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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20192020

OR

For the transition period from                     to

Commission file number 1-37728

Donnelley Financial Solutions, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code—(844) 866-4337(800) 823-5304

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:  None

Indicated by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issues its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☑

The aggregate market value of the shares of common stock (based on the closing price of these shares on the NYSE) on June 28, 2019,30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, held by nonaffiliates was $413,269,478.$250,689,340.

As of February 20, 2020, 34,253,92622, 2021, 33,293,289 shares of common stock were outstanding.

Documents Incorporated By Reference

Portions of the registrant’s proxy statement related to its annual meeting of stockholders scheduled to be held on May 18, 202013, 2021 are incorporated by reference into Part III of this Form 10-K.

DONNELLEY FINANCIAL SOLUTIONS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20192020

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Donnelley Financial Solutions, Inc. and subsidiaries (“DFIN” or the “Company”) has made forward-looking statements in this Annual Report on Form 10-K (the “Annual Report”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company. These statements may include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and variations of such words and similar expressions are intended to identify our forward-looking statements.

Forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to a number of important factors, including those factors discussed in detail in “Item 1A: Risk Factors” and elsewhere in this Annual Report, that could cause the Company’s actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document.

Consequently, readers of this Annual Report should consider these forward-looking statements only as the Company’s current plans, estimates and beliefs. Except to the extent required by law, the Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company undertakes no obligation to update or revise any forward-looking statements in this Annual Report to reflect any new events or any change in conditions or circumstances other than to the extent required by law.

PART I

Company Overview

Donnelley Financial Solutions, Inc. and subsidiaries (“DFIN” or the “Company”) is a leading global risk and compliance solutions company. The Company provides regulatory filing and deal solutions via its software-as-a-service (“SaaS”),software, technology-enabled services and print and distribution solutions to public and private companies, mutual funds and other regulated investment firms, to serve theirits clients’ regulatory and compliance needs. For corporateDFIN helps its clients withincomply with applicable regulations where and how they want to work in a digital world, providing numerous solutions tailored to each client’s precise needs. The prevailing trend is toward clients choosing to utilize the Company’s software solutions, in conjunction with its tech-enabled services, to meet their document and filing needs, while at the same time shifting away from physical print and distribution of documents, except for cases where it is still regulatorily required or requested by shareholders.

The Company serves its clients’ regulatory and compliance needs throughout their respective life cycles. For its capital markets offerings,clients, the Company offers technology-enabled filing solutions that allow U.S. public companies to comply with applicable U.S. Securities and Exchange Commission (“SEC”) regulations including filing agent services, digital document creation and online content management tools that support their corporate financial transactions and regulatory reporting; solutions to facilitate clients’ communications with their shareholders; and virtual data rooms and other deal management solutions. For the investment markets clients,companies, including alternative investmentmutual fund, insurance-investment and insurancealternative investment companies, the Company provides technology-enabled filing solutions including cloud-based tools for creating, compiling and filing regulatory documentscommunications as well as solutions for investors designed to improve the speed of access to and accuracy of their investment information. Throughout

Technological advancements, regulatory changes, and evolving workflow preferences, have led to the Company’s clients managing more of the financial disclosure process themselves, changing the marketplace for the Company’s services and products. DFIN’s strategy in its Software Solutions segments (CM-SS and IC-SS, as defined below) aligns with the changing marketplace by focusing the Company’s investments and resources in its advanced software solutions, primarily ActiveDisclosure®, Arc Suite and Venue® Virtual Data Room (“Venue”), while making targeted investments, such as the Company’s acquisition of eBrevia, Inc. (“eBrevia”) to further broaden its solution set. In its Compliance & Communications Management segments (CM-CCM and IC-CCM, as defined below), the Company’s strategy focuses on maintaining its market-leading position by offering a company’s life cycle, the Company serveshigh-touch, service-oriented experience, using its clients’ regulatorycombination of tech-enabled services and compliance needs. The Company’s deep industryprint and regulatory expertise and a commitment to exceptional service guides its clients to navigate a complex and ever-changing regulatory environment.distribution capabilities.

Global Capital Markets (“GCM”)

The Company provides a comprehensive set ofsoftware solutions, to corporate clients, domestically and internationally, to comply with disclosure obligations, create, manage and deliver accurate and timely financial communications, manage public and private transaction processes and provide clients with business intelligence from financial disclosures with data and analytics services. These solutions include the Company’s traditional full-service SEC’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) filing preparation and filing agent services, technology-enabled services and print and distribution solutions as well as the Company’s SaaS solutions, ActiveDisclosure, Venue Virtual Data Room (“Venue”), EDGAR Onlineto public and eBrevia.

The Company’s GCM clients consist mainly ofprivate companies that are, or are preparing to become, subject to the filing and reporting requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Clients leverage the Company’s software solutions, proprietary technology, deep industry expertise and experience to successfully navigate the SEC’s specified file formats when submitting compliance documents through the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system for their transactional and ongoing compliance needs. The Company also supportsassists its capital markets clients throughout the course of public and private companies throughout mergerbusiness transactions; mergers and acquisitions (“M&A”), initial public offerings (“IPOs”), initial creation of special purpose acquisition transaction processescorporations (“SPAC”) and insubsequent de-SPAC (acquisition of a public or private company), debt offerings and privateother similar transactions. In addition, the Company provides clients with compliance solutions to prepare their ongoing required Exchange Act filings that are compatible with the SEC’s EDGAR system, most notably Form 10-K, Form 10-Q, Form 8-K and proxy filings. These solutions include the Company’s traditional full-service EDGAR filing preparation and filing agent services, technology-enabled services and print and distribution solutions as well as the Company’s software solutions, ActiveDisclosure, Venue, EDGAR Online and eBrevia. In 2020, approximately 51% of capital markets transactions with deal management solutions focused on aiding transactional efficiency from inception to completion. In 2019, approximately 49% of GCM net sales were transactional in nature, approximately 36%25% of GCMcapital markets net sales were compliance in nature and approximately 14%24% of GCMcapital markets net sales were related to Venue servicessoftware solutions, including ActiveDisclosure and the remainder of GCM net sales were related to data and analytics services.Venue.

Transaction Solutions

The Company helps GCMcapital markets clients throughout the course of public and private business transactions. For mergers and acquisition (“M&A”)&A transactions, the Company supports deal participants in creating transaction-related registration statements, proxiesproxy statements and prospectuses, files client documents as their filing agent through the EDGAR filing system and manages print for distribution to its clients’ shareholders. The Company also provides complete initial public offering (“IPO”) solutions that support the various stages of the IPO process. Solutions include preparingregistration statement and prospectus preparation and filing registration statements and prospectuses, bothservices through the Company’s proprietary filing agent solution and itssoftware solution, ActiveDisclosure, SaaS solution, the Venue Virtual Data Roomdata room and secure file sharing SaaS solution and the eBreviathrough Venue as well as contract analytics SaaS solution.through eBrevia.

The Company’s cloud-based Venue® Virtual Data RoomVenue solution is a highly secure data room platform that allows GCM clients to share confidential information in real-time throughout the transaction lifecycle. Clients can also maintain control over sensitive data when conducting due diligence for M&A transactions, raising capital for an IPO or developing a document repository. Specifically, companies have used Venue to securely organize, manage, distribute and track corporate governance, financing, legal and other documents in an online workspace accessible to internal and outside advisors. Via integration with the Company’s eBrevia solution, Venue can use artificial intelligence to analyze documents to help clients better understand their content and make informed decisions.

The Company acquiredCompany’s eBrevia Inc. (“eBrevia”), a provider ofsolution leverages artificial intelligence-based data extraction and contract analytics software solutions, on December 18, 2018. The eBrevia technology providesalgorithms to provide enterprise contract review and analysis solutions, leveragingutilizing machine learning to produce fast and accurate results. eBrevia's software, which extracts and summarizes key provisions and other information, is leveraged in due diligence, contract management, lease abstraction, and document drafting. The acquisition enhanceseBrevia complements the Company’s Venue offerings to provide clients with secure data aggregation, due diligence, compliance and risk management solutions. 

The Company also offers clients the use of private conferencing facilities in major cities in the U.S. and international jurisdictions.global cities. This service helps clients maintain confidentiality in deal negotiations and provides clients a place to host in-person working groups to meet, strategize and prepare documents for the transactional deal stream. The Company’s sites are outfitted to provide around-the-clock services to support the transaction process. 

Through an investment in and commercial agreement with Mediant Communications, Inc. (“Mediant”),Due to the COVID-19 pandemic, the Company can simplifyprovided support for the annual meetingtransaction process in a virtual environment. The Company transformed its production platform and proxy processservice delivery model to adapt to clients’ need for its capital markets customers via project management servicesa fully-virtual experience while replicating the in-person experience. The Company anticipates that in the future, clients will utilize the range of options available to them, including a hybrid approach with working group members working both virtually and state of the art voting and tabulation technology. Additionally, the Company can help develop client-branded websites and enhanced online versions of the proxy statement and annual meeting documents to improve navigation, highlight key messaging and expandin-person during drafting sessions for their reach to a broader investor base. This partnership allows the Company to manage and centralize communications for all investors, fulfill and distribute proxy materials and host virtual shareholder meetings, if desired.  transactions.

Compliance Solutions

The Company provides compliance solutions to GCMcapital markets clients in preparing the Exchange Act filings that are compatible with the SEC’s EDGAR system. GCMCapital markets clients leverage the Company’s deep industry expertise and experience to successfully navigate the SEC’s specified file formats when submitting compliance documents through the EDGAR system.

The Company’s cloud-based ActiveDisclosure platform provides GCMcapital markets clients with end-to-end solutions to collaborate, tag, validate and file with the SEC efficiently. By leveraging its browser-enabled platform, ActiveDisclosure brings teams together across departments, functions and geographies in real time to create and edit Word, Excel or PowerPoint documents across devices, simultaneously. When combined with ActiveLink, a synchronous updating tool, ActiveDisclosure seamlessly flows changes throughout an entire document automatically, reducing risk and providing additional assurance to clients. In 2020, beta clients began using an entirely new cloud-based ActiveDisclosure disclosure management system, which was built from the ground up to be faster and to provide new features such as built-in collaboration tools and eXtensible Business Reporting Language (“XBRL”) client-tagging capability. The “new ActiveDisclosure” launched in 2021.

The Company also supports GCMcapital markets clients in meeting SEC-mandated regulatory filing requirements, including tagged filing in the eXtensible Business Reporting Language (“XBRL”)XBRL format. The Company provides clients with a suite of tagging, review and validation tools to assist them with the XBRL requirements. The Company has accounting and finance professionals that assist its GCMcapital markets clients with the processes of tag selection, tag review, file creation, validation and distribution.

The Company helps GCMcapital markets clients elevate their proxy filings from compliance documents to investor-focused strategic communications tools with Proxy Design services. The Company’s end-to-end proxy solutions include advisory services, proxy strategy and design, disclosure management, EDGAR filing and expertise, online hosting solutions, print production, distribution and annual meeting services.

The Company also provides additional compliance solutions through strategic partnerships, including a full suite of audit management and compliance solutions for Sarbanes-Oxley Act (“SOX”), compliance, operational audits, IT compliance, enterprise risk management and workflow management.

EDGAR® Online - Data and Analytics 

The Company’s EDGAR® Online solution deliversand EDGARPro solutions deliver intelligent solutions in financial disclosures, creatingallow for the creation and distributingdistribution of company data and public filings as well as provide subscription-based proprietary tools for equities, mutual fundsfinancial data analysis.

Through a minority investment in and other publicly traded assets. In addition to providing access to data sets,commercial agreement with Mediant Communications, Inc. (“Mediant”), the Company provides subscription-based proprietary desktopcan simplify the annual meeting and web toolsproxy process for data analysis. EDGARPro enablesits capital markets clients via project management services and state-of-the-art voting and tabulation technology. This partnership allows the Company to manage and centralize communications for all investors, analysts, lawyers, auditorsfulfill and corporate executives to access detailed company information, as-reporteddistribute proxy materials and standardized financial data, SEC filings, stock quotes and news.host virtual shareholder meetings.  

Global Investment Markets (“GIM”)Companies

The Company provides a comprehensive set ofsoftware solutions, technology-enabled services and print, distribution and fulfillment communications management solutions to its investment companies clients, operating in global investment markets domestically and internationally, including United States-basedprimarily consisting of mutual funds, hedge andfund companies, alternative investment funds, insurancecompanies, insurance-investment companies and overseasthird-party administrators, that are subject to the filing and reporting requirements of the U.S. Investment Company Act of 1940, as amended (the “Investment Act”) as well as European and Canadian regulations. The Company’s Arc Suite software platform, which includes ArcDigital, ArcReporting, ArcPro and ArcRegulatory, enables its investment structures for collective investments (similarcompanies clients to mutual funds incomply with applicable ongoing SEC, Canadian and European regulations as well as to create, manage and deliver accurate and timely financial communications to investors and regulators. Investment companies leverage the United States). The Company also provides productsCompany’s proprietary technology, deep industry expertise and experience to third party service providers and custodians who support investment managers, and sells products and distribution services to broker networks and financial advisors that distribute and sell investment products.successfully navigate the SEC’s specified file formats when submitting compliance documents (including incorporating appropriate XBRL tagging) through the EDGAR system.

