Donnelley Financial Solutions, Inc. (DFIN) Q3 2018 Earnings Report, Transcript and Summary

Good morning and welcome to the Donnelley Financial Solutions Third Quarter 2018 Results Conference Call. My name is Brendon, and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. And I will now turn it over to Sanja Burklow. Sanja, you may begin.

Thank you, Brendon. Good morning, everyone, and thank you for joining Donnelley Financial Solutions third 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 and Tom Juhase. I will now turn the call over to Dan.

Thank you, Sanja, and good morning, everyone. We are pleased with our third quarter results which continue to highlight the business mix shift we've outlined in our long-term guidance. Total organic revenue grew 5.1% in the quarter due to strong performance within U.S. capital markets and across the company in our SaaS offerings. Disciplined cost management along with the positive mix shift led to expanding non-GAAP adjusted EBITDA margins. Our software offerings achieved nearly 15% revenue growth in the quarter and now represent approximately 20% of total revenue. For reference, as a percentage of revenue software was 13% in 2016. Third quarter growth in software was primarily driven by our fund suite, our content management platform and active disclosure, each of which grew by more than 20% on a global basis. On our second quarter conference call, we said we expected to see stronger relative performance within our global investment markets offering in the back half of the year. In the third quarter performance improved as expected. Our software sales were supported by key arc reporting wins with top tier financial services firms and growth in our report modernization regulatory platform. Overall print revenue declined 4.7% in the quarter in line with the longer term trend and consistent with our expectation we communicated on our last call with you. We're pleased with the steady balance of our revolving revenue mix as we shift from print to software related services. Early in the quarter, we finalized the sale of our Language Solutions business, an important step in executing our long-term strategy. Proceeds from the sale were used to pay down debt creating additional financial flexibility. Now I'd like to cover our operating priorities. We continue to make strong progress against our long term strategic plan with a focus on driving growth in our core and adjacent markets, accelerating innovation and investing in our people. As I mentioned, we saw positive results in our U.S. capital markets business, driven primarily by an increase in IPO and secondary offerings and increased M&A activity. We are pleased with the progress we made within our software offerings. As we've discussed previously, we're committed to investing in best-in-class artificial intelligence within our Venue Virtual Data Room Solution to provide clients improved operational efficiency. Our partnership with eBrevia an integration with our venue offering differentiates us and gives clients industry leading artificial intelligence to streamline and expedite the standard deal cycle. And we're expanding what venue can do for our clients even further with our recent partnership with Teridion. With the adoption of Teridion’s Intelligent Cloud Routing, our clients are getting the best performance from any location globally to complete the due diligence process. This adds another layer of speed, ease reliability and security to our Venue product and ultimately our clients. We've made significant investments in developing our ActiveDisclosure offering. We saw a substantial number of clients onboard to this solution. Our compliance business has benefited from a strong IPO market, as well as our strong market share within that business. The third quarter was marked by a focus on delivering holistic proxy solutions to capital markets clients. This included numerous proxy focused events across the country and the recent distribution of our sixth edition of the Guide to Effective Proxies, a comprehensive review of innovative and shareholder friendly best practice disclosures drawn from the public filings of Donnelly Financial Solutions blue clip -- blue chip client base. The Guide has become a trusted go to resource for companies looking to transform proxy statements from traditional compliance documents to compelling shareholder communications. Investor expectations have shifted and proxy statements have evolved dramatically to keep pace. By sharing our expertise, companies can meet these changing requirements and promote greater transparency and enhance communications with shareholders. We see opportunity in the proxy space offering new and innovative ways to service and support the business evolution of our clients. Shifting to investment markets, we continue to see the effects of the change in revenue mix and stronger growth in software sales, particularly with the addition of N-CEN, N-PORT and print solutions. Last quarter we saw the implementation of SEC modernization and the related implications of N-CEN and N-PORT reporting. In September we went live with our solution to support clients filings through our ArcFiling platform and completed the first ever successful submission of the new form N-CEN with the SEC. The filings are the first to use the XML based form N-CEN part of the SEC’s modernization initiative along with form N-PORT to handle the new complexity and scale our ArcFiling product was developed as a cloud native solution capable of scaling to meet the high demands of the increase in data. We expect to complete N-CEN filings covering approximately 4,000 investment funds in the first year of the new requirement. To-date we filed with 100% success rate. Donnelley Financial remains largest EDGAR filer by volume as reported by the SEC and the only company offering end to end solutions that provide a single cloud based application to create, package and submit documents directly to the SEC. As we head into the fourth quarter, we’ve commenced test filings with the SEC for N-PORT via our regulatory platform. This is a critical step ahead of the April 2019 N-PORT filing requirement. We’re excited about the future direction of our regulatory platform as we continue helping our clients not only with U.S. regulatory requirements, but also on a global basis. Also in the quarter we announced a partnership with Bloomberg, integrating their liquidity assessment tool into our ArcFiling platform, which helps mutual funds comply with the new requirements mandated by the SEC’s liquidity and report modernization rolls. Our Bloomberg partnership as well as integration with ICE and MSCI leading providers of research based indexes and analytics position us as a leading provider of data and analytics for clients meeting compliance and regulatory filing requirements. As we continue to make progress against our strategy and evolve our business model to meet the needs of our clients we are diligent in managing the business effectively, simultaneously reducing cost [Technical Difficulty] organic investment back into the business. We ended the third quarter with $341 million of net debt, representing net leverage of two times. In the two years since the spin, we’ve reduced our net debt by $242 million or 42%, while we have continued to invest more in the business and are looking for ways to accelerate our strategic plan we continue to be disciplined around all investment. With that, I will turn it over to Dave. Dave?

