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Donnelly Financial Solutions (NYSE:DFIN)
Q1 2020 Earnings Call
May 07, 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 first-quarter earnings conference call. [Operator instructions] I would now like to hand the conference over to your speaker today, Justin Ritchie, head of investor relations. Sir, the floor is yours.

Justin Ritchie -- Head of Investor Relations

Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions first-quarter 2020 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 this 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, quarterly report on Form 10-Q and other filings with the SEC. Further, we will discuss non-GAAP financial information. We believe this 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 earnings 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 -- President and Chief Executive Officer

Thank you, Justin, and good morning, everyone. From all of us at DFIN, we hope that you and your families are staying safe and healthy. Well, we noted on our February calls the potential business impacts of COVID-19. We could not have anticipated the broader impact the pandemic would have in terms of the way we have lived and worked each day over the last couple of months.

I'm proud to say that, as a company, we adapted quickly to the rapidly changing environment to keep our employees safe while also meeting the ongoing needs of our clients. I'd like to thank our employees for the dedication and resilience they've demonstrated and encourage them to maintain the same focus as we all continue to navigate through the challenges of the pandemic, both personally and professionally. As it relates to our performance, we are pleased with our first-quarter results, which reflect our improving business mix, ability to manage costs and improve cash conversion, resulting in a strong balance sheet and liquidity position. We achieved record first-quarter software solutions revenue, up 330 basis points of year-over-year improvement in adjusted EBITDA margin and reduced our debt by $75 million, compared to the first quarter of 2019.

This performance, coupled with prudent financial discipline, resulted in net leverage of 2.3 times and available liquidity of just over $200 million. We achieved these results despite the negative impact from the global pandemic. Early this year, as the virus impacted our operations in the Asia-Pacific region, we activated our business continuity plan. The plan is focused on the health and safety of our employees and clients.

In addition to ensuring supply continuity, upon activating the plan, we established a cross-functional team that continues to meet on a regular basis to understand the global impacts and opportunities as we manage through this unprecedented situation. Our commitment to our organization and our clients is a continued focus on health and safety, supply continuity, employee engagement and communicating with empathy and candor. With operations throughout the world and a diverse offering from software development to manufacturing, the impact on our business has been varied. Our distributed sales, service and production models and long-tested practices of work rotation help to mitigate this event.

We implemented work from home for all those that could in mid-March; shut down all travel and conference hosting in attendance; and took great care to protect our manufacturing employees, a group that is unable to work from home, conducting temperature monitoring, distancing within and between shifts and implementing disinfecting protocols, at least as robust as the guidelines from the CDC and the World Health Organization. Our cloud-based software solutions increasingly larger part of our business were unaffected and continue to perform strongly. With distributed development teams and partners, we have been performing well at maintenance, support and new feature development.Our manufacturing facilities, which were deemed essential, have been fully operational during a particularly busy time of the year for us as clients in our capital markets and investment company businesses are each in compliance peaks. The overall environment certainly is not without challenges, yet we are seeing some incredible things get done through teamwork, creativity, innovation and brute force to serve our clients, all while doing things in a safe manner.

While our actions continue to evolve in concert with changes in the situation, our unwavering commitment to health, safety and providing uninterrupted service to our clients has not changed. Effective with the first quarter, we are reporting our results under a new segment structure, consistent with how we are now operating and managing the business. Dave will cover the new segmentation in more detail during his review of the first-quarter results. We are excited about the transparency this provides you to better track the execution of our strategy of shifting our revenue mix toward software and tech-enabled services, driving a more recurring base of revenue and delivering organic top-line growth, higher margins and resulting cash flows.

Our plan is to deliver 44% of our revenue from software solutions by the year 2024. We are on the path and have seen success. In 2016, 14% of our revenue was derived from software solutions. While in 2019, we delivered 22% of our total revenue from software solutions.

Given this mix shift, our expectation is that by the year-end 2022, the consolidated business should be posting positive organic revenue growth. While we continue to explore opportunities to accelerate our strategy via M&A, our plan is based on the organic mix shift being driven by clients and regulations, in addition to our position in the market as the provider of choice. Rest assured, we will operate with the same financial discipline around asset valuation and capital allocation that we have historically. Times like this highlight the importance of that financial discipline.

