Donnelley Financial Solutions

Transcription

1 S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L September 2016 Donnelley Financial Solutions

2 Safe Harbor Donnelley Financial Solutions Cautionary Statement Regarding Forward Looking Statements To the extent any statements made in this presentation contain information that is not historical; these statements are forward-looking in nature and express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause Donnelley Financial Solutions future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: the competitive market for our products and industry fragmentation affecting our prices; changes in technology, including electronic substitution and migration of paper based documents to digital data formats; the volatility and disruption of the capital and credit markets, and adverse changes in the global economy; the effects of global market and economic conditions on our customers; the effect of economic weakness and constrained advertising; uncertainty about future economic conditions; increased competition as a result of consolidation among our competitors; our ability to successfully integrate future acquisitions; factors that affect customer demand, including changes in postal rates, postal regulations and service levels, changes in the capital markets, changes in advertising markets and customers budgetary constraints; vulnerability to adverse events as a result of becoming a stand-alone company following separation from RRD; our ability to access debt and the capital markets due to adverse credit market conditions; the effects of seasonality on our core businesses; the effects of increases in capital expenditures; changes in the availability or costs of key materials (such as ink and paper) or in prices received for the sale of byproducts; performance issues with key suppliers; our ability to maintain our brands and reputation; the retention of existing, and continued attraction of additional customers and key employees; the effect of economic and political conditions on a regional, national or international basis; the effects of operating in international markets, including fluctuations in currency exchange rates; changes in environmental laws and regulations affecting our business; the ability to gain customer acceptance of our new products and technologies; the effect of a material breach of security of any of our or our vendors systems; the failure to properly use and protect customer and employee information and data; lack of market for our common stock; potential tax liability of the Distribution; lack of history as an operating company and costs associated with being an independent company; failure to achieve certain intended benefits of the Separation; failure of RRD or Donnelley Financial to satisfy their respective obligations under transition services agreements and other risks and uncertainties detailed under Risk Factors in Donnelley Financial Solutions Registration Statement on Form 10 filed with the Securities and Exchange Commission. Forward-looking statements speak only as to the date on which they are made, and Donnelley Financial Solutions undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise. 2

3 Non-GAAP Financial Measures This presentation provides information about free cash flow, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA margin and segment Non-GAAP Adjusted EBITDA margin, which are non-gaap financial measures. Donnelley Financial Solutions believes that certain non-gaap measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the company s operating performance. Internally, Donnelley Financial Solutions uses this non- GAAP information as an indicator of business performance, and evaluates management s effectiveness with specific reference to these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. This presentation includes a reconciliation between free cash flow, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA margin and segment Non-GAAP Adjusted EBITDA margin and their comparable GAAP measures. Non-GAAP Adjusted EBITDA and Free Cash Flow Non-GAAP Adjusted EBITDA is defined as income from operations adjusted for depreciation and amortization, restructuring, impairment and certain other charges and purchase accounting inventory adjustments and acquisition-related expenses. Free Cash Flow is defined as net cash from operating activities less capital expenditures. Non-GAAP Adjusted EBITDA and free cash flow are not recognized terms under GAAP and do not purport to be an alternative to net income or net cash from operating activities as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, Non-GAAP Adjusted EBITDA is not intended to be a measure of free cash flow available for management s discretionary use, as it does not consider certain cash requirements such as tax payments and debt service requirements. Each adjustment and the reasons the Company considers them appropriate for supplemental analysis should be evaluated. In evaluating Non-GAAP Adjusted EBITDA, one should be aware that in the future the Company may incur expenses similar to the adjustments included above. The Company's presentation of Non-GAAP Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or non-recurring items. Additionally, since not all companies use identical calculations, the presentation of Non-GAAP Adjusted EBITDA may not be comparable to similarly titled measures of other companies. 3

4 Presenters Dan Leib Chief Executive Officer Donnelley Financial Solutions EVP and Chief Financial Officer RR Donnelley Dave Gardella Chief Financial Officer Donnelley Financial Solutions SVP Finance RR Donnelley 4

5 Agenda Spinoff overview Company overview Investment highlights Financial considerations Appendix 5

6 Spinoff Overview 6

7 Spinoff Overview Spinoff Details Issuer: Ticker / Listing: Donnelley Financial Solutions, Inc. DFIN / NYSE Shares Distributed: 26.2 Million Shares (c %) Distribution Date: October 1, 2016 Transfer Agent: Computershare Trust Company 7

8 Executive Summary On August 4, 2015, RR Donnelley announced its intent to split into three independent, publicly traded companies through the tax-free spinoff of Donnelley Financial Solutions ( DFS ) and LSC Communications ( LSC ) Internal soft-spin completed on July 1, 2016 DFS and LSC will start regular way trading on the NYSE on October 3rd, 2016 When issued date of September 21st, 2016 Key benefits of the separation: Enhanced flexibility to execute distinct business strategies Valuations more accurately reflect distinct business characteristics Flexibility to optimize capital structures and investment policies Tailored corporate policies Existing bonds will remain at RR Donnelley with proceeds from DFS and LSC financings used to reduce debt at RR Donnelley RR Donnelley will retain 19.25% equity in each SpinCo entity for further deleveraging within one year of the spinoff Centerview Partners LLC and BofA Merrill Lynch are serving as financial advisors to RR Donnelley; J.P. Morgan and BofA are leading the financing and liability management for the spincos 8

