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Donnelly Financial Solutions (NYSE:DFIN)
Q4 2019 Earnings Call
Feb 26, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Donnelley Financial Solutions fourth-quarter earnings conference call. [Operator instructions] I would now like to hand the conference over to Justin Ritchie, head of investor relations. Thank you. Please go ahead.

Justin Ritchie -- Head of Investor Relations

Thank you, Denise. Good morning, everyone, and thank you for joining Donnelley Financial Solutions fourth-quarter and full-year 2019 results conference call. This morning, we released our earnings report, a copy of which can be found in the Investors section of our website at dfinsolutions.com. During the call, we will 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 in 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.

Please refer to the press release and related tables for GAAP financial information and reconciliations of GAAP to non-GAAP financial information. I'm joined this morning by Dan Leib, Dave Gardella, Kami Turner, and Tom Juhase. I will now turn the call over to Dan.

Dan Leib

Thank you, Justin, and good morning, everyone. We finished 2019 by delivering solid fourth-quarter results, including record quarterly SaaS sales, which made up 26.2% of total sales as well as significant year-over-year increases in quarterly earnings, earnings per share, and free cash flow. By continuing to focus on operating efficiencies, our team managed to improve fourth-quarter non-GAAP EBITDA margin by 400 basis points. Our fourth-quarter performance allows us to enter 2020 with momentum as we continue to execute on our long-term strategy.

For the full year, we reported net sales of $874.7 million and non-GAAP adjusted EBITDA of $137 million, holding non-GAAP EBITDA margin relatively flat year over year. We delivered solid results despite the significant headwinds that we faced over the course of the year in capital markets transactions and Venue, two of our most profitable offerings. Related to the first quarter SEC shutdown, uncertainties in Europe related to brexit, civil unrest in Hong Kong and an overall slowdown of global M&A activity. As the year progressed, our team stayed focused on closing our share of business available in the market while also driving efficiencies throughout the company.

Our operating efficiency focus helped us to expand non-GAAP adjusted EBITDA margins in the final two quarters of the year, keeping us on solid footing heading into 2020. We also continue to responsibly manage our asset base during 2019, selling nonstrategic assets to free up cash that was used to help reduce our total debt by $66.7 million. Since becoming a stand-alone company in 2016, we reduced our outstanding debt by $340 million, including fully paying off our term loan. We are also pleased to have ended the year at two times net leverage, below the low end of our targeted leverage range, giving us enhanced flexibility related to our capital deployment priorities.

2019 was another significant year for our continued digital transformation. We made steady progress against our strategic priorities, including maintaining strong market share in our core markets, improving our revenue mix, all while evolving the company. Focusing specifically on our market share performance in 2019 for a moment, we're pleased to have increased our market share in 10-K, 10-Q, and notice and proxy filings for the first time in 10 years, partially by capturing the opportunity presented by the SEC's iXBRL and FAST Act mandates. Moving next to the improvement of our revenue mix, continued success in selling Venue, ActiveDisclosure and FundSuite Arc, along with a healthy contribution from eBrevia, led to total SaaS net sales approaching 22% of total net sales for the year.

This represents a 290-basis-point increase from 2018, and a 770-basis-point increase from year-end 2016, demonstrating steady progress toward our previously stated revenue mix objectives. We continue to place an emphasis on fostering innovation at DFIN, making key appointments within our product and technology organizations, aimed at accelerating the pace of development. This innovation focus led to several key enhancements across our various platforms, including iXBRL capabilities, key infrastructure improvements, as well as a new user interface and improved upload speeds in Venue. We also continue to make investments in our employees aimed at increasing productivity and job satisfaction and are pleased to announce that we were recently named as a Best Place to Work, Chicago, by the technology community hub, Built In.

Moving now to fourth-quarter operating highlights. In Capital Markets, ActiveDisclosure had a strong quarter, growing fourth-quarter revenues by nearly 21% year over year, again, adding dozens of new clients. In addition to deeper integration with our Venue offering, eBrevia also announced an integration with iManage, a leading software vendor in the legal vertical. By pairing eBrevia with iManage's industry-leading document and email management system, clients can immediately benefit from a turnkey workflow solution while opening up a great opportunity for us to introduce eBrevia to iManage's large client base.

