Podcast #81: Richard Sosa sees value in $DFIN's niche

Richard Sosa, Co-Founder of thinkAEN, discusses his investment thesis for Donnelley Financial (DFIN).

You can find my Twitter thread on DFIN here, and please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or subscribe to this Substack (it’s free!) to get all new podcasts and transcripts delivered right to your inbox!

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript!

Transcript begins below.

Andrew Walker: All right. Hello, and welcome to Yet Another Value Podcast. I'm your host, Andrew Walker. With me today, I'm happy to have Richard Sosa. Richard is the co-founder of Think-ANE. Is it Think-ANE or Think-AEN? We just said like...

Richard Sosa: Think-AEN.

Andrew: Think-AEN. He's also the host of the Riches in the Niches Podcast. So I've got a little bit of a competitor on here, but that's okay ‘cause I really enjoy the Riches in the Niches Podcast. Richard, how's it going?

Richard: So I'm going well. How you doing?

Andrew: Doing good. Hey, let me start this podcast the way do every podcast. First, the disclaimers remind everyone nothing on this podcast is investing advice. Everyone should do their own research and keep that in mind. Then the second way, I started every podcast with a pitch for you, my guest. I guess, I'll give two pitches for you. First, I mentioned up front, Riches in the Niches Podcast, it's very similar to this podcast. A lot of times, it's people coming on particularly micro cap companies pitching micro cap companies giving you detailed history. My buddy, Dave Waters has been on several times and I'm certainly listen to those.

So, that would be the first pitch. Then the second way is, just a pitch for the company we're about to talk about. Back in February, I said, “Hey, I'm looking for ways to play the SPAC boom. I want kind of picks and shovels plays.” The only person who mentioned the SPAC boom we’re gonna talk about today was you, and you said this is the most obvious way in the world. This company is way undervalued whether you think SPAC’s have wage or not. I ignored it because it had spin dynamics. I looked at in the past and I thought it was broken. Shame on me because the stock is a triple in 10 months since then. So, good for you for staying up-to-date and kind of rethinking the story as things evolve. So, that pitch out the way. I'll just turn over to you. The ticker, the stock is not only financial. The ticker is DFIN. I'll give it to you. What is DFIN and why are we so interested in it?

Richard: All right, perfect. That's great. Thanks for the intro. Andrew, I really appreciate you having me on. Look, I'm passionate about three things. One, investor education. Two, storytelling, and three niche investing. Now, on...

Andrew: Are you passionate about baseball, too? ‘Cause I saw throws lefty in a profile somewhere, and I feel like there might be baseball as well, and I see a football helmet back there.

Richard: Yeah. I'm a big football guy. I like baseball growing up. I guess, I'm a pretty big baseball fan. I'm from Northern Virginia and like the Washington Nationals and kind of was excited to have them come from Montreal. Of course, yeah, I like sports. I like the competitive nature of it, and I’m a big [inaudible] sports fan.

Andrew: But out to get you, passion about niche stocks.

Richard: All right. So first, on the investor education side. Thank you for having me on the show. I'm a big believer and people doing their own research. With investing in stocks and really any asset class, the more education you have, I think the better. Your show does a great job, and just finding people, and having them talk ideas ‘cause at the end of the day, people have to get their ideas from somewhere, and ultimately it's the conviction level and the sizing that make great investors right. It's really just being in front of ideas. I think it's super important. It's why I started a podcast and I why I like your podcast. Why I like a lot of podcast. It's out there. Everyone's got to find what's comfortable for them.

I think it's great that you do, I like your format, really simple. It breaks it down and goes into a deep dive on certain name. So, I think that's great.

Andrew: I appreciate that.

Richard: Just with that, I like getting swag from people and passion about people that where I believe in the mission. Onramp Academy, it's a firm started by Tyrone Ross, this Onramp. What I believe they do is they provide registered investment, advisors with tools to invest and managed crypto assets. They also have Onramp Academy, which is really just investor education. They sent me this a couple days ago and I said, you know what? This is kind of a perfect place to put this on ‘cause, again, just on education. I have some thoughts on crypto, but I'm not gonna share them here, but what I do believe in, is education. If you're gonna invest in anything, you gotta get up to speed and there's really no excuse ‘cause there's plenty of resources out there.

Andrew: For people who are listening on the podcast ‘cause we're doing this with video over Zoom but most people actually listen on podcast. Richard is wearing an Onramp sweatshirt. So that's the swag he's talking about there.

Richard: All right, I appreciate it. Then, on niche side. Niche markets by definition, they're smaller. Because they're smaller, it generally attract less capital and less competition. That's why I've-- in my day job, I like finding managers that are experts or what I call masters of niche right there, because there's less capital and less competition. I believe you have opportunities for outsized returns. As a personal investor, I kind of have the same philosophy. I look at stocks where I believe. Look, there's not a lot of capital here, but maybe at some point there will be. Like Andrew said that this is not investment advice or DFIN just a company that I was fortunate enough to be at the right place, at the right time. There were some things that happened over the last few years, it kind of raised my conviction level on the company.

So, wasn't sure how to start on DFIN, but I think what's the best way to describe it. I'm gonna read this straight from their 10K ‘cause it's very simple. What do they do, you ask me? They provide regulatory filing solution, software solutions, print and distribute solutions, public and private companies as well as mutual funds, and other regulated firms. So there really a kind of a one-stop-shop for public companies, private companies, and investment managers. They file, they'll print stuff. When a company does a deal, does M&A, they're really the leader in that. That's what they do.

Before I go in to DFIN, I wanted to kind of give a background on the company, and why I think it's so cheap. I think it's important to understand where the company had been, to where it is now.

So this company was part of a larger company called RR Donnelley, which was a holding company and kind of a jack of all trade printer. I mean, they basically printed everything. They had this financial services arm. They had a magazine arm. They had a traditional book, the textbook. They do, they did everything. It was a role of strategy, a 150 or something year old company. With DFIN really being, you know, most of DFIN was acquired or Donnelly over the last, from 2005 to 2010. So, it's really was the newer part of Donnelly. In 2015, as you can imagine, the printing business was hemorrhaging losses. There was just, look, at the end of day, people printing this stuff. The company had, since it had been built really on acquisitions, had a ton of debt. There were some good parts and some not-so-good parts. I think 2015, they made a decision. “Hey, we gotta split this up.” This doesn't make any sense being this big company with just a lot of debt. We have to realize value in some way for shareholders. Really, I think to remain. It's not go bankrupt and it was bad. So, at that time, they decide to split up into three. From what I've heard, they always split it up where did remain RR Donnelley would be just some of the traditional printing stuff. LSE Communications that was really the magazine and textbook printing that they did for clients. From my understanding that was always split up to sell to another company. I'm blanking on the company now. For some reason, I'm blanking on it. Not important, it was intended to sell that company and they actually had a merger in place. The FCC came in and said, “No.”

