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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to the Donnelley Financial Solutions Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Justin Ritchie, Head of Investor Relations. Thank you. Please go ahead, sir.
Thank you. Good morning, everyone, and thank you for joining the Donnelley Financial Solutions fourth quarter 2020 results conference call. This morning, we issued our fourth quarter earnings release, a copy of which can be found in the Investors section of our website at investor.dfinsolutions.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 statements included in our earnings release and further detailed on our annual report on Form 10-K and other filings with the SEC.
Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP financial information provides you with useful supplementary information concerning the company's ongoing operations, and is an appropriate way for you to evaluate the company's performance. They are, however, provided for informational purposes only. Additional detailed reconciliations of GAAP and non-GAAP financial information are included in the earnings release issued today.
I'm joined this morning by Dan Leib, Dave Gardella, Craig Clay, Eric Johnson and Kami Turner. I will now turn the call over to Dan.
Thank you, Justin and good morning, everyone. Before I comment on our results, I'd like to introduce two of the people that Justin just mentioned; Craig Clay and Eric Johnson. Craig is the President of our Capital Markets Business, and Eric is the President of our Investment Companies Business. With Tom Juhase moving into an advisory role as of year-end, Craig and Eric, who now report directly to me, will be on our calls going forward.
I'd like to thank Tom for the leadership he provided to DFIN, and the insight he added on these calls, and I look forward to Craig and Eric sharing their insights with you as we continue to transform DFIN.
Turning now to our financial results. We finished the year by delivering strong fourth quarter results highlighted by record quarterly software solutions net sales of $54.2 million or nearly 26% of our total net sales in the quarter. Overall, our consolidated net sales grew by over 10% as compared to last year's fourth quarter. Excluding print and distribution, our remaining net sales grew approximately 20% as the strong rebound that began in the third quarter in our transactional offerings, as well as in our software solution sales continued. We also posted record quarterly operating cash flow and free cash flow of $101.7 million and $5.1 million respectively.
Fourth quarter non-GAAP adjusted EBITDA margin was 16.6%, an improvement of approximately 290 basis points from last year's fourth quarter, continuing a trend of year-over-year improvement that now stands at six straight quarters. The improvement was primarily driven by a better business mix, along with the significant impact of permanent cost reductions. Dave will provide more details on our quarterly results shortly, but it's fair to say I'm pleased with our performance, and more importantly, the momentum. I'm seeing in our software solutions and capital markets transactional offerings heading into 2021.
Regarding 2020; we've delivered outstanding performance for the year despite the impacts of the COVID pandemic, as well as the prolonged slump and M&A activity that started in 2019 and continued through the first three quarters of 2020 until activity levels rebounded at the end of the year and now into 2021. Net sales were $894.5 million in 2020, representing year-over-year growth of approximately 2%. Excluding print and distribution, our net sales grew 10% as we drove strong transactional and software sales through the back half of the year. Full year 2020 software solutions net sales totaled approximately $200 million, which was an annual record. Our 2020 software solutions net sales growth was led by our recurring compliance offerings, most notably ArcSuite and ActiveDisclosure growing over 9% year-over-year.
Full year 2020 non-GAAP adjusted EBITDA totaled $173.4 million, up $36.4 million or nearly 27% compared to the previous year. Our non-GAAP adjusted EBITDA margin expanded to 19.4% in 2020, a year-over-year improvement of approximately 370 basis point. This improvement is well ahead of our long-term target, again, driven by the continued improvement of our business mix and our diligent cost control. The company's increased profitability along with reduced capital expenditures and cash interest helped to drive record annual free cash flow of $123.1 million. Strategic capital allocation enabled us to repurchase both debt and equity at attractive prices during 2020, while simultaneously reducing net debt by $1.9 million during the year resulting in year-end net leverage of 0.9 times.
