Donnelley Financial Solutions, Inc. Q2 FY2025 Earnings Call

Hello, and thank you for joining us. My name is Lacy, and I will be your conference operator today. I would like to welcome everyone to the Donnelley Financial Solutions Second Quarter Earnings Conference Call. I will now turn the conference over to Mike Zhao, Head of Investor Relations. You may begin.

Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions Second Quarter 2025 Results Conference Call. This morning, we released our earnings report, including a set of supplemental trending schedules of historical results, copies of which can be found in the Investors section of our website at dfinsolutions.com. During this call, we'll refer to forward-looking statements that are subject to risks and uncertainties. For a complete discussion, please refer to the cautionary statements included in our earnings release and further detailed in our most recent annual report on Form 10-K, quarterly report on Form 10-Q, and other filings with the SEC. Further, we will discuss certain non-GAAP financial information, such as adjusted EBITDA and adjusted EBITDA margin. 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 Leib, Dave Gardella, and other members of management. I will now turn the call over to Dan.

Thank you, Mike, and good morning, everyone. We delivered solid second quarter results, highlighted by record quarterly software solutions net sales, strong adjusted EBITDA margin, and increases in both operating cash flow and free cash flow, all in the context of a challenging yet improving environment. We posted approximately 8% sales growth in our software solutions, including approximately 15% sales growth in our recurring compliance software offerings, all while continuing to drive operating efficiencies and investing further in our transformation. Our second quarter results once again demonstrated the resilience of our operating model and the sustainability of our performance as our business mix continues to evolve. As we entered the second quarter, difficult operating conditions persisted for much of April, most acutely in our capital markets transactional offerings due to market uncertainty. As the quarter progressed, we saw improving trends, not only in market activity but also with respect to our own results. This stabilization supported a strong sequential rebound in transactional activity and related results from April to May as well as from May to June. We are encouraged by the positive trajectory within the second quarter. A key area that reflects the success of our execution in the second quarter was our strong adjusted EBITDA margin performance. While the second quarter is a continuation of a prolonged multiyear downturn in capital markets transactional activity, our business remains fundamentally and substantially more profitable than it had been historically. Our second quarter adjusted EBITDA margin of 35% was the second highest quarterly EBITDA margin in our history, and a trailing 4-quarter EBITDA margin is 29.1% despite the ongoing headwinds of a weak transactional market. Another area I would like to highlight is continued momentum in our software offerings, where we delivered year-over-year net sales growth of approximately 8% despite a slight decline in our largest software offering, Venue, which faced a tough comparison, having grown 38% in last year's second quarter. Software solutions made up 42.3% of total second quarter net sales, up approximately 700 basis points from last year's second quarter sales mix. As a reminder, the second quarter, largely due to the annual meeting and proxy season, historically represents our largest quarter overall, yet represents a seasonal low for software as a percentage of revenue. On a trailing 4-quarter basis, software solutions comprised 45.1% of total net sales, an increase of approximately 610 basis points from the second quarter 2024 trailing 4-quarter period. Our second quarter software solutions net sales growth continues to be led by the performance of our recurring compliance and regulatory-driven products, ActiveDisclosure and Arc Suite, which grew approximately 15% year-over-year in aggregate. Importantly, ActiveDisclosure and Arc Suite each posted double-digit sales growth for the third consecutive quarter. For ActiveDisclosure, this growth was driven by the momentum in services revenue as a result of the continued adoption of our service package offerings, combined with the migration of certain traditional compliance activities to software, a trend we expect to continue going forward. In the case of Arc Suite, the improved growth rate was primarily driven by the Tailored Shareholder Reports regulation. Consistent with our expectation, we have realized software solutions net sales of approximately $11 million related to the TSR regulation since the effective date of July 2024. As we overlap the incremental year-over-year benefit from the Tailored Shareholder Reports regulation in the third quarter, we expect Arc Suite to exhibit a more normalized growth profile beginning in the third quarter. As an end-to-end software solution for investment company, financial, and regulatory reporting, Arc Suite is well positioned to capture additional growth as the industry increasingly looks to improve efficiency, automate processes and comply with evolving regulatory requirements. As it relates to Venue, following a moderate decline in the first quarter, sales accelerated in the second quarter and were nearly flat compared to last year's second quarter. The resilient level of underlying activity taking place on the platform, including activity from a large project, combined with improved go-to-market execution, enabled Venue to mostly offset the impact of several large projects, which benefited last year's second quarter results. We remain encouraged by Venue's strong performance, which reflects strong sales execution across Venue's broad application within the M&A ecosystem that serves both announced and unannounced deals across public and private companies. This results in more resilient, stable demand than our transactional offerings, which primarily serve public company, M&A, IPO and debt transactions. Our continued revenue mix shift towards software solutions was by a reduction in print and distribution net sales, which declined by approximately $14 million or 26% compared to the second quarter of 2024. This reduction was mostly realized in the printing and distribution of corporate proxy statements and annual reports as well as lower print volumes as a result of the Tailored Shareholder Reports regulation, which significantly reduced page counts for mutual fund reports. On a trailing 4-quarter basis, print and distribution revenue is $117 million and makes up approximately 16% of our trailing 4-quarter sales. As we continue to execute our strategy to transform DFIN into the leading provider of compliance and regulatory solutions served predominantly via software and services, we remain on target to deliver our latest 5-year plan, which was updated in February of last year. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our second quarter results and our outlook for the third quarter. Dave?

