- Delivered consolidated revenue growth of 26.0% in the first
quarter
- Revenue increased 7.1% excluding First American
- All four segments delivered year-over-year sales-driven revenue
growth
- Declared regular quarterly dividend
- Affirmed full year 2022 guidance
Deluxe (NYSE: DLX), a Trusted Payments and Business Technology™
company, today reported operating results for its first quarter
ended March 31, 2022.
“We had a great start to 2022, continuing our trend of
sales-driven growth,” said Barry McCarthy, President and CEO of
Deluxe. “All four segments reported year-over-year revenue growth
led by strong performance in our First American and Checks
businesses. Our strong momentum gives us confidence we will deliver
on our full-year goals.”
“We are proud of our execution in the first quarter that has led
to this strong revenue growth,” said Scott Bomar, Senior Vice
President and Chief Financial Officer of Deluxe. “There were a
number of known factors that impacted Adjusted EBITDA margin in the
quarter. These factors are included in our guidance and we are
affirming our outlook for the year."
First Quarter 2022 Financial and
Segment Highlights
(in millions, except per share
amounts)
1st Quarter 2022
1st Quarter 2021
% Change
Revenue
$556.0
$441.3
26.0
%
Net Income
$9.7
$24.3
(60.1
%)
Adjusted EBITDA
$99.6
$90.5
10.1
%
Diluted EPS
$0.22
$0.57
(61.4
%)
Adjusted Diluted EPS
$1.05
$1.26
(16.7
%)
- Revenue for the first quarter was $114.7 million higher than
the previous year. Excluding the First American acquisition, which
closed on June 1, 2021, revenue increased $31.4 million, or 7.1%
year-over-year.
- The Payments segment delivered revenue growth of 109.1% over
the previous year to $166.2 million. Excluding First American,
Payments grew 4.3%.
- Net income of $9.7 million included $12.7 million of
acquisition amortization from the First American acquisition, as
well as an increase in interest expense of $15.8 million driven by
the transaction.
- Adjusted EBITDA margin was 17.9%, down 260 basis points from
the prior year and was impacted by known factors such as IT
investments, inflation, changes in portfolio mix, and a return to
pre-COVID seasonal patterns.
- Cash flow from operations for the first quarter was $34.3
million and capital expenditures were $20.8 million. Free cash flow
was $13.5 million, a decrease of $4.4 million compared to the first
quarter of 2021, partially driven by increased cash interest
payments.
Outlook
The company continues to expect the following for full year
2022:
- Revenue growth of 8% to 10%, which includes a full year impact
from First American
- Adjusted EBITDA margin of approximately 20%
- Capital expenditures of approximately $105 million
The guidance outlined above is subject to, among other things,
prevailing macroeconomic conditions, anticipated continued supply
chain constraints, labor supply issues, inflation, and the impact
of recent 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
6, 2022 to shareholders of record as of market closing on May 23,
2022.
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 16, 2022 by dialing 1-800-770-2030 (access
code 7092711).
About Deluxe Corporation
Deluxe, a Trusted Payments and Business Technology™ 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 government restrictions or similar directives on our
future results of operations and our future financial condition;
uncertainties related to the Russia-Ukraine dispute; the impact
that further deterioration or prolonged softness in the economy may
have on demand for the company’s products and 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 additional 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 the company’s acquisition of First
American Payment Systems, including integration-related risks;
