Donnelley Financial Solutions Inc

NYSE:DFIN

Earnings Call Transcript 2018-Q2

[Operator]

Welcome to the Donnelley Financial Solutions Second Quarter 2018 Results Conference Call. My name is Alan, and I will be your operator for today’s call.

[Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Sanja Burklow. Ms. Burklow, you may begin.

[Sanja Burklow, Investor Relations]

Thank you, Alan. Good morning, everyone, and thank you for joining Donnelley Financial Solutions Second Quarter 2018 Results Conference Call. This morning, we released our earnings report, a copy of which can be found in the Investors section of our website at dfsco.com.

During this call, we’ll refer to forward-looking statements that are subject to uncertainty. For a complete discussion, please refer to the cautionary statement included in our earnings release and further details in our annual report on Form 10-K and other filings with the SEC. Further, we will discuss non-GAAP financial information. We believe that presentation of non-GAAP results 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 press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information. I’m joined this morning by Dan Leib, Dave Gardella, Tom Juhase and Kami Turner. I will now turn the call over to Dan.

[Dan Leib, President, Chief Executive Officer and Director]

Thank you, Sanja, and good morning, everyone. Overall, we are pleased with our second quarter results, which were in line with our expectations and the highlight to business mix shift we discussed at our Investor Day in May. We continue to see strong double-digit revenue growth in our SaaS offerings with revenue in the quarter growing by 16.4% year-over-year. The second quarter growth in these offerings was primarily driven by ActiveDisclosure, Venue and our FundSuite Arc content management platform, each of which achieved double-digit revenue growth on a global basis. Offsetting this growth was the impact of print revenue, which declined 9.2% in the quarter.

The reduction in print revenue was higher than the longer-term trend. We expect print reduction to return to the longer-term trend of down approximately 4% in the back half of the year. We continue to expect our revenue mix to evolve by drawing on our domain expertise, exceptional service and process knowledge to support our clients when, where and how they want to work in a digital world.

Before I move on to our operating priorities, I’d like to discuss the sale of our Language Solutions business, which closed on July 22. This transaction was an important step in executing our strategy, aligning directly to our 5-year plan and allowing us to better focus on our global regulatory and compliance offerings. In order to support the core business and transform our brand to meet the evolving digital needs of our clients around the globe, we must focus on assets that align more closely to our vision and position the brand competitively in the marketplace.

Through the process that began a year ago, we came to know the SDL management team quite well and are very pleased with how the transaction concluded. We believe SDL represents an attractive opportunity for the former Donnelley Language Solutions employees. We wish them and SDL good luck in the future. Dave will provide more detail regarding the impact of the transaction in his prepared remarks. As we move forward, we continue to invest organically and explore the M&A market, and we’ll take actions that further position Donnelley Financial as a leading compliance and risk solutions provider for our clients globally. We’ll, of course, continue to be prudent in our decisions.

Now I’d like to shift to our operating priorities. We continue to make strong progress against driving growth in our core and adjacent markets, accelerating innovation and investing in our people. In Capital Markets, our opportunity lies within evolving regulatory and financial reporting requirements, along with a healthier capital markets environment. In our compliance business, we continue to gain ground on the competition by leveraging the strengths of our best-in-class solutions for clients' most complex, data management and disclosure needs.

Within ActiveDisclosure, wins outpace losses again in Q2, and we expect the pace of wins in 2018 will continue to increase. Our clients look to us for a deep expertise and understanding of SEC rules and regulations as well as innovative solutions. As we accelerate innovation across the company, we’re introducing machine learning into our product capabilities, including ActiveDisclosure.

Our technology gives clients improved operational efficiency in meeting evolving requirements of the SEC to support structured data and digital reporting. Using ActiveDisclosure gives our clients a level of ease and transparency in navigating the new in-line XBRL requirements announced by the SEC in June. We have made iXBRL easy and intuitive, allowing our clients to focus on content creation and not the filing format.

In addition, ActiveDisclosure is the only compliance solution integrated with Microsoft Office Online, making it easy for clients to navigate with the tools they’re already using today. This client-centered focus is one of the reasons we’ve been recognized as a leader in XBRL as we were recently awarded certification for the XBRL U.S. Data Quality Committee 6th rule set.

In September, we will issue our annual proxy guide that offers clients a comprehensive roadmap for building innovative and shareholder-friendly proxy statements, drawn from the public filings of the 1,500 U.S. companies that we assist each year. We see a growth opportunity within emerging proxy trends like environmental, social, governance or ESG and are leveraging our expertise to support clients in preparing for the 2019 reporting season.