Regarding the 30E3 regulation that takes effect in the first quarter of 2021, we continue to refine our plan and preparation. As we discussed in our last earnings call, we reevaluated the demand for printing and distribution in light of the regulation, secular impacts and our ability to create an optimized platform. This change also factors into our targeted 44% mix of software revenue by 2024. I'll provide additional color on this after Dave covers our first-quarter results.

Dave?

Dave Gardella -- Chief Financial Officer

Thank you, Dan, and good morning, everyone. On last quarter's earnings call, I indicated our intent to make certain disclosure changes aimed at providing additional clarity around the performance of our traditional and software offerings. Today, we are pleased to introduce new operating segments that are aligned with our software transformation strategy, provide better visibility into the unique growth and profit drivers of each business and create enhanced transparency and accountability for results across the company. Please see the footnotes in our Form 10-Q which will be filed later today for a full description of these new segments.

In summary, we have realigned our organization and financial reporting to provide visibility by client vertical, as well as by the type of offering we provide. Specifically, we are now disclosing our capital markets business, which primarily serves corporations, law firms and advisory firms, including investment banks, accounting firms and private equity firms, in two reportable segments: capital markets software solutions and capital markets compliance and communications management. And for our investment companies business where we primarily serve mutual funds and insurance companies, we're also reporting in two segments: investment companies software solutions and investment companies compliance and communications management. Later in my remarks, I will detail our first-quarter performance for each of these segments, as well as our unallocated corporate costs.

But I did want to specifically call your attention to the supporting schedules in today's press release, which provide additional segment information for each quarter of 2019. We are currently working on recasting the full-year 2018 results in the new segment structure and expect to disclose those results later this year. Turning now to our consolidated financial results, as Dan mentioned, we started 2020 by delivering strong first-quarter results, including record first-quarter software solutions, as well as significant year-over-year increase in earnings, earnings per share, non-GAAP adjusted EBITDA and free cash flow. By continuing to focus on operating efficiencies while also improving our business mix, we improved first-quarter non-GAAP adjusted EBITDA margin by 330 basis points, compared to the first quarter of 2019, continuing the trend we established in the second half of 2019.

On a consolidated basis, net sales for the first quarter of 2020 were $220.7 million, a decrease of $8.9 million or 3.9% from the first quarter of 2019 as continued growth in our software solutions, led by FundSuite Arc and ActiveDisclosure, was more than offset by lower mutual funds compliance and transactions, lower commercial print and lower capital markets transactions. Software solutions net sales in the first quarter increased by $2.6 million or 5.8% as compared to the first quarter of 2019 as continued growth in our compliance and reporting software offerings, FundSuiteArc and ActiveDisclosure, more than offset declines in our Venue data room offering. Tech-enabled services net sales decreased by $1.3 million or 1.6%, primarily due to lower mutual fund and transactional activity. Print and distribution net sales decreased by $10.2 million or 10% due primarily to lower mutual funds compliance and transactional print, lower commercial print and lower capital markets transactional print.

This mix shift helps drive margin expansion which we expect to continue going forward as our revenue becomes more heavily weighted toward software solutions and tech-enabled services. First-quarter gross margin was 38.2% or 520 basis points higher than the first quarter of 2019, primarily driven by a favorable business mix toward higher-margin software solutions net sales, combined with lower overall print volume and ongoing cost-control initiatives. Non-GAAP SG&A expense in the quarter was $55.1 million, $3.1 million higher than the first quarter of 2019. As a percentage of revenue, non-GAAP SG&A was 25%, an increase of 240 basis points from the first quarter of 2019.

The increase in non-GAAP SG&A expense is due primarily to higher employee benefits cost. Our first-quarter non-GAAP adjusted EBITDA was $30.1 million, an increase of $6.4 million or 27% from the first quarter of 2019. Our first-quarter non-GAAP adjusted EBITDA margin was 13.6%, an increase of 330 basis points from the first quarter of 2019, again, primarily driven by the impact of ongoing cost-control initiatives and a more favorable revenue mix. Turning now to our segment results, net sales in our capital market software solutions segment were $31.2 million in the first quarter of 2020, an increase of 2.3% from the first quarter of 2019 as continued growth from ActiveDisclosure was partially offset by a reduction in Venue revenue related to the challenging transactional environment.

