Q3 2024 Donnelley Financial Solutions Inc Earnings Call
and the source of results, cops at which can be found in the Investors section of our website at defenseolutions.com.
During this call, we'll refer to forward-looking statements that are subject to risks and uncertainties.
For a complete discussion, please refer to the cautionary statements included in our earnings release.
Further detailed in our most recent annual report on Form 10K, Quarterly Report on Form 102, and other filings with the FCC.
Further, we will discuss certain non-gap financial information, such as a justady, a justady, but not margin and organic materials.
We believe the presentation of non-gap financial permission provides you with useful supplementary information concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance.
They are however provided for informational purposes only. Please report to the Ernest Release and related tables for gap financial information and reconciliation of gap to non-gap financial information.
Speaker Change: I am joined this morning by Dan Leib, Dave Gardella and other members of Management.
Speaker Change: I will now turn the call over to Dan.
Dan Leib: Thank you, Mike, and good morning everyone. Our third quarter results offered further validation of our strategy.
Dan Leib: including a favorable sales mix driven by double digit growth in our SaaS offerings. Improvements involve operating cash flow and free cash flow and great progress in expanding the adoption of our offerings in the marketplace.
Dan Leib: Against the backdrop of a soft capital market transaction environment, which resulted in an 8% reduction in our transactional revenue, we delivered solid results.
Dan Leib: with net sales of $179.5 million and a Justin Ivita of $43.2 million resulting in an adjusted to even down margin of 24.1%.
Dan Leib: which once again demonstrated the resiliency of our operating model across various market conditions and the sustainability of our performance as our business mix continues to transform.
Speaker Change: Dave will cover our results in more detail, including some items that negatively impacted our year-over-year profitability comparisons.
Speaker Change: Specific to our third quarter performance, I am pleased with it can continue strong demand for our software offerings, where we delivered year over year organic net sales growth of 13.6%. A continuation of the strong growth rate, we achieved in the first half of this year.
Speaker Change: Software Solutions Net Sales represented approximately 46% of total Net Sales in the quarter. The highest level we have achieved today.
Speaker Change: More significantly, third quarter software solution sales were for the first time, meaning fully higher than both tech enabled services and print and distribution sales.
Speaker Change: As our software offering serve recurring and reoccurring, business needs of our clients, this offers another positive proof point of our progress in transforming deepened.
Speaker Change: On a trailing four-quarter basis, software solutions, net sales reached nearly $322 million, growing 13.1% on an organic basis.
Speaker Change: from the third quarter, 20, 23 trailing four quarters. And represents 40.1% of trailing four quarter sales. An increase of approximately 360 basis points from the third quarter, 20, 23 trailing four quarter sales.
Speaker Change: Our third quarter software solutions net sales growth continues to be led by the performance of venue, which post that approximately 27% sales growth despite overlapping last year's strong third quarter.
Speaker Change: We remain encouraged by venues outstanding performance, which is primarily a result of strong sales execution.
Speaker Change: In addition, the growth rates of our recurring compliance software products, arcs, sweet and active disclosure, each improved in the third quarter compared to recent trend.
Speaker Change: With an arc suite, we realize incremental software revenue from our Taylor chairholder report solution.
Speaker Change: We are encouraged by the level of flying adoption of our software solutions for Taylor and Cheryl the reports. And remain on track to achieve 11 million to $12 million of incremental recurring software revenue on a full year basis.
Speaker Change: with approximately half being recognized in 2024. In addition to positive client feedback, our leadership-teller shareholder reports compliance has been recognized more broadly within the investment management industry.
Speaker Change: Earlier this week, Defin was awarded the 2024 Nova Award for industry innovation and product development, presented by Nixa, the Global Asset Management Trade Association.
Speaker Change: The award honors defense for its outstanding leadership, product development, and innovative marketing approach in response to the tailored shareholder reports regulation.
Speaker Change: We have spoken in the past about the creation of a platform that leverages capabilities across deep in areas such as composition, tagging, filing and regulatory and financial reporting while maintaining client segment unique capabilities.
