DFIN Software Excels Amid Economic Headwinds

Software once again was a standout performer in DFIN’s quarterly earnings results, released this week.

Against a backdrop of macroeconomic headwinds and market volatility, with IPO transactions at near record-lows and M&A activity far below historical levels, we achieved positive momentum in our software offerings, delivering year-over-year net sales growth of nearly 4% on an organic basis. Software solutions net sales represented 35.3% of total net sales, an increase of approximately 220 basis points from last year’s software sales mix.

Also notable, in the first quarter DFIN again delivered a higher level of profitability compared to historical quarters with similar overall and transactional revenues.

These results reflect the hard work, talent, and winning attitude of DFIN’s employees. I thank them for their continued excellence. DFIN’s first-quarter performance also keeps our company on track to achieve our long-term target of deriving 55% to 60% of total net sales from software solutions by 2026.

In pursuit of that goal, we made incremental investments in the first quarter in both our software offerings and associated business processes to support continued modernization, innovation, and growth. Cybersecurity, for example, remains an area of intense focus — and achievement — with ActiveDisclosure and Venue both honored at the RSA Conference 2023 in April.

A brief recap of our software results:

• Net sales for ActiveDisclosure, our purpose-built solution for SEC reporting, grew approximately 6% in the first quarter, while ActiveDisclosure’s recurring subscription revenue grew approximately 5%.

DFIN is continually working to make this platform more valuable and useful for our clients. For example, we announced this week a partnership with Salesforce to offer a best-in-class end-to-end solution enabling clients to capture and track ESG data in Salesforce’s Net Zero Cloud before seamlessly reporting that data to the SEC using ActiveDisclosure.

Looking ahead, we remain on schedule to decommission legacy AD3 in the second quarter as we complete the transition to new ActiveDisclosure. We expect stronger growth levels returning in the second half of 2023 as we pursue new logos and competitive wins.

• Our Venue Data Room solution performed much better in the quarter than its primary use case, M&A. With the global M&A market down nearly 30% year-over-year in the first quarter, Venue net sales were down less than 1%.

We are encouraged by the underlying activity on Venue, including subscription sales in life sciences and franchise as well as M&A. In addition, there is a lot of cash on the sidelines that can be put to work. We continue to innovate on the platform and last month released Venue Multi-file Redaction technology, which enables clients to redact across all folder and file structures in the data room. This is a significant differentiator versus other platforms.

Our software solutions form a winning lineup. But we don’t go to market alone. We integrate with a roster of partner solutions — Tipalti, Diligent, Oracle NetSuite, and others — that enhance and extend our competitive advantage.

It’s a value proposition designed to do well in both good markets and bad. As we approach the midpoint of the year, I am confident that DFIN is well-positioned for long-term success.