DFIN - Earnings call transcript Q4 2017 | Donnelley Financial Solutions, Inc.

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Dave Gardella

[Abrupt Start] Reports and on Form 10-K and other filings with the SEC. Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provides you with useful supplementary information concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance. They are, however, provided for informational purposes only. Please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information. by Tom morning Turner. and this joined Dan Juhase; Leib; Kami I'm

reviewing I'll his Dan detail results opening the Dan? Before in to turn our call over remarks. for

Dan Leib

to back this good steps service taking set agreements additional business, identifying additional needs. related right priorities for up fund company into a new and company to forward Last Dave, included we our as talent market to morning, size company a success. implementing our structure business. long-term you, communicated become investment that continued plan reshape in and yet to took year responses into to our Thank in the actions more brining transition position at standalone time the the exciting I were to and the spin parts all everyone. aggressive approach investment the opportunities cost organization The and We the intended thought prioritizing agile

XXXX our market. have the good further bringing and going As array toward I we our and we and wider take propel base compliance it made risk help steps of offerings look the in progress. position we've forward to strengthen will will path those taken core at dilutions down back the

XXXX note standalone margin pre-spin within XX.X Regarding of the combination reported pleased non-GAAP and I our million allocations related million to results. cost XX XXXX X.X% with financial basis performance and included in We we growth expansion also revenue cost XX should X.X% I'm that a or of our of headwind our results. XXXX adjusted of points. had EBITDA of

headwind. is million Our year-over-year EBITDA improvements $XX after covering of this

by reduced million pleased will with million cash more flow generated review Dave nearly year targeted shortly. ended in our leverage in of the equally addition, our XXXX, we quarter fourth which I'm our within $XX.X results detail $XXX range. In and free debt

offerings these SaaS revenue offering In the grew FundSuiteArc. XXXX and XXXX of service or disclosure, tied to our Before growth now strong by some of our the in room by like of our any XX.X%. data represent we $X.X go SaaS to in highlight aggregate and excluding that our XX.X% based related successes. there drove Total I'd revenue, XX.X% is million offerings. all revenue Venue offerings grew our of from after Venue We total

efficiencies the quarter second and technology continue the by Venue work content help clients For In year production global flow continued and growth cost. for as investment recognized top experienced M&A the as content was their markets offering XXXX management in and consecutive solutions our we to network. revenue look to M&A reduce

to many the In N-CEN and addition, clients in being added SEC's we delayed N-PORT successfully now of to on new and XXXX. filing clients requirements FundSuiteArc our is boarded performs of which anticipation

year to migration received client the rollout client very late three the of last and feedback good Following we disclosure active interest.

Our X.X% multiyear worldwide revenue language trend in XXXX, continuing a solutions business grew strong growth. of

revenue pleased the are these are making we We streams. recurring progress with

as Our key our knowledge like the to they they want With respect would expertise, to migrate operating support the to priorities. to opportunity in going leverage work domain is into our forward I customers world. our process to service evolving reiterate digital way plans the further company our and

our have our content and recurring continue sales in created on disclosure offerings active our Data will that where growth revenue solutions. significant the momentum Venue we We build we management as the to have Room, in areas such

enhancements will in We make continue software-as-a-service and invest our solutions. to to

and organic result our investment, with We expect strategic a expansion M&A of enhancements of to such partners. combination be of relationships the

will capital activity to pursue global We compliant continue aggressively within transactional and markets.

in XXXX are improves. looking growth. terms this more by incorporates strengthened and drive long to of can activity that on position In additional will as operating structure our we maintain that and we profitable Dave financial into are marketing through market managing detail go we the our will opportunities market drive sales growth market our positioned Within and see disciplined offerings. our incremental our guidance deploying investments term CapEx, capture well development same current investment. will targeting revenue the cost a both capital. we to approach opportunities that and and Last, time, driven to expense continue effectiveness XXXX in At we to transactional product accelerate the

power create to We have that are thinking these customer design utilizing and the solutions enhance embraced and more techniques intuitive journey.

to in we the platform Employee technologies, with experience, the user analytics are as our clients a comprehensive making and and innovation infusing machine efficiencies. our to to on clients, deliver to in will talent our of provide base we such addition work our to in in and continue these with success In success platform. to our investments data order our is are employee maximize capabilities ensure efforts, invest we emerging insights powerful we accelerating learning our and critical cohesive

it turn Dave? me up the to for Q&A. over he Let before Dave lines opens

Dave Gardella

Thanks, Dan.