Non-GAAP adjusted EBITDA margin for the segment was 16.7%, an increase of 520 basis points from the first quarter of 2019. The increase in non-GAAP adjusted EBITDA margin was due primarily to the operating leverage on the increase in sales and the impact of ongoing cost-control initiatives. Net sales in our capital markets compliance and communications management segment were $99.1 million in the first quarter of 2020, a decrease of 2.8% from the first quarter of 2019, primarily due to lower capital markets transactions related to the COVID-19 outbreak in Asia and a slowdown in the U.S. transactions market during the last few weeks of the quarter.

Non-GAAP adjusted EBITDA margin for the segment was 26.5%, an increase of 780 basis points from the first quarter of 2019. The increase in non-GAAP adjusted EBITDA margin was primarily due to the impact of ongoing cost-control initiatives and a favorable sales mix. Net sales in our investment companies software solutions segment were $16.1 million in the first quarter of 2020, an increase of 13.4% from the first quarter of 2019 due to strength in FundSuite Arc subscriptions. Non-GAAP adjusted EBITDA margin for the segment was 20.5%, an increase of over 2000 basis points from the first quarter of 2019.

The tremendous increase in non-GAAP adjusted EBITDA margin was due primarily to cost efficiencies related to our Arc regulatory solutions in Europe where we gained significant efficiencies by moving from an outsourced to an in-house solution. Net sales in our investment companies compliance and communications management segments were $74.3 million in the first quarter of 2020, a decrease of 10.4% from the first quarter of 2019, primarily due to lower mutual funds compliance, transactional volume and lower commercial print volume. Non-GAAP adjusted EBITDA margin for the segment was 7.3%, a decrease of 380 basis points from the first quarter of 2019. The decrease in non-GAAP adjusted EBITDA was due primarily to lower print volume, partially offset by the impact of ongoing cost control.

Our first-quarter 2020 non-GAAP unallocated corporate expenses were $10 million, an increase of $2.1 million from the first quarter of last year. The increase in unallocated corporate expense was primarily driven by an increase in employee benefits expense. Free cash flow in the quarter improved by $39.4 million from the first quarter of last year, primarily due to working capital management, lower cash taxes, lower capital spending and higher EBITDA. Given the seasonal nature of our business, we've historically been a user of cash in the first quarter.

This trend continued in this year's first quarter when we did reduce the cash usage by nearly 50% compared to the first quarter of 2019. As we have discussed on the last few calls, we are actively engaged in projects to improve our quote-to-cash processes with a goal of driving quicker cash conversions. We made good progress in the first quarter, improving DSO by over three days from last year's first quarter and a little over a month into the second quarter. Free cash flow continues to track well ahead of this point in last year's second quarter.

We purchased and retired $66.5 million of our 8.25% senior notes due 2024 at an average price of $95.25 and recognized a pre-tax gain on the extinguishment of debt of $2.3 million, net of unamortized debt issuance costs. The gain is recorded within interest expense in our P&L that we have excluded from our non-GAAP earnings. We ended the quarter with $336.6 million of total debt and $328.9 million of net debt, including $160 million drawn on our revolver and had net available liquidity of just over $200 million. As of March 31, 2020, our net leverage ratio was 2.3 times, down 0.6 times from a year ago.

Lastly, we repurchased approximately 616,000 shares of our common stock during the first quarter at an average price per share of $6.19 under the company's $25 million stock repurchase program, ending the quarter with 33.8 million shares outstanding. Our remaining share repurchase authorization is $21.2 million. I'll now pass it back to Dan, who will provide first-quarter business highlights, as well as updates regarding the SEC rule 30e-3, as well as our longer-term objectives. Dan?

Dan Leib -- President and Chief Executive Officer

Thanks Dave. Moving to our first-quarter business highlights in capital markets. ActiveDisclosure had another solid quarter, again adding new clients at a steady pace. Venue launched its data privacy tool for transactions and corporations, which can search for PII, or personally identifiable information, and redact the information, making it ideal for use cases involving GDPR and the California Consumer Privacy Act.

