Deluxe's Q4 net profit rises 14.4% year-over-year to US$39.8M, revenue up 4.2% to US$366.4M, with growth in small business services more than offsetting declines in personal check businesses
ST. PAUL, Minnesota
January 26, 2012
– Diluted EPS of $0.78; adjusted EPS of $0.83 at the high end of outlook;
--Provides 2012 outlook; projecting strong revenue, EPS and operating cash flow;
--Declares regular quarterly dividend
Deluxe Corporation DLX +6.04% announced its financial results for the fourth quarter ended December 31, 2011. Key financial highlights include:
Q4 2011 Q4 2010 Vs. Q4 2010
---------------- ---------------- ------------
Revenue $366.4 million $351.5 million 4.2 %
Net income $39.8 million $34.8 million 14.4 %
Diluted EPS - GAAP $ 0.78 $ 0.68 14.7 %
Adjusted diluted EPS - Non-GAAP $ 0.83 $ 0.78 6.4 %
A reconciliation between earnings per share on a GAAP basis and adjusted earnings per share on a non-GAAP basis is provided in the table on page 4.
Diluted earnings per share (EPS) of $0.78 was within the range provided in the Company's prior outlook, while revenue of $366.4 million and adjusted diluted EPS of $0.83 were at the high end of the range in the prior outlook. The impact of strong operating performance for each of our segments was partially offset by higher than expected income tax expense which reduced EPS by $0.04.
"We are pleased to finish the year with another strong quarter, delivering a second consecutive year of revenue growth," said Lee Schram, CEO of Deluxe. "In the fourth quarter and in the full year, we also posted continued strong operating margins, EPS, and cash flow while continuing to invest in our transformation through organic investments and acquisitions. Our product portfolio is better than ever and we believe we are entering the new year well positioned to grow for a third straight year."
Fourth Quarter 2011 Highlights:
-- Revenue for the quarter was $366.4 million compared to $351.5 million during the fourth quarter of 2010. Revenue increased 4.2% compared to 2010, with growth in Small Business Services more than offsetting declines in the personal check businesses.
-- Gross margin was 64.5 percent of revenue compared to 64.0 percent in 2010. Favorable impacts from price increases and the Company's continued cost reduction initiatives more than offset increased material costs and delivery rates in 2011.
-- Selling, general and administrative (SG&A) expense increased $1.5 million in the quarter compared to 2010. Increased SG&A expense associated with acquisitions and investments in revenue generating initiatives was partially offset by benefits from continued execution against cost reduction initiatives.
-- Operating income in 2011 was $74.0 million compared to $60.9 million in the fourth quarter of 2010. Restructuring and transaction-related costs were $3.1 million in 2011 versus $7.8 million in 2010. The 2011 costs were primarily attributable to the Company's on-going cost reduction initiatives. Results for 2011 also included an asset impairment charge of $1.2 million related to a vacant facility. Operating income was 20.2 percent of revenue compared to 17.3 percent in the prior year driven primarily by the increase in Small Business Services revenue.
-- Reported diluted EPS increased $0.10 from the prior year driven by improved operating performance, partly offset by a higher effective income tax rate due to discrete tax items and a shift in income between tax jurisdictions.
Small Business Services
-- Revenue was $228.8 million versus $204.2 million in 2010. Revenue was 12.0% higher in the quarter driven by growth in marketing and other services, the Safeguard distributor and dealer channels, and checks and forms. Revenue also benefited from price increases and the PsPrint acquisition.
-- Operating income in 2011 increased to $40.5 million from $32.7 million in 2010.
-- Revenue was $82.5 million compared to $88.0 million in 2010. The impact of price increases in 2011 and growth in non-check revenue was more than offset by lower order volumes caused by check usage declines.
-- Operating income in 2011 increased to $16.8 million from $13.0 million in 2010.
-- Revenue was $55.1 million compared to $59.3 million in 2010, primarily driven by lower order volume resulting from the continued decline in check usage.
-- Operating income in 2011 increased to $16.7 million from $15.2 million in 2010.
-- Cash provided by operating activities for 2011 totaled $235.4 million, an increase of $22.8 million compared to 2010. A $24.6 million contract settlement collected in the third quarter of 2010 was more than offset by the benefits from our cost savings initiatives and price increases, as well as lower contract acquisition, income tax and severance payments.
-- The Board of Directors of Deluxe Corporation declared a regular quarterly dividend of $0.25 per share to all outstanding shares of the Company. The dividend will be payable on March 5, 2012 to shareholders of record at the close of business on February 20, 2012. The Company had 50,861,747 shares outstanding as of January 24, 2012.
About Deluxe Corporation
Deluxe is a growth engine for small businesses and financial institutions. Four million small business customers access Deluxe's wide range of products and services including customized checks and forms as well as web-site development and hosting, search engine marketing, logo design and business networking. For financial institutions, Deluxe offers industry-leading programs in checks, customer acquisition, regulatory compliance, fraud prevention and profitability. Deluxe is also a leading printer of checks and accessories sold directly to consumers. For more information, visit us at www.deluxe.com , www.facebook.com/deluxecorp or www.twitter.com/deluxecorp .
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