Donnelley Financial Solutions Inc
NYSE:DFIN
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Donnelley Financial Solutions Inc
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Good morning. My name is Audra and I will be your conference operator today. At this time, I would like to welcome everyone to the Donnelley Financial Solutions Fourth Quarter and Full Year 2022 Financial Results Conference. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. At this time, I would like to turn the conference over to Michael Zhao, Head of Investor Relations. Please, go ahead.
Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions fourth quarter and full year 2022 results conference call. This morning, we released our earnings report including a supplemental trending schedule of historical results copies of which can be found in the investor section of our website at dfinsolutions.com.
During this call, we'll refer to forward-looking statements that are subject to risks and uncertainties. For a complete discussion, please refer to the cautionary statements included in our earnings release and further detailed in our most recent annual report on Form 10-K and other filings with the SEC. Further, we will discuss certain non-GAAP financial information, such as adjusted EBITDA and adjusted EBITDA margin. 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 earnings release and related tables for GAAP financial information and reconciliations of GAAP to non-GAAP financial information.
I am joined this morning by Dan Leib, Dave Gardella, Craig Clay, Eric Johnson, Floyd Strimling, and Kami Turner. I will now turn the call over to Dan.
Thank you Mike and good morning everyone. Our fourth quarter performance further demonstrated the resiliency of our operating model and sustainability of our adjusted EBITDA margin performance in a difficult operating environment. During the fourth quarter we navigated a transactions market that remained very challenging. As a result of strong execution we delivered an adjusted EBITDA margin of 23.4% in the quarter despite capital markets transactional revenue being down nearly 50% from the fourth quarter of 2021.
Consistent with our performance throughout 2022, our fourth quarter adjusted EBITDA margin performance, which reflects our evolving sales mix, permanent changes to our cost structure, and continued cost discipline is significantly higher than historical quarters with similar overall and transactional revenues. Our fourth quarter performance is a further validation of our strategy as well as our proven ability to sustainably operate at a higher level of profitability across a range of market conditions. Dave will cover the fourth quarter results in more detail shortly.
Reflecting on the full year of 2022, against the backdrop of the combination of market volatility, macroeconomic headwinds, and geopolitical uncertainty, we delivered strong full year results. Despite capital markets transactional revenue being down nearly $170 million or 41% for the year. We delivered $218.3 million of adjusted EBITDA and an adjusted EBITDA margin of 26.2%, both of which are significantly higher than historical periods with similar overall and transactional revenues. In fact, our full year 2022 adjusted EBITDA and adjusted EBITDA margin are each the second highest in the history of the company, exceeded only by the record results in 2021 that were driven by a much more robust transactions environment.
Our focused execution to improve our sales mix and manage our costs in a disciplined manner has resulted in DFIN becoming fundamentally more profitable. Our strong profitability combined with robust cash flow generation provided us the financial flexibility to increase organic investment in software development to drive growth, repurchase 4.7 million shares during the year, and end the year with non-GAAP gross and net leverage well below one times. In 2022, we made continued progress in our journey towards becoming a software centric company. For the full year, we achieved record software solutions net sales of $279.6 million, an increase of approximately 4% from 2021.
Despite the negative impact of the weak transactional market on the Venue, our dataroom, offering software solutions net sales represented nearly 34% of our full year net sales, up from 27% of total net sales in 2021. Software sales comprising more than one third of our total sales in 2022 compared to just 14% of total sales in 2016 is a significant proof point of our transformation and sets us on the right path to achieve our goal of driving 55% to 60% of total sales from software by 2026. The primary driver of full year software sales growth was the performance of our recurring compliance and regulatory driven software products, which in aggregate grew 11% versus full year 2021. These compliance software offerings, which include ActiveDisclosure and Arc Suite continued to gain scale in 2022 and reached approximately $171 million in total net sales, representing approximately 61% of our overall software solutions net sales.
To illustrate this progress, total compliance software generated less than $70 million of net sales in 2016. Over the course of the last six years through new product introductions such as new AD and ArcDigital, total compliance management, increased go to market investments and expansion of our partner ecosystem, we have grown the compliant software platform by more than $100 million to $171 million today, which translates into an annualized growth rate of approximately 16%. This sustained level of double-digit growth in recurring compliance software is an important step in the transformation of our business mix and financial profile to become more predictable and resilient.