With the eBrevia, we helped our clients automatically identify hundreds of different provisions in their contracts, including force majeure, events of default and terminations, speeding up contract review by 30% to 90%. Elsewhere in capital markets, while first-quarter global transactional performance was mixed, market share remained solid and despite the near-term transactional headwinds we expect to see related to COVID-19. Our transactions pipeline is building nicely for what we would expect to be stronger activity later in the year. Switching to investment companies.

Arc reporting continued its growth in Europe, winning a multiyear contract to provide financial reporting software to RBC and Luxembourg. Elsewhere. ArcPro continued its recent sales momentum with six more wins in the quarter as we continue to see strong demand for back-office software to help our clients drive out costs and automate regulatory compliance workflows. Lastly, as Dave mentioned earlier, we launched Arc regulatory, our global regulatory platform, in January.

As regulatory requirements continue to shift globally, the need to consolidate reporting solutions has never been more critical. Arc regulatory offers a full suite of cloud-based reporting solutions to meet the complex regulatory demands. Next, I would like to provide a bit more context to the upcoming SEC rule 30e-3 regulatory change and associated manufacturing platform optimization initiatives. On our last earnings call, we discussed our efforts to take a broader look at client product and job profitability to optimize our platform given upcoming demand changes.

Our analysis includes the mutual fund and variable annuity shareholder reports, print and distribution work that will be reduced in January 2021, in addition to specific customer contracts and business lines that in absence of the work related to 30e-3 would no longer generate enough profit to justify maintaining our network of third party and internal print and distribution capacity necessary to produce that work.As such, we have decided to terminate certain contracts and proactively refrained from accepting certain types of future printing and distribution production. These actions align with our strategy to move away from lower-margin, print-based revenue streams toward higher-margin software and service-based solutions. Regarding the profit implications, the impact of revenue is almost exclusively print and distribution in nature and generates much lower profit margins than our software solutions and tech-enabled services offerings. This means that we can shed this revenue while only modestly impacting profit in the process.

Our team has been working diligently to refine our planning, and we now estimate that the total annual reduction in revenue will be in the range of $130 million to $140 million, and the annual reduction to EBITDA will be in the range of $10 million to $50 million starting in January 2021. Further, we expect these changes to have only a de minimis effect on our 2021 free cash flow as the after-tax cash impacts from the reduction in EBITDA and restructuring charges are mostly offset by the associated working capital being freed up. We're currently working through the final details of our platform optimization efforts and will provide more detail on the specific actions on or prior to our next earnings call. I should also note that we do not expect these changes to have a meaningful impact on our 2020 results.

Further, we continue to expect low- to mid-teens growth in our software solutions revenue and recognize that, while we describe the 30e-3 regulatory driven reduction in print and its impacts in isolation, even absent 30e-3 each year, we face a decline in print for which we need to overcome by growth elsewhere in the portfolio, as well as cost management. Moving next to an update on our longer-term objectives. In May of 2018, we hosted our first investor day where we introduced DFIN as a stand-alone company and communicated our strategic objectives, which included changing the revenue mix, protecting our core markets and evolving the culture. We remain focused on growing our software revenue base by leveraging our domain expertise, market position and strong sales and service organizations with a goal of 44% of our total revenue being derived from software solutions by 2024.We believe that the focus on driving software revenue is the right strategy for both the company and investors.

As we have an opportunity to continue to serve our clients in the manner in which they desire to be served, scale our existing offerings and high incremental margins while also introducing new offerings into our existing client relationships, as we did with Arc regulatory this quarter. In addition to helping improve our overall margins, the recurring nature of the software revenues will help stabilize and increase visibility of our quarterly and annual financial performance. Similarly, maintaining our market-leading position and SEC compliance filing for both corporations and mutual funds carries forward as an objective from 2018. Our market leadership and strong customer relationships not only provide us with a steady base of annual business but also give us the opportunity to introduce new offerings to our existing clients to help them solve an ever-increasing set of compliance obligations.