Andrew: Oh, I actually remember that. Yeah, I remember that. I remember ‘cause lost memory but you're right. I think that's it's like text book or magazine, publishing, or something, and the FCC blocked it. I remember, I'm friends with several M&A involve people and all of them were like, especially the libertarians are like, all right, I understand there's a need for antitrust, but are we really concerned about magazine publishing right now? Is that really where the competitive landscape is?

Richard: Exactly. That's exactly what happening. So, with DFIN, it was always kind of set-up, spun off to sell to broader, which is the most complimentary business. Then not to mention that the synergies. Right BroadR-Reach, people don't know this. I'm shocked. I actually spoke with the broader to investors. Twenty percent of their business is printing documents. I think, a ton of proxy statement. That's where they print most of their stuff. I only don’t think you can find the word print in their filings, but they print on that. They print a lot of stuff. They definitely don't have a print division. I'm sure you can find print in there ‘cause obviously they have plans, and there's a cost, and working capital involve tied up with that space. That's been an absolute monster of a company, and BroadR-Reach brought out of ATP I think in mid-2005, and it's just been a nice textbook compounder.

The core business is got a nice smote, very little competition, but it's in a slow growth space. I mean, it ultimately you need more proxy battles. You need more companies. You need more than these things happening, and there's not a growth there. But it was a highly cash generated business. They go out, they do deals, do deals. They just been doing that. Even though it's only growing 3 to 5% a year been doing that. Now the thing trades are like, I don't know what 2007, 2008, multiple and it's just a nice stock. Stock a coffee can't stock. It really is. You look at the chart, boom.

I gave that background because, it's important to understand RR Donnelly was a mess. For my understanding, when they bought, what makes up DFIN today. Like, 2010. The biggest part of DFIN really was purchased in 2010, it was called Brown and Company. What most of DFIN is today. From what I've read, and what I understand, there was zero invested in the business. They invest anything. Over the next five years, when you had competitors come up and say, like Workiva and say, “You know what? We're just gonna take market share.” I mean, Donnelly was doing some digital stuff filings and there were doing some electronic stuff, but they weren't investing in it. There just had the moat. They had the business, they didn't really care. I mean, and then nor could RR Donnelly do anything. Which part of the reason they-- another part that spun it out. Now, is it’s own company, it could do all these things. So, you had a lot of under investment for really 5 or 6 year. You had no investment in what was Donnelly from 2010 to 2015, you had nothing.

Andrew: I mean, I put this up. This is classic spin dynamics, right? For about six years before RR Donnelley buys this business, and then it's not their core business. The company's a little over-leveraged and they're just, not only are they not paying any attention to it, but they're just taking the cash flow out, and taking it to nefarious corporate purposes, basically. So, this spins out in 2016, and I, and a lot of other people look at in 2016. I can tell you, I had this baggage until about four hours ago when I was prepping for this podcast, but it spins out and you look at it and say, “Oh, no growth business, lots of print, probably mismanaged and spins out and me and everyone passes.” If I remember correctly, the first earnings report, they just missed their numbers like crazy, and the stock got hammered. So, that's the background. But I think you start getting interested in 2020. So, what attracts you, and what's kind of changed about the story since then?

Richard: So, you didn't ask but you kind of implied it like what got me interested. I actually had been following the company. So I followed right then in 2007, probably 2017. Probably right when you looked at it ‘cause as I recall, there was a few activist investors immediately coming and telling the company sell.

Andrew: Yeah.

Richard: Company has spun off. It’s not gonna sell. It doesn't work that way. Spin-off dynamics, you can't just sell the company. I mean, I think there is usually a minimum of two to three years where you cannot even engage.

Andrew: You could do it within one year, but it's two years if you don’t [crosstalk]

Richard: That’s the reverse. It has to be someone has to engage with you.

Andrew: Yeah. So it's a cost where you could but, you could do it within one year, but it's two years is good and then John Malone who the IRS keeps really close tabs on. Three years is where it's like, you can do anything you want, just go crazy and they won't care. So John Malone only does it after three years ‘cause the IRS is on to him.

Richard: Yeah. Well, that makes sense. It means for a reason for that. So, that's someone called me. Talking about network, I believe in investing you need network. Via podcast, via other investors, and a good friend of mine comes, “Sosa, you gotta look at this. Is Donnelley, they spun this off it. You remember RRD, like that terrible company. This was like their prime leader, the crown jewel, and they're eventually gonna sell the BroadR-Reach which is perfect. So, stock was at 25 or something. It's sell for 50. That kind of thing was perfect. So I was like, “Yeah. Okay. I looked at it.” I was like, “Man, it was a mess.” They spun off.

So, company was doing about a billion dollars in revenue at the time. Doing 15% EBITDA margins, generate good cash, 25-50 million dollars. But had 600 million dollars of net debt, at about six and a half percent combined interest. So, it was manageable ‘cause it was even though the revenues was volatile, like the cash was there. It was there. But still it's a lot of debt for a company that is was at the time, 40% of their sales came from printing documents. Forty percent. Then not to mention the fact that capital market is extremely volatile. Since a lot all the most of their print stuff where they have any kind of margin or business is in the IPO, M&A, distressed debt bankruptcy business. They not only spun out with this mess, but over the next three years, there was kind of a low. People forget this. Like, from 2016-2018 IPOs were, everyone's private. Everyone, you wanted to stay private. You had all these companies that you're seeing now, they didn't go public.

Andrew: It's something, I was gonna ask you about later, but I’ll even don't step. Not only was ever in private. I mean, people forget. There were talks of what happens when all the-- not just is everyone’s private, but what happens when all the public market companies go private. Because public companies were looking and they were saying, we don't get great multiples. We think our private market values higher. We go private. We don't have to report quarterly earnings, deal with short sellers, deal with activists. We don't have to spend, public companies, big ones will spend 10 million plus on being an act, on being a public company. That's a lot of money. They're looking and saying, what's the point, we don't raise money from the public markets, let's go private. So, there was this huge private thing, and I think a lot of people were looking and saying, the number of public companies out there keeps shrinking and shrinking. DFIN is they're shrinking business just because they're the company data set there, thereafter shrinking.

Richard: So, you kind of nailed. There's been over two big headwinds that face the company at that time. Well, three. One was the debt, which at the time I thought was manageable. It’s a high leverage. You had that. You had the whole. You had the fact that there are less public companies. There's less, and less and people exactly what you said. That was heroin. Their business, their clients were just evaporating. The third one was the print. They were business that printed a lot of documents and you knew for a fact that they're just gonna be people printing that stuff over time and that's just a natural thing.

So, in 2017, I'd followed it. I think I purchase 100 shares. I wanna follow it. The guy had pitched me the stock was pretty good with these things. So I took the time to try to understand the business and let me tell you, it was so hard. ‘Cause as you know, investors to get a multiple, you need consistency. That's what t all they care about. Let’s be honest. Big investors, they want consistency and something that's predictable. DFIN was not that. I mean, their revenues and profitability were all over the place.

