Why Is Donnelley Financial Solutions Stock Trading Lower Tuesday?

Donnelley Financial Solutions, Inc DFIN stock is trading lower Tuesday after reporting its quarterly earnings.

The company clocked a fourth-quarter FY23 net sales of $176.5 million, up by 5.2% year-on-year, beating the consensus of $169.4 million.

The software solutions net sales grew 7.3% Y/Y to $73.7 million, and Tech-enabled services net sales climbed by 7.4% Y/Y to $73.6 million. Print and distribution net sales declined by 4.3% Y/Y to $29.2 million.

Adjusted EBITDA margin stood at 23.4%, flat Y/Y. Adjusted EPS of $0.61 beat the consensus of $0.59.

Donnelley Financial Solutions generated $56.0 million in free cash flow and held $23.1 million in cash and equivalents as of December 31, 2023.

CEO Daniel N. Leib said, “Heading into 2024, we look forward to opportunities created by new regulations such as Tailored Shareholder Reports and stand ready to assist our clients in complying with future regulatory changes.” 

The TSR rule went into effect on January 24, 2023, and compliance is required by July 24, 2024. As a result of this regulatory change, Donnelley Financial expects an annual net sales increase of $20 million to $25 million in 2025, with approximately a half-year impact in 2024.

Due to increased investment levels in 2024 to support software product development and sales and marketing initiatives, the company expects the TSR rule to be slightly dilutive to consolidated net earnings and Adjusted EBITDA in 2024 and accretive to consolidated net earnings and Adjusted EBITDA in 2025.

Price Action: DFIN shares traded lower by 2.43% at $59.91 on the last check Tuesday.