Donnelley Financial Solutions Inc (DFIN) 2025 Q1 法說會逐字稿

Thank you for standing by. My name is Eric, and I will be a conference operator today. At this time, I would like to welcome everyone to the Donnelley Financial Solutions first quarter earnings conference call.

(Operator Instructions)

I would now like to turn the call over to Mike Zhao; head of investor relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions first quarter 2025 results conference call. This morning we released our earnings report, including a set of supplemental trending schedules of historical results, copies of which can be found in the investors section of our website at dfinsolutions.com

During this call, we'll refer to forward-looking statements that are subject to risks and uncertainties. For complete discussion, please refer to the cautionary statements included in our earnings release and further details in our most recent annual report on Form 10k, quarterly report on Form 10Q, and other filings with the SEC.

Further, we will discuss certain non-gap financial information such as adjusted EBITDA adjusted EBITDA margin and organic net sales. We believe the presentation of non-gap financial information provides you with useful supplementary information concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance.

They are, however, provided for informational purposes only. Please refer to the earnings release and related tables for GAAP financial information and reconciliation of GAAP to non-gap financial information. I am joined this morning by Daniel N. Leib, Dave Gardella, and other members of management. I will now turn the call over to Dan.

Thank you, Mike, and good morning everyone. We delivered strong consolidated first quarter results with net sales of USD201.1 million adjusted EBITDA of USD68.2 million and adjusted EBITDA margin of 33.9%. Given our stock trading levels, strong balance sheet, and perspective on long-term value during the first quarter and into the second quarter thus far, we have repurchased approximately 5% of the company's outstanding shares.

While we recognize the uncertainty in the near term global operating environment, recent trading prices have provided an opportunity to be more aggressive in this area.

I'm encouraged by the continued growth in our software offerings where we delivered year over year net sales growth of approximately 6% on an organic basis, driven by approximately 16% growth in our recurring compliance and regulatory driven products, active disclosure and Arc Suite that more than offset a decline in the venue data room product.

Software solutions net sales represented 42.1% of total net sales in the first quarter, an increase of approximately 260 basis points from last year's software solutions net sales mix. On a trailing four quarter basis, software solutions net sales made up 42.8% of total net sales, an increase of approximately 500 basis points from the first quarter of 2024 trailing four quarter period. On both a quarterly and trailing 4 quarter basis, software solutions represented the largest component of our overall sales mix, a positive proof point of our progress in becoming a software centric company.

This positions us well to achieve our long-term target of deriving approximately 60% of total net sales from software solutions by 2028. During the quarter, Active Disclosure and our Suite each posted double digit sales growth for the 2nd consecutive quarter. For Active disclosure, this improvement was primarily driven by the continued adoption of our service package offerings combined with growth and subscription revenue as a result of higher net customer count from recent wins, as well as higher value per client.

In the case of Arc Suite, the improved growth rate was primarily driven by the tailwind from the tailored shareholder reports regulation, which became effective mid last year. As it relates to venue, following robust growth over the last several quarters, venue sales declined moderately in the first quarter as we overlap several large deal rooms. We remain encouraged by venue's performance, which benefits from stable demand from both announced and unannounced deals across public and private companies alike.

Despite some volatility inherent in the broader M&A market in terms of completed deals. Well, then you serves both public and private company deals whether announced or still in the diligent process. Our capital markets transactional offering primarily serves public company, M&A, IPO, and debt transactions. Our capital markets transactional revenue, while improving on a sequential basis from the 4th quarter of 2024, continued to be depressed by the combination of market volatility, macroeconomic headwinds, and heightened uncertainty.

Despite the ongoing downturn in global capital markets transactional activity, our business has proven to be fundamentally and substantially more profitable than historically. Our adjusted EBITDA margin of 33.9% in the quarter reached 29.5% on a trailing four quarter basis, despite the ongoing headwinds of a weak transactional market. Our performance reflects our evolving sales mix, permanent changes to our cost structure, and continued cost discipline, and further demonstrates our ability to sustainably operate at a higher level of profitability across a range of market conditions.

We continue to invest to shift toward a more favorable recurring sales mix while continuing to aggressively manage our cost structure and being disciplined stewards of capital. A key factor behind our margin performance has been the progress we have made toward creating a cost structure and operating model that better aligns with our business mix, part of which is driven by cyclical market factors.

Over the last several years, to establish an optimized and variable cost structure in areas of the business that have both seasonal and cyclical fluctuations, we took aggressive actions that targeted many aspects of our fixed cost base. Including downsizing our print production platform, driving internal efficiencies, and reducing our physical footprint.

During the quarter, we maintain the same disciplined approach and will continue to manage our cost structure prudently, especially in light of the current economic landscape and uncertainty. As we continue to gain efficiency across our operations, we also remain focused on reinvesting in areas of our business to accelerate our transformation.

In the first quarter, we continue to invest in our software offerings and the associated technologies to support continued innovation and growth. The investments we are making also enable us to modernize our business operations by applying automation and AI-driven tools, including commercial AI solutions and our own agentic AI development to streamline workflows, improve productivity, and support profitable growth.

These investments will help to profitably scale existing products, increase our speed to market for future offerings, and enhance client experience. Before turning the call over to Dave, I'd like to provide some perspective on DFIN's operating characteristics as we operate in a new and evolving global economic environment. While much uncertainty exists, we presently do not anticipate any significant impact on our operations based on the recently announced tariffs, in large part due to the nature and structure of our business.

Our business is primarily software and services and predominantly US based. We have a relatively simple supply chain that has continued to operate without disruption, with approximately 90% of our revenue derived from the US. Our software products and services are largely insulated from current trade pressures. In the cases where we do see input costs rising, we expect to be able to increase our prices.

In addition, approximately 75% of our revenue is based on recurring and reoccurring sources, the vast majority of which is related to ongoing SEC compliance, for which core regulations have thus far not been impacted. Our strong mix of recurring compliance offerings provides stability during times of market volatility. Of course, our clients that operate across different industries will have varying impacts to their operations.

As it relates to our event-driven capital markets transactional offering, while the global deal environment is yet to emerge from more than 3 years of historically low activity, the underlying latent demand for transactions remains intact. From a market demand perspective, recent comments from the SEC are encouraging. The commission's desire for regulations to be more tailored, avoiding unnecessary burdens on public companies, will support future IPO activity and ongoing compliance needs.

And while we do not expect to return to normalized levels of transactions until market uncertainty subsides, DFI remains very well positioned to support our clients when that occurs. Finally, our strong balance sheet and ample liquidity enable us to confidently execute our strategy and drive long term shareholder value.

With our non-gap net leverage ratio under 1 times and robust annual free cash flow generation, our strong financial flexibility enhances our ability to execute our transformation. We will continue to allocate capital in a disciplined and thoughtful manner that best advances our strategy and maximizes shareholder value. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our first quarter results and our outlet for the second quarter, Dave.

Thanks, SAM, and good morning everyone.

Before I discuss our first quarter financial performance, I'd like to recap one housekeeping item in the quarter. During the first quarter, we amended and extended our credit agreement to provide for a USD115 million term loan A and to extend the maturity of the USD300 million revolving credit facility. Both instruments have maturity dates of March 13, 2030.

The proceeds from the term loan A and the revolving credit facility were used to retire in full the USD125 million outstanding on the prior term loan A. This transaction Combined with our strong free cash flow generation continues to provide Din with abundant financial flexibility to execute our strategy. Now turning to our first quarter results. As Dan noted, we delivered solid first quarter results in a challenging environment.

Highlighted by a strong year over year increase in adjusted EBITDA and adjusted EBITDA margin expansion. We posted approximately 6% organic growth in our software solutions net sales, including approximately 16% sales growth in our recurring compliance software products, all while continuing to drive operating efficiencies and expanding adjusted EBITDA margin to 33.9%. As Dan noted earlier, we've made tremendous progress in aligning our cost structure and operating model to our evolving business mix over the last several years, including downsizing our print production platform, driving internal efficiencies, and reducing our physical footprint.

We maintain the same disciplined approach in the quarter and we'll continue to take a similar approach going forward. On a consolidated basis, total net sales for the first quarter of 2025 were USD201.1 million a decrease of USD2.3 million or 1.1% from the first quarter of 2024. First quarter revenue was above the high end of our guidance range and was aided by better than expected event-driven transactional revenue within capital markets and favorable timing in investment companies' compliance volume, a component of which was realized through higher print and distribution revenue within this segment.

In addition, software solutions net sales, which increased USD4.3 million or 5.8% on an organic basis compared to the first quarter of last year, helped to partially offset the decline in capital markets compliance revenue of USD7.8 million versus the first quarter of 2024, part of which was related to lower print and distribution volume consistent with recent trends.

First quarter adjusted non-gap gross margin was 63.7%, approximately 310 basis points higher than the first quarter of 2024, primarily driven by a favorable sales mix, the impact of cost control initiatives, and price uplifts partially offset by lower capital markets compliance volume. Adjusted non-gap SG&A expense in the quarter was USD59.9 million and USD8.2 million decrease from the first quarter of 2024.

As a percentage of net sales, adjusted non-gap SGNA was 29.8%, a decrease of approximately 370 basis points from the first quarter of 2024. The decrease in adjusted non-gap SG&A was primarily driven by a reduction in selling expense related to lower sales in certain areas. The impact of cost control initiatives and lower bad debt expense. Specific to our bad debt expense, as a result of our strategy to deprioritize low quality transactional deals, including certain desack transactions which have higher collections risk, we realized the reduction in bad debt expense during the first quarter compared to our recent experience.

As we continue to prioritize higher quality deals, we expect our bad debt expense profile to continue to normalize going forward. Our first quarter adjusted EBITDA was USD68.2 million an increase of USD13 million or 23.6% from the first quarter of 2024. First quarter adjusted EBITDA margin was 33.9%, an increase of approximately 680 basis points from the first quarter of 2024, primarily driven by a favorable sales mix, the impact of cost control initiatives, and lower bad debt expense, partially offset by lower capital markets compliance volume.

Turning now to our first quarter segment results, net sales on our capital market software solution segment were USD51.9 million. A decrease of USD1.1 million or 1.7% on an organic basis from the first quarter of last year driven by venue which was down USD3.1 million or approximately 9% year over year, partially offset by the growth in active disclosure.

During the first quarter. Active disclosure sales grew approximately 11%, a continuation of the stronger growth rate we experienced during the fourth quarter of last year. We continue to make progress to expand the adoption of active disclosure services packages. Providing a strong base of contracted recurring revenue. Also benefiting the growth was the migration of certain traditional activities to active disclosure.

As we increasingly serve our clients via software solutions, we experience the shift of certain activities which were historically performed on our traditional services platform. To active disclosure, including compliance work such as annual proxy documents. While the shift from traditional compliance to active disclosure during the first quarter was modest, we expect this trend to continue in the future, driven by the improved capabilities of our software platform and evolving client preference to work in a hybrid environment leveraging both our software and unmatched service and domain expertise.

We remain encouraged by active disclosures, continued growth in client count, and higher average price per client, which combined to create a solid foundation for future revenue growth. As expected during the first quarter, then you face tough comparisons as we overlap several large projects which benefited last year's first quarter sales.

In aggregate Those large projects accounted for approximately USD4 million of net year over year impact which more than offset the underlying growth in venue sales. We expect the year over year impact from large projects to continue in the second quarter, albeit at less of a headwind than in the first quarter, approximately USD2 million. Adjust that that margin for the segment was 26.8%, a decrease of approximately 300 basis points from the first quarter of 2024, primarily due to lower sales volume and an unfavorable sales mix partially offset by the impact of cost control initiatives.

Net sales in our capital markets compliance and communications management segment were USD83.9 million a decrease of USD7.2 million or 7.6% on an organic basis from the first quarter of 2024, driven by lower compliance volume, partially offset by higher transactional revenue. In the first quarter, we recorded USD48.6 million of capital markets transactional revenue, a modest increase from the USD48 million we delivered in last year's first quarter.

Following a very weak fourth quarter of 2024 where we recorded the lowest level of transactional revenue in our history, the global equity deal market rebounded modestly to start the first quarter with January and February deal volume, especially IPO transactions that raised over USD100 million exceeding last year's levels. However, escalating macroeconomic headwinds and tariff uncertainty resulted in an increased market volatility and limited deal activity in March.

In short, the global deal environment in the first quarter was very soft compared to historical averages, and this weakness will persist with market uncertainty. For transactions that we completed in the first quarter, we maintain our historical high market share, reflective of Dean's strong market position. Capital markets compliance revenue was down USD7.8 million primarily due to our continued exit of certain low margin proxy statement activity and the related print and distribution consistent with our approach during last year's proxy season.