2020 was a great year for DFIN. While the financial performance in 2020 strong, I'm equally proud of how the team accelerated the pace of our business transformation throughout the year; especially, considering that we are operating through an unprecedented business environment due to the ongoing COVID-19 pandemic. For example, in our investment companies business, we signed the largest software solutions customer contract in the company's history as a key customer significantly expanded their global deployment of our Arc reporting solution. We also launched our ArcRegulatory, our global regulatory platform, which offers a full suite of cloud-based reporting solutions to meet the complex regulatory demands. Finally, we launched ArcDigital, our digital content distribution solution, providing clients with a software-based solution to manage the complexities of content management and digital distribution in a post SEC Rule 30E3 and 498A environment.
Switching to our Capital Markets Transactional business. We reacted quickly to the changing environment in early 2020 transforming our production, platform and service delivery model to adapt to our clients need for fully virtual experience; and by doing so supported the first all virtual IPO on the New York Stock Exchange. The capital markets team also rapidly adapted to the sharp acceleration of stacked filings during 2020 by creating a custom offering leveraging ActiveDisclosure and significantly increasing our stacked market share. These are only a few of the many business wins we've produced during the year, and the result of all of our efforts is that DFIN is extremely well positioned heading into 2021.
Staying with ActiveDisclosure for a moment; we are very excited about the recent launch of our new ActiveDisclosure platform, New AD; a key component in delivering our 44 in 24 strategy. Born in the cloud and re-imagined from the ground up, this new platform transforms financial and regulatory reporting with seamless integration, simple and fast onboarding, and an array of intelligent core tagging and filing tools. Easy to get started, intuitive to use, and backed by the unparalleled support of DFIN experts, New AD includes the collaboration tools and fast financial data linking our clients need without extra ad-ons and hidden costs, and represents a significant step forward for the marketplace in SEC compliance. We believe that New AD is the perfect product fit for a market that is looking for a solution focused solely on SEC compliance. And we are building off the strong positive feedback from our early adopter clients. There is much more to come regarding New AD throughout 2021.
Before I return to provide an update on our 44 in 24 strategy, including our longer term objectives; I would like to turn the call over to Dave to provide more detail on our fourth quarter financial results and our outlook for the first quarter. Dave?
Thank you, Dan and good morning, everyone. Before I discuss our fourth quarter financial performance, I'd like to recap a few housekeeping items.
First, as discussed throughout the year. We are using the regulatory changes that are reducing mutual fund and variable annuity print demand as a catalyst to accelerate our mix shift toward our software and tech-enabled solution offerings. This more proactive approach has changed our longer-term growth outlook for the traditional investment company's offerings. Given this change in expectations, as part of our annual goodwill impairment analysis, we recognize a non-cash goodwill impairment charge of $40.6 million during the fourth quarter to fully impair goodwill in the investment company's compliance and communications management segment.
Next, regarding our segment results in 2021. We are near complete on implementing our plan to consolidate our manufacturing footprint in preparation for the regulatory changes that will impact demand for print and distribution starting this year. These actions will permanently and significantly reduce the fixed costs in the company in managing the business expected is that no costs are fixed in the mid to long-term, and we consistently look for opportunities to reduce all costs. There are certain expenses for centralized overhead divisions [ph] that are allocated to the four operating segments based on various drivers including net sales and headcount on a proportionate basis.
While we expect overall EBITDA margin to increase in 2021, a portion of these allocated expenses will shift out of our investment companies compliance and communications management segment in 2021, and into the other three segments due in large part to the significant expected drop in printing distribution net sales and headcount in this segment. We will update you each quarter as to the impact on the segment results but I wanted to mention it here in advance. In addition, we recorded $15.6 million in restructuring charges in 2020; most of this restructuring was related to the consolidation of our print platform that I just noted, and enables us to minimize the impact of the expected step-down in print revenue related to the regulatory changes that are effective in 2021.
Lastly, regarding the multi-employer pension plan liability related to the second quarter bankruptcy of LSE Communications; we expect to work through the arbitration process with RR Donnelley to finalize the allocation of this liability between the companies. As of the end of the year, we have $15.2 million accrued related to the contingent liability, as well as our estimated share of required payments until the final allocation is determined. These expenses associated with this liability are recorded within SG&A in the corporate segment and are excluded from our non-GAAP results.