Speaker Change: Our award-winning talent shareholder report solution is a great example of the benefits of the platform. We leverage foundational capabilities while building new requirements to serve the market.
Speaker Change: As a relates to active disclosure, while the overall growth rate improved modestly in the third quarter compared to recent trend, the subscription component of active disclosure grew at a faster pace in the quarter, reflecting the increased sales momentum from recent wins, combined with overlapping last year's product transition.
Speaker Change: The stronger subscription revenue growth is partially offset by lower section 16 beneficial ownership, filing activity as the demand for such filing continues to be impacted by a weak IPO market.
Speaker Change: Looking ahead, we expect the growth rate for active disclosure to continue to improve in the fourth quarter of this year and into 2025.
Speaker Change: with an active disclosure which also leverages platform capabilities. We are serving additional use cases, the a hybrid model that combines our software solution with an unmasked service offering.
Speaker Change: For example, after the disclosure serves the IPO registration and proxy statement use cases, which historically were managed in a traditional model. And we have received outstanding feedback from clients regarding their ability to work in a way that leverages the full spectrum of our solutions.
Speaker Change: Finally, our mixture was accelerated by the continued reduction in print in distribution revenue, which declined by $4.3 million or $16.3 per cent year over year.
Speaker Change: This reduction took place both in the printing and distribution of capital markets compliance documents, as well as lower print volume in the investment companies' business as a result of the college shareholder reports regulation.
Speaker Change: As a reminder, the Taylor Sherholder reports regulation eliminated the demand for full-length Sherholder report at the Fun Level, and replaced them with two to four-page summary documents at the Sherclass Level.
Speaker Change: Well, we experienced an increase in printing and distribution volume from the additional share-class documents primarily within the regulated insurance segment that increased in demand was more than offset by a reduction in the overall size of the report's mandated by the PSR rule.
Speaker Change: We expect this dynamic to continue in the fourth quarter in addition to the broader secular decline in the demand for printed products resulting in lower print and distribution revenue.
Speaker Change: Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our third quarter results in our outlook for the fourth quarter. Dave?
Dave Gardella: Thank you, Dan and good morning, everyone. Before I discuss our third quarter results, I'd like to recap two housekeeping items.
Dave Gardella: First, during the third quarter, we discontinued the use in development of a certain software product and recorded pre-tax charges of $2.8 million related to accelerated amortization of capitalized software.
Dave Gardella: and 0.6 million dollars of an impairment charge related to software development costs on assets, not yet placed in service, all within the capital markets, compliance and communications management segment.
Dave Gardella: Second, our effective tax rate in the quarter was 43.5%, which are driven by increases in both non-reffed and non-favorable discreet tax adjustments, combined with the impact of lower pre-tax earnings.
Dave Gardella: While these adjustments do not impact our forecast that effective tax rates for the year or our long-term outlook, they did have an outsized impact in the quarters.
Dave Gardella: Collectively, the accelerated amortization, impairment charge, and tax-related adjustments resulted in a reduction in gap and non-gap earnings per share of 17 cents and 16 cents respectively.
Dave Gardella: But had no impact on 3rd quarter adjusted E-betha, adjusted E-betha margin for cash flow.
Speaker Change: Next is Dan referenced there were a handful of items that impact your overyear copper ability.
Speaker Change: Specifically, a reduction in compensation related to coolals during the third quarter of last year, benefited last year's third quarter by approximately $4 million.
Speaker Change: In addition, higher compensation related accruals related to 2024 performance resulted in approximately $2 million of incremental expense being recorded in this year's third quarter.
Speaker Change: The mind, these items negatively impacted your overyear comparability by approximately $6 million in adjusted evitah across all four operating segments as well as corporate.
Speaker Change: with most of the year over year impact, seeing reflected within a DNA.
Speaker Change: Turning to our third quarter results.
Speaker Change: and Dan noted we continue to experience positive momentum in the adoption of our software solutions which increased by 13.6% on an organic basis year over year, representing the third consecutive quarter of double-digit software solutions in that sales growth.
Speaker Change: Despite the continued softness in capital markets transactional environment.