Thank you, Dan and good morning, everyone. Before I discuss our third quarter operating performance in more detail, I’d like to recap a couple of significant items in this quarter that are impacting our year-over-year comparability. As we previously announced, we completed the sale of our Language Solutions business on July 22, 2018 for $77.5 million in cash. Our third quarter 2018 results include Language Solutions through the disposition date, while the third quarter of last year includes Language Solutions for the whole quarter. In addition third quarter of 2018 GAAP results include the gain on the sale of Language Solutions of $38.4 million on an after tax basis, as well as a gain on equity investment of $8.5 million both gains are excluded from our non-GAAP results that I’ll be discussing today and our organic revenue was adjusted to exclude the impact of the Language Solutions sale. On a consolidated basis net sales for the third quarter were $216.9 million, a decrease of $5.7 million or 2.6% from the third quarter of 2017, primarily due to the sale of Language Solutions. After adjusting for the sale of Language Solutions changes in foreign exchange rates and the impact of the adoption of the new revenue recognition standard, organic sales increased 5.1%, as strong capital markets transactional volume and growth in our SaaS offerings more than offset declines in capital markets compliance volume and healthcare and commercial print volume within investment markets. Adjusted for the sale of Language Solutions our total services revenue grew by $12.5 million or 10.2%, driven by double-digit growth in both capital markets transactional revenue and our SaaS revenue, which was partially offset by a $3.9 million or 4.7% decline in print based revenue. Third quarter gross margin was 38.5% or 170 basis points higher than the third quarter of 2017, primarily driven by a favorable mix between higher margin services and lower margin products revenue. Non-GAAP SG&A expense in the quarter was $52.3 million, $1.8 million higher than the third quarter of 2017. As a percentage of revenue non-GAAP SG&A was 24.1% or 140 basis points higher than the third quarter of 2017. The increase in SG&A was primarily driven by higher investment spending in support of our strategic priorities, as well as the revenue mix that continues to be more heavily weighted toward our SaaS offerings. Our third quarter non-GAAP adjusted EBITDA was $31.3 million, a decrease of $0.2 million from the third quarter of 2017. The sale of Language Solutions negatively impacted year-over-year EBITDA comparison by approximately $1.7 million. Non-GAAP adjusted EBITDA margin in the quarter of 14.4% was 20 basis points higher than the third quarter of last year, primarily driven by the favorable mix of revenue. Turning now to our segment results, revenue in our U.S. segment was $185.5 million in the third quarter of 2018, a decrease of 0.3% from last year’s third quarter. On an organic basis after adjusting for the sale of Language Solutions and the impact of the new revenue recognition standard revenue increased 3.2%. Revenue in capital markets grew 9.3% on an organic basis, primarily due to strong transactional volume driven by continued strong market activity in IPOs and a couple of large M&A deals in the quarter. Higher transactional volume was partially offset by lower compliance revenue where we had a tough year-over-year comparison with a couple of non-recurring proxy deals in last year’s third quarter. We did however continue to see strong growth in active disclosure revenue, which grew 15.9% from the third quarter of 2017. Revenue in investment markets declined 3.6% on an organic basis, driven by secular declines in print based revenue in our healthcare and commercial offerings. The decline in print based revenue was only partially offset by growth in our fund suite arc SaaS solution. Non-GAAP adjusted EBITDA margin for the segment of 18.5% increased 80 basis points from the third quarter of 2017, primarily due to the favorable mix between services and products revenue. Revenue in our International segment was $31.4 million in the third quarter of 2018, a decrease of 14% from the third quarter of last year. On an organic basis excluding the impact of the Language Solutions disposition and unfavorable impact of changes in foreign exchange rates and the new revenue recognition standard revenue in the third quarter increased by 14.8%, driven by growth in our SaaS offerings and strong transactional volume in Asia. Non-GAAP adjusted EBITDA margin for the segment of 8.3% increased 10 basis points from the third quarter of 2017, as mix of revenue and cost savings initiatives more than offset stranded cost related to the Language Solutions sale. Our third quarter 2018 non-GAAP unallocated corporate expenses excluding depreciation and amortization were $5.6 million, an increase of $1.1 million from the third quarter of 2017, primarily driven by investment in strategic initiatives. Consolidated free cash flow in the quarter was $53.4 million, $11.7 million lower than the third quarter of 2017, primarily due to less cash generated by working capital, partially offset by lower tax and interest payments. Net proceeds from the sale of Language Solutions of approximately $60 million were used to reduce outstanding debt under our term loan. We ended the quarter with $397.2 million of total debt and $341 million of net debt, with nothing drawn on our revolver and we had net available liquidity of $265.3 million. As of September 30, 2018 our gross leverage ratio was 2.4 times and our net leverage ratio was 2.0 times, down 0.4 times from year end 2017 and down 0.8 times from a year ago. Based on the seasonality of our cash flow we expect to drive this down further by year end. As we enter the last quarter of the year let me share more detail on the full year 2018 guidance that was summarized in this morning’s press release. We expect 2018 revenue to be in the range of $970 million to $990 million. This range implies fourth quarter organic growth of approximately 5% at the midpoint. 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 $45 million $3 million lower than our previous guidance. We expect interest expense of approximately $36 million. Our full year non-GAAP effective tax rate is expected to be in the range of 30% to 31%. We project the full year fully diluted weighted average share count to be approximately 34 million shares. We expect capital expenditures in the range of $35 million to $40 million, $5 million lower than previous guidance as we 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. Regarding the fourth quarter comparison to last year. The most notable item impacting comparability is the sale of Language Solutions, which will negative impact our reported revenue comparison by $21.2 million and negatively impact our non-GAAP adjusted EBITDA comparison by approximately $3.9 million inclusive of net stranded cost. And with that, I'll turn it back to Dan.

