AP NEWS

Donnelley Financial Reports Second-Quarter 2018 Results

August 2, 2018

CHICAGO--(BUSINESS WIRE)--Aug 2, 2018--Donnelley Financial Solutions (NYSE: DFIN) today reported financial results for the second quarter 2018.

Highlights:

Second-quarter net sales of $290.6 million increased 0.1% from the second quarter of 2017 Second-quarter GAAP net earnings of $18.9 million, or $0.56 per diluted share, compared to GAAP net earnings in the second quarter of 2017 of $18.8 million, or $0.57 per diluted share Second-quarter non-GAAP net earnings (1) of $30.5 million, or $0.90 per diluted share, compared to non-GAAP net earnings in the second quarter of 2017 of $24.9 million, or $0.76 per diluted share Non-GAAP adjusted EBITDA (1) in the quarter was $63.4 million, or 21.8% of net sales, compared to non-GAAP adjusted EBITDA in the second quarter of 2017 of $63.0 million, or 21.7% of net sales Non-GAAP adjusted EBITDA in the second-quarter includes a negative $2.3 million impact related to the adoption of the new revenue recognition standard, (2) negatively impacting non-GAAP adjusted EBITDA margin by 80 basis points Company provides updated guidance for full-year 2018; changes to guidance reflect exclusively the impact of the sale of the Language Solutions business; sale closed on July 22, 2018

“We continue to make progress on our digital-focused strategy that we outlined at our recent Investor Day. SaaS revenue grew 16.4% in the second quarter, driven by Venue, ActiveDisclosure and FundSuiteArc,” said Daniel N. Leib, Donnelley Financial’s president and chief executive officer. “Additionally, we had strong performance in our Capital Markets business, driven by a combination of improved market activity and increased market share, which was offset by print-related declines in Investment Markets.”

Leib continued, “Also consistent with our strategic focus, we completed the sale of our global Language Solutions business following the close of the quarter. Net proceeds of approximately $60 million were used to reduce outstanding debt under our term loan. We remain committed to our disciplined approach toward capital deployment as we continue to invest in the highest return opportunities to reshape our portfolio and enhance shareholder value.”

Net Sales

Net sales in the second quarter of 2018 were $290.6 million, an increase of $0.4 million, or 0.1%, from the second quarter of 2017. After adjusting for changes in foreign exchange rates, organic sales decreased 0.5% from the second quarter of 2017. This decline was primarily driven by lower mutual funds volume in U.S. Investment Markets, lower transactional volume in the International segment and lower compliance volume in U.S. Capital Markets, offset by higher transactional volume within U.S. Capital Markets and growth in SaaS offerings across our operating segments.

GAAP Earnings

Second-quarter 2018 net earnings were $18.9 million, or $0.56 per diluted share, compared to net earnings of $18.8 million, or $0.57 per diluted share, in the second quarter of 2017. The second-quarter net earnings included after-tax charges of $11.6 million and $6.1 million in 2018 and 2017, respectively, all of which are excluded from the presentation of non-GAAP net earnings.

Non-GAAP Adjusted EBITDA and Net Earnings

Non-GAAP adjusted EBITDA in the second quarter of 2018 was $63.4 million, compared to $63.0 million in the second quarter of 2017. Non-GAAP adjusted EBITDA margin in the second quarter of 2018 was 21.8%, 10 basis points higher than in the second quarter of 2017. The increase in non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin was primarily driven by higher Capital Markets transactional volume and company-wide cost control initiatives, partially offset by lower Investment Markets mutual funds volume as well as higher investments. The adoption of the new revenue recognition standard in January 2018 negatively impacted non-GAAP adjusted EBITDA margin by 80 basis points in the second quarter, as it had a positive $0.1 million impact on sales and negative $2.3 million impact on non-GAAP adjusted EBITDA.

Non-GAAP net earnings totaled $30.5 million, or $0.90 per diluted share, in the second quarter of 2018 compared to non-GAAP net earnings of $24.9 million, or $0.76 per diluted share, in the second quarter of 2017. Reconciliations of net earnings to non-GAAP adjusted EBITDA and non-GAAP net earnings, as well as non-GAAP adjusted EBITDA margin, are presented in the attached schedules.

2018 Guidance

The Company provides the following updated full-year guidance for 2018, which reflects the impact of the recently completed disposition of Language Solutions. Current full-year guidance includes the results of Language Solutions through the sale date, July 22, 2018, while previous guidance included Language Solutions for the full year. Changes to guidance reflect exclusively the impact of the sale of the Language Solutions business.