Speaker Change: Our strong software performance enabled us to deliver another quarter of improved sales mix, solid adjusted e-detach, and yearly year improvements in both operating cash flow and free cash flow.
Speaker Change: and a consolidated basis total in that sales for the third quarter of 2024, where $179.5 million, a decrease of $0.5 million for 0.3% on a recorded basis.
Speaker Change: and an increase of 0.2% on an organic basis from the third quarter of 2023.
Speaker Change: The decrease in net sales was driven by lower volume and our compliance and communications management segments.
Speaker Change: which decreased by $9.5 million in aggregate, nearly offset by the growth in software solutions and that sales which increased by $9 million or 13.6% on organic basis.
Speaker Change: 3rd quarter just at 9th April, Margin was 61.7%.
Speaker Change: Approximately 110 basis points higher than the third quarter of 2023.
Speaker Change: are marriedly driven by a favorable business mix.
Speaker Change: featuring growth in higher margin software solution sales and the impact of ongoing cost control initiatives, partially offset by lower capital markets, transactional activity and higher compensation related expense.
Speaker Change: I adjusted 9 GFFC and A expense in the quarter was $67.6 million. A $7.9 million increase from the third quarter of 2023.
Speaker Change: The increase in the job said not yet SGA was primarily driven by higher compensation related expenses, including the items that I noted earlier, and higher bad debt expense.
Speaker Change: These variances were partially offset by lower third-party stances in cost control initiatives.
Speaker Change: Our third quarter just at Eva Davos 43.2 million dollars, a decrease of $6.2 million from a third quarter of 2023.
Speaker Change: 3rd quarter of Justice Eve at that margin was 24.1% of decrease of approximately 330 basis points from the 3rd quarter of 2023, primarily driven by the year over year variance in SGA that I just outlined.
Speaker Change: Turning to our third older segment results.
Speaker Change: and that sales in our capital market software solution segment were 53.3 million dollars in increase of 16.8% on organic basis from the third quarter of last year.
Speaker Change: for providing continued strength and venue, which was up $7.4 million or approximately 27% year over year.
Speaker Change: On a trailing four quarter basis, then you sales have exceeded $137 million and grew approximately 33% compared to the third quarter, 20, 23 trailing four quarter period.
Speaker Change: Consistent with the recent trend, an increase in volume on the platform and higher pricing continue to be the main drivers of venue sales growth.
Speaker Change: Further, our strong sales execution continued to deliver large plant winds onto the platform.
Speaker Change: The sales growth contribution from large projects in the third quarter was similar in magnitude to the second quarter or approximately one third of total third quarter growth.
Speaker Change: going forward. We expect them to continue to deliver solid year over year growth.
Speaker Change: albeit at a more moderate pace compared to the robust growth rates.
Speaker Change: We achieved in the first three quarters of this year, given the impact of the large projects in addition to overlapping venues very strong performance in the fourth quarter of 2023.
Speaker Change: That sales of active disclosure, including file 16
Speaker Change: Increase approximately 3% in the third quarter, a modest improvement compared to recent trend.
Speaker Change: given by growth in subscription revenue, which increased 6% versus the third quarter of last year, partially offset by a reduction in services revenue, primarily as a result of lower section 16 ownership filing activity that Dan noted earlier.
Speaker Change: The Groves & Third Quarter subscription revenue reflects the improvement and active disclosures operating metrics that we have been seeing over the last several quarters, including continued gross in net client count, which has accelerated following the platform transition in mid 2023.
In addition, our sales execution coupled with recent product enhancements is resulting in sequential improvements in revenue retention rates relative to earlier this year.
Speaker Change: are a tool performance and sales momentum create a solid foundation for future sales growth.
Speaker Change: [inaudible]
and suggested to be the bottom margin for the segment was 24.8%.
Speaker Change: A decrease of approximately 80 basis points from the third quarter of 2023, primarily due to an increase in compensation related expense and higher bad debt expense, partially offset by higher neck sales and a favorable sales mix from the growth in venue and cost control initiatives.
and that sales in our capital markets, compliance and communications management segment, were $63.5 million of decrease of $6.6 million or 9.4% from the third quarter of 2023.