Elsewhere, in our capital markets transactional and Venue offerings, the M&A environment remains soft in the fourth quarter with total closed M&A transactions as well as SEC merger filings, both being down over 25% versus the fourth quarter of 2018. However, IPO net sales again remained solid, with DFIN holding meaningful market share, especially in large complex deals, including supporting the largest IPO in history in the fourth quarter. ArcPro, which is part of our FundSuite Arc platform, continued its momentum in the fourth quarter with two more marquee wins. The first, a large Kansas City-based asset manager, will onboard their funds to ArcPro in early 2020.

The second, a large Midwest third-party-funded administrator, intends to use our software to manage their proprietary funds and ultimately, to support the compliance needs of their administration clients. This one represents the seventh third-party administrator to choose ArcPro to support their needs and those of their clients. In another fourth-quarter highlight, a large investment insurance client adopted ArcPro to help manage a considerable undertaking associated with their corporate rebranding. This effort will continue throughout 2020 as they leverage our software, combined with our services team, to complete the rebranding of their corporate documents.

This is yet another proof-point of how our core software solutions solve our clients' companywide challenges. Shifting gears, as we have discussed before, in our continuing efforts to generate long-term value for shareholders, our board of directors regularly evaluates all aspects of the company's strategy, including capital allocation. As such, the board recently approved a $25 million share repurchase program. This repurchase program demonstrates the board's confidence in our strategy and future prospects.

Going forward, we will maintain our disciplined approach to capital allocation and plan to opportunistically repurchase our stock while maintaining ample liquidity and financial flexibility. Before turning things over to Dave, I wanted to provide a quick update on our strategic priorities going into next year. We remain committed to driving our strategy to support our clients when, where, and how they want to work in the digital world. In 2020, you can expect our primary focus to remain on executing our business mix shift by continuing to grow our recurring SaaS revenue base while maintaining share in our core traditional businesses, including transactions.

In addition, similar to last year, we plan to continue to drive cost efficiencies to expand margins. Focusing on that point for a moment, as we plan for the upcoming SEC rule 30e-3 regulatory change that will significantly reduce demand for printing, we plan to further optimize our manufacturing platform. As part of this platform optimization, we are also taking a broader look at client, product, and job profitability outside of 30e-3, likely reducing our 2020 print volume in other offerings as well. We feel that the -- by proactively rightsizing our platform now, we set ourselves up for future profit margin and cash flow improvement by adjusting our overall fixed costs.

With that, I'll turn it over to Dave to provide more details on our financial performance and guidance for 2020. Dave?

Dave Gardella

Thank you, Dan. Good morning, everyone. Before I discuss our fourth-quarter financial performance, I'd like to recap a few housekeeping items, some of which impact our year-over-year comparability. First, as part of our ongoing effort to actively manage our asset base, we sold 50% of our investment in AuditBoard, receiving proceeds of $12.8 million in the fourth quarter of 2019.

This transaction resulted in a combined realized and unrealized gain of $13.6 million, freeing up cash for other uses, including debt repayment. Next, certain pension plan participants elected to receive lump sum pension payments in the fourth quarter, which resulted in a noncash settlement charge of $3.9 million in the fourth quarter. We also paid off the remaining balance of our term loan credit facility of $72.5 million in the fourth quarter. As a result, we recognized a pre-tax loss on extinguishment of debt of $4.1 million related to unamortized debt issuance cost and the original issuance discount.

This loss is included in our fourth-quarter 2019 interest expense. All three of these items are excluded from our non-GAAP results. GAAP income tax expense for the fourth quarter of 2019 was a benefit of $2 million due to favorable return to provision adjustments, primarily related to our foreign-derived intangible income deduction, state and local income taxes, and our research and development credits. Finally, as we have discussed on the last several calls, we completed the sale of our Language Solutions business in the third quarter of 2018.

For the year, the sale negatively impacts the year-over-year net sales comparison by $41.8 million and negatively impacted our gross profit and non-GAAP adjusted EBITDA comparisons by approximately $12 million and $3 million, respectively, inclusive of net stranded costs. The sale did not impact the year-over-year comparisons in the fourth quarter of 2019. Keeping these items in mind, let's review our fourth-quarter financial results. On a consolidated basis, net sales for the fourth quarter of 2019 were $190.3 million, a decrease of $10 million or 5% from the fourth quarter of 2018.