On the transactional business side, we also continue to see progress with our Venue Data Room product. Via partnership, we have expanded the utility of used cases of Venue. With our partner, eBrevia, we provide our clients with access to industry-leading artificial intelligence, helping to streamline legal and due-diligence processes. Venue Contract Analytics allows users to review documents in half the time, resulting in easier, more extensive reviews within time and budget constraints. In turn, this means more documents uploaded to Venue per transaction.

And finally, I’m proud to share that Venue was named Data Room of the year for the third year in a row at the Global M&A Network’s Annual M&A Atlas Awards in June. Within global investment markets, the implementation of SEC modernization and the related implications of N-CEN and N-PORT reporting our main focuses for our Investment Market mutual fund clients. As of June, our N-PORT, N-CEN solution within our arc filing product was made available ahead of live production.

In addition, our integration with ICE and MSCI, leading providers of research-based indexes and analytics, into our arc filing product position us as a leading provider of data and analytics for clients meeting compliance and regulatory filing requirements. The legislation, their market trends are shifting from documents to data, driving a significant increase in data handling and ingestion. We’ve created a data ingestion tool that allows us to move clients onto our platform easier, faster and with fewer resources. This tool increases efficiency, reduces costs and substantially improves the client experience.

Going forward, building on our industry-leading regulatory software, we are looking to expand the platform, targeting a single solution to address clients' global regulatory requirements. This will allow us to build our global filing platform on a single data warehouse so that we can satisfy global filing requirements in the U.S., EU and APAC with a holistic solution.

Finally, on June 4, the SEC adopted rule 30e-3, which creates an optional notice and access method for electronic delivery of shareholder reports. The SEC’s recommendation provides an extended transition period, stating that the earliest the fund could begin to rely on the rule would be January 1, 2021. Over the long term, we believe the rule provides better engagement for investors, giving them not just access but much-needed transparency and an improved investor experience.

The fund industry, in particular, has an opportunity to shift to a more data-centric and analytics-driven model, which is just one step in the overall evolution of financial services, moving from documents to data. We’re ready to support our clients with our existing digital solutions, and we will continue to enhance and build new capabilities in the future. Lastly, as we evolve our business model, it is critical we have the right people in place, delivering on a culture of speed to execution, innovation and agility.

I’m please to share we’ve recently brought on two new officers to our executive team. In June, we welcomed Floyd Strimling as Chief Product Officer. Floyd joined us from SAP, where he was most recently the Head of Customer Engagement and Strategy in the office of the CTO and was instrumental in the go-to-market of SAP Cloud Platform. Floyd has responsibility for driving technology, product and platform strategy for our client-facing products.

And most recently, we brought on Kirk Williams to lead Human Resources. Kirk comes to Donnelley Financial with more than 20 years of leadership experience with global companies ranging from Walmart to American Express. He has demonstrated expertise in leading global transformational initiatives. Both Floyd and Kirk will be essential to our success as we continue to evolve our business. With that, I will turn it over to Dave. Dave?

[Dave Gardella]

Thank you Dan and good morning everyone. As Dan mentioned earlier, our second quarter results were consistent with our expectations. On a consolidated basis, net sales for the second quarter were $290.6 million, an increase of $0.4 million or 0.1% from the second quarter of 2017. After adjusting for changes in foreign exchange rates, organic sales decreased 0.5% as strong Capital Markets transactional volume and growth in our SaaS offerings was more than offset by lower mutual funds volume in U.S. Investment Markets, lower transactional volume in the International segment and lower compliance volume in U.S. Capital Markets.

Consistent with the shift in revenue mix that we are targeting, services revenue grew by $10.8 million or 6.1%, driven by the 16.4% growth in our SaaS offerings that Dan noted earlier. That growth was offset by a $10.4 million decline in print- based revenue. Second quarter gross margin was 43% or 215 basis points higher than the second quarter of 2017, including a $2.6 million negative impact of the change in revenue recognition standard that negatively impacted gross margin by approximately 90 basis points. Excluding the negative impact of a change in revenue recognition standard, second quarter gross margin improvement of 340 basis points was driven by favorable mix between higher- margin services and lower-margin products revenue as well as cost reduction initiatives, partially offset by increased investments in our technology function.