Grieve in primarily by lower capital market's transactional revenue.
We recorded $45.3 million of capital markets transactional revenue, which was flat on a sequential basis, and down $3.8 million or 7.7% compared to last year's third quarter.
Similar to what we experienced in the second quarter, the level of deal activity in the third quarter remain next.
IPO activity in the third quarter we made higher than last year, which resulted in an increased number of price high peos that raised over $100 million compared to the third quarter of 2023.
While the market for completed public company and the aid deals in the US remain down on a year over year basis.
Speaker Change: Ogrom, the deal environment remains soft compared to historical averages.
For IPO and M&A transactions that were completed in the third quarter, we may gain our historical high market share.
Speaker Change: While the outlook for the capital markets transactional environment is uncertain, deep in remains very well positioned to capture a significant share of future demand for transaction-related products and services when market activity picks up.
Speaker Change: Dept. Markets Compliance revenue was down $2.8 million for 13.3% compared to the third quarter of 2023.
driven primarily by a lower volume of compliance work, including the related printing and distribution consistent with the trend from the first half of the year.
In addition, while our capital markets compliance offering, which supports our corporate clients with their ongoing compliance needs.
is mostly recurring in nature. A component is a venture-in, including certain AK, Files and special cruxies which can fluctuate from period of period.
During this year's third quarter, we experienced a decrease in the volume of event-driven special proxies for the contributing to the year over year sales decline.
As yesterday about margin for the segment was 31.7% of decrease of approximately 620 faces points from the third quarter of 2023.
The decrease in adjusted EVEFM, was primarily due to the lower transactional sales and higher compensation related expense, partially offset by cost control initiatives.
Net sales in our investment company Software Solutions segment were 28.9 million dollars in increase of 8.2% versus the third quarter of 2023. Driven by incremental revenue from our Taylor Shareholder Report Solutions.
Speaker Change: As Dan noted earlier, we are encouraged by the positive market response and client adoption of D-FIN's T-S-R software solution.
Speaker Change: The growth from TFR was partially offset by lower revenue and our our regulatory offering. As we overlap one time revenue from a regulatory driven filing in the EU that benefited us in the third and fourth quarters of last year.
Speaker Change: We expect a similar dynamic for the fourth quarter of this year, specifically continuing to realize incremental revenue from Taylor cheerholder reports.
Speaker Change: While overlapping the one-time EU-related revenue that benefited the third and fourth quarters of 2023.
Speaker Change: which combined will once again result in stronger overall arcsweed growth compared to the first half of 2024.
adjusted EBITDA margin for the segment was 30.8% a decrease of approximately 630 basis points from the third quarter of 2023. The decrease in adjusted EBITDA margin was primarily due to higher compensation related expense.
Higher Service Related Costs associated with the ramp up of the TFR offering and higher product development and technology investments in supportive growth opportunities to increase the cost of the high sales value and pricing.
Speaker Change: Net sales in our investment companies compliance and communications management segment were $33.8 million, a decrease of $2.9 million for 7.9%.
from the third quarter of 2023, driven primarily by a reduction in print and distribution revenue related to both the long-term secular decline in the demand for printed materials, as well as the tailored shareholder reports regulation.
A Jefe de De D'Aumargin for the segment was 30.2% Approximately 390 basis points lower than the third quarter of 2023.
Speaker Change: The decrease in adjusting the margin was primarily due to lower sales and higher compensation related expense, partially offset by our favorable sales mix.
9-gap on allocated corporate expenses, we're $9.2 million in the quarter, a decrease of 2.3 million dollars from a third quarter of 2023, primarily driven by lower third-party expenses and the impact of cost control initiatives.
Speaker Change: Partially offset by a higher compensation related expense.
Free cash flow in the quarter was $67.3 million, and improvement of $6 million compared to the third quarter of 2023. The year of a year increase in free cash flow was primarily driven by improved working capital performance.
Part of which is a result of our changing sales next featuring more software solution sales and less print and distribution sales and lower restructuring and interest payments.