In 2019,2020, approximately 96%76% of GIMinvestment companies net sales excluding postage and freight, were compliance in nature, whileapproximately 20% of the remaininginvestment companies net sales were related to software solutions, and approximately 4% of GIMinvestment companies net sales were transactional in nature. In addition, approximately 89% of the Company’s 2019 GIM net sales, excluding postage and freight, were derived predominantly from clients in the mutual fund and insurance industries, while the remaining 11% of net sales were derived primarily from clients in the healthcare industry. The Company’s services and sales teams currently support clients in the United States, Canada, Ireland, the United Kingdom, France, Luxembourg, Poland, India and Australia. 

The Company provides U.S. based mutual funds and investment insurance companies with solutions to prepare and file registration forms and subsequent ongoing disclosures, as well as XBRL-formatted filings pursuant to the Investment Company Act of 1940 (the “Investment Act”), through the EDGAR system.

The Company’s proprietary FundSuiteArcArc Suite software platform provides GIMinvestment companies clients with a comprehensive suite of cloud-based technology services and products that store and manage information in a self-service, central repository for compliance andallowing regulatory documents to be easily accessed, assembled, edited, translated, rendered and submitted to regulators. Some of theregulators to ensure compliance. Certain products within FundSuiteArcArc Suite are cloud-based and include automation and single-source data validation thatwhich streamlines processes and drives efficiency for clients. FundSuiteArc includes ArcFiling, ArcReporting, ArcPro, ArcExchange and ArcMarketing. The ArcFiling solution supports the newly required filing of Form N-CEN, as well as the filing of Form N-PORT, for which the initial filing dates began in April 2019. The Company’s ArcFiling software solution supports both filings. The Company expects an increase in SaaS revenue due to the increase in the frequency of filings for registered investment companies.

Through ana minority investment in and commercial agreement with Mediant, the Company provides a suite of software to brokers and financial advisors that enableenables them to monitor and view shareholder communications. The Company offers various technology and electronic delivery services and products to make the distribution of documents and content more efficient. The Company also supports the distribution, tabulation and solicitation of shareholders for corporate elections and mutual fund proxy events.

The Company provides turn-keyturnkey proxy services for mutual funds and investment insurance companies including discovery, planning and implementation, print and mail management, solicitation, tabulation services, shareholder meeting review and expert support for mutual funds, variable annuities, REITs and other alternative investments.  

The Company provides GIM clients with investor communication solutions including printing, digital distribution, e-Delivery and fulfillment systems.Segments

The Company offersIn the first quarter of 2020, management realigned the Company’s operating segments to healthcare providers a comprehensive set of solutions to support the creation, ordering and distribution of pre-enrollment and post-enrollment informationreflect changes in the formmanner in which the chief operating decision maker assesses information for decision-making purposes. The Company’s four operating and reportable segments are: Capital Markets – Software Solutions (“CM-SS”), Capital Markets – Compliance and Communications Management (“CM-CCM”), Investment Companies – Software Solutions (“IC-SS”) and Investment Companies – Compliance and Communications Management (“IC-CCM”). Corporate is not an operating segment and consists primarily of customized and/or personalized kits, booklets and packets.  

Segments

The Company operates in two business segments:

The Company reports certain unallocated selling, general and administrative (“SG&A”) activities and associated expenses within Corporate,, including, in part, executive, legal, finance marketing and certain facility costs. In addition,costs as well as companywide share-based compensation expense and certain costs and earnings of employee benefit plans, such as pension income and share-based compensation, are includedother postretirement benefit plans expense (income). Prior to its sale in Corporate2018, the Language Solutions business, which helped companies adapt their business content into different languages for specific countries, markets and are not allocated to the reportable segments.regions, was an operating segment.

All 2019 and 2018 amounts related to segments have been reclassified to conform to the Company’s current reporting structure. There was no impact on the Company’s previously reported consolidated statements of operations, consolidated statements of comprehensive (loss) income, consolidated balance sheets, consolidated statements of cash flows or consolidated statements of equity as a result of the new segmentation. For the Company’s financial results and the presentation of certain other financial information by segment, see Note 15, Segment Information, to the Consolidated Financial Statements.

Capital Markets – Software Solutions—The CM-SS segment provides Venue, ActiveDisclosure, eBrevia and EDGAR Online solutions to public and private companies to help manage public and private transaction processes, extract data and analyze contracts; collaborate; and tag, validate and file SEC documents.

Capital Markets – Compliance & CommunicationsManagement—The CM-CCM segment provides technology enabled services and print and distribution solutions to public and private companies for deal solutions and SEC compliance requirements. In addition, the Company offers clients the use of private conferencing facilities in major global cities. This service helps clients maintain confidentiality in deal negotiations and provide clients a place to host in-person working groups to meet, strategize and prepare documents for the transaction deal stream. Due to the COVID-19 pandemic, the Company transformed its production platform and service delivery model for a fully-virtual experience while replicating the in-person experience. The Company anticipates that in the future, clients will utilize the range of options available to them, including a hybrid approach with working group members working both virtually and in-person during drafting sessions for their transactions.

Investment Companies – Software Solutions—The IC-SS segment provides clients with the proprietary Arc Suite platform that contains a comprehensive suite of cloud-based solutions and services that enable storage and management of compliance and regulatory information in a self-service, central repository so that documents can be easily accessed, assembled, edited, translated, rendered and submitted to regulators.

Investment Companies – Compliance & Communications Management—The IC-CCM segment provides clients with technology-enabled solutions for creating and filing regulatory communications and solutions for investor communications, as well as XBRL-formatted filings pursuant to the Investment Act, through the SEC EDGAR system. The IC-CCM segment also provides turnkey proxy services, including discovery, planning and implementation, print and mail management, solicitation, tabulation services, shareholder meeting review and expert support.

Language Solutions—On July 22, 2018, the Company sold its Language Solutions business. Prior to the sale, the Language Solutions business helped companies adapt their business content into different languages for specific countries, markets and regions through a complete suite of language services and products.

Services and Products

The Company separately reports its net sales and related cost of sales for its software solutions, tech-enabled services and productsprint and distribution offerings. The Company’s software solutions consist of Venue, ActiveDisclosure, eBrevia, Arc Suite and others. The Company’s tech-enabled services offerings consist of document composition, compliance-related SEC EDGAR filing services and transaction solutions, and the Company’s SaaS solutions, including Venue, FundSuiteArc, ActiveDisclosure, EDGAR Online and others.solutions. The Company’s productprint and distribution offerings primarily consist of conventional and digital printed products and related shipping costs. Prior to the sale of the Company’s Language Solutions business on July 22, 2018, the Company provided various language solutions services to international clients.services.

Company History

Spin-off Transaction

On October 1, 2016, DFIN became an independent publicly traded company through the distribution by RRDR.R. Donnelley & Sons Company (“RRD”) of approximately 26.2 million shares, or 80.75%, of DFIN common stock to RRD shareholders (the “Separation”). Holders where holders of RRD common stock received one share of DFIN common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of DFIN common stock, or a 19.25% interest in DFIN, of which 6.1 million shares and 0.1 million shares were all subsequently sold by RRD in June 2017 and August 2017, respectively. DFIN’s common stock began regular-way trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016.2017. On October 1, 2016, RRD also completed the previously announced separation of LSC Communications, Inc. (“LSC”), its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering.

Language Solutions Disposition

On July 22, 2018, the Company sold its Language Solutions business. Prior to its sale, the Language Solutions business supported domestic and international businesses in 73 different countries and in a variety of industries, including the financial, corporate, life sciences and legal industries, among others, by helping them adapt their business content into different languages for specific countries, markets and regions through a complete suite of language services and products.

eBrevia Acquisition

On December 18, 2018, the Company acquired eBrevia, a provider of artificial intelligence-based data extraction and contract analytics software solutions. Prior to the acquisition, the Company held a 12.8% investment in eBrevia. The purchase price for the remaining equity of eBrevia, which includesincluded the Company’s estimate of contingent consideration, was $23.3 million, net of cash acquired of $0.2 million.million, as well as payments of $4.5 million and $1.9 million in 2019 and 2020, respectively. The eBrevia technology provides enterprise contract review and analysis solutions, leveraging machine learning to produce fast and accurate results. eBrevia's software, which extracts and summarizes key legal provisions and other information, is used in due diligence, contract management, lease abstraction and document drafting. eBrevia’s operations are included within the Capital Markets reporting unit in the U.S.CM-SS operating segment. The acquisition enhances the Company’s Venue offerings to provide clients with secure data aggregation, due diligence, compliance and risk management solutions. 

Markets and Competition

Technological and regulatory changes, including the electronic distribution of documents, continue to impact the market for the Company’s services and products. In addition to the Company’s ongoing innovation in its SaaSsoftware solutions, one of the Company’s competitive strengths is that it offers a wide array of products for required regulatory communications, products, compliance services, a global platform, exceptional sales and service and regulatory domain expertise, which provide differentiated solutions for its clients.

The global risk and compliance industry, in general, is highly competitive and barriers to entry have decreased as a result of technology innovation and the simplification of EDGAR filings. Despite some consolidation in recent years, the industry remains highly fragmented in the United States and even more so internationally with many in-country alternative providers. The Company expects competition to increase from existing competitors as well as new and emerging market entrants. In addition, as the Company expands its productservices and serviceproducts offerings, it may face competition from new and existing competitors. The Company competes primarily on product quality and functionality, service levels, subject matter regulatory expertise, security, price and reputation.

The impact of digital technologies has impacted many of the products and markets in which the Company competes, most acutely in the Company’s mutual fund, variable annuity and public company compliance business offerings. While the Company offers a high-touch, service oriented experience, technology changes have provided alternatives to the Company’s clients that allow them to manage more of the financial disclosure process themselves. The Company has invested in its own SaaSsoftware solutions, ActiveDisclosure, FundSuiteArcArc Suite and Venue, to serve clients and increase retention, and has invested to expand capabilities and address new market sectors. The future impact of technology as well as the streamlining and modernizing of disclosure requirements on the business is difficult to predict and could result in additional expenditures to restructure impacted operations or develop new technologies. In addition, the Company has made targeted acquisitions and investments in its existing business to offer clients innovative services and solutions, including acquisitionsthe acquisition of eBrevia and EDGAR Online and investments in AuditBoard, Mediant and Gain Compliance that support the Company’s position as a technology service leader in this evolving industry.  

The Company’s competitors for SEC filing services for public company compliance clients include full service financial communications providers, technology point solution providers focused on financial communications and general technology providers. The Company’s competitors for Venue Virtual Data Room include providers of virtual data room-specific solutions and enterprise software providers that offer online products that serve as document repositories, virtual data rooms as well as file sharing and collaboration solutions. The Company’s competitors for SEC filing services for investment marketscompanies clients include full service traditional providers, small niche technology providers and local and regional print providers that bid against the Company for printing, mailing and fulfillment services.  

Market Volatility/CyclicalityTechnology

The Company isinvests resources in developing software solutions to complement its services. The Company invests in its core composition systems and client facing solutions and has also adopted market-leading third-party systems which have improved the efficiency of its sales and operations processes. The Company has continued to invest in enhancements of its technology-based offerings including EDGAR filing and XBRL services, Venue, ActiveDisclosure, the Arc Suite software platform, and its data and analytics solutions. The Company continues to invest in leading and innovative technology such as Kubernetes, API management machine learning and hybrid cloud architecture.

Market Volatility/Cyclicality and Seasonality

The Company’s Capital Markets segments (CM-SS and CM-CCM), in particular, are subject to market volatility in the United States and world economy, as the success of the transactional offeringand Venue offerings is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions,M&A, public and private debt offerings, leveraged buyouts, spinouts and other transactions. A variety of factors impact the global markets for transactions, including economic activity levels, market volatility, the regulatory and political environment. Inenvironment, civil unrest and global pandemics, among others. The global transactional markets were disrupted due to the past,COVID-19 pandemic and its impacts to the overall economy and market volatility. Due to the significant net sales and profitability derived from transactional and Venue offerings, market volatility can lead to uneven financial performance when comparing to previous periods. U.S. IPO,IPOs, M&A transactions and public debt offerings were also disrupted by the U.S. federal government shutdown that occurred, most recently, from December 2018 to January 2019. Future government shutdowns could result in additional volatility. The International segment is particularly susceptible to capital marketCompany mitigates a portion of this volatility through its compliance offerings, supporting the quarterly and annual public company reporting processes through its filing services and ActiveDisclosure, as most of the International business is capital markets transaction focused.well as its Investment Companies segments (IC-SS and IC-CCM) regulatory and shareholder communications offerings, including Arc Suite. The Company also mitigates some of that risk by offering services in higher demand during a down market, likesuch as document management tools for the bankruptcy/restructuring process and also by moving upstream fromin the filing process with products like Venue, the Company’s data room solution. The Company also attempts to balance this volatility through supporting the quarterly/annual public company reporting process through its EDGAR filing services and ActiveDisclosure product, its investment markets regulatory and shareholder communications offering and continues to expand into adjacent growth businesses like data and analytics, which has recurring revenues and is not as susceptible to market volatility and cycles. Venue.

The quarterly/annual public company reporting process work also subjects the Company to filing seasonality shortly after the end of each fiscal quarter, with peak periods during the course of the year. Additionally, investment companies clients require the Company to manage the financial and regulatory reporting and filing for mutual funds on an annual basis as well as annual prospectus filings, which peaks during the second fiscal quarter. The seasonality and associated operational implications include the need to increase staff during peak periods through a combined strategy of hiring additional full-time and temporary personnel, increasing the premium time of existing staff and outsourcing production for a number of services. Additionally, clients and their financial advisors have begun to increasingly rely on web-based services which allow clients to autonomously file and distribute compliance documents with regulatory agencies, such as the SEC. While the Company believes that its ActiveDisclosure and FundSuiteArcArc Suite solutions are competitive in this space, competitors are also continuing to develop technologies that aim to improve clients’ ability to autonomously produce and file documents to meet their regulatory obligations. The Company remains focused on driving annual recurring revenue to mitigate market volatility.