In addition, we continue to experience lower market demand for certain event driven filings such as 8K and special proxies associated with corporate transactions given the softness in that market. Finally, as I commented earlier, certain activities which were historically performed on our traditional services platform shifted to active disclosure.

Adjusted EBITDA margin for the segment was 43.7%, an increase of approximately 920 basis points in the first quarter of 2024. The increase in adjusted EBITDA margin was primarily due to lower selling expense, cost control initiatives, and lower bad debt expense, partially offset by lower sales value. Net sales on our investment company software solution segment were USD32.7 million an increase of USD5.4 million or 20.2% on an organic basis versus the first quarter of 2024, primarily driven by incremental revenue from our tailored shareholder report solution.

On a trailing four quarter basis, total arc Suite reached approximately USD122 million in revenue and grew approximately 13% compared to the first quarter 2024 trailing four quarters, driven by growth in subscription revenue, including the impact of the tailored shareholder report solution. Based on the mid-year 2024 effective date. We will continue to realize incremental revenue from tailored shareholder reports in the second quarter of 2025.

Adjusted EBITDA even that margin for the segment was 39.1%, an increase of approximately 980 basis points from the first quarter of 2024. The increase in adjusted EBITDA margin was primarily due to operating leverage on the increase in net sales and price uplifts partially offset by higher service-related costs associated with the tailored shareholder reports offering.

Net sales in our investment companies' compliance and communications management segment were USD32.6 million an increase of USD0.6 million or 2.2% on an organic basis from the first quarter of 2024, primarily driven by the timing shift of certain print and distribution volume related to the tailored shareholder reports for the regulated insurance market from the second quarter into the first quarter. And higher event-driven transactional revenue.

The timing shift related to tailored shareholder reports, in addition to the broader secular decline in the demand for printed products will result in lower print and distribution revenue in the second quarter compared to the second quarter of last year. Adjusted EBITDA margin for the segment was 37.4%, approximately 1,180 basis points higher than the first quarter of 2024.

The increase in adjusted EBITDA margin was primarily due to higher sales, a favorable sales mix, and cost control initiatives. Non-gap unallocated corporate expenses were USD7.4 million in the quarter, a decrease of USD0.8 million in the first quarter of 2024, primarily due to cost control initiatives and lower healthcare expense. Free cash flow in the quarter was negative USD51 million. USD10.8 million unfavorable compared to the first quarter of 2024.

The year over year decline in free cash flow was primarily driven by unfavorable working capital timing and elevated performance-based payments in the quarter related to full year 2024 performance partially offset by higher adjusted EBITDA.

We ended the quarter with USD189.5 million of total debt and USD173.3 million of non-gap net debt, including USD75 million drawn on our revolver. As of March 31, 2025, our non-gap net leverage ratio was 0.8 times. As a reminder, our cash flow is historically seasonal. We are a user of cash in the first quarter, closer to break even in the second quarter, and generate more than 100% of our free cash flow in the second half of the year.

Regarding capital deployment, we repurchased approximately 861,000 shares of our common stock during the first quarter for USD41.8 million at an average price of USD48.57 per share. As of March 30, 2025, we had USD49.5 million remaining on our USD150 million stock repurchase authorization.

Based on our confidence in the strategy and our strong belief in the value of DFIN, we view share repurchases as a very attractive use of cash, especially at the prices we experienced during the last six weeks of the quarter and throughout April. As such, in a continuation of our historical approach of being much more aggressive with share repurchases at lower prices. So far in April, in accordance with our pre-established trading parameters, we have repurchased an additional 657,000 shares for USD27.6 million at an average price of just over USD42 per share through April 29th.

On a year-to-date basis, we've repurchased approximately 1.5 million shares for USD69.4 million at an average price of USD45.75 per share. We continue to view organic investments to drive our transformation, share repurchases, and net debt reduction each as key components of our capital deployment strategy, and we'll remain disciplined in this area. As it relates to our outlook for the second quarter of 2025, we expect a challenging operating environment driven by market volatility and ongoing uncertainty.

Further, we expect a reduction in print and distribution revenue in the second quarter based on both the timing shift of certain print and distribution volume from the second quarter into the first quarter that I discussed earlier, as well as the reduction in volume of printed pages associated with the tailored shareholder reports rule, both of which impact the investment company's compliance and communications management segment.

With those factors as the backdrop. We expect consolidated second quarter net sales in the range of USD215 million to USD235 million and adjusted EBITDA margin in the mid-30% range. Compared to the second quarter of last year, the midpoint of our consolidated revenue guidance, USD225 million implies a reduction of approximately USD18 million or 7% year over year as lower print and distribution sales, including the timing benefit reflected in our first quarter results, is expected to more than offset growth in arc suite and active disclosure.

We expect venue to decline at a rate similar to what we experienced in the first quarter in part due to the revenue associated with outsized rooms in last year's second quarter. Further, our estimates assume capital markets transactional revenue in the range of USD35 million to USD45 million which at the midpoint is down approximately USD5 million from last year's second quarter.

In addition, and related to my earlier comments regarding the impact of the transactional environment on certain compliance filings, most notably special proxies and AKs, our second quarter estimate assumes a modest year over year decline in our compliance-based sales within this segment, part of which is related to print and distribution.

With that, I'll now pass it back to Dan.

Thanks, Dave.

Our strong performance in the first quarter was the result of the historical and current disciplined execution of our strategy, which again demonstrated defense's ability to perform across varying market conditions. Our focus remains on accelerating our business makeshift by continuing to grow our SAS revenue base while maintaining share in our core traditional businesses.

We will continue to invest in our compliance software platform to capitalize on regulatory tailwinds. In addition, we will continue to aggressively manage our costs and drive operational efficiencies while maintaining our historical discipline in the allocation of capital. As I noted earlier, the latent demand for transactions and a more favorable regulatory landscape combined with our market leadership is a significant opportunity for defense going forward. Market volatility and uncertainty, however, must subside for this opportunity to materialize.

Before we open it up for Q&A, I'd like to thank the DFIN employees around the world who have been working tirelessly to ensure our clients continue to receive the highest quality solutions. Now with that operator, we're ready for questions.

(Opearator Instructions)

Your first question comes from the line of Charlie Strausser with CJS Securities Incorporated. Please go ahead.

Hi, good morning. Just a couple of quick questions here. Margins were, significantly higher than expected, especially versus guidance, coming in at the high end of your guidance range for revenue, just if you could perhaps, provide us with a little bit more color on what kind of what drove that and, perhaps some acceleration of or pull forward of the expense reduction efforts.

Yeah, Charlie, thanks for the question. A few factors there and a couple of things you know that are actually tied together, but, I would say first and we highlighted this on the fourth quarter call. The soft transactional market that we saw exiting the year and we had, taken some incremental cost reduction actions that in, permanent cost reduction actions, and I would say in the first quarter those came in better than what we had anticipated.

The second factor is, the higher revenue and the operating leverage associated with that revenue outperformance, and when you look at that outperformance, it was, I'd say predominantly a combination of two things. The first was higher capital markets, transactional sales, we posted revenue of about USD49 million which was about USD4 million higher than our guidance.

And then also, as I mentioned in the prepared remarks, we had some favorable timing in investment companies and that was probably, USD3 million or so of sales that we had assumed would would be recognized in Q2 and that moved up in Q1 and again when you look at the The incremental margins on this higher revenue very strong, and then I would say that the third thing and again mentioned this in the prepared remarks, and we also commented on it on the fourth quarter call, we've really been taking a much more discerning approach on the quality of transactions that we're accepting due to the collection risk.

On some of the lower quality deals. So related to this, bad debt expense came down in the quarter about USD2.7 million versus the first quarter of last year. While we expected a decrease, I would say this decrease was more than we had contemplated, certainly in our guidance, and, we'll expect this trend to continue.

In a positive direction, though it's really tough to predict exactly you know how that how that declines over time, but you know we're starting from a pretty high water mark coming off of last year's bad debt expense number and looking to drive that down more to historical averages.

God, that makes sense. And just secondly, just looking at your guidance for Q2, maybe some more color on the segment level basis into your the assumptions behind that.

Yeah, I think when you look at, overall, you have the numbers obviously we talked about it in the prepared remarks. I think when you dive into the segments, if I start with capital markets right, we expect, from a product perspective, active disclosure to continue to perform well.

From a year over year growth perspective, venue, as we talked about, has a tough comp really all year long, but certainly, we saw it in one and we'll see that again in two and then I think, when you look at the capital markets compliance and communications management segment. And I'll I'll start with the compliance work we talked about, some print being down and expect, the compliance revenue to continue to decline modestly on a year over year basis and again a lot of that's related.

The biggest wildcard there would be transactions and obviously you know we we gave a pretty wide range for this quarter, and as we said in the prepared remarks that until. The markets have some certainty and less volatility. We would expect the transactional side to be to be relatively soft as I move over to investment companies on the software side, we'll continue to see. The benefit in our suite, predominantly related to the Tailor shareholder reports regulation, we'll start to overlap that benefit in the second half of the year, but certainly in Q2 we we would expect to see, the benefit again similar to what we saw in Q1.

And then on the investment company's compliance and communications management, probably the biggest item there is, the piece that I just mentioned on the timing shift, about USD3 million of revenue shifted out of what we expected for Q2, and really on a year over year basis right would have been comparable to last year's Q2, and so. Would expect some, the trend in that segment to be softer in Q2 then certainly what we experienced in Q1.

Great thanks Dave.

The next question comes from the line of Pete Heckman with DA Davidson. Please go ahead.

Good Morning everyone. Thanks for taking the question.

I wanted to I wanted to see if you can comment a little bit on share, on the active disclosure side, how the trends been there over the past four quarters, and are you seeing a little bit, kind of maybe a lead a bit of pulling away from the pack in terms of it seems like maybe there's one or two competitors that actually have the ability to. Invest in in the future functionality of software and then some of the smaller players may not have that ability. Would you agree and and do you see that becoming a bigger differentiating factor over the next five years?

Yeah, Pete, it's Dave again and I, I'll start and then correct can comment with some more details. I think you know certainly from a trend perspective and new client logos and as we mentioned price per client, we continue to make good progress there, from an overall market perspective and then you know the other aspect that we're seeing in active disclosure and then you know also.

Expect that to continue to be a trend that is as you know clients continue to want to work more and more in a hybrid model that's certainly going to benefit us we're, having the best of both worlds in terms of being able to leverage the software as well as the traditional service domain expertise, etc. But I'll I'll let Craig comment on on some more of the details.

Yeah, thanks David (Stan) before Craig goes, just on the second question that Pete had on ability to invest and you know we are seeing the benefits we saw it even in the in the TSR or tailored shareholder reports regulation of the investments that we've made historically in the platform and the ability to get into the market faster and it does build on itself and that with our prioritization of capital allocation towards organic investment. First, and, going forward with our transformation, we do see that as a big differentiator, and so I'll pass that off to Craig.

Yeah, to build on those comments, after having completed our platform transformation last year and modest growth, we're certainly really pleased with where we are Q4, Q1 performance and perspective metrics. The progress we're making is reflected, and you'll continue to see that Q1 was our seventh. A consecutive quarter of net client growth, our subscription revenue continues to grow. Our (AC) growth shows we're selling at a higher value per client, as mentioned. We're increasing our percentage of three year contracts, so our clients are locking in, which makes future revenue more predictable.

And then we've had sequential improvements in revenue retention rates. As well as our service revenue is up 36% in the quarter, driven by significant increases in our service package sales. Again, predictable revenue. Our clients love AD service. It leads the market. They like predictable packages and it creates this predictable mix of recurring revenue for DFIN.

If you look at the market, our solution is the most advanced, specifically designed disclosure tool. We have decades of serving SEC clients and we have a price opportunity. We have product improvement that Dan spoke of with our investment. Our clients for proxy this season are using the newest editor on the market, the creative work for proxy and other documents. And AD is incredible.

We've added presentations to that, which is a full connection of the single source to their truth to all creative teams, whether they're creating something for the board, investor, and all of that imports and exports from AD to PowerPoint. Lastly, the hybrid solution that Dave mentioned, it's a great opportunity for us to marry our traditional platform with software. We're the only ones that can do that, and over time this will create an even stronger foundation for sustained growth. So thanks for the question.

Okay, that's all really helpful, and good to hear, Dave, just one quick follow up, in terms of the new credit facility, how, will that change if at all your weighted average cost of debt.

Yeah, Pete, so it's no substantial changes in terms of the overall terms in the transaction there were a handful that all worked to the company's benefit, which was great to see.