ActiveDisclosure, a key component of the compliance software offering, purpose built for SEC reporting for corporations grew 14% in 2022. I am pleased with ActiveDisclosure’s recurring subscription revenue base which grew 19% year-over-year despite the impact of SPAC liquidations which negatively impacted the growth rate in recurring subscription revenue.
I am also pleased with the progress we made in 2022 to transition customers from our legacy AD3 platform to new ActiveDisclosure. At the end of 2022, and less than two years since its launch, only approximately 15% of our ongoing client base remains on legacy AD3, a significant milestone that has enabled us to achieve higher price levels and longer term commitments resulting in strong annual recurring revenue. Based on the strong progress we have made thus far, as of year-end 2022, the cumulative subscription contract value sold on new ActiveDisclosure reached nearly $110 million. We remain on track to decommission legacy AD3 by the end of the first half of 2023, which will allow us to shed the duplicative costs associated with operating two platforms. Prior to that point, we expect to transition the majority of the remaining legacy AD3 customers onto the new ActiveDisclosure platform.
As we've noted in the past, we expect our customer churn rate to be temporarily elevated, recognizing that we would not convert all our legacy AD3 customers to new ActiveDisclosure and we have seen that play out in 2022. While the churn impact is more than offset by price uplifts and longer term contracts, we expect higher retention rates when we complete the transition in the first half of 2023, consistent with what we are experiencing on the new ActiveDisclosure offering. Overall, I am pleased with the progress we have made in driving towards a single ActiveDisclosure platform while at the same time creating a strong foundation for new ActiveDisclosure.
Arc Suite, our market leading compliance software offering to mutual funds and other regulated investment companies delivered solid full year net sales growth of 12% or 13% growth on a constant currency basis. I am encouraged by the solid subscription revenue growth across our Arc Pro and Arc Regulatory solutions helping to more than offset a normalized demand profile for Arc Digital total compliance management solution, which had a very strong adoption in 2021 following its introduction in response to regulatory change. Arc Suite possesses the characteristics of a best in class enterprise software offering with a high component of recurring subscription revenue which makes up nearly 90% of total revenue, as well as long-term contracts with average contract terms in excess of three years.
Turning to our transactions driven software Venue, which experienced tremendous growth last year as a result of a robust capital markets transaction environment. Compared to a very strong 2021 when Venue sales were up 46% versus the prior year, full year 2022 Venue sales were down 6%, performing significantly better than its primary use case M&A. With the global M&A market down over 20% year-over-year in 2022, the level of underlying activity taking place on our virtual dataroom platform remained resilient. Perhaps more significantly, under a very challenging M&A environment Venue delivered just under $100 million in net sales in 2022. For context, Venue’s 2022 net sales were nearly 40% higher than net sales reported in 2019 and 2020 of 71 million and $72 million respectively. Given the higher levels of transactional activity in both 2019 and 2020, Venue’s growth is a great testament to our sales execution and market share gains.
Overall, I'm encouraged by the performance of our software solutions portfolio in 2022 and believe both our recurring compliance and transactional software products are well positioned for the future. The progress we made throughout 2022 to scale our portfolio recurring compliance software solutions combined with opportunities for new SEC regulations which I touched upon previously, position us well to achieve our long-term goals.
Let me highlight one of the regulatory tailwinds we see on the horizon. Tailored shareholder reports, which we believe is a regulation that can unlock additional revenue opportunities for DFIN both in terms of increased adoption of software solutions as well as higher consumption of tech enabled services within the investment company segment. Late last year, the SEC released its final ruling on tailored shareholder reports, which has a compliance date of July 2024. The new regulation, which applies to mutual funds and exchange traded funds requires the creation and distribution of tailored reports that highlight key information such as fund expenses, performance, and portfolio holdings on a semiannual basis.
These concise financial reports, which feature increased adoption of graphic and stylistic presentation, aimed to make the information more effective for the average retail investor and will replace detailed disclosures being distributed today. This rule carries three important measures that directly impact the content creation and production requirements for our clients. First, the rule requires a tailored shareholder report to be produced and filed at the share class level versus at the fund level, where it's done today. With multiple share classes per fund on average, the new rule significantly increases the volume of reports a fund has to create and distribute to shareholders. Second, unlike the current Form N-CSR reports, which are filed only in EDGAR HTML, the Regulation introduces iXBRL tagging requiring the Tailored Shareholder Reports to be iXBRL tagged, inserted into Form N-CSR and then filed. Third, the regulation requires a layered disclosure whereby the summary document is linked to a more comprehensive disclosure.