Non-GAAP SG&A expense in the quarter was $61.6 million, $7.1 million higher than the second quarter of 2017. As a percentage of revenue, non-GAAP SG&A was 21.2% or 240 basis points higher than the second quarter of 2017. The increase in SG&A was primarily driven by higher commission expenses associated with an improved mix of higher-margin revenue as well as investments in support of our strategic priorities.

Our second quarter non-GAAP adjusted EBITDA was $63.4 million, an increase of $0.4 million from the second quarter of 2017. Non- GAAP adjusted EBITDA margin in the quarter of 21.8% was 10 basis points higher than the second quarter of last year, including approximately 80 basis points of a negative impact related to the adoption of a new revenue recognition standard, which negatively impacted EBITDA by approximately $2.3 million.

Excluding the negative impact from the change in revenue recognition standard, second quarter EBITDA margin improvement of 90 basis points was primarily driven by the favorable mix between services and products that I noted earlier and our cost-reduction actions, partially offset by higher investments in support of our strategic priorities. Turning now to our segment results. Revenue in our U.S. segment was $242.5 million in the second quarter, an increase of 0.3% from last year’s second quarter. On an organic basis, after adjusting for the impact of the new revenue recognition standard, revenue was up 0.1%.

Capital Markets reported organic revenue growth of 10.2%, primarily due to strong transactional volume driven by a combination of improved market activity and market share gains. We also continue to see double-digit growth in our Capital Markets SaaS offerings, Venue and ActiveDisclosure, which is offset by lower revenue in traditional compliance. Revenue in Investment Markets declined 14.4% on an organic basis driven by lower print-based revenue in our mutual funds and health care offerings.

In addition to continued secular declines and modest point reductions in prints, there were a couple of projects in the second quarter of 2017 that did not repeat this year. The decline in print-based revenue was only partially offset by growth in our content management services. Non-GAAP adjusted EBITDA margin for the segment of 26.7% increased 100 basis points from the second quarter of 2017, primarily due to the favorable mix between services and products and savings from our cost-control initiatives, partially offset by higher investments in support of our strategic priorities and the negative impact of the revenue recognition standard.

Revenue in our International segment was $48.1 million in the second quarter, a decrease of 0.8% from the second quarter of last year. On an organic basis, excluding the favorable impact of changes in foreign exchange rates and the negative impact of the new revenue recognition standard, revenue in the second quarter declined 3.7%, primarily due to lower transactional volume in Europe, which was partially offset by growth in our SaaS offerings and higher volume in Language Solutions and compliance. Non-GAAP adjusted EBITDA margin for the segment of 10.2% increased 590 basis points from the second quarter of 2017, primarily due to an unfavorable revenue mix and reduced operating leverage on lower sales.

Our second quarter 2018 non-GAAP unallocated corporate expenses, excluding depreciation and amortization, were $6.2 million, a decrease of $0.7 million from the second quarter of 2017. Consolidated free cash flow in the quarter was a use of $5.8 million, $3.1 million favorable to the second quarter of 2017. Relative to last year’s second quarter, the lower use of cash was primarily due to lower tax payments, partially offset by working capital underperformance and higher spin-off-related expenses.

We ended the quarter with $486.3 million of total debt, including $27 million drawn on our revolver. And we had net available liquidity of $154.4 million. As of June 30, 2018, our gross leverage ratio was 2.9 times, up 0.2times from year-end 2017 and down 0.3times from a year ago. The increase from year-end was driven by normal seasonality of our cash flow, which is negative in the first half of the year and turns positive in the second half of the year.

Subsequent to the end of the quarter, we completed the sale of our Language Solutions business for $77.5 million. Net proceeds after expected taxes and transaction-related payments of approximately $60 million from that sale were used to reduce outstanding debt under our term loan, and we expect to be below our targeted gross leverage range of 2.25 times to 2.75 times by the end of this year.

As highlighted in this morning’s press release, we provided updated full year 2018 guidance to reflect the impact of the disposition of the Language Solutions business. Current guidance includes the result of Language Solutions through July 22, 2018, while previous guidance included Language solutions for the full year. As also noted in the press release, changes to our guidance reflect exclusively the impact of the sale of Language Solutions business as we continue to expect the remaining operations to be in line with what was assumed in our previous guidance. We expect 2.18 revenue to be in the range of $970 million to $990 million.

