared to the.

David A. Gardella: As Dan noted, we continue to demonstrate positive momentum in our performance during the first quarter 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 first quarter 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%.

David A. Gardella: First quarter of 2023.

David A. Gardella: 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%.

David A. Gardella: On a consolidated basis, total net sales for the first quarter of 2024 were $203.4 million, an increase of $4.8 million, or 2.4% on a reported basis and 2.8% on an organic basis from the first quarter of 2023.

David A. Gardella: On a consolidated basis total net sales for the first quarter of 2024 were $203 $4 million, an increase of $4 8 million or two 4% on a reported basis and two 8% on an organic basis from the first quarter.

David A. Gardella: <unk> of 2023.

David A. Gardella: The growth in software solutions net sales, which increased $10.2 million, 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%. First quarter adjusted non-GAAP gross margin was 60.6 percent, approximately 590 basis points higher than the first quarter 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.

David A. Gardella: The growth in software solutions, net sales, which increased $10 2 million or 16% on organic basis, combined with higher capital markets transactional sales.

David A. Gardella: 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.

David A. Gardella: Excluding print and distribution net sales grew approximately 10%.

David A. Gardella: First quarter adjusted non-GAAP gross margin was 66% approximately 590 basis points higher than the first quarter of 2023, primarily driven by a favorable sales mix, including lower overall print volume and the impact of ongoing cost control initiatives.

David A. Gardella: Partially offset by incremental investments to accelerate our transformation.

David A. Gardella: Adjusted non-GAAP SG&A expense in the quarter was $68.1 million, a $1.8 million increase from the first quarter of 2023. As a percentage of net sales, adjusted non-GAAP SG&A was 33.5%, an increase of approximately 10 basis points from the first quarter of 2023. The increase in adjusted non-GAAP SG&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.

David A. Gardella: Adjusted non-GAAP SG&A expense in the quarter was $68 1 million, a $1 $8 million increase from the first quarter of 2023.

David A. Gardella: As a percentage of net sales adjusted non-GAAP SG&A was 33, 5% an increase of approximately 10 basis points from the first quarter of 2023.

David A. Gardella: The increase in adjusted non-GAAP SG&A was primarily driven by an increase in selling expenses as a result of higher sales higher.

David A. Gardella: Higher bad debt expense.

David A. Gardella: And higher incentive compensation expense.

David A. Gardella: We offset by lower third party expenses and the impact of cost control initiatives.

David A. Gardella: Our first quarter adjusted EPITA was $55.2 million, an increase of $12.8 million, or 30.2% from the first quarter of 2023. First quarter adjusted EBITDA margin was 27.1%, an increase of approximately 580 basis points from the first quarter of 2023, primarily driven by a favorable sales mix, higher overall sales, and cost control initiatives, partially offset by higher incentive compensation. Turning now to our first quarter segment results. Net sales in our capital market software solution segment were $53 million, an increase of 23.8% on an organic basis from the first quarter of last year, driven by the strong growth in venue, our virtual data room product, which was up $10.2 million, or 43.4% year over year, and achieved record quarterly sales, consistent with the recent trend during the first quarter. Meanwhile, you continue to benefit from an increase in page volume on the platform and higher prices.

David A. Gardella: Our first quarter adjusted EBITDA was $55 $2 million, an increase of $12 8 million or.

David A. Gardella: 32% from the first quarter of 2023.

David A. Gardella: First quarter adjusted EBITDA margin was 27, 1% an increase of approximately 580 basis points from the first quarter of 2023, primarily driven by a favorable sales mix higher overall sales and cost control initiatives, partially offset by higher incentives.

David A. Gardella: <unk> expense.

David A. Gardella: Turning now to our first quarter segment results.

David A. Gardella: Sales in our capital markets software solutions segment were $53 million, an increase of 23, 8% on an organic basis from the first quarter of last year driven by the strong growth in venue, our virtual data room product, which was up $10 2 million or <unk> 43.

David A. Gardella: 4% year over year and achieved record quarterly sales.

David A. Gardella: Consistent with the recent trend during the first quarter venue continued to benefit from an increase in page volume on the platform and higher pricing in.

David A. Gardella: In addition, our strong sales execution resulted in several large client wins in the quarter, with those projects combined to account for approximately half of Venue's first quarter net sales. As Dan noted earlier, Venue's consistent level of performance is a testament to the 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 first quarter of this year, given the outsized impact of the large project, in addition to overlapping venues' accelerated growth, which started during the second quarter of 2020.

David A. Gardella: In addition, our strong sales execution resulted in several large client wins in the quarter with those projects combined to account for approximately half of venues first quarter net sales growth.

David A. Gardella: As Dan noted earlier venues consistent level of performance is a testament to the strong recurring demand for our virtual data room platform as well as through our sales execution.

David A. Gardella: Going forward, we expect menu 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 first quarter of this year given the outsized impact of the large projects.

David A. Gardella: In addition to overlapping venues accelerated growth, which started during the second quarter of 2023.

David A. Gardella: Net sales of our recurring compliance product, Active Disclosure, including File 16, increased approximately 2% in the first quarter, driven primarily by growth in Active Disclosure service revenue, partially offset by lower Section 16 filing activity. The 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 fourth quarter, first quarter subscription revenue increased 4% sequentially and was flat versus the first quarter of last year.

David A. Gardella: Net sales of our recurring compliance product active disclosure, including <unk> increased approximately 2% in the first quarter driven primarily by growth in active disclosure service revenue, partially offset by lower section 16 filing activity.

David A. Gardella: The 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.

David A. Gardella: Following a modest year over year decline in active disclosure subscription revenue in the fourth quarter.

David A. Gardella: First quarter subscription revenue increased 4% sequentially and was flat versus the first quarter of last year.

David A. Gardella: During the first quarter, we made continued progress to expand the adoption of active disclosure, resulting in the third 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 active disclosure revenue. To illustrate this in greater detail, Active Disclosures ACD from new logos during the first quarter is approximately double the level we achieved in the first quarter of 2023. The momentum and client count growth, coupled with product enhancements, create a strong foundation for future sales groups.

David A. Gardella: During the first quarter, we made continued progress to expand the adoption of active disclosure, resulting in the third consecutive quarter of net client count growth the.

David A. Gardella: The improvement in client count combined with higher average price per client is generating a solid foundation for future active disclosure revenue.

David A. Gardella: To illustrate this in greater detail.

David A. Gardella: The disclosures ACB from new logos during the first quarter is approximately double the level, we achieved in the first quarter of 2023.

David A. Gardella: The momentum in client count growth, coupled with product enhancements.

David A. Gardella: A strong foundation for future sales growth.

David A. Gardella: As we have stated previously, we expect Active Disclosure's growth rate in the second half of 2024 to be higher than in the first half, as some of the headwinds we experienced in 2023 continue to play out in the first half of 2024. Adjusted EBITDA margin for the segment was 29.8%, an increase of approximately 1290 basis points in the first quarter 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.

David A. Gardella: As we have stated previously we expect active disclosures growth rate in the second half of 2024 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 2024.