After adjusting for the 2018 acquisition of eBrevia and the impact of foreign exchange rates, organic net sales decreased 5.2%, as a reacceleration in growth in our SaaS solutions, led by ActiveDisclosure and FundSuite Arc, was more than offset by lower capital markets transactional and compliance print volume as well as lower investment markets, mutual fund, and healthcare print volume. Services net sales in the fourth quarter increased by $2.4 million, or 1.8%, compared to the fourth quarter of 2018, primarily driven by growth in our SaaS solutions. Products net sales decreased by $12.4 million or 18.2%, due primarily to lower investment markets, mutual fund, and healthcare print volume as well as lower capital markets transactional and compliance print volume. Fourth-quarter gross margin was 37.9% or 270 basis points higher than the fourth quarter of 2018, primarily driven by a favorable mix, featuring higher-margin SaaS -- services net sales, combined with lower overall print volume.

Non-GAAP SG&A expense in the quarter was $46 million, $5.1 million lower than the fourth quarter of 2018. As a percentage of revenue, non-GAAP SG&A was 24.2%, a decrease of 130 basis points from the fourth quarter of 2018. The decrease in non-GAAP SG&A expense is primarily due to the impact of ongoing cost savings initiatives. Our fourth quarter non-GAAP adjusted EBITDA was $26.1 million, an increase of $6.7 million from the fourth quarter of 2018.

Our fourth-quarter non-GAAP adjusted EBITDA margin was 13.7%, an increase of 400 basis points from the fourth quarter of 2018, again, primarily driven by the impact of ongoing cost savings initiatives and a more favorable revenue mix. Turning now to our segment results. Net sales in our U.S. segment were $161.7 million in the fourth quarter of 2019, a decrease of 5.3% from last year's fourth quarter.

On an organic basis, net sales were down 5.7%. Net sales in U.S. capital markets decreased 6.8% on an organic basis, due primarily to lower transactional and compliance activity, partially offset by growth in our SaaS solutions, primarily in ActiveDisclosure. Net sales in U.S.

investment markets decreased 4.4% on an organic basis, driven by lower mutual fund and healthcare print volume, partially offset by solid growth in FundSuite Arc. Non-GAAP adjusted EBITDA margin for the segment of 16.7% increased 250 basis points from the fourth quarter of 2018, primarily due to the impact of ongoing cost savings initiatives. Net sales in our international segment were $28.6 million in the fourth quarter of 2019, a decrease of 3.4% from the fourth quarter of 2018. On an organic basis, excluding the impact of changes in foreign exchange rates, net sales in the fourth quarter were down 3%.

Non-GAAP adjusted EBITDA margin for the segment was 11.9%, an increase of 510 basis points from the fourth quarter of 2018. The increase in non-GAAP adjusted EBITDA margin was primarily due to the impact of ongoing cost savings initiatives. Our fourth quarter 2019 non-GAAP unallocated corporate expenses, excluding depreciation and amortization, were $4.3 million, a decrease of $2.5 million from the fourth quarter of last year. The decline in unallocated corporate cost was primarily driven by cost savings initiatives.

Consolidated free cash flow in the quarter was $49 million, $7.4 million higher than the fourth quarter of 2018, primarily due to higher EBITDA, lower interest payments and lower capital expenditures. As we have discussed on the last few calls, we are actively engaged in an initiative to improve our quote-to-cash processes with the goal of driving better cash conversion. We are already starting to see results in the first quarter of 2020, with improvement in our year-over-year cash flow through the first several weeks of the year, and are targeting ongoing improvement in this area throughout the year. We paid off our term loan in the fourth quarter of 2019, ending the year with $296 million of total debt and $278.8 million of net debt, with nothing drawn on our net revolver, and net available liquidity of $248.8 million.

As of December 31, 2019, our net leverage ratio was 2.0 times, flat from a year ago. Lastly, at year-end 2019, our pension and other post-retirement plans were $60.2 million underfunded, a decline in funding levels of $7.7 million compared to year end 2018. With that covered, let me now provide some color on the full-year 2020 guidance summarized in this morning's press release. Specifically, we expect 2020 total consolidated net sales to be in the range of $860 million to $880 million, staying essentially flat year over year at the midpoint as SaaS net sales growth of low double digits is offset by the proactive reductions in less profitable sales that Dan mentioned earlier as well as any potential unfavorable election year impacts to our transactional business, which we are assuming to be flat to slightly down for the year.