9 Overview Compelling benefits of separation Creates three publicly traded industry leaders Separation to provide significant strategic and financial benefits Increased management focus to pursue tailored business strategies Continue to develop Multi Channel Communications Management strategy (RR Donnelley) Leader in transition to a content management, e delivery, digital, data business (DFS) Cost leadership and industry consolidation (LSC) Tailored management incentive plans aligned with financial and operating profiles Flexibility to optimize capital structures capital allocation to drive appropriate investment policy Ability to attract long term investor base appropriate for each company Enables investors to value each company separately New management teams DFS Dan Leib CEO (formerly CFO of RRD) Dave Gardella CFO (formerly SVP Finance of RRD) LSC Tom Quinlan CEO (formerly CEO of RRD) Drew Coxhead CFO (formerly Chief Accounting Officer of RRD) RR Donnelley Dan Knotts CEO (formerly COO of RRD) Terry Peterson CFO (formerly CFO of Deluxe Corporation) 9

10 Strategy for Success Print Unique Industry Dynamics are Creating Different Paths to Success for Key RRD Businesses Donnelley Financial Solutions LSC Communications RR Donnelley Financial Publishing, Retail and Office Products Product Promotion & Logistics Variable Print Global Capital Markets Magazines, Catalogs, and Retail Inserts Packaging & Related Products Commercial & Digital Print Books Global Turnkey Solutions Direct Mail Global Investment Markets Logistics Services Statements Directories Business Process Outsourcing Labels Language Solutions Office Products Digital & Creative Solutions Forms Investment in technology/workflow Focus on content collaboration & data analytics Quickly adapting to changing regulatory requirements Cost optimization & efficient capacity utilization Strategic consolidations and alliances Leveraging print and supply chain optimization capabilities Expanding scope of offerings to existing customers Providing integrated multi-channel communications offerings and workflows for targeted segments Investing to broaden print and digital technology platforms Ongoing development of industry leading content management, data analytics and multi-channel capabilities Customized multi-channel communications management 10

11 Creates Three Industry Leading Companies Donnelley Financial Solutions LSC Communications RR Donnelley 2015 net sales mix Lang Sols 4% Inv Mgt 33% Int'l 14% Cap Mkts 49% Office Products 15% Directories 4% Europe 8% Book 25% MCR 48% Int'l 28% Strategic Services 23% Variable Print 49% 2015 net sales EBITDA margin $1B $3.7B $7B High teens low 20s Low double digits High single digits Capital intensity Asset light Low incremental Low to medium (asset light logistics) Long-term target gross leverage 2.25x to 2.75x 1.75x to 2.25x 2.25x to 2.75x Description Provides data management and analytics solutions to the corporate filing and global financial community One-stop shop for content creation, collaboration, management, and distribution Produces and distributes magazines, catalogs, retail inserts, books, office products and directories Diversified scope of print-related capabilities Serves publishers, merchandisers and retailers globally making the supply chain more efficient Creates, manages and executes customer-specific marketing and business communications strategies Provides comprehensive solutions that reduce supply chain and organizational inefficiencies Manages related data analytics and digital content management services 11

12 Company Overview 12

13 Donnelley Financial Solutions Description We create, manage and deliver accurate and timely financial communications to investors and regulators Customers include: corporations, mutual funds, hedge and alternative investment funds, private equity firms and insurance companies Also provide language translation and localization services We have a diverse product and client portfolio with strong recurring revenues Market leader in compliance and compliance related communications Two reportable segments, US and International; with three divisions in the US: Global Capital Markets, Global Investment Markets and Language Solutions We help clients with technologies and services to facilitate with: Filing compliance-related documents Communicating with shareholders Buying and selling companies Going public and raising debt/equity Localizing communications Regulations drive the need; technology drives delivery 69 facilities (66 leased + 3 owned) worldwide 41 in the US and 28 internationally Summary financials ($mm) $1,085 $1,080 $1,050 $1,008 (1%) Net sales and growth (3%) LTM Q Non-GAAP Adj. EBITDA / margin 1 $211 $226 $219 19% 21% 21% $193 21% 19% LTM Q Net sales (reporting unit) Select clients 4% 14% 49% 33% 1 EBITDA is adjusted for restructuring, impairments, pension charges and other non-gaap items 13

14 Evolution Towards Service and Software Offerings DFS has enhanced its offerings through organic investments, strategic partnerships and acquisitions Organic developments Providing content management since late 1990 s Strategic partnerships (2015 investment) (2015 investment) Acquisitions PROSPECTUS CENTRAL (2008 partnership) D D (2009 partnership) Building on our 30-year heritage to meet evolving needs of clients worldwide 14