So, in 2017, they said something pretty interesting. They had an analyst day and they said it with conviction. We are not gonna do deals. We are gonna focus on our software offerings. Over time, we're gonna bring down our print business. Lot of it will just come off from less printing, but they're gonna voluntarily print this, where the contracts didn't make sense, and use all that working capital. Really invest in the software business that, as I mentioned earlier. They're just not invested in. So, it was one of these things where that made sense to me. I was out there. What I find, what I struggle with a lot of companies it's the opposite, where they go out and no company wants to get smaller. It's just against everything. That you're task, it's against what you make. Just go out and say we are gonna print less. So therefore decreasing sales considerably and then not only do that, but take that money and invest in something where we don't. We believe we know the outcome but ultimately we don't know. Because we're gonna be have to taking market share, and we're gonna be rolling market share, and taking market share from competitors for we lost market share. So, that's what they did and that's got me more interested. I said, “Okay, that makes sense. I like that.” If that works, this is a home run. But, how you're gonna solve the volatility in the business, right? Then at around that same time, they announced. That their investment management business, which now makes up about 25% of the business of revenue that business was gonna lose in one fell swoop. One hundred thirty million dollars of sales. So the best management and was much bigger. So a lot of the printing clients that have come in the business have come from the investment management business from regulatory chain that said, okay, if your investment manager, your default setting doesn't have to be-- it doesn't-- you're not legally obligated to have your default setting be a printed statement.

Andrew: Yeah. If your mutual fund, you don't have to send your clients, printed statements every month or every quarter...

Richard: Unless, they have.

Andrew: Exactly. I just wanna put in perspective. You said this regulatory change, cost them a 130 million in revenue. This year they'll do about 900 million dollars in revenue.

Richard: I don’t know, their billion.

Andrew: Fine, a billion. Two, or three years...

Richard: To keep it simple, keep a math simple.

Andrew: Two or three years ago they were doing a billion dollars. So, we're talking about more than 10% of their sales are getting evaporated by this regulatory change. Now, that these sales are much lower margin than the rest of the business, but that is still a lot of headwind. A lot of sales headwind pretty good earnings and when just to put that in perspective.

Richard: Oh, by the way. All of that are majority of that happen this year. So, even with that, look, capital markets business has been, no one could have predicted this to happen.

Andrew: Yeah.

Richard: Which is really changed everything about DFIN. But, for analysts had them doing 820 million dollars in sales this year, they’re gonna do a billion dollars. I mean, mostly because of this 130 million dollars in sales that they predicted, but they could also couldn't. ‘Cause at the end of the day, you don't know what the bonds gonna be like, even with the regulatory change. ‘Cause some mutual funds, from what I've heard, they still wanna send the print. They just wanna do it.

They wanna slowly roll that opposite of 1,000...

Andrew: I can see that because, if you're delivering, like, when I get my bank statement online, I pretty much just trash it. Don't look at it. But there is something about sending [?] especially boom markets. Sending a paper statement with like a branded fidelity, and the person says, “Hey, my $10,0000 grew to 11,500. It does form a little bit of a bond. It's the old JC Penney. One of the things they said when they lost when Ackman took over with the old Apple guy and they tried to turn around. They stopped doing mailers and they said that really decreased their store traffic. It's funny because over the summer, bed, bath, & beyond, stop doing mailers. In 2021 and next quarter, they come out and say that was a mistake, it decreased foot traffic. Yeah, that's different than these paper statements, but I'm just saying it is, there is brand there. Some a lot of people are sloping and it does have an effect. It’s a different effect than email.

Richard: Exactly, then it is and that all happen this year. I believe in my heart of hearts, that's what forced him to say, we got to be careful. We're losing this. Even though it sounds good where I'm at the story that I'm telling. On the business perspective, they're losing a lot of business. It was profitable. Wasn't like, it was maybe low margins better than no margin. I think that kind of forced him to say. “Hey, we need to just focus on the software ‘cause we have this.” Just to reiterate on both sides. On the capital market and investment management, they do have a moat. Much more so in the capital market side, but they really are a big player. I'll get into that later. I just wanna kind of finish my thought on that. That force them to, I think stay focused ‘cause I don't like companies [inaudible] I don't want a company that owned go to zero. They were really diligent and I think that's what now in 2018 fast forward a year. When what I think something happened that really changed the way I thought about the company is look, I'm not a huge activist investor fan, but I do believe some activists can add tremendous value.

Andrew: Mm-hmm.

Richard: What happened here was an actress by the name of Jeff Jacobowitz, he came in Simcoe Capital and took a significant step. I mean, he owns the biggest largest shareholder outside of a black rock. The 3.3 million 10% stake in the company.

His background is activism but he wants to be involved. He wants to be involved in. He's a software guy that he had a huge winning with teller who's on the board of that company. He was really involved in kind of blanking on that one, the print, the mailings, the stamp. Was it a stamp company? Just recently the stamp...

Andrew: Stamps.com, is it?

Richard: Yeah, stamps.com. Was it the [inaudible].

Andrew: Oh! Yeah.

Richard: It wasn't on the board, but this is you see the same see a pattern. There's going through change and people don't value the change accordingly. So he is that kind of guy. I know you plugged in some of your podcast guests, but I believe this is the perfect time to plug to reiterate a couple that you've had, both of us had but you can put the links on this as well, but I wanna just mention Dave Waters, and Jeff Moore, and Ben Claremont. Because those three, I think those podcasts with kind of, I've evolved as an investor in a lot of those things I’ve evolved because of some things I've seen. One with Dave Waters and Jeff Moore. First and foremost, they talk a lot about Peter Kelman, Rob Alpert, and Clark Webb. They have a playbook. That playbook just for some reason, it doesn’t get-- people don't get excited about in the short term but it works. It's like, you can't predict the business all the time, but you can't predict, I think you can predict people and what they're gonna do.

When Jeff came in, I read about him and I already kind of like DFIN I wanted to own. I didn't really own, I think I'd actually traded a little bit lost, actually, lost money. I think just went straight down. I like what he was doing. By the way, he got on the board with no just pretty much walked in. I don't know what the process right. There was no campaign or anything. Just came in, came on the board. Then I think, once he started the communication was just much more focused on. We're gonna build a software company. We are a software company. That's when they announced their 44% software by 2024.

Reverberated around the company and people have talked to me. At that point in time, I think they became a software company. They said, they're so we're gonna focus entirely on doing this. It's gonna be our mission. We're gonna have to make a lot of short-term sacrifices. Like I said, lay off a ton of people. In print, it had been difficult. It is always difficult to do. Quarter after quarter, I talk about how hard that was. Now, to lay off any thousands, or thousands people, or something, that's a lot of people.