From a culture perspective, we continue to merge the talent that we have post spinoff with new leaders from the technology industry who have infused the culture with new ideas, helping to modernize our business, at the same time, retaining the industry expertise that makes DFIN a trusted partner. We will execute on these strategic objectives while also continuing to aggressively drive operating efficiencies and leverage our industry and regulatory domain expertise to assist clients in meeting their compliance obligations. Finally, I wanted to provide a few longer-term financial objectives to help illustrate why we feel that our strategy will produce compelling returns for our shareholders.While the variability of our transactional offerings makes it difficult to provide consistent annual targets, our current plan which includes conservative estimates for transactional revenues and the introduction of products already in development as our 2024 adjusted EBITDA margin increasing to approximately 20%, representing an average annual increase of approximately 75 basis points. In addition to the improved margin, our current plan realizes the benefits associated with our consistent deleveraging and the opportunity to refinance our 8.25% 2024 senior notes, producing average annual non-GAAP net earnings-per-share growth of approximately 15%.

With an opportunity to further increase this earnings-per-share growth through future share repurchases. Given the shifting mix, we would expect low single-digit organic revenue growth during 2022, free cash flow exceeding $60 million in 2023 and zero net debt in 2024 again, the capital allocation policy for modeling purposes is that all cash builds, and we achieve our plan organically. We are very excited about the next chapter of our software lead business transformations. We believe we have the client relationships and right strategy to deliver market-leading compliance solutions to our customers and excellent returns to our shareholders.

With that, I'll turn it over to Dave to discuss our perspective on the balance of the year. Dave?

Dave Gardella -- Chief Financial Officer

Thank you, Dan. As we stated in this morning's press release, we have retracted our guidance for 2020. In the absence of specific guidance, however, I would like to provide some guardrails for the year and also a high-level outlook for the second quarter. First, the guardrails.

Over 60% of our business is recurring in nature. Corporations and mutual funds are still required to comply with their ongoing SEC compliance obligations, so we expect this portion of our revenue to be mostly unaffected. Our transactional-related revenue, including Venue, will certainly be impacted by the overall environment, but the magnitude and duration of the impact is very difficult to predict, which is why we retracted and are not updating our 2020 guidance until visibility improves. As I've mentioned often previously, our transactional-related revenue can be challenging to forecast in more stable environments, and the current macro environment makes it much more so.

To add some context of size, revenue for our transaction-related revenue, including Venue, in the last three quarters of 2019 was approximately $255 million, nearly 40% of our total revenue for the last three quarters of 2019. Meanwhile, we continue to aggressively manage our cost structure to mitigate as much of the impact to our bottom line as possible. And as the market leader in transactional filings, we remain well-positioned to capture transactional revenue and profit growth when market conditions return to a more normalized level. Other items that we feel we have enough visibility to comment on include depreciation and amortization, which we continue to expect to be approximately $55 million; interest expense, which we expect to be approximately $30 million, reflecting the partial-year benefit of retiring a portion of our 8.25% notes, partially offset by a higher revolver balance.

Regarding capital expenditures, which we previously expected to be approximately $35 million, we now expect to be in a range of $30 million to $35 million in light of the current situation in our end markets. Full year fully diluted shares are expected to be approximately $34.5 million, assuming no additional share repurchases. Lastly, for the second quarter, we're expecting net sales to be in the range of $220 million to $230 million, down approximately 13% year over year at the midpoint due largely to the impact of COVID-19 on our transactional and Venue offerings. Again for size context, these offerings generated approximately $90 million of revenue in the second quarter of 2019.

Regarding profitability, we expect our second-quarter non-GAAP adjusted EBITDA margin to be in the range of 16% to 17%, down approximately 500 basis points from the second quarter of 2019 due to the expected lower level of transactional activity, partially offset by the impact of our ongoing cost-savings initiatives. I'll now turn it back to Dan before we open it up for Q&A.

Dan Leib -- President and Chief Executive Officer

Thank you, Dave. In closing, I want to thank the DFIN employees around the world who have been working tirelessly to maintain our business operations and ensure our clients continue to receive the highest-quality service without disruption. Your efforts have been inspiring. Stay safe and healthy.

Operator, we're ready for questions.

Questions & Answers:


Operator

[Operator instructions] And our first question is from Charlie Strauzer with CJS. Please go ahead.