We expect our non-GAAP adjusted EBITDA to be in the range of $140 million to $145 million, up approximately 4%, as we continue to see the benefits of our improved revenue mix as well as the continued run rate impact of our ongoing cost savings initiatives. Depreciation and amortization is expected to be approximately $55 million. We expect interest expense of approximately $30 million. Our full-year non-GAAP tax rate is expected to be in the range of 29% to 31%.

We project the full-year fully diluted weighted average share count to be approximately 35 million shares, not including any potential impact of the share repurchase program that Dan mentioned earlier. We expect capital expenditures to be approximately $35 million, down nearly $10 million from 2019, primarily related to the one-time investment in digital print equipment in 2019. And lastly, we expect free cash flow in the range of $35 million to $40 million. Regarding our outlook for the first quarter, we're expecting net sales to be in the range of $220 million to $230 million, down approximately 2% year over year at the midpoint, due largely to a $4 million nonrecurring special proxy project in U.S.

investment markets in the first quarter of 2019, as well as the expected unfavorable impacts to our business related to the coronavirus outbreak, specifically in our international segment. Regarding profitability, we expect our non-GAAP adjusted EBITDA margin to improve compared to the first quarter of 2019, as we continue to see the run rate impact of our ongoing cost savings initiatives show up in the results. Regarding seasonality of our cash flow, our normal cash flow pattern has us as a net user of cash in the first half of the year, generating most of our cash in the back half of the year. We do, however, expect to see improvements in cash flow related to the quote-to-cash initiative I mentioned earlier, some of which, we expect to see in the first half of the year.

Finally, we're planning to make changes to certain disclosures in the first quarter of 2020, aimed at providing additional clarity around the performance of our traditional and SaaS offerings. We look forward to sharing these changes with you beginning with our first quarter 2020 results. And with that, I'll turn it back to Dan.

Dan Leib

Thank you, Dave. Before we open it up for Q&A, I wanted to share a few additional thoughts. Over the three years, I'm proud that our team has established DFIN as a profitable stand-alone company, made significant progress against our strategic priorities to improve our mix of business, protected our core markets, and evolved our company, all while significantly deleveraging the business. Moving into 2020, we are entering a new chapter of our digital transformation, one that will feature an enhanced focus on accelerating our software growth and continuing to improve our overall business performance.

We firmly believe in our strategy and remain focused on delivering value to our shareholders. And with that, let's open the line for Q&A.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from Michael Cho with JP Morgan. Your line is open.

Michael Cho -- J.P. Morgan -- Analyst

Hi. Good morning. Thanks for taking my question. I just wanted to ask --

Dan Leib

Good morning, Mike.

Michael Cho -- J.P. Morgan -- Analyst

Hi. Good morning -- on -- you mentioned some comments around rightsizing the platform and taking proactive, I guess, reductions in the profitability of the business. Can you just give a little bit more flavor on what that kind of looks like? What that means to you from a -- one, from a physical operating perspective? And then two, from a financial perspective?

Dan Leib

Yeah, sure. So, we own several facilities, in which we print our own products, and that represents work that -- or of our total work, that represents roughly 50% of our own. We use our own capacity for 50% of our production work, and we outsource the rest, etc. And so, as we think through that, and we know what's coming in terms of regulatory change, the fixed cost nature of a platform, taking into consideration what we can also offshore, we want to look at all of the work that gets produced.

And it's both within our physical platform as well as what we're doing on the software side. We're looking at all client profitability and product profitability and job profitability. But in this regard, it's looking at how we optimize our physical assets in order to drive a higher level of profit and cash, recognizing that we know there's a reduction, regulatory-driven, in print volume. In terms of sizing it for you, we'll plan to do that later this year.

But, you know, that's our thinking. And I think we made good progress against it, and well on the way to being finalized with that analysis.

Michael Cho -- J.P. Morgan -- Analyst

OK, great. And if I could just ask one follow-up on the software business. I mean, just given strength in the quarter around the software business, maybe can you just remind us how big some of the components are that you mentioned, whether it's ActiveDisclosure, Venue, or ArcPro?