15 Services Dynamics Key Trends Across the Various Solutions Transactions Filing requirements of diverse capital markets transactions Debt, equity, M&A, IPO, secondary offerings Decision maker includes: CFO, General Counsel Influencers are investment banks and outside legal counsel Consultative sales force and robust client service Transactions driven by market events Long-standing client relationships Compliance Support Filing requirements for regulatory purposes 10-Qs, 10-Ks, proxies, 8-Ks, Sarbanes Oxley Decision maker includes: CFO, Controller, Director of Accounting XBRL data tagging ActiveDisclosure: Hybrid solution of full service and do-ityourself workflow tool Consultative sales force and robust client service Quarterly and annual software subscriptions; longstanding client relationships Filings and content origination/ management (IPO docs, proxies, PPMs) Venue Virtual Data Rooms Regulatory Filings ActiveDisclosure File 16 / Netfiler EDGAR / SEDAR Reporting Management Solutions EDGAR Pro Regulatory Filings ActiveDisclosure File 16 / Netfiler EDGAR / SEDAR Data and Analytics Reporting Management Solutions I-Metrix Xcelerate 15

16 Services Dynamics Key Trends Across the Various Solutions (cont.) Investor Communications Provide mutual funds and insurance companies with compliance-related content management and distribution Provide healthcare companies with regulatory driven distribution of pre-enrollment and post-enrollment materials FundSuiteArc manages content and distribution of marketing, prospectus and performance materials 3-5 year contract terms Language Full range of products and services: translation, interpreting, transcreation, multilingual typesetting, software localization and voiceover Over 5,000 in-country linguists capable of translating into 140 languages Market-leading MultiTrans Translation Management Solution 3-5 year contract terms FundSuiteArc content management ArcFiling Shareholder report solutions Fund marketing and fund fact sheet edelivery of all investor communications Post-sale trade data Right Prospectus & icompli Translation services Comprehensive localization portfolio Editing Interpreting Proof-reading Multilingual typesetting RightProspectus 16

17 Global Capital Markets - Overview Description Provides a comprehensive suite of products and services that help GCM clients comply with disclosure obligations including the creation, management and delivery of accurate and timely financial communications GCM overview: Offers compliance services on regularly filed documents (10-K,10-Q) Provides services for equity, M&A and debt transactions Acts as the filing agent in transactions Services overview: Software as a Service ( SAAS ) Venue: Virtual Data Room Active Disclosure: cloud based tool used for the creation of financial disclosures Data and Analytics: data extraction of interactive financial data and flexible API Managed Services EDGAR Filing Services: fully integrated SEC filing service XBRL Advisory Services: web based platform that provides extensible Business Reporting Language Historical net sales and growth ($mm) $546 $527 $517 (4%) (2%) $ LTM Q Recurring (compliance) 1 48% Net sales and growth Recurring (compliance) 1 vs. transactional (2015 net sales) Transactional 52% Collaborative business reporting Content collaboration: real-time collaboration and sharing capabilities to support any task or project Management & workflow: power mission-critical processes with ActiveDisclosure / Venue workflow engines and ActiveLink Governance & compliance: file with government agencies and communicate with shareholders built on a deep knowledge of regulations Consulting services: focus on solving clients most critical business reporting issues 1 Represents required compliance work (i.e. 10-K, 10-Q) that is driven by regulatory agencies Competitive differentiators Trust: long history as a trusted service provider Scale: global, tenured service team, service center network and technology Clients: relationships with high level decision makers Domain expertise: deep knowledge of SEC regulations and filing requirements Technology wrapped in service: easy to use, intuitive and innovative technology platforms 17

18 Global Capital Markets Complete Lifecycle Venue Deal Management Solutions EDGAR Filing Services RRD ActiveDisclosure Disclosure Management Services Integrated Services XBRL Advisory Services Conferencing Facilities Investor Communication Services Print Services Private Company IPO Public Company Growth Venue Virtual Data Room Transactions & M&A activity Venue Virtual Data Room Due diligence Roundtable Corporate repository Venue Virtual Data Room Transactions & M&A activity ActiveDisclosure Due diligence Financial reporting Transactions & M&A activity EDGAR Filings S-1 RRD File16 Forms 3, 4 & 5 Venue Virtual Data Room Composition & Printing 10-K, 10-Q & other SEC filings 10-K, 10-Q & other SEC filings EDGAR Filings Composition & Printing 10-K, 10-Q, Section 16, S-4 & 144A S-3, S-4 & 144A Composition & Printing IPO & prospectus ActiveDisclosure 10-K, 10-Q & other SEC filings ActiveDisclosure 10-K, 10-Q & other SEC filings XBRL Reporting 10-K, 10-Q & registration statements XBRL Reporting 10-K, 10-Q & other registration statements 18