Charlie Strauzer -- CJS Securities -- Analyst

Couple of just quick questions on the 30e-3. Thank you for the additional and quantification there. Just as we think about next year, the ramp of that $130 million to $140 million decline in revenue, how should we think about the ramp of that over the course of the year?

Dan Leib -- President and Chief Executive Officer

Sure. Yes. So I'll start off. Tom and Dave can jump in as well.

So the regulation kicks in January. And just this background, it allows mutual funds and variable annuities to distribute their shareholder reports electronically by default rather than by option, and then the balance is another client work that we're exiting. So when we think about organizationally our content management, software and service organization role is unchanged. Our system continues to manage client content and financials for SEC filing and shareholder viewing.

As we've said previously from print and distribution, we have our own assets, and then we also rely on the trade. So the team has been planning for options, in light of the volume demands and including secular trends and printing as we design a platform, both internal and external, to serve our needs. So when we look at the financial impact, as you're familiar on the print side, a lot of the revenue here is passed through materials, paper and ink primarily that's 100% variable and fluctuates with volume. Beyond that, we get into addressing or designing the network to serve our needs.

And then, as I mentioned in my prepared remarks, from a strategic perspective, we're excited. It accelerates the strategy and delivering the 44% of our revenue from software by 2024.

Charlie Strauzer -- CJS Securities -- Analyst

Great. Thank you for that. And looking kind of near term. There has been a lot of talk in the news about the company is doing debt offerings, follow on equity offerings, etc.

to short their balance sheets. Are you seeing some of the benefits of that? And what is kind of baked into that forecast for Q2 that you gave out?

Dan Leib -- President and Chief Executive Officer

Sure, yes. So let me start. I'll take the broader guidance view and then, Dave, if you want to jump in as well. So you know, as Dave said, about 60% of our revenue is recurring driven by compliance requirements within both the corporate and the fun space that works predictable.

Within software and non-software segments, the mix of the same roughly 60% of our software revenues derived from recurring requirements. The balance of the work, as you highlighted, is driven by transactions, including the Venue data room. Within transactional offerings, our total filings are actually up year to year. However, the mix began to change in the last half of March and into April.

So transactions that more market-sensitive IPOs, M&A spin were reduced and product lines, such as debt issuances, were markedly higher. In the short term, we'd expect the disruption given market events until advisors and companies have a clear view on valuations, the market stabilizes and that ample liquidity is maintained in the market. So as that happens, we're bullish on M&A in the medium and long term. Regardless of the level that defines the new normal, there is tremendous amount of dry powder that will be deployed, valuations have in some spots come down, and we'll find their level.

And we would expect this favorable low interest rate environment and access to financing, as well as some of the underlying dynamics of digital transformation technological disruption etc., to continue. In terms of Dave's comments on Q2, I'll let him jump in here in a minute. The one thing I would say is, as we've seen with transactions, they can dry up relatively quickly, and they can also restart relatively quickly. Our overall business has seasonality to it.

Roughly 60% of our activities in the first half of the year driven largely by client compliance schedules. And in the meantime, we've remained aggressive on the cost side despite shrinking revenue. We've expanded margins over the past three quarters. We'll continue to be disciplined as it relates to capital deployment and be opportunistic as we think about the balance sheet as well.

So David, you want to jump in more specific to the Q2 question?

Dave Gardella -- Chief Financial Officer

Yes. Sure, Charlie, just on Q2. As we look at the transactional pipeline of identified transactions that are significant size, the pipeline is actually a little bit better in terms of the number of deals than where we were a year ago at this point. I think the big question for us obviously is with the current macroenvironment, how long or how impactful the COVID-19 impact on the overall market will continue to be.

And so we're optimistic, as Dan said, about the pipeline building and the fact that we're hopeful these will come back later in the year or come to market later in the year. It's just from a timing perspective, tough to predict. The other comment I would make with respect to your question around that offerings, we've certainly seen debt activity there and get our fair share of that work. But from a deal value size, as we've talked about in the past, certainly IPO and M&A are more valuable from an overall size of deal than debt offerings are.

Operator

And your next question is from Peter Heckmann with Davidson & Company. Please go ahead.

Alexis Huseby -- D.A. Davidson and Company -- Analyst

This is Alexis on for Pete. Good morning. So thank you for all of the incremental details. It's definitely very helpful.