Turning now to our consolidated financial results; net sales for the fourth quarter of 2020 were $210.3 million, an increase of $20 million or 10.5% in the fourth quarter of 2019. Software solutions net sales in the fourth quarter increased by $4 million or 8% compared to the fourth quarter of 2019, primarily due to the continued adoption of our software solutions across the portfolio. Tech-enabled services sales increased by $23.2 million or 27.6%, primarily due to the increased capital market transactional and compliance activity. Print distribution revenue decreased by $7.2 million or 12.9%, primarily due to the lower demand for printed materials within investment companies for both, compliance and commercial printing.
Fourth quarter non-GAAP gross margin was 47.8% or approximately 980 basis points higher than the fourth quarter of 2019, primarily driven by a favorable business mix featuring increased higher margin tech-enabled services and software solution sales combined with overall lower print volume and the impact of ongoing cost control initiatives, partially offset by an increase in incentive compensation expense associated with the strength of the company's full year financial performance. Non-GAAP SG&A expense in the fourth quarter of $65.5 million, an increase of $19.5 million compared to the fourth quarter of 2019. As a percentage of net sales, non-GAAP SG&A was 31.1%, an increase of approximately 690 basis points from the fourth quarter of 2019; the increase in non-GAAP SG&A was primarily due to higher incentive compensation expense and associated with the strength of our full year financial performance. In addition, higher benefits related costs, the increase in net sales and changes in the business mix also resulted in higher SG&A which was partially offset by our ongoing cost control initiatives.
Our fourth quarter non-GAAP adjusted EBITDA was $34.9 million, an increase of $8.8 million for 33.7% from the fourth quarter of 2019. Our fourth [ph] quarter non-GAAP adjusted EBITDA margin was 16.6%, an increase of approximately 290 basis points from the fourth quarter of 2019, again, primarily driven by the impact of ongoing cost control initiatives, operating leverage on higher sales, and a more favorable sales mix, partially offset by increases in incentive compensation and employee benefits expense.
Turning now to our segment results; net sales in our capital markets software solutions segment were $36.1 million in the fourth quarter of 2020, an increase of 11.1% from the fourth quarter of 2019, primarily due to increased venue data room activity, new wins and upselling of existing you [indiscernible] clients, continued client growth and ActiveDisclosure, as well as price increases. We were particularly pleased to see venue sales increase 10.4% from the fourth quarter of 2019 as the improving M&A environment we saw late in the third quarter continued into the fourth quarter. Non-GAAP adjusted EBITDA margin for the segment was 20.8%, an increase of 20 basis points from the fourth quarter of 2019. The increase in non-GAAP adjusted EBITDA margin was primarily due to operating leverage benefits and the increased net sales, as well as the impact of operating efficiencies, partially offset by higher incentive compensation expense.
Net sales in our capital markets, compliance and communications management segment were $108 million in the fourth quarter of 2020, an increase of 37.9% from the fourth quarter of 2019, primarily due to increased capital markets transactional and traditional compliance activity. We continue to see year-over-year growth in transactional sales in the fourth quarter, primarily driven by the continued strengths in our IPO activity with IPO market pricings up significantly from the fourth quarter of 2019. Similar to the third quarter stacks continue to drive an outsized portion of the IPO market. Fourth quarter M&A filings also increased year-over-year with larger filings, a sweet spot for DFIN, being particularly strong as the pickup in deal announcements we noted on our third quarter earnings call started to translate into increased filings in the fourth quarter. After a strong start to the year debt-related transactional activity was softer in the fourth quarter as both domestic and EMEA debt offering slowed. And our compliance sales were up in the quarter, primarily due to increased market share of SEC compliance filings, solid year-over-year growth in proxy sales, as well as increased 8-K activity related to the new fast-app mandate.
A quick note on our market share; 2020 marks the second consecutive year that we have increased our share of SEC compliance filings after several years of share declines, yet another major milestone for DFIN in 2020. Transactional filing was also strong during the year, up over 2019 nearly across the board. Non-GAAP adjusted EBITDA margin for the segment was 35.4% in the fourth quarter of 2020, an increase of 790 basis points from the fourth quarter of 2019. The increase was primarily due to the influx of high margin transactional sales along with the impact of ongoing cost control initiatives, partially offset by higher incentive compensation expense.
