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DELUXE CORP (DLX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue declined 3.1% year over year to $520.5M, while comparable adjusted EBITDA margin expanded 60 bps to 19.9%; GAAP diluted EPS was $0.28, and comparable adjusted diluted EPS increased 9.1% to $0.84 .
  • Segment mix: Data Solutions grew 26.8% YoY in Q4 with margin improvement; Merchant Services were roughly flat, and Print declined 7.1% with margins holding in the low-30s; B2B Payments revenue was roughly flat but EBITDA declined due to onboarding costs and mix shifts .
  • 2025 outlook guides revenue to $2.090–$2.155B, adjusted EBITDA to $415–$435M, adjusted diluted EPS to $3.25–$3.55, and free cash flow to $120–$140M; dividend maintained at $0.30 per share .
  • Capital structure catalyst: in Dec 2024 the company refinanced maturities to 2029 via $450M senior secured notes (8.125%) and new $500M term loan/$400M revolver; management expects blended interest ~7.5% going forward .

What Went Well and What Went Wrong

What Went Well

  • “We drove four consecutive quarters of operating leverage in 2024…comparable adjusted EBITDA growth outpacing our revenue trajectory for the second year in a row” (CEO Barry McCarthy) .
  • Data Solutions delivered strong growth and margin expansion: Q4 revenue +26.8% YoY to $55.9M and Q4 adjusted EBITDA +68% YoY; FY margins sustained at low-to-mid 20s profile (CFO commentary) .
  • Balance sheet progress and refinancing: net debt reduced by $52.2M in 2024; maturities extended to 2029; dividend continuity for 30th straight year (CFO/press) .

What Went Wrong

  • Q4 GAAP net income fell to $12.6M from $15.0M in Q4 2023; GAAP diluted EPS declined to $0.28 from $0.34, reflecting lower revenue and higher interest expense (YoY) .
  • Merchant Services moderated in Q4 due to lapping a large 2023 bank portfolio conversion (Fulton Bank), with adjusted EBITDA down 5.2% YoY and margin mix effects (CFO) .
  • B2B Payments Q4 adjusted EBITDA declined 16.2% YoY amid lockbox onboarding expenses and mix shift from prior-year nonrecurring revenue, though revenue was roughly flat (CFO) .

Financial Results

Consolidated Results vs Prior Year and Prior Quarter

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$537.4 $528.4 $520.5
Net Income ($USD Millions)$15.0 $8.9 $12.6
Diluted EPS ($USD)$0.34 $0.20 $0.28
Adjusted Diluted EPS ($USD)$0.80 $0.84 $0.84
Comparable Adjusted Diluted EPS ($USD)$0.77 $0.84 $0.84
Adjusted EBITDA ($USD Millions)$106.4 $104.9 $103.3
Adjusted EBITDA Margin % (Total)19.8% 19.9% 19.8%
Comparable Adjusted EBITDA ($USD Millions)$102.6 $104.5 $103.4
Comparable Adjusted EBITDA Margin %19.3% 19.8% 19.9%

Segment Revenue

SegmentQ4 2023 ($MM)Q3 2024 ($MM)Q4 2024 ($MM)
Merchant Services$95.7 $93.5 $95.5
B2B Payments$73.1 $75.1 $73.0
Data Solutions$44.1 $61.1 $55.9
Print$318.4 $297.3 $295.7
Business Exits$6.1 $1.4 $0.4
Total$537.4 $528.4 $520.5

Segment Adjusted EBITDA

SegmentQ4 2023 ($MM)Q3 2024 ($MM)Q4 2024 ($MM)
Merchant Services$21.3 $17.8 $20.2
B2B Payments$17.3 $15.3 $14.5
Data Solutions$7.3 $17.5 $12.3
Print$102.9 $97.4 $94.4
Business Exits / Corporate($42.4) ($43.1) ($38.1)
Total$106.4 $104.9 $103.3

KPIs and Balance Sheet

MetricFY 2023FY 2024
Revenues ($USD Millions)$2,192.3 $2,121.8
Comparable Adjusted Revenues ($USD Millions)$2,136.5 $2,111.0
Net Income ($USD Millions)$26.2 $52.9
Comparable Adjusted EBITDA ($USD Millions)$391.2 $406.5
Comparable Adjusted EBITDA Margin %18.3% 19.3%
Free Cash Flow ($USD Millions)$97.7 $100.0
Total Debt ($USD Millions)$1,592.9 $1,503.1
Cash and Cash Equivalents ($USD Millions)$72.0 $34.4
Net Debt ($USD Millions)$1,520.9 $1,468.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025n/a$2.090–$2.155 New
Adjusted EBITDA ($USD Millions)FY 2025n/a$415–$435 New
Adjusted Diluted EPS ($USD)FY 2025n/a$3.25–$3.55 New
Free Cash Flow ($USD Millions)FY 2025n/a$120–$140 New
Dividend ($/share)Quarterly$0.30 (ongoing) $0.30 (Mar 3, 2025 payable) Maintained
Interest Expense ($USD Millions)FY 2025 (assumption)n/a~$120 New
Adjusted Tax Rate (%)FY 2025 (assumption)n/a26% New
D&A ($USD Millions)FY 2025 (assumption)n/a~$140 (acq. amort. ~$45) New
Capex ($USD Millions)FY 2025 (assumption)n/a$90–$100 New
Segment GuidanceFY 2025n/aMerchant mid-single-digit growth; B2B ramps from low single-digit to mid-single-digit; Data mid- to high single-digit; Print low- to mid-single-digit decline; margins: Print low-30s, Merchant/Data low-20s, B2B high-teens to low-20s New