Thank you, Dave. In closing we are pleased with the progress we've made this year in driving our strategy forward and are excited by the opportunities to grow, while reasonably managing our shifting mix of business. Our focus has not changed, we are committed to serving our clients well and leading them through a digital transformation, while also remaining purposeful in how we execute our strategy. While our balance sheet has been well managed and we now sit at 2 times leverage on a net debt basis, we'll continue to be disciplined while investing in growth opportunities to improve our overall portfolio. Finally, before I open it up for questions. I'd like to share a recent addition to our Board of Directors, Juliet Ellis, Chief Investment Officer of the U.S. Growth Equities for Invesco joined the Board on October 11. Juliet brings expertise in the investment management industry and has long track record in financial leadership and investment oversight for strategies expanding asset classes and industries. We're looking forward to the critical insights we know she will bring at the Board as we continue to execute on our business plan to drive growth and enhance shareholders value. Juliet replaces Oliver Stockwell, who has retired after over 20 years of service as a board member to Donnelley Financial and or Donnelley. We thank Oliver for his contributions over the years and wish him well in retirement. And with that, let's open up the line for Q&A.

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And from CJS Securities we have Charlie Strauzer. Please go ahead.

Hi, good morning.

Good morning, Charlie.

Just to clarify on the revenue guide, Dave, you've talked about the 5% at the midpoint. Does that exclude Language from the comparison there?

Yes, so that's an organic number in Q4.

Got it, great. And then do you expect to strip that out of the kind of segmentation going forward?

That will be left in the results that we've report, given the way that we found the accounting on it going forward. But we intend to continue throughout next year to quantify the impact as we go through the quarters there.