Speaker Change: We ended the quarter with $124.6 million of total debt, or $91 million on a non-gap net debt basis.
A reduction of 41.3 million dollars and 63.2 million dollars respectively versus the end of last year's third quarter.
From a liquidity perspective, we had no outstanding ball rings under our revolver and had $33.6 million of cash on hand.
Speaker Change: As of September 30, 2024, our non-gap net leverage ratio was 0.4 times.
As a reminder, our cash flow is historically seasonal, generating more than all of our free cash flow in the second half of the year.
As our sales mix continues to evolve to proportionally more subscription-based software solutions, we expect the seasonality to be less significant as we have experienced so far in 2024.
Regarding capital deployment, we were purchased approximately 208,000 shares of our common stock during the third quarter for 13.3 million dollars and an average price of $63.96 per share.
Here today through September 30th, we've purchased approximately 666,000 shares of our common stock, with 41.3 million dollars at an average price of 62 dollars 10 cents per share.
As of September 30, 2024, we had $108.7 million remaining on our $150 million stock-reported authorization.
Speaker Change: 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-depth reduction each as key components of our capital deployment strategy, and we'll remain disciplined in this area.
As we relate to our outlook for the fourth quarter of 2024, we expect consolidated fourth quarter net sales in the range of $165 million to $175 million and adjusted even that margin in the low 20% range.
Speaker Change: compared to the fourth quarter of last year, the midpoint of our consolidated revenue guidance, 170 million dollars.
Employee the consolidated Net Fail's Decrease.
of approximately $6 million for last year's fourth quarter as the reduction in Britain distribution and lower transactional sales.
Mostfully related to last year's large mutual fund special proxy project within the investment companies compliance and communications management segment.
are expected to more than offset growth in software solution sales, part of which is driven by the incremental revenue from our Taylor shareholder report solution.
Further, the skydens assumes capital markets transactional sales of approximately $48 million, down approximately $2 million from last year's fourth quarter.
Speaker Change: Before I turn it back to Dan, I'd like to count on an action the company has taken regarding its primary defined benefit plan, which has been frozen since 2011 at our Ardhanelie and was inherited by DeFen as part of our spin-off.
During the quarter, we executed an amendment to allow for the termination of the plan.
Speaker Change: We intend to settle the existing obligations by offering lump sum distributions to participants, followed by the purchase of a newty contracts to transfer the plans remaining obligations to a third party.
As settlement of the obligations will be funded with plan assets, we expect to make a cash contribution in 2025 to fully fund the plan.
The amount of cash contribution is dependent on how many participants elect lump sum settlements as well as prevailing market conditions.
In addition to the expected cash funding, we also expect to record non-cash pension settlement charges in the second half of 2025 related to the termination.
Given the plan termination is subject to certain considerations, including market conditions, the amount of cash payments required, and regulatory review, we have the ability to change the effective date of the termination will result the decision to terminate the plan.
We will provide updates on our progress over the next several corners.
with that, I'll now pass it back to Dan.
Dan Leib: Thanks, Dave. The execution of our strategy continues to deliver positive results and further demonstrates deepened abilities of form well in varying market conditions.
Our solid financial profile provides us with the foundation to continue to execute our strategic transformation.
We are in the midst of preparing our 2025 operating plan.
In 2025, we expect to realize additional year-over-year benefits from tailored shareholder reports, continue your operational transformation and the execution of our strategy.
We expect to provide an update on 2025 and guidance for the first quarter in February.
Before we open it up for Q&A, I'd like to thank the decent employees around the world who have been working tirelessly to ensure our clients can keep receiving the highest quality solutions.
Now with that, operator, we're ready for questions.
If you wish to ask a question, please first star follow by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question.
and your first question comes line of Charles Strosa from CJA Security thing. Your line is open.
Speaker Change: [inaudible]
Speaker Change: i
Zhao Strauss, you're lying inside him.
I'm here today. Good morning. Morning, Charlie. If you could talk a little bit about Eva Demarges in the quarter and more colors there, and just as the items are impacted, you're year for your comparisons.