I also wanted to touch on 30e-3. So the estimated loss from printing is about double what you would set at the investor day in 2018. I think it was $70 million at the time. But the EBITDA reduction is essentially saying the same.

So I'm hoping that you can provide a bit more detail on the assumptions going into this. And then really, how much of that is 30e-3? And how much of it is practically terminating contracts?

Dan Leib -- President and Chief Executive Officer

Sure. Thanks. So there is a couple of new components. As you highlighted, the overall revenue impact about double the profit impact about the same.

In addition to funds, shareholder reporting, we've also assumed variable annuity, shareholder reporting will go electronic as well. And then we've taken the assumption and actions on some client contracts.So, as we think about, as I mentioned, the revenue and the composition of costs, there is a high content of variable costs. And then as we think about our platform, both internally managed as well as in the trade, we've just been able to do more work and refine those numbers and get to a better spot in terms of mitigating the impact. So roughly half the margin impact that we thought it would be originally, and as we're excited about the prospect because it does help us accelerate the transformation of the company into a much more software and tech-enabled service mix of revenue.

And Dave, I don't know if you have something to add.

Dave Gardella -- Chief Financial Officer

Yes. Alexis, I would just say when we look at the overall cost structure in terms of our ability to move work, either out of the trade at a lower cost and move them on to our own assets or take additional fixed costs out of the platform that Dan mentioned in his prepared remarks, really the combination of those two things are what has allowed us to have a better. Yes, just the one ad is that the majority of the reduction is regulatory driven. And the summary was moved into 2021.

So that was originally contemplated to be further out.

Alexis Huseby -- D.A. Davidson and Company -- Analyst

OK. Thank you for that, and it was nicely done. I suppose my next question, which was-wondering if you could quantify the expense savings in the quarter, and how much of the cost-cutting initiatives would you consider sustainable?

Dave Gardella -- Chief Financial Officer

Yes. Alexis, so I'll take that one. We haven't quantified specifically the amount of cost savings in the quarter. We talked about frankly over the quarters through the last handful years, cost reduction is an ongoing aspect here, Dan mentioned in his prepared remarks that even absent regulatory changes, we still face headwinds on the secular decline related to print and are always looking at cost reductions.

I think the cost reductions related to 30e-3 are not yet in place. And so while we had the plans and ready to execute as appropriate, that would be in addition to kind of a normal cost mitigation effort.

Dan Leib -- President and Chief Executive Officer

Yes. The only thing I'd add to that, this is Dan, is that these are sustained cost savings, and some of it, facilitated by business mix shift and just what the company needs to look like and tremendous job by the everyone within the company, thinking of ways of doing business differently and driving efficiencies throughout the company at all levels.

Alexis Huseby -- D.A. Davidson and Company -- Analyst

Understood. Thank you. And then one last one for us. So on the capital markets transactional side, it sounds like, based on our review, that IPO transactions actually maintained fairly well in the first quarter.

And so I'm inferring that most of it is going to be coming from M&A volumes lower, which, of course, then leads to Venue trends. Have you seen any improvement in April that's maybe leading to your more bullish outlook on M&A in the medium and long term?

Dan Leib -- President and Chief Executive Officer

Yes. One comment, and I'll jump in and start and then Dave. So as we think about the market and comparison to last year, certainly last year we had the SEC was closed for the first month or so, so it was a pretty light IPO environment. And then we did see the impact of the virus early on coming in the Asia-Pacific region.

Thankfully, we've seen some of that rebound as the viruses has moved on from that region. So yes, I think when we think about that, IPOs were up a little quarter to quarter. But when we look at March and April activity levels, it doesn't look so good. And then obviously in the M&A arena was a pretty soft quarter, actually worldwide, so both domestic and international.

And the good news there is, as I mentioned in my comments, I think it was Charlie's question, I think there's a lot of dynamics out there that would foreshadow a better M&A environment as things stabilize. Then Dave, do you want to add?

Dave Gardella -- Chief Financial Officer

No, Dan. You covered what I was going to say. Thanks.

Operator

And your next question is from Raj Sharma with Donnelly Financial. Please go ahead.