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; 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; risks of unfavorable outcomes and the costs to
defend litigation and other disputes; and the impact of
governmental laws, regulations or investigations. 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, 2021 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,
2022
2021
Product revenue
$317.3
$299.1
Service revenue
238.7
142.2
Total revenue
556.0
441.3
Cost of products
(114.4
)
(107.3
)
Cost of services
(134.8
)
(71.2
)
Total cost of revenue
(249.2
)
(178.5
)
Gross profit
306.8
262.8
Selling, general and administrative
expense
(259.7
)
(212.5
)
Restructuring and integration
expense
(16.2
)
(14.3
)
Operating income
30.9
36.0
Interest expense
(20.3
)
(4.5
)
Other income
2.0
2.0
Income before income taxes
12.6
33.5
Income tax provision
(2.9
)
(9.2
)
Net income
9.7
24.3
Non-controlling interest
(0.1
)
—
Net income attributable to
Deluxe
$9.6
$24.3
Weighted average dilutive
shares
43.2
42.5
Diluted earnings per share
$0.22
$0.57
Adjusted diluted earnings per
share
1.05
1.26
Capital expenditures
20.8
21.7
Depreciation and amortization
expense
41.6
27.8
EBITDA
74.4
65.8
Adjusted EBITDA
99.6
90.5
DELUXE CORPORATION
CONSOLIDATED CONDENSED BALANCE
SHEETS
(dollars and shares in
millions)
(Unaudited)
March 31, 2022
December 31, 2021
March 31, 2021
Cash and cash equivalents
$44.1
$41.2
$125.4
Other current assets
474.1
579.3
379.1
Property, plant & equipment
124.3
126.0
87.8
Operating lease assets
53.4
58.2
41.3
Intangibles
499.5
510.7
254.2
Goodwill
1,430.1
1,430.1
736.9
Other non-current assets
328.8
328.9
268.6
Total assets
$2,954.3
$3,074.4
$1,893.3
Current portion of long-term
debt
$57.2
$57.2
$—
Other current liabilities
504.2
626.2
404.6
Long-term debt
1,635.2
1,625.8
840.0
Non-current operating lease
liabilities
53.4
56.4
34.3
Other non-current liabilities
125.3
134.2
55.6
Shareholders' equity
579.0
574.6
558.8
Total liabilities and shareholders'
equity
$2,954.3
$3,074.4
$1,893.3
Net debt
$1,648.3
$1,641.8
$714.6
Shares outstanding
42.9
42.7
42.1
Number of employees
6,224
6,313
5,893
DELUXE CORPORATION
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Quarter Ended March
31,
2022
2021
Cash provided (used) by:
Operating activities:
Net income
$9.7
$24.3
Depreciation and amortization of
intangibles
41.6
27.8
Prepaid product discount
payments
(7.9
)
(9.6
)
Other
(9.1
)
(2.9
)
Total operating activities
34.3
39.6
Investing activities:
Purchases of capital assets
(20.8
)
(21.7
)
Other
0.5
(0.2
)
Total investing activities
(20.3
)
(21.9
)
Financing activities:
Net change in debt
8.6
—
Proceeds from issuing shares
0.8
0.7
Dividends
(13.3
)
(12.9
)
Net change in customer funds
obligations
(99.3
)
1.7
Other
(6.8
)
(3.7
)
Total financing activities
(110.0
)
(14.2
)
Effect of exchange rate change on cash,
cash equivalents, restricted cash and restricted cash
equivalents
1.3
1.6
Net change in cash, cash equivalents,
restricted cash and restricted cash equivalents
(94.7
)
5.1
Cash, cash equivalents, restricted cash
and restricted cash equivalents, beginning of year
285.5
229.4
Cash, cash equivalents, restricted cash
and restricted cash equivalents, end of period
$190.8
$234.5
Free cash flow
$13.5
$17.9
DELUXE CORPORATION
SEGMENT INFORMATION
(In millions)
(Unaudited)
Quarter Ended March
31,
2022
2021
Revenue:
Payments
$166.2
$79.5
Cloud Solutions
69.5
62.2
Promotional Solutions
133.2
124.5
Checks
187.1
175.1
Total
$556.0
$441.3
Adjusted EBITDA:
Payments
$36.4
$18.3
Cloud Solutions
17.3
17.2
Promotional Solutions
17.0
17.7
Checks
82.8
83.6
Corporate
(53.9
)
(46.3
)
Total
$99.6
$90.5
Adjusted EBITDA Margin:
Payments
21.9
%
23.0
%
Cloud Solutions
24.9
%
27.7
%
Promotional Solutions
12.8
%
14.2
%
Checks
44.3
%
47.7
%
Total
17.9
%
20.5
%
The segment 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, 2021.
DELUXE CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP MEASURES (in millions) (Unaudited)
Note that the company has not reconciled the adjusted EBITDA
margin outlook for 2022 to the directly comparable GAAP financial
measure because the company does not provide outlook guidance for
net income or the reconciling items between net income and adjusted
EBITDA. Because of the substantial uncertainty and variability
surrounding certain of these forward-looking reconciling items,
including asset impairment charges; restructuring, integration and
other costs; and certain legal-related expenses, a reconciliation
of the non-GAAP financial measure outlook guidance to the
corresponding GAAP measure 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,
2022
2021
Net income
$9.7
$24.3
Non-controlling interest
(0.1
)
—
Interest expense
20.3
4.5
Income tax provision
2.9
9.2
Depreciation and amortization expense
41.6
27.8
EBITDA
74.4
65.8
Restructuring, integration and other
costs
16.3
15.2
Share-based compensation expense
8.1
6.7
Acquisition transaction costs
0.1
2.8
Certain legal-related expense
0.7
—
Adjusted EBITDA
$99.6
$90.5
Adjusted EBITDA as a percentage of total
revenue
(adjusted EBITDA margin)
17.9
%
20.5
%
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,
2022
2021
Net income
$9.7
$24.3
Non-controlling interest
(0.1
)
—
Net income attributable to Deluxe
9.6
24.3
Acquisition amortization
23.9
13.2
Restructuring, integration and other
costs
16.3
15.2
Share-based compensation expense
8.1
6.7
Acquisition transaction costs
0.1
2.8
Certain legal-related expense
0.7
—
Adjustments, pre-tax
49.1
37.9
Income tax provision impact of pretax
adjustments(1)
(10.9
)
(8.5
)
Income tax impact of Australian web
hosting business held for sale(2)
(2.2
)
—
Adjustments, net of tax
36.0
29.4
Adjusted net income attributable to
Deluxe
45.6
53.7
Re-measurement of share-based awards
classified as liabilities
(0.1
)
—
Adjusted income attributable to Deluxe
available to common shareholders
$45.5
$53.7
Weighted-average dilutive shares
43.2
42.5
GAAP Diluted EPS
$0.22
$0.57
Adjustments, net of tax
0.83
0.69
Adjusted Diluted EPS
$1.05
$1.26
(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.
(2)
Represents the recognition of a
deferred tax asset, net of valuation allowance, for the difference
between the book and tax basis of the investment in our Australian
web hosting business, which was classified as held for sale as of
March 31, 2022.
DELUXE CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP MEASURES (continued) (in millions) (Unaudited)
REVENUE EXCLUDING FIRST AMERICAN
Because of the magnitude of the First American acquisition,
management views the measure of revenue growth, excluding the First
American acquisition, as an important indicator when assessing and
evaluating the performance of the business and when identifying
strategies to improve performance. This measure of revenue growth
may be expressed as a dollar amount or as a percentage rate. By
excluding the First American revenue, management is able to
evaluate internally-generated revenue, measured by comparable sales
of products and services year-over-year. This measure will be
utilized by management until the acquisition has been under the
company's ownership for at least four full fiscal quarters at the
beginning of a reporting period.
Quarter Ended March
31,
2022
2021
Total revenue
$556.0
$441.3
Less: First American revenue
(83.3
)
—
Total revenue excluding First American
$472.7
$441.3
Total revenue growth excluding First
American
$31.4
Total revenue growth excluding First
American %
7.1
%
Payments revenue
$166.2
$79.5
Less: First American revenue
(83.3
)
—
Payments revenue excluding First
American
$82.9
$79.5
Payments revenue growth excluding First
American
$3.4
Payments revenue growth excluding First
American %
4.3
%
DELUXE CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP MEASURES (continued) (in millions) (Unaudited)
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, 2022
December 31,
2021
March 31, 2021
Total debt
$1,692.4
$1,683.0
$840.0
Cash and cash equivalents
(44.1
)
(41.2
)
(125.4
)
Net debt
$1,648.3
$1,641.8
$714.6
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,
2022
2021
Net cash provided by operating
activities
$34.3
$39.6
Purchases of capital assets
(20.8
)
(21.7
)
Free cash flow
$13.5
$17.9
DELUXE CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP MEASURES (continued) (in millions) (Unaudited)
LIQUIDITY
Management defines liquidity as cash and cash equivalents plus
the amount available for borrowing under the company's revolving
credit facility. Management considers liquidity to be an important
metric for demonstrating the amount of cash that is available or
that could be readily available to the company on short notice.
This financial measure is not a substitute for GAAP liquidity
measures. Instead, management believes that this measurement
enhances investors’ understanding of the funds that are currently
available to the company.
March 31, 2022
December 31,
2021
March 31, 2021
Cash and cash equivalents
$44.1
$41.2
$125.4
Amount available for borrowing under
revolving credit facility
339.2
362.6
302.3
Liquidity
$383.3
$403.8
$427.7
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220505005149/en/
Tom Morabito, VP, Investor Relations 470-607-5567
tom.morabito@deluxe.com
Cam Potts, VP, Communications 651-233-7735
cameron.potts@deluxe.com
Deluxe (NYSE:DLX)
Historical Stock Chart
From Apr 2024 to May 2024
Deluxe (NYSE:DLX)
Historical Stock Chart
From May 2023 to May 2024