Donnelley Financial Solutions, Inc. Price & Performance (DFIN)

Morning, everyone, and thank you for joining Donnelley Financial Solutions fourth quarter and full year twenty twenty four 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 defensolutions.com. During this call, we'll refer to forward looking statements that are subject to risks and uncertainties. For a complete discussion, please refer to the cautionary statements included in our earnings release and further details in our most recent annual report on Form 10 ks and other filings with the SEC. Further, we will discuss certain non GAAP financial information. Such as consolidated adjusted EBITDA, consolidated adjusted EBITDA margin, and organic net sales. We believe the presentation of non GAAP 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 reconciliations of GAAP to non GAAP financial information, I am joined this morning by Dan Lieb, Dave Cardela and other members of management.

I will now turn the call over to Dan. Thank you, Mike. Good morning, everyone. Our fourth quarter results offered further validation of our strategy. Including an improved sales mix solid growth in Software Solutions net sales, driven by double digit increases in our SaaS compliance offerings and great progress in expanding the adoption of our offerings in the marketplace. Offsetting the growth in software solutions our fourth quarter event driven transactional revenue was down approximately $20,000,000 or 33% compared to the fourth quarter of last year. In addition, as we previously communicated, we faced robust sales comparisons year over year in Venue. Dave will cover the fourth quarter results in more detail shortly. Reflecting on the full year of 2024, the disciplined execution of our strategy delivered strong financial and operational results. Including Software Solutions organic net sales growth of 13.8% growth in adjusted EBITDA adjusted EBITDA margin expansion and improvements in both operating cash flow and free cash flow compared to full year 2023. Despite a reduction in our event driven transactional revenue for the third consecutive year. Following declines in capital markets transactional revenue in 2022, and 2023 deal activity remained muted in 2024 resulting in a revenue reduction of approximately $9,000,000 or 5%.

Combined with lower event driven transactional revenue in our Investment Company segment, our total event driven revenue was down approximately $15,000,000 or percent compared to full year 2023. For perspective, the level of event driven revenue we recorded in 2024 one hundred and eighty six point five million dollars was the lowest annual level and more than $100,000,000 below the average annual event driven revenue we've achieved in our history as a standalone company. While we have retained our strong share position, the level of overall transaction Despite this prolonged headwind, our strong execution enabled us to deliver consolidated adjusted EBITDA of $217,300,000 an increase of $9,900,000 or 4.8% year over year and consolidated adjusted EBITDA margin of 27.8% approximately 180 basis points higher compared to 2023. We remain on track to deliver our long term goal of achieving adjusted EBITDA margin of 30% plus by 2028. Our continued strong performance through an extended weak transactions market is an important accomplishment that demonstrates the underlying strength of our business and is a proof point for our broader strategy. One of the fundamental drivers of our strong margin performance has been delivering higher value to clients through our higher margin software offerings.

Our 2024 performance further demonstrated the progress of our strategy For full year 2024, we delivered record Software Solutions net sales of approximately $330,000,000 an increase of 13.8% from 2023 on an organic basis. Resulting in software solutions comprising approximately 42% In addition to the strong growth, our Software Solutions performance in 2024 helped us reach two important milestones. First, in May of twenty twenty, we introduced our forty four and twenty four specifically targeting to double our sales mix derived from software solutions over five years. Moving from 22% of net sales from software solutions in 2019 to 44% in 2024. And more importantly benefiting from the resulting financial profile from such a business [indiscernible] From the time we committed to that aspirational target, we focused our efforts to accelerate the development and go to market velocity including launching new products such as new Active Disclosure, ARC Digital, Total Compliance Management and the tailored shareholder reports module within Arc Reporting increasing go to market investments, and expanding our partner ecosystem while divesting non strategic software assets could not deliver an appropriate financial return. At the same time, we maintained a strong tech enabled services offering and successfully managed the decline in print and distribution net sales, which was impacted by regulatory driven reductions, the secular decline in the demand for printed materials and our proactive decision to exit some lower margin work.