The key changes introduced by this rule require new levels of automation and workflow along with industry specific technology, making the DFIN platform an excellent foundation for the industry solution. Specifically, new ActiveDisclosure was designed and built to integrate our Arc Suite capabilities to create a future stage single platform for all compliance solutions serving corporations, mutual funds, exchange traded funds, and regulated insurance companies. The platform combines foundational and market specific capabilities across composition, tagging, filing, and regulatory and financial reporting into a single platform. This platform in conjunction with our deep domain service expertise allows us to address client needs under the Tailored Shareholder Reports regulation. Finally, the requirements of this rule are a great fit for our digital distribution platform to support our clients with web hosting, e-delivery, digital output, and distribution of required reports.
Tailored Shareholder Reports is just one of several new regulations that our clients turned to DFIN to help them operationalize. Pay Versus Performance and as the ruling becomes more well defined, the Financial Data Transparency Act are both good examples of this. We are excited by the opportunity presented by Tailored Shareholder Reports as well as other opportunities on the horizon for future regulatory changes to expand the uses of our software and services as we assist our clients with their regulatory requirements.
In addition to the progress we made towards becoming a software centric company, I'd be remiss not to highlight the continued success we are having in improving the profitability of our investment company’s compliance and communications management segment. Through a combination of exiting low margin contracts, aggressively managing the cost structure, and aligning our pricing with the value we deliver to clients, our 2022 adjusted EBITDA increased by over $20 million, nearly doubling what we delivered in 2021. Further adjusted EBITDA margin more than doubled in 2022, increasing by more than 1600 basis points to 29.1%. As further evidenced in 2020 adjusted EBITDA margin in the segment was approximately 6%.
Before turning things over to Dave, I wanted to provide a quick update on our strategic priorities for this year. As I have stated previously, our strategy to be the market leading provider of regulatory and compliance solutions is unchanged. We remain committed to executing our strategy to support our clients as they navigate increasingly complex regulatory and compliance landscape. In 2023, you can expect our primary focus to remain on accelerating our business mix shift by continuing to grow our recurring SaaS revenue base while maintaining share in our core traditional businesses including transactions. We will continue to invest in our regulatory and compliance software platform to ready ourselves to capitalize on the demand from future new regulations and non-SEC use cases.
In addition, we will continue to aggressively manage our costs and drive operational efficiencies. Finally, we will remain disciplined in the allocation of capital in order to maintain our FINANCIAL flexibility to execute our strategy. I'm confident that if we do these things well in 2023, we will create increased value to all our stakeholders, our clients, employees and shareholders. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our fourth quarter results, and our outlook for first quarter, Dave.
Thank you, Dan. And good morning everyone. As Dan noted, we delivered strong fourth quarter adjusted EBITDA margin in the context of a very weak capital markets transactional environment. The volume of capital markets deal activity remains substantially below last year's levels, as the market softness in the first three quarters of 2022 deteriorated further in the fourth quarter. In fact, the fourth quarter of 2022 had the fewest number of high priced IPOs and completed M&A transactions of any quarter in the year. Despite the very challenging demand environment, our focused efforts to execute our strategy have enabled DFIN to become fundamentally more profitable with adjusted EBITDA margins nearly 1000 basis points higher compared to the fourth quarter of 2019, which had slightly higher levels of overall sales and transactional sales.
On a consolidated basis, net sales for the fourth quarter of 2022 were $167.7 million, a decrease of $65.1 million or 28% from the fourth quarter of 2021. The parts of our portfolio most leveraged through corporate transactions, specifically capital markets transactional and the Venue dataroom businesses drove the vast majority of the year-over-year decline. In aggregate, capital markets transactional and Venue dataroom revenue decreased $57 million, or 42%, versus the fourth quarter of last year.
Fourth quarter non-GAAP gross margin was 54.9%, approximately 550 basis points lower than the fourth quarter of 2021 primarily driven by lower sales volume and an unfavorable business mix, both related to lower capital markets transactional activity, partially offset by the impact of the ongoing cost control initiatives and lower incentive compensation expense. Adjusted non-GAAP SG&A expense in the quarter was $53.2 million, a $26.1 million decrease from the fourth quarter of 2021. The decrease in adjusted non-GAAP SG&A is primarily driven by a reduction in selling expenses as a result of lower sales volume, lower incentive compensation expense, and the impact of ongoing cost control initiatives. As a percentage of net sales, adjusted non-GAAP SG&A was 31.7%, a decrease of approximately 240 basis points from the fourth quarter of 2021.