19 Deal Sourcing Deal Flow Management Deal Marketing Automation Data & Analytics Due Diligence Contract Analytics Document Collaboration Roadshow Support Investor Reporting Board Communications File Share & Collaboration Global Capital Markets VENUE Transactional execution Secure, turn-key virtual data room enabling distribution of highly privileged information between parties involved in transactions or regulatory filings Management of access and permissions at the document and folder levels Optimization for maximum transfer speed, accelerating every process Globally localized data room platform Industry-leading service with project manager support available 24/7 Member base of over 20,000 CEOs, advisors and investors Strategic partnerships On-going processes 19

20 Global Capital Markets ActiveDisclosure Client Accounting System RRD ActiveLink HTML Generation XBRL Generation Management Board Auditors Review Workspace Print Narrative Document Composition XBRL Validation Mobile SEC Filing Investor Deck Graphs and Charts ActiveDisclosure streamlines content creation, review and distribution: its collaborative platform improves efficiency, speeding up the financial close process 20

21 Global Investment Markets - Overview Description Provides products and services to US-based mutual funds, hedge and alternative investment funds, insurance companies and overseas investment structures for collective investments (similar to mutual funds in the US) Historical net sales and growth ($mm) Net sales and growth $347 $348 $339 $338 0% (3%) Transforms the creation and publishing of disclosure and marketing communication with content management solutions Financial regulators require market participants to communicate and disclose data-driven content about their products and services LTM Q Increasing pace of global regulatory change / standardization Regulators globally are adding new regulations requiring the more frequent submission of information and data in an attempt to reduce financial risk and improve disclosure Insurance / Healthcare 40% Net sales by market (2015 net sales) Transactional vs. recurring (2015 net sales) Transactional 4% Market participants need new tools and services to manage the increased requirement for creation and distribution of disclosure communication Mutual funds 60% Recurring (compliance) 1 96% Overview of services Competitive differentiators Storage and management of information in central repository Creation of reports, prospectuses, fact sheets and other marketing and disclosure documents Preparation and submission of 1940 Act and XBRL filings (extensible Business Reporting Language) Assists in efficient distribution of documents 12+ year average relationship with clients Average contract term: 3.2 years Segment leader at 37% of SEC filings (next largest provider 6%) Source: Management estimates based on filing agent information disclosed by the Securities and Exchange Commission 1 Represents required compliance work (i.e. 10-K, 10-Q) that is driven by regulatory agencies 21

22 Global Investment Markets Market and Customers Competitive dynamics Select GIM customers Edgar filings Mutual Fund Industry 2016 YTD Other Filers 31% Self-filers 22% Merrill 6% Donnelley Financial Solutions 41% Working relationship for over 30 years DFS is critical provider of regulatory printing and mailing, including sole provider for large proxy print and mailing ~7% revenue CAGR from 2011 to 2016E Donnelley Financial Solutions CompSci Interactive Converter Mutual Fund XBRL market share (by tagging software) 2016 YTD GoFiler Complete Data Communique FilePoint ProofPlus.com Workiva Iris Carbon DataTracks Ez-XBRL QXInteractive EDGARsuite 5% 5% 4% 3% 2% 2% 1% 1% 1% Source: Management estimates based on filing agent information disclosed by the Securities and Exchange Commission 1 Represents compliance work that is recurring in nature 10% 23% 43% Working relationship for over 18 years DFS is provider of choice for regulatory filing, content management and distribution ~6% revenue CAGR from 2011 to 2016E Working relationship for over 12 years Exclusive 5 year Arc Reporting agreement Largest user and reseller of Arc Reporting. Reseller of ArcProspectus ~11% revenue CAGR from 2011 to 2016E 22

23 Tool Task Global Investment Markets Complete Lifecycle Content management platform for efficient creation, management and distribution of regulatory communications Suite of applications that enables clients to create and file reports, prospectuses, fact sheets and other marketing and disclosure documents Storage and management of information in central repository Global Compliance Cycle Investment product communication (compliance cycle) Pre-sale Point of sale Post sale T+1 On-going Marketing materials Personalized letters Prospectus Web/online prospectus delivery Advisor presents printed prospectus Print confirm Print/mail prospectus Enrollment kits Print/Mail prospectuses, shareholder reports and other compliance materials FundCompli ArcMarketing ArcProspectus Translations Fulfillment e-consent 1 st Dollar Processing e-consent FundCompli RightProspectus e-delivery RightProspectus ArcProspectus ArcReporting e-delivery RightMix 23

