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0000027996
2024-05-01
2024-05-01
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 1, 2024
DELUXE CORPORATION
(Exact name of registrant as specified in its charter)
MN 1-7945 41-0216800
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
801 S. Marquette Ave. 55402-2807
,
Minneapolis
,
MN
(Address of principal executive offices) (Zip Code)
(
651
)
483-7111
Registrant's telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
Written communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common stock, par value $1.00 per share DLX NYSE
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 ((s)230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 ((s)240.12b-2 of this
chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
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Section 2 - Financial Information
Item 2.02
Results of Operations and Financial Condition.
Furnished as Exhibit 99.1 is a press release of Deluxe Corporation reporting
results from first quarter 2024.
The information in this Item 2.02 and Exhibit 99.1 shall not be deemed "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
nor shall it be deemed incorporated by reference into any filings under the
Securities Act of 1933, as amended.
Section 9 - Financial Statements and Exhibits
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Description
Number
99.1 Press Release, dated May
1
, 2024, of Deluxe Corporation reporting
results from first quarter 2024 (furnished)
101.INS XBRL Instance Document - the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH XBRL Taxonomy Extension Schema Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover page interactive data file (formatted
as Inline XBRL and contained in Exhibit 101)
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 1, 2024
DELUXE CORPORATION
/s/ Jeffrey L. Cotter
Jeffrey L. Cotter
Senior Vice President, Chief
Administrative Officer and
General Counsel
3
Exhibit 99.1
Contact:
Brian Anderson, VP, Strategy & Investor Relations Keith Negrin, VP, Communications
651-447-4197 612-669-1459
brian.anderson@deluxe.com keith.negrin@deluxe.com
DELUXE REPORTS FIRST QUARTER 2024 RESULTS;
RAISES FULL-YEAR FREE CASH FLOW OUTLOOK
.
Reported revenue decreased 1.9%, while comparable adjusted revenue increased
1.2%, excluding the impact from divestitures.
.
Net income was $10.8 million, improving from $2.8 million in 2023, on stronger
operating results and realized gain on 2023 business exit.
.
First quarter GAAP diluted EPS was $0.24 while comparable adjusted diluted EPS
improved 4.3% to $0.72.
.
Comparable adjusted EBITDA increased 7% to $96.9 million.
.
Increasing FY'24 free cash flow guidance; affirming guide for the balance of
2024 metrics
Minneapolis
- May 1, 2024
- Deluxe (NYSE: DLX), a modern Payments and Data company, today reported
operating results for its first quarter ended March 31, 2024.
"We reported a strong start to 2024 highlighted by increases across all of our
comparable adjusted metrics," said Barry McCarthy, President and CEO of
Deluxe. "Comparable adjusted EBITDA expanded at a rate significantly faster
than revenue, demonstrating the scaling profitability of our business."
"Beyond expanding profits, we were particularly pleased to deliver a
significant year-over-year increase in cash flows.
Our continued strong execution enables us to increase our free cash flow
guidance range for the full year," said Chip Zint, Senior Vice President and
Chief Financial Officer of Deluxe. "We are proud of our progress on our North
Star plan and our disciplined capital allocation, further building confidence
in our earnings growth trajectory."
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First Quarter 2024 Financial Highlights
(in millions, except per share amounts)
1 1 % Change
st st
Quarter Quarter
2024 2023
Revenue $535.0 $545.4 (1.9 %)
Comparable Adjusted Revenue $529.0 $522.7 1.2 %
Net Income $10.8 $2.8 n/m
Comparable Adjusted EBITDA $96.9 $90.6 7.0 %
Diluted EPS $0.24 $0.06 n/m
Comparable Adjusted Diluted EPS $0.72 $0.69 4.3 %
----
n/m - not meaningful
.
Revenue for the first quarter decreased 1.9% from the previous year.
Comparable adjusted revenue, reflecting the removal of business exits,
increased 1.2% compared to the previous year.
.
Net income of $10.8 million was up from $2.8 million in the first quarter of
2023, primarily reflecting gains on business exits and expense management.
.
Comparable adjusted EBITDA margin was 18.3%, up 100 basis points from the
prior year.
.
Comparable adjusted diluted EPS of $0.72 was up 4.3% year over year.
Outlook
The Company now expects the following for full-year 2024, reflecting the
removal of business exits, and all figures are approximate:
.
Revenue of $2.14 to $2.18 billion
.
Adjusted EBITDA of $400 to $420 million
.
Adjusted diluted EPS of $3.10 to $3.40
.
Free cash flow of $80 to $100 million
The guidance outlined above is subject to, among other things, prevailing
macroeconomic conditions, global unrest, labor supply issues, inflation, and
the impact of business exits.
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 3, 2024, to shareholders of
record as of market closing on May 20, 2024.