I think doing that in 2018 and 2009. You started seeing it slowly. You started seeing the business become less volatile. IPO market still wasn't that great. The M&A market was up, was better than I was helping them a lot. But in 2020, when they reported the fourth quarter earnings in February. Is February, right? Before everything happened, they had blowout quarter. It was amazing. Everything that they had talked about. Boom was just like everything. The software was growing, the print was slowing down. You see the light at the end of the tunnel where they would eventually stop hemorrhaging print sales. ‘Cause the end of a people in print stuff, right? They're the go-to people. I mean, they always be part of the business. So that happened and then COVID happened.

I think I was just in the right place, the right time that I was excited already, when they announced this earnings and then, oh, by the way, COVID happening. So you had these two things happen at exact same time. There was inflection point where you see the business actually turning, or software was becoming just bigger and bigger, and everything I've been saying for quarters was, they work actually for the first time. I think they started this in 2019 late. They started being super conservative on guy, on everything. Giving you less information, forward-looking because they were just sticking with, we're gonna do this, we're gonna do this, we're gonna do this. But, we can't control the volatility. So that happened then COVID happened, and that's when I took a position. I said, this company. Yeah, I didn't take a position then actually, ‘cause I was worried about COVID. So I was like, “Oh, man, that's great that they're doing this but, no one cares. Man, it was the end of the world.” In February, wasn't the end of the world yet.

I thought, I recall was like, things are getting bad. I’d be honest. I didn't want be the market. You need to be panic. You see senators, selling their stocks.

Andrew: Or even find about the senators selling their stock until a couple months after that.

Richard: Right. So then in April, they announce earnings, and they announced for first-quarter earnings. This might have been in May. This will got me really excited. This, I believe was all because Jeff Jacoby. It's in the heart of, no. Actually, so I purchased shares at the bottom when I think in April was the bottom. Fidelia blown out that I was told that the portfolio manager retired. They just unloaded an 8% position, everything, as everything was going up. So stock went to 450. I bought it. I bought some shares there ‘cause my thesis was, this guys doing the right thing, not a zero. Plus that the bankruptcy business, and that's a huge part of their business, it's not anything now ‘cause no one's going bankrupt, but as a huge part of our business. So that happened and then they reported first quarter, good quarter, but then they did something look wild. I do not see companies, never would expect that RR Donnelley company to go out and they went and bought a bunch of eight and a quarter percent coupon debt at a massive discount with cash and stock. That is just some, I think trading I could in the 80s.

Eight and a quarter percent coupon debt in the 80s. They use their revolver. These are just things that you don't see companies do.

Andrew: It's a really good trade because everybody wants share BuyBacks. Buying eight and a half percent debt at the 80s, that is a basically risk-free 10% return. As long as, if you're gonna hit financial distress, it's not gonna be risk free ‘cause that's gonna push you into bankruptcy. But a short of that, I mean, it's just an incredible, incredible trade.

Richard: So that's what I think the turning point for me got me super excited in the company. I was like, this is I know, I like a big knock on the company then was like, they don't trust management. It's like, RR Donnelley people. They're gonna go out and leverage themselves. Buy that, they're gonna take more leverage. Buy companies which they could have done. But that told me they're not gonna do that. These guys, I don't know what they did in their board meeting, but to go out and do that when nobody else was doing that. People love that. I mean, nobody else is doing stuff like that.

Andrew: Yeah. So that's great background. But let's fast forward a little bit too today because I'm worried we're gonna start running into a little bit of time constraints here. So, that's great background on the story. We've got the spin. We've got everything. Today, the print business is largely gone away. A lot of their business, let's say the business day it's benefiting from a lot of trend. It's benefiting from this background, it’s benefiting from the M&A, we talk about that. I wanna talk about two things.

A) You mentioned, you said, we're gonna talk about later. The moat they have as kind of the largest provider of SSC connections and B) How specifically are they benefiting from the spectrum? ‘Cause I think we can talk valuation to. I think the market is clearly saying, this is a one-time boom where you and maybe the company would say, well, actually, there's probably some legs and there's probably some things on the back ends to that. So, we can start either moat or how they're benefiting.

Richard: Right. So, thank you for stopping there. I'd like to give too much background but it was important. So, on the capital markets, let’s just keep away from the investment management side ‘cause it's smaller.

Andrew: Yeah.

Richard: On the capital market side, which is really been a big driver. It’s really accelerated all their plans or 44%, 2024. All these long-term goals, they had free COVID, all got accelerated. Because of this massive, we have never seen the capital markets like this. I mean, not even in 2000. We are 20 IPOs away from doubling last year, which was a record year. So, they're the only company, in the capital markets they're the only company that can service the issuer like full stop. They can, from being private to IPO, to SEC filings, to ERP, to stocks, M&A, bankruptcy.

Andrew: Real quick. So servicing them as private, IPO, and public. What are they gonna do for private companies?

Richard: It's helped the filings. They can print stuff, they can help your filings, they can help with accounting. They have so many things that they can do that. By the way, help you set up everything to go public. So, which banks do too, but they use them as well. They invested in this business. As you can imagine, three or four years ago, when everybody's going private. So the things they were able to do.

Andrew: So, that's all they would help the private side. I think the jewel, but it is quite volatile. Because you need IPO volume, but the jewel is the IPO business. So when a company is IPO owing, what is deep in doing from them and what are they getting paid for it?

Richard: Well, the biggest driver of sales is really putting their documents. They print a lot of prospectuses.

Andrew: It's literally just printing the prospectuses what they're gonna be.

Richard: Bringing the prospectuses, the digital filings, they'll help set up meetings, and a lot of paperwork that goes on between the bankers, and then the issuers that they have all these remote offices. They have venue which is a date of room that helps on some of those things. That's more for M&A but it's helping the IPO as well. So they'll do a lot of little things like that. To really expedite the process. By the way, last year during COVID, they're the prime reason why a lot of, I mean, a lot of IPOs were done virtually. Because it companies like DFIN, they were able to really manage everything on the compliance side. Because I think people don't realize there's a lot of compliance-related stuff that goes on when you're done, especially in IPO. I think more so than a follow-on offering, much more so than private offering at least on the venture capital side, but on the IPO side, there are so many laws.

There's so many laws and you use DFIN because you know that they're not gonna mess it up. On the playing aside, you can't just go to Kinko's, and print a document. There’s so many checks and balances go along with paperwork. It's incredible. So...

Andrew: I talk to anyone who's gone public and they will say the six to nine months leading up to the IPO is like the worst months ever to be a manager ‘cause there's just so much going on. As you said, it is so regulated, like you can't do anything. I always get freshy ‘cause these IPO guys will have the netroadshow. It’s netroadshow.com. Sometimes a lot of slides. When you can't download the slides, you can't save the slides or any things, like I want these, I wanna save it for my files or something, even if I'm not interest but you just can't keep them. So yes, super regulated and obviously you need someone to hold your hand because the other interesting thing is you're only gonna do it once. You're not gonna build this thing in a house or something. You have to go to an outsourced provider because, as an IPO company you do it once.

