Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Deluxe Corp (NYSE:DLX) successfully expanded both comparable adjusted EBITDA dollars and rate for the full year and fourth quarter of 2024.
• The company reduced net debt by more than $52 million and refinanced 2026 debt maturities on attractive terms, extending maturities to 2029.
• Deluxe Corp (NYSE:DLX) made significant progress on its North Star plan, aiming to increase annual free cash flows by $100 million by 2026.
• The data segment achieved a full year growth rate of more than 10%, showcasing strong performance.
• The company maintained its regular quarterly dividend throughout 2024, marking the 30th consecutive year of rewarding shareholders.

Negative Points

• Deluxe Corp (NYSE:DLX) faced revenue headwinds that modestly impacted top-line growth in 2024.
• The print segment experienced a decline of 4.5% in annual revenue, consistent with secular decline expectations.
• The B to B payment segment saw a 3.8% decline in revenues, reflecting challenges in transitioning to a subscription-based model.
• Fourth quarter revenue for the merchant segment was roughly flat, impacted by the lapping of a large conversion with Fulton Bank.
• The company anticipates ongoing low to mid single-digit secular decline rates in the print segment for 2025.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with DLX.

Q: Barry, could you share your thoughts on the fundamentals of the merchant business and areas of focus for 2025 with the new leadership? A: Barry McCarthy, CEO: We are pleased with the progress in the merchant business, exceeding expectations since acquisition. In 2024, we improved capabilities with the Deluxe Payment Platform, facilitating growth in new markets. With Brian Mahoney joining us, we expect continued product improvement and market penetration.

Q: Chip, can you explain the significant improvement in free cash flow expected in 2025 compared to 2024? A: Chip Zy, CFO: The improvement is due to better profitability, reduced restructuring spend, and conservative working capital management. We are executing the North Star program, aiming to increase annual free cash flow by $100 million from the start of the journey.

Q: How are you addressing competition in the low-margin print business? A: Chip Zy, CFO: We focus on maintaining strong margins and will not chase low-margin deals. Our print business is crucial for cash flow and relationships, supporting our transformation and growth in payments and data.

Q: Are there any tariff-related headwinds impacting your supply chain, particularly in print or merchant services? A: Barry McCarthy, CEO: We do not anticipate significant impacts from tariffs. Most print materials are domestically produced, and promotional items, which are lower margin, may be affected but are naturally hedged.

Q: Can you discuss the pricing flexibility in the merchant business and the growth drivers for 2025? A: Barry McCarthy, CEO: We differentiate through customer experience and routinely adjust pricing. Growth will come from new partners, increased volume, and enhanced features, such as those in the Deluxe Payment Platform.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.