Earnings Call Information
Deluxe management will host a conference call today at 5:00 p.m. ET (4:00 p.m.
CT) to review the financial results. Listeners can access the call by dialing
1-888-210-4748 (access code 7092711). The
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audio and accompanying slides will be available via a simultaneous webcast on
the investor relations website at
www.investors.deluxe.com
. Alternatively, an audio replay will be available after 11:30 a.m. ET through
midnight on May 8, 2024, by dialing 1-800-770-2030 (access code 7092711).
About Deluxe Corporation
Deluxe, a modern Payments and Data company, champions business so communities
thrive. Our solutions help businesses pay, get paid, and grow. 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 more than $2 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
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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, 2023, 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.
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DELUXE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in millions, except per share amounts)
(Unaudited)
Quarter Ended
March 31,
2024 2023
Product revenue $300.4 $310.3
Service revenue 234.6 235.1
Total revenue 535.0 545.4
Cost of products (114.4) (118.5)
Cost of services (137.1) (132.2)
Total cost of revenue (251.5) (250.7)
Gross profit 283.5 294.7
Selling, general and administrative expense (234.1) (247.7)
Restructuring and integration expense (13.8) (12.9)
Gain on sale of businesses and long-lived assets 8.6 -
Operating income 44.2 34.1
Interest expense (30.8) (30.0)
Other income 3.0 2.4
Income before income taxes 16.4 6.5
Income tax provision (5.6) (3.7)
Net income attributable to Deluxe $10.8 $2.8
Weighted average dilutive shares 44.5 43.7
Diluted earnings per share $0.24 $0.06
Adjusted diluted earnings per share 0.76 0.80
Comparable adjusted diluted earnings per share 0.72 0.69
Capital expenditures 20.4 25.5
Depreciation and amortization expense 41.7 43.5
EBITDA 88.9 80.0
Adjusted EBITDA 100.5 100.4
Comparable adjusted EBITDA 96.9 90.6
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DELUXE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars and shares in millions)
(Unaudited)
March 31, December 31,
2024 2023
Cash and cash equivalents $23.5 $72.0
Other current assets 406.7 689.0
Property, plant & equipment 111.1 116.5
Operating lease assets 55.1 59.0
Intangibles 374.0 391.7
Goodwill 1,430.6 1,430.6
Other non-current assets 327.6 321.8
Total assets $2,728.6 $3,080.6
Current portion of long-term debt $21.6 $86.2
Other current liabilities 423.1 732.9
Long-term debt 1,538.5 1,506.7
Non-current operating lease liabilities 55.4 58.8
Other non-current liabilities 81.6 91.4
Shareholders' equity 608.4 604.6
Total liabilities and shareholders' equity $2,728.6 $3,080.6
Net debt $1,536.6 $1,520.9
Shares outstanding 44.0 43.7
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DELUXE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Quarter Ended
March 31,
2024 2023
Cash provided (used) by:
Operating activities:
Net income $10.8 $2.8
Depreciation and amortization of intangibles 41.7 43.5
Gain on sale of businesses and long-lived assets (8.6) -
Prepaid product discount payments (10.5) (7.4)
Other (6.8) (45.6)
Total operating activities 26.6 (6.7)
Investing activities:
Purchases of capital assets (20.4) (25.5)
Other (0.2) -
Total investing activities (20.6) (25.5)
Financing activities:
Net change in debt, including debt issuance costs (34.6) 41.6
Dividends (14.0) (13.6)
Net change in customer funds obligations (272.8) (145.6)
Other (5.2) (4.7)
Total financing activities (326.6) (122.3)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents (2.6) 0.6
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents (323.2) (153.9)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year 458.0 337.4
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $134.8 $183.5
Free cash flow $6.2 ($32.2)
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DELUXE CORPORATION
SEGMENT INFORMATION
(In millions)
(Unaudited)
Quarter Ended
March 31,
2024 2023
Revenue:
Merchant Services $96.5 $89.1
B2B Payments 69.4 75.2
Data Solutions 59.7 44.4
Print 303.4 314.0
Business exits 6.0 22.7
(1)
Total $535.0 $545.4
Comparable Adjusted Revenue $529.0 $522.7
Adjusted EBITDA:
Merchant Services $21.4 $18.4
B2B Payments 13.3 13.5
Data Solutions 14.9 10.2
Print 91.0 95.2
Business Exits (40.1) (36.9)
(1)
/ Corporate
Total $100.5 $100.4
Comparable Adjusted EBITDA $96.9 $90.6
Adjusted EBITDA Margin:
Merchant Services 22.2 % 20.7 %
B2B Payments 19.2 % 18.0 %
Data Solutions 25.0 % 23.0 %
Print 30.0 % 30.3 %
Total 18.8 % 18.4 %
Comparable Adjusted EBITDA 18.3 % 17.3 %
(1)
Includes the North American web hosting and logo design businesses, which were
sold in June 2023, and the payroll and human resources services business,
which the company is currently exiting.