COVID-19

In December 2019, COVID-19 was identified in China and has since extensively impacted the global health and economic environment. On March 11, 2020, the World Health Organization (“WHO”) characterized COVID-19 as a pandemic. Although COVID-19 has adversely impacted the Company’s financial condition, results of operations and overall financial performance, the extent of that impact is currently uncertain and depends on factors including the impact on the Company’s customers, employees and vendors.

The COVID-19 pandemic has had and may continue to have a material adverse impact on certain of the Company’s customers’ financial results, which has and may continue to force those clients to alter their plans for purchasing the Company’s services and products. In addition, the global markets were disrupted due to the COVID-19 pandemic, which negatively impacted the Company’s transactional offerings. The market stabilized in the third quarter of 2020 and the Company has experienced an increase in transactional offerings. However, there remains uncertainty for future periods with the possibility of a resurgence of the COVID-19 pandemic, including potentially new strains of COVID-19, resulting in renewal of mitigation measures, including targeted shutdowns. Some of this volatility is mitigated through the Company’s compliance offerings, supporting the quarterly and annual public company reporting processes, as well as its investment companies regulatory and shareholder communications offerings. If the Company’s customers reduce, defer or cancel their spending with DFIN, it would materially adversely impact the Company’s business, results of operations and overall financial performance.

Some of the Company’s operations also have been affected by a range of external factors related to the COVID-19 pandemic that are not within the Company’s control. For example, many jurisdictions imposed a wide range of restrictions on the physical movement of the Company’s employees and vendors to limit the spread of COVID-19, although many of these restrictions have been rescinded, in whole or in part. If any of these external factors or widespread geographic shutdowns are renewed, or if the COVID-19 pandemic and related mitigation measures otherwise have a substantial impact on the Company’s or vendors’ employee attendance or productivity, the Company’s operations are expected to be adversely affected, and in turn the Company’s business, results of operations, liquidity and overall financial performance would be harmed. Furthermore, the Company’s insurance costs may increase.

The Company has taken numerous steps, and will continue to take further actions as needed, in its response to the COVID-19 pandemic. The Company has implemented business continuity plans and has instructed all employees that can work from home to do so, has implemented travel restrictions and has conducted virtual customer and employee meetings. These decisions may delay or reduce sales and harm productivity and collaboration. In 2020, the Company incurred $0.5 million of incremental expenses, net of sales surcharges and government subsidies, as a result of the COVID-19 pandemic. Incremental expenses incurred included incremental vendor costs and premium wages paid to certain employees as well as costs to clean and disinfect the Company’s facilities more frequently. The Company also received certain government subsidies in connection with COVID-19, primarily related to employee wages at certain international locations. As a result of the incremental expenses, the Company invoiced certain customers COVID-19-related sales surcharges to recoup some of the expenses. The Company could continue to incur such costs in future periods, however, the impact of such costs on the Company’s business, results of operations, liquidity and overall financial performance cannot be predicted at this time. The Company is also working closely with its clients to support them as they implement their own contingency plans, helping them access the Company’s services and products and continue to meet their regulatory requirements.

The Company believes that implementing cost reduction efforts helped mitigate the impact that reduced revenues in the first half of 2020 had on income from operations. The Company has reduced expenses and may take further actions that alter its business operations as the situation evolves. The ultimate impact of the COVID-19 pandemic and the effects on the Company’s business, results of operations, liquidity and overall financial performance cannot be predicted at this time.

Government Regulation and Regulatory Impact

The SEC is adopting new as well as amending existing rules and forms to modernize the reporting and disclosure of information by registered investment companies. These changes are driving significant regulatory changes which impact the Company’s customers within its Investment MarketsCompanies business. On October 13, 2016, the SEC adopted a newan N-PORT filing requirement, which requires certain registered investment companies to report information about their portfolio in XML, a structured data format, on a monthly basis, replacing what was previously a quarterly filing requirement. This rule also includes an annual N-CEN filing in XML, replacing a semi-annual filing requirement. Compliance dates depend on asset size and began as soon as June 1, 2018 for larger funds. In 2019, the SEC amended the rule and Funds now file three months of N-PORT on a quarterly basis. The first N-PORT filing deadlines began in April 2019 for larger funds with over $1 billion in assets. Beginningassets and began in April 2020 for smaller funds will beginbegan filing N-PORT on a quarterly basis. The Company’s ArcFiling software solutionArc Suite can support both filings.

On June 5, 2018, the SEC adopted Rule 30e-3 which provides certain registered investment companies with an option to electronically deliver shareholder reports and other materials rather than providing such reports in paper. Investors who prefer to receive reports in paper will continue to receive them in that format. While Rule 30e-3 was effective January 1, 2019, default electronic distribution pursuant to the rule will beginbegan on January 1, 2021 due to a 24-month transition period, during which registered investment companies must notifynotified investors of the upcoming change in transmission format of shareholder reports. The Company expects a significant decline in the volume of printed annual and semi-annual shareholder reports in 2021 and beyond as a result of Rule 30e-3.

On June 28, 2018, the SEC announced that it was adopting amendments to require the use of the Inline XBRL (“iXBRL”) format for the submission of operating company financial statement information and fund risk/return summary information to improve the data’s usefulness, timeliness and quality, benefiting investors, other market participants and other data users and decreasing, over time, the cost of preparing data for submission to the SEC. On September 17, 2020, large fund groups, defined as fund groups with net assets of $1 billion or more as of the end of their most recent fiscal year, became subject to the iXBRL requirements. The Company expects an increase in revenue associated with iXBRL compliance services for the IC-SS segment.

On March 11, 2020, the SEC announced that it has adopted a new rule 498A under the Securities Act and related regulatory amendments permitting variable annuity and variable life insurance contracts to use a more concise summary prospectus to provide disclosures to investors. More detailed information about the variable annuity or variable life insurance contract will be available online, and an investor can now choose to have that information delivered in paper. The new rule and related form amendments became effective on July 1, 2020 with compliance required by January 1, 2022. The Company expects the majority of its insurance customers will adopt the rule by early 2021. As a result, the Company expects a decline in printed prospectus volume in 2021 and beyond. Based on the requirements of the rule, the Company is also expecting an increase in revenue from the ArcPro software solution and related regulatory filings.

Raw MaterialsIt is the Company’s policy to conduct its global operations in accordance with all applicable laws, regulations and other requirements. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company may undertake in the future. However, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect on the Company’s consolidated annual results of operations, financial position or cash flows.

Resources

The primary raw materials used in the Company’s printed products are paper and ink. The paper and ink is sourced from a small set of select suppliers to ensure consistent quality that meets the Company’s performance expectations and provides for continuity of supply. The Company believes that the risk of incurring material losses as a result of a shortage in raw materials is unlikely and that the losses, if any, would not have a materially negative impact on the Company’s business.

Distribution

The Company’s products are distributed to end-users through the U.S or foreign postal services, through retail channels, electronically or by direct shipment to customer facilities.

Customers

For each of the years ended December 31, 2020, 2019 2018 and 2017,2018, no customer accounted for 10% or more of the Company’s net sales.

Technology

The Company invests resources in developing software solutions to complement its services. The Company invests in its core composition systemsCybersecurity and client facing solutions and has also adopted market-leading third party systems which have improved the efficiency of its sales and operations processes. The Company has continued to invest in enhancements of its technology-based offerings including EDGAR filing and XBRL services, Venue Virtual Data Room, ActiveDisclosure, FundSuiteArc software platform, and its data and analytics solutions. The Company continues to invest in leading and innovative technology such as robotic process automation, machine learning and hybrid cloud architecture.

Cybersecurity & Data Protection

A core aspect of the Company’s business relies on technology and software; as a result, the security of those technologies and software, as well as the protection of the confidential information entrusted to the Company by its customers, are key partscomponents of the Company’s business and strategy. The DFIN Cybersecurity Program is based upon industry leading frameworks, which include International Standardization Organization #27001 (ISO 27001), Control Objectives for Information Technology (COBIT), and the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity (commonly known as NIST). The Company’s technologies and software must also comply with domestic and international regulatory and legal requirements. Ensuring that these technologies and software comply with those regulations is a key focus of the Company’s efforts.

The Company leverages cybersecurity technologies designed to ensure thatprovide for the security of client, employee and business confidential data is secure.data. The Company’s cybersecurity portfolio is inclusive of, but not limited to, data encryption, data masking, leading secure software development methodologies, aggressive application and network penetration testing, incident response, digital forensics, least-privileged access controls, anti-malware, end-point detection and response, virtual private networks and cyber threat intelligence. Additionally, the Company manages a 24x7 Security Operations capability that monitors and responds to cyber threats in real time.

To demonstrate transparency, the Company’s commitment to effective cybersecurity and data protection efforts and in pursuit of continuous improvement, the Company undergoes a series of third-party security reviews, including third-party penetration tests.

Environmental ComplianceHuman Capital

ItThe Company’s human capital management objective is the Company’s policy to conduct its global operations in accordance with all applicable laws, regulationsattract, retain and other requirements. It is not possibledevelop talent to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company may undertake in the future. However, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effectdeliver on the Company’s consolidated annual resultscorporate strategy. DFIN employs a strategy of operations, financial position or cash flows.

Employees“get, grow and keep” in which it strives to get the best talent available, develop their skills and abilities to help them grow their career, and keep them engaged and motivated with rewards based on their contributions and performance.  

As of December 31, 2019,February 15, 2021, the Company had approximately 2,9002,350 employees, with approximately 85% located in the United States and approximately 15% in international locations. Approximately 37% of DFIN’s workforce is female and approximately 63% is male, with an average tenure of approximately 13.3 years with DFIN (including periods prior to the Separation from RRD). The Company also hires temporary employees in its manufacturing facilities during peak periods of production. None of the Company’s employees are represented by a labor union or covered by a collective bargaining agreement.  

The Company manages its human capital through the following programs:

Compensation and Benefits—The Company’s compensation and benefits program is designed to attract, retain and motivate employees. DFIN offers competitive base salaries and a variety of short-term, long-term and commission-based incentive compensation programs to reward performance relative to key strategic and financial metrics. DFIN also offers comprehensive benefit options, including retirement savings plans, medical insurance, prescription drug benefits, dental insurance, vision insurance, accident and critical illness insurance, life and disability insurance, health savings accounts, flexible spending accounts and legal insurance. The Company continuously evaluates elements of its benefits program, which it calls Total Rewards, to address the needs of its employees. For example, in 2020, DFIN increased paid time off to cover sick time, added four weeks of paid parental leave and implemented supplemental pay programs to reward employees’ special efforts during COVID-19.

Employee Wellbeing—DFIN’s wellbeing program focuses on physical health, emotional/mental health and financial wellness and encourages all employees to take ownership of their wellbeing. The Company’s approach has been to raise awareness about and increase participation in programs that address the diverse needs of its employee base. Program highlights include topical webinars, targeted programs (e.g., tobacco cessation, diabetes management, weight management), virtual health challenges and paid time off to support individual wellbeing. During the fourth quarter of 2020, DFIN surveyed employees to gauge how they were coping with issues arising during 2020. They identified stress, burnout, work/life balance, career advancement and financial stress as their top five challenges, but they also felt that their managers showed support for their wellbeing. By continuing to foster a culture of wellbeing, DFIN advances employee morale, productivity and engagement.

Diversity, Equity & Inclusion (“DEI”)—The Company values diverse perspectives.In 2020, DFIN hosted a series of conversations with its global workforce that generated ideas on how the Company could continue to create an inclusive, equitable and diverse environment, with emerging themes of education and awareness, advocacy and support and fairness and equality. An employee-led DEI task force is creating recommendations around each of those areas. While the Company supports employee-led efforts, the Company believes it is equally important that leadership is engaged. DFIN’s Chief Executive Officer, Dan Leib, expressed the Company’s commitment to DEI in a letter that was shared with employees and posted to its website in the fall of 2020. DFIN has made progress in bringing more diverse perspectives to leadership. Since the beginning of 2020, approximately 32% of all hires and promotions at the Vice President level were women or part of an underrepresented group and approximately 31% of all hires and promotions at the Director level were women. Women and people who are part of an underrepresented group constitute approximately 30% and 15% of the Company’s independent Board of Directors, respectively. Approximately 33% of DFIN’s employees in managerial roles were female and approximately 24% of its employees in managerial roles were part of an underrepresented group. Creating an inclusive community in which all voices are heard is key to the Company’s success.

Training and Development—DFIN invests in its employees’ skills and professional development by offering virtual, social and self-directed learning, mentoring, coaching and career development opportunities. In 2020, approximately 70% of employees engaged in self-directed learning and development activities through its on-demand learning platform. DFIN equips its employees with targeted learning pathways for leadership, finance, and technical roles as well as safety, compliance and equipment-related training. Guided by the Company’s philosophy of continuous performance management, DFIN encourages its people managers to check in with employees frequently.  

Employee Experience and Retention—The Company strives for all employees to feel valued and part of the DFIN community. DFIN collects feedback in the form of pulse surveys to gain insight into what matters to its employees, what motivates them and how best to reach them. The Company has surveyed its employees to better understand their preferences regarding remote work, commuting and productivity as well as their assessment of their overall wellbeing and stress management. Engagement was high: response rates ranged from 40% to 60% and many employees provided thoughtful comments. The Company has strengthened the connection between executives and employees through town hall meetings, quarterly all-employee calls and more frequent internal communications from executives. DFIN provides tools and resources to help its people managers cultivate an environment in which employees are well-informed and comfortable providing feedback.  