24 Language Solutions / Other - Overview Description Description DFS s Language Solutions is a recognized and trusted localization brand providing a full range of linguistic products and services Fragmented market sustains attractive M&A opportunities to complement the organic growth for scaled providers like DFS Large market with attractive growth rates ( CAGR: 4.9%; E CAGR: 3.3%), $38.2bn market in 2015 (Europe 54%, the Americas 35%, Asia 11%) Language Solutions overview: Provides comprehensive localization including translation, technology and support for a variety of industries Has grown to support legal, life sciences, institutional and corporate communications in addition to DFS s traditional financial clients 600M Source Words Translated Yearly Most of our clients are $1B+ global companies 5,000+ Specialized Linguists Customized workflows for Each client Key facts 140+ Languages 98.6% on time delivery 25+ Years of Experience 100% Continuous improvement driven Historical net sales and growth ($mm) $44 Net sales and growth $44 $45 $42 (5%) 5% LTM Q Net sales by market 1 (2015 net sales) Legal 4% Life sciences 19% Corporate / Other 23% Financial 54% Competitive differentiators Innovative language technology under the MultiTrans brand Dedicated project managers with a +300-strong team Fast and proven quality system allows for specialized translation workflows, superior quality and fast turnarounds Large network of over 5,000 accredited translators supporting 140 languages Global network of translators with a 24/7/365 service delivery platform Strict confidentiality policies and technologies provide clients with high security solutions Source: Common Sense Advisory, Inc. The Language Services Market: Reflects language solutions net sales by market 24

25 International Description Description Provides transaction based services to international clients attempting to execute transactions in the US Offers products and services that assist international businesses to become regulatory-compliant with regulators, such as the SEC Summary financials ($mm) Net sales and growth $148 $164 $149 11% (9%) $138 Offers language solutions for international customers to operate globally Includes operations in Asia, Europe, Latin America, Australia and Canada Select clients LTM Q Non-GAAP Adj. EBITDA / margin 1 $24 $21 $18 $17 15% 14% 12% 12% LTM Q Net sales by geography (2015 net sales) Canada 17% Latin America 1% Asia 33% Europe 48% 1 EBITDA is adjusted for restructuring, impairments, pension charges and other non-gaap items 25

26 Investment Highlights 26

27 Key Investment Considerations 1 2 Comprehensive product suite in attractive end markets Strong client relationships and client service 3 Stable recurring sales and cash flow profile 4 Highly variable cost structure 5 Experienced and proven management team 6 Significant opportunities for growth 27

28 1 Comprehensive Product Suite in Attractive End Markets Language Solutions MultiTrans EasyLing Global Investment Markets Content Distribution & Web Hosting GIM multi-channel distribution ARC Content Mgmt GIM Software as a Service Global Capital Markets GCM Software as a Service Data & Analytics Transformation & Analytics GIM & GCM Key Products & Services Document Creation Regulatory Expertise SEC Filing XBRL Document Distribution Document Hosting Print, Bind, Fulfillment We believe DFS has the broadest product offering compared to current competitors We leverage innovative technology solutions with the collective business expertise of our team Our legacy full-service offering combined with evolving self-service tools provides unique value Given the complexity of the markets we serve, we serve a crucial role in GCM and GIM Ability to leverage customer relationships to land and expand 28

29 1 Comprehensive Product Suite in Attractive End Markets Peer metrics and product portfolio 2015A Peer Net sales ($mm) Non-GAAP Adj. EBITDA Margin Trading Multiple 1 Tech/ FinTech Professional services Regulatory / compliance Data $1, % N/A % 15.0x 2, % 12.8x 1, % 11.0x 2, % 12.7x 2, % 16.5x 1, % 13.1x % 11.4x % 7.0x 12, % 12.3x 145 NM N/M Source: Company filings and FactSet as of September 13, Represents enterprise value to 2016 non-gaap adjusted EBITDA 29

30 2 Strong Client Relationships and Client Service (GCM) We are the lead provider of compliance services on regularly filed documents (10-K, 10-Q) for many leading companies Provide GCM services to 379 of the S&P 500 listed companies and 685 of the Fortune 1,000 companies Capital Markets notable 2015 IPOs (market value of the deals) IPO segment share FY2015 DFS % Merrill 49 25% Vintage 11 6% Other Financial Printer 26 13% Total % $2,560mm $1,204mm $1,077mm $770mm $732mm Top 20 deals by value FY2015 DFS 15 75% Merrill 3 15% Vintage 1 5% Other Financial Printer 1 5% Total % $677mm $675mm $665mm $483mm $441mm $428mm $425mm $420mm $410mm Capital Markets 2015 WSJ top M&A transactions (market value of the deals) Sharehold ers $148,567mm $65,968mm $62,376mm $56,802mm $50,412mm $14,193mm $49,200mm $48,468mm $41,358mm $40,500mm $36,704mm $16,076mm $36,567mm $35,042mm $34,105mm $31,584mm $28,901mm $16,725mm $18,411mm Source: Management estimates, primarily based on third-party reports from CCH / WoltersKluwer, imetrix (RRD s Edgar Online tool), Wall Street Journal / Dealogic and renaissance Capital 30

31 2 Strong Client Relationships and Client Service (GIM) Service over 80% of the top mutual fund and insurance providers Mutual Funds & Providers Alternative Investments Investment Insurance Broker Dealers DFS is provider of choice for regulatory filing, content management and distribution First major hedge fund client to adopt ArcReporting as single reporting system First joint sale in Broker Dealer segment with partner Mediant Communications 30+ year relationship with Mutual Fund industry leaders Large clients with annual revenue across multiple services Largest International ArcReporting Hedge Administrator Key broker dealer clients in a market dominated by a single provider Exclusive 5 year agreement with the largest global service provider - $15mm/year US hedge fund administrator moving funds onto ArcReporting, 4 of 5 largest hedge administrators operate on FundSuite Arc Top 10 largest Annuity providers served by GIM 31