Thanks, Dan, and good morning, everyone. As Dan noted, we continue to experience positive momentum in the adoption of our software solutions for which sales increased approximately 8% year-over-year, including approximately 15% net sales growth in our recurring compliance software products. Despite a very weak capital markets transactional environment, our software performance enabled us to deliver another quarter of improved sales mix, strong adjusted EBITDA margin, and year-over-year improvements in both operating cash flow and free cash flow. As Dan commented earlier, following a very soft start to the quarter, driven by heightened market volatility and economic uncertainty, our results improved sequentially throughout the quarter as market conditions gradually stabilized and deal activity began to recover. On a consolidated basis, total net sales for the second quarter of 2025 were $218.1 million, a decrease of $24.6 million or 10.1% from the second quarter of 2024. The decrease in consolidated net sales was driven by lower volume in our Compliance and Communications Management segments, which decreased by $31.2 million in aggregate, with compliance revenue across the capital markets and investment companies businesses accounting for approximately $19 million of that decline. The reduction in compliance revenue was mostly reflected in lower print and distribution volume related to both the ongoing decline in this area, consistent with the recent trend, as well as the timing impact of certain investment companies print volume that shifted from the second quarter into the first quarter of this year. In addition, total event-driven transactional revenue declined approximately $13 million year-over-year, primarily a result of the depressed level of capital markets transactional activity during the quarter. These declines were partially offset by growth in software solutions net sales, which increased $6.6 million or 7.7% compared to the second quarter of last year. Second quarter adjusted non-GAAP gross margin was 63.7%, approximately 70 basis points lower than the second quarter of 2024, primarily driven by lower capital markets transactional volume, partially offset by higher software solutions net sales, the impact of cost control initiatives, and price uplifts. Adjusted non-GAAP SG&A expense in the quarter was $62.6 million, a $6.4 million decrease from the second quarter of 2024. As a percentage of net sales, adjusted non-GAAP SG&A was 28.7%, an increase of approximately 30 basis points from the second quarter of 2024. The decrease in adjusted non-GAAP SG&A expense was primarily driven by a reduction in selling expense related to lower sales in certain areas, the impact of cost control initiatives, and lower bad debt expense, which continued to normalize in the second quarter. Our second quarter adjusted EBITDA was $76.3 million, a decrease of $10.9 million or 12.5% from the second quarter of 2024. Second quarter adjusted EBITDA margin was 35%, a decrease of approximately 90 basis points from the second quarter of 2024, primarily driven by lower capital markets transactional volume, partially offset by higher software solutions net sales, cost control initiatives, and lower selling expenses as a result of the decrease in sales volume. Turning now to our second quarter segment results. Net sales in our Capital Markets Software Solutions segment were $59.1 million, an increase of $1.8 million or 3.1% from the second quarter of last year, driven by ActiveDisclosure, which was up $2.2 million year-over-year, partially offset by a slight decline in Venue. During the second quarter, ActiveDisclosure sales grew approximately 11%, a continuation of the stronger growth trend we experienced over the last 2 quarters, primarily driven by the continued adoption of ActiveDisclosure services packages and the ongoing migration of certain activities historically performed on our traditional services platform to ActiveDisclosure. We remain encouraged by ActiveDisclosure's solid foundation for future revenue growth. During the second quarter, Venue posted $37.3 million in revenue, aided by a large project that partially offset last year's several large projects and was down approximately 1% year-over-year against the robust performance from last year's second quarter when Venue achieved record quarterly revenue and grew approximately 38%. In addition, Venue delivered strong sequential improvement in revenue, increasing approximately 22% from the first quarter. Adjusted EBITDA margin for the segment was 37.9%, an increase of approximately 90 basis points from the second quarter of 2024, primarily due to the increased sales and cost control initiatives. Net sales in our Capital Markets Compliance and Communications Management segment were $93.5 million, a decrease of $20.3 million or 17.8% from the second quarter of 2024, driven by lower transactional revenue as well as a reduction in compliance volume, part of which was related to lower print and distribution consistent with recent trend. In the second quarter, we recorded $34.8 million of capital markets transactional revenue, which was at the low end of our expectation and down $10.4 million from last year's second quarter, resulting in the lowest level of quarterly transactional revenue in our history. Following a modest rebound in the first quarter, global equity deal volume declined sharply in April as a result of escalating market volatility and macroeconomic uncertainty. Following the slow start to the quarter, market conditions gradually improved with modest upticks in activity levels during May and June, resulting in sequential improvement as the quarter progressed. That said, overall transactional activity in the second quarter remained well below historical norms, with regular way IPO transactions that raised over $100 million and large public company M&A deals below last year's levels. Capital markets compliance revenue decreased by $9.9 million, primarily due to lower proxy statement and annual report volume and the related printing and distribution, consistent with our experience during last year's proxy and annual meeting season. In addition, the weak transactional environment resulted in lower market demand for