Donnelley Financial Solutions Inc (DFIN) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Donnelley Financial Solutions Second Quarter Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to turn the call over to Justin Ritchie, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining the Donnelley Financial Solutions Second Quarter 2020 Results Conference Call. This morning, we released our earnings report, a copy 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 uncertainty. For a complete discussion, please refer to the cautionary statements included in our earnings release and further detailed on our annual report on Form 10-K, quarterly report on Form 10-Q and other filings with the SEC.

Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP financial information provides 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 information purposes only. Please refer to the earnings release and related tables for GAAP financial information and reconciliations of GAAP to non-GAAP financial information.

I'm joined this morning by Dan Leib, Dave Gardella, Kami Turner and Tom Juhase.

I will now turn the call over to Dan.

Thank you, Justin, and good morning, everyone. From all of us at DFIN, we hope that you and your families are staying safe and healthy. We are extremely pleased with the company's performance during the quarter, especially in light of the continuing pandemic, current social unrest and related market volatility. We leveraged our long history of focusing on health and safety to rapidly implement measures to protect our employees throughout the company with a specific focus on our manufacturing employees who are most at risk. Our decisive actions allowed us, across the company, to remain fully operational during our peak filing period, serving clients well with minimal disruption and operating safely.

I'm also pleased with the solid progress the team made against a number of the operating objectives that underpin the 44% in '24 strategy, deriving 44% of our sales from software by the year 2024 and delivering the financial results associated with that business mix that we outlined on the last earnings call. Specifically, we improved our mix of business, helping to drive significant margin and profit improvement; released a new software solution, ArcDigital; increased our second quarter market share in SEC compliance filings; extended our market-leading position in SEC transactional filings; and shed lower-profit offerings from our portfolio. The consistent progress we continue to make against our stated plan is showing results. We will continue to provide you with additional updates on our progress each quarter.

This quarter displayed DFIN's ability to continue to thrive in tough conditions and again, shows the strength of our recurring offerings. These recurring offerings provide our business with stability during times of market volatility while also keeping us close to our customers when it matters most. Further, our market position as the leading SEC filer, customer-centric focus, long history of operational excellence and strong financial position have reinforced our clients' trust in us and will help us emerge from these challenging external conditions in an even stronger position.

In the second quarter, total revenues came in at $254 million, down 1.9% from the prior year and well above our expectations as activity in our transactional offerings, including Venue, picked up in June after a very slow start to the quarter. Our cost control efforts were expanded and accelerated, providing profit and margin benefit. The lower cost structure, influx of transactional activity and overall improved business mix drove an 8.4% increase in second quarter non-GAAP adjusted EBITDA versus the second quarter of 2019 as well as a 220 basis point improvement in second quarter adjusted non-GAAP EBITDA margin.

We have achieved 4 consecutive quarters of year-over-year margin improvement with an average quarterly improvement of nearly 280 basis points. Over those 4 quarters, overall revenue has declined by nearly $45 million, with non-GAAP adjusted EBITDA increasing nearly $18 million based on the same factors as we experienced in this quarter: better revenue mix, including less revenue from print and distribution; and disciplined cost management. Both are important components of our strategy, especially as we head into 2021 when we will see the significant decrease in print and distribution revenue associated largely with regulatory change.

The increased profitability, combined with lower interest expense related to our consistent deleveraging and opportunistic repurchases of debt and equity, led to an 18% increase in second quarter non-GAAP net earnings per share. The strong second quarter profit and continued focus on cash conversion led to a healthy $10.2 million or 340% increase in operating cash flow as well as a $12.5 million increase in free cash flow as second quarter capital expenditures came down year-over-year as expected.

We are happy with these financial results in the quarter. However, the variability in the quarter in both revenue and earnings illustrates the short cycle time of some of the more variable components of the business that results in forecasting challenges. We'll touch on this again when we discuss our outlook for the third quarter.

We've invested and will continue to invest in areas of the company for growth while maintaining a focus on driving efficiencies and optimizing our cost structure to ensure we continue to deliver the margin and profit growth outlined in our longer-term financial objectives. We took specific additional steps to optimize our operations in the second quarter, reducing costs further while also streamlining our organizational structure to allow for quicker decision-making, focused on moving authority and accountability closer to those that serve our end customers. We are pleased with the focus the team has put on these efforts and tend to continue to look for ways to allocate resources to areas of opportunity.