32 3 Stable Recurring Sales and Cash Flow Profile Net sales ($mm) Free cash flow ($mm) 3 $1,200 $900 $600 $300 Net sales Non-GAAP Adj. EBITDA margin $1,085 $1,080 $1,050 $1, % 20% 15% $150 $125 $100 $75 $50 $25 $120 Free cash flow 2 $97 3 Operating cash flow (% of sales) $94 3 $ % 16% 12% 8% 4% $ Q2 LTM Strong and stable recurring revenue from Business continues to evolve to services; 62% recurring revenue, 38% transaction Some cyclicality which Company continues to manage through diversified product and service offerings 10% $ Q2 LTM strong operating cash flow of $121 - $139 million per year Capex of $20 $29 million ( ); % of revenue Primarily IT systems development 0% Implemented a number of strategic initiatives to reduce overall cost structure, improve efficiency and continue to improve free cash flow Recent Q2 decline in Q due to EBITDA margin compression and working capital adjustments 1 EBITDA is adjusted for restructuring, impairments, pension charges and other non-gaap items ; 2 Free cash flow is calculated as operating cash flow less capital expenditures ; 3 Due to requirements for carve-out financials, 2014, 2015, & Q2 LTM cash flows include a portion of the pension plan not coming to DFS ($29mm in 2014, $25mm in 2015); on a go-forward basis DFS expects its obligation based on the portion of the pension taken to be $3mm annually 32

33 4 Highly Variable Cost Structure Estimated 2015 cost components as a % of net sales 100% variable 29% Outsource purchases % Direct materials 2 8.7% Cost of transportation 5.6% Incentive compensation 0.2% % variable 24% Sales compensation 10.5% <50% Variable Non-GAAP Adj. EBITDA 3 100% Variable Direct labor 9.5% Travel/Entertainment 1.9% Employee benefits 1.8% 50-75% variable 23% Admin compensation 0.7% Energy 0.4% 50 75% Variable % Variable Other 21.8% Less than 50% variable 3% Occupancy costs 2.5% Maintenance & repairs 0.7% Non-GAAP Adj. EBITDA 3 21% Outsourcing and management focus has led to a more variable cost structure 1 Includes print purchases, composition services, language solutions translators cost and other purchases 2 Includes paper, ink and packaging materials 3 EBITDA is adjusted for restructuring, impairments, pension charges and other non-gaap items 33

34 5 Experienced and Proven Management Team The Company s senior management team has extensive industry and company experience, with an average of 20 years of tenure with RRD Officer Current position Years with company Rick Crandall Chairman of the Board 4 Dan Leib Chief Executive Officer 12 Tom Juhase Chief Operating Officer 25 Dave Gardella Chief Financial Officer 23 Kami Turner Chief Accounting Officer 8 Jennifer Reiners General Counsel 19 Diane Bielawski Chief Human Resource Officer 30 Craig Clay Capital Markets 21 Eric Johnson Global Investment Markets 24 Christophe Djaouani Language Solutions 17 34

35 6 Strategic Priorities to Drive Profitable Growth Drive new recurring sales through product extension and expansion, smoothing cyclical exposure Selectively expand into new markets Continue to transform operational platform to manage overall business costs effectively Deliver exceptional client experience through a global platform with localized service culture Maintain disciplined approach to capital allocation 35

36 Prudent Financial Policy Targeting 2.25x to 2.75x gross leverage Leverage and liquidity Pension plans Strong free cash flow generation supports commitment to de-lever Combination of pre-payable and long term debt provides ability to efficiently pay down debt US pension plans closed and frozen; management of transferred assets and liabilities continue with previously implemented de-risking to reduce funded status volatility and minimizing required contributions As of April 30, 2016 underfunded obligation of $72mm Cash contribution of ~$3mm in 2016 Capital expenditures Historically invest in technology and workflow solutions (~2% of revenues) Mergers, acquisitions and partnerships Dividend policy Pursue selective strategic relationships and acquisitions to expand service offerings and broaden market reach Strategy governed by target leverage; intend to use a combination of cash and equity Credit Agreement limits the payment of dividends to $15mm Board of directors to review dividend quarterly 36

37 Financial Considerations 37

38 Summary Financial Overview ($mm) Net sales OCF & capex 2 $1,200 $1,000 $800 $1,085 $1,080 $1,050 $1,008 $200 $150 $139 OCF Capex 2 $125 $121 2 $600 $100 $95 2 $400 $200 $50 $20 $29 $27 $29 $ Q2 LTM $ Q2 LTM Non-GAAP Adj. EBITDA 1 FCF (OCF - capex) 2 $280 $150 $210 $211 $226 $219 $193 $125 $100 $120 2 $97 $94 2 $140 $75 $66 2 $70 19% 21% 21% 19% $50 $25 $ Q2 LTM $ Q2 LTM % Non-GAAP Adj. EBITDA margin 1 EBITDA is adjusted for restructuring, impairments, pension charges and other non-gaap items 2 Due to requirements for carve-out financials, 2014, 2015, & Q2 LTM cash flows include a portion of the pension plan not coming to DFS ($29mm in 2014, $25mm in 2015); on a go-forward basis DFS expects its obligation based on the portion of the pension taken to be $3mm annually 38