Certain components of the guidance given above are provided on a non-GAAP basis only, without providing a reconciliation to guidance provided on a GAAP basis. Information is presented in this manner, consistent with SEC rules, because the preparation of such a reconciliation could not be accomplished without “unreasonable efforts.” The Company does not have access to certain information that would be necessary to provide such a reconciliation, including non-recurring items that are not indicative of the Company’s ongoing operations. Such items include, but are not limited to, restructuring charges, impairment charges, spinoff-related transaction expenses, acquisition-related expenses, gains or losses on investments and business disposals and other similar gains or losses not reflective of the Company’s ongoing operations. The Company does not believe that this information is likely to be significant to an assessment of the Company’s ongoing operations, given that it is not an indicator of business performance.

Conference Call

Donnelley Financial will host a conference call and simultaneous webcast to discuss its second-quarter results today, Thursday, August 2, at 9:00 a.m. Eastern time (8:00 a.m. Central time). The live webcast will be accessible on Donnelley Financial’s web site at www.dfsco.com. Individuals wishing to participate on the call must register in advance at http://www.meetme.net/DFIN. After registering, participants will receive dial-in numbers, a passcode, and a personal identification number (PIN) that is used to uniquely identify their presence and automatically join them into the audio conference. A webcast replay will be archived on the Company’s web site for 30 days after the call. In addition, a telephonic replay of the call will be available for seven days at 630.652.3042, passcode 7739939#.

About Donnelley Financial

With the right solutions in moments that matter, Donnelley Financial Solutions (NYSE: DFIN) delivers risk and compliance solutions that fuse deep industry experience, unparalleled service, and elegant technologies to provide our clients with insights that power their decisions and shape global markets. The company has 3,100 employees in 59 locations across 17 countries, serving thousands of clients globally. For more information about Donnelley Financial Solutions, visit www.dfsco.com or follow us on Twitter @DonnelleyFin or on LinkedIn.

Use of non-GAAP Information

This news release contains certain non-GAAP measures, including non-GAAP SG&A, non-GAAP SG&A as % of total net sales, non-GAAP income from operations, non-GAAP operating margin, non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP net earnings, non-GAAP diluted earnings per share, free cash flow and organic net sales. The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, provide useful information about the Company’s operating results and liquidity and enhance the overall ability to assess the Company’s financial performance. The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business.

Our non-GAAP statement of operations measures, non-GAAP SG&A, non-GAAP SG&A as % of total net sales, non-GAAP income from operations, non-GAAP operating margin, non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP net earnings and non-GAAP diluted earnings per share, are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operations. These adjusted measures exclude the impact of expenses associated with the Company’s acquisition activities, spin-off related expenses, share-based compensation and eliminate potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges and gain or loss on certain equity investments and asset sales.

Free cash flow is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities less capital expenditures. By adjusting for the level of capital investment in operations, the Company believes that free cash flow can provide useful additional basis for understanding the Company’s ability to generate cash after capital investment and provides a comparison to peers with differing capital intensity.

Organic net sales is a non-GAAP financial measure and is defined by the Company as reported net sales adjusted for the impact of changes in foreign exchange rates and acquired and disposed businesses.

These non-GAAP measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies.

Use of Forward-Looking Statements

This news release includes certain “forward-looking statements” within the meaning of, and subject to the safe harbor created by, Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, strategy and plans of Donnelley Financial and its expectations relating to future financial condition and performance. Statements that are not historical facts, including statements about Donnelley Financial management’s beliefs and expectations, are forward-looking statements. Words such as “believes,” “anticipates,” “estimates,” “expects,” “intends,” “aims,” “potential,” “will,” “would,” “could,” “considered,” “likely,” “estimate” and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. While Donnelley Financial believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond Donnelley Financial’s control. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from Donnelley Financial’s current expectations depending upon a number of factors affecting the business and risks associated with the performance of the business. These factors include such risks and uncertainties detailed in Donnelley Financial’s periodic public filings with the SEC, including but not limited to those discussed under “Risk Factors” in Donnelley Financial’s Form 10-K for the fiscal year ended December 31, 2017, those discussed under “Cautionary Statement” in Donnelley Financial’s quarterly Form 10-Q filings, and in other investor communications of Donnelley Financial’s from time to time. Donnelley Financial does not undertake to 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 statement or to reflect the occurrence of anticipated or unanticipated events.

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