Net sales in our investment company's software solutions segment were $18.1 million in the fourth quarter of 2020, an increase of 2.3% from the fourth quarter of 2019 with growth driven by the continued demand for our new ArcDigital offering. Growth in this segment was lower than what we have seen recently, due in part to a large one-time ArcPro services engagement in last year's fourth quarter. Non-GAAP adjusted EBITDA margin for the segment was 15.6% for the fourth quarter of 2020, a decrease of approximately 490 basis points from the fourth quarter of 2019. The decrease was primarily due to higher incentive compensation expense, partially offset by the impact of our ongoing cost control initiatives.
Net sales on our investment companies compliance and communications management segment were $48.1 million in the fourth quarter of 2020, a decrease of 22.2% from the fourth quarter of 2019, primarily due to lower commercial printing sales from contracts we exited relating to the right-sizing of our manufacturing platform in addition to lower mutual fund compliance print volume. Non-GAAP adjusted EBITDA margin for the segment was negative 6.7%, a decrease of approximately 570 basis points from the fourth quarter of 2019. The decrease in non-GAAP adjusted EBITDA margin was primarily due to the lower overall print volume and higher incentive compensation expense related to the strength of the consolidated financial performance of the company, partially offset by the impact of ongoing cost control initiatives.
As I mentioned earlier, we are implementing our plan to consolidate our manufacturing footprint which will permanently and significantly reduce the fixed costs in this segment going forward. Given this, we expect the segment to return to profitability.
Our fourth quarter 2020 non-GAAP unallocated corporate expenses were $10.6 million, an increase of $5.3 million from the fourth quarter of 2019. The increase was primarily due to increased incentive compensation and higher benefits related costs, partially offset by the impact of our ongoing cost control initiatives. Free cash flow in the quarter was $95.1 million, a quarterly record and full year cash flow was $123.1 million, an increase of $113.4 million over full year 2019. The full year increase was primarily due to the higher adjusted EBITDA, lower interest expense and reduced capital expenditures. In addition, an overall reduction in working capital benefited full year 2020 free cash flow.
We ended the year with $230.5 million of total debt and $73.6 million of cash on hand resulting in $156.9 million of non-GAAP net debt. In addition, we had nothing drawn on and full access to our $300 million revolver. As of December 31, 2020, our non-GAAP net leverage ratio was 0.9 times, down 1.1 times compared to December 31, 2019. We repurchased approximately 90,000 shares of our common stock during the quarter for $1.3 million. For the full year 2020 we repurchased just over 1.1 million shares of common stock for $10.3 million, an average price of $8.92 per share. As noted in our earnings release, and as part of their ongoing evaluation of DFIN's various capital allocation options, our Board of Directors recently approved a $50 million common stock repurchase program that expires December 31, 2022 replacing our existing $25 million plan, which was set to expire on December 31, 2021. This repurchase program demonstrates managements, as well as the Board's confidence, in our strategy and the expected financial performance.
We plan to be opportunistic with repurchasing shares in 2021 as part of a broader capital allocation strategy that will also feature additional debt reduction and a refinancing of our high coupon notes, which are callable later this year. At the same time, we will maintain our disciplined approach on capital spending and M&A.
Next, I wanted to provide some color around guidance as well as our outlook for the first quarter. As Dan mentioned earlier, we are very pleased with our tremendous 2020 results; however, as I've noted several times over the last few years, the transactional pieces of our business are challenging to forecast regardless of the economic environment. But we're not providing comprehensive guidance for full year 2021; we will provide some components to facilitate your modeling. I'll summarize these items now.
As Dan will deepen [ph] later in his remarks, we expect total software solutions net sales to grow by at least 10% in 2021 coming off a strong second half in 2020 with additional momentum expected from the recent launch of new AD. Regarding the upcoming regulatory change that will reduce demand for prints in 2021; we continue to expect a reduction in print related net sales of approximately $130 million to $140 million in 2021. And specific to this net sales reduction, we continue to expect a reduction in non-GAAP adjusted EBITDA of approximately $5 million to $10 million. Depreciation and amortization is expected to be in the range $40 million to $45 million, down from $50.9 million in 2020 as the acquisition-related intangibles from a 2010 acquisition are fully amortized as of December 31, 2020.