As our are mostly market Dan growth results. earlier offering. driven U.S. saw X.X%, we capital mentioned revenue We improving pleased by quarter with fourth our of generally activity within

cost non-GAAP non-GAAP XXXX. the addition, by XXX versus initiatives implemented $XX.X adjusted points XX% the of EBITDA XXXX million improved almost of XXXX adjusted in quarter $X.X or by from fourth driven we quarter EBITDA and XXXX. reduction And basis late margin primarily of In million fourth our expanded early

increased or our lower fourth foreign markets and driven offset transactional international of by was each to consolidated from with million adjusting the quarter due offset XXX strong was and partially offerings. revenue XX.X% generated cash quarter quarter of in or flow quarter free for $XXX.X of in partially growth higher which rates, U.S. Non-GAAP X% the in for transactional, finishing was the Room XXXX, were growth flow declines our fourth fourth decline international growth by quarter was basis late sales the driven last The Data compensation began we cost After reductions $XX.X free growth On capital million solutions revenue also in by $XX.X primarily the year. in markets points higher in XXXX. in to Fourth implement offering $X.X fourth million, offering. markets. an for Venue SG&A than organic driven by U.S. of We than our primarily quarter segment the gross net capital the cash sales by revenue full expense our primarily X.X% language was by compliance year. of investment the exchange driven quarter million XXXX margin The basis in increase changes expenses. performance-based of $X.X million, segment

percentage XXX points basis the than was fourth or SG&A quarter of As XX.X% higher of XXXX. revenue, the

Non-GAAP quarter adjusted primarily non-GAAP fourth quarter million, $X.X margin Our the our million by last of was of quarter $XX.X cost an adjusted XX.X% of of EBITDA XXX quarter the fourth points year, in reduction fourth EBITDA actions. basis higher driven increase the was from than XXXX.

to reported mainly segment offerings. of now markets and by Venue investment to quarter. capital revenue services was markets Language in and other declines achieving to fourth from content margin saving coming from in compliance management adjusted fund Revenue of across solutions by was basis, from offerings. and and year. growth XXX of an the margin the by Turning Revenue excluding last actions the X.X% primarily an capital Non-GAAP XXXX, in decrease fourth management print international partially as improvement last of transactional, quarter fourth an markets mix of offering quarter quarter our EBITDA the to margin quarter million X.X% fourth in revenue was healthcare growth quarter of fourth segment million of On our $XX.X mutual driven XXXX, well as the driven in for a our year’s organic the improved XXXX. compared in X.X% based declined offset growth X.X% last lower revenue growth in segment U.S. our adjusted revenue related segment in of was X.X% XXX transactional quarter XX.X% fourth XXXX, impact foreign and translation results. Room increased increase the unit segment of decline margin due of basis primarily favorable partially services due lower the to rates, fourth Non-GAAP basis activity. Data and EBITDA within $XXX.X volume in content by from in which fourth of was declined cost activity revenue. transitional offset quarter the lower segment. the XX.X% decreased of year of X.X% [ph] in in Revenue points which reporting the primarily our increased EBITDA changes the primarily The growth prick the our points in revenue for the due exchange

we XXXX. base performance gross have and million reduction the the savings of quarter of of in the expenses million, the and cash as spin EBITDA of income we interest $XX.X lower X.X as the higher total an of to fourth re-measurement cash representing XXXX, lower XXXX to debt $XX of assets. total were related $XX.X amortization ended spending bad from times times gross leverage excluding an additional $XXX.X within of of expense Jobs $X.X expense payment year the in Act $XX.X than Tax targeted million. did by by of higher the by which XXXX, the due Since was higher have $XXX.X the not and primarily deferred a quarter off Cuts expenses of Donnelley, transition R.R. third increase of net times free initial free to reduced non-GAAP capital of the and the quarter flow offset unallocated $X tax and quarter X.X from were offset X.XX was our the quarter leverage impact of increase recorded full management, in which an the million; flow we of cost XXXX. improvement from quarter taxes million our tax end leverage working partially fourth cash corporate accumulated We our debt, depreciation year and well quarter fourth earnings a foreign improved is U.S. estimate cash on million by fourth and with at XXXX capital million fourth Our times We partially in debt Consolidated X.XX driven in range that initiatives. in compensation turn reported million the tax

without and perspective $XX additional to U.S. an roughly internationally. cash implications. the freely forward U.S. million we move balance million estimate tax daily From approximately foreign have a average in operational total Going ability we million needing of jurisdictions $X the $X on cash to the from

mentioned As year I of earlier, $XX million cash at sheet end. on the balance we had

turn full that I more our in share it let back year summarized release. Before detail on was XXXX press guidance this to me Dan morning’s

and expense transactional long CapEx targeted flat noted includes level our and market’s environment investment Our both a capital increased as release in an growth. guidance operating driving of revenue towards assumes term in press

approximately the We growth billion XXXX X% organic revenue expect $X to of representing X%. in range of

