DFIN Q3 Sales Rise 5.5% as ActiveDisclosure and Deal Activity Drive Growth

Donnelley Financial Solutions Inc. (NYSE: DFIN) reported higher third-quarter 2026 sales, earnings and cash flow as growth in its ActiveDisclosure software and capital-markets transactional work outweighed softer results in parts of its Investment Companies business. Net sales rose 5.5% year over year to $185.0 million, while adjusted EBITDA increased 9.9% to $54.4 million, expanding the adjusted EBITDA margin by 120 basis points to 29.4%.

Free cash flow, defined as operating cash flow less capital expenditures, increased by $26.6 million to $85.8 million. Operating cash flow was $98.2 million, up from $74.4 million a year earlier, while capital spending declined to $12.4 million from $15.2 million.

On a GAAP basis, DFIN earned $21.3 million, or $0.85 per diluted share, compared with a net loss of $40.9 million, or $1.49 per share, in the third quarter of 2025. The prior-year period included an $82.8 million pension-plan settlement charge. Adjusted non-GAAP net earnings increased to $26.8 million, or $1.07 per diluted share, from $23.7 million, or $0.86 per share.

GAAP operating income rose to $32.6 million from $28.2 million, lifting the operating margin to 17.6% from 16.1%. Non-GAAP gross margin increased to 64.8% from 62.7%, reflecting DFIN’s continuing shift toward software and other higher-margin offerings.

ActiveDisclosure and transaction activity support growth

Software Solutions sales increased 5.0% to $95.2 million and represented 51.5% of total quarterly revenue. Tech-enabled services revenue rose 5.4% to $72.3 million, while print and distribution revenue increased 9.4% to $17.5 million.

Capital Markets generated $126.0 million of third-quarter sales, up about 8% from $116.2 million a year earlier. Segment adjusted EBITDA rose to $44.4 million from $40.2 million, with a margin of 35%.

Within Capital Markets, Software Solutions revenue increased 8.6% to $64.1 million. ActiveDisclosure sales climbed approximately 24% to $28.1 million, supported by subscription growth and increased IPO filing activity on the platform. ActiveDisclosure subscription sales rose 7% to $19.0 million, while annualized recurring revenue reached $78.6 million, up 15%. Gross revenue retention was 90% and net revenue retention was 98%.

Venue revenue was $36.0 million, down about 1% from the prior-year quarter. During the period, DFIN introduced AI-powered document translation and document-summary features for the virtual data-room platform.

Capital Markets Compliance and Communications Management sales rose 8.2% to $61.9 million. Transactional revenue increased approximately 9.3% to $45.7 million, which the company attributed to higher U.S. merger-and-acquisition activity. Compliance revenue increased 5% to $16.2 million.

Investment Companies revenue remains broadly flat

Investment Companies recorded third-quarter sales of $59.0 million, little changed from $59.1 million a year earlier. Adjusted EBITDA increased to $22.0 million from $21.1 million, and the segment margin rose to 37% from 36%.

Arc Suite sales declined 1.9% to $31.1 million, with subscription revenue flat at $28.2 million. Investment Companies Compliance and Communications Management revenue increased 1.8% to $27.9 million. Its adjusted EBITDA margin improved by 400 basis points to 38.7%, according to the presentation.

The contrast between the two business units underscores DFIN’s current revenue mix: Capital Markets benefited from ActiveDisclosure adoption and event-driven transaction work, while Investment Companies posted limited top-line growth but maintained higher profitability.

For the 12 months ended September 30, DFIN generated $787.2 million of revenue and $253.1 million of adjusted EBITDA, representing a 32.2% margin. Software revenue totaled $377.2 million, or 48% of sales, while recurring and reoccurring revenue accounted for 74% of the company total. Trailing-12-month free cash flow was $178.9 million.

Long-term targets emphasize software and recurring revenue

DFIN maintained long-term projections for low-single-digit total sales growth from 2023 through 2028, including mid-teens growth in Software Solutions and mid-single-digit growth in recurring and reoccurring revenue. Management expects software to account for about 60% of total revenue in 2028 and projects an adjusted EBITDA margin above 30%.

The company expects to generate more than $500 million of cumulative free cash flow from 2024 through 2028, with adjusted EBITDA converting to free cash flow at approximately 45%. Annual capital spending is expected to average about $60 million over that period, with spending higher in the near term before moderating. Substantially all capital expenditures are directed toward software development and supporting technology.

DFIN ended September with net leverage of 0.4 times and $27.2 million in cash. It had $106.4 million outstanding under its variable-rate term loan and $277.5 million available under its revolving credit facility. The company also had $118.5 million remaining under a $150 million share-repurchase program scheduled to expire at the end of 2027. During the third quarter, it repurchased about 146,700 shares for $6.9 million.

The presentation identified several uncertainties affecting future cash generation and performance. Transactional revenue is event-driven and less predictable than recurring compliance revenue, while cash interest expense remains exposed to variable rates. DFIN also expects $5 million to $10 million of annual cash restructuring costs over the next few years and continues to anticipate a mid-single-digit secular decline in print and distribution revenue. In addition, the company’s long-term targets depend on software adoption, pricing, regulatory developments, productivity gains and the continued migration of traditional services to SaaS products.