Health and Safety—The health, safety and well-being of its employees is DFIN’s highest priority and a core element of its culture. The Company believes everyone contributes to a safe and healthy work environment no matter where they sit in the organization. DFIN’s Environmental, Health and Safety Management System aligns with ISO 14001 and 45001. The Company sets annual leading and lagging indicators to improve its sustainability performance and achieved, in 2020, a workforce total recordable incident rate of 0.47 (per 200,000 hours worked) and a 99% completion rate for safety training. Employee engagement and positive recognition are pivotal to DFIN’s success. The Company’s manufacturing employees participate in robust safety committees and quarterly roundtables to share best practices transparently and conduct a Speak Up for Safety employee recognition program for identifying near misses. DFIN also observes Safety Month globally and launched a Safety Pinnacle Award to recognize the best-in-class contributions of employees who foster a culture of safety, health and well-being in the workplace. The Company’s employee resilience and focus on safety has clearly been demonstrated during COVID-19. DFIN quickly implemented numerous changes in operations to protect its global workforce, preserve business continuity and comply with government requirements. Employees that can work from home are doing so, travel restrictions have been implemented and virtual employee and customer meetings are required. Additional safety measures recommended by government and public health authorities have been implemented for essential employees who continue critical onsite work in the Company’s manufacturing facilities that are based in the United States. In June 2020, 93% of employees responding to the Company’s first Workplace Survey said DFIN communicated well during the pandemic. In July 2020, 95% of employees responding to the Safety Month Survey believe DFIN has taken appropriate safety actions in response to COVID-19.  

Available Information

The Company maintains a website at www.dfinsolutions.com where the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as other SEC filings, are available without charge, as soon as reasonably practicable following the time they are filed with, or furnished to, the SEC. The Principles of Corporate Governance of the Company’s Board of Directors, the charters of the Audit, Compensation, Corporate Responsibility & Governance Committees of the Board of Directors and the Company’s Principles of Ethical Business Conduct are also available on the Investor Relations portion of the Company’s website, and will be provided, free of charge, to any shareholder who requests a copy. References to the Company’s website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of or incorporated by reference in this document.

Special Note Regarding Forward-Looking Statements

The Company has made forward-looking statements in this Annual Report on Form 10-K (the “Annual Report”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company.

These statements may include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and variations of such words and similar expressions are intended to identify our forward-looking statements.

Forward-looking statements are not guarantees of performance. These forward-looking statements are subject to a number of important factors, including those factors discussed in detail in “Item 1A: Risk Factors” and elsewhere in this Annual Report, that could cause the Company’s actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document.

Consequently, readers of the Annual Report should consider these forward-looking statements only as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company undertakes no obligation to update or revise any forward-looking statements in this Annual Report to reflect any new events or any change in conditions or circumstances.

The Company’s consolidated results of operations, financial position and cash flows can be adversely affected by various risks. These risks include the principal factors listed below and the other matters set forth in the Annual Report. You should carefully consider all of these risks.

COVID-19 Pandemic Risk

The current COVID-19 pandemic and other global public health epidemics may materially adversely impact the Company’s business, its future results of operations and its overall financial performance.

The Company’s business could be materially adversely affected by the risk, or the public perception of risk, related to a pandemic or widespread health crisis, such as the current COVID-19 pandemic. A significant outbreak of epidemic, pandemic, or contagious diseases in the human population resulting in a widespread health crisis that adversely affect the broader economies and financial markets will also adversely impact the overall demand environment for DFIN’s services and products. The current global health crisis caused by COVID-19 has adversely affected the Company’s workforce and clients, as well as economies and financial markets globally, leading to an economic downturn. A recession would adversely impact the global market for IPOs and other financial transactions, adversely affecting the demand for DFIN’s services and products (see the Company’s risk factor captioned “A significant part of the Company’s business is derived from the use of DFIN’s services and products in connection with financial and strategic business transactions. Trends that affect the volume of these transactions may negatively impact the demand for DFIN’s services and products.

A significant portion” below), and those adverse effects may be material. In addition, any preventative or protective actions that governments implement or that the Company takes in respect of a global health crises such as COVID-19, such as travel or movement restrictions, quarantines or site closures, may interfere with the ability of the Company’s net sales depends onemployees and vendors to perform their respective responsibilities and obligations relative to the purchaseconduct of DFIN’s services and products by parties involved in GCM compliance and transactions. Asbusiness. Such results could have a result,material adverse effect on DFIN’s operations, business, financial condition, results of operations, or cash flows. For example, when both the Company’s business is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions, public and private debt offerings, leveraged buyouts, spinouts, bankruptcy and claims processing and other transactions. These transactions are often tied to market conditionsState of New Jersey and the resulting volumeCommonwealth of these types of transactions affects demand forPennsylvania enacted stay at home orders, the Company’s servicesCompany was deemed essential and products. Downturnscontinued to operate, but there can be no assurances that the operations will continue to be deemed essential both in the financial markets, global economy orthose locations and in the economies of the geographiesother jurisdictions in which the Company does businessor its vendors operate and reduced equity valuations create risks that could negatively impactare allowed to remain operational. In addition, the Company’s business. For example,Company uses vendors in multiple countries to fulfill the past, economic volatility has led to a declineglobal demand for its services. When global lockdowns were ordered by many governments in the financial condition of a numberMarch 2020, many of the Company’s clients and ledvendors had to the postponement of their capital markets transactions. To the extent that there is continued volatility, the Company may face increasing volume pressure. Furthermore, the Company’s offerings for GIM clients can be affected by fluctuations in the inflow and outflow of money into investment management funds which determines the number of new funds that are opened and closed. As a result, the Company is unablerapidly transition to predict the impact of any potential worsening of macroeconomic conditions which could have impacts to the Company’s results of operations. The level of activity in the financial communications services industry, including the financial transactions and related compliance needs DFIN’s services and products are used to support, is sensitive to many factors beyond the Company’s control, including interest rates, regulatory policies, general economic conditions, the Company’s clients’ competitive environments, business trends, terrorism and political change, such as the impact of the United Kingdom’s (the “UK”) recent withdrawalwork from the European Union (the “EU”). While EU rules will continue to apply in the UK until the end of 2020 (which period may be extended by one or two years), there can be no assurance that an agreement between the UK and the EU with regard to future trade and co-operation will be reached prior to the end of this transition period. In addition, a weak economy could hinder the Company’s ability to collect amounts owed by clients. Failure of the Company’s clients to pay the amounts owed or to pay such amounts in a timely manner, may increase the Company’s exposure to credit risks and result in bad debt write-offs. Unfavorable conditions or changes in any of these factors could negatively impact the Company’s results of operations, financial position and cash flow.

The quality of the Company’s customer support and services offerings is important to the Company’s clients, and if the Company fails to offer high quality customer support and services, clients may not use DFIN’s solutions resulting in a potential decline in net sales.

A high level of customer support is critical for the successful marketing and sale of DFIN’s solutions. If the Company is unable to provide a level of customer support and service to meet or exceed clients’ expectations, the Company could experience a loss of clients and market share, a failure to attract new clients, including in new geographic regions and increased service and support costs and a diversion of resources. Any of these results could negatively impact the Company’s results of operations, financial position and cash flow.

A substantial part of the Company’s business depends on clients continuing their use of DFIN’s services and products. Any decline in the Company’s client retention would harm the Company’s future operating results.

The Company does not have long term contracts with most of GCM and GIM clients and, therefore, relies on their continued use of DFIN’s services and products, particularly for compliance-related services. As a result, client retention, particularly during periods of declining transactional volume, is an important part of the Company’s strategic business plan. There can be no assurance that clients will continue to use DFIN’s services and products to meet their ongoing needs, particularly in the face of competitors’ services and products offerings. Client retention rates may decline due to a variety of factors, including:

If the Company’s retention rates are lower than anticipated or decline for any reason, the Company’s net sales may decrease and the Company’s profitability may be harmed, which could negatively impact the Company’s results of operations, financial position and cash flow.

The Company’s business may be adversely affected by new technologies enabling clients to produce and file documents on their own.

The Company’s business may be adversely affected as clients seek out opportunities to produce and file regulatory documentation on their own and begin to implement technologies that assist them in this process. For example, clients and their financial advisors have increasingly relied on web-based services which allow clients to autonomously file and distribute reports required pursuant to the Exchange Act, prospectuses and other materials as a replacement for using the Company’s EDGAR filing services. If technologies are further developed to provide clients with the ability to autonomously produce and file documents to meet their regulatory obligations, and the Company does not develop products or provide services to compete with such new technologies, the Company’s business may be adversely affected by those clients who choose alternative solutions, including self-serving or filing themselves.

The Company’s performance and growth depend on its ability to generate client referrals and to develop referenceable client relationships that will enhance the Company’s sales and marketing efforts.

The Company depends on users of its solutions to generate client referrals for the Company’s services. The Company depends, in part, on the financial institutions, law firms and other third parties who use DFIN’s services and products to recommend solutions to their client base, which provides the Company the opportunity to reach a larger client base than it can reach through the direct sales and internal marketing efforts. For instance, a portion of the Company’s net sales from GCM clients is generated through referrals by investment banks, financial advisors and law firms that have utilized the Company’s services in connection with prior transactions. These referrals are an important source of new clients for the Company’s services.

A decline in the number of referrals could require the Company to devote substantially more resources to the sales and marketing of its services, which would increase costs, potentially lead to a decline in net sales, slow the Company’s growth and negatively impact its results of operations, financial position and cash flow.

The Company’s indebtedness may adversely affect the Company’s business and results of operations, financial position and cash flow.

As of December 31, 2019, the Company had $300 million of 8.25% senior unsecured notes due October 15, 2024 (“Notes”) outstanding. As of December 31, 2019, the Company did not have any amounts outstanding under its Credit Facilities, as defined below. The Company’s ability to make payments on and to refinance indebtedness, as well as any future debt that it may incur, will depend on the Company’s ability to generate cash in the future from operations, financings or asset sales. The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company’s control. The Company may not generate sufficient funds to service its debt and meet its business needs, such as funding working capital or the expansion of the Company’s operations.home, creating process inefficiencies. If the Company is not able to repaymeet its client’s work requirements in a timely fashion or refinance debt as it becomes due, it may be forced to take disadvantageous actions, including facility closure, staff reductions, reducing financing in the future for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of cash flows from operations to the payment of principal and interest on its indebtedness, and restricting future capital return to stockholders. The lenders who hold the Company’s debt could also accelerate amounts due in the event of a default, which could potentially trigger a default or acceleration of the maturity of the Company’s debt.

In addition, the Company’s competitors who may be less leveraged, could put the Company at a competitive disadvantage. These competitors could have greater financial flexibility to pursue strategic acquisitions, secure additional financing and may better withstand downturns in the Company’s industry or the economy in general.

The agreements and instruments that govern the Company’s debt impose restrictions that may limit the Company’s operating and financial flexibility.

On September 30, 2016, in connection with the Separation, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for a $350.0 million senior secured term loan B facility (the “Term Loan Credit Facility”) and a $300.0 million senior secured revolving credit facility (the “Revolving Facility,” and, together with the Term Loan Credit Facility, the “Credit Facilities”). The Credit Agreement that governs the Company’s Credit Facilities and the indenture that governs the Notes contain a number of significant restrictions and covenants that limit the Company’s ability to:

These covenants can have the effect of limiting the Company’s flexibility in planning for or reacting to changes in the Company’s business, reputation and the markets in which it competes. In addition, the Credit Agreement that governs the Credit Facilities requires the Companyability to comply with certain financial maintenance covenants. Operating results below current levels or other adverse factors, including a significant increase in interest rates, could result in the Company being unable to comply with the financial covenants contained in the Term Loan Credit Facility and indenture. If the Company violates covenants under the Credit Facilities and indenture and is unable to obtain a waiver from the lenders, the Company’s debt under the Credit Facilities and indentureretain clients would be in default and could be accelerated by the Company’s lenders. Due to cross-default provisions in the agreements and instruments governing the Company’s debt, a default under one agreement or instrument could result in a default under, and the acceleration of, other debt.

If the Company’s debt is accelerated, the Company may not be able to repay its debt or borrow sufficient funds to refinance it. Even if the Company is able to obtain new financing, it may not be on commercially reasonable terms, on terms that are acceptable, or at all. If the Company’s debt is in default for any reason, the Company’s business and results of operations, financial position and cash flow could be materially and adversely affected. In addition, complying with these covenants may also cause the Company to take actions that are not favorable to holders of the Notes and may make it more difficult for the Company to successfully execute its business strategy and compete against companies that are not subject to such restrictions.

Despite the Company’s current level of indebtedness, it may be able to incur significantly more debt.

Despite the Company’s current level of indebtedness, the Company may be able to incur significant additional debt, including secured debt, in the future. Although the indenture governing the Notes and the Credit Agreement governing the Credit Facilities restrict the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions. Also, these restrictions do not prevent the Company from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2019, the Company had $231.6 million available for additional borrowing under the Revolving Facility. The more indebtedness the Company incurs, the further exposed it becomes to the risks associated with leverage described above.

Adverse credit market conditions may limit the Company’s ability to obtain future financing.

The Company may, from time to time, depend on access to credit markets. Uncertainty and volatility in global financial markets may cause financial markets institutions to fail or may cause lenders to hoard capital and reduce lending. As a result, DFIN may not obtain financing on terms and conditions that are favorable, or at all.