We finished the year with Software Solutions net sales of our total net sales a bit short of the 44% goal in part due to the divestiture of non strategic software products, However, we are realizing the financial profile benefits associated with the significantly improved sales mix. This achievement is a significant proof point of our transformation and keeps us on the right path to achieve our long term financial goals. Second, for the first time in the company's history, full year net sales from Software Solutions exceeded net sales from each of tech enabled services, and print and distribution. Becoming the largest component of our overall net sales. This offers another proof point that Defend is delivering excellent solutions to our clients which in turn positions us to continue to deliver strong returns to our shareholders. Since becoming a standalone company in 2016, we've grown our annual software solutions net sales by nearly $200,000,000 from $136,000,000 to $330,000,000 representing an annualized growth rate of approximately 12% or approximately 13% on an organic basis. Let me share a few highlights that underpin the growth in our software solutions in 2024. And the momentum we are carrying into 2025. First, venue, our virtual data room offering, delivered outstanding results in 2024, growing approximately 26% year over year and reaching a record level of revenue of nearly $140,000,000 Performance was driven by our strong sales execution, which resulted in several large projects pricing improvements and increased room and page volume.

Next, we are encouraged by the sales momentum in our recurring compliance product Active Disclosure in ArcSuite Having posted moderate growth during the first three quarters of the year, the growth in aggregate of active disclosure in ArcSuite accelerated in the fourth quarter increased approximately 19% compared to last year's fourth quarter. The improvement in trend creates positive momentum heading into 2025.

For active disclosure, 2024 represented the first full year of operating on the new AD platform. Which was a new build released in the first quarter of twenty twenty one. Since completing the decommission of the former AD product, in the first half of twenty twenty three, we've realized improved operating performance, including growth in net client count as well as higher subscription value per client. In addition, our sales execution coupled with recent product enhancement have also resulted in sequential improvements in revenue retention rates. The improvements we have made across the offering from technology, services, [indiscernible] and sales create a strong foundation for sustained future growth. We expect Active Disclosure to continue to deliver solid growth in 2025. As it relates to ArcSuite, we delivered solid full year net sales growth of approximately 9%. In part from the tailored shareholder reports regulation for which we generated approximately $6,000,000 of software revenue in line with our expectations. We remain on track to achieve $11,000,000 to $12,000,000 of recurring soft [indiscernible] In addition, during the fourth quarter, we closed on a large multiyear renewal of a software subscription contract with a strategic ArcSuite client. Further improving the predictability of our future revenue.

Before turning it over to Dave, I wanted to provide a quick update on our strategic priorities for this year. In 2025, we can expect our primary focus remain on accelerating our business mix shift by continuing to grow our recurring SaaS revenue base, while maintaining share in our core traditional businesses, including transactions, We are encouraged by the momentum in active disclosure in ArcSuite heading into the year and expect Venue to continue to perform well in 2025, despite facing tougher year over year comparisons, particularly in the first half of the year. Will continue to invest in our regulatory and compliance software platform to ready ourselves to capture the demand from future new regulations and non SEC use cases In addition, we will continue to aggressively manage our costs including taking additional actions to better align our cost structure with our current level of sales. Finally, We will maintain our disciplined approach to investments and capital allocation in our pursuit of profitable growth opportunities, to maximize financial return and create long term value. I'm confident with our continued focus on executing our strategy, employees and shareholders. Before I share a few closing remarks, I would like to turn the call over to Dave, to provide more details on our fourth quarter financial results and outlook for the first quarter of twenty twenty five. [indiscernible] Thank you, Dan, and good morning, everyone.

As Dan noted, we continue to deliver solid growth in our software solutions offerings during the quarter, which grew 11.6% on an organic basis the fourth consecutive quarter of double digit organic software solutions net sales growth. The fourth quarter capped off outstanding full year 2024 performance during which Software Solutions net sales increased 13.8% on an organic basis the highest year over year growth rate we've achieved in the last three years. We are encouraged by the accelerating growth of our compliance software offerings Active Disclosure and ArcSuite with each product generating double digit growth during the quarter an improvement compared to recent trend. Our software performance enabled us to deliver another quarter of improved sales mix and solid adjusted EBITDA margin performance despite lower than expected transactional revenue. On a consolidated basis, total net sales for the fourth quarter of twenty twenty four were $156,300,000 a decrease of $20,200,000 or 11.4% from the fourth quarter of twenty twenty three. The decrease in consolidated net sales was driven by lower volume in our compliance and communications management segments which decreased by $28,100,000 in aggregate, with event driven transactional revenue accounting for approximately $20,000,000 of the year over year decline.