Interest expense is expected to be approximately $22 million; our full-year non-GAAP effective tax rate is expected to be in the range of 29% to 31%. We expect capital expenditures [Technical Difficulty] software solutions offering in the near-term to further accelerate our 44 in 24 strategy. Dan will provide more context on this increased investment in his remarks, shortly.
Regarding our outlook for the first quarter, we are expecting net sales to be in the range of $200 million to $220 million, down approximately 3.6% year-over-year at the midpoint due to the significant reduction in print and distribution for the regulatory changes related to SEC rules 30E3 and 498A nearly offset by continued strength in our transactional and software offerings. Given this positive mix shift in net sales with less print and more software, as well as increased transactional activity, we expect our non-GAAP adjusted EBITDA from both, a dollar and margin perspective, to improve substantially when compared to the first quarter of 2020.
Included in this expectation and supported by what we've seen through the first two months of the year; we anticipate that we will continue to benefit from a favorable sales mix while also realizing benefit from the cost control initiatives we've put in place during 2020.
I'll now pass it back to Dan, who will provide an update on our 44 in 24 strategy, including our long-term objectives. Dan?
Thank you, Dave. Before we open it up for Q&A, I would like to discuss further our 44 in 24 strategy. In May of last year, I introduced our goal of doubling the proportion of our sales mix derived from software over the next five years; moving from 22% of sales from software solutions in 2019 to 44% in 2024. Growth in our software offerings, strong tech-enabled service offerings, and a shrinking printing distribution offering results in continued strong adjusted EBITDA, adjusted EBITDA margin, and cash flow performance.
As I detailed in my opening remarks, we have made excellent progress in terms of enhancing product development velocity; introducing three new software products to market over the last 15 months, while also expanding various key customer relationships across our product portfolio. Building off already strong software solution sales growth in the second half of 2020, these product introductions and expanded relationships, as well as the potential for a rebound in M&A in 2021, a key driver of venue growth, positions us well to increase our software solution sales growth back to double digits in 2021.
While on the print and distribution side, we remain on-track to execute our print platform optimization efforts in concert with the rollout of SEC rules 30E3 and 498A which when combined with our proactive exit from non-strategic low margin commercial print contracts significantly reduces our expected print and distribution sales starting this year. The combined impact of these efforts have us on-track with, if not ahead of, where we thought we would be heading into year two of our 44 in 24 journey. In fact, we are currently estimating that software solutions net sales will make up over 30% of total net sales in 2021, with print and distribution falling to a little over 20% which will mark the first time in the company's history that software sales will exceed print sales, a major milestone in our transformation.
Given the significant progress we made against our 44 in 24 operating objectives in 2020, as well as our outstanding financial performance, we are updating our longer term financial objectives heading into 2021, and will include these updated targets in our investor presentation. Let's start with our longer term organic revenue growth target. As business mix continues to improve and with the reduced headwind from print and distribution sales, we continue to expect that we will return to sustained, consolidated organic revenue growth in 2022 following the regulatory driven reduction in print and distribution sales.
Regarding software solution sale specifically, we expect software solution annual net sales growth to return to 10% starting in 2021. With this acceleration in software solutions sales growth, we continue to expect software solutions to make up at least 44% of total sales by 2024. With print and distribution sales expected to drop down to the mid-teens. In terms of profitability, we made significant progress in this area in 2020 improving non-GAAP adjusted EBITDA margin by approximately 370 basis points year-over-year which is well ahead of our initial goal of 75 basis points per year and putting us close to our original longer-term target of 20% by 2024. Due to our over achievement in 2020, we are updating our longer-term margin goals and now expect to operate at or above 20% non-GAAP adjusted EBITDA margin, starting in 2021 with the intent of continuing to improve margin from this level over time, while also investing for growth. As I mentioned earlier, our improved profitability, stronger business mix, lower cash interest and disciplined capital spending produced record annual free cash flow in 2020 again, well ahead of our expectations heading into the year.
