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| Statement |
|---|
| On a full year basis, total Arc Suite delivered approximately $107 million in revenue and grew 7.4% year-over-year, driven by growth in subscription revenue as a result of the continued strong adoption of Arc Suite within investment companies |
| We finished 2023 by delivering strong fourth quarter results, highlighted by 5.4% organic consolidated net sales growth, year-over-year growth in adjusted EBITDA and strong adjusted EBITDA margin performance |
| Calling the timing exactly of that shift is a little tougher, but we found good ability to be able to transition clients and take them – support them in the way in which they want to work as they move from the traditional side over to the software side |
| And I think our unique position on the deal team from our traditional CM-CCM [ph] business means that we'll continue to drive software revenue through our Venue virtual data room |
| I am encouraged by the reacceleration of sales growth in the fourth quarter despite the continued headwind in our event-driven capital markets transactional offering |
| I am also pleased by the performance of our Venue dataroom product, which delivered net sales growth of approximately 26% in the quarter |
| The combination of an evolving revenue mix, specifically growing our high margin software offerings, along with pricing opportunities and improvements in operating efficiencies creates the basis for a long-term adjusted EBITDA margin expansion |
| Based on our experience in other areas where this has occurred, the shift from traditional services to software produces favorable economics with slightly lower revenue but higher adjusted EBITDA |
| Reflecting on the full year 2023 results, given the persistent market volatility, macroeconomic headwinds and geopolitical uncertainty, we delivered strong full year results |
| Specifically, we expect the growth in software solutions to more than offset the declines in tech-enabled services and print and distribution sales, enabling us to deliver consistent, low-single-digit consolidated net sales growth annually starting in 2024 |
| Based on the incremental revenue from Tailored Shareholder Reports, we expect stronger Arc Suite revenue growth starting in the second half of 2024 |
| In 2023, we made continued progress in increasing the consistency and stability of our performance |
| Venue growth was obviously very strong in the quarter, 26% despite a sluggish M&A market, so up 9% sequentially from Q3, record revenue quarter for us |
| I am confident that if we do these things well, we will continue to create increased value for our stakeholders, clients, employees and shareholders in 2024 and beyond |
| For the full year, we achieved record software solutions net sales of approximately $293 million, an increase of approximately 7% from 2022 on an organic basis, driven by double-digit growth in our Venue dataroom offering, which has become our largest software product with nearly $110 million in revenue |
| In addition to its strong growth, Venue also exhibited a consistent level of performance in 2023 and significantly outperformed the market trend for its primary use case, M&A, owing to Venue's broader application within the deal ecosystem that creates more resilient, stable demand |
| As it relates to our outlook for the first quarter of 2024, we are encouraged by improving level of transactional activity so far in the first quarter, especially in the number of priced and publicly filed IPOs |
| Our past investments position us well to capture opportunities from current and future regulations |
| And the 26% growth that we saw in the quarter, obviously, much, much stronger than the number of deals getting completed |
| With Tailored Shareholder Reports being a financial report, DFIN is ideally positioned to leverage our ArcReporting offering, a leading financial close solution for investment companies, and our deep expertise in the areas of iXBRL tagging and compliance filing to create an end-to-end compliance solution for Tailored Shareholder Reports |
| Our updated five year projections deliver sustainable and profitable revenue growth |
| And so one of the advantages we have in the competitive landscape is being able to serve clients on all three of those fronts |
| In 2023, we executed well in a very challenging market environment, delivering solid financial results while continuing to invest to become the leading provider of compliance and regulatory solutions |
| Our focused strategic transformation over the past several years has enabled DFIN to become more profitable and resilient |
| With the solid foundation created, we are well positioned to continue to deliver increasing value to our three stakeholders: our clients, our employees and our shareholders |
| We expect ActiveDisclosure’s growth rate in the second half of 2024 to be stronger than the first half as some of the headwinds we experience in 2023 continue to play out in the first part of 2024 |
| In Chapter 3, we will continue to realize benefits from our revenue mix shift and historical investments that have resulted in a strong foundation for continued innovation and growth |
| These dynamics result in sustained profitable revenue growth |
| We look forward to increasing value creation by delivering predictable, consistent organic top line growth, continued strong profitability and robust cash flow generation over the next five years |
| The momentum in client count growth coupled with product enhancements we have released create a strong foundation for sales growth in 2024 and beyond |
| Statement |
|---|
| Net sales of our recurring compliance product active disclosure, including File 16 declined approximately 2% in the fourth quarter, driven primarily by lower Section 16 filing activity, which was down nearly 16% |
| In addition, following the decommissioning of the legacy AD3 platform, we had fewer clients on the new AD platform as a result of the expected elevated customer churn rate during the transition |
| In the quarter, we experienced lower demand for beneficial ownership filings as a result of a weak IPO market as well as elevated churn as we transition clients to a subscription based model |
| Following significant declines in capital markets event-driven revenue in 2022, the market remained very weak throughout 2023, resulting in a further revenue reduction of approximately $52 million or 22% year-over-year |
| Adjusted EBITDA margin for the segment was 30.7%, a decrease of approximately 120 basis points from the fourth quarter of 2022 |
| Net sales in our Capital Markets Compliance and Communications Management segment were $68.3 million, a decrease of $5.1 million or 6.9% from the fourth quarter of 2022, primarily driven by lower event-driven or transactional net sales |
| Adjusted EBITDA margin for the segment was 31.5%, a decrease of approximately 530 basis points from the fourth quarter of 2022 |
| A lower customer count in conjunction with the impact of SPAC liquidations, normal customer churn and the ongoing weakness in IPO activity resulted in a modest decline in subscription revenue in the quarter |
| In the near-term, we expect macroeconomic headwinds and geopolitical factors will continue to weigh on the return to a more normalized deal activity level |
| Our total event-driven revenue, which also includes investment companies transactions, was down [Technical Difficulty] or 18% year-over-year |
| We expect tech-enabled services net sales to decline moderately moving forward due to the shift to our software solutions |
| Now that said, last year’s first quarter was the low watermark in recent history |
| The decrease in adjusted EBITDA margin was primarily due to lower transactional sales volumes partially offset by cost control initiatives |
| Similar to the trends we experienced during the first nine months of the year, the demand environment for equity transactions remained soft in the fourth quarter, though the rate of decline continued to moderate as we overlap periods of weak demand in 2022 |
| And so while we’re seeing a pretty substantial or anticipating a pretty substantial percentage increase, I would say, on an absolute dollar amount, the transactional revenue for the quarter is still expected to be well below historical averages |
| Though, overall transactional activity remains well below the historical average |
| Consistent with the long-term trend, print and distribution net sales will continue to be impacted by secular decline and by 2028 are expected to represent approximately 15% of our net sales |
| M&A was down 18% in Q4 |
| The decrease in adjusted EBITDA margin was primarily due to higher product development and technology investments in support of growth opportunities, such as Tailored Shareholder Reports and higher incentive compensation expense partially offset by cost control initiatives |
| Free cash flow in the quarter was $56 million, a decrease of $2.5 million compared to the fourth quarter of 2022 |
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