The highly competitive market for DFIN’s services and products and industry fragmentation may continue to create adverse price pressures.

The financial communications services industry is highly competitive with relatively low barriers to entry and the industry remains highly fragmented in North America and internationally. Management expects that competition will increase from existing competitors, as well as new and emerging entrants. Additionally, as the Company expands its product and service offerings, it may face competition from new and existing competitors. As a result, competition may lead to additional pricing pressure on DFIN’s services and products, which could negatively impact its results of operations, financial position and cash flow.

The business plan management announced at the Company’s 2018 investor day relies on the Company’s ability to transform into a software-as-a-service company, and a failure to adapt to technological changes to address the changing demands of clients may adversely impact the Company’s business, and if the Company fails to successfully develop, introduce or integrate new services or enhancements to its services and products platforms, systems or applications, DFIN’s reputation, net sales and operating income may suffer.

In May 2018, management introduced the Company’s new business plan that focuses on transitioning its business to a software and technology focused company. In order to do that, the Company must attract new clients for those businesses, and its ability to attract new clients and increase sales to existing clients will depend in large part on the Company’s ability to enhance and improve existing services and products platforms, including application solutions, and to introduce new functionality either by acquisition or internal development. The Company’s operating results would suffer if its innovations are not responsive to the needs of the Company’s clients, are not appropriately timed with market opportunities or are not brought to market effectively. In addition, it is possible that management’s assumptions about the features that they believe will drive purchasing decisions for the Company’s potential clients or renewal decisions for the existing clients could be inaccurate. There can be no assurance that new products or services, or upgrades to DFIN’s products or services, will be released as anticipated or that, when released, they will not contain defects. If product defects arise, the Company could experience negative publicity, damage to its reputation, decline in net sales, delay in market acceptance or claims by clients brought against the Company. Moreover, upgrades and enhancements to the Company’s platforms may require substantial capital investment without assurance that the upgrades and enhancements will enable the Company to achieve or sustain a competitive advantage in the product and service offerings. If the Company is unable to licenseaccurately predict the ultimate impact of the current COVID-19 pandemic due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the virus, the presence of new strains of the virus, the duration of the outbreak, actions that may be taken by governmental authorities to contain the virus and any economic recession resulting from the pandemic. The Company closely monitors the impact of the COVID-19 pandemic, continually assessing its potential effects on its business. The extent to which the Company’s results are affected by COVID-19 will largely depend on future developments which cannot be accurately predicted and are uncertain, but the COVID-19 pandemic or acquire new technology solutions to enhance existing product and service offerings, the perception of its effects could have a material adverse effect on DFIN’s business, financial condition, results of operations, financial position andor cash flow may be negatively impacted.  

Undetected errors or failures found in DFIN’s services and products may result in loss of or delay in market acceptance of the services and products that could negatively impact its business.

DFIN’s services and products may contain undetected errors or scalability limitations during their life cycle, but particularly when first introduced or as new versions are releasedflows. Refer to the market. The Company releases enhanced versions of products including platforms during various stages of development. Despite production testing by the Company and operational testing by current and potential clients, errors may not be found in new services and products until after commencement of commercial availability or use, resulting in a loss of or a delay in market acceptance, damage to the Company’s reputation, client dissatisfaction and decline in net sales and operating income.

Modifications in the rules and regulations to which clients or potential clients are subject to may impact the demandItem 1. Business—COVID-19 for the Company’s product and service offerings.

Clients are subject to rules and regulations requiring certain printed or electronic communications governing the form, content and delivery methods of such communications, such as SEC Rule 30e-3 which provides certain registered investment companies with an option to electronically deliver shareholder reports and other materials rather than providing such reports in paper. Modifications in these regulations may impact clients’ business practices and could reduce demand for DFIN’s services and products offerings. Modifications in such regulations could eliminate the need for certain types of communications altogether or impact the quantity or format of required communications.

additional information.

Technology Risks

The Company’s failure to maintain the confidentiality, integrity and availability of its systems, software and solutions could seriously damage the Company’s reputation and affect its ability to retain clients and attract new business.

Maintaining the confidentiality, integrity and availability of DFIN’s systems, software and solutions is an issue of critical importance for the Company and its clients and users who rely on DFIN’s systems to prepare regulatory filings and store and exchange large volumes of information, much of which is proprietary, confidential and may constitute material nonpublic information. Given DFIN’s systems contain material nonpublic information about public reporting companies and potential mergers and acquisitions activities prior to its public release, the Company mayhas been, and expects it will continue to be, a target of hacking or cybercrime. Inadvertent disclosure of the information maintained on DFIN’s systems (or on the systems of the vendors on which the Company relies) due to human error, breach of the systems through hacking, cybercrime or a leak of confidential information due to employee misconduct, could seriously damage the Company’s reputation, could cause it to expend significant resources responding to document requests from government agencies and customers and could cause significant reputational harm for the Company and its clients. The Company’s technologies, systems, networks and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual attempts to sophisticated and targeted measures directed at the Company. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased and the Company has in the past and may in the future be subject to security breaches. For example, during 2019 and 2020 the Company experienced two cyber incidents, one of which was through a commercial partner. The incident involving the Company’s commercial partner was a result of a compromise to the partner’s email server, and thewhich allowed unauthorized viewing of client information on that system. The DFIN incident was, the Company believes, the result of a compromised login credential each of which allowed unauthorized viewing of client information on that system and access to an internal Company system. In each incident, the Company believes the unauthorized accessviewing of client information was limited to that system. The Company has contacted, and, in the future will contact, impacted customers as appropriate with respect to all cyber incidents.

The Company’s customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate login credentials, including passwords, or to introduce viruses or other malware programs to its information systems, the information systems of its vendors or third-party service providers and/or its customers' computers. Though the Company endeavors to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber attacks against the Company or its vendors and third-party service providers remain a serious issue. Further, to access the Company’s services and products, the Company’s customers use personal electronic devices that are beyond DFIN’s security control systems. Techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and generally are not recognized until executed against a target. Consistent with all software solutions, DFIN’s software may be vulnerable to these types of attacks. Breaches and other inappropriate access can be difficult to detect and any delay in identifying them could increase their harm. An attack of this type could disrupt the proper functioning of the Company’s software solutions, cause errors in the output of clients’ work, allow unauthorized access to sensitive, proprietary or confidential information and other undesirable or destructive outcomes.

As a result of these types of risks and attacks, the Company has implemented and continuously reviews and updates systems, processes and procedures to protect against unauthorized access to or use of data and to prevent data loss. For example, in 20192020 the Company refreshedcontinued to refresh relevant security standards to reflect changes in current security threats, enhanced and increased the number of cyber security resources monitoring DFIN systems for cyber threats, enhancedcontinued to update intrusion and detection capabilities and refreshed mandatory information security awareness training content, including awareness around phishing. However, the ever-evolving threats mean the Company and its third-party service providers and vendors must continually evaluate and adapt their respective systems and processes and overall security environment. There is no guarantee that these measures will be adequate to safeguard against all data security breaches, system compromises or misuses of data.

Furthermore, DFIN’s systems allow the Company to share information that may be confidential in nature to its clients across the Company’s offices worldwide. This design allows the Company to increase global reach for its clients and increase its responsiveness to client demands, but also increases the risk of a security breach or a leak of such information as it allows additional points of access to information by increasing the number of employees and facilities working on certain jobs. In addition, DFIN’s systems leverage third party outsourcing arrangements, which expedites the Company’s responsiveness but exposes information to additional access points. IfThe occurrence of an actual or perceived information leak or breach of security were to occur,could cause the Company’s reputation couldto suffer, clients couldto stop using DFIN’s services and products offerings, the Company couldto have to respond to document requests from government agencies and customers in connection with such event and it couldthe Company to face lawsuits and potential liability, any of which could cause DFIN’s financial performance to be negatively impacted. The Company has incurred, and expects to continue to incur, expenses to prevent, investigate and remediate security breaches and vulnerabilities, including deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. Though the Company maintains professional liability insurance that includes coverage if a cybersecurity incident were to occur, there can be no assurance that insurance coverage will be available, responsive, or that the available coverage will be sufficient to cover losses and claims related to any cybersecurity incidents the Company may experience.

A number of core processes, such as software development, sales and marketing, client service and financial transactions, rely on DFIN’s IT infrastructure and applications. Defects or malfunctions in the Company’s IT infrastructure and applications have caused, and could cause in the future, DFIN’s services and products offerings not to perform as clients expect, which could negatively impact the Company’s reputation and business. In addition, malicious software, sabotage and other cybersecurity breaches of the types described above could cause an outage in DFIN’s infrastructure, which could lead to a substantial delay of service and ultimately downtimes, recovery costs and client claims, any of which could negatively impact the Company’s results of operations, financial position and cash flow.flows.

The Company’s business may be adversely affected by new technologies enabling clients to produce and file documents on their own.

The Company’s business may be adversely affected as clients seek out opportunities to produce and file regulatory documentation on their own and begin to implement technologies that assist them in this process. For example, clients and their financial advisors have increasingly relied on web-based services which allow clients to autonomously file and distribute reports required pursuant to the Exchange Act, prospectuses and other materials as a replacement for using the Company’s EDGAR filing services. If technologies are further developed to provide clients with the ability to autonomously produce and file documents to meet their regulatory obligations, and the Company does not develop products or provide services to compete with such new technologies, the Company’s business may be adversely affected by those clients who choose alternative solutions, including self-serving or filing themselves.

Undetected errors or failures found in DFIN’s services and products may result in loss of or delay in market acceptance of the services and products that could negatively impact its business.

DFIN’s services and products may contain undetected errors or scalability limitations during their life cycle, but particularly when first introduced or as new versions are released to the market. The Company releases enhanced versions of products including platforms during various stages of development. Despite production testing by the Company and operational testing by current and potential clients, errors may not be found in new services and products until after commencement of commercial availability or use, resulting in a loss of or a delay in market acceptance, damage to the Company’s reputation, client dissatisfaction and decline in net sales and operating income.

Some of DFIN’s systems and services are developed by third parties or supported by third party hardware and software. The Company’s business and reputation could suffer if these third party systems and services fail to perform properly or are no longer available to the Company.

Some of DFIN’s systems and services are developed by third parties or rely on hardware purchased or leased and software licensed from third parties. These systems and services, or the hardware and software required to run the Company’s existing systems and services, may not continue to be available on commercially reasonable terms or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of DFIN’s services, which could negatively affect the Company’s business until equivalent technology is either developed by the Company or, if available, is identified, obtained and integrated. In addition, it is possible that the Company’s hardware vendors or the licensors of third party software could increase their prices, which could have an adverse impact on DFIN’s business, operating results and financial condition. Further, changing hardware vendors or software licensors could detract from management’s ability to focus on the ongoing operations of the Company’s business or could cause delays in the operations of the business.

Additionally, third party software underlying DFIN’s services can contain undetected errors or bugs, or be susceptible to cybersecurity breaches described above. The Company may be forced to delay commercial release of its services until any discovered problems are corrected and, in some cases, may need to implement enhancements or modifications to correct errors that the Company does not detect until after deployment of its services.

Increasing regulatory focus on privacy issues and expanding laws could impact DFIN’s software products and expose the Company to increased liability.

Privacy and data security laws apply to DFIN’s various businesses in all jurisdictions in which the Company operates. In particular, clients use DFIN’s software services, including Venue, to share personal data and information on a confidential basis, and such sharing may be subject to privacy and data security laws. DFIN’s global business operates in countries that have more stringent data protection laws than those in the United States. These data protection laws may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. New laws, such as the GDPR which went into effect in May 2018 in Europe, and industry self-regulatory codes have been or are being enacted to protect personal data. Complying with these regulations has been, and will continue to be, costly, and there are or will be significant penalties for failure to comply with these regulations, including significant penalties for failing to comply with GDPR. Further, any perception of DFIN’s practices, products or services as a violation of individual privacy rights may subject the Company to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt DFIN’s business and expose the Company to liability.

Transferring personal data and information across international borders is becoming increasingly complex. For example, Europe has stringent regulations regarding transfer of personal data and information. The mechanisms that DFIN and many other companies rely upon for data transfers from Europe to the United States (e.g., Privacy Shield and Model Clauses) are being contested in the European court systems. The Company is closely monitoring developments related to requirements for transferring personal data and information. These requirements may result in an increase in the obligations required to provide DFIN’s services in the EU or in sanctions and fines for non-compliance. Several other countries, including Australia and Japan, have also established specific legal requirements for cross-border transfers of personal information. These developments in Europe and elsewhere could harm DFIN’s business, financial condition and results of operations.

Fluctuations in the costs and availability of paper, ink, energy and other raw materials may adversely impact the Company.

Increases in the costs of these inputs may increase DFIN’s costs and the Company may not be able to pass these costs on to clients through higher prices. Moreover, rising raw materials costs, and any consequent impact on pricing, could lead to a decrease in demand for DFIN’s services and products.

If the Company is unable to protect its proprietary technology and other rights, the value of DFIN’s business and its competitive position may be impaired.