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Technology initiatives (cloud, platforms)Advanced cloud-native data platform; Deluxe Payment platform; R360+ receivables built; investments to accelerate product features Continued progress; Data campaign mix favorably supporting margins Reaffirmed platform builds (Deluxe Payment platform, cloud-native data lake, print-on-demand) as growth enablers for 2025–2026 Sustained execution and scale benefit
Macro/discretionary vs nondiscretionaryNoted softness in discretionary spend; nondiscretionary strong; promo short-cycle demand softened Macro stable overall; continued monitoring; revenue growth modest Base assumption of stable conditions in 2025; limited tariff risk; continued nondiscretionary resilience Stabilizing after prior caution
Merchant ServicesQ2 strong growth (+7.7% YoY) with margin expansion; pipeline across FI/ISO/ISV Q3 +6.3% YoY; expected moderation in Q4 due to prior-year bank conversion comp Q4 roughly flat; lapping Fulton impacted; expecting sequential ramp through 2025 under new leader Moderation in Q4; ramp in 2025
B2B PaymentsYoY declines with SaaS transition; lockbox wins (>$20M annualized) to offset Returned to modest YoY growth; onboarding lockbox volumes; margins stabilized Q4 revenue flat; EBITDA down on onboarding costs; guidance for sequential ramp and margins into low-20s Improving trajectory, near-term cost drag
Data SolutionsQ2 lapped tough comp; YTD +13%; margin expansion Q3 sequential improvement; lapped strong prior-year comps; margins +470 bps Q4 +26.8% YoY; margins back to low-20s; sustained mid- to high single-digit growth outlook Strengthening, smoothing lumpiness
Print & ChecksQ2 promo softness; legacy check steady; margins ~30% Q3 low-single-digit decline; margin ~32.8% Q4 -7.1% YoY; margins ~31.9%; focus on cash flow and efficiency Predictable decline; stable high margins
Capital & refinancingAR securitization (shift maturities), leverage ~3.7x, dividend maintained Net debt reduced; guidance narrowed; dividend Refinance executed: $450M notes (8.125%), new term/revolver to 2029; blended rate ~7.5% Maturity extension, liquidity secured

Management Commentary

  • “We expanded both comparable adjusted EBITDA dollars and rate for the full year and fourth quarter…delivering consistent operating leverage” (CEO) .
  • “Our strong cash flow performance enabled us to improve our net debt position by more than $52 million…target leverage ratio of 3x” (CEO) .
  • “Merchant revenues for the fourth quarter finished…roughly flat…driven most materially by lapping of the large conversion with Fulton Bank” (CFO) .
  • “B2B…Q4 adjusted EBITDA…declined…reflect some outsized impacts…lockbox share gains onboarding…would not forecast these…to recur throughout all of 2025” (CFO) .
  • “Data…finished at $55.9 million…Q4 adjusted EBITDA…expanding more than 68% year-over-year…returning toward…low 20s expectation” (CFO) .

Q&A Highlights

  • Merchant leadership and fundamentals: New president from Elavon; focus on Deluxe Payment platform APIs to penetrate new verticals; win-business differentiation via service quality (ATSI awards) .
  • Free cash flow outlook drivers: Improving profitability and lower restructuring spend; caution not to rely on continuous working capital optimization; on track toward North Star $100M annual increase by 2026 (CFO) .
  • Pricing in merchant: Price taken twice per year; emphasis on customer experience and features; growth mix of price, volume, and new logos .
  • Tariffs/supply chain: Minimal direct impact given domestic production of checks/paper; promo low-margin exposure provides natural hedge .
  • 2025 cadence: Revenue flat-ish first half with acceleration in back half (Merchant/B2B); margins profile by segment (Print low-30s; B2B high teens to low-20s; Merchant/Data low-20s) .

Estimates Context

  • Wall Street consensus estimates via S&P Global for Q4 2024 were unavailable due to system limits at the time of analysis, so we cannot assess beat/miss versus estimates. Values from S&P Global were unavailable.
  • Given management’s 2025 guidance (revenue flat to +2%, adjusted EBITDA +2% to +7%, adjusted EPS flat to +9%, FCF +20% to +40%), estimate revisions may skew toward higher EPS/FCF and slightly higher EBITDA, with revenue near flat to modest growth depending on Merchant/B2B ramp and Data trajectory .

Key Takeaways for Investors

  • Margin-led execution continues: four straight quarters of operating leverage; comparable adjusted EBITDA margin expanded to 19.9% in Q4 and 19.3% for FY 2024 .
  • Watch Merchant/B2B sequential ramps: Q4 moderation from lapping bank conversion; onboarding costs in B2B lockbox should abate as volumes accrue; 2025 expects ramp to mid-single-digit growth in both .
  • Data remains a growth/margin engine: Q4 +26.8% YoY and margin normalization supports mid- to high single-digit FY growth; platform investments position for steadier intra-year performance .
  • Print cash flow anchor: predictable low- to mid-single-digit revenue declines with stable low-30s margins; management will not chase low-margin promo volume .
  • Capital structure de-risked: maturities extended to 2029, blended interest ~7.5%; net debt down ~$52M in 2024; dividend sustained at $0.30 per share .
  • 2025 setup: Guidance implies EPS/FCF growth with stable tax/interest assumptions; capex ~$90–$100M and adjusted tax rate 26% supporting model visibility .
  • Near-term trading: Narrative likely driven by proof of Merchant/B2B sequential acceleration and sustained Data momentum; watch quarterly cadence and segment margins to validate guidance trajectory .