Got it. And then on the lower CapEx, I know you said about $5 million less. Are you, I guess, satisfied is the work I guess I'm looking forward in terms of the spend that you've made this year in terms of keeping your products fresh and competitive?

Yes, absolutely. We increased the spending on CapEx from the prior year quite a bit. And when we did that said, we have a disciplined process around how we spend. So it just ends up being that balance of spending responsibly with continuing to grow those products. And so as you can see by the growth rate that we've achieved and some of that is obviously not yet in the product given the timing between spend and realizing the benefit. But feel very good about what we've invested back into the products and the pace at which we're going. Always likes to move faster but we want to balance being disciplined around how much we're putting in and the benefit we’re getting out.

And Charlie just to clarify, most of that spend still goes to the software offerings that, Dan, was referring to.

Excellent. Thank you. And then just lastly when you look at the competitive environment with Toppan buying Merrill, just maybe some thoughts there and just overall any other major changes in the competitive environment that we should pay attention to? Thanks.

Thanks. So certainly have seen a fair number of assets move in our environment, the one you mentioned being one and then we've seen other assets that have moved to both strategic, as well as private equity. And we look at those as opportunities for us, there's always some amount of disruption. But we don't see a major change in the competitive environment driven by M&A happening with the competitor.

Great, thank you very much.

Thank you.

From JP Morgan we have Michael Cho. Please go ahead.

Hi. Good morning, guys.

Good morning.

Just given the growing, I guess, presence or mix of the SaaS business or SaaS revenues, can you just give a comment on margins today and I guess where you hope to kind of roughly get to when it is more closer to the longer term target of the quarter of the business?

Sure, yes, so you're cutting out a bit. I think I got the question though. So we see amongst the three main customer facing products Venue, Arc Suite and ActiveDisclosure. We haven't broken out the margins for public consumption, we do see what you would expect at a gross margin level and then some of the products are at scale and generating pretty high margins and others are the products are coming up at scale ramp. But we do think and do see on an incremental basis very good flow through on margin. So the growth is very helpful. We made a couple of comments on it in terms of the flow through and impact to margin. If you reflect back on our prior calls and our discussion around investing more in the business. So back to Charlie's question on the CapEx side. With that CapEx also often comes expense. And so we highlighted that we would be investing more in the business. So we're seeing the level of performance that we have, which is this growth and the profitability flow through is offsetting the incremental investment. So very happy with the model as it's playing out this year.

Okay, great. Thanks, that's helpful. Just one quick follow up on the fourth quarter guide on organic. I don’t know if you’ve mentioned it, but can you give you a comment on the rough, I guess, mix that's implied in terms of the capital markets and investment market segments when you talked about the 5% organic implied for fourth quarter.

Yes. Thanks, Mike. So -- and we didn't mention it specifically, but I can tell you as we mentioned on the last call with respect to investment markets we said that we expected the year-over-year comparisons to improve in the back half of the year relative to the comparisons that we saw in the first half of the year, and obviously that that did come through in Q3. And then from a capital markets perspective we would expect that the transactional activity remains relatively healthy, similar to what we saw in Q3.

Okay, great. Thank you.

Thank you.

From D.A. Davidson we have Peter Heckmann. Please go ahead.

Good morning gentlemen.

Good morning.

I wanted to follow up on that organic growth question. In terms of the shift -- the continued mix shift as well as divestiture of Language, does that change in any way some of your thoughts around kind of the intermediate term, organic growth outlook and for that matter as we start to look to 2019 even though I know you’re not giving guidance, any particular tough comparisons that we should be keeping an eye out for as we model 2019?

Yes, so Pete, I think with respect to Language Solutions and how that sale impacts our longer term guidance. I think if you go back to Investor Day in May we had given a range of organic growth that amounted to 1% to 1.5%. It baked in their Language Solutions was growing faster than the overall, I think in a few presentations that we’ve posted to revise for the sale of Language Solutions that longer term organic range comes down by about 25 basis points. So it’s basically 1% at the midpoint.

Okay. Language, okay. And then…

And then underpinning that right there is the same growth that you’ve seen in the software offering. So continue to see the expansion there with print declines continuing in that 5% or so range.

Yes. And then the only thing I would say about 2019 and again relative to kind of the five year CAGR that we gave at Investor Day the impact of 33 -- the negative impact was built-in to that five year CAGR. And with that being deferred to 2021, the expectation would be that the 2019 revenue growth would exceed what we’ve laid out in that presentation.