I would say secondly that it's all variable rate that so it's. So for plus the spread and that spread is based on different tiers of our, basically our net leverage range and so we're, currently sit at the lowest tier of that of that spread so it'll all be tied to sour I think when you look at the all in rate now is in the probably 7% range or so.

Okay. That's helpful. I appreciate it. I'll get back in the queue.

Thank you. The next question comes from the line of Kyle Peterson with Needham. Please go ahead.

Great, thanks guys. Good morning. I want to start, off on arc suite, growth has been, really impressive here in the second quarter in a row we've seen a nice pop in the the year and year growth rates. Just want to see like is this kind of a sustainable like central paradigm shift here for for growth within that product or?

Is there anything like lumpy or one time that we need to be mindful of when when modeling out Earth suit moving forward?

Yeah, Kyle, it's Dave. Thanks for the question. So probably the the one factor that is a bit lumpy would be the piece that we're seeing as it relates to the Tailored shareholder report regulation. So we started recognizing revenue on that.

Last year in Q3 and so you know we saw the back the benefit in the back half last year we're getting the incremental, kind of annualization of that that revenue in the first half of this year. And then, we'll start to overlap that in in the third quarter. I would say the other factor that we will see all year long is some benefits of increased pricing that that affect the arc suite, and then Eric can provide some more details on what we're seeing in the business.

Yeah, thanks, Dave. Thanks for the question, Kyle.

In addition to the TSR lift, I think it's important to kind of structure out what we mean from a from a TSR perspective we're talking reporting, tagging, filing, web hosting, e-delivery, complex mailing, as well as digital output. So it's a very broad spectrum of services that TSR drives and Deacon's very well positioned to handle. The full spectrum of services, but specific to your software question, we've had key contract renewals, which are very important for the year.

We are seeing growth with existing clients across our arc suite offering and we're also seeing strong price performance. So TSR, as Dave mentioned, certainly an aspect of the growth, but in the core fundamentals of the Arc suite platform we're seeing positive results.

Not to mention, I believe it's our 25th consecutive quarter of growth in this in this segment. So you know we're encouraged by, the performance we've seen in Q1 and obviously we take advantage of the TSR opportunities that that we'll see, but very pleased with the, overall fundamentals of the software business within Marc Suite.

Okay, yeah, the last thing I'd add, Kyle just just on that piece is, we, Arc suite as as the software product and then the related service expertise and domain expertise that goes around it and even more so than on the corporate side, the the funds and you know regulated insurance folks, value that service and and they've spoke to how much.

It's valued on the corporate side, so it's not to diminish that, but they value it even more and I think it's based more on the funds outsourced model and so we see we see a lot of benefit from and very high customer satisfaction scores with the service that they receive and so that's another differentiator that supports Eric's comments about the holistic system.

Okay, that's really helpful, appreciate it, and then, I guess as a follow up, great to see you guys really, stepped up, the buyback, pace here, both in the first quarter and in April, I guess, as long as you know the share price remains, below.

Historical or recent evaluations, is this something you guys could continue to buy back at a faster clip like you have been, recently, or do you think this will kind of normalize back down, given you guys have bought back such a good, amount of the shares in the last few months here.

Yeah.

Go ahead.

I was going to say, we've been very consistent on this, in terms of, being more aggressive at lower prices and less aggressive but still in the market at higher prices and as we commented on the prepared remarks, still view share repurchases. As a, one of the priorities in terms of capital deployment, and then I think I cut you off, so. (multiple speakers)

(multiple speakers) (Go ahead. Yeah, no, you hit it.) The only thing I'd add is, we have used a grid to Dave's point, much more aggressive at lower prices, feel really good about the. Future performance of the business, notwithstanding some market hoppiness currently and uncertainty, but the opportunity to create a lot of value for shareholders and so it is one of the, second to executing the transformation and the strategy, really important that we continue to. To buy back and then certainly, within the confines of overall leverage, etc. And so that that's how we think about it.

Okay, that's great color, thank you.

(Operator Instructions)

There are no further questions at this time. I'd now like to turn the call over to Daniel N. Leib for closing remarks. Please go ahead.

Thank you, Eric, and yeah, thank you everyone for joining us, and we'll look forward to speaking with you in a few months and seeing you at some conferences in the interim.

Ladies and gentlemen, that concludes today's call.

(Operator Instructions)