Related to both lower revenue from capital markets transactions as well as lapping a large mutual fund special proxy project in investment companies from last year's fourth quarter. Partially offset by the growth in Software Solutions net sales which increased by $7,900,000 or 11.6% on an organic basis. Fourth quarter adjusted non GAAP gross margin was 59.9% approximately 10 basis points higher than the fourth quarter of twenty twenty three as the favorable impacts of higher Software Solutions net sales ongoing cost control initiatives, and price uplifts were mostly offset by lower event driven transactional activity. Adjusted non GAAP SG and A expense in the quarter Net [indiscernible] adjusted non GAAP SG and A was 39.7% an increase of approximately three thirty basis points from the fourth quarter of twenty twenty three. The decrease in adjusted non GAAP SG and A was primarily driven by a reduction in selling expense as a result of lower transactional sales and the impact of ongoing cost control initiatives, partially offset by higher bad debt expense. Our fourth quarter adjusted EBITDA was $31,700,000 a decrease of $9,600,000 from the fourth quarter of twenty twenty Fourth quarter adjusted EBITDA margin was 20.3% a decrease of approximately three ten basis points from the fourth quarter of twenty twenty three.

The declines in adjusted EBITDA and adjusted EBITDA margin were primarily driven by lower transactional revenue partially offset by higher software solutions net sales and the impact of ongoing cost control initiatives. Turning now to our fourth quarter segment results. Net sales in our Capital Markets Software Solutions segment were $50,000,000 an increase of 5.7% on an organic basis from the fourth quarter of last year, driven by the performance of our recurring compliance product Active Disclosure, which increased approximately 12% in the fourth quarter. Fourth quarter subscription revenue increased 6% year over year in line with the growth rate from the third quarter and once again stronger than the growth we recorded in the first half of twenty twenty four. In addition, we continue to make great progress to increase the adoption of active disclosure service packages. And offering that bundles commonly used services into tiered packages which previously were offered on an ad hoc basis. The contracted service packages create a more predictable experience for our clients and a more predictable mix of recurring revenue [indiscernible] Venue sales were up $700,000 or approximately 2% year over year. As expected, venue sales growth was more modest in the fourth quarter compared to recent trend as we lap the very strong fourth quarter of twenty twenty three during which venue grew approximately 26% over year.

In addition, the impact from large projects, which aided Venue's robust growth through the first three quarters of this year, was less significant during the fourth quarter. On a full year basis, Venue delivered approximately $138,000,000 in net [indiscernible] and grew approximately 26% versus full year 2023. Adjusted EBITDA margin for the segment was 26.6% an increase of approximately 10 basis points from the fourth quarter of twenty twenty three primarily due to higher net sales and cost control initiatives, partially offset by higher selling expenses as a result of increased net sales. Net sales in our Capital Markets, Compliance and Management segment were $53,300,000 a decrease of $15,000,000 or 22% from the fourth quarter of twenty twenty three primarily driven by lower event driven transactional revenue. During the fourth quarter, we recorded $37,700,000 in transactional revenue which was approximately $10,000,000 below our expectations and down nearly $12,000,000 or approximately 24% from the fourth quarter of twenty twenty three. From a market perspective, the equity deal environment showed some signs of improvement in the fourth quarter including increases in the number of price IPOs and completed public company M and A deals in The U. S. Compared to the fourth quarter of twenty twenty three.