Another area where we continue to remain disciplined is capital allocation. Our consistent focus on cost control and debt reduction since our spin-off has put us in a very solid liquidity position, providing ample financial flexibility, with second quarter ending total debt down $68.4 million year-over-year and net leverage of 2.1x reduced by a full turn compared to last year. We entered the second half of the year below the lower end of our targeted leverage range, and we'll look for opportunities to continue to leverage our balance sheet to create shareholder value while still maintaining the liquidity that may be needed to weather future challenges in the operating environment.

Before I share a few business highlights as well as an update on our manufacturing platform optimization efforts, I would like to turn the call over to Dave to provide more detail on our second quarter financial results and our outlook for the third quarter. Dave?

Thank you, Dan, and good morning, everyone. Before I discuss our second quarter financial performance, I'd like to recap a few housekeeping items in the quarter, which impact our year-over-year comparability. As noted in our press release, we recently disclosed a restructuring plan related to the consolidation of our East Coast manufacturing operations. Under this plan, we recorded a pretax cash expense of approximately $3.9 million during the second quarter of 2020 for severance and other expense related to employee terminations, with another approximately $2.9 million of additional charges to be recorded through the second quarter of 2021.

Also in the second quarter of 2020, we became aware that subsequent to the LSC Communications' Chapter 11 filing in April, LSC failed to make certain required withdrawal liability payments to multi-employer pension plans from which R.R. Donnelley had withdrawn prior to the spin-off and for which R.R. Donnelley and DFIN are jointly and severally liable. In July, DFIN and R.R. Donnelley agreed to submit to mediation, and, if required, arbitration, to determine the final liability allocation between the companies. DFIN and R.R. Donnelley also agreed to share all required withdrawal liability payment obligations that become due in the interim with an adjustment to be made in accordance with the final allocation.

In the second quarter, we recorded a contingent liability of $10.2 million on our balance sheet for future potential payments related to these liabilities, accounting for payments that extend through 2034. We also recorded an additional $2.1 million for our estimated share of obligations until a final allocation is determined. The expense associated with this liability has been recorded in SG&A expense within the corporate segment and has been excluded from our non-GAAP results.

Turning now to our consolidated financial results. As Dan mentioned, we delivered very strong second quarter results, including significant year-over-year increases in non-GAAP adjusted EBITDA, non-GAAP adjusted earnings per share, operating cash flow and free cash flow. By continuing to focus on operating efficiencies while also improving our business mix, we improved second quarter non-GAAP adjusted EBITDA margin by 220 basis points compared to the second quarter of 2019, further extending the trend we established in the second half of 2019.

On a consolidated basis, revenue for the second quarter of 2020 was $254 million, a decrease of $4.9 million or 1.9% from the second quarter of 2019. Software solutions revenue in the second quarter decreased by $0.2 million or 0.4% as compared to the second quarter of 2019 due to lower Venue data room activity driven by the weak M&A market, partially offset by increases in ActiveDisclosure subscriptions as well as increases in our other compliance software solutions. Tech-enabled services revenue increased by $2 million or 1.8%, primarily due to increased capital market transactional activity, partially offset by lower mutual funds transactional and compliance activity. Print and distribution revenue decreased by $6.7 million or 6.9%, primarily due to lower demand for printed materials within capital markets, partially offset by higher mutual fund transactional print volume.

Second quarter non-GAAP gross margin was 46.3% or 380 basis points higher than the second quarter of 2019, primarily driven by a favorable business mix, featuring higher-margin tech-enabled services revenue combined with lower overall print volume and the impact of ongoing cost control initiatives. Non-GAAP SG&A expense in the quarter was $56.8 million, $3 million higher than the second quarter of 2019. As a percentage of revenue, non-GAAP SG&A was 22.4%, an increase of approximately 160 basis points from the second quarter of 2019. The increase in non-GAAP SG&A is primarily due to changes in the business mix, higher variable compensation and benefits-related costs, partially offset by the impacts of ongoing cost savings initiatives.

Our second quarter non-GAAP adjusted EBITDA was $60.8 million, an increase of $4.7 million or 8.4% from the second quarter of 2019. Our second quarter non-GAAP adjusted EBITDA margin was 23.9%, an increase of 220 basis points from the second quarter of 2019, again primarily driven by the impact of ongoing cost control initiatives and a more favorable revenue mix.