If the Company is unable to protect its intellectual property, the Company’s competitors could use its intellectual property to market services and products similar to DFIN’s, which could decrease demand for its services. The Company relies on a combination of patents, trademarks, licensing and other proprietary rights laws, as well as third party nondisclosure agreements and other contractual provisions and technical measures, to protect its intellectual property rights. These protections may not be adequate to prevent competitors from copying or reverse-engineering DFIN’s technology and services to create similar offerings. Additionally, any of DFIN’s pending or future patent applications may not be issued with the scope of protection the Company seeks, if at all. The scope of patent protection, if any, the Company may obtain is difficult to predict and the patents may be found invalid, unenforceable or of insufficient scope to prevent competitors from offering similar services. DFIN’s competitors may independently develop technologies that are substantially equivalent or superior to the Company’s technology. To protect DFIN’s proprietary information, the Company requires employees, consultants, advisors, independent contractors and collaborators to enter into confidentiality agreements and maintain policies and procedures to limit access to the Company’s trade secrets and proprietary information. These agreements and the other actions may not provide meaningful protection for DFIN’s proprietary information or know-how from unauthorized use, misappropriation or disclosure. Further, existing patent laws may not provide adequate or meaningful protection in the event competitors independently develop technology, products or services similar to DFIN’s. Even if the laws governing intellectual property rights provide protection, the Company may have insufficient resources to take the legal actions necessary to protect its interests. In addition, DFIN’s intellectual property rights and interests may not be afforded the same protection under the laws of foreign countries as they are under the laws of the United States.

Business, Economic, Market and Operating Risks

A significant part of the Company’s business is derived from the use of DFIN’s services and products in connection with financial and strategic business transactions. Trends that affect the volume of these transactions may negatively impact the demand for DFIN’s services and products.

A significant portion of the Company’s net sales depends on the purchase of DFIN’s services and products by parties involved in capital markets compliance and transactions. As a result, the Company’s business is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions, public and private debt offerings, leveraged buyouts, spinouts, bankruptcy and claims processing and other transactions. These transactions are often tied to market conditions and the resulting volume of these types of transactions affects demand for the Company’s services and products. Downturns in the financial markets, global economy or in the economies of the geographies in which the Company does business and reduced equity valuations create risks that could negatively impact the Company’s business. For example, in the past, economic volatility has led to a decline in the financial condition of a number of the Company’s clients and led to the postponement of their capital markets transactions. To the extent that there is continued volatility, the Company may face increasing volume pressure. Furthermore, the Company’s offerings for investment companies clients can be affected by fluctuations in the inflow and outflow of money into investment management funds which determines the number of new funds that are opened and closed. As a result, the Company is unable to predict the impact of any potential worsening of macroeconomic conditions which could have impacts to the Company’s results of operations. The level of activity in the financial communications services industry, including the financial transactions and related compliance needs DFIN’s services and products are used to support, is sensitive to many factors beyond the Company’s control, including interest rates, regulatory policies, general economic conditions, the Company’s clients’ competitive environments, business trends, terrorism and political change, such as the impact of the United Kingdom’s (the “UK”) withdrawal from the European Union (the “EU”), commonly referred to as “Brexit.” In December 2020, the EU and the UK reached an agreement governing the UK exit from the EU as well as certain terms of trade. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. In addition, a weak economy could hinder the Company’s ability to collect amounts owed by clients. Failure of the Company’s clients to pay the amounts owed or to pay such amounts in a timely manner, may increase the Company’s exposure to credit risks and result in bad debt write-offs. Unfavorable conditions or changes in any of these factors could negatively impact the Company’s business, results of operations, financial position and cash flows.

The highly competitive market for DFIN’s services and products and industry fragmentation may continue to create adverse price pressures.

The financial communications services industry is highly competitive with relatively low barriers to entry and the industry remains highly fragmented in North America and internationally. Management expects that competition will increase from existing competitors, as well as new and emerging entrants. Additionally, as the Company expands its services and products offerings, it may face competition from new and existing competitors. As a result, competition may lead to additional pricing pressure on DFIN’s services and products, which could negatively impact its business, results of operations, financial position and cash flows.

The quality of the Company’s customer support and services offerings is important to the Company’s clients, and if the Company fails to offer high quality customer support and services, clients may not use DFIN’s solutions resulting in a potential decline in net sales.

A high level of customer support is critical for the successful marketing and sale of DFIN’s solutions. If the Company is unable to provide a level of customer support and service to meet or exceed clients’ expectations, the Company could experience a loss of clients and market share, a failure to attract new clients, including in new geographic regions, and increased service and support costs and a diversion of resources. Any of these results could negatively impact the Company’s business, results of operations, financial position and cash flows.

A substantial part of the Company’s business depends on clients continuing their use of DFIN’s services and products. Any decline in the Company’s client retention would harm the Company’s future operating results.

The Company does not have long term contracts with most of capital markets and investment companies clients and, therefore, relies on their continued use of DFIN’s services and products, particularly for compliance-related services. As a result, client retention, particularly during periods of declining transactional volume, is an important part of the Company’s strategic business plan. There can be no assurance that clients will continue to use DFIN’s services and products to meet their ongoing needs, particularly in the face of competitors’ services and products offerings. Client retention rates may decline due to a variety of factors, including:

If the Company’s retention rates are lower than anticipated or decline for any reason, the Company’s net sales may decrease and the Company’s profitability may be harmed, which could negatively impact the Company’s business, results of operations, financial position and cash flows.

The Company’s performance and growth depend on its ability to generate client referrals and to develop referenceable client relationships that will enhance the Company’s sales and marketing efforts.

The Company depends on users of its solutions to generate client referrals for the Company’s services. The Company depends, in part, on the financial institutions, law firms and other third parties who use DFIN’s services and products to recommend solutions to their client base, which provides the Company the opportunity to reach a larger client base than it can reach through the direct sales and internal marketing efforts. For instance, a portion of the Company’s net sales from capital markets clients is generated through referrals by investment banks, financial advisors and law firms that have utilized the Company’s services in connection with prior transactions. These referrals are an important source of new clients for the Company’s services.

A decline in the number of referrals could require the Company to devote substantially more resources to the sales and marketing of its services, which would increase costs, potentially lead to a decline in net sales, slow the Company’s growth and negatively impact its business, results of operations, financial position and cash flows.

A failure to adapt to technological changes to address the changing demands of clients may adversely impact the Company’s business, and if the Company fails to successfully develop, introduce or integrate new services or enhancements to its services and products platforms, systems or applications, DFIN’s reputation, net sales and operating income may suffer.

In May 2018, management introduced the Company’s new business plan that focuses on transitioning its business to a software and technology focused company. In order to do that, the Company must attract new clients for those businesses, and its ability to attract new clients and increase sales to existing clients will depend in large part on the Company’s ability to enhance and improve existing services and products platforms, including application solutions, and to introduce new functionality either by acquisition or internal development. As further described in Item 1. Business—Company History, in July 2018, the Company sold its Language Solutions business and in December 2018 acquired eBrevia. In the first quarter of 2020, management realigned the Company’s operating segments to enable management to have greater visibility into the performance of the Company’s software solutions and compliance and communications management operating segments. The Company’s software solutions net sales increased from 18.5% of total net sales in 2018 to 22.4% of total net sales in 2020, while the Company’s tech-enabled services net sales as a percentage of total net sales stayed relatively consistent and print and distribution net sales as a percentage of total net sales has declined from 35.8% in 2018 to 31.9% in 2020. In 2020, the Company undertook significant restructuring of its compliance and communications management operating segments due partially to regulatory changes that will significantly reduce print volumes starting in 2021. The Company continues to invest a significant portion of its capital expenditures budget on software development, including the development of software solutions for both investment companies and capital markets, most recently with the launch of new ActiveDisclosure in early 2021. The Company’s operating results would suffer if its innovations are not responsive to the needs of the Company’s clients, are not appropriately timed with market opportunities or are not brought to market effectively. In addition, it is possible that management’s assumptions about the features that they believe will drive purchasing decisions for the Company’s potential clients or renewal decisions for the existing clients could be inaccurate. There can be no assurance that new products or services, or upgrades to DFIN’s products or services, will be released as anticipated or that, when released, they will not contain defects. If product defects arise, the Company could experience negative publicity, damage to its reputation, decline in net sales, delay in market acceptance or claims by clients brought against the Company. Moreover, upgrades and enhancements to the Company’s platforms may require substantial capital investment without assurance that the upgrades and enhancements will enable the Company to achieve or sustain a competitive advantage in the services and products offerings. If the Company is unable to license or acquire new technology solutions to enhance existing services and products offerings, the results of operations, financial position and cash flows may be negatively impacted.  

Fluctuations in the costs and availability of paper and other raw materials may adversely impact the Company.

Increases in the costs of these inputs may increase DFIN’s costs and the Company may not be able to pass these costs on to clients through higher prices. Moreover, rising raw materials costs, and any consequent impact on pricing, could lead to a decrease in demand for DFIN’s services and products.

DFIN’s business is dependent upon brand recognition and reputation, and the failure to maintain or enhance the Company’s brand or reputation would likely have an adverse effect on its business.

DFIN’s brand recognition and reputation are important aspects of the Company’s business. Maintaining and further enhancing DFIN’s brands and reputation will be important to retaining and attracting clients for DFIN’s products. The Company also believes that the importance of DFIN’s brand recognition and reputation for products will continue to increase as competition in the market for DFIN’s products and industry continues to increase. The Company’s success in this area will be dependent on a wide range of factors, some of which are beyond the Company’s control, including the efficacy of the Company’s marketing efforts, its ability to retain existing and obtain new clients and strategic partners, human error, the quality and perceived value of DFIN’s services and products offerings, actions of the Company’s competitors and positive or negative publicity. Damage to the Company’s reputation and loss of brand equity may reduce demand for DFIN’s services and products offerings and negatively impact its business, results of operations, financial position and cash flow.

flows.

The Company may be unable to hire and retain talented employees, including management.

DFIN’s success depends, in part, on its general ability to attract, develop, motivate and retain highly skilled employees. The loss of a significant number of employees or the inability to attract, hire, develop, train and retain additional skilled personnel could have a serious negative effect on DFIN’s business. Management believes the Company’s ability to retain its client base and to attract new clients is directly related to DFIN’s sales force and client service personnel, and if the Company cannot retain these key employees, its business could suffer. In addition, many members of DFIN’s management have significant industry experience that is valuable to competitors. The Company expects that its executive officers will have non-solicitation agreements contractually prohibiting them from soliciting clients and employees within a specified period of time after they leave DFIN. If one or more members of the senior management team leave and cannot be replaced with a suitable candidate quickly, the Company could experience difficulty in managing its business properly, which could negatively impact its business, results of operations, financial position and cash flow.

The trend of increasing costs to provide health care and other benefits to employees and retirees may continue.

DFIN provides health care and other benefits to both employees and retirees. For many years, costs for health care have increased more rapidly than general inflation in the U.S. economy. If this trend in health care costs continues, the cost to provide such benefits could increase, adversely impacting profitability. Changes to health care regulations in the U.S. and internationally may also increase cost of providing such benefits.

Changes in market conditions, changes in discount rates, or lower returns on assets may increase required pension and other post-retirement benefit plan contributions in future periods.

The funded status of DFIN’s pension and other post-retirement benefits plans is dependent upon many factors, including returns on invested assets and the level of certain interest rates. As experienced in prior years, declines in the market value of the securities held by the plans coupled with historically low interest rates have substantially reduced, and in the future could further reduce, the funded status of the plans. These reductions may increase the level of expected required pension and other post-retirement benefit plan contributions in future years. Various conditions may lead to changes in the discount rates used to value the year-end benefit obligations of the plans, which could partially mitigate, or worsen, the effects of lower asset returns. If adverse conditions were to continue for an extended period of time, the Company’s costs and required cash contributions associated with pension and other post-retirement benefit plans may substantially increase in future periods.

The Company is exposed to risks related to potential adverse changes in currency exchange rates.

The Company is exposed to market risks resulting from changes in the currency exchange rates of the currencies in the countries in which it does business. Although operating in local currencies may limit the impact of currency rate fluctuations on the operating results of non-U.S. activities, fluctuations in such rates may affect the translation of these results into DFIN’s financial statements. To the extent borrowings, sales, purchases, net sales and expenses or other transactions are not in the applicable local currency, the Company may enter into foreign currency spot and forward contracts to hedge the currency risk. Management cannot be sure, however, that its efforts at hedging will be successful, and such efforts could, in certain circumstances, lead to losses.flows.

There are risks associated with operations outside the United States.

The Company has operations outside the United States. DFIN works with capital markets clients around the world, and in 20192020 the International segmentCompany’s international sales accounted for approximately 13% of DFIN’s net sales. The Company’s operations outside of the United States are primarily focused in Europe, Asia, Canada and Latin America. As a result, the Company is subject to the risks inherent in conducting business outside the United States, including:

The Company cannot be sure that its investments or operations in other countries will produce desired levels of net sales or that one or more of the factors listed above will not affect the Company’s global business.

The Company’s reliance on strategic partnerships as part of its business strategy may adversely affect the development of DFIN’s business in those areas.

The Company’s business strategy includes pursuing and maintaining strategic partnerships, such as the Company’s commercial agreement with Mediant, in order to facilitate its entry into adjacent lines of business. This approach may expose the Company to risk of conflict with its strategic arrangement partners and divert management resources to oversee these partnership arrangements. Further, as these arrangements require cooperation with third party partners, these strategic arrangements may not be able to make decisions as quickly as DFIN would if it was operating on its own or may take actions that are different from what the Company would do on a standalone basis in light of the need to consider DFIN partners’ interests. As a result, the Company may be less able to respond timely to changes in market dynamics, which could have a material adverse effect on its business, results of operations, financial position and cash flows.

The Company has in the past acquired and may in the future to acquire other businesses, and it may be unable to successfully integrate the operations of these businesses and may not achieve the cost savings and increased net sales anticipated as a result of these acquisitions.

