Donnelley Financial Solutions (DFIN) Q1 2026 earnings summary

Executive summary

• Net sales for Q1 2026 rose 2.2% year-over-year to $205.5 million, driven by strong software solutions growth of 8.4% to $91.7 million, now 44.6% of total sales, and supported by improved operating and free cash flow.

• Adjusted EBITDA increased 3.5% to $70.6 million, with margin expanding to 34.4%.

• Net earnings grew 8.1% to $33.5 million, with diluted EPS at $1.27, up from $1.05 in Q1 2025.

• Share repurchases totaled $28.3 million in Q1 2026; a new $150 million buyback program was authorized, replacing the prior authorization.

• Continued transformation toward a software-centric business model, targeting 60% of net sales from software solutions by 2028.

Financial highlights

• Software solutions net sales grew 8.4% year-over-year to $91.7 million; tech-enabled services declined 8.4%; print and distribution sales increased 9.3%.

• Adjusted EBITDA margin reached 34.4%, up 50 basis points year-over-year.

• Non-GAAP gross margin improved to 64.0% from 63.7% year-over-year.

• Free cash flow was negative $16.0 million, an improvement of $35 million year-over-year.

• Net leverage stood at 0.8x as of March 31, 2026.

Outlook and guidance

• Q2 2026 net sales expected between $215 million and $225 million; adjusted EBITDA margin guidance for Q2: 34%–36%.

• Capital markets transactional revenue for Q2 expected at $40–$45 million.

• Software sales expected to grow at a double-digit annual rate, driving mix shift toward higher-margin recurring revenue.

• Capital expenditures projected at $55–$60 million for 2026, primarily for software development.

• Free cash flow conversion expected at ~45% of EBITDA from 2024–2028.