Turning now to our segment results. Revenue in our Capital Markets - Software Solutions segment was $31.8 million in the second quarter of 2020, a decrease of 1.2% from the second quarter of 2019, primarily due to lower Venue data room activity, partially offset by increases in ActiveDisclosure subscriptions as well as increases in our other compliance software solutions. As we anticipated, the COVID-19 pandemic and its impact on the capital markets accelerated the preexisting slump in M&A, negatively impacting Venue revenue in the quarter, driving down activity and new rooms opened during April and May before seeing an uptick in June. ActiveDisclosure had a solid second quarter albeit down from previous quarters in terms of growth as net new customer additions slowed temporarily due to fewer IPOs being available for cross-sell as well as several firms choosing to delay adoption due to COVID-19.

Non-GAAP adjusted EBITDA margin for the segment was 16.4%, a decrease of 560 basis points from the second quarter of 2019. The decrease in non-GAAP adjusted EBITDA margin was primarily due to lower Venue revenue, which typically carries high margins plus higher variable compensation, partially offset by the impact of ongoing cost control initiatives.

Revenue in our Capital Markets - Compliance and Communications Management segment was $120.8 million in the second quarter of 2020, a decrease of 5% from the second quarter of 2019, primarily due to lower capital markets transactional activity as well as lower proxy and traditional compliance printing value. As expected, the slowdown in transactional activity in April and May that I discussed when detailing Venue's performance also impacted our traditional transactional offerings, with IPO and M&A-related transactional activity being down significantly early in the quarter before strongly rebounding in June. Debt-related transactional activity remained strong, providing a revenue lift in the quarter. Compliance revenue was down in the quarter, primarily due to lower compliance printing volume and fewer large proxies.

Non-GAAP adjusted EBITDA margin for the segment was 40.8%, an increase of 570 basis points from the second quarter of 2019, with adjusted EBITDA increasing by nearly $5 million from the second quarter of 2019 on lower overall segment revenue. The increase in non-GAAP adjusted EBITDA margin was primarily due to the impact of ongoing cost control initiatives.

Revenue in our Investment Companies - Software Solutions segment was $15.8 million in the second quarter of 2020, an increase of 1.3% from the second quarter of 2019 due to increased FundSuite Arc subscriptions. FundSuite Arc revenue growth in the quarter, while positive, was below its longer-term historical growth rate, in part due to several clients either slowing or delaying implementations due to operational challenges being presented by COVID-19. The good news is that we have a strong implementation pipeline building, including several new ArcPro contracts won in the second quarter and have the ability to onboard these clients when they are able to proceed. Given this, we expect FundSuite Arc activity to pick back up in the coming quarters as these implementations start moving forward.

Non-GAAP adjusted EBITDA margin for the segment was 23.4%, an increase of over 2,000 basis points from the second quarter of 2019. The large increase in non-GAAP adjusted EBITDA margin was primarily due to ongoing cost control initiatives as well as cost savings related to our ArcRegulatory solution in Europe where we gained significant efficiencies by moving from an outsourced to an in-house solution.

Revenue in our Investment Companies - Compliance & Communications Management segment was $85.6 million in the second quarter of 2020, an increase of 2% from the second quarter of 2019, primarily due to the increased mutual fund transactional print volume, partially offset by lower commercial and compliance print volume. We had 2 large mutual fund proxies complete in the quarter compared to only 1 in the second quarter of 2019. These 2 deals accounted for approximately $3.2 million of additional transactional revenue year-over-year, offsetting minor decreases in other fund-related compliance volume as well as a decrease in commercial print revenue, primarily related to contracts we are exiting in connection with our manufacturing platform optimization.

Non-GAAP adjusted EBITDA margin for the segment was 13.8%, an increase of 370 basis points from the second quarter of 2019. The increase in non-GAAP adjusted EBITDA was primarily due to the impact of ongoing cost control initiatives as well as the increased transactional activity. Our second quarter 2020 non-GAAP unallocated corporate expenses were $9.2 million, an increase of $4.6 million from the second quarter of last year. The increase in unallocated corporate cost was primarily due to increased variable compensation, consulting fees related to the execution of our cost savings initiatives across the company and higher benefits-related costs, partially offset by the impact of ongoing cost control initiatives within corporate.