Richard: Right. So they having 70% market share, I've never figured out the answer to this, but for some reason on the biotech side, they have an over 95% market share of initial public offering filing. I mean, they literally do everything. And these things cost money. I mean, to put in perspective, a bit, a traditional IPO, that's where they make a lot of money. On larger side, like a large IPO, an ally, I think about a big IPO. One that you read about a big one and there making what, two to three million dollars in sales. That's how much they get out of a big IPO.

Maybe not so much, but on a big merger, the amount. Same thing, the amount of document compliance related to a big merger. That's also a big moneymaker for them. That is why the SPAC boom will should have benefit them tremendously going forward. I wanna just on this SPAC side. It's actually not the SPAC where they make much money on. They don't make much. I mean, to follow a SPAC and then only you pay them 25 grand or something.

It's when the D-SPAC, when they merge with somebody, the complexity involved. That's where they'll do as much as traditional IPO.

Andrew: Yep. That's, you front ran me but this is one thing the company said, a lot of people look at this year's results, which there’s been a memos SPAC boom.. I think almost 500 SPAC’s of IPOs so far this year. I can't remember exactly but, people look at this year's results to say, “Oh, yeah, you guys were huge SPAC boom beneficiary.” As I said, you were the one who said, this is a picks and several play for the SPAC, but the company would argue, “Hey, the SPAC are just the beginning. Now, there's 300 SPAC that are waiting for a merger target. When all of these SPAC find a merger target, we're gonna get M&A revenue from them and that's 10 times what we got from the SPAC. By the way now that their public, they're gonna need somebody to do their compliance and reporting stuff. We've already got this great relationship with them. So, that's 500 potential new customers that are gonna create annual recurring revenue for us.

Richard: Exactly. They talked a little bit more about this quarter and have it. But what I think is kind of a big wild card with the company is the IPO activity-- we’ll be honest. That's volatile and looking go away tomorrow. We know that. I mean, I worked in Investment Bank, investment background. It could literally go away tomorrow.

Andrew: Yep.

Richard: But what it has done and what you're starting to see more is that active disclosure, that business, it's a significant part of their business. It's like a third of their software business is filing financials. Actual 10Ks, 10Qs, that's nothing. I mean, that's not a volatile business.

Andrew: So that's what they do for a public business. If I'm public business, I’ll contract with DFIN to, I give them my 10K and they file it for me. Is that right?

Richard: Exactly.

Andrew: DFIN, that's on the electronic side. So we moved on from the printing side business. One of the growth businesses, everything. For the electronic side, is DFIN the largest provider of the electronic filing for SEC?

Richard: I know it's Workiva.

Andrew: Okay. So what's about DFIN market share on the electronic side for publics?

Richard: On the electronic side for publics, well, they do a couple business. They have venue, which is the data room. Which [inaudible] put on the digital side that's gonna be lumpy, even though it is a software to service business. I mean, you do pay yearly but you know.

Andrew: Yeah.

Richard: If there was no deals or no activity, you could see the current be a little bit higher. But active disclosure really is something that I think they're super excited about. That was a business that was not invested in. They had a dominant market share. Workiva came in, boom. We have this great platform. It's all cloud-based. Your Coca-Cola, you can be in Europe and United States, and you can all collaborate together real time. You control the workflows with your auditors and your accountant. So you can do, they did that and they push that. That company by the way is 20 times, 25 times sales.

Andrew: Are they publicly traded?

Richard: Public. WK, trading at 15-20% sales. It does more sales ‘cause it’s bigger. Then active disclosure, but active disclosure they've invested a ton of money in it and they said multiple times that they're winning, they're taking back market share. We've taking back market share from Workiva. So active disclosure actually grew more. Workiva grew 35%, 30% in the third quarter, this quarter. Stock went up 10%, but it's huge multiple stock. Right 20 times sales and obviously not making money because it's a grin and growth mode. Active disclosure, 35% in the third quarter. I mean, so your company growing more. I mean, look, I'm not gonna put a 20 revenue multiple in active disclosure, which I don't know. It probably does a hundred million dollars in, but know you could. It's taking back market share and it's easier for them to take back market share, or if they say, up from what I've heard and right from heard from some clients, their new offering, their new software offering is who's the for the ground up. They redid the entire platform. It is superior than Workiva. Obviously, that's what they're gonna say and I've heard that from some clients, but at the end of the day people don't need Workiva, if they can just do everything with Donnelley Financial.

Andrew: So that actually brings me into two questions on the recited I wanted to. On stickiness and competitors. So let's start with stickiness. When I'm a company and obviously DFIN does a lot of different things for a lot of different companies at a lot of different points, their lifestyle. So you can't brush it with too broad strokes. But if I'm a company doing SEC compliance with DFIN and I submit my annual report through them and DFIN puts it onto SEC or something. I would guess that's quite sticky. Because all of my 2020 numbers are loaded in there. If I wanna go get a whole new provider for 2021, I basically have to reconnect the whole thing. But then when I do DFIN gets lost from M&A and IPOs, those are one-offs. I would guess those are not sticky. So you have to go win someone basically every time. Am I thinking about this correctly or is there like kind of hidden stickiness in the IPO business I didn't think about, or is the SEC business not as sticky as I laid out?

Richard: The SEC business is sticky and an M&A deal, it can get interesting. But first and foremost, M&A deal lot of times it's the same company. The two companies use the same providers, right?

Andrew: Yeah.

Richard: So that's a matter and it DFIN what matter when they're now emerging, and there's another competitor, Workiva for example or on in SS&C in the data room side. It's more competition. Sure. But ultimately on an M&A deal that they're can pay the onetime kind of money to process that transaction. They're right there in front of you, trying to earn the business and because they provide so many, and this is what. I haven't mentioned because they provide all these different platforms. There's room to negotiate here, or here, or here. No one else can do that. They will cut deals. In certain segments, like, okay, we'll give you a discount on the SEC filing if you do or if we put these documents for you. Then vice versa. Whatever fits the client's needs. They're able to do that. I believe it's why they don't give so much detail in every individual segments. They try to, but it's a challenge. There all the businesses are intertwined. People in the past, it all just split off the print business. It's not that easy because, it is so important to them, because it puts them in the front door, because everyone needs a print prospectuses. So you're getting everything. A lot of clients would you say, “Okay. I'll just do everything with you.” It happens more, and more, and more, and you can see it in their numbers where this year they're gonna grow 10% when they lost 10% of their business. Like, phenomenal.

Andrew: Let me just ask one more question just on the M&A side. If I'm going to M&A, and one of DFINs products is data room. If I'm going to M&A, who decides and how do they decide who's running the data room? I'm guessing, is it the bank that's gonna decide. “Hey, Andrews private equity. Andrews, industrial firm is up for sale. He's gonna load everything up to this data room ‘cause that's who we always work with, or is it someone else deciding?”