Going forward, we will continue to focus on driving free cash flow, targeting to convert our EBITDA to adjusted free cash flow at an average of at least 40% annually, which for context is our average annual conversion rate since the spin. One last comment on longer term targets as Dave mentioned earlier, we are very excited about the wealth of internal investment opportunities we have currently and given the accelerated progress we saw in 2020 in terms of profit and cash flow growth. We are planning to increase our investment in annual capital spending to approximately 5% to 6% of net sales over the next few years.
To ensure we can continue to drive the top line growth, we are targeting. As a reminder, the vast majority of our capital spending relates to the capitalization of software development costs. Like all our capital allocation decisions, you can expect us to remain disciplined in our approach to internal investment, allocating funding only to projects that we expect will produce superior returns to investors over the long term.
In closing, we enter 2021 with strong end markets and are keenly focused on continuing to drive our 44 and 24 strategy and the resulting financial profile. Our various operational successes in 2020 prove that we are delivering the right solutions in the moments that matter and creating exceptional value for our clients while the stellar financial performance in 2020 shows how those successes can translate into superior returns for our shareholders. I’m more confident than ever in our future.
Now with that, operator, we're ready for questions.
[Operator Instructions] Your first question comes from the line of Pete Heckman. Please go ahead, your line is open.
Good morning, gentlemen. Thanks for all the information on the quarter and the outlook. Dan could you revisit a comment that you just made, want to make sure that I heard correctly. I mean, clearly, the company has made some sustainable reductions in the cost base and our assumption was that you really outperformed in 2020 and we are expecting EBITDA margins to fall in 2021. You made a comment, as regards 2021 just a few minutes ago it and I missed it, sounds to me like you're expecting that in kind of a base case 2021 EBITDA margins could be up year-on-year?
Thanks, Pete. Yeah, that's correct. When we look at the reduction of revenue coming in print and distribution out the $35 million at the midpoint and $5 million to $10 million of EBITDA, coupled with where we're seeing growth, mainly software solutions and then entering 2021 with a pretty robust transactions market. We feel we have the opportunity to expand margins in 2021.
That's great. That's impressive. All right and then, great job on getting net leverage down significantly over the last three or four years, how does that change your thoughts about capital allocation and the kind of target leverage that you think about running the business.
Sure. Thanks. So I'll take a first crack and then Dave, if you want to jump in, but it's an important question and one that we discuss internally and with our Board frequently, certainly we're pleased that our performance has put us in the position to have the amount of financial flexibility that we do. And we do have a lot of our revenue, that's recurring but we also understand the cyclicality of some of the markets we play and as Dave has mentioned previously the transactions turn off and on very quickly. So even taking that into consideration, we’ve created a great balance sheet, the cash does not burn a hole in our pocket so when we think of capital allocation, you saw we increased our buyback. It starts with looking at our business in the assets that we own. We model out several years forward look at intrinsic value, the typical financial metrics nothing unique there. I think what is unique within our businesses is the transformation that is underway and well in progress.
And so we have over $200 million of software revenue growing in the 10 plus percent range and that has a lot of value when we look at comparable market multiples. The largest part of the revenue software revenues roughly two third is recurring compliance SaaS revenue primarily ArcSuite and ActiveDisclosure. Venue and eBravia [ph] make up the -- most of the rest, and they have really attractive financial profiles and value as well. So we look at CapEx is the other place and so on 2021 that we're increasing CapEx. We view capital and that's we're increasing that it's primarily software development and where we're making the increase is in software development. And it's variable, and so we're thrilled with our internal development efforts in terms of great product design, development velocity rather. And so we've opened the spigot there a bit. We think the markets for existing products, ability to add functionality capabilities to serve our clients.