Free cash flow in the quarter improved by $12.5 million from the second quarter of last year, primarily due to higher EBITDA, the timing of cash tax payments, lower cash interest, lower capital spending, partially offset by higher cash restructuring. As we have discussed on the last several calls, we are actively engaged in projects to improve our quote-to-cash processes with the goal of driving quicker cash conversion. We made good progress again in the second quarter, improving DSO by nearly 4 days from last year's second quarter. And a little over a month into the third quarter, free cash flow continues to track well ahead of this point in last year's third quarter.

We ended the quarter with $350.7 million of total debt and $313.3 million of net debt, including $120 million drawn on our revolver and had net available liquidity of just over $217 million. As of June 30, 2020, our net leverage ratio was 2.1x, down 1.0x from a year ago.

We expanded our Capital Markets - Compliance Software Solutions footprint this quarter when we announced our partnership with Galvanize, an award-winning developer of cloud-based security, risk management, compliance and audit software. Our partnership with Galvanize provides our clients with a complete GRC solution that includes industry-leading internal controls, SOX compliance, operational audit and enterprise risk management software solutions. As such, we sold our remaining investment in AuditBoard, receiving proceeds of $12.8 million in the second quarter of 2020. We did not repurchase any shares in the quarter, ending the second quarter with 33.8 million shares outstanding. Our remaining share repurchase authorization is $21.2 million.

Next, I want to provide some color around the guidance as well as our outlook for the third quarter. As Dan mentioned earlier, we are pleased with our strong second quarter results. However, as I have noted a number of times over the last few years, the transactional pieces of our business are challenging to forecast regardless of the economic environment, and the current circumstances make it even more so. Given the challenging visibility on approximately 40% of our business, we are not providing full year guidance at this time.

Regarding our outlook for the third quarter, we are expecting revenue to be in the range of $180 million to $190 million, down approximately 5% to 6% from the third quarter of 2019 due largely to the anticipated impact of the macroeconomic landscape on our capital markets transactional and Venue offerings. For size context, these offerings generated approximately $69 million of revenue in the third quarter of 2019.

Regarding profitability, we expect our non-GAAP adjusted EBITDA margin to be approximately flat to the third quarter of 2019 as the impact of the anticipated decline in capital markets transactional and Venue revenue is expected to be offset by the impact of our ongoing cost savings initiatives.

I'll now pass it back to Dan who will provide second quarter business highlights as well as an update on our manufacturing platform optimization. Dan?

Thanks, Dave. In closing, I'd like to highlight a few items. I'm very pleased with the increased velocity we are seeing in our software development efforts. The recent changes we made to better align our product management, software development and IT functions is allowing us to deliver the features our clients want and will pay for more quickly. Our clients have been very receptive to our existing solutions as well as new offerings that we are bringing to market. For example, we teamed up with Leading BioSciences, Inc. to leverage Venue to manage remote monitoring of their recent COVID-19 study. By leveraging Venue's powerful feature set, LBS was able to reduce study costs, increase efficiency, maintain a safe work environment and abide by all local, state and federal guidelines while conducting their study. Going forward, LBS plans to incorporate Venue as part of its new normal for managing clinical trial monitoring.

Driving additional growth in capital markets software, specifically eBrevia, is the need to transition contracts away from the use of LIBOR. Identifying LIBOR references and contracts as well as potentially relevant fallback language is an important element in a complex transition that firms around the world will manage for the next few years. A lack of clarity on LIBOR's replacement is an additional challenge that can slow down preparations, increasing the value of technology solutions that speed up the process.

In support of our transactional business, the combination of Venue and eBrevia is opening up opportunities for us to expand upon our existing customer relationships to generate buy-side revenue and transactions by accelerating the due diligence process, precisely at the time buyers and their counsel need it most. Following the deal, the software can also assist with post-merger contract migration to further solidify the relationships. This powerful combination also enabled DFIN to more seamlessly introduce Venue to law firms, audit consulting firms, corporations and financial institutions leveraging eBrevia for their ongoing contract analytics needs.

Also in our transactional business, we transformed our production platform and service delivery model during the quarter to adapt to our clients' need for a fully virtual experience. And by doing so, we were able to support SelectQuote in the first all-virtual IPO on the New York Stock Exchange. What differentiates our approach from others in the marketplace is that we were able to replicate the in-person experience, leveraging a variety of video conferencing options that unite our technology and the deal team. This has provided our clients immediate and personalized access to our service teams in confidential video breakout rooms.