Richard: That's a good question. I don't know the answer to that. My gut is it's the bank. In conjunction with the company, but I don't know. I don't wanna tell you something that's wrong.

Andrew: I'm pretty sure it's the bank ‘cause I was in private equity before and every, the banks would alway-- you know, if it was a Jeffrey seal, it would always be on whoever Jeffrey’s was using. So I'm pretty sure it's the bank, but it could be private equity firms. I'm not a hundred [crosstalk/inaudible]

Richard: I heard that before like they want and dine at the junior banker. So was like, it was never the senior person's decision for some reasons.

Andrew: Again, that's probably it's tougher because if you do the bank and you know the bank runs 200 process year, the banks have-- they probably got a lot of pricing power there ‘cause there's only seven banks who kind of matter. But, it's probably extremely sticky because, if you've won the bank and the bank wants to shift, or you're gonna have an awful lot of angry bankers for six months. You say, “Hey, we have to go recreate all of our models because you guys are trying to save $10,000 or something. So that's interesting. So we've talked about a lot. I wanna talk about the growth of the company this year. You mentioned 10% growth, but it's actually probably better than that. Because they've got the print decline and tweeted out this slide in my prep tweets, and people can go see them a link in the show notes, but they've got the print is going down while the software business is going up. So it's 10% consolidated, but the really valuable stuff is actually growing quicker.

So, let's talk valuation and how you look at the kinda, DFIN even publishes in their investor global some of the parts like. How do you think about the sum of the parts in the overall valuation here?

Richard: This is a tough question. I think this is why I went into the company in so much detail. I think they're all important to understand because unfortunately, it's not so simple because, we don't know how much of it sticky and what's not. Because, I mean, the bare case. I think people at this point understand the software is gold and is good. The print business, it’s decline, it's manageable because at this point, they had 40% of the business with print in 2017. 20% now.

That's not going down much more at this point. Then all that cash that they have going on the software. They're gonna generate 800 million dollars of free cash flow over the next four years. I mean, 4, 5 years, 800 million free cash flow they have zero net that. What I’m gonna do with that? That's incredible.

[crosstalk]

Andrew: I think they’re gonna buy shares.

Richard: Let me tell you sale side analysts, don't talk about 800 million like a free cash or what you’re gonna do with it. That is extraordinary. I believe they'll do buybacks, and invest in the business. But to answer your question on the growth, this is a really difficult. Because, they say in their deck. They believe 1 to 2%, going forward and that includes some print decline and then the 15 to 25% software growth, which they believe that let us have their modeling. That's how they're running their business. But a lot of this backing, it's just so hard ‘cause if they don't break down how much is one time. This year 2020 it's been a record-breaking year. Just even on the traditional IPO side, it's never seen anything like this. Me and SPAC side that people can talk about that, but un-traditional IPO, their only so many private companies. You can see this continued for a few years, and if it doesn't mean the things super undervalued. But why I think people don't understand. This is why I gave the background. Again, if you just revert to the mean, which I think is impossible to do ‘cause it's a totally different company. But if you just revert to a transactional mean, this company still gonna make 3-4 bucks. I don't think people understand that. That's how it's run because the software business and it's becoming exponential is growing exponentially. Like this is not, you can't just model. I mean, this company was doing 15% more EBITDA margins in 2017. They're doing over 30% now. It'll pull back, they're still gonna be doing 25% margins.

Andrew: Just to add on to what you said, ‘cause as I was reading, researching this. The stock had run so much. I was like, “Oh, I missed it.” It's probably treating that 30 times EBITDA or something. Right now, right? It's not, it's treating it seven times you do. So I was getting really excited. I was like, oh, software business going quickly, masks the overall business is growing, but software business going quickly into two things that were jumping out to me, and you just one of them. A) It just like they don't give great dis-- they've started to get better, but they don't give perfect segment disclosure yet. I was noticing there was lots of jumping around between. Hey, there were stuff of is this recurring in nature versus re-occurring in nature, and then there would B) lots of jump between 30% of our sales or print, but 20% of our sales are print and it was just going in lots of different directions. Again, look, I prepped for this podcast this morning. It's not like I've spent, you've got 18 months following the company, but I was very much noticing. I know I'm not doing a great job of saying, but I was very much noticing that they were jumping between numbers and stuff, and you could tell that they were maybe trying to hide something or maybe they didn't quit no how to explain it. Or maybe it's just complicated, but there was something there that was standing out to me.

Richard: No. I love that you said that. This is the truth. I mean, I did prep for this little bit and try to address that problems. It is a problem is confusing. Then, I think a lot of time. They say 60% of their business is recurring in nature. Because a lot of transactions, I mean, if you don't see on the IPO side, you're gonna see it in the M&A side. You're gonna see in other places. So I think that 60% number, they're very comfortable with that. That's a lot of software side. But it's on the transaction, is not just IPOs and we haven't seen bankruptcy. We haven't seen a lot of these other things that usually are so sweet spot for them. That's what's great about business. I mean, it is...

Andrew: Yeah.

Richard: They can prepare for them. They can be do well in different markets. That allows them to be confident with their capital allocation. But I think they can't accurately predict what will happen. In active disclosure, that's growing. A lot of that growth. A lot of that that's coming from internal investment and winning market share, but a lot of that's also coming from the IPO business growing so much. That's not, not one time. Just getting you active disclosure clients because it's more IPOs, and they're getting a business just 100-- probably 100% at the time.

Andrew: Yep.

Richard: Going forward, that will be recurring but that the incremental growth from the IPO, that won't be growing. I think it's just so hard from them too. It's so hard for them, and at this point I think they just stopped trying to explain it all because they don't always they don't know, they cannot predict. They cannot predict what the capital markets will do. They only give cord in the guidance. Now, I don't think they will ever give yearly guidance again. Because the capital markets is so volatile. I mean...

Andrew: Yeah.

Richard: I believe...

Andrew: Next...

Richard: Yeah. It’s hard to model. But you can model, you can't predict what they will do. With reasonable confidence know that they're gonna generate a ton of cash. When I say 800 million, I mean, at that range is can range from 500 to 800 but it's still 500 million dollars for cash, for company at one point six billion dollars. So, 33 million shares out, no debt, $50 stock price, 1.65, I mean, it's not a big company. Five hundred million dollars on a base case of ton of free cash flow, but they can do wonderful things with. Include doing these little tuck in acquisitions, where they haven't done. I mean, a tuck in for a platform company can be incredibly in creative which what we've seen from BroadR-Reach.

Andrew: Did actually really transitions nicely to my next question, right? So this is trading seven times EBITDA probably less as of this year, right? ‘Cause they're growing very quickly. Still they even said, hey, on their Q4, on their Q3 they said, October trends were great. We're still growing pretty rapidly. But even after a big round, stocks 3X since the beginning of the year, this is trading at seven times EBITDA. It's not like this is unknown. I try not to read too much sale-side research, but B Riley covers it. They have a blowout Q3 quarter, B Riley up their price target from 40 to 52. Six times EBITDA this year. Say again?