First, the key three of last year and also what you're assuming, you know, what kind of some of the things that you're assuming in, and Q4 guidance. Thanks.
I truly, it's David. I'll take that one. Thanks for the question.
So we talked about in the prepared remarks on a year over year basis. There was about 4 million dollars.
of benefit that was reflected in Q3 of...
223's results.
and about 2 million dollars of incremental expense.
in Q3 of 24, I'll related to 2024 performance.
So you know, just some anomalies on the timing there in terms of overall margin and the impact as it relates, you know, on a year or a year basis. I think also, you know, from a sequential perspective.
Speaker Change: Q3
It was typically our highest margin quarter.
and that's really the result of the operating leverage given the seasonality of our top line. So we typically do see lower margin in Q3 compared to Q2, obviously some of the relative that impact from 23 relative to 24.
was exaggerated by some of these compensation related items that I mentioned. You know, the second thing I would also say, you know, some of the in addition to these items.
When you look at the combination of Q2 and Q3
Speaker Change: [inaudible]
Speaker Change: the same period over the last couple years.
that margins up a couple hundred basis points, you know, looking back to 22, the to mine quarters are about 28%, just over 28%. And last year about 29 and a half percent, and again, that's close to 31% this year.
You know, some noise from quarter to quarter, but we feel really good about the direction of margins.
and our long-term guidance thereof of 30%
Specifically as it relates to Q4 guidance.
the assumption there, you know, we outlined our...
the impact of transactional in capital markets.
and I've done a couple million dollars relative to last year. Certainly the impact of some of the one time items that we had last year, which amounted to about seven and a half million dollars within the two investment companies.
Tagmans, you know, by the time you get to Q4 margin, you know, our guidance in the low 20% range is pretty consistent with what we delivered in Q4 last year.
Got a great, and just one Husky beat I did in the quarter, you know, it seemed to stick up a little bit to question me and you're a year on that.
Yeah, it would point back to one of the housekeeping items that I noted at the beginning of my prepared remarks.
We accelerated amortization of an asset that we're no longer using, and that was about $2.8 million of its accelerated amortization there.
and how should we think about modeling that going forward?
I would, yeah, you could, you could just forget out that was a one-time acceleration and so, you know, I would go back to kind of what the normal run rate had looked like historically.
Great, thank you very much.
Speaker Change: Yep.
Your next question, Councilor Liner Peter Heckman from DA Davidson, your line is open.
and thanks for taking the call.
a few questions. I was coming to the moment of trouble.
taking on the notes on the call out of misinformation. But can you give us an update on Taylor cheerholder reports and kind of put the update us on the brackets around kind of the full year benefit that you're expecting and how that's evolved over the last few days.
Yeah, you cut out a little, I think I guess the question was an update on Taylor, shareholder reports.
I don't have the best signal here, but I think you said 11 to 12 million and how do you expect that to roll on?
Speaker Change: Yeah, exactly. So 11 to 12 million recurring software revenue. Half of that, we realize in 2024, and then we should realize the full 11 to 12 million in 2025.
Okay, and so the print portion, but I think you said previously that some of your competitors were going out with some very competitive pricing and I assume that's consistent, so you don't expect much of a print benefit from PSR then.
Speaker Change: That's correct. Yeah, we saw some pickup as we mentioned in the script and then, you know, there is a regulation change that reduces the amount of
Grant Nassus Ari just been going to a shorter form. So that's, you know, a net reduction off of any pickup.
Okay, okay, and then within capital markets transaction revenue, I think it was down $2 million year be here, just noting that the number of IPOs you retained on was up, that looked like M&A and that issue inches up. Was your tribute?
and Lisa, a portion of the law revenue to a lower level of D-Spaq merger transactions.
Yeah, this is Craig. Thank you for the question. I think the overall market, you know, we said was up. We had some larger deals in 2023, so some some comps there. As you look at the market from a total perspective, you know, we said the beginning of the year, the IPO market wouldn't be a straight line recovery.
that certainly hasn't been the case. The interest rate cut last month from the Fed didn't do much to turn the tie for IPOs.