Raj Sharma -- Donnelly Financial -- Analyst

A couple of areas I just wanted to touch on. So you mentioned that the guidance this year, there's no material change from 30e-3. Obviously, that starts in the beginning of the new year. And also, you said free cash flow impact in fiscal 2021 would be immaterial from 30e-3.

Is that correct? Is that because of the working capital savings?

Dave Gardella -- Chief Financial Officer

That's correct.

Raj Sharma -- Donnelly Financial -- Analyst

And then the SaaS offerings, what was overall number the percentage of the business? What is the SaaS now as a percentage of the business? And what was the overall growth year on year? I know that FundSuite are up in double-digits.

Dave Gardella -- Chief Financial Officer

You're right. So overall growth was 5.6%. And in terms of the total revenue of the portfolio that it represents, I think if you just take the two software solution segments that you get to the number that you're looking for.

Dan Leib -- President and Chief Executive Officer

Yes, just over 21% or so.

Operator

And your next question is from Richard Sosa, investor. Please go ahead.

Richard Sosa -- Investor

Just -- I am a individual investor, and I do want to congratulate you on buying back so much of your debt. You rarely see that from companies. And $66 million at that discount to par makes me very happy. I know you probably can't comment on April, but will you be able to continue to be in the debt markets? I know that the bonds are still trading at a discount.

Or is that something you can't discuss there and we have to wait?

Dan Leib -- President and Chief Executive Officer

Yes, yes. That's not something that we would comment on.

Richard Sosa -- Investor

And second question, just looking into 2021 and 2022. Just like is there like a kind of-if all else being equal, should we be seeing maybe something like 750, 780 in sales? Is that kind of -- what else should we be thinking about? Or is that a little bit higher or lower?

Dan Leib -- President and Chief Executive Officer

Yes. So we have given specific guidance there. On the out-years, I think you can start to get the pieces right. We still expect the software revenue to grow, as we've indicated, I think, if you do the math on the impact that we talked about in terms of 30e-3 and some of the contracts that we're exiting.

And then the secular decline on print, you should be able to get pretty close to what our estimates would be. Obviously, the big variable would be the transactional-related work in both the capital markets, communications-compliance and communications management, as well as the Venue portion of capital markets software solutions.

Richard Sosa -- Investor

So the pullback in sales for 30e-3 should take like a year, right, to kind of fully -- is that the right way we should think about that? Could it be all at once, correct. It's going to be over a year --

Dan Leib -- President and Chief Executive Officer

It will be throughout 2021.

Richard Sosa -- Investor

OK. Throughout 2021, OK. And then as that happens, are there any further asset sales we could expect, selling of a printer or anything like that? Or is that -- most of that been done already?

Dan Leib -- President and Chief Executive Officer

Yes. Again, wouldn't comment on any specific asset sales, other than to say we're always looking at monetizing things that we can. You've seen us do some transactions in the past where we generated cash. We're always looking at ways to get the best value from our assets but don't have any specific comments on that.

Richard Sosa -- Investor

And my last question. With you buying so much of that $300 million at term debt, is there any chance to see a refinance prior to the October call date? Or is that out of the question-you can't take out additional debt to the further pay that off, correct?

Dan Leib -- President and Chief Executive Officer

Yes. Again, wouldn't comment on any specific transactions that we are contemplating or not contemplating. Obviously, a lot of it's driven by market conditions that that note is callable in October of next year at 102. But beyond that, wouldn't say anything about any refinancing plans.

Richard Sosa -- Investor

OK, perfect. And I appreciate you guys taking my call, and great quarter again. I love seeing you guys being so aggressive with the debt and stock, and I really appreciate that.

Operator

[Operator instructions] We have no further questions at this time.

Dan Leib -- President and Chief Executive Officer

OK. Thank you very much, and thank you to everyone for joining. We look forward to seeing you, if not in person, virtually, in the near future, and thanks again for your interest.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Justin Ritchie -- Head of Investor Relations

Dan Leib -- President and Chief Executive Officer

Dave Gardella -- Chief Financial Officer

Charlie Strauzer -- CJS Securities -- Analyst

Alexis Huseby -- D.A. Davidson and Company -- Analyst

Raj Sharma -- Donnelly Financial -- Analyst

Richard Sosa -- Investor

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