Our fourth quarter adjusted EBITDA was $39.3 million, a decrease of $22 million or 35.9% from the fourth quarter of 202. Fourth quarter adjusted EBITDA margin was 23.4%, a decrease of approximately 290 basis points from the fourth quarter of 2021 primarily driven by lower capital markets transactional and Venue sales, partially offset by lower selling expenses as a result of lower sales volume, lower incentive compensation expense, and the impact of ongoing cost control initiatives. As we noted earlier, our fourth quarter adjusted EBITDA margin is approximately 1000 basis points higher than our historical margins in quarters with similar overall and transactional revenue. Our focused efforts to reduce fixed costs across the business and to variablize our cost structure in specific areas has positioned DFIN to be more sustainable and resilient throughout market cycles.
Turning now to our fourth quarter segment results, net sales in our capital market software solution segment were $43.4 million, a decrease of 14.2% from the fourth quarter of 2021. The decrease in net sales is primarily due to lower Venue dataroom activity and the disposition of EDGAR Online partially offset by the increase in our recurring compliance product ActiveDisclosure. In the fourth quarter, ActiveDisclosure’s recurring subscriptions revenue grew 6% while total revenue, which includes both subscriptions and services grew 2%.
As Dan commented earlier, we are nearing the end of client transitions from AD3 to new AD. As the number of clients making the transition decreases, the amount of services revenue, part of which is related to customer migrations declined in the fourth quarter. Additionally, the combination of SPAC liquidations, normal customer churn, and the ongoing weakness in IPO activity results in a modest decline in the number of customers on the platform. The declining services revenue and impact of customer churn was more than offset by price increases on conversions in addition to new customer wins.
Sales of our virtual dataroom offering Venue were down 19.1% compared to the fourth quarter last year, driven by a steep decline in M&A volume. Robust M&A activity during the fourth quarter of 2021 resulted in record quarterly Venue revenue, breeding a difficult year-over-year comparison. Similar to what we experienced in the first three quarters of this year, Venue performed better than the market trend of its primary use case M&A during the fourth quarter. With the global M&A market down nearly 40% on a year-over-year basis in the fourth quarter, we continue to be encouraged by the resiliency of Venue sales. Adjusted EBITDA margins for this segment was 21.2%, a decrease of approximately 210 basis points from the fourth quarter of 2021, primarily due to lower sales volume, and unfavorable sales mix, and a higher allocation of overhead costs partially offset by lower selling expenses as a result of lower sales volume, lower incentive compensation expense, and price uplift from new AD.
Net sales in our capital markets Compliance and Communications Management segment were $73.4 million, a decrease of $54 million or 42.4% from the fourth quarter of 2021, primarily driven by lower capital markets transactional activity, which accounted for approximately $52 million of the year-over-year sales decline in this segment. Similar to the trends we experienced in the first nine months of the year, the demand environment for equity transactions remained very challenging in the fourth quarter. Specifically, the IPO market remained frozen during the fourth quarter, with only three pre-priced IPOs over $100 million taking place on U.S. exchanges, compared to nearly 200, priced IPOs in the fourth quarter of 2021.
The M&A market while more resilient than the IPO market loads sequentially from the third quarter and was down nearly 40% in the fourth quarter versus last year. Adjusted EBITDA margin for this segment was 31.9%, a decrease of approximately 950 basis points from the fourth quarter of 2021. The decrease in adjusted EBITDA margin was primarily due to the lower transactional sales, partially offset by lower selling expenses, lower incentive compensation expense, and cost savings initiatives.
Net sales in our investment company software solution segment were $25.3 million, an increase of 9.1% from the fourth quarter of 2021. Excluding the negative impact of foreign exchange rates, net sales increased 10.8% versus the fourth quarter of 2021. The year-over-year growth was primarily driven by subscription revenue in Arc Pro and Arc Regulatory two products within Arc Suite offering. Additionally, Arc Digital our total compliance management offering delivered positive year-over-year sales growth in the quarter, an improvement from the more normalized demand profile we saw in the first three quarters of the year, following the initial adoption of the solution in 2021. Combined, our Arc Suite products delivered full year net sales growth of 11.7% or 13.4%, including the negative impact of foreign exchange rates.
