Deluxe's Q4 net income up 7% year-over-year to US$42.6M, net sales up 5.8% to US$387.6M driven by growth in Small Business Services including the imapct of the OrangeSoda acquisition

ST. PAUL, Minnesota , January 24, 2013 (press release) – Revenue grows 6%; Small Business Services grows 11%

Diluted EPS of $0.83 grows 6%; adjusted EPS of $0.95 grows 14.5% exceeding high end of outlook

Provides 2013 Outlook; projects growing revenue and EPS and strong cash flow

Declares regular quarterly dividend


Deluxe Corporation (NYSE: DLX) announced its financial results for the fourth quarter ended December 31, 2012. Key financial highlights include:

A reconciliation between earnings per share on a GAAP basis and adjusted earnings per share on a non-GAAP basis is provided after the Forward-Looking Statements discussion.

Adjusted Diluted EPS exceeded the high end of the range in the prior outlook due to strong operating performance, particularly in Financial Services, and a better than expected effective income tax rate. In addition, GAAP diluted EPS included a loss of $0.07 per share related to the early retirement of debt.

“We are excited to deliver our third straight year of revenue growth and our highest annual revenue growth rate since 1994, excluding the NEBS acquisition,” said Lee Schram, CEO of Deluxe. “Revenue in the fourth quarter was at the top end of our outlook and adjusted EPS exceeded our outlook, driven by strong performance in both Small Business Services and Financial Services. Full year adjusted EPS grew almost 14% to $3.53. Looking forward to 2013, in spite of an anticipated continued sluggish economy, we expect to continue our strong performance with a fourth year of profitable revenue growth.”

Fourth Quarter 2012 Highlights:

  • Revenue for the quarter was $387.6 million compared to $366.4 million during the fourth quarter of 2011. Revenue increased 5.8% compared to 2011, driven by 11.2% growth in Small Business Services, which included the impact of the OrangeSoda, Inc. acquisition in the second quarter. Marketing solutions and other services revenue, which also included the impact of the OrangeSoda, Inc. acquisition, increased 26.4% compared to 2011 and represented 22.5% of consolidated revenue, up from 18.8% in the fourth quarter of 2011.
  • Gross margin was 64.5 percent of revenue, the same as in 2011. Increased delivery rates, material costs and performance based compensation expense in 2012 were offset by favorable impacts from price increases and the Company’s continued cost reduction initiatives.
  • Selling, general and administrative (SG&A) expense increased $10.3 million in the quarter compared to 2011. Increased SG&A expense associated with commissions on increased revenue, as well as higher performance based compensation expense, higher brand awareness spending, and the OrangeSoda acquisition in the second quarter, was partially offset by benefits from continued execution against expense reduction initiatives.
  • Operating income in 2012 was $77.8 million compared to $74.0 million in the fourth quarter of 2011. Restructuring and transaction-related costs were $4.0 million in 2012 versus $3.1 million in 2011. These 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 20.1 percent of revenue compared to 20.2 percent in the prior year driven primarily by higher performance based compensation expense, increased delivery rates and material costs, and the OrangeSoda acquisition in the second quarter, offset by higher revenue per order and continued cost reductions.
  • Reported diluted EPS increased $0.05 from the prior year driven by a lower effective income tax rate due to discrete items, and improved operating performance, partially offset by a charge of approximately $0.07 per diluted share in 2012 related to early debt retirements.
Segment Highlights

Small Business Services
  • Revenue was $254.5 million versus $228.8 million in 2011. Revenue was 11.2% higher in the quarter driven by growth in marketing solutions and other services revenue, checks, and in our on-line, Safeguard® distributor, and dealer channels. Revenue also benefited from price increases and $8.0 million from the OrangeSoda acquisition.
  • Operating income in 2012 increased to $43.7 million from $40.5 million in 2011.
Financial Services
  • Revenue was $82.0 million compared to $82.5 million in 2011. The impact of check usage declines offset the benefits of price increases, revenue from a new financial institution client, which began contributing revenue in the first quarter of 2012, and growth in non-check revenue.
  • Operating income in 2012 increased to $18.2 million from $16.8 million in 2011.
Direct Checks
  • Revenue was $51.1 million compared to $55.1 million in 2011, primarily driven by lower order volume resulting from the continued decline in check usage.
  • Operating income in 2012 decreased to $15.9 million from $16.7 million in 2011.
Other Highlights
  • Cash provided by operating activities for 2012 totaled $244.0 million, an increase of $8.6 million compared to 2011. Improved operating performance and the discontinuation of payments to our defined contribution pension plan were partially offset by higher income tax payments, a planned contribution in the first quarter of 2012 to our VEBA trust for future medical costs, and higher contract acquisition 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 4, 2013 to shareholders of record at the close of business on February 18, 2013. The Company had 50,642,257 shares outstanding as of January 22, 2013.

Editor’s Note

Deluxe will hold an open-access teleconference call today at 11:00 a.m. ET (10:00 a.m. CT) to review the financial results. All interested persons may listen to the call by dialing 1-866-713-8310 (access code 74231470).

The presentation also will be available via a simultaneous webcast on our investor relations website at www.deluxe.com/investor.

An audio replay of the call will be available through midnight on February 7th by calling 1-888-286-8010 (access code 93002809). The presentation will be archived on Deluxe’s web site.


About Deluxe Corporation

Deluxe is a growth engine for small businesses and financial institutions. Over 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, search engine optimization, logo design and business networking. For financial institutions, Deluxe offers industry-leading programs in checks, customer acquisition, 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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