Richard: Yeah. The EBITDA, their price target, EBITDA multiple [inaudible].

Andrew: They say, our price target are six times EBITDA this year, five times EBITDA next year. Sale side can be wrong. Obviously, they can be wrong. They can be too conservative. They can be too aggressive but I'm just saying, it's not like this isn't known. The market is sit looking at the saying this is seven times EBITDA business, despite the software growth we've talked about, despite the good margins all this. Analysts are looking at this and saying this. So, what is the market missing here? It feels to me like the markets worried that earnings are really inflated by the SPAC and IPO Boom, and that's gonna fall DFIN they'll go to clip. But is it something else, or you can dive a little bit into why you're not too worried about that IPO class?

Richard: Okay. David Waters, again, I mentioned these. The David Waters and then Jeff Moore ‘cause what, I think everyone misses always. The sale side especially it’s capital allocation, what that can do for business. If they're taking money, they're taking working capital. What a lot of companies do they pay a dividend. They'll just buyback stock, which are doing but, rarely, they'll throw that money into a business is extremely, extremely highly value. That's what they're doing, and that's predictable, and you know that's gonna continue. They've already raised their CapEx, CapEx guidance. That coupled with the buybacks, they're gonna start doing and I believe in mass, which as you know buybacks this don't get credit. I mean, you have your liberty bros and stuff, but at the end of the day, people don't care about buybacks. When you have a business that could be growing revenues and EPS, and is investing in the business in a big way is transformative. Plus the 5X. You have this compounding effect that I think only certain investors are gonna be able to see. I mean, you can play the game all you know the software business growing 20%, it's 25%, and the business going 44. You can put a 10 revenue, multiple, and it boom, boom, boom, a hundred on our stock, you do all that math, but at the end of the day you can't control any what happens. But you can't control that these guys are gonna be investing in their business and buyback a ton of stock, and the next five years, even if the sales don't do anything. I mean, they could be making $89 in earnings and have a business that's 50% software.

Andrew: Yep.

Richard: That it will be worth, a lot more.

Andrew: So, let me ask you. This actually segues nicely in to may be my last question. Incentives here, right? ‘Cause I was a little surprised, there is a big semi active shareholder. I believe Simcoe. The guys at Simcoe are very sharp and they filed a 13 day. So they're active, they're on the board. They own 10%. That's nice. But I was a little surprised, like the CEO. He stock, he owns about 300,000 shares. That's worth, what am I doing the math in my head at 15 million dollars at today's prices. So that's great. But it's, he makes four million dollars a year and he only has 15 millions of stock because the stocks 3X this year. Before that he was kind of making four million and he own about 5 million. The board of directors, most of them own maybe a million dollars worth but they make $250,000 a year for being on the board. I get it to spin off which means it's not found or later anything but, I was just a little surprised, you're not seeing insider buying. The insider ownership just feels pretty low. So I just wanted to talk about the incentives here for a second ‘cause that seemed to worry to me. You have a business that just this pivot and the management says, we're geniuses. Let's go buy another SAS company. Let's love her up. Let's issue equity. Let's go on an acquisition spree. We're genius here. I was worried, they might not be fully aligned, if all that makes sense.

Richard: I'll be completely honest with you. I think it is a risk when I started conversing with other smart people like these types of stories in 2019. They all thought it was fascinating. But they all had that one put that, nobody questioned the print or the software. Nobody questioned that. What the question was, what you just hit the net? What you just talk about was like, I don't trust these guys, they were part of [inaudible] in which you saw that.

Andrew: What I just said, yeah.

Richard: Right. Which is why they don't own a ton of stock when it gets spun off and all the stocks they own for the most part, I mean, maybe 20% they bought on a dip. But most of it was given to them. The options and and just being a spin-off company. Look, I've talked to these guys a couple times. More probably I've talked to a lot of people that work with them. What I do understand is they're incredibly sharp and know the business. I mean, their backbone is RR Donnelley. What they did, they don't have direct experience in this transformation, but they've hired the right people, and they're hiring a ton of people. This is why I've mentioned Jeff’s called with like five times on this call. It's really the one of the biggest reasons I bought because I know he will be in there.

He's got the playbook and they're just going off this playbook. They're gonna have playbook that's working. It's working very well. That gives me more comfort. They said it multiple times. They will not do a big deal. They will do tuck-ins. 2015 and our deal, they won't do a transformative deal over they take on that. They've said that but, look, they don't have a prior case study. Their prior case study was they're all RR Donnelley people. I do know, one another board member Julia Dallas which was she was a big fund manager at Invesco Aim. Big time, small cap growth. I know she's on the board. I know she's good. I mean, the board is pretty good. Then the manager Tina, all I can say is everything they've said, they're executing man. From the first conference called, we go back to their first conference called, total mess. They really improved, the tried much better to communicate their story, and just I see the actions. The actions, do speak louder than words at the end of the day. You're seeing the execution.

Andrew: Speaking of actions. One of the things I like is look, last year, they bought back shares and they were buying back shares. Whoa. When this market was up and the only time I believe there's been insider purchases in this company's history was at the end of March 2020, which says, but they were buying back shares when the stock was hammered and everything was hammered. I know that. They're going and buying back their high yield debt as you mentioned earlier. It's one of those things, I do think actions speak a little louder than words. I know so many companies say, “Oh, we're gonna be aggressive.” When did the stock price goes down, we're gonna hammer bit. Guess, what they do? They pull the Peloton this morning and they issue shares when their stocks down 70% or something, or they sit on their hands, or they go and do deals instead of. In this case, I mean, it's not to say that they won't, but you've got an active shareholder who's a board member, who owns 10%, and the history of the capital allocation recently has been, we give it back to shareholders or we retire a really high cost debt at attractive prices. I think, their actions speak to what their how they're looking at.

Again, words mean, don't mean a lot, but go look at their desk and everything they say. Shareholder focused, laser focus on shareholder returns. It seems like they're running the right playbook here.

Richard: I think so. I mean, look, the same with P10 and David Waters. They don't give any forward guidance at all. There’s no hype. It's all backward. Looking to give you everything and then the actions you see, it's just creating value slowly, but surely. I mean, look. They had much more success with prior companies. But at DFIN, it’s just in five years the exact same thing over, and over, and over again, and that's why I had to get that story ‘cause you cannot invest in this company without knowing that. ‘Cause your push back there that's exactly what they're all the right investors think that. I mean, but it's been five years of not doing that. At some point, you have to give them the benefit of the doubt that they're doing the right things. Then they're actually just doing what they say they're gonna do.