As Dan mentioned earlier, Arc Suite is well positioned to capture additional demand from new regulations such as Tailored Shareholder Reports, to further drive future revenue growth. Adjusted EBITDA margin for this segment was 36.8%, an increase of approximately 1650 basis points from the fourth quarter of 2021. The increase in adjusted EBITDA margin was primarily due to operating leverage on the increase in sales and lower incentive compensation expense, partially offset by higher product development and technology investments.
Net sales in our investment companies Compliance and Communications Management segments were $25.6 million, a decrease of 19% from the fourth quarter of 2021 as the impact of regulatory changes, and a reduction of print sales related to contracts we proactively exited, were partially offset by higher service related revenue and price increases. Adjusted EBITDA margin for this segment was 21.5%, approximately 570 basis points higher than the fourth quarter 2021. The increase in adjusted EBITDA margin was primarily due to a favorable sales mix, featuring more services and less print, price increases, and a reduction in overall expense within the segment based on the lower activity level in this segment.
Non-GAAP on outdated corporate expenses were $13.7 million in the quarter, a decrease of $8.9 million from the fourth quarter of 2021 primarily driven by lower incentive compensation expense, and the impact of ongoing cost control initiatives partially offset by an increase in expenses aimed at accelerating our transformation. Free cash flow in the quarter was $58.5 million, a decrease of $4.2 million compared to the fourth quarter of 2021. The reduction in fourth quarter free cash flow is primarily driven by the decline in adjusted EBITDA, partially offset by lower cash payments on interest and taxes and favorable working capital.
We ended the quarter with $169.2 million of total debt and $135 million of non-GAAP net debt, including $45 million drawn on our revolver. From a liquidity perspective, we had access to the remaining $255 million of our revolver, as well as $34.2 million of cash on hand. As of December 31, 2022, our non-GAAP net leverage ratio was 0.6 times. Regarding capital deployment, we repurchased approximately 0.4 million shares of common stock during the fourth quarter for $13.7 million and an average price of $37.27 per share. For the full year 2022, we repurchased approximately 4.7 million shares of common stock for $152.5 million at an average price of $32.21 per share. As of December 31, 2022 we had $124.3 million remaining on our $150 million stock repurchase authorization. As always, we will remain disciplined on all future capital allocation decisions.
As it relates to our outlook for the first quarter of 2023 we expect continued weakness in the trajectory of our transactional sales offerings. The transactional pieces of our business remain challenging to forecast and though we are very well positioned to secure the opportunities when market activity returns, we are planning for ongoing weakness in the near term. With that as the backdrop, we expect consolidated first quarter sales in the range of $180 million to $190 million and non-GAAP adjusted EBITDA margin of approximately 20%.
As it relates to the full year, our 2023 operating plan includes incremental investments aimed towards accelerating our transformation. Our capital spending, which is predominantly related to development of software products and underlying technology to support them, is projected to be approximately $60 million, a modest increase from the $54.2 million that we spent in 2022. In addition, our 2023 operating plan also includes approximately $25 million in operating expense, primarily related to additional product and technology investments, including system implementations, all of which are also aimed for accelerating our transformation, enhancing revenue growth, and improving operating efficiencies. We expect these to impact each quarter equally throughout the year and as with all investment decisions, we will remain disciplined and take a staged approach to ensure projects are generating returns at or above expected levels. We expect the benefit of these initiatives will pay off substantially beginning in 2024. With that, I'll now pass it back to Dan.
Thanks, Dave. Our performance in 2022 serves as further proof that our strategic transformation is enabling DFIN to become more profitable, focused, and resilient. We executed well in a very challenging market environment and resilient. We executed well in a very challenging market environment, delivering solid financial results while continuing to invest in our aspiration of becoming a software centric company. While it was difficult to predict the end of the current downturn in capital markets, our solid financial profile provides us with the foundation to continue to execute our strategic transformation. I am more excited about our future than ever.
Before we open it up for Q&A, I'd like to thank the DFIN employees around the world who have been working tirelessly to ensure our clients continue to receive the highest quality solutions. Now with that we're ready for questions.
Thank you. [Operator Instructions]. We will go first to Charles Strauzer at CJS Securities.
Good morning, this is Stefanos Crist calling in for Charlie, thanks for taking our questions.
Thanks Stefanos.
Can you just talk about your visibility in the software business and maybe just thoughts on the growth in the near term?
