UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-37728

Donnelley Financial Solutions, Inc.

(Exact name of registrant as specified in its charter)

Delaware	36-4829638
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
35 West Wacker Drive, Chicago, Illinois	60601
(Address of principal executive offices)	(Zip code)

(800) 823-5304

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (Par Value $0.01)	DFIN	NYSE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☒
Non-Accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐    No  ☒

As of July 30, 2021, 33,606,833 shares of common stock were outstanding.

DONNELLEY FINANCIAL SOLUTIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3
Part I
FINANCIAL INFORMATION
Item 1:	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	7
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3:	Quantitative and Qualitative Disclosure About Market Risk	44
Item 4:	Controls and Procedures	44

Part II
OTHER INFORMATION
Item 1:	Legal Proceedings	44
Item 1A:	Risk Factors	44
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3:	Defaults Upon Senior Securities	45
Item 4:	Mine Safety Disclosures	45
Item 5:	Other Information	45
Item 6:	Exhibits	46
Signatures		50

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Donnelley Financial Solutions, Inc. and subsidiaries (“DFIN” or the “Company”) has made forward-looking statements in this Quarterly Report on Form 10-Q (the “Quarterly Report”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company. These statements may include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and variations of such words and similar expressions are intended to identify the Company’s forward-looking statements.

Forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to a number of important factors, including those factors discussed in detail in “Item 1A: Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021 (the “Annual Report”), in addition to those discussed elsewhere in this Quarterly Report, that could cause the Company’s actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:

the adverse impacts of the pandemic resulting from a novel strain of coronavirus, known as COVID-19 (“COVID-19”), and other global public health epidemics on the Company’s business and operations, including demand for DFIN services and products, and the Company’s ability to effectively manage the impacts of the coronavirus pandemic on its business operations;

the volatility of the global economy and financial markets, and its impact on transactional volume;

failure to offer high quality customer support and services;

the retention of existing, and continued attraction of additional clients;

the growth of new technologies with which the Company may be able to adequately compete;

the Company’s inability to maintain client referrals;

the competitive market for the Company’s products and industry fragmentation affecting prices;

the ability to gain client acceptance of the Company’s new products and technologies;

delay in market acceptance of the Company’s services and products due to undetected errors or failures found in its services and products;

failure to maintain the confidentiality, integrity and availability of systems, software and solutions;

failure to properly use and protect client and employee information and data;

the effect of a material breach of security or other performance issues of any of the Company’s or its vendors’ systems;

factors that affect client demand, including changes in economic conditions, national or international regulations and clients’ budgetary constraints;

the Company’s ability to access debt and the capital markets due to adverse credit market conditions;

the effect of increasing costs of providing healthcare and other benefits to employees;

changes in the availability or costs of key materials (such as ink and paper) or in prices received for the sale of by-products;

failure to protect the Company’s proprietary technology;

ability to maintain the Company’s brands and reputation;

the retention of existing, and continued attraction of, key employees, including management;

funding obligations arising from multi-employer pension plans obligation of the Company’s former affiliates;

the effects of operating in international markets, including fluctuations in currency exchange rates; and

the effect of economic and political conditions on a regional, national or international basis.

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document.

Consequently, readers of the Quarterly Report should consider these forward-looking statements only as the Company’s current plans, estimates and beliefs. Except to the extent required by law, the Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company undertakes no obligation to update or revise any forward-looking statements in this Quarterly Report to reflect any new events or any change in conditions or circumstances other than to the extent required by law.