We expect our non-GAAP adjusted EBITDA to be in the range of $160 million to $170 million. Depreciation and amortization is expected to be approximately $48 million. We expect interest expense of approximately $35 million. Our full year non-GAAP tax rate is expected to be in the range of 29% to 31%. We project the full year fully diluted weighted average share count to be approximately 34 million shares. We continue to expect capital expenditures in the range of $40 million to $45 million.

Our year-to-date CapEx is up $3.6 million from last year, and while our fully-year guidance implies an acceleration to that trend. As we have stated previously, we will continue to be disciplined around not spending if the appropriate returns are not available. And lastly, we expect free cash flow in the range of $35 million to $40 million, $20 million lower than previous guidance, solely reflecting the impact of the sale of Language Solutions.

The difference between gross proceeds of $77.5 million and net proceeds of approximately $60 million is comprised of onetime tax payments related to the gain on the sale and onetime transaction-related payments, both of which negatively affect free cash flow. The impact of these onetime payments, in addition to the impact of excluding the year-to-go operating results of Language Solutions, as I noted earlier, drives the entire change from previous guidance.

Our guidance assumes an improvement in the Investment Markets' revenue trend relative to what we’ve seen in the first half of the year where the year-over-year comparisons were more difficult. Within Capital Markets, we’re assuming a flattish to modest increase in the second half of the year compared to last year. We had a few large compliance deals in the second half of last year. And while Capital Markets transactional pipeline is improving, the visibility on timing remains somewhat challenging. On a full year basis, we expect the impact of the new revenue standard to have no impact.

With that, I’ll turn it back to Dan.

[Dan Leib, President, Chief Executive Officer and Director]

Thank you, Dave. In closing, we are well on our way in implementing our strategy and are excited by the opportunities to grow our core business. Our focus is on our clients and leading them through a digital transformation while also remaining purposeful in how we execute on our strategy. We’ll continue to be disciplined toward managing the balance sheet while investing in growth opportunities to improve our overall portfolio. And with that, let’s open up the line for Q&A.

[Operator]

Thank you. We will now begin the question-and-answer session [Operator Instructions] Our first question is from Charles Strauzer with CJS securities.

[Charles Strauzer, CJS securities]

Hi, good morning.

[Dan Leib, President, Chief Executive Officer and Director]

Good morning, Charles.

[Charles Strauzer, CJS securities]

Can we just have a quick discussion about the Investment Markets' revenue decline year-on-year. I know you’re still cycling and get some tough comps there. Maybe a little additional color and help us frame a little bit more the magnitude in the quarter from that. And then how should we think about the next two quarters? And how that should trend? Thanks.

[Dave Gardella]

Yes, Charlie, I’ll start. So as I mentioned, we had some work in 2017 that didn’t repeat. And then there was some additional freight and postage that goes along with the printing that was a decline, and then some timing. So I think, Dan mentioned, for the back half of the year, on the print side, we would expect a more normalized secular decline of roughly 4%. And I think, if you look at the Investment Markets trends over time, what we’ve seen is generally flattish, which is the combination of kind of that declining print, which gets offset by some of the content management that we’re doing in that space.

[Dan Leib, President, Chief Executive Officer and Director]

Yes. I’ll – the only thing I’ll add, Charlie, and then I know Tom wanted to add a few things, is we do see the content management performance, which was quite good year-to-date and in the second quarter, actually improving or accelerating into the back half of the year as well.

[Tom Juhase, Chief Operating Officer]

Yes, Charlies, so it’s Tom. The only thing I’d say anything about visibility with funds is that when they’re quite like they were in the first half of the year for different economic reasons that they side, we get to see some visibility and some, if you will, conversation around what to expect so that we can prepare for what – launching of new funds and things like that. So we’re anticipating a better back half of the year because of what we’re hearing. But we’re – and we’re hearing they want to do some things in the back half of the year. So I think, that ways into Dave’s comments as well.

[Charles Strauzer, CJS securities]

That’s helpful, thank you. And then maybe you can talk, kind of segue into a little bit more on the guidance and how we should think about kind of Q3, Q4 as it breaks up for the second half of the year for topline and EBITDA. Just maybe give us give us a sense of what your thoughts are there. Thanks.

[Dave Gardella]

Yes, Charlie. So as we look at the back half of the year, I think, probably the best assumption is, looking at Q3 and Q4, to be of about equal size, right. So I think if you look at our year-to-go guidance, puts EBITDA in kind of the high $20 million, maybe close to $30 million per quarter. And similarly, on revenue, we would expect both quarters to be about equally sized.