In addition, we've seen an uptick in our clients collaborating with our service teams on transactional documents using our ActiveDisclosure platform. This combination has allowed us to take companies to the public markets even faster than in the physical world of the past. This was truly a remarkable achievement, especially given the limited time frame we had to work with and highlights the domain expertise and ingenuity of our people and technology.

We also launched ArcDigital, our digital content distribution solution this quarter. ArcDigital brings to bear DFIN's distribution software design, leveraged for sales collateral, marketing communications and regulatory materials in a secure environment. Our client sales teams can access content for multichannel distribution and real-time reporting, all with add-to-cart simplicity. Pairing ArcDigital with ArcPro allows us to provide our investment companies' clients with software-based solutions to manage the complexities of content management and digital distribution in a post-SEC rule 30e-3 and 498A environment where physical distribution of compliance documents will be significantly diminished.

Staying with SEC rules 30e-3 and 498A and the associated anticipated drop in demand for printed materials in the mutual fund and variable annuity areas, I wanted to provide some additional detail on our platform optimization actions. As disclosed in a recent 8-K, we made the decision to consolidate our East Coast manufacturing operations. Additionally, we will be closing our Charlotte, North Carolina manufacturing facility at the end of the third quarter this year. These decisions were not taken lightly nor were they easy to make. We appreciate all the great work our employees in the impacted facilities have done over the last several decades, including excellent performance and resilience during the pandemic. We are doing everything we can to support them in this transition.

Regarding our expectations for the financial impacts of our manufacturing platform optimization efforts, we continue to expect print and distribution revenue in our Investment Companies - Compliance and Communications Management segment could be reduced by $130 million to $140 million in 2021. We have, however, lowered our range for the expected reduction of non-GAAP adjusted EBITDA by $5 million to $5 million to $10 million and continue to work to mitigate the profit impact further.

In closing, we've made many tough decisions to streamline our business in preparation for the upcoming SEC rule changes. These changes were necessary to rightsize the organization to operate in an environment where compliance documents are increasingly being created and distributed digitally as well as to help to ensure our continued profit growth during this challenging period. I'm proud of how the organization has pulled together to take on these challenges and focus on serving our clients well.

Through our continued financial discipline and prudent capital allocation, we've improved the balance sheet and derisked the company, creating capacity to accelerate our strategy and opportunistically return capital to shareholders. While there is still significant uncertainty in the environment and some of our end markets, we will continue to provide you with transparency into our business results and drivers to allow you, our shareholders, to track our progress against our stated objectives. The actions we took in the second quarter, combined with the investments we are making, firmly position us to continue to drive strong results through the remainder of 2020 and into the future.

Now with that, operator, we're ready for questions.

(Operator Instructions) Your first question comes from Pete Heckmann with D.A. Davidson.

I just wanted to see if you could comment on the notable uptick in higher-quality SPAC and how Donnelley might be participating with some of those. As well, if you could talk about the IPO pipeline that you see here at the back half.

Sure. Thanks, Pete. Yes. So clearly, you have seen the uptick in SPAC activity, and we've become a much larger player in that area as both activity has increased and the quality of SPACs out there has as well. And so when we look at our overall share there, it's an increasing amount over what historically was a market that we didn't have as large of a presence. The IPO market showed a nice uptick and broadly transactional showed a nice uptick throughout the quarter. June was a good month in terms of pricing. And we continued to see a pretty robust market in IPOs in filings, which will obviously be future pricings.

Got it. Got it. And then, Dave, could you revisit that number? I missed it. For the third quarter of '19, just how much transactional revenue and Venue was as a percent of revenue in the year-ago period?

Yes, Pete. So -- and I think I misspoke in the prepared remarks, the -- I said $69 million in the third quarter of '19 was transactional and Venue, and that was just the U.S. component. On a worldwide basis, the combination of transactional and Venue was $83 million.

Okay. Got it, got it. And then just one last follow-up. Remind me, with Venue, does Venue typically cater to the complex corporate restructuring environment? And so would you expect to see any benefit from higher Chapter 11 activity?

Yes. We've seen some activity there, the sweet spot for Venue, we've seen really good success in health care. And it's focused principally on M&A but we also are heavily involved in serving the bankruptcy market, so would expect some benefit there.