Achieving the anticipated benefits of acquisitions will depend in part upon DFIN’s ability to integrate these businesses in an efficient and effective manner. The integration of companies that have previously operated independently may result in significant challenges, and the Company may be unable to accomplish the integration smoothly or successfully. In particular, the coordination of geographically dispersed organizations with differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration of acquired businesses may also require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day operations of the Company. In addition, the process of integrating operations may cause an interruption of, or loss of momentum in, the activities of one or more of the Company’s businesses and the loss of key personnel from the Company or the acquired businesses. Further, employee uncertainty and lack of focus during the integration process may disrupt the businesses of the Company or the acquired businesses.

Financial Risks

The Company’s reliance on strategic partnerships as part of its business strategyindebtedness may adversely affect the developmentCompany’s business and results of DFIN’soperations, financial position and cash flows.

As of December 31, 2020, the Company had $233.0 million of 8.25% senior unsecured notes due October 15, 2024 (“Notes”) outstanding. As of December 31, 2020, the Company did not have any amounts outstanding under its Credit Facilities, as defined below. The Company’s ability to make payments on and to refinance indebtedness, as well as any future debt that it may incur, will depend on the Company’s ability to generate cash in the future from operations, financings or asset sales. The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company’s control. The Company may not generate sufficient funds to service its debt and meet its business needs, such as funding working capital or the expansion of the Company’s operations. If the Company is not able to repay or refinance debt as it becomes due, it may be forced to take disadvantageous actions, including facility closure, staff reductions, reducing financing in those areas.the future for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of cash flows from operations to the payment of principal and interest on its indebtedness, and restricting future capital return to stockholders. The lenders who hold the Company’s debt could also accelerate amounts due in the event of a default, which could potentially trigger a default or acceleration of the maturity of the Company’s debt.

In addition, the Company’s competitors who may be less leveraged, could put the Company at a competitive disadvantage. These competitors could have greater financial flexibility to pursue strategic acquisitions, secure additional financing and may better withstand downturns in the Company’s industry or the economy in general.

The agreements and instruments that govern the Company’s debt impose restrictions that may limit the Company’s operating and financial flexibility.

On September 30, 2016, in connection with the Separation, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for a $350.0 million senior secured term loan B facility (the “Term Loan Credit Facility”) and a $300.0 million senior secured revolving credit facility, as amended (the “Revolving Facility,” and, together with the Term Loan Credit Facility, the “Credit Facilities”). The Term Loan Credit Facility was paid in full during the year ended December 31, 2019. The Credit Agreement that governs the Company’s Credit Facilities and the indenture that governs the Notes contain a number of significant restrictions and covenants that limit the Company’s ability to:

The

These covenants can have the effect of limiting the Company’s flexibility in planning for or reacting to changes in the Company’s business strategy includes pursuing and maintaining strategic partnershipsthe markets in order to facilitate its entry into adjacent lines of business. This approach may exposewhich it competes. In addition, the Credit Agreement that governs the Credit Facilities requires the Company to risk of conflictcomply with its strategic arrangement partnerscertain financial maintenance covenants. Operating results below current levels or other adverse factors, including a significant increase in interest rates, could result in the Company being unable to comply with the financial covenants contained in the Term Loan Credit Facility and indenture. If the Company violates covenants under the Credit Facilities and indenture and is unable to obtain a waiver from the lenders, the Company’s debt under the Credit Facilities and indenture would be in default and could be accelerated by the Company’s lenders. Due to cross-default provisions in the agreements and instruments governing the Company’s debt, a default under one agreement or instrument could result in a default under, and the need to divert management resources to oversee these partnership arrangements. Further, as these arrangements require cooperation with third party partners, these strategic arrangementsacceleration of, other debt.

If the Company’s debt is accelerated, the Company may not be able to make decisions as quickly as DFIN wouldrepay its debt or borrow sufficient funds to refinance it. Even if the Company is able to obtain new financing, it was operatingmay not be on its owncommercially reasonable terms, on terms that are acceptable, or at all. If the Company’s debt is in default for any reason, the Company’s business and results of operations, financial position and cash flows could be materially and adversely affected. In addition, complying with these covenants may also cause the Company to take actions that are different from whatnot favorable to holders of the Notes and may make it more difficult for the Company would do on a standalone basis in lightto successfully execute its business strategy and compete against companies that are not subject to such restrictions.

Despite the Company’s current level of indebtedness, it may be able to incur significantly more debt.

Despite the need to consider DFIN partners’ interests. As a result,Company’s current level of indebtedness, the Company may be less able to respond timelyincur significant additional debt, including secured debt, in the future. Although the indenture governing the Notes and the Credit Agreement governing the Credit Facilities restrict the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions. Also, these restrictions do not prevent the Company from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2020, the Company had $300.0 million available for additional borrowing under the Revolving Facility. The more indebtedness the Company incurs, the further exposed it becomes to the risks associated with leverage described above.

Adverse credit market conditions may limit the Company’s ability to obtain future financing.

The Company may, from time to time, depend on access to credit markets. Uncertainty and volatility in global financial markets may cause financial markets institutions to fail or may cause lenders to hoard capital and reduce lending. As a result, DFIN may not obtain financing on terms and conditions that are favorable, or at all.

The Company is exposed to risks related to potential adverse changes in currency exchange rates.

The Company is exposed to market risks resulting from changes in the currency exchange rates of the currencies in the countries in which it does business. Although operating in local currencies may limit the impact of currency rate fluctuations on the operating results of non-U.S. activities, fluctuations in such rates may affect the translation of these results into DFIN’s financial statements. To the extent borrowings, sales, purchases, net sales and expenses or other transactions are not in the applicable local currency, the Company may enter into foreign currency spot and forward contracts to hedge the currency risk. Management cannot be sure, however, that its efforts at hedging will be successful, and such efforts could, in certain circumstances, lead to losses.

Legal and Regulatory Risks

Modifications in the rules and regulations to which clients or potential clients are subject to may impact the demand for the Company’s services and products offerings.

Clients are subject to rules and regulations requiring certain printed or electronic communications governing the form, content and delivery methods of such communications, such as SEC Rule 30e-3 which provides certain registered investment companies with an option to electronically deliver shareholder reports and other materials rather than providing such reports in paper. Modifications in these regulations may impact clients’ business practices and could reduce demand for DFIN’s services and products offerings. Modifications in such regulations could eliminate the need for certain types of communications altogether or impact the quantity or format of required communications.

Increasing regulatory focus on privacy issues and expanding laws could impact DFIN’s software solutions and expose the Company to increased liability.

Privacy and data security laws apply to DFIN’s various businesses in all jurisdictions in which the Company operates. In particular, clients use DFIN’s software solutions, including Venue, to share personal data and information on a confidential basis, and such sharing may be subject to privacy and data security laws. DFIN’s global business operates in countries that have more stringent data protection laws than those in the United States. These data protection laws may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. New laws, such as the General Data Protection Regulation (“GDPR”) which went into effect in May 2018 in Europe, and industry self-regulatory codes have been or are being enacted to protect personal data. Complying with these regulations has been, and will continue to be, costly, and there are or will be significant penalties for failure to comply with these regulations, including significant penalties for failing to comply with GDPR. Further, any perception of DFIN’s practices, products or services as a violation of individual privacy rights may subject the Company to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt DFIN’s business and expose the Company to liability.

Transferring personal data and information across international borders is becoming increasingly complex. For example, Europe has stringent regulations regarding transfer of personal data and information. The mechanisms that DFIN and many other companies rely upon for data transfers from Europe to the United States (e.g., Privacy Shield and Model Clauses) are being contested in the European court systems. The Company is closely monitoring developments related to requirements for transferring personal data and information. These requirements may result in an increase in the obligations required to provide DFIN’s services in the EU or in sanctions and fines for non-compliance. Several other countries, including Australia and Japan, have also established specific legal requirements for cross-border transfers of personal information. These developments in Europe and elsewhere could harm DFIN’s business, results of operations, financial position and cash flows.

Benefit, Pension and Other Post-Retirement Benefit Plans Risk

Changes in market conditions, changes in discount rates, or lower returns on assets may increase required pension and other post-retirement benefit plan contributions in future periods.

The funded status of DFIN’s pension and other post-retirement benefits plans is dependent upon many factors, including returns on invested assets and the level of certain interest rates. Declines in the market value of the securities held by the plans coupled with historically low interest rates have substantially reduced, and in the future could further reduce, the funded status of the plans. These reductions may increase the level of expected required pension and other post-retirement benefit plan contributions in future years. Various conditions may lead to changes in market dynamics,the discount rates used to value the year-end benefit obligations of the plans, which could havepartially mitigate, or worsen, the effects of lower asset returns. If adverse conditions were to continue for an extended period of time, the Company’s costs and required cash contributions associated with pension and other post-retirement benefit plans may substantially increase in future periods.

The Company may become liable for funding obligations arising from multi-employer pension plan obligations of the Company’s former affiliates.

On April 13, 2020, LSC announced that it, along with most of its U.S. subsidiaries, voluntarily filed for business reorganization under Chapter 11 of the U.S. Bankruptcy Code. LSC and the Company separated from RRD in a material adverse effect on its business, financial conditiontax-free distribution to shareholders of RRD effective October 1, 2016. In the second quarter of 2020, the Company became aware that, subsequent to the LSC Chapter 11 Filing, LSC failed to make certain required monthly and quarterly withdrawal liability payments to multiemployer pension plans from which RRD had withdrawn prior to the Separation. Responsibility for certain pre-Separation withdrawal liability obligations, resulting in such monthly and quarterly payment obligations (the “LSC MEPP Liabilities”), had been assigned to LSC pursuant to the Separation Agreement, while RRD retained responsibility for certain other pre-Separation withdrawal liability assessments against RRD. However, the Company and RRD remain jointly and severally liable for the LSC MEPP Liabilities pursuant to laws and regulations governing multiemployer pension plans and the Company remains jointly and severally liable for certain additional RRD MEPP liabilities. If RRD fails to make required payments in respect of the LSC MEPP Liabilities or RRD fails to make required payments in respect of the RRD MEPP liabilities, the Company may become obligated to make such payments, which payment obligations may negatively impact the Company’s cash flows and results of operations. In addition, the Company’s MEPP liabilities could also be affected by the financial stability of other employers participating in such plans and decisions by those employers to withdraw from such plans in the future. See Note 8, Commitments and Contingencies, to the Consolidated Financial Statements for more information about these potential LSC MEPP Liabilities.

The trend of increasing costs to provide health care and other benefits to employees and retirees may continue.

DFIN provides health care and other benefits to both employees and retirees. For many years, costs for health care have increased more rapidly than general inflation in the U.S. economy. If this trend in health care costs continues, the cost to provide such benefits could increase, adversely impacting profitability. Changes to health care regulations in the U.S. and internationally may also increase cost of providing such benefits.

None.

The Company’s corporate office is located in leased office space at 35 West Wacker Drive, Chicago, Illinois, 60601. As of December 31, 2019,2020, the Company leased or owned 4031 U.S. facilities, some of which had multiple buildings and warehouses, and these U.S. facilities encompassed approximately 1.31.1 million square feet. The Company leased 2219 international facilities, some of which had multiple buildings and warehouses, encompassing approximatelyless than 0.1 million square feet in Europe, Asia Canada and Latin America.Canada. Of the Company’s worldwide facilities, approximately 0.3 million square feet of space was owned, while the remaining 1.10.9 million square feet of space was leased.

For a discussion of certain litigation involving the Company, see Note 13,8, Commitments and Contingencies, to the Consolidated Financial Statements.

Not applicable.

PART II

Principal Market

DFIN’s common stock began “regular-way” trading under the ticker symbol “DFIN” on the New York Stock Exchange (“NYSE”) on October 3, 2016.The following table sets forth, for the periods indicated, the range of the high and low closing prices for the Company’s common stock as reported by the NYSE:

Stockholders

As of February 20, 2020,22, 2021, there were 4,2003,964 stockholders of record of the Company’s common stock.

Issuer Purchases of Equity Securities

___________

Common Stock Repurchases—On February 4, 2020, the Board of Directors (the “Board”) authorized a stock repurchase program, under which the Company is authorized to repurchase up to $25.0 million of its outstanding common stock from time to time in one or more transactions on the open market or in privately negotiated purchases in accordance with all applicable securities laws and regulations and all repurchases in the open market will be made in compliance with Rule 10b-18 under the Exchange Act. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The stock repurchase program will be effective through December 31, 2021, however, it may be suspended or discontinued at any time.

Equity Compensation Plans

For information regarding equity compensation plans, see Item 12 of Part III of the Annual Report.

PEER PERFORMANCE TABLE

The following graph compares the cumulative total shareholder return on DFIN’s common stock from October 3, 2016, when “regular-way” trading in DFIN’s common stock began on the NYSE, through December 31, 2019,2020, with (i) the comparablecumulative total return of the Russell 2000 Index, (ii) the cumulative return of the Standard & Poor’s (“S&P”) SmallCap 600 Index, and a selected(iii) the peer group used in previous filings (the “Previous Peer Group”), consisting of companies. 17 companies (Advisory Board Company (acquired by OptumInsight on November 17, 2017), ARC Document Solutions Inc, Bottomline Technologies Inc, Broadridge Financial Solutions Inc, CoreLogic Inc, CSG Systems International Inc, DST Systems Inc (acquired by SS&C Technologies on April 16, 2018), Dun & Bradstreet Corp, ePlus Inc, Euronet Worldwide Inc, FactSet Research Systems Inc., Gartner Inc, Henry (Jack) & Associates Inc, LiveRamp Holdings Inc, Perficient Inc, Resources Connection Inc and Verint Systems Inc), and (iv) a new business industry index, S&P Composite 1500 Diversified Financials Index, of which DFIN is a constituent. Subsequent to the resegmentation of the Company’s business and due to its continued focus on software solutions and tech-enabled services, the Company revised the performance table to align with its long-term business strategy.