In additional markets our offerings is really strong. And so I would say that even though we are planning to ramp-up CapEx we're only going to spend, where we have good projects, like 2020 was a great example we had more dollars allotted, we were unconstrained by our balance sheet and cash flow. We remain very disciplined on projects and dollars that we approved and ultimately spent. And so, we've built a culture here of not confusing activity with progress. So, and then moving on M&A. M&A does remain very expensive despite our enhanced financial flexibility, we look at M&A based on intrinsic value of the asset and what it means to us. We also recognized a current prices many our price for perfection or beyond. So while we've looked at a ton of opportunities over the past four years, or four plus years. If you look at M&A, we've been a net seller.
Debt pay down will continue and so, if I were to summarize it maybe give a little more [ph]. But if I were to summarize it, I would say, more of the same continue to drive performance, generate cash and be very disciplined and thoughtful on how we deploy your capital to grow the business profitably.
Got it. And just on a housekeeping basis those term notes 230 million in notes in the quarter those can be called in October at 102?
That's correct.
Thanks. All right.
Your next question comes from Charles Strauzer from CJS Securities. Your line is open.
Hi, good morning. If you could maybe explain a little bit more on the guidance, if you could, you talked about EBITDA improving substantially year-over-year maybe quantify that and also maybe give us some sense on the different segments, how we should think about that for Q1 and how that should shape up for the year as well, and both the top line and profitability perspective based?
Sure, Charley. So, as I noted we're expecting an uplift to margin and it's really driven by the shift in the revenue mix as Dan commented earlier. Really two specific aspects of that, the first is less print and more software and tech-enabled services. And then the second is the higher proportion of the capital markets transactional revenue. You look we way we started the year, our January results support this. We don't have February results yet, but the trend has continued. I'd also say in addition to that, we did a great job in 2020 reducing the cost structure. Most of that reduction was not reflected until the second quarter in 2020. So we'll also see the benefits of those actions.
I guess more specific to the margin. Last year, we reported 13.6% in the first quarter and I'd say if current trends continue through March. I see EBITDA margin exceeding 20%. So call it low to mid '20s from a margin perspective and again all contingent on the stronger mix continuing and as we said that published part to predict is really the capital markets transaction market. We have strong activity there, but the timing of exactly when those will hit is not certain.
Got it. And perhaps just a little bit more the commentary by the segments than in Q1 in terms of the contribution from each of the segments and also the margin outlook that.
So to my comments obviously the transactional revenue in capital markets would hit within capital markets compliance and communication management. So that's the area we'd expect to see the most expansion also with the software growth we would expect to see operating leverage there in the few software segments. And then on the investment company compliance and Communications Management, a couple of different things going on there, one with the drop in print, you have negative operating leverage and I commented on this in my prepared remarks, but one of the things that will affect all the segments, is the way some of the shared costs get allocated. We have certain expenses more centralized functions in their areas like IT, finance, procurement, HR, just to name a few. And those get allocated to the four operating segments.
There is a variety of drivers that we use to allocate these costs in different segments. Most of them are really based on a combination of net sales and headcount. And so I would say is, given the significant drop that we expect to see in investment company's compliance and Communications Management net sales related to this regulatory impact we'll be shifting, probably about $11 million of cost out of that segment. And then I'll go to the other three segments. Roughly $3 million to $3.5 million will get pushed to each of the two software segments and then the remaining $4 million to $5 million will go to capital markets compliance and Communications Management and those are, just to clarify, those are full year numbers. And again it's a zero-sum game really just a question on how the segment share certain of those centralized past.
Got it. And then just one more question on the Q1 guidance, the 200 to 220 there, how much of that reflects kind of the -- lost print, if you will?
Yes. So obviously with the regulatory impact that's hitting this year. We haven't specifically broken out the print detail relatives to the first quarter of 2020. We're certainly expecting that to decline and then again, mostly offset or nearly offset by the transactional activity and the growth in the software revenue.
Just looking at the comps year-over-year, we're seeing the back half of 2021 being a tougher comp versus last year obviously.
Yes that's a great point. I would go back to my comments about having a lack of visibility. Probably a good example, less than a year ago, when we were trying to understand the potential impact that the pandemic would have, we certainly would have expected a substantially weaker transactional environment during 2020 and obviously, we're pleasantly surprised by the strength of the markets there. Certainly hard to predict what the second half of 2021 will look like, but to your point, we’ll definitely be comping against a very strong second half.