David A. Gardella: Adjusted EBITDA margin for the segment was 29, 8% an increase of approximately 290 basis points from the first quarter of 2023, primarily due to higher sales and a favorable sales mix from the growth in our high margin venue data room offering.

David A. Gardella: And cost control initiatives, partially offset by incremental investments in sales and marketing.

David A. Gardella: Net sales in our capital markets compliance and communications management segment were $91.1 million, a decrease of $3 million or 3.2% from the first quarter 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 first quarter, we recorded $48 million of capital market transactional revenue, an increase of approximately $7 million or 17% compared to last year's first quarter, and We are encouraged by the year-over-year improvement in market activity during the first quarter, which resulted in increased deal volume across both IPOs and debt offerings compared to the first quarter of 2023, though M&A activity was down on a year-over-year basis. In short, the deal environment remains soft compared to historical adversity.

David A. Gardella: Net sales in our capital markets compliance <unk> Communications management segment were $91 1 million, a decrease of $3 million or three 2% from the first quarter of 2023, driven by lower capital markets compliance revenue.

David A. Gardella: Dominantly in lower margin print and distribution that Dan and I noted earlier.

David A. Gardella: Partially offset by higher transactional revenue.

David A. Gardella: In the first quarter, we recorded $48 million of capital market transactional revenue, an increase of approximately $7 million or 17% compared to last year's first quarter and represents the first quarter of year over year revenue growth in this offering following two years of decline.

David A. Gardella: We are encouraged by the year over year improvement in market activity during the first quarter, which resulted in increased deal volume across both ipos and debt offerings compared to the first quarter of 2023, So M&A activity was down on a year over year basis.

David A. Gardella: In short the deal environment remains soft compared to historical averages.

David A. Gardella: While the outlook for the capital markets transactional environment is uncertain, DFIN 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 590 basis points from the first quarter 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.

David A. Gardella: While the outlook for capital markets transactional environment is uncertain.

David A. Gardella: <unk> remains very well positioned to capture a significant share of future demand for transactional related products and services when market activity picks up.

David A. Gardella: Adjusted EBITDA margin for the segment was 34, 5% an increase of approximately 590 basis points from the first quarter of 2023.

David A. Gardella: The increase in adjusted EBITDA margin was primarily due to a favorable sales mix featuring growth and 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.

David A. Gardella: That expense.

David A. Gardella: Net sales in our investment company software solution segment were $27.3 million, an increase of 3.4% versus the first quarter of 2023, driven by growth in ArcSuite subscription revenue, which increased by approximately 9%, partially offset by lower services revenue compared to the first quarter 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 ARC Suite revenue growth starting in the second half of 2024.

David A. Gardella: Net sales in our investment company software solutions segment were $27 3 million, an increase of three 4% versus the first quarter of 2023, driven by growth in arc suite subscription revenue, which increased by approximately 9%.

David A. Gardella: Partially offset by lower services revenue compared to the first quarter of 2023, which benefited from higher onetime implementation revenue.

David A. Gardella: As we've stated previously based on the incremental revenue from tailored shareholder reports, we expect stronger our suite revenue growth starting in the second half of 2024, we remain well positioned to capture opportunities from regulatory changes to drive future recurring revenue growth.

David A. Gardella: We remain well positioned to capture opportunities from regulatory changes to drive future recurring revenue growth. The adjusted EBITDA margin for the segment was 29.3%, a decrease of approximately 180 basis points from the first quarter 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. Net sales in our investment companies compliance and communications management segment were $32 million, a decrease of $2.4 million or 7% from the first quarter of 2023, driven primarily by a reduction in print and distribution revenue related to the long-term secular decline in the demand for printed material

David A. Gardella: Adjusted EBITDA margin for the segment was 29, 3%.

David A. Gardella: Decrease of approximately 180 basis points from the first quarter of 2023.

David A. Gardella: 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.

David A. Gardella: Net sales in our investment companies compliance <unk> Communications management segment were $32 million, a decrease of $2 $4 million or 7%.

David A. Gardella: First quarter of 2023.

David A. Gardella: <unk>, primarily by a reduction in print and distribution revenue related to the long term secular decline in the demand for printed materials.

David A. Gardella: Adjusted EBITDA margin for the segment was 25.6%, approximately 170 basis points lower than the first quarter of 2023. The decrease in adjusted EBITDA margin was primarily due to lower sales partially offset by the impact of cost control initiatives.

David A. Gardella: Adjusted EBITDA margin for the segment was 25, 6% approximately 170 basis points lower than the first quarter of 2020 free.

David A. Gardella: The decrease in adjusted EBITDA margin was primarily due to lower sales, partially offset by the impact of cost control initiatives.

David A. Gardella: Non-GAAP unallocated corporate expenses were $8.2 million in the quarter, a decrease of $1.3 million from the first quarter 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 health care costs. Free cash flow in the quarter was negative $40.2 million, an improvement of $21.9 million compared to the first quarter of 2023. The 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.

David A. Gardella: non-GAAP unallocated corporate expenses were $8 $2 million in the quarter, a decrease of $1 $3 million from the first quarter of 2023, primarily driven by lower third party expenses and the impact of cost control initiatives, partly offset by an increase in.

David A. Gardella: <unk> aimed at accelerating our transformation and higher health care costs.

David A. Gardella: Free cash flow in the quarter was negative $42 million, an improvement of $21 $9 million compared to the first quarter of 2023.

David A. Gardella: 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.

David A. Gardella: We ended the quarter with $204.5 million of total debt and $160.8 million of non-GAAP net debt, including $80 million drawn on our revolver. From a liquidity perspective, we had access to the remaining $219 million of our revolver, as well as $43.7 million of cash on hand. As of March 31st, 2024, our non-GAAP net leverage ratio was 0.7 times.

David A. Gardella: We ended the quarter with $204 5 billion of total debt and $168 million of non-GAAP net debt, including $80 million drawn on our revolver.

David A. Gardella: From a liquidity perspective, we had access to the remaining $219 million of our revolver as well as $43 $7 million of cash on hand as.

David A. Gardella: As of March 31, 2024, our non-GAAP net leverage ratio was 0.7 times.

David A. Gardella: As a reminder, our cash flow is historically seasonal. We are a user of cash in the first quarter, closer to breaking even in the second quarter, and generate more than 100% 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 first quarter for $8.8 million at an average price of $62.61 per share. As of March 31, 2024, we had $141.2 million remaining on our $150 million stock repurchase authorization.

David A. Gardella: As a reminder, our cash flow is historically seasonal we are a user of cash in the first quarter closer to breakeven in the second quarter and generate more than 100% of our free cash flow in the second half of the year.

David A. Gardella: Regarding capital deployment, we repurchased approximately 140000 shares of our common stock during the first quarter for $8 $8 million at an average price of $62 61 per share.

David A. Gardella: As of March 31, 2024, we had $141 $2 million remaining on our $150 million stock repurchase authorization.

David A. Gardella: 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 will remain disciplined in this area. As it relates to our outlook for the second quarter of 2024, we expect the reduction in print and distribution revenue we highlighted earlier to continue in the second quarter, which historically is comprised of a heavy mix of print and distribution sales.

David A. Gardella: Going forward, we will continue to take a balanced approach towards capital deployment.

David A. Gardella: 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 will remain disciplined in this area.

David A. Gardella: As it relates to our outlook for the second quarter of 2024, we expect the reduction in printing distribution revenue. We highlighted earlier to continue in the second quarter, which historically is comprised of a heavy mix of print and distribution sales.

David A. Gardella: This component of our sales profile, although 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 the range of $235 million to $250 million and an adjusted EBITDA margin in the low 30%. Compared to the second quarter of last year, the midpoint of our consolidated revenue guidance, $242 million, implies consolidated net sales approximately flat to last year's second quarter as the reduction in print and distribution sales is expected to offset growth in software solution sales.

David A. Gardella: 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.

David A. Gardella: With that as the backdrop, we expect consolidated second quarter net sales in the range of $235 million to $250 million and adjusted EBITDA margin in the low 30% range.

David A. Gardella: Compared to the second quarter of last year, the midpoint of our consolidated revenue guidance $242 million implies consolidated net sales approximately flat to last year's second quarter as the reduction in print and distribution sales is expected to offset growth in <unk>.

David A. Gardella: <unk> solution sales.

David A. Gardella: Furthermore, this guidance assumes capital markets transactional sales of approximately $50 million, up approximately $5 million from last year's second quarter and up $2 million from the $48 million we recorded in this year's first quarter. With that, I'll now pass it back to Dan.

David A. Gardella: Further this guidance assumes capital markets transactional sales of approximately $50 million up approximately $5 million from last year's second quarter and up $2 million from the $48 million. We recorded in this year's first quarter.

David A. Gardella: With that I'll now pass it back to Dan.

Daniel N. Leib: Thanks, Dave.

Daniel N. Leib: Our performance in the first quarter offers a further proof point that our strategy and execution continue to make DeFIN 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.

Daniel N. Leib: Our performance in the first quarter offers a further proof point that our strategy and execution continue to make deeper and more durable and structurally resilient than in the past.

Daniel N. Leib: 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.

Daniel N. Leib: In the meantime, we are focused on creating best-in-class regulatory and compliance solutions to help our clients comply with those recurring regulations. Before we open it up for Q&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.

Daniel N. Leib: Meantime, we are focused on creating best in class regulatory and compliance solutions to help our clients comply with those recurring regulations.

Speaker Change: Before we open it up for Q&A I'd like to thank the <unk> 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.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star one again. If you are called upon to ask a question on listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Charlie Strauzer with CJS Securities. Your line is open.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: I would like to withdraw your question. Please press star one again, if you are called upon to ask a question or no listening via a loudspeaker on your device. Please pickup your handset and ensure that you're going to start and you've been asking your question at Gammon Crestar, one to China Q and your first question comes from the line of Charles Charles.

Speaker Change: Sir.

Charles S. Strauzer: C. J S Securities Your line is open.

Charles S. Strauzer: Hi, good morning.

Charles S. Strauzer: Good morning, Charlie.

Charles S. Strauzer: How are you guys? I just want to, you know, touch base on one thing this morning on the margin side, EBITDA margin, you know, nice improvement, year over year, also versus our model, just, you know, the factors that, you know, help that kind of drive that along here, are they expected to kind of continue in Q2, you know, when you look at guidance as well?

Charles S. Strauzer: How are you guys.

Charles S. Strauzer: Such a baseline on one thing.

Speaker Change: Morning on margin side, EBITDA margins nice improvement year over year versus our model.

Speaker Change: Just.

Speaker Change: The factors that help kind of drive that along here.

Charles S. Strauzer: We expect it to kind of continue.

Charles S. Strauzer: In Q2 basis, when you look at guidance as well.

David A. Gardella: Yeah, Charlie, this is Dave. I'll take it. Thanks for the question. So, you know, a few things driving margin in Q1. Most notably, the favorable mix that we highlighted in the prepared remarks. And, you know, I would point to two things there.

Charles S. Strauzer: Yes, Charlie this is Dave I'll take it thanks for the question so.

David A. Gardella: A few things driving margin in Q1.

David A. Gardella: Most notably the favorable mix that we highlighted in.

David A. Gardella: In the prepared remarks.

David A. Gardella: One is the tremendous growth that we saw in the venue data room offering, and obviously, the incremental margin on that is 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 the second thing I would point to, sorry, would be the work we continue to do on the cost structure, really, you know, being disciplined from a cost perspective.

David A. Gardella: I would point to two things there one is the tremendous growth that we saw in the venue data room offering and obviously the incremental margin.

Charles S. Strauzer: On that are very high and when you look at the.

Charles S. Strauzer: The.

Charles S. Strauzer: 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.

Charles S. Strauzer: The third thing I would point to.

Charles S. Strauzer: Second thing I would point to sorry, it would be the the work we continue to do on the cost structure really being disciplined.

David A. Gardella: As we look at Q2 and beyond, you know, from a cost perspective, I think you, you know, you can assume we'll be, we'll continue to be disciplined there, obviously overlapping some tough accounts as we go forward from an overall cost structure perspective. And then, as we noted in the prepared remarks, from a mixed perspective, a few things there. One, the software growth, you know, in particular for active disclosure and arc suite, expect, don't expect much different from a growth perspective in Q2, but really ramping up in the back half of the year.

Charles S. Strauzer: From a cost perspective.

Charles S. Strauzer: As we look at Q2 and beyond.

Charles S. Strauzer: From a cost perspective, I think <unk>.

Charles S. Strauzer: You can assume we will be we will continue to be disciplined there obviously overlapping some tougher comps as we go forward from from overall cost structure perspective.

Charles S. Strauzer: And then.

Charles S. Strauzer: As we noted in the prepared remarks.

Charles S. Strauzer: From a mix perspective, a few things there one the software growth in particular for active disclosure and <unk> suite.

Charles S. Strauzer: Expect don't expect much.

Charles S. Strauzer: From a growth perspective.

Charles S. Strauzer: 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.

David A. Gardella: Probably the one thing I would point to in Q2, and we noted, you know, 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 venues. But certainly from a print perspective, which we also noted, we would expect that to come down. You know, overall, we would say margins in Q2 were roughly flat to what we delivered last year. And then, like I said, as you look at the back half of the year with the incremental software growth, you know, starting to improve there.

Charles S. Strauzer: Some of the some of the large venue data rooms that we had in Q1.

Charles S. Strauzer: Which drove about half of the growth.

Charles S. Strauzer: It is tough to overcome and then we start to overlap tougher comps in venue.

Charles S. Strauzer: But certainly from a print perspective, which we also noted we'd expect that to come down.

Charles S. Strauzer: Overall, we would say margins roughly in Q2, roughly flat to what we delivered last year and then like I said as you look into the back half of the year would be incremental software growth.

Charles S. Strauzer: Starting to starting to improve there.

Craig D. Clay: And just if you look at kind of the improving IPO market, you know, obviously, there's a handful of good deals, you know, good aftermarket performance, and that could lead to, obviously, more transactions coming out of the pipeline. When you talk to your clients out there and the legal and banking side, you know, what's the tone there about IPOs?

Speaker Change: Got it and just if you look at kind of the improving IPO market. Obviously, there is a handful of good deals.

Speaker Change: Good aftermarket performance.

Charles S. Strauzer: That could lead to obviously more transactions coming out of the pipeline.

Charles S. Strauzer: You talked to your <unk>.

Charles S. Strauzer: Clients out there.

Charles S. Strauzer: Banking side, what's the tone there.

Charles S. Strauzer: Pos.

Craig D. Clay: Hi, it's Craig Clay. I'll take that. I think first, I'll start with the leading indicator on the transactional market. After many quarters of decline, investment banks finally this quarter had fees from new issuance debt and M&A that were up. So 27%, it's the highest increase since the first quarter of 22, when the Fed started raising rates. So if you look at what happened in the quarter, certainly improved IPOs. It feels good to have made a little bit of improvement.

Craig: Hi, It's Craig I'll.

Craig: I'll take that I think first I'll start with a leading indicator.

Craig: On the transactional market after many quarters of decline investment banks filing this quarter had a.

Craig: Fees from new issuance debt and M&A.

Craig: We're up two.

Craig: 27% its the highest increase.

Craig: Since the first quarter of 'twenty, two and the fed started raising rates. So if you look at what happened in the quarter certainly improved ipos. It feels good to have a little bit of improvement there.

Craig D. Clay: There were 16 companies that raised more than $50 million, $8 billion in the quarter. 57% of that came from the healthcare sector, which is nice to see. DFIN is pleased to have supported 75% of the Q1 IPO filings. A lot of great names in there, BB Foods, BrightSpring, etc.

Craig: There were 16 companies that raised more than $50 million 8 billion in the quarter we had.

Craig: 57% of that came from the healthcare sector, which is nice to see.

Charles S. Strauzer: <unk> is pleased to supported 75% through.

Charles S. Strauzer: Q1 IP filings.

Charles S. Strauzer: A lot of great names in <unk> foods bright screen et cetera.

Craig D. Clay: Nine 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 raise a combined $5.3 billion. This is just barely above the 10-year historical average by deal count and by proceeds, but I think the market will take it.

Charles S. Strauzer: Nine of those 16 are trading well above their IPO price. So this is positive for the IPO market.

Charles S. Strauzer: Our clients are telling us.

Charles S. Strauzer: It's exciting thing as they look to the future and I think if you look at April.

Charles S. Strauzer: We had 18 Ipos raised a combined $5 3 billion. This is just barely above the 10 year historical average by deal count.

Charles S. Strauzer: By proceeds, but I think the market will take it.

Craig D. Clay: It was the busiest month for overall new issuance, greater than $100 million since November 21, and nine deals in the month, over $100 million. Our share was 67% of that. The largest deal in April we were very happy to support was the billion-dollar offering of Viking. So Viking set its price last night and began trading during this call.

Charles S. Strauzer: It was the busiest months for overall, new issuance greater than 100 million since November of 'twenty one.

Charles S. Strauzer: Nine deals in the month over $100 million, our share was 67% of that.

Charles S. Strauzer: The largest deal in April.

Charles S. Strauzer: Happy to support was the $1 billion offering of Viking Viking starts.

Charles S. Strauzer: Price last night begins trading during this call.

Craig D. Clay: They priced during or at the top of their range, and they increased the number of shares in the offering several times. Another positive for the market, large VC tech companies continued their comeback. So we had Rubrik, which was nice to see.

Charles S. Strauzer: They price during or at the top of the range.

Charles S. Strauzer: They increased the number of shares in the offering several times.

Charles S. Strauzer: Another positive from the market large D. C Tech continued come back so we had rubric, which was nice to see.

Craig D. Clay: So in April, we also had new filings for over $100 million. There were eight, which was a small increase from the prior month of six. So, as I previously commented, we remain encouraged, our clients remain encouraged by the pipeline deals that are in process, by the pent-up demand. We're working with several highly, you know, marquee deals that are publicly filed. We 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.

Charles S. Strauzer: And April we also had new filings over $100 million there were eight which was a small increase from the prior month of six so as we've previously commented we remain encouraged our clients remain encouraged by.

Charles S. Strauzer: By the process deals that are in process, but the pent up demand.

Charles S. Strauzer: We're working with several highly.

Charles S. Strauzer: Marquee deals that are publicly filed and we also have some that are still confidential and given the steps our clients are taking the remain public or to go public.

Charles S. Strauzer: We think they'll respond when the market opens.

Craig D. Clay: The Wall Street Journal mentioned last week that the recent success bodes well and companies could potentially 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 think the IPO market will continue to normalize into the summer.

Charles S. Strauzer: The Wall Street Journal mentioned last week.

Charles S. Strauzer: The recent success bodes well companies potentially would move their IPO up.

Speaker Change: We haven't seen that publicly.

Charles S. Strauzer: But we're encouraged by the receptivity of the Ipos that have gone out.

Charles S. Strauzer: The IPO market will continue to normalize into the summer.

Speaker Change: Great. Thank you.

Charles S. Strauzer: Okay.

Operator: Your next question comes from the line of Pete Heckman with DA Davidson. Your line is open.

Charles S. Strauzer: Your next question comes from the line of peak Heckman with the D. A Davidson your line is open.

Peter James Heckmann: Morning, Pete, Chair. Hey, good morning.

Peter James Heckmann: Good morning, Pete sure Hey, good morning.

Peter James Heckmann: We had noticed that ourselves. I think we had counted 73% of the top 15. And I think you said 75% of the top 16.

Peter James Heckmann: We had noticed that ourselves I think we had kind of 73% of the top 15, I think you said, 75% of the top 16, but what do you attribute that to.

Craig D. Clay: But what do you attribute that to? Better competitive solutions.

Peter James Heckmann: Just.

Peter James Heckmann: Better competitive solutions from defend or are there are some competitors that have fallen off.

Craig D. Clay: Dfin, or are there some competitors that have fallen off? Or is it just a fortunate, fortunate mix of a high retention rate amongst the IPOs that were going out?

Peter James Heckmann: Or.

Peter James Heckmann: Just kind of fortunate unfortunate mix of our high retention rate amongst the Ips that we are going out.

Craig D. Clay: Yeah, thanks for the question. I think it's a number of factors. I think our industry-leading portfolio of solutions, you know; 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 of serving on their deal team, helping them project manage and providing, most importantly, the software to make that happen. So I think it's about our clients, in their moment of need, turning to somebody who can provide the best solution for them.

Speaker Change: Yes, thanks for the question.

Speaker Change: It's a number of factors I think our industry leading portfolio of solutions.

Speaker Change: We're dedicated to our clients private to public journey.

Peter James Heckmann: So we have a rich history in this space I think when the market gets busy.

Peter James Heckmann: We play an important part serving on their deal team, helping them project manage and providing most importantly, the software to make that happen.

Peter James Heckmann: So I think it's about our clients in their moment of need turning to somebody who can provide the best solution for them.

Craig D. Clay: I think the exciting thing is that these are event-driven transactions, but it's providing this pipeline for recurring software and subscriptions that support our clients' ongoing compliance, so the DFIN 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 their dual track. I think what they're getting, what our clients are getting when they come here, is the trust that clients have in DFIN to get their deal done. And then the support, the services, and the software, whether it's active disclosure or venue, that helps them do the work that they do.

Peter James Heckmann: The exciting thing is that these are event driven transactions, but it's providing this pipeline for recurring software.

Peter James Heckmann: Subscription and support our clients' ongoing compliance so the decent compliance platform, but also as you heard in the venue results, that's a leading indicator and it also supports the IPO market.

Peter James Heckmann: Most almost every one of these deals has a PDR associated with it as their dual track.

Peter James Heckmann: What theyre getting and what our clients are getting when they come here as the trust that clients have and lead time to get their deal done.

Peter James Heckmann: And then the support services and the software.

Peter James Heckmann: Whether it's active disclosure venue.

Peter James Heckmann: That helps them do the work that they do.

Daniel N. Leib: Okay, that's helpful. And then how about tailored shareholder reports as we get one quarter closer to the go live, any change in the thought process around the potential incremental benefit to do thin or any higher confidence in that number? Yes.

Peter James Heckmann: Okay. That's helpful and then how about on tailored shareholder report it because we get one quarter closer to the.

Peter James Heckmann: Because the go live any change in the thought process around the potential incremental benefit could be soon or any higher confidence in that number.

Daniel N. Leib: Yeah, let me, this is Dan. I'll start, and then I think Dave and Eric may have a few comments, but, you know, we, with the new regulation, the tailored shareholder report is a financial report. And so, yeah, we look at this on the software side, and we have a great position with funds with our ARC reporting. Financial Reporting Offering within ArcSuite. And TSR is now a new module that's integrated within ArcReporting.

Speaker Change: Yes, let me.

Peter James Heckmann: This is Dan I'll start and then I think Dave and Eric May I have a few comments, but yes.

Peter James Heckmann: With the new regulation.

Peter James Heckmann: Tailored shareholder report as 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.

Daniel N. Leib: And so for those using ArcReporting, it builds upon the existing data flows, generates underlying TSRs, 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 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.

Peter James Heckmann: Financial reporting offering within our suite and <unk> now a new module that's integrated.

Peter James Heckmann: Within arc reporting and so for those using our reporting it builds upon the existing data flows generates underlying tsi are the data model creates the tsi itself and then we tag and assemble the tsi are into the CSR and then ultimately filed with the SEC.

Peter James Heckmann: So we've been in the process of Onboarding configuring clients to the Tsi module, we've seen good progress.

Peter James Heckmann: We're really not seeing.

Peter James Heckmann: Any more of we're seeing a little I guess play out in the marketplace, but that's pretty well set on.

Daniel N. Leib: On the distribution side, for now, the requirement is that the document is printed and distributed. And 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, you know, Dave may want to comment on the print as well as Eric.

Peter James Heckmann: On the distribution side for now the requirement is the documents printed and distributed.

Peter James Heckmann: And some of the print.

Peter James Heckmann: <unk> continues to play out in the market as we mentioned on the last call.

Peter James Heckmann: We're certainly seeing more price pressure on the printing side and so.

Peter James Heckmann: Dave May want to comment on.

Peter James Heckmann: The print as well as Eric.

David A. Gardella: Yeah, thanks, Dan. And thanks for the question, Pete.

David A. Gardella: Yes, Thanks, Dan.

David A. Gardella: Thanks for the question please.

Eric J. Johnson: Just building on Dan's comment.

David A. Gardella: I would draw your attention to our two recent <unk>.

Eric J. Johnson: Yes releases, where we've been able to successfully test filed two full form and CSR in <unk> <unk>.

David A. Gardella: You know, just building on Dan's comment, I would draw your attention to our two recent press releases, where we were able to successfully test file two full form NCSRs 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 SAS solution arc reporting. And our product team has done a tremendous job getting that type of test filing completed well in advance of the July deadline.

Eric J. Johnson: I think this represents our ability to 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.

David A. Gardella: And our product team has done a tremendous job.

David A. Gardella: Getting that type of test filing completed well.

David A. Gardella: In advance of the July deadline, so very pleased with the progress from that perspective.

David A. Gardella: So, you know, very pleased with the progress from that perspective. Our revenue mix seems to be trending toward software, which does reflect DFINN's position as a leader in the investment company's regulatory and reporting software.

David A. Gardella: Our revenue mix seems to be trending toward.

David A. Gardella: Software, which does reflect <unk> position as a leader in the investment companies regulatory reporting software so.

David A. Gardella: That's been somewhat consistent and as Dan mentioned.

David A. Gardella: Consistent with our operating plan over the past few years, we continue to exit low margin print.

David A. Gardella: So, that's been somewhat consistent. And as Dan mentioned, you know, we have been consistent with our operating plan over the past few years. You know, we continue to exit low margin print. As it relates to TSR printing, you know, 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, you know, where DFINN can provide end-to-end efficiency, we'll certainly take that work. But, you know, we will stay true to our operating plan around low margin print and ease that where we need to.

David A. Gardella: As it relates to CSR printing, we're operating under that same discipline.

David A. Gardella: And where we have projects that make sense and add value for our clients from a straight through processing perspective.

David A. Gardella: We can deepen can provide end to end efficiency, we will certainly take that work, but we will stay true to our operating operating plan around.

David A. Gardella: Low margin print and.

David A. Gardella: Exiting that where.

David A. Gardella: Where we need to.

David A. Gardella: Okay, all right, you have a problem. And Pete, I would just jump in there. You know, both Dan and Eric talked about some of our approach to print and how it ties into the bigger strategy and the discipline around pricing. You know, 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, you know, we had sales north of, you know, 300 million, 321 million, and 20% gross margins.

Speaker Change: Okay, Alright thats helpful.

Speaker Change: And Pete I would just jump in on there both.

Speaker Change: Dan and Eric.

Speaker Change: Talk about some of the.

Pete: Our approach to print and how it ties into the bigger strategy and the discipline around pricing.

Pete: I think if you look at our historical gross margins for print and distribution. There is really a strong trend there.

David A. Gardella: So, you know, 63 million dollars in gross profit dollars. I think you contrast that with where we're currently at, you know, on a trailing, trailing four-quarter basis. $158 million in sales; gross margin is 43%. Gross profit dollars are $67 million. So, you know, we've cut our print revenue in half over the last four or five years or so, taking out more than $160 million of sales and actually increasing our gross profit dollars by a few million bucks. We have done a great job with our operating model. We've outsourced 100% of our offset printing.

Pete: Going back to 2019.

Pete: We had sales north of.

Speaker Change: Yes, 300 million $321 million.

David A. Gardella: 20% gross margins so.

David A. Gardella: $63 million in gross profit dollars I think you contrast that with where we're currently at.

David A. Gardella: On a trailing trailing four quarter basis.

David A. Gardella: $158 million of sales gross margin is 43% gross profit dollars or $67 million. So.

David A. Gardella: We've cut our revenue and half over less.

David A. Gardella: For five years or so.

David A. Gardella: Taking out more than a $160 million of sales and actually increasing our gross profit dollars by a few million Bucks.

David A. Gardella: You have done a great job with our operating model, we've outsourced the 100% of our our offset printing we've reduced our cost structure and made it more variable and.

David A. Gardella: We've reduced our cost structure and made it more variable. And, you know, again, taking a disciplined approach to pricing has really driven this trend. You know, kind of at a high level, right? We know all revenues are not created equal. And then I would say, you know, even within print and distribution, all revenues are not the same. And 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.

David A. Gardella: Again, taking the disciplined.

David A. Gardella: Approach to pricing have really have really driven this trend.

David A. Gardella: No.

David A. Gardella: The high level right. We know all revenues not created equally and then I would say even within Britain distribution all revenues not the same and 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 cost.

David A. Gardella: <unk> level to continue to drive.

David A. Gardella: The financial results we have here.

David A. Gardella: Okay, thanks, Dave for that. I mean, while I've got to be like, 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 first quarter? Yeah, so print in the second quarter, or the second quarter, I should say, is proportionately, you know, typically a heavy print quarter. And so, you know, roughly about the same as what we saw in Q1.

Speaker Change: Okay. Thanks, Dave for that I mean, while I've got you guys. If I can just sneak in one more but I didn't hear it but in terms of just didn't give that second quarter numbers.

Speaker Change: Would you think that would be down by about the same magnitude as the as the first quarter.

Speaker Change: Yes, so print.

Speaker Change: In the second quarter or the second quarter I should say is proportionately typically a heavy print quarter.

Speaker Change: And so.

Speaker Change: Roughly about the same as what we saw in Q1.

Peter James Heckmann: Okay, all right. That's helpful. I appreciate it. I'll get back in the queue.

Speaker Change: Okay, Alright thats helpful.

Speaker Change: I appreciate it I'll get back in the queue.

Speaker Change: Thank you.

Operator: Your next question comes from the line of Kyle Peterson with Needham. Your line is open.

Speaker Change: Your next question comes from the line of Kyle Peterson with Needham Your line is open.

Kyle David Peterson: Great. Thanks, guys. And good morning.

Kyle David Peterson: Great. Thanks, guys and good morning.

Kyle David Peterson: Wanted to touch on venue a little bit more.

Kyle David Peterson: I want to touch on, you know, venue a little bit more. You know, the growth was really impressive. Appreciate 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. You know, what you guys kind of impact of whether it's pricing versus just kind of usage or volume will be really helpful.

Kyle David Peterson: Ortho is really impressive I appreciate some of the color on your on new clients and such but.

Kyle David Peterson: Just wanted to see if you could unpack.

Kyle David Peterson: A little bit outside of the new client wins.

Kyle Peterson: What you guys kind of.

Speaker Change: The impact of whether it's.

Speaker Change: Pricing versus just kind of usage or volume will be really helpful.

Craig D. Clay: Sure, 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 Change: Sure. This is Craig thanks for the question.

Craig: I think as you saw.

Craig: And Dave reviewed.

Craig D. Clay: It was up 10% sequentially from Q4. So, record high revenue, driven by three 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 2024.

Craig: Rate growth, 43%, I'll unpack that a little bit.

Craig: It was up 10% sequentially from Q4.

Craig: So record high revenue driven by three factors.

Craig: So we're overlapping Q1 is lowest quarter of.

Craig: 2023.

Craig: As Dave mentioned, we will have tougher comps as we move into.

Craig: The second half of 2024.

Craig D. Clay: The increase was driven by page count activity. Hence, higher activity on existing rooms, new rooms, as well as higher pricing. And these rooms are staying open longer, again, reinforcing the stability of the venue.

Craig: The increase was driven by page count activity.

Craig: So higher activity on existing rooms, new rooms.

Craig: As well as higher pricing.

Craig: These rooms are staying open longer again, reinforcing the stability of venue.

Craig D. Clay: The underlying demand is a little less volatile versus M&A. So, the demand we see is becoming reoccurring in nature, you know, 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.

Craig: The underlying demand is a little less volatile versus M&A sort of demand.

Craig: We see as becoming reoccurring in nature.

Craig: For this sort of more stable revenue stream.

Craig: And what has been an event driven transactional software product.

Craig: I've mentioned, the large projects, even when you strip those out.

Craig: We have some some nice growth.

Craig D. Clay: Our clients are telling us that dealmaking, as well, is looking up. And so, we're seeing that venue as a precursor to dealmaking. 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 dealmaking in the past. Before sort of a recent zero interest rate area, the prior U.S. M&A volume peaks came when the average fund rate was about 5%.

Craig: Our clients are telling us the deal making as.

Craig: As well as looking up and so we're seeing that when you as a precursor to dealmaking I think.

Craig: Companies are not waiting on the fed anymore. So the current level of interest rates.

Craig: Of itself has not been a barrier to dealmaking in the past.

Craig: Before sort of our recent zero interest rate area.

Craig: Prior U S.

Craig: M&A volume peaks came when the average fund rate was about 5%.

Craig: So we keep seeing demand for high quality assets.

Craig D. Clay: 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. You heard we're executing well. And as Dan stated, venues bring applications to the ecosystem, whether it's announced or 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, and delivering great products.

Craig: There's large amounts of capital that is being looked to put to work.

Craig: We're pleased with our pipeline you've heard we're executing well and as Dan stated venue.

Craig: Venues broad application in the ecosystem, whether it's announced unannounced, whether it's public or private and as I mentioned in the IPO space. It's just more resilient. So we're going to continue to focus on whats got us here, which is sales execution share expansion.

Craig: Delivering great product and serving our clients.

Craig: Okay.

Craig D. Clay: That's really helpful. And maybe if I could just get, you know, a follow up on capital allocation here, it seems like you guys were able to, you know, sell, you know, some land and I know you guys have divested some assets over time, but, you know, just wanted to pick your brain on kind of how you guys are thinking about putting, you know, the the proceeds from some of that capital work and how you guys are thinking about balancing whether it's you know, potential M&A or further buybacks.

Speaker Change: That's really helpful and maybe if I could just get a follow up.

Craig: And then capital allocation here.

Speaker Change: It seems like you guys were able to.

Speaker Change: 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.

Craig: The proceeds from some of that capital to work in and how you guys think about balancing whether it's.

Craig: Potential M&A or buybacks or debt pay down.

Daniel N. Leib: Yes, thank you. Yeah, I'll start and see if Dave wants to weigh in.

Speaker Change: Yes. Thank you.

Speaker Change: Yes, I'll start and if David wants to weigh in.

Speaker Change: So really more of the same.

Daniel N. Leib: So really more of the same. You know, we, the highest and best use, we want to make sure we have financial flexibility to execute the strategy. We 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 two highest priorities, along with 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 toward those three priorities. But no changes at all in capital priorities. We remain extremely disciplined across all aspects of capital deployment.

Speaker Change: The highest and best use we want to make sure we have financial flexibility to execute the strategy.

Craig: We have built up ample financial flexibility.

David: And so you've seen us obviously buying back.

David: More shares.

David: And then paying down debt.

David: And those are the.

David: The tourist highest highest priorities along with the organic investment and accelerating the transformation.

David: And that will continue I mean, the proceeds from the sale of.

David: Of the building in this case over the land.

Craig: We will go into.

Craig: Into the coffers and be targeted towards those.

Craig: Those three priorities.

Speaker Change: No no changes at all in capital priorities, we remain extremely disciplined across all <unk>.

Speaker Change: Aspects of capital deployment.

Daniel N. Leib: Yeah, Dan, I will just reiterate, you know, Kyle, you specifically asked about M&A, as Dan pointed out, but, in our view, the best use of Capital to Drive Returns is organic investment. And, you know, certainly from a shareholder return perspective, the share repurchases. I think, you know, when we look at M&A opportunities, especially for those that are, you know, purely aligned with our strategy, we think that, you know, valuations are still pretty rich, certainly weighed against the opportunities we have from an organic perspective. And so, you know, we keep that on the radar, but, you know, stay very, very disciplined on driving the best return.

Speaker Change: Yes, Dan I would just reiterate.

Speaker Change: You, specifically asked about M&A standpoint, it out.

Speaker Change: But our view the best use of.

Speaker Change: Capital to drive returns is the organic investment and certainly from a shareholder return perspective.

Speaker Change: The share repurchases.

Speaker Change: I think when we look at M&A opportunities, especially for those that are.

Speaker Change: Purely aligned with our strategy, we think that valuations are still pretty rich.

Speaker Change: Certainly weighed against the opportunities we have from an organic perspective, and so we keep that on the radar but.

Speaker Change: A very very disciplined.

Craig: <unk>.

Craig: Driving driving the best returns.

Kyle David Peterson: That's helpful and makes sense. Thanks, guys.

Speaker Change: That's helpful and makes sense thanks, guys.

Speaker Change: Thank you.

Speaker Change: Yeah.

Operator: Your next question comes from the line of Raj Sharma with Be Riley. Your line is open.

Speaker Change: Your next question comes from the line of Raj Sharma with B Riley Your line is open.

Rajiv Sharma: Yeah, thank you. Congratulations on the good cost cutting in the margins. My question, yeah, sure. I have a couple of questions. One, 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?

Rajiv Sharma: Yes. Thank you.

Rajiv Sharma: Congratulations on the good cost cutting in the margins.

Rajiv Sharma: Thanks for your question, Yes sure.

Rajiv Sharma: I have a couple of questions one eight.

Rajiv Sharma: The revenue contribution from the <unk> view.

Speaker Change: Have a.

Speaker Change: A reasonable idea of what that could be this year and next year and also.

Speaker Change: Does that push up the gross margin profile.

Speaker Change: Your software business.

David A. Gardella: Yeah, Raj, we said last quarter that $20 to $25 million on an annualized basis in 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, which, 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 makeshift with more software proportionately and less print proportionately.

Speaker Change: Yes, Raj we said.

Raj: So last quarter, we said, 20% to 25 million on.

Raj: An annualized basis contribution from Tsi.

Speaker Change: With roughly half of that coming in 2024.

Speaker Change: As we talked about earlier.

Speaker Change: On the print side I think a lot of that is still in play and we're.

Speaker Change: We've been very happy with with where we're at on the software right, which is to your point delivers higher margins.

Speaker Change: 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.

Speaker Change: With more software proportionately and less print proportionately.

David A. Gardella: The other thing I would say is, you know, we're still investing pretty heavily in TSR, and so I think you'll start to see more of the margin expansion as it specifically relates to TSR starting to hit in 2025 and beyond when we get past this initial product development investment.

Speaker Change: The other thing I would say is we're still in.

Speaker Change: Best thing pretty heavily in <unk>, and so I think what youll start to see more of the margin expansion as it specifically relates to <unk>.

Speaker Change: Starting to hit in in 'twenty, five and beyond when we're when we.

Speaker Change: Get past this initial product development investment.

Craig D. Clay: Got it. And then, and then on the active disclosure side, could you help me understand just kind of a recap of what was going on earlier? Last year there were some headwinds; there was a switch to the digital version. What growth rate could we expect from active disclosure going forward? I know that you've talked about a second half pickup. Could you explain what caused the weakness in the first quarter and then how is that transition coming along?

Speaker Change: Got it.

Speaker Change: And then on <unk>.

Speaker Change: On the active disclosure side could you help me understand.

Speaker Change: Just kind of recap on what's going on earlier last year was there were some headwinds there was.

Speaker Change: Which to the digital version.

Speaker Change: What growth rate could we expect from active disclosure.

Speaker Change: Going forward I know that you've talked about a second half pick up could you.

Speaker Change: What caused the weakness in the first quarter and then how does that transition coming.

Craig D. Clay: Rajiv, it's Craig. Thanks for the question. So, yes, as you mentioned, AD grew 2% in the quarter. But, compared to its recent trend, it declined 2% in Q4. It grew by a percent in Q3. It 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 third 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 for active disclosure.

Speaker Change: Ross, It's Craig Thanks for the question so.

Ross: So yes as you mentioned.

Craig: Grew 2% in the quarter.

Craig: So compared to recent trend.

Speaker Change: Climbed 2% in Q4 grew.

Speaker Change: Grew 1% in Q3 it.

Speaker Change: <unk> was up six in Q2 and two in Q1, so we're continuing to make progress toward the future growth of the platform.

Speaker Change: It's our third consecutive quarter of net client growth.

Speaker Change: Within what drove Q1 results.

Speaker Change: One of them and one of the items mentioned.

Speaker Change: We're excited to build a leading section 16 filing platform within active disclosure section 16 beneficial owners publicly disclosing.

Craig D. Clay: 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. So, we've covered that topic.

Speaker Change: Within the quarter, there was lower section 16 filing activity.

Speaker Change: Driven from the transition to a subscription model and the new product as.

Speaker Change: As well as driven by fewer ipos, so we've covered that topic.

Craig D. Clay: We're also up against a lower customer count as a result of the AD3 churn that was associated in the first half of last year. The continued lack of IPOs means we're not able to keep our own clients, also negatively impacting SPAC liquidations. Now, we're offsetting that with price increases in service revenue. So, to your question about what to expect in Q2 and in the second half of 24, we're excited by what we see, but the progress we've been making to expand the adoption of AD is slowly being reflected. In this quarter's result, we have some prospective metrics that are favorable. So, some of them were mentioned.

Speaker Change: 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.

Speaker Change: The continued lack of ipos were not able to keep our own clients.

Speaker Change: Also negatively impacting Spackling liquidations.

Speaker Change: Now, we're offsetting that with price increases in service revenue.

Speaker Change: Question, what to expect in Q2 and in the second half of 'twenty four.

Speaker Change: We're excited by what we see but the progress we've been making to expand the adoption of <unk> is slowly being reflected in this quarter's result.

Craig D. Clay: So, Q1, 24, our third consecutive quarter of net client growth, which is exciting because it's much better than we've seen in past quarters. Mentioned our average price was up in the mid-teens versus active disclosure three, which we have, again, migrated off of. As Dave stated, we had net new logo ACV, which is approximately double. Q1 of 23, again, what's moving onto the platform will start to show in future quarters. So, we expect the AD growth in the second half of 24 to be stronger.

Speaker Change: We have some perspective metrics that are favorable so some of them are mentioned.

Speaker Change: So Q1 'twenty for a third consecutive quarter of net client growth, which is exciting it's much better than we've seen in past quarters mentioned.

Speaker Change: I mentioned, our average price up in the mid teens versus active disclosure three which we again migrated off of.

Speaker Change: As Dave stated, we had net new logo ACB, which is approximately double Q1 of 'twenty three again whats moving on to the platform, we will start to show in future quarters. So.

Speaker Change: So we expect the growth in the second half of 'twenty four to be stronger, we're going to overlap the platform transition and related churn.

Craig D. Clay: We're going to overlap the platform transition and related churn. And the excitement of what we see is we have the newest, fit-for-purpose product in the market, and the market wants what we build. We're able to price it accordingly. It's an opportunity for us, for DFIN.

Speaker Change: The excitement by what we see is we have the newest fit for purpose product in the market and the market wants what we bill.

Speaker Change: The price it accordingly, as an opportunity for us for these and.

Rajiv Sharma: It's also an opportunity for our clients because they can pay less than the leading competitor, so they are recognizing the value of this better product. They want a choice. They get to have the newest product in the market with product improvements, such as our editor, and our track changes. It's all driven by our decades in the market and 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 DFIN and active disclosure as the compliance leader.

Speaker Change: It's also an opportunity for our clients because our clients can pay less in the leading competitor.

Speaker Change: So our clients are recognizing the value of this better product.

Speaker Change: One of choice that you have to have the newest product in the market.

Speaker Change: With product improvements.

Speaker Change: Such as our editor our track changes, it's all driven by our decades in the market and surveying SEC clients.

Speaker Change: So our current clients are using.

Speaker Change: For the most important reporting needs and our pipeline is strong because our future clients Cds enacted disclosure as the compliance leader.

Rajiv Sharma: Thank you. Yeah, that's, that's very helpful. Color.

Speaker Change: Thank you, yes, that's that's very helpful color and just lastly.

David A. Gardella: And just lastly, the print declines were more than expected. Can you help me understand that, you know, you've said they're going to be flat, you know, it's a print-heavy second quarter, the print-heavy quarter, have the print declines bottomed out? You know, we have to expect, you know, I know. You have 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? A little bit more color on that please.

Speaker Change: The print declines were more than expected could you help me understand that Dave I know, you said theyre going to be flat.

Speaker Change: It's a print heavy second quarter as a printer every quarter.

Speaker Change: Yes.

Speaker Change: Have the print declines bottomed out.

Speaker Change: We had expected.

Speaker Change: You have taken quite a few of the print declines in the last several years.

Speaker Change: And you had expected a 5% ongoing decline in the market is that sort of still in line.

Speaker Change: It was a little bit more color on that please.

David A. Gardella: Yeah, Raj, I appreciate the follow-up there. And I want to point out a couple of things. One, I think, you know, 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, not only on the cost side of the print, but the overall volume. As we talked about in 2021 with Rule 30E3 and 498A, we saw print volume drop right as the distribution default changed from print to electronic.

Speaker Change: Yes Raj.

Speaker Change: Appreciate the follow up there.

Speaker Change: I'd point to a couple of things one I think from the 5% perspective.

Speaker Change: <unk> is intended to address the secular decline that we just see print, becoming smaller and smaller over time.

Speaker Change: To your point, we've done a really nice job.

Speaker Change: Yeah.

Speaker Change: Managing the not only the cost side of the print but the.

Speaker Change: The overall volume.

Speaker Change: As we talked about in.

Speaker Change: 2021, with with rule <unk>, three and $4 98 a.

Speaker Change: Saw print print volume drop right as the distribution default changed from.

David A. Gardella: At the same time, we use that as a catalyst to exit, you know, some of the lower margin print work and variability in the cost structure, etc. And, you know, to my earlier point, that's proved to be a good strategy for us.

Speaker Change: Print to electronic.

Speaker Change: At the same time, we use that as a catalyst to exit.

Speaker Change: Some of the lower margin print work and variable is the cost structure et cetera, and to my earlier point.

Speaker Change: Proved to be a good strategy for us gross margin in print has gone from 20% to over 40%.

David A. Gardella: You know, 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, you know, that print makes sense for us. I think, you know, as we saw in the first quarter here, not much revenue change, but a pretty significant change in profit, really driven by that mix, right?

Speaker Change: So what I would say is we're continuing to take a look.

Speaker Change: At.

Speaker Change: The economics around certain print jobs, the economics around certain.

Speaker Change: Certain clients and whether or not.

Speaker Change: That makes sense for us I think as we saw in the.

Speaker Change: In the first quarter here.

Speaker Change: Not much revenue change, but pretty significant change in profit and really driven by that mix right more more software less print.

David A. Gardella: More software, less print, driving profit dollars, driving margin. We will continue to see that in Q2, because that same dynamic is playing out. I think as we, you know, get into the back half of the year, that certainly starts to taper off. But, you know, we're going to continue to keep an eye on the overall mix, the overall economics that, you know, the component pieces of our offering drive. And again

Speaker Change: Driving profit dollars driving margin.

Speaker Change: We'll continue to see that in Q2.

Rajiv Sharma: Great. Thank you for all the color again.

Speaker Change: Because that same dynamic is playing out I think as we get into the back half of the year.

Speaker Change: That certainly starts to temper, but we're going to continue to keep an eye on the overall mix the overall economics that.

Speaker Change: Component pieces of our offering drive and again the aggregate customer.

Speaker Change: Customer economics as well.

Speaker Change: Great. Thank you for all the color and again great job.

Speaker Change: On the business.

Speaker Change: And running it.

Speaker Change: <unk>. Thank you again I'll take it offline. Thank.

Speaker Change: Thank you Raj.

Daniel N. Leib: That concludes our Q&A session. I will now turn the conference back to Dan Lee for closing remarks.

Speaker Change: Okay.

Speaker Change: That concludes our Q&A session I will now turn the conference back to Dan Lee for closing remarks.

Daniel N. Leib: Okay, thank you. And thank you everyone for joining us. We look forward to speaking with you, both on our call and in a few months and in the interim.

Dan Lee: Okay. Thank you and thank you everyone for joining we look forward to.

Dan Lee: Speaking with you.

Dan Lee: Both on our call in a few months and in the interim thanks.

Speaker Change: Thanks again.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Okay.

Speaker Change:

Speaker Change:

Speaker Change: Yeah.