Donnelley Financial Solutions, Inc. ((DFIN)) has held its Q2 earnings call. Read on for the main highlights of the call.

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Donnelley Financial Solutions’ latest earnings call struck an upbeat tone as software-led growth drove another quarter of higher sales and profits. Management highlighted record software revenue, expanding margins, stronger cash flow and ongoing share repurchases, while acknowledging structural pressure from shrinking print and new regulatory risks. Overall, executives emphasized that software momentum now clearly outweighs legacy headwinds.

Consolidated Revenue Growth

Donnelley Financial reported second-quarter net sales of $224.2 million, up 2.8% year over year and marking a third straight quarter of consolidated growth. Excluding print and distribution, sales rose 6.9%, underscoring how digital and software offerings are increasingly driving the company’s top line.

Record Software Revenue

Software solutions delivered record quarterly net sales of $99.4 million, representing 44.3% of total revenue and growing roughly 8% versus last year. On a trailing four-quarter basis, software reached 47.9% of sales, with mix up 280 basis points, highlighting DFIN’s transition toward a higher-margin, recurring-revenue model.

ActiveDisclosure Outperformance

ActiveDisclosure remained a standout performer, growing about 29% year over year in the quarter, its fourth consecutive period of 20% plus expansion. Growth was fueled by more clients, higher spend per client, migration of additional transactional documents to the platform and robust S-1 activity, with S-1 filings driving roughly one-third of the product’s growth.

Profitability Expansion

Adjusted EBITDA climbed to $82.3 million, up $6 million or 7.9% from a year earlier, as software scale and capital markets activity supported earnings. The adjusted EBITDA margin hit 36.7%, up about 170 basis points and described as a quarterly record, reinforcing the benefits of DFIN’s mix shift and cost discipline.

Gross Margin Improvement

Adjusted non-GAAP gross margin rose to 66.0%, improving about 230 basis points compared with the prior-year quarter. Management attributed the gain to software growth, stronger capital markets transactional revenue, ongoing cost controls and pricing actions, all helping offset pressures from legacy print operations.

Capital Markets Transactional Recovery

Capital markets transactional revenue rebounded sharply to $47.3 million, up roughly $13 million or 36% year over year and above the high end of expectations. The improvement reflected a recovery in IPO issuance and U.S. M&A activity versus a weak Q2 2025, signaling healthier deal flow in DFIN’s core markets.

Cash Flow and Balance Sheet Strength

Free cash flow reached $61.2 million in the quarter, up $9.5 million from last year, giving DFIN added flexibility for capital deployment. The company ended June with total debt of $204 million, non-GAAP net debt of $178.7 million and a modest net leverage ratio of 0.7 times, underscoring a solid balance sheet.

Share Repurchases and Capital Deployment

DFIN continued to return capital to shareholders, repurchasing about 763,000 shares in Q2 for $34.7 million at an average price of $45.48. Year to date, buybacks total roughly 1.4 million shares for $63 million, with $125.4 million still available under the $150 million authorization, signaling confidence in long-term value.

Organizational and Cultural Recognition

The company strengthened its leadership team by appointing Ken Napolitano as Chief Revenue Officer and adding Joe Binz to the board. DFIN also earned cultural accolades, being named the number one Most Loved Workplace on the 2026 Global 100 list, a recognition that may support talent retention and organizational stability.

Forward-Looking Momentum

Management highlighted ongoing momentum in software platforms such as ActiveDisclosure and Venue, alongside sustained capital markets activity, as key drivers for future performance. They reiterated that these growth engines should more than offset expected declines in print, positioning DFIN for continued mix improvement and durable margin strength.

Print and Distribution Decline

Print and distribution net sales fell about 15% year over year, a roughly $6 million decrease in the quarter, as clients continue shifting to digital formats. Since the spin-off, trailing four-quarter print revenue has plunged from around $385 million to about $108 million, a roughly 72% drop that underscores the secular decline.

Regulatory Risk to Print Demand

The proposed SEC Regulation E-Delivery could materially accelerate the industry-wide shift from paper to electronic delivery. While its potential impacts are expected post-2027, DFIN acknowledged this rule as a structural headwind that may further compress print revenue over time and push more clients toward digital solutions.

Segment Weaknesses: Compliance & Investment Companies

Capital markets compliance revenue fell $10.1 million year over year, mainly due to lower proxy and annual report volume and reduced printing and distribution. Investment Companies Compliance & Communications net sales dropped 10.8%, or $3.5 million, largely on weaker print demand, highlighting pockets of softness in traditional segments.

Moderate Growth in Certain Software Offerings

Arc Suite and Investment Companies Software Solutions posted more modest gains, with net sales of $33.7 million, up about 1.8% year over year. Management noted Arc Suite growth of roughly 2% in Q2 tends to be stronger during periods of regulatory change, suggesting upside when new rules drive client demand.

Margin Pressure from Selling and Incentives

Adjusted non-GAAP SG&A rose $3.1 million to $65.7 million, reaching 29.3% of sales and adding about 60 basis points year over year. Higher selling expenses, bad debt and incentive compensation contributed to margin pressure, including an approximately 180 basis point EBITDA margin decline in the Venue segment.

Timing Risk in Capital Markets Revenue

Guidance for Q3 capital markets transactional revenue of $45 million to $50 million is sensitive to the timing of deal effectiveness. Management cautioned that reported revenue could swing based on when transactions close and are recognized, creating short-term visibility risk despite healthy underlying pipelines.

Bad Debt and Incentive-Related Costs

The company reported higher bad debt expense and elevated incentive compensation in the quarter, which partially offset margin gains from software mix and cost control efforts. These items highlight ongoing investment in growth and client acquisition, even as management works to keep overall expenses in check.

Guidance and Outlook

For the third quarter of 2026, DFIN guided consolidated net sales of $175 million to $185 million, implying about 3% growth at the midpoint. The company expects an adjusted EBITDA margin of 26% to 28% and capital markets transactional revenue of $45 million to $50 million, with software growth and deal activity forecast to more than offset further print declines.

DFIN’s earnings call paints a picture of a company successfully pivoting toward higher-growth, higher-margin software while managing legacy print exposure. Investors heard a story of record software sales, strong cash generation and disciplined capital returns, tempered by regulatory and segment-specific headwinds, leaving the stock positioned as a play on digital disclosure and capital markets activity.