3

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Operations

(in millions, except per share data)

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net sales
Tech-enabled services	$	134.0		$	115.4		$	252.5		$	197.3
Software solutions		66.6			47.6			126.9			94.9
Print and distribution		66.9			91.0			133.4			182.5
Total net sales		267.5			254.0			512.8			474.7
Cost of sales (a)
Tech-enabled services		42.7			47.5			83.7			90.3
Software solutions		25.1			23.7			49.6			48.5
Print and distribution		49.7			66.3			94.5			135.0
Total cost of sales		117.5			137.5			227.8			273.8
Selling, general and administrative expenses (a)		75.1			72.8			148.6			129.8
Depreciation and amortization		10.1			14.7			19.9			27.1
Restructuring, impairment and other charges, net		2.8			25.1			3.6			28.2
Income from operations		62.0			3.9			112.9			15.8
Interest expense, net		5.9			6.3			11.2			10.9
Investment and other income, net		(1.5	)		(0.5	)		(2.3	)		(0.9	)
Earnings (loss) before income taxes		57.6			(1.9	)		104.0			5.8
Income tax expense (benefit)		14.7			(0.6	)		25.9			3.0
Net earnings (loss)	$	42.9		$	(1.3	)	$	78.1		$	2.8
Net earnings (loss) per share:
Basic	$	1.27		$	(0.04	)	$	2.32		$	0.08
Diluted	$	1.24		$	(0.04	)	$	2.26		$	0.08
Weighted average number of common shares outstanding:
Basic		33.7			34.0			33.6			34.1
Diluted		34.5			34.0			34.5			34.1

(a)Exclusive of depreciation and amortization

See Notes to the Unaudited Condensed Consolidated Financial Statements

4

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Comprehensive Income

(in millions)

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021		2020
Net earnings (loss)	$	42.9		$	(1.3	)	$	78.1	$	2.8
Other comprehensive income (loss), net of tax:
Translation adjustments		(0.4	)		1.1			0.5		(1.7	)
Adjustment for net periodic pension and other postretirement benefits plan		0.8			0.5			1.4		1.1
Other comprehensive income (loss), net of tax		0.4			1.6			1.9		(0.6	)
Comprehensive income	$	43.3		$	0.3		$	80.0	$	2.2

See Notes to the Unaudited Condensed Consolidated Financial Statements

5

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Balance Sheets

(in millions, except per share data)

(UNAUDITED)

	June 30, 2021			December 31, 2020
ASSETS
Cash and cash equivalents	$	39.9		$	73.6
Receivables, less allowances for expected losses of $13.4 in 2021 (2020 - $10.5)		266.0			173.5
Inventories		4.3			4.9
Prepaid expenses and other current assets		14.4			9.7
Assets held for sale		5.5			5.5
Total current assets		330.1			267.2
Property, plant and equipment, net		18.7			12.0
Operating lease right-of-use assets		48.5			52.5
Software, net		51.9			51.2
Goodwill		410.1			409.9
Other intangible assets, net		9.3			9.8
Deferred income taxes, net		28.4			34.0
Other noncurrent assets		34.5			29.0
Total assets	$	931.5		$	865.6
LIABILITIES
Accounts payable	$	59.7		$	54.2
Operating lease liabilities		19.1			19.7
Accrued liabilities		158.4			164.6
Total current liabilities		237.2			238.5
Long-term debt		240.9			230.5
Deferred compensation liabilities		20.7			20.8
Pension and other postretirement benefits plan liabilities		46.4			51.0
Noncurrent operating lease liabilities		45.4			51.0
Other noncurrent liabilities		21.3			26.0
Total liabilities		611.9			617.8
Commitments and Contingencies (Note 7)
EQUITY
Preferred stock, $0.01 par value
Authorized: 1.0 shares; Issued: None		—			—
Common stock, $0.01 par value
Authorized: 65.0 shares;
Issued and outstanding: 35.9 shares and 33.6 shares in 2021 (2020 - 34.9 shares and 33.3 shares)		0.4			0.3
Treasury stock, at cost: 2.3 shares in 2021 (2020 - 1.6 shares)		(35.1	)		(16.0	)
Additional paid-in capital		249.6			238.8
Retained earnings		183.6			105.5
Accumulated other comprehensive loss		(78.9	)		(80.8	)
Total equity		319.6			247.8
Total liabilities and equity	$	931.5		$	865.6

See Notes to the Unaudited Condensed Consolidated Financial Statements

6

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Cash Flows

(in millions)

(UNAUDITED)

	Six Months Ended June 30,
	2021			2020
OPERATING ACTIVITIES
Net earnings	$	78.1		$	2.8
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		19.9			27.1
Provision for expected losses on accounts receivable		2.1			4.0
Impairment charges		—			12.1
Share-based compensation		9.0			5.4
Gain on debt extinguishment		—			(2.3	)
Deferred income taxes		5.0			(4.9	)
Net pension plan income		(2.1	)		(1.0	)
Amortization of right-of-use assets		8.7			12.1
Other		1.2			0.2
Changes in operating assets and liabilities:
Accounts receivable, net		(94.4	)		(93.6	)
Inventories		0.6			0.1
Prepaid expenses and other current assets		(5.3	)		(1.6	)
Accounts payable		4.0			(4.6	)
Income taxes payable and receivable		(3.9	)		6.6
Accrued liabilities and other		(19.3	)		25.3
Operating lease liabilities		(10.6	)		(11.1	)
Pension and other postretirement benefits plan contributions		(0.7	)		(0.5	)
Net cash used in operating activities		(7.7	)		(23.9	)
INVESTING ACTIVITIES
Capital expenditures		(17.7	)		(15.7	)
Purchase of investment		—			(1.0	)
Proceeds from sale of investment		—			12.8
Other investing activities		—			(0.3	)
Net cash used in investing activities		(17.7	)		(4.2	)
FINANCING ACTIVITIES
Revolving facility borrowings		228.0			240.5
Payments on revolving facility borrowings		(218.0	)		(120.5	)
Payments on long-term debt		—			(63.3	)
Debt issuance costs		(2.8	)		—
Treasury share repurchases		(19.1	)		(5.3	)
Proceeds from exercise of stock options		2.0			—
Other financing activities		—			(1.9	)
Net cash (used in) provided by financing activities		(9.9	)		49.5
Effect of exchange rate on cash and cash equivalents		1.6			(1.2	)
Net (decrease) increase in cash and cash equivalents		(33.7	)		20.2
Cash and cash equivalents at beginning of year		73.6			17.2
Cash and cash equivalents at end of period	$	39.9		$	37.4
Supplemental cash flow information
Income taxes paid (net of refunds)	$	24.3		$	1.2
Interest paid	$	10.6		$	13.7

See Notes to the Unaudited Condensed Consolidated Financial Statements

7

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended June 30, 2021 and 2020

(in millions)

(UNAUDITED)

	Common Stock				Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at March 31, 2021		35.6	$	0.4		2.0	$	(27.7	)	$	241.9	$	140.7	$	(79.3	)	$	276.0
Net earnings		—		—		—		—			—		42.9		—			42.9
Other comprehensive income		—		—		—		—			—		—		0.4			0.4
Share-based compensation		—		—		—		—			5.9		—		—			5.9
Common stock repurchases		—		—		0.3		(7.1	)		—		—		—			(7.1	)
Issuance of share-based awards, net of withholdings and other		0.3		—		—		(0.3	)		1.8		—		—			1.5
Balance at June 30, 2021		35.9	$	0.4		2.3	$	(35.1	)	$	249.6	$	183.6	$	(78.9	)	$	319.6

	Common Stock				Treasury Stock					Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at March 31, 2020		34.8	$	0.3		1.0	$	(9.4	)	$	227.5	$	135.5		$	(86.8	)	$	267.1
Net loss		—		—		—		—			—		(1.3	)		—			(1.3	)
Other comprehensive loss		—		—		—		—			—		—			1.6			1.6
Share-based compensation		—		—		—		—			3.1		—			—			3.1
Issuance of share-based awards, net of withholdings and other		0.1		—		0.1		(0.1	)		—		—			—			(0.1	)
Balance at June 30, 2020		34.9	$	0.3		1.1	$	(9.5	)	$	230.6	$	134.2		$	(85.2	)	$	270.4

See Notes to the Unaudited Condensed Consolidated Financial Statements

8

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Six Months Ended June 30, 2021 and 2020

(in millions)

(UNAUDITED)

	Common Stock				Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at December 31, 2020		34.9	$	0.3		1.6	$	(16.0	)	$	238.8	$	105.5	$	(80.8	)	$