[Charles Strauzer, CJS securities]

Great, that’s very helpful. Thank you very much.

[Operator]

Our next question is from Peter Heckmann with D.A. Davidson.

[Peter Heckmann, D.A. Davidson]

Good morning, gentlemen. I wanted to follow up on your comments in the press release about share gains. And can you talk about some – we’re seeing the same thing in the data that we’re looking at. Can you talk about some of the areas where that might be most prevalent moves to us, certainly in the IPO markets that’s as well compliance, funds? What areas are you gaining share back at the best rate? And what do you attribute it to?

[Dave Gardella]

Yes. So I think that from a share gain perspective, most of the significant gains that we’ve seen within Capital Markets have been on the transactional side. You referenced IPO, that – the data that you have lines up with what we’re looking at. I think the – very similar situation around the S-4 mergers that we saw some nice increases there as well. And then I think Dan was going to comment.

[Dan Leib, President, Chief Executive Officer and Director]

Yes. The only other thing I’d add to that is we are seeing, as we mentioned in our prepared comments, additional wins in our ActiveDisclosure product, and the attribution of that is, we’ve been making investments behind the product and getting into the market more aggressively behind it and feel good about where we are. Obviously, we’d like to accelerate development efforts to continue to grow that offering but feel good there as well on the compliance side.

[Dave Gardella]

And the only thing I’d say is the quality of the IPOs. So I think in past calls, we’ve talked about the market being down, Peter. And then, now market is trending up and the quality of the deals are up as are the M&A. We like to say no two deals are created equal. So you look at the numbers for stats and percentages, but it’s not necessarily that. The valuation is also important, the type of the deal it is. And then the other thing I’d add in our Venue product is that we do a lot of private transactions in that product as well. So we’re seeing gains, both on the public markets as well as the private markets.

[Peter Heckmann, D.A. Davidson]

Okay, that’s helpful. And then as a follow- up, your – you made it clear that your guidance – your updated guidance only reflects the divesture, though the upside that we saw in margins and in EPS in the second quarter, we’re not rolling that through. Should we interpret that you’re trying to build in some additional conservatism? Or maybe are there some new offsets, some new items that come up that they look like they’ll offset some of the strength in the second quarter?

[Dave Gardella]

Yes, Pete. So in the back half, we obviously didn’t give quarterly guidance on Q2 but recognize the numbers that you referenced. I think as we look at the back half of the year, we mentioned the transactional pipeline is building, still the visibility on timing there remains challenged. We did have some large compliance work, compliance jobs in Capital Markets last year that were overlapping so that the comp becomes a little bit tougher within Capital Markets. And then on Investment Markets, we said the trend’s getting a little bit better.

[Peter Heckmann, D.A. Davidson]

Okay. Thanks. I will get back in the queue.

[Operator]

The next question is from Michael Cho with JP Morgan.

[Michael Cho, JP Morgan]

I just wanted to touch one more time on the 2018 guidance. Just want to confirm, so organic growth, adjusting for Language, well, should still be 1% to 2% for 2018. Is that what you’re guiding?

[Dave Gardella]

Yes, so I think our range is a little bit wider this time. And the organic comes down a little bit. Language Solutions was growing faster than our overall average of our previous guidance.

[Michael Cho, JP Morgan]

Got it, okay. Are you updating that at all today as well?

[Dave Gardella]

Yes, I think if you look at the – our – the midpoint of our full year guidance, it’s about 1.3%. So in the range but, like you said, a little bit lower than the midpoint of previous guidance

[Michael Cho, JP Morgan]

Okay, that’s helpful. And then just quick follow-up on the onetime revenues. So what was the actual onetime revenue in Investment Markets in 2017 second quarter?

[Dave Gardella]

So I think between the onetime revenue and then some of the postage in freight was about $6 million, combined. And then the rest of it was some – the normal secular decline, some timing on different pieces of work, et cetera.

[Michael Cho, JP Morgan]

Okay. And then just one more on – you said that there were some project-related revenues in the second half for Capital Markets. Can you help us, I guess, frame the magnitude of that?

[Dave Gardella]

Yes. So I don’t have the numbers with me, Mike. So I just want to say they were in the $5 million to $10 million range. And they were on the compliance side of Capital Markets that – they tend to – it was really proxy work that tends to kind of act more like transactional, just given the nature of that work.

[Michael Cho, JP Morgan]

Okay, great. Thank you.