Effective January 1, 2024, the company realigned its organization structure to
better reflect its portfolio mix and offerings, and it will be updating its
reportable segments to correspond with these changes effective with the
company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.
The company did not operate under the new segment structure during 2023. Prior
period segment information reported here has been recast to reflect the
revised reportable segments. The methodology utilized to determine segment
operating performance did not change, and information regarding this
methodology is provided in the Notes to Consolidated Financial Statements
included in the company's Annual Report on Form 10-K for the year ended
December 31, 2023.
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DELUXE CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in millions)
(Unaudited)
Note that the company has not reconciled the comparable adjusted revenue,
comparable adjusted EBITDA or comparable adjusted diluted EPS outlook guidance
for 2024 to the directly comparable GAAP measures. The outlook excludes the
payroll and human resources services business, which the company is currently
in the process of exiting. Revenue from this business is decreasing as its
customers convert to other service providers, and as such, the company is
unable to predict the results for this business in 2024. In addition, the
company has not reconciled the adjusted comparable EBITDA, adjusted comparable
diluted EPS or free cash flow outlook for 2024 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 expense, gains and
losses on sales of businesses and long-lived assets, and certain legal-related
expenses, a reconciliation of the outlook for these non-GAAP financial
measures 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,
2024 2023
Net income $10.8 $2.8
Interest expense 30.8 30.0
Income tax provision 5.6 3.7
Depreciation and amortization expense 41.7 43.5
EBITDA 88.9 80.0
Restructuring and integration expense 14.8 14.1
Share-based compensation expense 5.1 5.9
Certain legal-related expense 0.3 0.4
Gain on sale of businesses and long-lived assets (8.6) -
Adjusted EBITDA $100.5 $100.4
Adjusted EBITDA as a percentage of total revenue (adjusted EBITDA margin) 18.8 % 18.4 %
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DELUXE CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (continued)
(in millions, except per share amounts)
(Unaudited)
ADJUSTED DILUTED EPS AND COMPARABLE ADJUSTED DILUTED EPS
Adjusted diluted EPS and comparable adjusted diluted EPS are key financial
performance metrics used to assess the operating results and performance of
the business and to identify strategies to improve performance. 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. 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. Comparable adjusted diluted EPS also
excludes the impact of business exits, allowing management to evaluate
comparable results on a year-over-year basis. Management does not consider
adjusted diluted EPS or comparable adjusted diluted EPS to be substitutes for
GAAP performance measures, but believes that they are useful performance
measures that should be considered in addition to GAAP performance measures.
Quarter Ended
March 31,
2024 2023
Net income $10.8 $2.8
Acquisition amortization 14.8 21.3
Accelerated amortization 3.1 -
Restructuring and integration expense 14.8 14.1
Share-based compensation expense 5.1 5.9
Certain legal-related expense 0.3 0.4
Gain on sale of businesses and long-lived assets (8.6) -
Adjustments, pre-tax 29.5 41.7
Income tax provision impact of pretax adjustments (6.5) (9.6)
(1)
Adjustments, net of tax 23.0 32.1
Adjusted income attributable to Deluxe available to common shareholders 33.8 34.9
(A)
Business exits, pretax (2.2) (6.7)
Income tax provision impact of business exits 0.6 1.8
(1)
Business exits, net of tax (1.6) (4.9)
Comparable adjusted income attributable to Deluxe available to common $32.2 $30.0
shareholders
(B)
Weighted-average dilutive shares 44.5 43.7
(C)
Adjusted Diluted EPS $0.76 $0.80
(A) / (C)
Comparable Adjusted Diluted EPS $0.72 $0.69
(B) / (C)
(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.
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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, comparable
adjusted EBITDA and comparable adjusted EBITDA margin, 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 comparable results on a year-over-year basis. These measures
are utilized by management to compare operational performance across fiscal
periods when acquisitions or business exits occur.
Quarter Ended
March 31,
2024 2023
Total revenue $535.0 $545.4
Business exits (6.0) (22.7)
Comparable adjusted revenue $529.0 $522.7
Adjusted EBITDA $100.5 $100.4
(1)
Business exits (3.6) (9.8)
Comparable adjusted EBITDA $96.9 $90.6
Comparable adjusted EBITDA margin 18.3 % 17.3 %
(1)
The reconciliation of adjusted EBITDA to net income can be found on a
preceding page.
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.
March 31, December 31,
2024 2023
Total debt $1,560.1 $1,592.9
Cash and cash equivalents (23.5) (72.0)
Net debt $1,536.6 $1,520.9
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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,
2024 2023
Net cash provided (used) by operating activities $26.6 ($6.7)
Purchases of capital assets (20.4) (25.5)
Free cash flow $6.2 ($32.2)
###
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