Andrew: What do you think the end game for DFIN here is? I would think the end game comes in one of four categories. They could just keep running the business as is, grow, eventually, I wouldn't be surprised if you saw a Leopard buyback model. Again, Simcoe's on the board, you can go look at their 13F. There, an Altice as well. Altice hasn't been running delivered buyback model properly recently but, clearly Simcoe knows the Leopard buyback model. So that would be one. Number two, they could sell to a private equity or strategic buyers. You mentioned Simcoe with stamps.com. Obviously, strategic buyers private equity there, or number three would be, they could go do a transformational deal. Hopefully one that creates a lot of shareholder value, but or I guess number four would be, they could do some mismatch of it, where they do some Leopard BuyBacks and they do strategic bolts on the stuff. But, if you had to guess, what's the endgame for the company here?

Richard: Oh! So, I...

Andrew: Just predict the future for me, right here, right now, predict the future.

Richard: I wanna predict the future. This is just my thoughts. I don't think they'll do transformational deal. I would not be super excited for them doing transformation. You don't have the multiple. I think there's not investment opportunities within their business. But look, the reason why I wanna talk about, I mean, that kept free cash flow. They never had this problem ‘cause I had a ton of debt and they were forced. That's he forced to buyback.

Andrew: Yeah.

Richard: You were force to pay down ‘cause of the terms, were ridiculous, and they had this window last month, which was it for me, another inflection point. They could pay it all back with the revolver and they did. So now they have essentially as of the end of the year, they're gonna have no net that zero. So they can do whatever they want. They can do whatever recap, which will be a creative. They can raise a ton of money. I mean, they could do 4, 300 million dollar debt deal and buyback ton of stock.

Man, look, I do believe my heart of hearts is always set up to to sell to a BroadR-Reach but let me tell you. The time for BroadR-Reach to make a deal, it's slowly it's go away. I wanna say this on this called, they don't make an offer for DFIN, they're not gonna be able to buy it. I mean, what this rate they're gonna keep on investing their business and growing. As soon as that revenue number is able to turn consistently positive, I mean, this stock is gonna have a massive re-rating because it is ultimately. In the working, it is a pretty simple business to understand. I mean, they do little bit of everything. They have software. They generate ton of cash, nice mode, nice business, and it's super cheap. Right now, I mean, the valuation is so low. They can be wrong, and things can turn in such a big way, and it's still cheap. Then you got all this cash flow to buyback stock. I mean, have this amazing things happening. I believe, I think they will-- one I think they’re doing their buyback. I think they just finished it. Honestly, they're announcing a hundred million dollar buyback ground. I believe they'll over the next few months they’re gonna announced they replace their 50 million dollars I think they're gonna complete. Do a hundred million dollar buyback, which it's not a lot at the end of the day. They're gonna invest more in their business. I don't know. I know, a stale could happen. I'll be happy with it. Me, honestly, but we are seeing a turn in the investor base. I loved seeing the 9, 30 holders and we saw Wasatch, which is a really smart investor come in, and Rice Hall James, a huge investor. These are big SAS conversion holders. So you're getting the institutional interests of stock is going up and when the stock price goes up, things happen.

Andrew: It's just, it's interesting you mention the multiple trades at because one of the things you would hear at the height of this SPAC boom, when they were announcing deals, public companies would be like, oh, well, if we were getting taken over by SPAC, we treat a 10 and a SPAC would take us out at 30. It's just funny because DFIN is benefiting from this SPAC boom, and they trade it seven times EBITDA. When you just saw the numbers, especially if you could just X out the print number, just bring it all to zero right now. Obviously you actually lose money there but, if you just looked at the software business side of this and this SPAC was taking a private. I think it would be a 40 or 50X EBITDA business, or would trade at some revenue multiple or something. Right now trades it seven times EBITDA and it's just surprising in that. I think you're kind of right. It's a rotation the shoulder base from, hey, we were here for the little multiple. We're here for the spin dynamics to eventually especially as print continues to lose those headwinds. I think it goes to. Hey, this is a compound be SAS maybe not perfectly SAS, but SAS like business that forget seven times EBITDA, seven times sales might be the right number or something.

Richard: That is what I believe. That's why Simcoe invested in this. I believe that's why Rice Hall James or Wasatch. I believe that's their primary drivers. Like this, there's not a short-term thing. If they get bought out, they get bought out, whatever. But if their software continues to grow it, will you saw in the third quarter which means stock price up 25% in 15 days. If that continues, that's what every investor coming in is going to care about their software. That's all they're going to care for them. They’re not gonna compare about the capital markets volatility. They're gonna compare, they're gonna look at the software. Be like, and bad markets that's still growing. Good market is growing a lot, and becoming more and more the business. It’s gonna be 50% soon. I mean, a couple years. That's ultimately what anybody's got. I think that'll be the story and that's why I say, look, if someone's abide, they better do it now at the top of the market. Where were they have to have a fiduciary duty to say, okay, we have to sell. ‘Cause, you know what happens when it deals happen. I mean, ‘cause once that turns, you know what's gonna happen. I'm excited. I think that's, it's so hard with the end games ‘cause you don't know, we don't know. I don't know, there seemed to be marketing that's, which is a little bit odd, but I don't think...

Andrew: I am a little surprised. I think they do one conference a year, but I subscribe to BamSEC and I look through the transcripts and there's no conference transcript or they're laying the story out, or anything. They do have an investor presentation. I was a little surprised that, but I'm cool with that. I'd rather my companies manage the business instead of go conference but, it's a capital markets business. I kind of thought, maybe they go to these conferences, pitch investors for half, and maybe pitch bankers for half, but it makes sense.

Hey, it's been over an hour, but I always wanna give you, I always wanna give the guests last word. Anything we didn't talk about that you think we should have talked about? Anything we kind of glanced over that you wish we had hit a little harder or anything?

Richard: No, it's good. Look, what I did wanna- Education is a very important investor. We did talk a lot about the risks and those risks are very, maybe we should have started with them. This is a capital markets driven business and there's always risks in the capital markets. These guys do print a lot and there's risk in the print business. With any stock there's always things that can go wrong and just, maybe one looks suggestor, it's a good story. They have a lot of positive tailwinds. But I do think we covered. I mean, covered everything. They have a good presentation on their website...

Andrew: New presentation came out today. This morning, they were prepping podcast.

Richard: Exactly. They had new presentation today. There's good investors involved. The float seems pretty small. This talk has run and that's always hard. When stock runs, I mean, if you look at the chart, it's been battle. For some reason hasn't been volatile, but there's been some moments of extreme volatility.

Andrew: It’s under two billion company with a 10% owner. Those are generally right for volatility. Because 10% owner wants to get out, boom. Stocks going down a lot as it kind of digest that or, just bad day in the market, or bad day with one seller. But yeah, cool. Richard, this has been great. Richard host the Riches in the Niches Podcast. You guys, all listeners should absolutely check that out. I think I've badgered Richard enough where he's gonna let me on at some point. Hopefully, I'll have an appearance on there at some point in the near future. But Richard, this was great. Thanks so much for coming on, and looking forward to either having you on at some point in near future, or coming on to yours at some point.

Richard: Thank you very much, Andrew.

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