The comparison assumes all dividends have been reinvested and an initial investment of $100 on October 3, 2016. The returns of each company in the peer group have been weighted to reflect their market capitalizations. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

Performance Table

Below are the specific companies included in the peer group.

This performance graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.

SELECTED FINANCIAL DATA^(a)

(in millions, except per share data)

For periods prior to the Separation, basic and diluted earnings per share were calculated using the number of shares distributed and retained by RRD, totaling 32.4 million. The same number of shares was used to calculate basic and diluted earnings per share since there were no DFIN equity awards outstanding prior to the spin-off.

The above table reflects results of acquired businesses from the relevant acquisition dates and includes the following significant items:

items, see Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures for discussion of the Company’s Non-GAAP measures:

The following discussion of DFIN’s financial condition and results of operations should be read together with other sections of this Annual Report, including “Item 1. Business,” “Item 6. Selected Financial Data” and the consolidated financial statements and notes to those statements included in this Annual Report.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the Company’s audited Consolidated Financial Statements and notes thereto, as well as “Item 1. Business” and “Item 6. Selected Financial Data,” included in this Annual Report on Form 10-K.

MD&A contains a number of forward-looking statements, all of which are based on the Company’s current expectations and could be affected by the risks and uncertainties, andas well as other factors, described throughout this Annual Report andon Form 10-K, particularly in “Item 1A. Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Business

For a description of the Company’s business segments and productservices and serviceproducts offerings, seerefer to Item 1,1. Business, of Part I of this Annual Report.Report on Form 10-K.

The Company separately reports its net sales and related cost of sales for its software solutions, tech-enabled services and productsprint and distribution offerings. The Company’s software solutions consist of Venue, ActiveDisclosure, eBrevia, Arc Suite and others. The Company’s tech-enabled services offerings consist of all non-print offerings, including document composition, compliance-related SEC EDGAR filing services and transaction solutions, and the Company’s SaaS solutions, including Venue, FundSuiteArc, ActiveDisclosure and data and analytics, and others.solutions. The Company’s productprint and distribution offerings primarily consist of conventional and digital printed products and related shipping costs.

Spin-off TransactionSegments

On October 1, 2016, DFIN became an independent publicly traded company throughIn the distribution by RRDfirst quarter of approximately 26.2 million shares, or 80.75%, of DFIN common stock2020, management realigned the Company’s operating segments to RRD shareholders. Holders of RRD common stock received one share of DFIN common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of DFIN common stock, or a 19.25% interest in DFIN, of which 6.1 million shares and 0.1 million shares were subsequently sold in June 2017 and August 2017, respectively.

DFIN’s common stock began “regular-way” trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC, its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginningreflect changes in the quarter ended June 30, 2017, LSC no longer qualifiedmanner in which the chief operating decision maker assesses information for decision-making purposes. The Company’s four operating and reportable segments are: Capital Markets – Software Solutions, Capital Markets – Compliance and Communications Management, Investment Companies – Software Solutions and Investment Companies – Compliance and Communications Management. Corporate is not an operating segment and consists primarily of unallocated selling, general and administrative (“SG&A”) activities and associated expenses, as a related party of the Company. Beginningfurther described below. Prior to its sale in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore amounts disclosed related to RRD are presented through June 30, 2017 only.

Executive Overview

2019 Overview

Net sales decreased by $88.3 million, or 9.2%, in 2019 compared to 2018, including a $41.8 million, or 4.3%, decrease due to the impact of the sale of the Language Solutions business, in July 2018which helped companies adapt their business content into different languages for specific countries, markets and regions, was an operating segment. For a $3.0description of the Company’s segments, refer to Item 1. Business, of Part I of this Annual Report on Form 10-K.

All prior year amounts related to segments have been reclassified to conform to the Company’s current reporting structure. There was no impact on the Company’s previously reported consolidated statements of operations, consolidated statements of comprehensive (loss) income, consolidated balance sheets, consolidated statements of cash flows or consolidated statements of equity as a result of the new segmentation. For the Company’s financial results and the presentation of certain other financial information by segment, refer to Note 15, Segment Information, to the Consolidated Financial Statements.

Executive Overview

2020 Overview

Net sales for the year ended December 31, 2020 increased by $19.8 million, decrease dueor 2.3%, as compared to changes in foreign exchange rates. The remaining decline in netthe year ended December 31, 2019. Net sales wasincreased primarily due to lowerhigher capital markets transactionstransactional volumes, higher software solutions volume in Arc Suite, ActiveDisclosure and Venue and sales increases in other compliance volumes, which wassoftware solutions, partially offset by growth in SaaS solutions, primarily in ActiveDisclosure and FundSuiteArc, growthlower print volumes in mutual fund compliance and commercial. Of the $19.8 million net sales increase, tech-enabled services net sales increased $44.5 million, software solutions net sales increased $10.9 million whereas print volumes and the impact from the acquisition of eBrevia.distribution net sales decreased $35.6 million.

Income from operations for the year ended December 31, 20192020 decreased $42.6$74.9 million, or 35.2%95.4%, as compared to $78.5the year ended December 31, 2019. Income from operations decreased primarily due to $65.6 million of higher restructuring, impairment and other charges, net, higher incentive compensation expense, the $19.2 million net gain from $121.1the sale of a building recorded in the year ended December 31, 2019, the predominantly non-cash charges of $19.0 million for the LSC multiemployer pension plan obligations and higher healthcare expense, partially offset by cost control initiatives and higher sales volumes. Restructuring, impairment and other charges, net for the year ended December 31, 2020 included $60.6 million of non-cash impairment charges and $15.6 million of restructuring charges, primarily related to efficiency efforts to prepare the Company for the upcoming implementation of SEC Rule 30e-3 and amendments to SEC rule 498A, as described below, and the reorganization of certain capital markets operations and selling and administration functions.

Net cash provided by operating activities increased $99.7 million to $154.2 million for the year ended December 31, 2018, primarily due2020 as compared to the $53.8$54.5 million gain on sale of the Language Solutions business recognized duringfor the year ended December 31, 2018,2019, primarily due to improved operating performance, working capital changes as well as lower payments for interest and income taxes, as further described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Outlook

In 2021, the Company expects a decrease in net sales, as compared to 2020, primarily due to the regulatory impact from the implementation of SEC Rule 30e-3, Rule 498A and the Company’s exiting of certain printing and distribution relationships. Both regulations reduce or eliminate printed shareholder and investor information. Capital markets traditional transactional and compliance volumes within CM-CCM are also expected to decline, partially offset by the $19.2 million net gain recognizedexpected continued growth from the sale of a building during the year ended December 31, 2019.Company’s software solutions portfolio. The remaining decrease in income from operations was driven by lower capital markets transactions and compliance volumes, as well as higher restructuring, impairment and other charges, partially offset by lower spin-off related transaction expenses, disposition-related expenses and incentive compensation expense, as well as growth in the Company’s SaaS offerings and mutual fund print volume.

Outlook

In 2020, the Company expects net sales to be relatively flat, as compared to 2019, with the Company’s SaaS portfolio providing top line growth, offset by a decline in print-related services and products sales in both Capital Markets and Investment Markets. Accordingly, the Company also expectsanticipates modest margin improvement in 20202021 from an improved business mix and the continued impact of cost control actions. The Company does not expect foreign exchange rates to have a significant impact on results.

Cash flows from operations in 20202021 are expected to decline, due primarily to the anticipated lower net sales, partially offset by the benefit from cost control actions and significantly lower cash interest expense. The Company expects capital expenditures to be approximately $35.0$45.0 million in 2020,2021, as compared to $44.8$31.1 million in 2019.2020. The increase in capital expenditures is primarily related to investments in the Company’s software portfolio.

COVID-19

As further described in Part 1—Item 1. Business—COVID-19, in December 2019, COVID-19 was identified in China and has since extensively impacted the global health and economic environment. On March 11, 2020, WHO characterized COVID-19 as a pandemic. Although COVID-19 has adversely impacted the Company’s financial condition, results of operations and overall financial performance, the extent of that impact is currently uncertain and depends on factors including the impact on the Company’s customers, employees and vendors.

The Company has taken numerous steps, and will continue to take further actions as needed, in its response to the COVID-19 pandemic. The Company has implemented business continuity plans and has instructed all employees that can work from home to do so, has implemented travel restrictions and has conducted virtual customer and employee meetings. These decisions may delay or reduce sales and harm productivity and collaboration. The Company incurred $0.5 million of incremental expenses, net of sales surcharges and government subsidies, as a result of the COVID-19 pandemic during the year ended December 31, 2020. Incremental expenses incurred included incremental vendor costs and premium wages paid to certain employees as well as costs to clean and disinfect the Company’s facilities more frequently. The Company also received certain government subsidies in connection with COVID-19, primarily related to employee wages at certain international locations. As a result of the incremental expenses, the Company invoiced certain customers COVID-19-related sales surcharges to recoup some of the expenses. The Company could continue to incur such costs in future periods, however, the impact of such costs on the Company’s business, results of operations, liquidity and overall financial performance cannot be predicted at this time. The Company is also working closely with its clients to support them as they implement their own contingency plans, helping them access the Company’s services and products and continue to meet their regulatory requirements.

The Company believes that implementing cost reduction efforts helped mitigate the impact that reduced revenues in the first half of 2020 had on income from operations. The Company has reduced expenses and may take further actions that alter its business operations as the situation evolves. The ultimate impact of the COVID-19 pandemic and the effects on the Company’s business, results of operations, liquidity and overall financial performance cannot be predicted at this time.

Multiemployer Pension Plans Obligation

On April 13, 2020, LSC announced that it, along with most of its U.S. subsidiaries, voluntarily filed for business reorganization under Chapter 11 of the U.S. Bankruptcy Code (“LSC Chapter 11 Filing”). LSC and the Company separated from RRD in a tax-free distribution to shareholders effective October 1, 2016. In the second quarter of 2020, the Company became aware that, subsequent to the LSC Chapter 11 Filing, LSC failed to make certain required monthly and quarterly withdrawal liability payments to multiemployer pension plans from which RRD had withdrawn prior to the Separation. Responsibility for the LSC MEPP Liabilities, had been assigned to LSC pursuant to the September 14, 2016 Separation and Distribution Agreement among the Company, RRD and LSC (the “Separation Agreement”), however, the Company and RRD remained jointly and severally liable for the LSC MEPP Liabilities pursuant to laws and regulations governing multiemployer pension plans. The Company believes the total undiscounted LSC MEPP Liabilities for which LSC was responsible at the time of the LSC Chapter 11 Filing were approximately $103 million (or approximately $57 million on a discounted basis, assuming a blended discount rate of approximately 10%) and are payable over approximately a 14-year period (through 2034), with annual payments ranging from $1.6 million to $8.2 million.

On July 24, 2020, the Company and RRD signed an agreement agreeing to submit to mediation and, if required, arbitration to determine the final liability allocation between the Company and RRD with respect to the LSC MEPP Liabilities. DFIN and RRD also agreed to share all required monthly and quarterly withdrawal liability payment obligations that become due during the mediation/arbitration period, with an adjustment and repayment to be made for any such payments according to the final allocation. The Company and RRD were unable to agree on the final liability allocation in mediation and anticipate submitting the matter to arbitration pursuant to the terms of the Separation Agreement.

The Company is required to record a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of June 30, 2020, the Company recorded a contingent liability of $10.2 million for its potential payments in respect of the LSC MEPP Liabilities, representing the Company’s low end of the range of potential outcomes. The Company also recorded an additional accrual of $2.1 million in the second quarter of 2020 for the Company’s estimated share of the obligation until a final allocation is determined. Subsequently, the Company increased its estimated low end of the range of potential outcomes and the estimated duration of the Company’s shared payments until a final allocation is determined. As of December 31, 2020, the Company has $15.2 million accrued related to the contingent liability as well as the Company’s estimated share of required payments until a final allocation is determined. The Company is not able to reasonably estimate the maximum potential loss due to the uncertainty related to the outcome of the final allocation of the LSC MEPP Liabilities between the Company and RRD. The expense associated with this liability has been recorded in SG&A expense within the Corporate segment in the Company’s audited Consolidated Statements of Operations for the year ended December 31, 2020.

There can be no assurance that the Company’s actual future liabilities relating to the LSC MEPP Liabilities will not differ materially from the contingency amount recorded in the Company’s audited Consolidated Financial Statements. The Company’s LSC MEPP Liabilities could also be affected by the financial stability of other employers participating in such plans and decisions by those employers to withdraw from such plans in the future, including the financial stability of RRD.  

Financial Review

In the financial review that follows, the Company discusses its consolidated results of operations, financial condition, cash flows and certain other information. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statementsaudited Consolidated Financial Statements and the related notes.notes thereto.

The Company’s Annual Report on Form 10-K for the year ended December 31, 2018 includes a discussion and analysis of the Company’s financial condition and results of operations for the year ended December 31, 2017 and year-to-year comparisons of 2018 and 2017, which are not included in this Annual Report, in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Results of Operations for the Year Ended December 31, 2020 as Compared to the Year Ended December 31, 2019 and Year Ended December 31, 2019 as Compared to the Year Ended December 31, 2018

The following table shows the results of operations for the years ended December 31, 2020, 2019 and 2018: