- Reported revenue decreased 1.9% due to anticipated impact from
divestitures, and comparable adjusted revenue increased 0.5%
- First quarter GAAP diluted EPS was $0.06 and adjusted diluted
EPS was $0.80
- Net income was $2.8 million, down from $9.7 million in the
prior year
- Adjusted EBITDA increased 0.8%, and comparable adjusted EBITDA
increased 2.1%
- Affirms full-year 2023 guidance
Deluxe (NYSE: DLX), a Trusted Payments and Data company, today
reported operating results for its first quarter ended March 31,
2023.
“We had a solid start to 2023 highlighted by increases in both
comparable adjusted revenue and EBITDA,” said Barry McCarthy,
President and CEO of Deluxe. “We are pleased to see modest growth
in both of these metrics, particularly with profits growing faster
than revenue, demonstrating continued improvement in operating
leverage.”
“We are encouraged by our overall performance in the first
quarter, and we are affirming our full-year 2023 guidance,” said
Chip Zint, Senior Vice President and Chief Financial Officer of
Deluxe. “We also completed the go-live of our ERP system, the last
of our "Six Flags" infrastructure modernization initiatives. Now,
in addition to continued top line growth, we are better positioned
to see increases in operational efficiencies and free cash flow as
the year progresses.”
First Quarter 2023 Financial and Segment Highlights (in
millions, except per share amounts)
1st Quarter
2023
1st Quarter
2022
% Change
Revenue
$545.4
$556.0
(1.9
%)
Comparable Adjusted Revenue
$545.4
$542.7
0.5
%
Net Income
$2.8
$9.7
(71.1
%)
Adjusted EBITDA
$100.4
$99.6
0.8
%
Comparable Adjusted EBITDA
$100.4
$98.3
2.1
%
Diluted EPS
$0.06
$0.22
(72.7
%)
Adjusted Diluted EPS
$0.80
$1.05
(23.8
%)
- Revenue for the first quarter decreased $10.6 million from the
previous year. Comparable adjusted revenue, where we have removed
the impact of divesting non-core businesses, increased 0.5%.
- Net income of $2.8 million was down from $9.7 million in the
first quarter of 2022, primarily due to higher interest expense and
a higher income tax rate.
- Adjusted EBITDA margin was 18.4%, up 50 basis points from the
prior year, driven by pricing actions and improved cost
structure.
- Adjusted diluted EPS was $0.80 versus $1.05 in the prior
year.
Outlook
The Company continues to expect the following for full-year
2023, inclusive of expected divestitures, and all figures are
approximate:
- Revenue of $2.145 to $2.210 billion
- Adjusted EBITDA of $390 to $405 million
- Adjusted EPS of $2.90 to $3.25
- Free cash flow of $80 to $100 million
Among other things, the guidance outlined above is subject to
the closure of the web hosting and logo divestiture in May 2023,
prevailing macroeconomic conditions, labor supply issues,
inflation, and the impact of other divestitures.
Capital Allocation and Dividend
The Board of Directors recently approved a regular quarterly
dividend of $0.30 per share. The dividend will be payable on June
5, 2023 to shareholders of record as of market closing on May 22,
2023.
Earnings Call Information
Deluxe management will host a conference call today at 8:30 a.m.
ET (7:30 a.m. CT) to review the financial results. Listeners can
access the call by dialing 1-888-210-4748 (access code 7092711).
The webcast and presentation will also be available on the investor
relations website at www.investors.deluxe.com. Alternatively, an
audio replay of the call will be available after 11:30 a.m. ET
through midnight on May 11, 2023 by dialing 1-800-770-2030 (access
code 7092711).
About Deluxe Corporation
Deluxe, a Trusted Payments and Data company, champions business
so communities thrive. Our solutions help businesses pay and get
paid, accelerate growth and operate more efficiently. For more than
100 years, Deluxe customers have relied on our solutions and
platforms at all stages of their lifecycle, from start-up to
maturity. Our powerful scale supports millions of small businesses,
thousands of vital financial institutions and hundreds of the
world’s largest consumer brands, while processing approximately $3
trillion in annual payment volume. Our reach, scale and
distribution channels position Deluxe to be our customers’ most
trusted business partner. To learn how we can help your business,
visit us at www.deluxe.com, www.facebook.com/deluxecorp,
www.linkedin.com/company/deluxe, or www.twitter.com/deluxe.
Forward-Looking Statements
Statements made in this release concerning Deluxe, the company’s
or management’s intentions, expectations, outlook or predictions
about future results or events are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements reflect management’s current intentions or
beliefs and are subject to risks and uncertainties that could cause
actual results or events to vary from stated expectations, which
variations could be material and adverse. Factors that could
produce such a variation include, but are not limited to, the
following: potential continuing negative impacts from pandemic
health issues, such as the coronavirus / COVID-19, along with the
impact of related government restrictions or similar directives on
our future results of operations and our future financial
condition; changes in local, regional, national and international
economic or political conditions, including those resulting from
heightened inflation, rising interest rates, a recession, or
intensified international hostilities, and the impact they may have
on the company, its customers or demand for the company’s products
and services; the effect of proposed and enacted legislative and
regulatory actions affecting the company or the financial services
industry as a whole; continuing cost increases and/or declines in
the availability of materials and other services; the company’s
ability to execute its transformational strategy and to realize the
intended benefits; the inherent unreliability of earnings, revenue
and cash flow predictions due to numerous factors, many of which
are beyond the company’s control; declining demand for the
company’s checks, check-related products and services and business
forms; risks that the company’s strategies intended to drive
sustained revenue and earnings growth, despite the continuing
decline in checks and forms, are delayed or unsuccessful; intense
competition; continued consolidation of financial institutions
and/or bank failures, thereby reducing the number of potential
customers and referral sources and increasing downward pressure on
the company’s revenue and gross profit; risks related to
acquisitions, including integration-related risks and risks that
future acquisitions will not be consummated; risks that any such
acquisitions do not produce the anticipated results or synergies;
risks that the company’s cost reduction initiatives will be delayed
or unsuccessful; risks related to any divestitures contemplated or
undertaken by the company; performance shortfalls by one or more of
the company’s major suppliers, licensors or service providers;
continuing supply chain and labor supply issues; unanticipated
delays, costs and expenses in the development and marketing of
products and services, including web services and financial
technology and treasury management solutions; the failure of such
products and services to deliver the expected revenues and other
financial targets; risks related to security breaches, computer
malware or other cyber-attacks; risks of interruptions to the
company’s website operations or information technology systems; and
risks of unfavorable outcomes and the costs to defend litigation
and other disputes. The company’s forward-looking statements speak
only as of the time made, and management assumes no obligation to
publicly update any such statements. Additional information
concerning these and other factors that could cause actual results
and events to differ materially from the company’s current
expectations are contained in the company’s Form 10-K for the year
ended December 31, 2022, and other filings made with the SEC. The
company undertakes no obligation to update or revise any
forward-looking statements to reflect subsequent events, new
information or future circumstances.
DELUXE CORPORATION
CONSOLIDATED CONDENSED
STATEMENTS OF INCOME
(in millions, except per share
amounts)
(Unaudited)
Quarter Ended March
31,
2023
2022
Product revenue
$310.3
$317.3
Service revenue
235.1
238.7
Total revenue
545.4
556.0
Cost of products
(118.5
)
(114.4
)
Cost of services
(132.2
)
(134.8
)
Total cost of revenue
(250.7
)
(249.2
)
Gross profit
294.7
306.8
Selling, general and administrative
expense
(247.7
)
(259.7
)
Restructuring and integration
expense
(12.9
)
(16.2
)
Operating income
34.1
30.9
Interest expense
(30.0
)
(20.3
)
Other income
2.4
2.0
Income before income taxes
6.5
12.6
Income tax provision
(3.7
)
(2.9
)
Net income
2.8
9.7
Non-controlling interest
—
(0.1
)
Net income attributable to
Deluxe
$2.8
$9.6
Weighted average dilutive
shares
43.7
43.2
Diluted earnings per share
$0.06
$0.22
Adjusted diluted earnings per
share
0.80
1.05
Capital expenditures
25.5
20.8
Depreciation and amortization
expense
43.5
41.6
EBITDA
80.0
74.4
Adjusted EBITDA
100.4
99.6
DELUXE CORPORATION
CONSOLIDATED CONDENSED BALANCE
SHEETS
(dollars and shares in
millions)
(Unaudited)
March 31, 2023
December 31,
2022
Cash and cash equivalents
$24.6
$40.4
Other current assets
530.3
663.6
Property, plant & equipment
125.4
124.9
Operating lease assets
56.4
47.1
Intangibles
435.6
459.0
Goodwill
1,430.6
1,431.4
Other non-current assets
338.0
310.1
Total assets
$2,940.9
$3,076.5
Current portion of long-term
debt
$78.8
$71.7
Other current liabilities
500.4
680.6
Long-term debt
1,607.9
1,572.5
Non-current operating lease
liabilities
58.2
49.0
Other non-current liabilities
100.0
98.5
Shareholders' equity
595.6
604.2
Total liabilities and shareholders'
equity
$2,940.9
$3,076.5
Net debt
$1,662.1
$1,603.8
Shares outstanding
43.4
43.2
DELUXE CORPORATION
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Quarter Ended March
31,
2023
2022
Cash provided (used) by:
Operating activities:
Net income
$2.8
$9.7
Depreciation and amortization of
intangibles
43.5
41.6
Prepaid product discount
payments
(7.4
)
(7.9
)
Other
(45.6
)
(9.1
)
Total operating activities
(6.7
)
34.3
Investing activities:
Purchases of capital assets
(25.5
)
(20.8
)
Other
—
0.5
Total investing activities
(25.5
)
(20.3
)
Financing activities:
Net change in debt
41.6
8.6
Dividends
(13.6
)
(13.3
)
Net change in customer funds
obligations
(145.6
)
(99.3
)
Other
(4.7
)
(6.0
)
Total financing activities
(122.3
)
(110.0
)
Effect of exchange rate change on cash,
cash equivalents, restricted cash and restricted cash
equivalents
0.6
1.3
Net change in cash, cash equivalents,
restricted cash and restricted cash equivalents
(153.9
)
(94.7
)
Cash, cash equivalents, restricted cash
and restricted cash equivalents, beginning of year
337.4
285.5
Cash, cash equivalents, restricted cash
and restricted cash equivalents, end of period
$183.5
$190.8
Free cash flow
($32.2
)
$13.5
DELUXE CORPORATION
SEGMENT INFORMATION
(In millions)
(Unaudited)
Quarter Ended March
31,
2023
2022
Revenue:
Payments
$172.0
$166.2
Data Solutions
58.6
69.5
Promotional Solutions
136.1
133.2
Checks
178.7
187.1
Total
$545.4
$556.0
Comparable Adjusted Revenue:
Payments
$172.0
$166.2
Data Solutions
58.6
63.5
Promotional Solutions
136.1
125.9
Checks
178.7
187.1
Total
$545.4
$542.7
Adjusted EBITDA:
Payments
$36.5
$36.4
Data Solutions
15.3
17.3
Promotional Solutions
18.8
17.0
Checks
76.5
82.8
Corporate
(46.7
)
(53.9
)
Total
$100.4
$99.6
Comparable Adjusted EBITDA:
Payments
$36.5
$36.4
Data Solutions
15.3
16.2
Promotional Solutions
18.8
16.8
Checks
76.5
82.8
Corporate
(46.7
)
(53.9
)
Total
$100.4
$98.3
Adjusted EBITDA Margin:
Payments
21.2
%
21.9
%
Data Solutions
26.1
%
24.9
%
Promotional Solutions
13.8
%
12.8
%
Checks
42.8
%
44.3
%
Total
18.4
%
17.9
%
Comparable Adjusted EBITDA
Margin:
Payments
21.2
%
21.9
%
Data Solutions
26.1
%
25.5
%
Promotional Solutions
13.8
%
13.3
%
Checks
42.8
%
44.3
%
Total
18.4
%
18.1
%
The segment revenue and adjusted EBITDA information reported
here was calculated utilizing the methodology outlined in the Notes
to Consolidated Financial Statements included in the company's
Annual Report on Form 10-K for the year ended December 31,
2022.
DELUXE CORPORATION RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (in millions) (Unaudited)
Note that the company has not reconciled the adjusted EBITDA,
adjusted EPS or free cash flow outlook for 2023 to the directly
comparable GAAP financial measures because the company does not
provide outlook guidance for the reconciling items between net
income, adjusted net income and adjusted EBITDA, and certain of
these reconciling items impact cash flows from operating
activities. Because of the substantial uncertainty and variability
surrounding certain of these forward-looking reconciling items,
including: asset impairment charges, restructuring and integration
costs, gains and losses on sales of businesses and facilities, and
certain legal-related expenses, a reconciliation of the non-GAAP
financial measure outlook to the corresponding GAAP measures is not
available without unreasonable effort. The probable significance of
certain of these reconciling items is high and, based on historical
experience, could be material.
EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDA
MARGIN
Management discloses EBITDA, adjusted EBITDA and adjusted EBITDA
margin because it believes they are useful in evaluating the
company's operating performance, as the calculations eliminate the
effect of interest expense, income taxes, the accounting effects of
capital investments (i.e., depreciation and amortization) and in
the case of adjusted EBITDA and adjusted EBITDA margin, certain
items, as presented below, that may not be indicative of current
period operating performance. In addition, management utilizes
these measures to assess the operating results and performance of
the business, to perform analytical comparisons and to identify
strategies to improve performance. Management also believes that an
increasing EBITDA and adjusted EBITDA depict an increase in the
value of the company. Management does not consider EBITDA and
adjusted EBITDA to be measures of cash flow, as they do not
consider certain cash requirements, such as interest, income taxes,
debt service payments or capital investments. Management does not
consider EBITDA, adjusted EBITDA or adjusted EBITDA margin to be
substitutes for operating income or net income. Instead, management
believes that these amounts are useful performance measures that
should be considered in addition to GAAP performance measures.
Quarter Ended March
31,
2023
2022
Net income
$2.8
$9.7
Non-controlling interest
—
(0.1
)
Interest expense
30.0
20.3
Income tax provision
3.7
2.9
Depreciation and amortization expense
43.5
41.6
EBITDA
80.0
74.4
Restructuring and integration costs
14.1
16.3
Share-based compensation expense
5.9
8.1
Acquisition transaction costs
—
0.1
Certain legal-related expense
0.4
0.7
Adjusted EBITDA
$100.4
$99.6
Adjusted EBITDA as a percentage of total
revenue (adjusted EBITDA margin)
18.4
%
17.9
%
DELUXE CORPORATION RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (continued) (in millions, except per
share amounts) (Unaudited)
ADJUSTED DILUTED EPS
By excluding the impact of non-cash items or items that may not
be indicative of current period operating performance, management
believes that adjusted diluted EPS provides useful comparable
information to assist in analyzing the company's current and future
operating performance. As such, adjusted diluted EPS is one of the
key financial performance metrics used to assess the operating
results and performance of the business and to identify strategies
to improve performance. It is reasonable to expect that one or more
of the excluded items will occur in future periods, but the amounts
recognized may vary significantly. Management does not consider
adjusted diluted EPS to be a substitute for GAAP performance
measures, but believes that it is a useful performance measure that
should be considered in addition to GAAP performance measures.
Quarter Ended March
31,
2023
2022
Net income
$2.8
$9.7
Non-controlling interest
—
(0.1
)
Net income attributable to Deluxe
2.8
9.6
Acquisition amortization
21.3
23.9
Restructuring and integration costs
14.1
16.3
Share-based compensation expense
5.9
8.1
Acquisition transaction costs
—
0.1
Certain legal-related expense
0.4
0.7
Adjustments, pre-tax
41.7
49.1
Income tax provision impact of pretax
adjustments(1)
(9.6
)
(13.1
)
Adjustments, net of tax
32.1
36.0
Adjusted net income attributable to
Deluxe
34.9
45.6
Re-measurement of share-based awards
classified as liabilities
—
(0.1
)
Adjusted income attributable to Deluxe
available to common shareholders
$34.9
$45.5
Weighted-average dilutive shares
43.7
43.2
GAAP Diluted EPS
$0.06
$0.22
Adjustments, net of tax
0.74
0.83
Adjusted Diluted EPS
$0.80
$1.05
(1)
The tax effect of the pretax adjustments
considers the tax treatment and related tax rate(s) that apply to
each adjustment in the applicable tax jurisdiction(s). Generally,
this results in a tax impact that approximates the U.S. effective
tax rate for each adjustment. However, the tax impact of certain
adjustments, such as share-based compensation expense, depends on
whether the amounts are deductible in the respective tax
jurisdictions and the applicable effective tax rate(s) in those
jurisdictions.
DELUXE CORPORATION RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (continued) (in millions)
(Unaudited)
COMPARABLE ADJUSTED REVENUE, COMPARABLE
ADJUSTED EBITDA AND COMPARABLE ADJUSTED EBITDA MARGIN
Management views the measures of comparable adjusted revenue and
comparable adjusted EBITDA, which exclude the impact of business
exits, as important indicators when assessing and evaluating the
performance of the business and when identifying strategies to
improve performance. By excluding the impact of business exits,
management is able to evaluate internally-generated revenue and
adjusted EBITDA, measured by comparable results on a year-over-year
basis. These measures are utilized by management to compare
operational performance across fiscal periods when an acquisition
or business exit occurs.
COMPARABLE ADJUSTED REVENUE
Quarter Ended March
31,
2023
2022
Total Company:
Total revenue
$545.4
$556.0
Business exits
—
(13.3
)
Comparable adjusted revenue
$545.4
$542.7
Payments:
Total revenue
$172.0
$166.2
Data Solutions:
Total revenue
$58.6
$69.5
Business exits
—
(6.0
)
Comparable adjusted revenue
$58.6
$63.5
Promotional Solutions:
Total revenue
$136.1
$133.2
Business exits
—
(7.3
)
Comparable adjusted revenue
$136.1
$125.9
Checks:
Total revenue
$178.7
$187.1
DELUXE CORPORATION RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (continued) (in millions)
(Unaudited)
COMPARABLE ADJUSTED EBITDA AND COMPARABLE
ADJUSTED EBITDA MARGIN
Quarter Ended March
31,
2022
2021
Total Company:
Adjusted EBITDA
$100.4
$99.6
Business exits
—
(1.3
)
Comparable adjusted EBITDA
$100.4
$98.3
Comparable adjusted EBITDA margin
18.4
%
18.1
%
Payments:
Adjusted EBITDA
$36.5
$36.4
Data Solutions:
Adjusted EBITDA
$15.3
$17.3
Business exits
—
(1.1
)
Comparable adjusted EBITDA
$15.3
$16.2
Comparable adjusted EBITDA margin
26.1
%
25.5
%
Promotional Solutions:
Adjusted EBITDA
$18.8
$17.0
Business exits
—
(0.2
)
Comparable adjusted EBITDA
$18.8
$16.8
Comparable adjusted EBITDA margin
13.8
%
13.3
%
Checks:
Adjusted EBITDA
$76.5
$82.8
Corporate:
Adjusted EBITDA
($46.7
)
($53.9
)
DELUXE CORPORATION RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (continued) (Unaudited)
COMPARABLE ADJUSTED REVENUE AND
COMPARABLE ADJUSTED EBITDA OUTLOOK
(in billions)
2023 Outlook
2022 Actual
Total revenue
$2.145 - $2.210
$2.238
Business exits
—
(0.063
)
Comparable adjusted revenue
$2.145 - $2.210
$2.175
Comparable adjusted revenue growth %
(1%) - 2%
(in millions)
Adjusted EBITDA
$390 - $405
$418
Business exits
—
(19
)
Comparable adjusted EBITDA
$390 - $405
$399
Comparable adjusted EBITDA growth %
(2%) - 2%
NET DEBT
Management believes that net debt is an important measure to
monitor leverage and to evaluate the balance sheet. In calculating
net debt, cash and cash equivalents are subtracted from total debt
because they could be used to reduce the company’s debt
obligations. A limitation associated with using net debt is that it
subtracts cash and cash equivalents, and therefore, may imply that
management intends to use cash and cash equivalents to reduce
outstanding debt. In addition, net debt suggests that our debt
obligations are less than the most comparable GAAP measure
indicates.
(in millions)
March 31, 2023
December 31,
2022
Total debt
$1,686.7
$1,644.2
Cash and cash equivalents
(24.6
)
(40.4
)
Net debt
$1,662.1
$1,603.8
DELUXE CORPORATION RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (continued) (in millions)
(Unaudited)
FREE CASH FLOW
Management defines free cash flow as net cash provided by
operating activities less purchases of capital assets. Management
believes that free cash flow is an important indicator of cash
available for debt service and for shareholders, after making
capital investments to maintain or expand the company’s asset base.
A limitation of using the free cash flow measure is that not all of
the company’s free cash flow is available for discretionary
spending, as the company may have mandatory debt payments and other
cash requirements that must be deducted from its cash available for
future use. Free cash flow is not a substitute for GAAP liquidity
measures. Instead, management believes that this measurement
provides an additional metric to compare cash generated by
operations on a consistent basis and to provide insight into the
cash flow available to fund items such as dividends, mandatory and
discretionary debt reduction, acquisitions or other strategic
investments, and share repurchases.
Quarter Ended March
31,
2023
2022
Net cash (used) provided by operating
activities
($6.7
)
$34.3
Purchases of capital assets
(25.5
)
(20.8
)
Free cash flow
($32.2
)
$13.5
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230504005260/en/
Tom Morabito, VP, Investor Relations 470-607-5567
tom.morabito@deluxe.com
Keith Negrin, VP, Communications 612-669-1459
keith.negrin@deluxe.com
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