$XXX of SG&A non-GAAP and expect EBITDA P&L in income recorded to note our the of in to line We beginning and our be from $XXX range million. the XXXX of pension that non-GAAP investment should instead calculation income I will adjusted excluded adjusted in the be will other on be million EBITDA.

reference XXXX to and expected is $XX included non-GAAP of million. pension EBITDA For $X.X adjusted income million. amortization be SG&A approximately and Depreciation

expect million. approximately We expense interest of $XX

of range $XX count to full range tax XX%. lastly, range million XX capital free average to be the cash we year share expect is expenditures weighted flow approximately and We year fully in $XX of to and full diluted be project $XX million. Our the million of expected XX% non-GAAP shares million $XX to the in rate the million to in

free Our XXXX and will XXXX costs taper cash off that related spin related total $XX assumes continue outflows, XXXX. off of in approximately million primarily flow to throughout guidance systems replacements for

the As where primarily growth. accelerate targeted long CapEx I to noted are earlier increase areas towards is looking term we

to comparison will And and turn outsized XXXX year. that have special from the not reporting back the primarily Dan. in markets included to I'll investment this proxies year-over-year first timing seasonality, we the Regarding quarter two quarter repeat which of revenue it first unit difficult as expect with funds a mutual

Dan Leib

Thank you, Dave.

and reiterate capitalize first a company. line serve Q&A, our the full-year these relationships investments opportunities. I opportunities up markets we to our open to in we our leverage as the want can where progress new Before identified potential we've to on capabilities made for and accelerate core growth to We've planned standalone

detail. late are We York quarter to these New which in in discuss Day more host during will in second the planning we Investor an opportunities

hope Additional open details on that event in see we will with coming the that to available you up and line be for there. And the Q&A. let's weeks

Operator

Securities. comes from CJS Instructions] [Operator from our And Charles first Strauzer question

Charles Strauzer

mentioned you've down start let's questions up QX the of industrial kind Couple was of the why lower revenue that mutual markets segment the X% plus that related the healthcare on fund there. with print was

from of strip you that prints? give how recurring the kind revenue more portion on the the color print of grew you excluding us recurring can out If portion portion, kind little that

Dave Gardella

Yes, thanks the Charlie. so I question for think the

the As we've mostly of was on lot healthcare a said side. print driven that the

think similar content think about I we for the the to of management on when that pretty look services, was it you quarter had X% year at for I or X%. some think is and growth I which the the X% was

Charles Strauzer

you is And kind and result taking there you like quantify you in kind talking then the what of CapEx things, tax correct? if and the company. we're looks of just [ph] into look the to the can that at decline increased the and investments the the is other it

Dave Gardella

that's correct. Yes,

funding up it's offerings. to related external ultimately mostly model these facing we additional of areas growth the initiatives our start of end invest then we the So, the a to around but funding seeding ROI based the drive some of innovation and to taking and are of majority is that but and to opportunity things prior fund also in external few products that phasing all the getting looking different to type SaaS a we products, are to extensive mentioned

Charles Strauzer

to about going kind think million forward be and million there. [more XX numbers the maintenance we trend some in is of things] this should new the a And thing of or or other XX constant number kind

Dave Gardella

good Charlie Yes, question.

at that over can lined the identify I did think to the projects those might not there extent to that be has ahead and of as do these looking continue the the to year not or drive we into opportunities there and some work specific may continue done find try so we will and I magnitude. growth incremental business some work we've back opportunities, avenues we're opportunities in to last the of of to some we growth that of lie. think and extent look that be up may terms reinvest

these of one said of stands Dan projects each their As kind own. on

will Investor nothing have CapEx guidance quarter long-term this kind in view better Day at terms we So, of on second specific of a but in point. the

Operator

Bank from Lynch. we Next, Merrill America have David Lane Ridley of

David Ridley Lane

influence getting view Wondering about, in recent how the in did see does volatility postponed, market you first business? markets the in of of the what of stock ’XX bout terms that IPOs in your quarter capital

Dan Leib

volatility part part a the to of in change that the part due volatility still to That environment the activity, overall we saw borders. see said there’s but lot in activity lot the underlying notes the lower markets. that’s rates market place We also private of did to free-flowing followed M&A between in tax obviously positive capital, being quite M&A taking in a the in of

business. our in and do those And that relative results within for ends markets to in opportunity for to a business, end Venue us up it? so, any additional transactional us add an the to numbers public opportunity have additional And in good when our in up you