(Operator Instructions) Your next question comes from Charles Strauzer with CJS Securities.

A couple of questions for you. First of all, maybe you could provide a little bit more deeper detail in Q2 from the contribution from transactions in the quarter, also looking at how much came from kind of cost reductions and the incremental EBITDA margin from that extra transactional work.

Yes, Charlie. So when we look at transactional in the quarter, still down slightly on a year-over-year basis but certainly picked up as we talked about in June. If you look at our -- from a total revenue perspective, we saw in April, when we gave the guidance or the outlook for the quarter in early May, we had visibility to April. April revenue was down 9%. May was down 13%. And then the big uptick, as we noted, came in June, and total revenue for the company was up 23% year-over-year. And so when we looked at where that came from, a lot of the change in trajectory was really driven by the IPO market, some increased debt activity as well as the Venue activity picking up.

And then from a contribution perspective, as we talked about, historically, we see very good incremental margins as that activity picks up. In addition, as you noted, the cost savings initiatives really helped enhance the margin expansion that we were able to deliver. Some of that, obviously, was actions that we took in the back half of 2019 and that were -- was going to be starting to overlap some of those. But also some of them were related to new actions that we've taken really throughout the first half of the year.

Great. That's helpful. And then just picking up on what Pete was asking before, just about the Q3 outlook. It definitely seems like you're factoring in some continued pickup in activity, IPOs and M&A. It seems like July was still a pretty healthy month for that activity, and then you're starting to see some pretty big M&A deals being announced. How much are you factoring in, in terms of the usual August slowdown? And are you seeing, potentially in the pipeline, any potential pickup in September again that could cause those -- the outlook to be kind of conservative on this basis?

Yes, right. So -- and obviously, you named a lot of the variables that impact that part of the business. So when we think about the momentum obviously coming out of June and into July with a pretty strong pipeline, feel pretty good about the third quarter. Obviously, the August time frame does typically slow down. I think when you look at last year, you may recall that we had 2 large deals that we referenced, the clients actually both ended up withdrawing their transactions in the third quarter of last year, but the value of those deals, to us, was pretty good in the third quarter of last year. So without the specific visibility on anything that might be that large to cover those, I guess I'd say we're cautiously optimistic. If the momentum continues, things can be better. But as we've talked about, they can change pretty quickly in either direction.

Yes. And the only thing I'd add there is just -- sorry, one thing to add is, continue to see good activity, particularly as folks get back to a new normal and are able to set a price on assets from an M&A perspective. Clearly, the timing of when the final transaction gets completed is always a question or a bit of a wildcard. But otherwise, feel good about our market position and getting our fair share, more than our fair share, both to Pete's question as SPACs have improved in quality and then also in the broader M&A environment. But calling timing's always a bit rough with the election in front of us and, to Dave's point, a couple of larger deal comps that we had last Q3.

Excellent. And just one last follow-up. Just if I can get a little bit more color, maybe from Dave, on the LSC pension obligation that you called out, a little bit more background and color and how we should think about it kind of going forward.

Yes. So as we talked about in the prepared remarks, Charlie, they were pre-spin liabilities of R.R. Donnelley. They got allocated to -- across the 3 companies. We took a very, very small portion. But as I mentioned, both DFIN and RRD are jointly and severally liable if LSC defaults on those payments. And so they have missed a handful of payments. As I mentioned, we and RRD have shared the interim payments. There'll be a true-up process there. I think when you look at, on an undiscounted basis, the LSC payments are just over $100 million over the next 15 years. And those payments range from anywhere from $1.5 million to $8.5 million per year. And that's on a pretax basis. So when you look from a cash flow perspective, you'd get a tax benefit on those payments. And obviously, depending on the portion that gets allocated to DFIN would be, in our estimation, obviously much lower than the full amount.

And is it an equal split between you and RRD or is it kind of more pro rata?

In -- the interim payments are 50-50 split and those will be trued up in accordance with the final allocation agreement.

(Operator Instructions) And we have no further questions queued up at this time. I'll turn the call back over to Dan Leib, CEO, for closing remarks.

Thank you very much. Thanks for the call, and we will look forward to connecting with everyone in about 90 days or so. Thank you. Bye.

This concludes today's conference call. You may now disconnect.