Consistent with our historical track record, we continue to maintain high market share for large high quality IPO and M and A transactions completed in the quarter. However, despite an increase in deal activity, we recorded lower revenue on a year over year basis primarily due to three factors. First, while our revenue for price IPOs increased, market activity for secondary and other follow on offerings declined. Second, we recorded lower revenue from de SPAC transaction as we deprioritize certain lower quality deals including de SPACs with depleted trust due to redemptions and lack of financing which can create future collections risk. Third, transactional revenue in the Asia Pacific region declined year over year driven by limited market activity and a proactive decision not to pursue certain low margin work. As it relates to our approach on low quality and low margin opportunities, we will maintain the same level of discipline going forward. Capital Markets compliance revenue was down $3,200,000 or 17.1% year over year driven by a lower volume of compliance work including certain event driven filings such as eight ks proxies associated with corporate transactions as well as the related printing and distribution consistent with the trend from the first three quarters of the year.

Adjusted EBITDA margin for the segment was 25.5% a decrease of approximately five twenty basis points from the fourth quarter of twenty twenty three. The decrease in adjusted EBITDA margin was primarily due to lower transactional revenue partially offset by cost control initiatives. Net sales in our investment company saw Software Solutions segment were $31,600,000 an increase of $5,900,000 or 23% versus the fourth quarter of twenty twenty three driven in part by revenue from our tailored shareholder report solution. In addition, as Dan noted earlier, during the fourth quarter, we closed on a large multiyear renewal of a software subscription contract with a strategic Arc Suite client. The renewal became effective in the fourth quarter and will continue to facilitate improved economics over the renewal term. On a full year basis, total Arc Suite delivered approximately $116,000,000 in revenue and grew 8.7% year over year driven by growth in subscription revenue including the impact of the tailored shareholder report solution. Based on the incremental revenue from tailored shareholder reports, we expect stronger ArcSuite revenue growth to continue in the first half of twenty twenty five. Adjusted EBITDA margin for the segment was 37% an increase of approximately five fifty basis points from the fourth quarter of twenty twenty three.

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 ramp up of the tailored shareholder reports offering. Net sales in our investment company Compliance and Communications Management segment were $21,400,000 a decrease of $13,100,000 or 38% from the fourth quarter of twenty twenty three driven by lower print and distribution revenue which accounted for substantially all of the year over year sales decline. The reduction in print and distribution revenue is a result of lapping a large mutual fund special project in the fourth quarter of twenty twenty three and the impact of the tailored shareholder reports regulation which lowered the demand for printed materials, similar to what we experienced in the third quarter. Adjusted EBITDA margin for the segment was 22.4% a decrease of approximately seven seventy basis points from the fourth quarter of twenty twenty three. The decrease in adjusted EBITDA margin was primarily due to lower sales and an unfavorable sales mix partially offset by lower selling expenses as a result of lower sales. Non GAAP unallocated corporate expenses were $11,700,000 in the quarter an increase of $800,000 from the fourth quarter of twenty twenty three primarily driven by higher incentive compensation expenses, partially offset by lower third party expenses.

Free cash flow in the quarter was $41,300,000 and full year free cash flow was $105,200,000 an increase of $43,000,000 over full year 2023. The improvement in full year free cash flow was primarily due to the flow through of higher adjusted EBITDA and favorable working capital partially offset by additional capital expenditures. We ended the year with $124,700,000 of total debt and $67,400,000 of non GAAP Net debt At year end 2024, we had no outstanding borrowings under our revolver and had $57,300,000 of cash on hand. As of 12/31/2024, our non GAAP net leverage ratio was 0.3 times. Regarding capital deployment, we repurchased approximately 282,000 shares of common stock during the fourth quarter were $17,400,000 at an average price of $61.67 share. For full year 2024, we repurchased approximately 947,000 shares for $58,700,000 at an average price of $61.97 per share. Going forward, we will continue to take a balanced approach toward capital deployment. 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 will remain disciplined in this area. As it relates to our outlook for the first quarter of twenty twenty five, we are encouraged by the improving transactional pipeline so far in the first quarter though overall transactional activity remains well below the historical average.