Got it. Thank you very much.
There are no further questions at this time, I will now turn -- we have a question from Raj Sharma from B. Riley Securities. Your line is open.
Hello, good morning. Yes. Fine results, congratulations. I think congratulations also on the continued efforts to cut down costs and improve margins. I just wanted to follow up on the guidance for the year. There is not much of a revenue guidance, but you did say print is going to be down 130 from fiscal 2020 levels.
That's right, yes.
Then, software services up 10%, right? Or double digits? And then tech-enabled, we will be leaving out because that's all transactional based.
I wouldn't say it's all transactional based, but certainly the transactional piece, then again as we pointed to several times, not only in the past, but also on this call, it's the hardest to predict and that's really the biggest variable that from a predictability standpoint, we don't have great insight to what the balance of the year will look like on the transaction side.
So it is what it is. It is what transactions turn out to be in the U.S. and globally and will happen to be enough for the guidance for the first quarter, are you assuming transaction sequentially up or is there any?
Yes. To my earlier comments, what we saw in January supports that. We haven't closed February yet, but the activity level remains high on transactional and then we'll see where March comes out. Right, we have a lot in the pipeline still. One of the challenges on transactional is also the timing on when these deals will hit and one will ultimately recognize revenue. And so if that trend continues and that mix remains favorable like that, that was my earlier comment around margins potentially reaching low 20%.
And just to add to that is, it's great to see Venue respond with a stronger M&A market. We went through a fairly weak M&A market, despite the fact that IPO has been really hard and so you saw Venue was strong growth starting in Q3 continuing in Q4, to the 10.4% in Q4 and that will be sensitive to the M&A market as well. In Q1 we had last year, one or two larger projects, but a strong M&A market will certainly be helpful for venue.
Right and on that front, any sort of change in pricing relative to IPO’s respects and also about your market share, so market share holding up in deals that are greater than $100 million in the funds transaction side?
So we continue to have strong market share. I think when you look at the activity in 2020, a lot of what drove the IPO pricings was the SPAC market and typically, we historically have had lower market share there, but have really increased that in 2020. So I think when you look at the overall -- we increased our share in SPACs IPO, we increased our share in non-SPAC IPO, but given the mix, I think probably our overall share is down on the IPO side, but certainly happy that, individually, when we look at SPAC and non-SPAC that we're doing very, very well there. SPACs obviously result in De-SPACs, so that's being well positioned on the M&A side, as well.
Got it. And then, on the compliance, you mentioned the compliance side revenues in the fourth quarter were up year-on-year. I understand there’s seasonality there on the fourth quarter. Any color on why they were higher than expected?
I don't think seasonality would play into a year-over-year comparison, but certainly we commented on market share being slightly up, some additional 8-K volume, etcetera.
Some of that compliance here is driven on the transactional side, so just [indiscernible] which is the 8-K piece involved and [indiscernible] you saw on the transaction [ph] side?
Got it. And then, just a couple of more -- I understand your comments about your capital allocation. So as I understand it correctly, there’s no real big M&A, basically the new CapEx is going to be our internal software product development to grow on into areas related to compliance and management.
Yes. So we continue to look at M&A aggressively, but we're disciplined on what things are worth. And so to us, what it means for our business. But yes, we've increased -- we see great opportunity in our internal development both for venue, as well as for the compliance platforms. One of the things, I think Dave may have referenced earlier, on the Investment Company side is, the print is going away, the $135 million next in 2021, we're extremely well-positioned for our total compliance management product which leverages our software and so, we're investing behind those software products to drive the growth. But relative to capital allocation, I think you've got it right, which is we'll continue to look at M&A, but we're realistic about the price multiples.
That's all, again, congratulations on a wonderful job of transforming the company and pushing up cash flows.
There are no further questions at this time. I will now turn the call back to the presenters for closing remarks.
Great, thank you very much and thank you for everyone for joining us and we will speak to you again in May.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.