certain event-driven filings such as 8-K and special proxies associated with corporate transactions. Finally, as I commented earlier, certain traditional compliance activities shifted to ActiveDisclosure during the second quarter. Adjusted EBITDA margin for the segment was 39.4%, a decrease of approximately 80 basis points from the second quarter of 2024. The decrease in adjusted EBITDA margin was primarily due to lower sales volume, partially offset by lower bad debt expense, lower selling expense, and cost control initiatives. Net sales in our Investment Company Software Solutions segment were $33.1 million, an increase of $4.8 million or 17% versus the second quarter of 2024, primarily driven by incremental revenue from our Tailored Shareholder Report solution. On a trailing 4-quarter basis, total Arc Suite reached approximately $126 million in net sales and grew approximately 17% compared to the trailing 4 quarters as of last year's second quarter, driven by growth in subscription revenue, including the impact of the Tailored Shareholder Report solution. As Dan noted, based on the midyear 2024 effective date, we will overlap the growth from this new regulation in the second half of the year. And as such, we expect a more normalized growth rate beginning in the third quarter. Adjusted EBITDA margin for the segment was 42.9%, an increase of approximately 370 basis points from the second quarter of 2024. The increase in adjusted EBITDA margin was primarily due to operating leverage and the increase in net sales and price uplifts, partially offset by higher service-related costs associated with the Tailored Shareholder Reports offering. Net sales in our Investment Companies Compliance and Communications Management segment were $32.4 million, a decrease of $10.9 million or 25.2% from the second quarter of 2024, primarily driven by lower print and distribution volume, which accounted for $9.6 million of the year-over-year decline. Second quarter print and distribution revenue within this segment was impacted by the timing shift into this year's first quarter of certain volume related to Tailored Shareholder Reports for the regulated insurance market, as well as lower page counts related to Tailored Shareholder Reports for the mutual fund industry. As a reminder, the Tailored Shareholder Reports regulation eliminated the demand for full-length shareholder reports at the fund level and replaced them with 2- to 4-page summary documents at the share class level, resulting in a net reduction in print. With the second quarter being a peak period for mutual fund compliance, the year-over-year reduction on the overall page count was significant in the second quarter as a result of the TSR regulation. We expect this dynamic will become less meaningful in the second half of the year as we overlap last year's second half impact of this regulation. Going forward, we expect a broader secular decline in the demand for printed products will continue to result in lower print and distribution revenue within this segment. Adjusted EBITDA margin for the segment was 38.9%, approximately 340 basis points lower than the second quarter of 2024. The decrease in adjusted EBITDA margin was primarily due to the impact of lower sales volume, partially offset by cost control initiatives. Non-GAAP unallocated corporate expenses were $9.7 million in the quarter, an increase of $0.5 million from the second quarter of 2024, primarily due to higher investments aimed at accelerating our transformation and higher healthcare expenses, partially offset by cost control initiatives. Free cash flow in the quarter was $51.7 million, $14.9 million higher than the second quarter of 2024. The year-over-year increase in free cash flow was primarily driven by favorable working capital and lower capital expenditures, partially offset by lower adjusted EBITDA. On a year-to-date basis, the strong free cash flow generation during the second quarter enabled us to achieve positive free cash flow through the first half of the year. For reference, our cash flow is seasonal with the majority of it generated in the second half of the year. We ended the quarter with $190.1 million of total debt and $156.3 million of non-GAAP net debt, including $77 million drawn on our revolver. As of June 30, 2025, our non-GAAP net leverage ratio was 0.7x. Regarding capital deployment, we repurchased approximately 787,000 shares of our common stock during the second quarter for $34.3 million at an average price of $43.56 per share. Year-to-date through June 30, we've repurchased approximately 1.6 million shares for $76.1 million at an average price of $46.18 per share. During the second quarter, the Board of Directors authorized a new share repurchase program of up to $150 million with an expiration date of December 31, 2026. This repurchase authorization, which commenced on May 16, 2025, replaced the prior authorization, which was nearly fully utilized. As of June 30, 2025, we had the full $150 million remaining on the new authorization. We continue to view organic investments to drive our transformation, share repurchases and net debt reduction as key components of our capital deployment strategy and will remain disciplined in this area. As it relates to our outlook for the third quarter of 2025, we expect consolidated third quarter net sales in the range of $165 million to $175 million and adjusted EBITDA margin in the range of 23% to 25%, which at the midpoint is similar to last year's third quarter, where we posted adjusted EBITDA margin of approximately 24%. Compared to the third quarter of last year, the midpoint of our consolidated revenue guidance of $170 million implies a reduction of $9.5 million or 5.3% as lower print and distribution sales and lower capital markets transactional sales are expected to more than offset growth in software solutions. We expect Venue to be approximately flat to last year's third quarter, similar to the year-over-year change we reported in the second quarter. Further, our estimates assume capital markets transactional net sales in the range of $35 million to $40 million, which at the midpoint is down approximately $8 million from last year's third quarter. And with that, I'll pass it back to Dan.

Thanks, Dave. Our performance in the second quarter offers a further proof point that DFIN continues to become more durable and structurally resilient as we execute our strategy. The stability of our revenue base, driven by a high proportion of recurring and reoccurring compliance-related offerings provides a solid foundation even in turbulent times. Although capital markets transactions remain well below historical levels, we are encouraged by the recent uptick in activity levels. With a strong balance sheet, robust free cash flow, and disciplined capital allocation, we are confident in our ability to execute our strategy and deliver long-term value to all stakeholders. Before we open it up for Q&A, I'd like to thank the DFIN employees around the world. Now with that, operator, we're ready for questions.

Your first question comes from the line of Charlie Strauzer with CJS Securities, Inc.

So if we look at the Q3 guidance and the granularity of the transactional guidance within that, maybe you can shed a little bit more light on the assumptions behind that and kind of like what the deal environment is looking like currently for both IPOs and M&A, especially M&A given the change in administration?

Yes. Thanks, Charlie. It's Dave. I'll start and Craig may want to add a little bit of color here. I think when you look at our guidance for transactional sales for Q3, right, the range of $35 million to $40 million, that's sequential growth over Q2 and up to about 15% at the high end of that range. As you know, and we've talked about before, this is the area where we have the least visibility in terms of timing of getting the deals done. So while we feel good about the underlying trend in market activity, I'd say, as it relates to the guidance, trying not to get too far over our skis here. I think probably the most positive is regardless where transactional revenue comes in, we're very happy with the margins and cash flow that we're delivering. Obviously, you could see that in the Q2 results, the year-to-date results as well as our guidance for Q3. With respect to the market activity, M&A, IPO, Craig, I'll let you comment there.

Yes, thank you for the question, Charlie. I'll provide some context on the second quarter and then discuss what we're seeing in July in relation to our guidance. Transactional offerings are often uncertain, and the market conditions changed significantly throughout the quarter. The tariff announcement had a major short-term effect, followed by some improvement. This is reflected in the number of IPOs during the quarter. Of the 14 IPOs over $100 million, there was 1 in April, 5 in May, and 8 in June. This is the same total of 14 IPOs as in the first quarter, showing no quarter-over-quarter growth. DFIN was pleased to support Circle, the largest IPO over $1 billion, which had a remarkable increase, marking the largest rise ever for that size IPO, and it was the largest in the first half of the year. We also supported many others. In the first half of 2025, there were 30 IPOs compared to 35 in the same period last year, indicating a 14% decrease. DFIN supported 4 of the 5 largest during this time. However, there is a resurgence evident; for instance, the Renaissance IPO index rose by 16%, indicating renewed investor interest. Regarding July IPOs, if Figma and Shoulder price today, we can expect 27 IPOs in the quarter compared to 14 in July of last year. Excluding smaller international deals, there are 10 IPOs forecasted, up from 7 last year. The count for IPOs above $100 million will also be 7 for both this year and last July, indicating a decline from June’s figures. One noticeable trend is that the recovering IPO market is accepting lower valuations, as seen with Hinge Health. Additionally, Shoulder is pricing below its expected range at $15. Another important metric we monitor is the number of companies that have publicly filed, which stands at 19. This is not a strong number by historical standards. DFIN also has a substantial pipeline of companies that are filing confidentially as well as proposals in progress. The market is gradually improving. In terms of M&A activity, we witnessed similar trends during the second quarter, with fewer deals but larger ones on a year-over-year basis. There is optimism in M&A, driven by spending, consolidation among cost-cutting companies like Union Pacific and Northrop, and AI opportunities. Overall, while we are building momentum, there are still risks such as rate pressures and trade policy shifts. We are aware that news can change situations quickly. Additionally, the third quarter poses challenges due to seasonal factors like August and Labor Day, which have not historically favored deal-making. We anticipate a modest increase and expect the stabilization we observed in May and June to continue. Our guidance reflects both the positive outlook for the second half and the realities of pipeline development and revenue recognition. As Dave mentioned, we are prepared for any market conditions and are committed to delivering results regardless of the market situation.

Great. That's very helpful. And just looking at the nontransactional segments, as we think about guidance in general, what assumptions should we be using when we model out the quarter?

Yes, I believe we didn't provide enough detail here. When examining some of the software products, particularly in the first two quarters, we've seen growth. ActiveDisclosure has achieved 11% growth year-to-date, making it a strong area for us, and we anticipate continued growth. As noted in our prepared remarks, the growth in Arc Suite has been particularly high at the beginning of the year, partly due to the timing of the Tailored Shareholder Reports regulation that began in the third quarter of last year. We will be comparing some of the growth we saw last year in Arc Suite, which may moderate that growth a bit. Venue is facing tough comparisons throughout the year; while we saw significant growth, even with a slight decline in Q2 compared to the same quarter last year, it was coming off of a 38% increase last year. Therefore, it seems reasonable to expect that Venue will remain flat in Q3 compared to last year. Regarding traditional compliance, the nontransactional aspect of compliance and communications management will continue to face challenges with print counts. We have observed this trend for some time and expect it to persist. Additionally, there was a drop in overall print demand related to the Tailored Shareholder Reports regulation, which began to impact in the second half of last year, slightly offsetting the growth in software.

Great. Can you remind us of some of the assumptions behind your long-term goals?

Yes. At a high level, we are focused on executing a shift in our product mix by expanding our recurring and reoccurring software offerings and increasing our margins, largely due to the operating leverage from this growth. When we evaluated our capital markets transactional revenue, we expected minimal changes overall; however, there has been a significant decline since last February. This area is cyclical, and while we maintain or grow our market share, we cannot influence the overall demand. Additionally, regarding our revenue mix, we anticipate that some sales in the Compliance and Communications Management segments will shift to software, a trend we've observed over the past several quarters. This includes a move towards a hybrid model that incorporates both software and tech-enabled services in the short term, but eventually we will migrate fully to software. We aim to continue expanding margins and expect to convert EBITDA to free cash flow at a rate of about 45% or more.

Got it. And just speaking of cash flow, when you look at the strong performance of cash flow in the quarter, and then look at the full year, are you expecting full year free cash flow to be up year-over-year?

We are clearly ahead of our position this time last year. When considering our progress over the past few years, we've noted that as our revenue increasingly comes from software solutions, long-term contracts, and advanced payments, our cash flow has become less seasonal than it has been in the past. We're beginning to see this trend, which provides us with an advantage. Overall, if I had to predict our cash flow for the full year, I would say it looks quite similar to last year's figures.

Got it. Lastly, regarding the deal environment, are you maintaining a good share of the available deals? If you lose a deal to a competitor, what are the reasons for that? It could be that companies or issuers are opting for a different vendor for the printing and distribution of documents while you handle the software side. Are you encountering situations like that?

I'll begin, and then Craig can add his thoughts. Overall, we are satisfied with our market share performance. Even though the market conditions are improving in terms of the number of deals, as Craig mentioned, our share in smaller foreign or domestic deals, as well as SPACs, tends to be lower compared to larger, more prominent deals. Therefore, while our overall share aligns with our expectations, we are pleased with our performance in our core areas. Craig?

To build on that, trans share is going to fluctuate quarter-to-quarter. Our strength is in the $1 billion, $2 billion M&A deals, large IPOs raising over $100 million, even de-SPACs that have upgraded to have a substantive acquisition and the upgrade includes an upgraded deal team. So where we really win is when these deal teams that are familiar with DFIN, our service, and our technology, whether that's traditional or software come into play on these deals, we're really doing well. So you saw that play out in the first half of the year. If you look at priced IPOs as a barometer, 171, 63 were SPACs. So of the 108 total priced, excluding SPACs, there were only 30 that were over $100 million. So there was still a lot of fundraise-like deals in there. Our share of those over 100 was our historic average, which is around 60%. So as you unpack what's happened in the first half of the year and even in Q2, it is comprised of a lot of smaller, international, smaller places that we don't play.

Question comes from the line of Kyle Peterson with Needham.

I wanted to follow up on the outlook regarding the capital markets guidance. It seems to be a bit softer than we anticipated, especially considering there appears to be an improving pipeline. You mentioned that the confidential filings are showing signs of picking up. Is some of that activity turning into successful closings? Is that reflected in the outlook for the third quarter? Or are you adopting a more cautious stance in your capital markets guidance?

Yes, Kyle, as I said earlier, I think when you look at that $35 million to $40 million range, at $40 million, that's up roughly 15% relative to the Q2 number. I guess I would describe it this way without getting into the details of any particular deal would be to say that if the trend that we saw in Q2 in terms of the intra-quarter improvement from month-to-month, if that trend continues, I would say we would be at the high end of the guidance, potentially above if that trend continues. So we're just taking a look at the improvement, again, given the lack of visibility in terms of the exact timing, as I said to Charlie, just trying not to get too far over our skis there.

Okay. That is helpful. And then I guess as a follow-up on capital allocation it sounds like based on the authorization. It sounds like it's still full after it's authorized like halfway through the quarter. So it seems like you guys kind of front-loaded buybacks this quarter. Do you still think that, that will be an important part of the toolkit moving forward? Or are you guys being sensitive around valuation and where the stock is at? Like how should we think about the buyback, especially given that we have bounced off the post-liberation day lows?

Yes. So I think as we said in the prepared remarks that we view share repurchases as a key component of capital allocation. To your point, and also consistent with what we've done historically and said that our path would be forward, right, is that at the higher prices, we're less aggressive, at the lower prices, we're more aggressive, and that will continue to be the path forward.

One thing to add is that, as we have previously mentioned, the most effective use of capital for us is to execute and, if possible, accelerate the transformation. That being said, the business generates a significant amount of cash. To Dave's point, we prioritize organic investment in growth and transformation as the top priority. We also evaluate buybacks based on stock price using a structured approach. For example, in Q2, we acted very aggressively early on when prices were much lower. Additionally, debt reduction remains important, ensuring we don’t excessively leverage ourselves through buybacks as we monitor performance over time. Looking back to when we started this several years ago, we purchased much more aggressively at much lower prices than we are at now, and that's how we plan to proceed moving forward.

Okay. That's helpful. And then last one for me, I guess, just do you have any update on the pension? I think you guys were planning on doing kind of an annuitization and kind of converting that over just to clean up the balance sheet a little bit. Any update on either the expected timing or cash impact or anything that we should be mindful of as that process continues?

Yes. So the update on timing, that process is underway. Things are coming out, I'd say, generally in line with kind of the assumptions we made going into it. We still haven't gone out to annuitize the plan and work with the insurers to take that over. That will happen during the third quarter. And so on the Q3 call, potentially before then, we'll have additional news to share in terms of the cash outlay and what that looks like.

We have no more questions. This concludes our Q&A session. I would now like to turn the conference over to Dan Leib for closing remarks.

Great. Thank you, Lacy, and thank you, everyone, for joining. We look forward to talking to you in a few months and seeing you in the interim.

That concludes today's call. You may disconnect.