That’s right. Okay. And then just in terms of any updated thoughts on capital allocation continue to have an appetite for M&A you’ve said that you’re not able to source and negotiate favorable terms for acquisitions. How do you feel about other capital allocation specifically repurchase down here?

Yes, thanks Pete. So yes, as you mentioned we’re certainly pleased with the progress we’ve made in deleveraging since the spin. And as I mentioned on the call and Dave hit as well just for reference we spun out in October of 2016 with about $584 million of net debt and we expect our net debt at the end of this year to be less than the $300 million. We do feel good about the underlying business performance in free cash flow generation and then the sale of Language Solutions that’s allowed us to accomplish this. And we’ve also been as I mentioned investing more in the business organically and then we’ve had some spin related cash cost running through as well. So we do continue to look at a lot of M&A opportunities in the current environment, things are expensive and we’re certainly very disciplined around the acquisition criteria. We did share our capital deployment priorities at Investor Day and continue to believe that there are great opportunities in our end markets. That said, as we think about capital deployment, we do think about all avenues including return of capital to shareholders and we’re always assessing the best use of capital.

Great. Okay, I’ll get back in the queue. Appreciate it.

Thank you.

From Bank of America Merrill Lynch we have David Ridley-Lane please go ahead.

Yes, good morning. Back in the first quarter you gave some numbers around the impact of ASC-606 the revenue rec changed. Do you have any update around what that would be in the fourth quarter?

So we said on a full year basis, we expected it to be approximately flat. And I think if you look at the year-to-date organic revenue schedule that we have in the press release, we show that it was a 0.1% impact on the organic growth rate. And so I think overall pretty close to zero impact for the year still holds.

Okay. And then, what gives you confidence in the capital markets revenue in fourth quarter given the volatility that the market shared in October, is it pipelines, is it things that you know are already in the market, just how much visibility you have, how much confidence do you have in that expectation?

Yes, so a lot of it just based on the deals that we're seeing that we know are in progress, I would say, and we’ve talked about it pretty consistently quarter in and quarter out. That remains the part of the business that that does have the most volatility and that can change quickly. So it's our best view at this point in time.

Yes. And as we sit here, first week of November, obviously, the benefit of seeing some activity levels in October. And then to Dave's point, what we've seen come through in the market and pipeline, gives us a level of confidence with the caveat that Dave laid forth as well.

And then, the benefits that you're going to get from implementing the N-PORT and N-CEN solutions that you have, is that full revenue run rate start in the fourth quarter since you went live in September or does it kind of build gradually as we go into 2019?

Yes, it builds gradually with the biggest impact that we’ll start to see it in the second quarter of 2019. The big and import kicks off in April of 2019.

Got it. So the solution is launched, but the revenue rec really doesn't start until the client turns it on?

Yes, there's a small amount runs for now, but it's -- the lion share of it starts in April of 2019.

April of 2019. Okay. And then last one for me, what's the dollar amount of stranded cost from the Language Solutions sale and how quickly could you work on that?

Yes. So we think on a run rate basis, it'll will get it down to about $3 million. We obviously start from a much higher level. The expectation would be that that probably from a run rate perspective, we would be pretty close to that by the end of 2019 or early 2020.

And then just the last one for me real quickly, you gave the dollar amount on Language Solutions contribution for revenue and EBITDA and just you went pretty fast at the end of the guidance?

Yes. So Q4 $22 million of revenue -- $21.2 million of revenue and $3.9 million of EBITDA.

Okay. And that's what Language Solutions contributed in the fourth quarter of 2017?

Yes, and that's inclusive of the kind of this some of the stranded costs that we’ll absorb this year. So the year-over-year Delta…

The year-over-year delta.

Yes.

Okay, thank you.

From Wells Fargo Securities we have William Warmington. Please go ahead.

Good morning, everyone.

Good morning.

So on the lower -- on the free cash flow guidance I noticed that you had lowered the CapEx guidance by about $5 million, you kept the free cash flow guidance the same you'd mentioned working capital just wanted to ask what was going on there, if we could get some color?

Yes. So the comment on working capital was specific to Q3, to your point on the math around the CapEx coming down and free cash staying the same. Interest was up $1, the attractive tax rate is up a little bit higher than the previous guidance and we've had some cost you kind of running through spin related expense that had been anticipated as capital. And so, you combine all those things and the fact that we're frankly not that precise on the -- what the year-end working capital number is, we're just holding that same free cash range.

And then I wanted to ask a question on rule 30e-3. Just was curious, if that was -- you're finding that's now been a catalyst for conversations with clients or is that still too far off?

No, there's quite a bit of conversation with clients and in the industry about alternative solutions and how investor communications can be delivered to enhance that access information, et cetera. And so there's quite a bit of conversation at all levels clients, with the industry, with the regulator, et cetera.

Okay, thank you very much.

Thank you.

From Citi we have Peter Christiansen. Please go ahead.

Good morning. Thanks for taking my question. I was wondering if you could talk about the -- how the pipeline for international has shifted if any at all in the last couple of months, not only given what we've seen in terms of added volatility in the market. But is there any impact that we should be concerned about as it relates to trade tariffs?

Yes. So, Pete, I think the -- now that Language Solutions is out of the mix. The biggest piece of international is the capital markets transactional work. And so the same comments that I made around the volatility and visibility. I mentioned the third quarter a lot of what we saw in international was driven by transactional work in Asia. This is really the transactional work outside of the U.S. acts very similar to what we see within the U.S. and just don't have the great visibility. But I don't think anything specific on trade tariffs influencing our numbers.

Yes. And the only thing I'd add to that, we've talked a bit about this previously, the -- we've pushed into the global filing area and have added capabilities internationally within our investments markets business. And so some of the success I mentioned in my prepared comments on perhaps some of the success that we've had in growth and technology is being driven out of the investment markets area as well.

Great. Thanks. And then do you see any benefit from limitation of ASC 842 that's the new lease reporting requirements that kick in next year? Do you see that as a potential tailwind at least for the -- some of the ActiveDisclosure sales?

No, I think not really. Additional disclosures will exist, but relative to that driving incremental opportunity for us. There will be our domain expertise will be helpful for customers so around the service organization and things like that. But relative to the software product it will just be another disclosure that we need to make and that our customers need to make as well.

Great. And last one for me, Dan, I was wondering if you could help us understand some of the AI capabilities that you now have with eBrevia partnership and with the Venue Data Room? And how much of that do you believe is a competitive advantage?

Sure. Yes. So we've a partnership with an ownership stake in eBrevia and it's a contract analytics capabilities. So in the diligence process drives additional efficiency. And it's proven to resonate quite well with customers and has been a very good arrangement for both us and for eBrevia. So that's the AI side within Venue. And then, if we look at within our own operations, we're looking at machine learning and AI in terms of driving some efficiencies within our own business. But specific to eBrevia, we think it's a very nice capability to have added to the Venue Data Room and it does make the diligence process more efficient.

How does this change the user experience?

So it's a quite a nice thing on the legal documentations for the most part to allow faster cycle time. And so from a user experience, it just makes the process smoother, less time intensive and it allows people to focus on higher value added activities because the intelligence in the tool is sorting through some of the lower value added type of things. And then obviously as the process learns itself you can move higher up to value chain. So we've had very positive feedback from corporate clients and then also from the legal community on that relationship and that capability.

Okay, thank you.

Yes, thank you.

And from Baird and Company we have Bill Mastoris. Please go ahead.

Thank you very much. A lot of my questions have been answered, but I'd like to go back to the capital allocation question. Dave, one of the things that you indicated and Dan I think you also touched on it is that, in your capital allocation policy nothing has yet been really finalized or determined. You have an 8.25% coupon out there that is really expensive. Would part of that capital allocation policy include open market purchases of debt?

Yes, Bill, so the first thing I would say is we have communicated our priorities for capital allocation, reinvesting back in the business and then at the low end or at the bottom end of that kind of the share repurchases and dividends. And Dan talked about that earlier, Dan also mentioned I think when, Pete, asked the question that we're always assessing the best uses of capital, which obviously includes the full gamut of the structure.

Yes, specific to your question, yes, those -- that bond was put into place at the spin. There are certain restrictions on time to call, et cetera relative to whether or not we would make open market purchases we certainly won't comment on that.

Okay, that does it for me. Thank you.

Okay, thank you. And with that operator I understand no more questions. So appreciate everyone's time and look forward to talking again soon. Thank you. Bye.

Thank you. Ladies and gentlemen this concludes today's conference. Thank you for joining. You may now disconnect.