DFS Annual Report

To Fellow Shareholders: I am excited to be writing to you in this inaugural shareholder letter for Donnelley Financial Solutions. Having spun off from RR Donnelley in October 2016, Donnelley Financial Solutions is now uniquely positioned to further enhance our standing in the evolving market for compliance and risk solutions while providing our clients confidence in a complex regulatory environment. Across each of our offerings worldwide, Donnelley Financial Solutions continues to deliver to our clients both service and technology solutions that create, manage, securely store, translate, disclose and disseminate critical business content. Notably, we continue to support our clients and evolve in an increasingly complex and evolving worldwide regulatory environment. Whether it be a capital markets debt offering, an investment company special fund proxy, a virtual data room for a multinational merger or a life sciences document in multiple languages, we serve our clients in a timely, accurate and data driven market. At the heart of each of our offerings we deliver technology that results in productivity gains associated with electronic delivery, process automation and digital data. Donnelley Financial Solutions is intensely focused to invest and partake in the growing end- market for valuable data and its management. We are encouraged by this opportunity. We are also encouraged that capital markets transactions seemingly have inflected from the depressed 2016 levels. As we have noted, the 2016 IPO market and M&A volumes declined approximately 40% and 20%, respectively, compared to 2015. This part of our business is subject to the cyclicality of the capital markets, driven by economic performance, market volatility, sentiment, our clients’ and prospects’ access to alternative capital sources and specific events, such as last year’s Brexit referendum and the US Presidential election. In the near term, capital markets transactional revenue will continue to have the strongest influence on our consolidated profitability, given the inherently higher margin in this offering. We have strong competitive advantages and believe we have scaled our capital markets transactions business to generate solid margins in both up years and down. While the impact of a softer market for transactional activity challenged 2016 performance, we did have a number of successes, especially in areas where revenue is recurring in nature: • Total revenue from our Venue Dataroom software offering grew by 20%. Through our development efforts and partnerships we have expanded the use cases for Venue. In December, Venue was recognized with the Virtual Dataroom of the Year Award from the Global M&A network. • Our worldwide Language Solutions business, which derives its revenue primarily from the financial, life sciences and legal industries, captured over 500 new clients and grew revenue by 9%, continuing a multi-year trend of strong revenue growth. • In our Investment Markets offering, we experienced continued revenue growth in Content Management, as clients look for efficiencies in content production and workflow solutions to help reduce costs and risk. We are pleased with the progress we are making in these recurring revenue offerings. While a return to a more normalized IPO and M&A market will strengthen our results, on balance, we will target investments that can drive a shift in our mix of revenue to one that is more recurring in nature, and therefore, more predictable over the long run. While still in the early days as a standalone company, I’m encouraged by the opportunity we have to build new offerings in governance, risk and compliance, expanding from our core compliance capabilities. The ability to deliver more comprehensive solutions within large, evolving markets, and leverage our brand, customer relationships and strong service backbone, provides opportunities to drive growth. We plan to capitalize on these exciting dynamics and believe that Donnelley Financial Solutions is poised to drive value for its shareholders. We and our Board of Directors prudently will evaluate our uses of cash, including debt reduction, investments in growth and potential return of capital to you, our shareholders. At the time of the spin from RR Donnelley we had $637 million of debt. In our first quarter as a standalone company, we paid off $50 million of debt and will pay off an additional $68 million upon receipt of the payment due from RR Donnelley in April 2017. This reduction in debt will happen concurrently with increased investment in our growing software product offerings. Coupled with our expected performance in 2017, we expect to approach the top end of our targeted leverage range of 2.25x to 2.75x by the end of 2017. I thank you for your investment and look forward to updating you on our progress to drive value in the shares of Donnelley Financial Solutions for years to come. Sincerely, Daniel N. Leib Chief Executive Officer