Donnelley Financial Solutions (DFIN -3.34%), a provider of regulatory compliance and risk solutions, released its results for the second quarter of fiscal 2025 on July 31, 2025. The main headline was a strong non-GAAP earnings per share of $1.49, higher than the consensus non-GAAP estimate of $1.42. However, Total revenue (GAAP) missed estimates, landing at $218.1 million compared to expectations for $225.5 million, and declining from $242.7 million in the prior-year period. The quarter demonstrated continued growth in recurring software sales but highlighted persistent declines in the company’s legacy print and distribution business. Overall, the period showed disciplined cost control and progress in reshaping the business, but with mixed results due to ongoing top-line pressures.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.49 | $1.42 | $1.66 | (10.2%) |
| Revenue | $218.1 million | $225.53 million | $242.7 million | (10.1%) |
| Free Cash Flow (Non-GAAP) | $51.7 million | $36.8 million | 40.5% | |
| Adjusted EBITDA | $76.3 million | $87.2 million | (12.5%) | |
| Software Solutions Revenue | $92.2 million | $85.6 million | 7.7% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Overview of Donnelley Financial Solutions’s Business and Key Focus Areas
Donnelley Financial Solutions is a U.S.-based provider of software and services tailored for compliance, regulatory, and financial reporting for corporations, investment companies, and capital markets participants. Its platform covers software solutions like ActiveDisclosure (compliance software), Arc Suite (for investment company reporting), and Venue (virtual data rooms for deal-making). The company serves a broad range of clients needing to meet complex requirements around the Securities and Exchange Commission’s (SEC) filings and other financial disclosures.
Recently, Donnelley Financial Solutions has focused on expanding its software offerings and reducing its reliance on legacy printing and manual services. Key areas of emphasis include technological leadership in regulatory software, adapting to changes in financial regulation, and managing the balance between cyclical project-driven demand (such as merger transactions) and more stable recurring revenues from software subscriptions. Maintaining a strong product development team and sustaining capital investment in new features are also critical, as customer retention depends heavily on product quality and ability to keep up with regulatory changes.
Quarter Highlights: Progress and Pressures
The second quarter showed major progress in software sales. Software Solutions revenue reached a record $92.2 million, growing 7.7% from the prior-year quarter and representing 42.3% of company-wide net sales, up from 35.3 % a year ago. The key compliance software products -- ActiveDisclosure and Arc Suite -- together delivered about 15% growth. Management noted that Q2 2025 was the seventh straight quarter of net client growth on ActiveDisclosure, with longer and higher-value contracts boosting predictability of future revenue.
Software sales in the investment companies segment grew 17.0% compared to the same period in 2024. However, print and distribution sales contracted significantly, dropping 25.9% to $40.7 million, while tech-enabled services fell 16.6% compared to the second quarter of 2024. The impact was concentrated among capital markets and investment companies’ compliance activities, where print volumes and event-driven revenues continue to decline as more clients move to digital platforms and as transactional activity remains subdued.
The company reported a decrease in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which fell 12.5% compared to the second quarter of 2024. The margin on adjusted EBITDA came in at 35.0%, down about 0.9 percentage points. Net earnings dropped 18.2% compared to the second quarter of 2024. These declines reflect lower volumes in higher-margin transactional products. Free cash flow (non-GAAP) increased from $36.8 million in the second quarter of 2024 to $51.7 million, an improvement of approximately 40.5%. This boost came from streamlined working capital management and reduced capital spending.
Cost discipline played a role, with adjusted selling, general and administrative expenses coming down from prior-year levels, but overall operating margin (GAAP) was pressured by revenue declines. Management also noted an aggressive approach to capital allocation with $34.3 million worth of share buybacks and a new $150 million authorization extending through December 2026, as of June 30, 2025. The balance sheet remains solid, with net leverage (non-GAAP) of 0.7x EBITDA and liquidity resources of $255.3 million as of June 30, 2025.
Donnelley Financial Solutions’s software strategy continues to play out as a key differentiator. ActiveDisclosure and Arc Suite, both core compliance software platforms, are increasingly important for recurring revenue and client retention. Venue, the company’s data room platform for deal management, saw nearly flat year-over-year sales and remains sensitive to the pace of capital markets deal-flow, such as mergers and acquisitions (M&A) and initial public offerings (IPOs).
Outlook and What to Watch
Looking ahead, management offered guidance for Q3 2025, calling for GAAP net sales between $165 million and $175 million, a decline both sequentially and from the prior year. Adjusted EBITDA margin (non-GAAP) is expected to fall further, guided to 23% to 25%, a notable step down from the current quarter, highlighting anticipated ongoing pressure from lower transactional and print revenues. The capital markets segment is expected to deliver $35 million to $40 million in transactional net sales. The company’s leadership did not provide additional guidance for the full year beyond these near-term figures.
With market conditions for corporate deals still in a lull, Donnelley Financial Solutions remains concentrated on growing its software mix, managing costs, and retaining financial flexibility. Shareholders should keep an eye on whether recurring revenue from platforms like ActiveDisclosure and Arc Suite can offset the ongoing declines in print and event-driven businesses, and on progress toward the company’s target of a 60% software mix by 2028.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