Yeah, sure. This is Dan, I'll start off. So if we look at our compliance offerings, there's great stability in terms of market demand that exists regardless of the economy in which we're operating. And so, as we mentioned, they've grown 16% or so since we spun out on a compounded annual growth rate. And as we look forward long-term, we're in that same teens rate. The one thing we talked -- we talked about two things; one that is a bit of a headwind, is within ActiveDisclosure and the final transition from AD3 on to new AD. So we think that's a bit of a headwind. And then the tailwind are some of the regulatory -- new regulations, I should say that will benefit us and a lot of that benefit starts to occur towards more prominently in 2024. There's potential that there's some benefit towards the end of 2023.
And then the last piece, which is not insignificant is Venue, which has done a really -- we've done a really nice job of outperforming the broader transactions market. But I would, just point out that its major use case is M&A. So that will be impacted by how the M&A market is. But again, if you will look at the spread, we've been doing well in a more challenging M&A environment.
Got it. Thank you. Then you mentioned 60 million of CAPEX on software, or sorry, total CAPEX, can you just break that down into how much is going to be on improving the software offerings?
Yeah, Stefanos this is Dave. Substantially all of our CAPEX is around either specific to product development. And then there's a portion also the underlying IT that supports it. There's very little capital that goes outside the two technology areas there.
Got it, thanks so much.
Thank you.
We will move next to Pete Heckmann at D.A. Davidson.
Hey, good morning, gentlemen. A few quick questions. When you think about that increase in operating expenses, how would you kind of quantify that in terms of basis points on EBITDA margins?
Yeah, so Pete, I think you're referring to the -- we noted about 25 million and some of that OPEX around accelerating the transformation. Roughly, I'd say two thirds of that is incremental on a year-over-year basis. And then, some of its probably in the base. And so, I think the impact on overall margin or basis points is tough to gauge I think, depending obviously on what happens with the transactional market in 2023. That amount will vary in terms of the impact it has on margin.
Okay, alright. And then just the divestiture of EDGAR Online, was there any material level of revenue related to that subsidiary?
They were insignificant. We have I think it was about 1.5 million a quarter last year, or 5 million in total.
Okay, great. And then just lastly, you noted some of this back liquidations, I mean, is there a way to think about that and obviously, the final chapters haven't been written on some of those facts that are still looking for deals, but I guess, how are you thinking about maybe your best guess or best estimate in terms of the remaining crop of 2020, 2021 SPACs having success finding and closing deals versus liquidating and about how much drag do you anticipate that would be on 2023 revenue?
Yeah, sure. This Craig Clay, I'll start. SPAC IPOs have historically made up a small percentage of our transactional revenue. The bigger opportunity, as we noted in the past is the De SPAC. So Q4 had 71 SPAC announce their business combinations, it was the most active quarter in 2022. There were 25 in December alone. So as you referenced about 350 SPACs were obtained for their business combination. According to deal logic, these SPACs or valuing companies are seeking to take private at their lowest level since the boom began. So last year, the merger valuation fell to about 200 million from 2 billion. So what this shows is a reset in valuation, but also a progress in the market digesting that SPAC peaked. And certainly, as you referenced, De SPAC performance has been challenged. So of the SPAC that completed last year, only 10% were trading at $10 and higher. And this poor market performance did cause a lot of scrutiny, it did have certainly the largest number of redemptions. So Q4 had 96%, which was the worst on record. But when you roll all that together, what you have is some quality deal teams that are still there, that are still looking, and we're optimistic that SPAC are going to continue to find their place in the capital market albeit at a lower level than we saw.
Okay. Alright…
The one thing I would add there is, as it relates to the compliance business specific on AD, we did see obviously in 2021, a lot of the SPACs coming onto the platform. And then with some of the liquidations in 2022, and lack of IPO in 2022, our growth rate in AD was really moving up nicely. In 2021 obviously it started to slow and 2022, because of that impact, in addition to, as Dan mentioned earlier, is transitioning the remainder of clients off of AD3. And so, we'll expect to see that continuing to kind of softer trend in the first half of the year as everything kind of resets and then improving starting in the back half.