Dan Leib

Yeah, sure. So we -- and we've broken these out before. So Venue is the largest, followed by FundSuite Arc, and then ActiveDisclosure. ActiveDisclosure has had the nicest growth this quarter as well as through the balance of the year.

And that's consistent with what we've seen going in, starting probably midyear last year.

Michael Cho -- J.P. Morgan -- Analyst

Alright. Great. Thank you.

Dan Leib

Thank you.

Operator

Your next question comes from Peter Heckmann with Davidson. Your line is open.

Peter Heckmann -- D.A. Davidson and Company -- Analyst

Good morning, gentlemen. Thanks for taking the question. Looks like Capital Markets for the year, on a global basis, is maybe between 55% and 60% of revenue. Can you talk about how much of the transactional business made up of that? And if possible, maybe some rough quantification of IPOs and M&A?

Dan Leib

Yeah. Yeah so, Pete, on a global basis, transactional was roughly $250 million of total revenue, about $190 million of that in the U.S. and $60 million internationally.

Peter Heckmann -- D.A. Davidson and Company -- Analyst

OK.

Dan Leib

And then as you look at -- within transactions on a full-year basis, the biggest decline, as we've talked about all year long, the biggest challenge was in M&A activity. And that volume was certainly down on a year-over-year basis, IPOs. And I'm looking for the detail here, hang on a second. The S-1 activity was up for the year, about $6 million in revenue.

And when we look at total, S-4 revenue was down about $27 million.

Peter Heckmann -- D.A. Davidson and Company -- Analyst

Got it. OK. And then in terms of what you're seeing right now, the IPO activity year to date looks OK, some questions that you said about the election, the coronavirus. But I guess, how do you feel about the pipeline, what you're seeing today, still relatively solid and reflecting solid market share?

Dave Gardella

Yeah. So certainly, the pipeline is good. We are certainly internationally seeing the impact of the virus. And that will -- in the region, most of our offices, not all, but most of the offices have people working from home, and we've seen a standstill there.

Early in the year, as I mentioned, pipeline is good, share seems stronger, and M&A is still not where -- still not fully picked up, but seeing a little bit of firming up there.

Peter Heckmann -- D.A. Davidson and Company -- Analyst

Got it. Got it. Thank you. I'll get back in the queue.

Dave Gardella

Thank you.

Operator

Your next question comes from Charlie Strauzer with CJS. Your line is open.

Charlie Strauzer -- CJS Securities -- Analyst

Hi. Good morning.

Dan Leib

Hey, Charlie.

Charlie Strauzer -- CJS Securities -- Analyst

Hey. If you could talk a little bit more about 30e-3? And I assume we're still on the same start date there for next year?

Dan Leib

Yes, yes. It's first quarter of 2021.

Charlie Strauzer -- CJS Securities -- Analyst

Got it. And any changes to your thoughts on the potential revenue impact there?

Dan Leib

You know, we're doing more work there. There's certainly the fund side. There's the variable annuity side of it as well. And as we layer in some of the work we -- that I mentioned on the profitability side, we'll come back with an overall estimate of what we think that looks like, but making good progress there.

On the profit side, I think we're pretty well-covered in terms of our ability to mitigate the impact on the bottom line.

Charlie Strauzer -- CJS Securities -- Analyst

Excellent. And if you -- on Q1, you talked about improvement year over year on EBITDA margin. Maybe a little bit more color there and a little bit more quantification, if you could. Thanks.

Dave Gardella

Yeah, Charlie. So I think we talked about the cost savings rolling through. A lot of the margin improvement is going to depend on the level of transactional activity that we see and then the impact internationally, as we talked about of the coronavirus and how that impacts international transactional activity. But I think we're expecting that to be, obviously, softer.

But all in all, still expecting overall EBITDA margin improvement, again, largely driven by the cost savings. We haven't specifically quantified it only because of the variability that, as you know, transactional could have.

Charlie Strauzer -- CJS Securities -- Analyst

OK, great. Thank you very much.

Dave Gardella

Thank you.

Operator

Your next question comes from Bill Warmington with Wells Fargo. Your line is open.

Bill Warmington -- Wells Fargo Securities -- Analyst

Good morning, everyone.

Dave Gardella

Good morning, Bill.