Dave Gardella

perspective XXXX, in see remains obviously in certainly started off then did and we out calls. it a market said visibility in up so growth middle of and I on a tapered and the some what the to from back previous and little then pick started The similar We limited. long-term I well pretty to think think pretty have year bit IPOs fairly

David Ridley Lane

the on M&A guidance full of debt implies I year IPO optimistic IPOs transactional I activity levels. your or And more view on you flat activity, kind the guess around Are issuance? for heard or

Dave Gardella

question. good a So,

to on when ’XX, saw think guidance. I the M&A you IPO year back assumption, we intent a some of and perspective, framework Again, a kind of within we we as kind set I understand thinking for how saw look the volume just of up are visibility kind we again, and from think in down the mentioned in throughout picking well. that as up the to I choppiness of at was

guidance if just transactions potentially way would we relatively and if picks flat. Obviously aggregate end. buckets up at should declines in big to that it one those it point our the changes lower so, or towards And relative that look you being of

David Ridley Lane

pension And that is quickly. you of magnitude question a other The just income? to and Would was through be expect clarification that investment income to XXXX? a really similar running -- that now

Dave Gardella

Yes, Yes. $XXX,XXX a like different.

Operator

from we Thank Pete you and Christiansen next Citi. have

Pete Christiansen

guys in are improved sales, how morning also then that GCM with in to better have the seeing sense us I compliance share? upgrade a the think Good has of so retention cross side about you had two earlier you give or talking were questions, this you I affected on new the effort you market from XXX, can year Office and [indiscernible] selling

Dave Gardella

or the went net you and customer so we of that an some did see deficit retention we see on on in in a did terms were us. development still into experience in a and back customer driven if but for net and go a several year front ActiveDisclosure we turnaround the increase that improved So, positive etcetera IPOs of as years wins by net win

that As up] to been names of opportunity, rebranded board so hear and company cycle the very about is the been transacting we both [stocks well. [stocks amount so name well. are see it to you going refer we've new is in with We excited a us there which has relates now that's that new has specifically audit investments up] been time made may faster and going tremendous market

Pete Christiansen

X% dynamic there. with a expect there? And guidance the mix year then similar of going you bit shift products we the it down the print or had in Do looks the this like mostly

Dave Gardella

of it's the been onetime annually, compliance with a I decline as at look print numbers perspective XXXX. pretty about pretty constant or seen consistent, perspective a about from and from but transactions we've X% expectations secular think secular of decline around pieces no different some obviously jump at we X% those of Yes, some that

Pete Christiansen

XX expecting transition was next then I pushed CapEx, into that of in a Okay, this X to were some you of it think earlier million little looks lower million and came bit CapEx year? year, this year like

Dave Gardella

as million Yes, the through some million came originally just were of XX were product so We perspective. under worked we CapEx looking in at range, just timing some it XX there of in million. kind the a development XX to from

some seeing of Dan lock as some that think opportunities additional of noted you in we kind well plans it's guidance of is are what I down shifting the those the So, as earlier. as some XXXX of which

Dan Leib

past we've our relates to Yes, and as product mentioned in the of XX% roughly capital development.

Pete Christiansen

Last issues one from me, be should that or pending initiatives regulatory we of any this year? mindful

Dan Leib

some the we originally talk] Yes, the Xst activity was when to in so pushed which April date back and than N-CEN Other opt-out we that, pushed cup around documents Xst the [ph] of long-term referenced N-PORT call fund on XXXX it opt-in some interest proposals continued takes be was we've in call X what some a being some it ultimately and months and that there 'XX. do the from July to the and that, on is versus proposed [I'd around about where to place. lands seen mutual see timing that reporting, form [ph] shorter XX

Operator

from we JPMorgan. Andrew have Next, Simon

Andrew Simon

the or quantified The for part just when of the XXXX [indiscernible] first for is segment. stuff other price of in could one to revenue incremental framing market organic The exited incremental question X% what assumptions the of second your is guide capital besides terms it? segments for investments about accelerated here XXXX some also you you comments make investments that the are X%

Dave Gardella

XXX. operating apples-to-apples million walk the as so didn’t think investment a did that million then of year midpoint, we X perspective at million the XXX you XXX so said X% $X otherwise we organic incremental it’s and go kind XXX so, incremental you So, guide if $XX X% and this so few say to kind just of XXX to take from but million I so an quantify -- our the bucks, or so and we roughly is profit a income, of are take would on basis the if we pension it and expense mentioned revenue million the I growth, million included an $X through to specifically XXX call EBITDA, the to