[Operator]

Our next question is from David Ridley-Lane with Bank of America Merrill Lynch.

[David Ridley-Lane, Bank of America Merrill Lynch]

Sure. So a couple of questions on the Investment Markets side. It’s been four quarters of declines. And I guess I’m just curious, business reflect a broader trend among your client base. Is your client base under pressure? And is it more of a true volume decline within your clients, if that makes sense?

[Dan Leib, President, Chief Executive Officer and Director]

Yes. Sure, so let me kick it off, and thanks for the question. I think you see a – we – and we’ve mentioned this before, the larger percentage of that business is print-related. And so as you see this shift, so we’ve also had – well, we’ve had overall declines. You see a more pronounced mix shift in that business because we also have had overall growth in the software and content management product. And so you will see a more pronounced mix shift within that business. We, frankly, expect that to continue as it relates to some of the lumpiness that you see quarter in, quarter out. That really relates to largely special proxies in addition to what Dave mentioned specific to this quarter. And I’ll kick it back to Tom, but Tom referenced earlier, the nature of those special proxies are tough to call from a timing perspective. And then you do see some pressures on the funds impacting timing of some of those proxies.

[Tom Juhase, Chief Operating Officer]

Yes, I would add. Without question, the secular decline of print is in the numbers. Second, we are definitely working with – it’s kind of a plus and a minus. We’re working with our clients on – particularly, in the funds side where they want to reduce cost, and they look to print to do that. However, they still have to manage their content. So something like our arc reporting in content management, we’re seeing quarter-after-quarter increases in percentages of using the content management tools. So while it’s not the same dollar-for-dollar print revenue, it’s profitable revenue that’s replacing the print revenue. So that’s in there. Dan’s comment around the chunkiness around the special proxies, we had two mega proxy deals in the first half of last year. That makes the comps tough. And then lastly, we’re seeing new markets coming around with alternative investments, for example, which is all incremental new business using arc reporting. So it’s kind of a tale of two cities where you have the number of the print decline that you’re referencing and the customers wanting to reduce costs there, but at the same time, we’re selling them other content management products that are increasing at a different rate.

[David Ridley-Lane, Bank of America Merrill Lynch]

Embedded in your 2018 guidance is your view for Investment Markets to – U.S. Investment Market revenue to be growing in the second half?

[Dave Gardella]

No. I think it’ll be closer to flattish. If you look at the year-to-date, obviously, there’s been organic declined a lot, driven by some of the tougher comps. Closer to flat, maybe slightly decline in the back half of the year, right. And again, exhibiting the same mix shift that we talked about. So the software side will be growing and the print side will be the headwind.

[David Ridley-Lane, Bank of America Merrill Lynch]

Thank you very much.

[Dave Gardella]

Thank you.

[Operator]

And our final question for today comes from Bill Mastoris with Baird & Company.

[Bill Mastoris, Baird & Company]

Thank for slipping me in. Dan, in your prepared remarks, you referenced exploring options in the M&A market. And given some of the other comments that you’ve had, is this going to be geared towards maybe exploring more digital service-related products to make up for the decline in print revenue? Any color that you could give on that would be greatly appreciated.

[Dan Leib, President, Chief Executive Officer and Director]

Yes, sure. Thanks for the question, Bill. So we certainly look across the spectrum from things closer to what we’re doing today, things a bit further away, obviously, understand the price points, and the overall M&A market is at elevated levels from a price point perspective. But clearly, the focus of the company is towards our digital strategy so – as we can help our clients along that journey as they transition from print to digital. But we are disciplined around what that differential is in terms of price point of what those assets trade at. And so that’s, frankly, been – we’ve looked at quite a bit in the market to date. And that’s been why you haven’t seen us transact in – other than to be on the sell side, but you haven’t seen us transact. We’re discipline about what we’re going to spend for what we are going to get.

[Bill Mastoris, Baird & Company]

And I assume that any acquisition of any small business is not going to take you outside of your – or much outside of your targeted leverage range. Would that be a fair statement?

[Dan Leib, President, Chief Executive Officer and Director]

Yes, I didn’t talk to speculate on hypothetical acquisitions, but clearly, our targeted leverage range is a consideration and guard rail, both from size of acquisition as well as consideration and how we think about approaching the M&A market. Okay. And with that, operator, we thank you for hosting the call and thank all of those for participating. And we will talk to you after next quarter. Thank you.

[Operator]

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating. And you may now disconnect.