Despite equity in a beat in an all-time high.
Speaker Change: The VIX was in range for conducive to IPOs, but as we stated, there were very few that raised over 100 million. When you look in the quarter July started out strong, there were seven IPOs that raised over 100 million. It was led by line-edge. We were proud to support line-edge.
Speaker Change: Zairn's 4.4 billion near the high end of the range, but this positivity on the market didn't last. The market stumbled in early August with economic weakness.
and then the post-laver day, we saw more clients who were turning to 2025 for their pre-IPO.
Speaker Change: Look, so...
We have seen large issuers joining the pipeline so we have 15 companies that join the IPO pipeline.
Speaker Change: which is slightly below prior quarters.
Speaker Change: and then what we've seen in October, so as we look at Q4, is a busy or month. There were 10 marquee IPOs in the price. We were fortunate to have supported 8 of those 10.
Speaker Change: There should be just a handful more IPOs in November and December.
and it's Q4 in this week's day.
Speaker Change: We should have a year that has about 69 IPOs.
Speaker Change: So this would be more than 2022 and 2023.
but to add context to Dave's comments earlier, there was just 40 last year, there were 27 in 2022 and the 20 year average is 254.
So the longer-term outlook for IPOs is more promising. Morgan Stanley on their earnings call, they're seeing a talk about the surge that they expect in 2025. There's still obviously room for skepticism as the US election will provide hopefully some clarity and the market is looking for certainty around regulatory as well as economic policy.
Speaker Change: So as you relate back to the quarter, a few more.
It's the mix of those and then the lower, you know, per debt.
In the ways, you know, the debt doesn't make up for that. And M&A is certainly...
Stills Suppress. It only takes a few and you heard the market is ready for change and we have a robust pipeline of companies who filed confidentially or are planning to file as well as a strong pipeline of IPO RFPs.
Speaker Change: So I think another piece is this normalizes this event driven transactions. It's a pipeline.
for our Leah Curings software and contracted software. So it leads to venue, it leads to active disclosure, pre-IPO is Dan talked about IPO and certainly post-IPO work.
So thank you for the constant.
Your next question comes from one of Sam's Alvers from Needleman Co. The line is open.
Hey guys, just jumping on for Kyle here this morning.
I wanted to dig into venue, you know, it was good to see another quarter of strong growth. And I know you guys mentioned the tough comp from last year, but I did want to just touch on the D.C.L., which was pretty sharp.
Are there any changes in the market you're seeing or in terms of competitive dynamics? You know, any walk up in the market given?
The uncertainty around the election or anything like that that may be contributed to the diesel, the score. Yeah, I'll start and then maybe.
We've pointed towards some of the...
the larger projects and I think that have taken place earlier in the year and the expected.
and tougher Combs, given our improvement in performance late last year. And then to your question on the market, you know, there's not.
Speaker Change: Great market information in terms of how other companies are performing, but we have seen at least one or two and feel like in a 27% increase.
in a revenue that we are taking some share and the remarkable remains consistent with frankly what we've seen earlier in the year. And so, Craig, anything to add?
Yes, so I appreciate the question. Certainly that type of growth I want to keep to is hard to sustain and as we said, we had
Tuffer Combs, we've, Tuffer Combs coming up in Q4 and then certainly as we get into 25.
and we're proud of the quarter and we think.
to build on dance points.
We drove higher-paged activity, higher-pricing.
We're seeing still flood-ish M&A demand, but we believe a continued sales execution, which is resulted in several large projects, driving some significant revenue in Q3, will continue. We feel great about the position we're in, the product that we have, a sales team that we have, the broader application within the M&A ecosystem that's serving both announced and announced deals across public and private companies.
and his resulting in the more resilient, stable demand.
So we think as we look into 2025 and hopefully getting back to a medium level of activity. The demand for assets will be high, private equity will be back. There's a large amount of capital looking to be put to work.