39 Recent Performance Net sales and growth rates ($mm) LTM 2Q 16 Total net sales $1,085 $1,080 $1,050 $1,008 Organic growth rate 1 2.2% 0.6% (1.0%) n/a Q2 and YTD 2016 Update Q2 Actual Q2 YTD (H1 Actual) ($mm) Δ Δ Net sales $309 $298 ($11) $579 $538 ($41) Business unit sales Non-GAAP Adj. EBITDA (8) (26) $1,200 International US Investment Markets US Language Solutions & Other US Capital Markets Non-GAAP Adj. EBITDA Margin 25.5% 23.9% (162) bps 22.4% 19.3% (317) bps $900 $600 $546 $527 $517 $487 Q2: Q2 16 Net Sales and EBITDA lower than Q2 15 by $11mm and $8mm, respectively, driven by lower volume of compliance related filings in the US Capital Markets reporting unit, as well as lower transactional volume in Asia. Cost-reduction actions implemented in Q2 16 partially offset impact of lower volume. Q2 16 organic revenue decline was ~1.8%, showing an improvement from Q1 16 s organic decline of ~10% $300 $ LTM 2Q '16 Q2 YTD: Q2 16 YTD 2016 Net Sales and EBITDA lower than YTD 2015 by $41mm and $26mm, respectively, primarily driven by lower worldwide transactional volume (in Q1 16), as well as lower compliance-related revenue. YTD 2016 EBITDA margin unfavorably impacted by negative operating leverage on lower overall volume an unfavorable work mix, related to the lower level of transactional volume in Q1 16, partially offset by cost reduction actions implemented in Q Organic growth rates pro forma for acquisitions and excluding impact of changes in fx rates; Based on historical reporting for Financial business segment, not adjusted for spin off 39

40 Appendix 40

41 Pension Overview Update of Standalone Costs and Shared Services Standalone costs Enterprise-level standalone costs of ~$11-16mm included in model, primarily related to IT, finance, legal, HR and executive leadership functions Corporate staff (finance, legal, etc.): ~$3-4mm per year IT infrastructure and staff: ~$ mm per year Employee benefits: ~$1-2mm per year Other public company costs: ~$ mm Transition services and commercial agreements Transition services agreements for certain support functions (IT, shared services, payroll, etc.), generally running months with an annualized net total of ~$3.3mm IT-related costs of ~$2.5mm Finance-related shared services (Accounts payable, credit and payroll) of ~$0.8mm Commercial agreements will be in place for various operational services (composition, fulfillment, logistics, etc.) DFS expects to receive a material benefit to SG&A on a go-forward basis ($10.8mm based on 2015A volume) due to revised pricing on the remaining logistics relationship with R.R. Donnelley Pursuant to the transition agreement, DFS will receive an additional $68mm in U.S. cash from R.R. Donnelley on or before April 1,

42 DFS Financial Statement Historicals Summary income statement ($mm) FYE 12/ Q LTM Sales $1,085 $1,080 $1,050 $1,008 COS Gross profit $401 $427 $418 $396 SG&A (incl. restructuring) D&A Income from operations $161 $91 $173 $148 Interest Investment and other income (0) (3) (0) (0) EBT $159 $92 $172 $147 Income tax Net Income $96 $57 $104 $90 Summary cash flow statement ($mm) FYE 12/ Q LTM Net earnings $96 $57 $104 $90 Non cash adjustments Impairment charges D&A Provision for doubtful accounts SBC Deferred taxes (6) (13) 10 5 Loss on pension settlement Other Changes in uncertain tax positions (1) (0) 0 0 Gain on investments 0 (9) 0 0 Change in assets and liabilities Accounts receivable 5 4 (10) (32) Inventories (1) Prepaid expenses 1 (1) 1 (6) Accounts payable 4 (6) 5 10 Income tax payable 2 2 (1) (2) Accrued liabilities (10) (51) (33) (16) Operating Cash Flow $139 $125 $121 $95 Capex (20) (29) (27) (29) Free cash flow $120 $97 $94 $66 Summary balance sheet ($mm) FYE 12/ Q 2016 Assets Cash and cash equivalents Receivables, less allowances Inventories Prepaid expenses and other current assets 7 13 Total current assets $191 $312 Property, plant and equipment - net Goodwill Other intangible assets-net Software - net Deferred income taxes Other noncurrent assets Total assets $818 $936 Liabilities Accounts payable Accrued liabilities Short-term debt 9 - Total current liabilities $124 $118 Note payable with affiliate Deferred compensation liabilities Other noncurrent liabilities Total liabilities $194 $188 EQUITY Total liabilities and equity $818 $936 42