Andrew Simon

the around framework? to then segment X% And comments X%

Dave Gardella

of capital ActiveDisclosure of where would the in as Dan so Yes, on so, reporting we seen more then growth solutions, probably think the within so see international term has unit markets. and market relatively print offerings, kind the same markets on longer the been software we flat, language of side, growing have over same to the the of which that been more alluded high sit has And there and some so continue then the that’s revenue single areas then same rest content transactional is expect digits, as the why the we know investment in market that heavily I flat more Venue, would just you side, is international expect assuming of there. and that more growth management, the are is to of to to with and for both and offering mid weighted the primarily

Operator

we next Capital. and you [indiscernible] Thank Kim John from have

Unidentified Analyst

level. here Taking sheet guys tremendous look soft are debt front, going at in at and that opportunity the as made of the you of further an at evaluate something progress like is April? a reduction cost the have [south times to that call reduce leverage turn] flat leverage secured to the balance rolls looks a X.X on bank off there’s debt you loan protection

Dave Gardella

but XXX certainly ago the obviously side I John maybe basis on is at opportunities there. the repriced on we perspective five-year the call, the you points, I to loan a there that right so cost. from we bank a opportunity soft are as bond restructuring calling on And then always bit know there think that, there little little reduce chased bonds a tougher think also six-month a and up while that is just so looking

Operator

from we question and a have you Strauzer. follow-up Thank Charles

is line open. Your

Charles Strauzer

also the to top around segments? about about QX what two about line a more comps to back perspective Just and large the how and go on can to little we to more discussion think get year-over-year the EBITDA proxies how from just mentioned, various wanted commentary, and little for bit QX bit a commentary maybe just be tough you the think

Dave Gardella

Yes, there to so revenue so X% for would that we a expect from growth we QX Charlie again in and print proxies funds revenue year couple was organic range large a special of are mutual X% calling were perspective mostly related that puts the full-year pretty EBITDA slightly. From lot the to you think spread kind that guidance of be year I takes look down there perspective an is and over there the but and a close. at of if to should get

Charles Strauzer

Just do QX down each of mean EBITDA in because to year-over-year revenues you expect I margin to print other be as slightly terms lower the your offerings. that and

Dave Gardella

bad I slightly think a so it's Yes, is not down assumption.

Operator

[Operator Instructions].

Jake have Fargo from we Next, Securities. Wells Williams

Jake Williams

was products investing that are creating on as are with more you if Is I a existing products you in. line expand you the could looking at that in developing hoping products new well?

Dave Gardella

or If of last late year out late facing rolled our so products, XXXX. customer XX we ActiveDisclosure each

and When as reference but success. we integration in made on making some we've and N-PORT market preparation touched good rollout this to there with, a incremental selling are that's with products tool, for currently going N-CEN that the and that we and adding some well functionality well. partner year last been other in as FundSuiteArc call very during XXXX investments bit down that you are go with adding We to been we

in as technology and with again we sales well We have substantially we've investing there product success both in incrementally are as had that And the marketing. added Venue to the on final product. the

pieces So AI would are three-main then of some expenses Analytics those the and and Data also adding we facing through capital the of be on software operating both customer some and as investment capabilities. additional we talk

Operator

question follow-up have from we Pete And Christiansen.

Pete Christiansen

realize of reporting broadly there for kind be going effect that changes companies. terms public have quick year is for a opportunity like the with counting that of a in your things one. on seen beneficial next sheet balance any or something for could into leases that? offering I Just is operating

Dave Gardella

do XXX then that see well of the as wouldn’t cut could to changes in as and over adoption as solutions regulatory So of we support point ability from a us, both typically, that’s that tailwind some see against changes I some have one that saw that accounting to we point base for our us as with as thought well our but accounting some we offer customers. with the some and isolation and those partners benefit. the marginally product to in cut all as like leadership for time lease some major

Operator

Okay appears we further and it no have questions.

Dan Leib

Okay so I’d like shortly to and us. seeing that be will as Look you everyone forward forward with then with in we thank results joining May all details for look Investor coming quarter with there. to up we mentioned to out first the catching an Day and

So, thank you, bye.

Operator

you gentlemen, Thank you you, and disconnect. conference. and now today’s ladies participating Thank this for may concludes

Donnelley Financial Solutions (DFIN) 28 Feb 182017 Q4 Earnings call transcript