We're pleased with our results, we're pleased with the pipeline and we're going to continue to execute a work goddess here, which is great product, sales, execution and share expansion.
and that's super helpful. Let's appreciate the color on that.
and then just as we think about the fourth quarter and maybe the next few quarters in terms of the software business and growth there, how are you guys thinking about price versus volume, new sales, etc.
Speaker Change: You know, nearer term.
Yes, Sam, it's safe. We haven't broken that out specifically, but I would say, you know, I'd point to a couple of items, I think.
When we look at our long-term contracts, you know, certainly there are customary price escalators there.
We've seen historically in venue kind of moving up to a more market-based price, which is driven a lot in the growth over the last year, but still some opportunity there as well.
Probably the one item to point to that's a little bit unique is the Taylor Chairhold of reports impact.
and his dad mentioned earlier, right, $11 and $12 million. Most of that on an annualized basis, most of that hits within software.
Speaker Change: and so...
Speaker Change: with half of it coming this year and then getting this second half benefit into the next year.
Good luck. Okay, thanks, yes.
Thank you for taking my questions, solid growth and software, especially venue again and just kind of following up. Can you provide some more color on the arts suite? The better growth you're expecting in Q4 if I heard that correctly.
Speaker Change: Yeah, right. I think what we said there was a continuation of, you know, the better growth that we saw in Q3 relative to the first half of the year, will also hit in Q4 and that's the point I just raised regarding Taylor chairholder reports, right?
Speaker Change: We saw the benefiting Q3, we'll continue to see the benefiting Q4 and then also in the first half of 2025. Concent regulation was effective, became effective in the third quarter.
Guy, I'm glad to thank you. And then can you comment on the ongoing offering expenses the spend on the software in Q4, is that higher lower.
Speaker Change: Yeah, I would, you know, there's always...
Speaker Change: You know, again, some kinding changes and modest variances from quarter to quarter, but I think
Largely from a modeling perspective, whether you're looking at Q4 or longer term, I think it's making an assumption something similar to run rate is the right way to look at it.
Can you clarify that again, please? Yeah, yeah, let me clarify that. So I addressed it in the prepared remarks as one of the two housekeeping items.
The Tax Rate was...
43.5% really a combination of two things there were some.
with the way the tax laws work, some non-recognizable losses, right? So you don't get the tax benefit associated with those losses, and then some discrete tax adjustments.
You combine those two things with the modest pre-tax earnings that it has.
and the tax rate at 43.5%.
I should also clarify that within the 17th sense.
About nine cents is related to those tax adjustments.
Speaker Change: The other eight cent impact was the combination of the accelerated amortization and the related impairment charge on the asset that we took out of service and wrote down.
Speaker Change: I think I missed the point in the call where you were talking about the guidance for the fourth quarter.
Speaker Change: mentioned that again please.
Speaker Change: for revenues. So, so big in our guidance for Q4 is that.
Transactions will be down a couple million dollars relative to Q4 of last year.
I think also when you look at the guidance relative.
Brigadins and compare that to Q4 last year. We did have about seven and a half million dollars of, you know, one time revenue related to a regulation change in the EU and that.
that impacted the investment companies' segments.
Most Lee, the investment companies compliance and communications management segment.
Speaker Change: Right, and to the range is for for Q.
Speaker Change: So 170 million at the midpoint, the range we gave was 165 to 175.
and then low 20s, either done margins.
Yeah, and that's pretty comparable to what we did in Q4 last year.
and just lastly for me the cadence so far on transactions business and Q4.
Speaker Change: Anything unusual or
I'd say nothing unusual obviously, you know we have a view of the October activity and certainly that gets.
You kind of faked into our guidance for Q4, so I'd say at a high level, you know, more the same of the environment still being relatively soft, certainly compared to historical levels.
Great, great. Thank you for taking my questions, I'll take this off.
Speaker Change: and Matthew.
There are no further questions at this time, slide to hand call back over to Dan Leib for closing comments.
Great, thank you and thank you everyone for joining and we'll look forward to speaking with you, Sharon.
Speaker Change: That doesn't do a lot of comfort for today. Thank you for participating in my now all disconnect.
I'm a little bit nervous.