Bill Warmington -- Wells Fargo Securities -- Analyst

So to follow up on that question, what's the incremental margin running on the transactional business these days?

Dave Gardella

Yeah. It's still, Bill, in the -- we would call it, probably in the 50% to 60% range. Now, you know, a lot of it depends on the mix of transactions, right? So, you know, something -- there's variance between debt deals, IPO, M&A. And then within those transactions, the size and complexity could also drive variance in the incremental margins on each.

But I think if you looked at it overall, we would say in the 50-plus percent range.

Bill Warmington -- Wells Fargo Securities -- Analyst

Got it. And then the, you know, operating cash flow guidance improvement, I just want to know if you could talk a little bit about the drivers there? I know you had mentioned in a cash flow improvement program that you had, but I wasn't sure if that was driving all of it or some of it?

Dave Gardella

Yeah. So it's some of it. I think when you look at the cash flow in 2019, we were just under $10 million in free cash, but there's about $25 million or so of either unusual items or incremental investment. We noted in the press release this morning that there was just over $18 million associated with some taxes related to -- in 2019 to the gain on Language Solutions as well as the sale of the Secaucus facility.

And then in addition, in the free cash flow number, there was about $7 million of capex related to the digitization of the print platform in 2019 that we don't expect to recur in 2020. And as I mentioned in the prepared remarks, you know, so far, 7 or 8 weeks into the year, we're starting -- we're already starting to see some of the benefits of the initiatives.

Bill Warmington -- Wells Fargo Securities -- Analyst

Got it. And then, I was also going to ask about the -- you named a number of new business wins, and I just wanted to ask for some color there. Are they -- is that -- are those typically net new clients or the existing clients buying new products? Some color there would help.

Dan Leib

Sure. Yeah, it's a little bit of both. What -- in the example I gave on using ArcPro, that's actually an existing client finding a new use case for our software to solve a firmwide challenge that they had. And so, given our strong share in all of our core offerings, you know, typically, we find a lot of opportunity to expand share of wallet with existing clients.

In some of the more transactional offerings, you'll also find new clients there. Specific to these, it's a little bit of both.

Bill Warmington -- Wells Fargo Securities -- Analyst

Alright. Thank you very much.

Dan Leib

Thank you.

Operator

Your next question comes from Bill Mastoris with Baird. Your line is open.

Bill Mastoris -- Robert W. Baird and Company -- Analyst

Thank you. Dan, you talked about the -- you're entering a new chapter of digital transformation. You also highlighted the regulatory change, which is going to reduce print volume. I'm just kind of wondering right now, what is kind of the breakdown between maybe print transactions and digital transactions? And then anything that you could comment on, just in terms of trends that you would expect? You know, obviously, with the new regulatory requirement, I would expect them to drop off, but any color that you -- any additional color that you could provide would be greatly appreciated.

Dan Leib

Yeah, sure. Thanks, Bill. So, we stated our software revenue was roughly 22% for the full year, print would be in that 35% to 37% range, and the balance would be services. And to your point, as 30e-3 takes hold, and there's obviously, there's -- as I mentioned, the mutual fund piece, there's a variable annuity piece, which may come in over different times, but that will take print down in aggregate, for sure.

And then, you know, what we've seen as we model it out, and you know, as Dave mentioned, some additional disclosures coming next quarter, and you'll be able to see it more clearly. But the -- as we model it out, you see good growth in software this year, low double digits. And so, when you remix this, you continue to see the shift that we've seen, which is quite positive from our perspective, generates a higher incremental margin, generates good free cash flow. And so that's the shift that we're talking about, Bill.

Bill Mastoris -- Robert W. Baird and Company -- Analyst

OK, great. And Dave, a question for you on kind of the cadence of the change in leverage ratios. As you mentioned, you're a cash user for the first half of the year, and during the back half of the year, you generate considerable cash. Would we see a similar fluctuation to, let's say, 2019 in leverage ratios, where we're going to have an increase of maybe a half turn to maybe a full turn in the first half of the year and then we get back down to near two times at the tail end of the year? How is that going to work out that cadence? And I do acknowledge, of course, that the international division is going to have an impact depending upon how long the coronavirus actually plays out?