43 Non-GAAP Adj. EBITDA Reconciliation Adjusted Non-GAAP EBITDA Years Ended Six Months Ended 6/30 Reconciliation of GAAP to Non-GAAP ($mm) Net earnings $96 $57 $ Restructuring, impairment and other Pension settlement charges Gain on sale of building - (6) Gain on equity investment - (3) Depreciation and amortization Interest expense Income tax expense Non-GAAP Adj. EBITDA $211 $226 $219 $130 $104 43

44 Case study Aeglea BioTherapeutics Aeglea BioTherapeutics, preparing for its initial public offering used our Venue and Active Disclosure solutions. Venue an online repository for the secure storage and sharing of confidential documents to provide key company documents to its lawyers and bankers. Active Disclosure a cloud based tool used for the creation of financial disclosures. Private Company IPO Public Company Growth Decision to go public - previously no relationship Venue Data Marketing communicated the value of the company to potential buyers Venue Virtual Data Room finalized S-1 with dedicated service team EDGAR Filings - filed documents with SEC ActiveDisclosure - provided collaborative solution for the creation, editing and distribution of filings Venue Virtual Data Room EDGAR Filings XBRL Reporting chose dedicated service team to ensure accuracy and integrity of XML-based filing requirements ActiveDisclosure Venue Virtual Data Room Potential secondary, debt and M&A transactions XBRL Reporting Proxy filings discussions with the company to service proxy statements requirements Data and Analytics discussions to analyze and process data requirements under the National Physician Payment Transparency Program 44

45 Case study Ameriprise Financial Ameriprise, retaining a relationship with DFS gained through the acquisition of Columbia Funds, has realized the benefits of full-service integration, process efficiency improvement and risk mitigation over a nearly decade-long relationship Print & Mail RightProspectus [Initially sold enterprise wide to Bank of America in 2008]; retained by Ameriprise after purchase of Columbia Funds in 2009 Automated production / inclusion of graphics and charts Allowed production of fact sheets for all funds with single user $250k in annual revenue Developed strategic relationships throughout the company Gained portion of regulatory print and mail work Pitched high-value mission-critical service FundSuite Arc Streamlined prospectus and summary prospectus annual update process Achieved goal of synchronized disclosure of ~200 retail funds into one common standard $1.8mm in annual revenue Pitched benefits of integration with ArcProspectus for webhosting capabilities previously handled in-house Awarded mandate over Broadridge $250k in annual revenue Pitched derivatives functionality, cover to cover publishing, SEC-compliant backlining, risk mitigation and integration benefits $250k in annual revenue Pitched concurrently with ArcReporting to provide comprehensive solution for financial reporting and regulatory filing Used concurrently to file forms NSAR and NMFP Ameriprise s Nport solution by default (pending SEC approval) 45

46 Case study BlackRock Blackrock uses DFS as the provider of choice for regulatory filing/comp and distribution. They favor the consistent ability to meet filing and distribution deadlines and they see efficiency gains in coordination between DFS and industry third-party administrators Print & Mail Print & Mail Print & Mail Acquisition of Bowne brings work for all of BlackRock including former ishares on West Coast into Donnelley Financial All fund reporting done on Donnelley Financial Software through BNY Mellon Asset Servicing and State Street Fund Administration Awarded ArcProspectus work for annual prospectus update on East Coast Streamlines prospectus and summary prospectus annual update process $900m in annual revenue beginning in 2013 State St and BNY Mellon add BlackRock money funds to ArcFiling N-MFP to meet new regulatory requirement Awarded RFP for marketing and financial printing State Street adopts ArcProspectus to address BlackRock ishares work for prospectuses Success in delivering for commercial work leads to increased work State St. and BNY Mellon actively migrating funds to ArcReporting Pitched new ArcFiling product for upcoming regulations N-Port and N-Cen BlackRock s Nport solution by default (pending SEC approval) 46

47 Case study Fidelity Fidelity relies on DFS as critical provider of regulatory printing and mailing, including sole provider for large proxy print and mailing. Historically focused on in-sourcing, success with ArcFiling has led them to consider DFS for future reporting and prospectus work as well as segments of work at National Financial Print & Mail Print & Mail 2015 Print & Mail 2016 Early adopter and long time user of N-Sar module for 400+ funds to manage this annual submission Print & Mail $5.27 million relationship Entrusted with overflow mailing and electronic insertion from Fidelity facilities $5.85 million relationship Revenue increase to $7.5 million with successfully 6.3 million piece proxy Review of ArcProspectus for in-house use for all funds $2 million opportunity Entrusted RRD with notable proxy project as well as other high profile print projects State St. Fund Administration awarded confidential Fidelity launch and uses ArcReporting Pitched new ArcFiling product for upcoming regulations N-Port and N-Cen Proxy consisted of 3 documents, 14.6 million printed proxies and 1.65 billion printed pages Review of ArcReporting for in-house use for all other funds $3 million opportunity DFS & National Financial review of services for Wealth Management post sale and proxy 47