In the near term, we expect macroeconomic headwinds market volatility and geopolitical factors to continue to weigh on the return to a more normalized level of deal activity. In addition, we expect a continued decline in print and distribution sales which will impact our traditional compliance offerings consistent with the recent trend. We remain bullish on the growth trajectory of our recurring compliance software offerings Active Disclosure and ArcSuite, Further, Venue is expected to face tough comparisons through the first half of the year driven in part by lapping the large projects which benefited venue sales last year. With that as the backdrop, we expect consolidated first quarter net sales in the range of $190,000,000 to $200,000,000 and consolidated adjusted EBITDA margin in the mid-twenty percent range. Compared to the first quarter of last year, the midpoint of our consolidated revenue guidance $195,000,000 implies a decrease of approximately 4% as growth in software solutions is more than offset by the continued decline in print and distribution volume and lower capital markets transactional activity. I'll also provide a bit more color on our assumptions for the At the midpoint of our sales range, we assume transactional sales of approximately $45,000,000 in the reflecting a decrease of approximately $3,000,000 from the first quarter of twenty twenty four and a sequential increase from the $37,700,000 we recorded in the fourth quarter of twenty twenty four.

As it relates to the full year, our 2025 operating plan reflects the continued execution of our strategy and associated investments aimed toward accelerating our transformation. Our capital spending, which is predominantly related to development in our software products and the underlying technology to support them is projected to be between $65,000,000 and 70,000,000 This CapEx supports the continued development of our regulatory and compliance software platform including advancing toward our single compliance platform in addition to developing solutions targeted for new regulations, and incremental use cases. With that, I'll now pass it back to Dan. Thanks, Dave. Our performance in 2024 serves as further proof point that our strategic transformation is enabling DeFIN to become more profitable focused and resilient. We executed well in a very challenging market environment delivering solid financial results while also continuing to invest in and execute our strategic transformation. Before we open it up for Q and A, I'd like to thank the Difin employees around the world who ensure our clients continue to receive the highest quality solutions. Now with that, we're ready for questions.

Thank you. We will now begin the question and answer session. We'll take our first question from Charles Strauser of CJS Securities.

Hi, good morning.

Just a couple of questions. If we could talk about kind of maybe give some more color on results versus guidance and kind of what were some of the key drivers behind the differential Yes. Charlie, it's Dave. I'll take that one. Thanks So from a a revenue perspective, the biggest variance as we talked about was the capital markets transactional revenue. Which was off $10,000,000 from what we had assumed in our guidance.

I think at a from an EBITDA margin perspective as well, we came in at just north of 20%. Our guidance was for the low 20s. I think when you look at the variance in that transactional revenue, right, so $10,000,000 we typically think about incremental margins on that work in the 50% to 60% range. So you add another $5,000,000 to $6,000,000 of EBITDA and it puts us in the kind of call it $22,500,000 to 23% range which would have been right in line with our guidance of low 20s. So effectively, it's really just that the capital markets transactional volume, which explains the variance.

Great. Thank you on that. And then just shifting gears a little bit to regulation. Can you comment on basically how you think about how you will address kind of future regulations and regulatory change and whether or not you expect negative impact from the reduction in regulations specifically on ESG in The U. S. And the EU?

Thank you, Charlie. It's Dan. I'll start and then I'll ask Craig and Eric to make a couple of comments. So So relative to just broadly speaking, our teams are working to assess proposed regulations and if and how they fit with our offerings and certainly if we're best suited to build on our own or to partner From a timing perspective, typically a long lead time between a regulations proposal the comment period and then the effectiveness period. And so one of the benefits of the platform that we've talked about and have built is our ability to get to market quicker, and more economically as we share our common platform services, This also lowers our investment required to serve core regulations. So relative if we pivot over to your specific question on U. S, EU, ESG related and the impact de minimis impact to us, our plan was to leverage our existing platform entering the market as the last mile to the SEC for tagging and filing.

So with that, I'd ask Craig if you want to add a little more detail.

Yes. Thanks, Dan. The global ESC regulations are certainly changing to reflect the current political climate. So here in The U. S, our clients are telling us that ultimately the court is going to vacate [indiscernible] in its entirety. If you move to the EU, the EU President has said that their upcoming omnibus bill, which is expected on February 26, is to take a huge approach approach to reducing in one step all three ESG [indiscernible] that includes their taxonomy, the CSRD and the CS3D. And as Dan stated, there's very little impact to DFN as a result of this. But I think it's worth noting that without an ESG mandate, our clients are talking about their ESG efforts within their documents today. And Deepin has met that moment with a one stop shop. So we're delivering through our compliance platform, Active Disclosure, the last mile of the SEC, as well as to our client shareholders and investors. In addition to the general disclosure, Deepin for years has been providing an ESG fact sheet solution which uses SaaSBI guidelines. It's a really easy way for companies to take what they're doing, and visualize that via design. So it's a presentation layer, again, integrated with an active disclosure.

I think at the highest level, whether it's ESG or any new disclosure or required, it highlights our value proposition. We have great software and client trust to make it happen. Great. Thank you, Charles. Charles, if I could just add to that from an investment company's perspective, I think it's important to note and Dan and David mentioned this, the tailored shareholder reports rule is really just passing the midway point and 2025 will be our first full year impact. So we're still working through that process with our clients, which will roll out through the balance of the year. And then as Dan mentioned around the benefits of our platform, the Arc Suite is also very well positioned to help our clients meet the financial reporting requirements related to emerging new investment trends. And I'm sure you're tracking and many of been watching what's happening in the market relative to broadening access to private markets for retail investors. So this is going to drive new products, different product structures. And as Dan mentioned, the benefits of our platform is the ability to be nimble and handle these financial reporting requirements, which are really based on historical regulations and reporting requirements.

So we see some very nice positives in that area as well. And I'll just close out by saying, [indiscernible] is our clients tell us they use it to drive cost efficiencies They also use it to streamline processes via work workflow and robust content management tools. So the utilization of the Arc Suite goes well beyond [indiscernible] regulatory horizon. So we've got a lot of work to do this year relative to TSR. And certainly some exciting things with new products being created with this private market shift to retail investors.

Thanks. That was insightful. Thank you very much.

You bet.

Thanks.

We'll go next to Kyle Peterson at Needham.

Great. Thank you. And good morning. I appreciate you guys taking my questions. I wanted to start off on the de SPAC headwind that you guys kind of mentioned in the prepared remarks. I guess, it seems like I guess, how long should we think about this continuing to remain a headwind? Is Is this the last year or how long is the tail this activity? Yes. Thank you for the question. This is Craig.

I think you can expect that we're certainly at the tail end of this de SPAC, SPAC market certainly took off in 2020. Through 2021.

And where we changed our strategy is again, we had lower revenue in the quarter from de SPAC transactions because we deprioritized these low quality deals.

So the market has shifted.

When we look at a deal, it includes looking at de SPACs that are going to happen with depleted trust due to redemptions. Despacs with poor financing. If you unpack what happened in Q4, there were 12 completed de SPACs. 10 of them had done their IPO over three years ago and have almost nothing left in the trust to do to redemptions.

Of them had previously terminated deals, half of the targets they were acquiring were foreign, and almost all are now nano, micro, cap stocks, and many of them are at risk of delist due to not meeting the NASDAQ or New York Stock Exchange listing requirements. So the market is coming to an end. Are there a few quality ones left? Yes. We will compete for those. The new SEC Chairman that's coming in has said he'll look at the rules that are passed but we'll be very prescriptive about what we take. And I think we'll see that moving forward into the 2025 and 2026 market. Okay. Yes. Kyle, I would just Kyle, I would just add to it. A lot of that's strategy over the last few years, we've talked about the increase that we've seen in the SG and A line specifically as it relates to bad debt. And so, we look back and say, when the SPAC market was at its peak, from an economic perspective, it made sense to cap knowing that there were going to be some winners and some losers in that arena. But as we go forward here and evaluate the quality, we're just being much more discerning on that as Craig outlined.

Okay. Appreciate the color on that. I'm just switch over to the distribution revenue. I think historically, how you guys have kind of messaged it is we should think about kind of a single digit runoff. Obviously, it was quite a bit larger in '24 How should we think about the pace of of print and distribution in 2025? Should it kind of revert back to that mid single digit declines after the bigger reset in '24 or how are you guys kind of budgeting for the print revenue? For the coming year?

Yes. Kyle, thanks for the question. I should clarify when we talk about print revenue, the declining in the call it 4% to 5% range, That's how we view just the overall secular trend. So the overall market all else being equal, I think when you look at specific to our results, in addition to any that underlying secular decline, we'll see variances both positive and negative relative to that baseline. The best example probably was the special proxy in the fourth quarter of twenty twenty three, right, that really drives print revenue. [indiscernible] transactional revenue, to the extent that market activity reverts back to a more normalized level, there will be increased print demand with that as well. You almost have to bifurcate the underlying print secular decline from market activity or event driven activity such as special proxies, etcetera.

Okay.

Okay. That's good color. And then if I could just squeeze one last one in, particularly on on capital allocation. You guys made a lot of progress and have the debt in a really good spot. You're continuing to buy back stock. How are you guys kind of thinking about this in 2025? And then is there any update? I think you guys were planning on annuitizing Your pension. So just any update on timing or or expected cash impact there would be very helpful. [indiscernible] lot there. Let me unpack it. From a capital deployment per perspective, I think you should expect business as usual as we outlined in our prepared remarks investing in the business, repurchasing shares, and net debt reduction are the priorities for capital deployment. So more of the same going forward. Specifically as it relates to the pension termination, we are still on track to have that done by the end of this year. We don't yet have an estimate that we're ready to share on the On the cash contribution, I would say similar to the balance of our capital deployment, right, we took a pretty disciplined look at this and had waited for a while to do this transaction, and we're very confident that now is the right time to get this behind us.

Okay. Appreciate all the color and thank you guys for taking my questions. Thank you.

Thank you.

We'll now take a follow-up from Charles Strauss at CJS Securities.

Hi. Just a quick follow-up. When looking at Q1 guidance, If you mind providing a little bit more more insight color really in the the confidence level you have behind the guidance and some of the assumptions you're baking into that Yes, Charlie. So from an overall confidence perspective, obviously, we had a look at January at this point. And factor in February activity I think when you look at some of the variables obviously, the biggest one will be the assumption around capital markets transactional activity. As we noted in the prepared remarks, right, the $45,000,000 that we're assuming for capital markets transactions is down slightly from first quarter of twenty twenty four, down about $3,000,000 but also it's the $45,000,000 is a pretty significant increase from roughly $38,000,000 that we did in the fourth quarter. Again, that's with kind of the insight on what how January came in and what we're seeing so far in February. I would say that's still remains the biggest area of of variability if we were to to fast forward and look back similar to what we saw in Q4 where we were off 10,000,000 That's the area where we do have some visibility, but from a timing perspective, tough to really understand when these deals will hit.

To add maybe to a little bit of that, this is Craig. As stated or we're a little bit pleased with what we see early on. January was the busiest January for IPOs, which is good news since 2021. As of today, Defense IPO count is 11. So we've done 80% of the IPOs this year. It's worth noting that in full quarter of twenty twenty four, there were only four So we're hopeful for that market. It's still trying to find its direction. SailPoint, which is a decent client, priced last week. It's exciting. They only had three years of private equity ownership. And they had a lot of positives. So they priced at the high end. They had $10,000,000 more shares than anticipated. But the headline after it was in TechCrunch, SailPoint's Dole debut did little to unstick the IPO window. So we just don't know how these things are going to impact the market. As Dave said, we're planning for any market. We plan for continued volatility. We're off to a solid start. It only takes a few deals. To make it happen. And then as you think about the M and A market, where we're really focused is some of the euphoria in that space has depleted a little bit.

So you have the Wall Street Journal this past week which had an article that the CEOs and bankers say that Trump before you is fading fast. And that deal market has been curtailed [indiscernible] January had a decade low announced deals, just 900. Which were compared to 1,200. In the prior year and 1,500 in 2023. So again, a lot of optimism. The partner of Paul Weiss the article stated tsunami of M and A is coming. It's just ripe to arrive later. We have no idea when that's going to come. But given the nature of it, we're certainly focused from an M and A transaction perspective. And then as it relates to venue, that space as well. Thank you.

And that concludes our Q and A session. I will now turn the conference back over to Dan Lieb for closing remarks.

Thank you, and thank you everyone for joining us We look forward to speaking in a couple of months.