Dave Gardella

Yeah, Bill. And I think generally, similar pattern, I think it will be, based on what we're seeing so far this year and some of the initiatives in place, it will be less pronounced in terms of the cash usage, specifically, in the first and second quarters of the year. And then that we start to overlap some of the benefits. But I think, generally, that pattern of being a user in the first half will hold this year, But again, less dramatic than what we've seen in -- certainly in '19 and in all previous years.

Bill Mastoris -- Robert W. Baird and Company -- Analyst

OK. Thank you very much.

Dave Gardella

You're welcome.

Dan Leib

Thank you.

Operator

[Operator instructions] Your next question comes from Michael Cho with JPMorgan. Your line is open.

Michael Cho -- J.P. Morgan -- Analyst

Thanks, guys. Thank you for squeezing me back in. I -- you made a quick comment on -- in your intro comments around winning market share for the first time in a long time. So I was just -- and I assume that has to do with ActiveDisclosure.

But I'm trying to get a little bit more color behind that comment. I mean, you're winning share in the 10-K, 10-Q compliance solutions area. I mean, is it just ActiveDisclosure is just winning more RFPs or displacing a competitor? Or was there something else in the competitive backdrop? Thanks.

Dave Gardella

Sure. Yes. So, when we look at the overall compliance side, there are -- or there is some impact from transactional offerings that have compliance types filings, which is why we were pretty specific on the 10-K, 10-Q notice and proxy. But as you characterized it, it is driven by success of ActiveDisclosure and winning more in the marketplace.

The 21% growth is a strong quarter for us. We have won dozens of new clients, consistent with prior quarters, and that's on a net basis. And so, that's the biggest driver.

Michael Cho -- J.P. Morgan -- Analyst

OK, great. Thank you.

Dave Gardella

Thank you.

Operator

Your next question comes from Raj Sharma with B. Riley FBR. Your line is open.

Raj Sharma -- B. Riley FBR -- Analyst

Hi. Good morning, guys. I was wondering if you could provide some more color on what you're assuming in your first-quarter guidance? Is the transactions, is it in line with sort of -- what level of transactional business are you assuming for the first quarter and for the rest of the year?

Dave Gardella

Yeah, so as we said, for the full year, transactional, expected to be flat to slightly down. For the first quarter, and again, largely depending on what we see in international, flattish is probably the right way to think about it.

Raj Sharma -- B. Riley FBR -- Analyst

Right. And then what -- for 2020, what sort of print/services breakdown are you assuming on the $860 million to $880 million number?

Dave Gardella

So, we -- the print versus software and service in 2019 was 37% print and 63% service.

Raj Sharma -- B. Riley FBR -- Analyst

Right.

Dave Gardella

The print probably comes down a few hundred basis points to closer to 35%, so probably 35-65. And in the 65%, we would expect the SaaS number, as Dan mentioned, was approaching 22% in 2019, we would expect that to increase a few hundred basis points.

Raj Sharma -- B. Riley FBR -- Analyst

Right. Up 200 basis points. And then what sort of margins? I hear -- I heard that you said transactions was around 50% margins than transactions-related business?

Dan Leib

Yeah, that's on an incremental basis, Raj.

Raj Sharma -- B. Riley FBR -- Analyst

So, what sort of margins are you getting on the overall SaaS business?

Dan Leib

More to come on that. The -- as we go throughout the year here and part of our comments on the additional disclosures regarding traditional and SaaS. And the expectation is that throughout 2020, you'll start to see more of that.

Raj Sharma -- B. Riley FBR -- Analyst

Got it. Thank you.

Operator

There are no further questions at this time. I'll turn the call back over to Dan Leib for closing remarks.

Dan Leib

Thank you. And thank you, everyone, for joining. We'll look forward to speaking with you again in May. Thanks.

Bye.

Operator

[Operator signoff]

Duration: 42 minutes

Call participants:

Justin Ritchie -- Head of Investor Relations

Dan Leib

Dave Gardella

Michael Cho -- J.P. Morgan -- Analyst

Peter Heckmann -- D.A. Davidson and Company -- Analyst

Charlie Strauzer -- CJS Securities -- Analyst

Bill Warmington -- Wells Fargo Securities -- Analyst

Bill Mastoris -- Robert W. Baird and Company -- Analyst

Raj Sharma -- B. Riley FBR -- Analyst

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