[Multiple Speakers]
Can you maybe provide some additional on the IPO side, for the reasons you know to well, 2022 slowest year for IPO proceeds in 30 years, and it was dominated by real small deals. There were only 16 offerings in the full year that were greater than 100 million. That's the lowest in over 20 years. We're happy that we worked with 16 of those 20 largest deals. And what our clients are telling us right now is that we may see a few highly selective IPOs in the first half but that can lead to a broader IPO issuance in the second half. And as you've previously commented, you're encouraged by the pipeline or in process yields, and that pent up demand for future transactions. We have a little tailwind with the new regulatory approval for direct listings without being limited to the price restriction. So this yet unused alternative could have a positive for the market. And it's the same amount of work for DFIN. So given all these steps our clients are taking to remain ready to go public, we know that they'll respond quickly when that market opens.
Great, thanks.
We'll take our next question from Raj Sharma at B. Riley Securities.
Hi, thank you for taking my questions. I just wanted to understand on your guidance first quarter, can you give us just a little bit more visibility into what is the guidance building in for transactions and for software? And, from your pipeline that you have currently, how do you see that, do you see certain sectors and transactions doing better than the others, any sort of color on that would be great?
Yeah, Raj. So I think when we look at from a transactional perspective specifically, we're expecting kind of the continued downward pressure, both sequentially. And even year-over-year, I think transactional capital markets revenue last year was 51 million or so. And so we're expecting, down again relative to that number. I think from a software perspective, again, I commented on AD. So, slower growth in the first half and better growth in the second half as things reset. And then I think when you look at the software component within the GIC business, more a continuation of what we've been -- what we've been seeing over the last few quarters here. I'd also counted just from a margin perspective that Q1 is typically our lowest margin quarter. And again, given the pressure on transactional, we think in that 20% range or so is likely where we come up.
Great. And then on the software piece, I know that you commented that this year and probably possibly longer term you're expecting mid-teens growth. How should we see that build up and there are headwinds, so we should expect somewhere South of low to mid-teens in growth rates this year, but something picking up with your investments in 2024, is that the way to look into that?
Yeah, and we've talked about this in the past that so we do kind of a long range guidance on that. And that mid teen is meant to be exactly that. Certainly not going to be quarter-to-quarter or even year-to-year or product-by-product, right. But in aggregate we would expect that mid teen growth and like you said, there's certain things that we're facing this year what I alluded to on earlier on AD will be a headwind earlier in the year. And then kind of resetting to a more normalized trajectory in the back half. Certainly Venue has done better than the broader M&A market. But given the lack of activity in M&A and depending on how the year plays out on the transactional side, Venue will be a function of what the M&A market does, largely. And then, you referenced some of the tail winds and Dan talked about them earlier, specifically around Tailored Shareholder Reports, but that's more of a second half 2024. And then there's some other regulatory rules on the horizon that would be [Technical Difficulty].
We didn’t get it, just off.
Sorry. I guess, yeah. So I would just add and Dave hit it on the two thirds is compliance driven software. One third is Venue. And, if you just go back I think the last few years are instructive as to what the growth rates can look like with a tailwind of regulation. Back in 2021, we grew our software over double what our long term target is. And obviously we had tailwinds and transactions there as well. So, to Dave's point, there's a long range guidance here because a third of it is less predictable and two thirds is more predictable and becoming a bigger part of the whole as we operate through cycles.
Got it and then just on print of what sort of a decline or flat lining are you expecting in certain revenues this year?
Yeah, Raj I would say back to kind of the longer run trend on print secular decline and they call it the 5% range or so. Some of that gets impacted by the transactional environment to the extent there are more or less transactions and printed documents going along with those. And then longer term we would expect the same thing. The one caveat there would be to the extent that any of the future regulations such as Tailored Shareholder Reports might require some incremental printing that could possibly beat the trend there as well.
Great and then just lastly on EDGAR Online, can you talk about -- I know that you just mentioned the revenue impact was $5 million. Can you talk about the reason for the disposition and sort of how much was it disposed for, do you already have that functionality now in the other software pieces?
Yeah. So at a high level the declining business, it's not core to our compliance offering was going to require some incremental, pretty significant incremental investment to maintain it. And just so from an overall economic perspective as we look at capital deployment the combination of investing in a non-strategic declining asset just didn't make sense. And fortunately we found a buyer albeit at a pretty low price but I think relative to the alternatives there, it was a really good outcome for us.
Great. Thank you. Thank you again, I will take my questions offline.
Thank you Raj.
Thanks Raj.
And that does conclude the question-and-answer session. I would like to turn the call back over to Dan Leib for any closing remarks.
Great, thank you. Appreciate everyone’s time this morning, and we'll look forward to connecting with you over the ensuing months. Thank you.
This concludes today's conference call. You may now disconnect.