Deluxe Posts Spike in Net Income on More Modest Revenue Increase
ST. PAUL, MI—April 26, 2012—Deluxe Corp. announced its financial results for the first quarter ended March 31, 2012. The company reported revenue of $378.0 million, an 8.1 percent increase from $349.8 million in first quarter of 2011, and net income of $44.1 million, up 35.3 percent from $32.6 million in the previous year’s first quarter.
“We hit a home run this quarter and are off to a fantastic start to the year,” said Lee Schram, CEO of Deluxe. “We reported revenue and adjusted EPS well above our expected outlook with strong contributions coming from all three segments. Core check products revenue exceeded our expectation and marketing solutions and other services revenue grew 35 percent and is solidly on track to achieve its projected growth this year.”
First Quarter 2012 Highlights:
Revenue for the quarter was $378.0 million compared to $349.8 million during the first quarter of 2011. Revenue increased 8.1 percent compared to 2011, with growth in Small Business Services and Financial Services. Both the number of orders in the quarter and revenue per order were up vs. 2011. Marketing solutions and other services revenue increased 35 percent compared to 2011 and represented 16.1 percent of consolidated revenue, up from 12.8 percent in the first quarter of 2011.
Gross margin was 66.3 percent of revenue compared to 65.6 percent in 2011. Favorable impacts from price increases and the Company’s continued cost reduction initiatives more than offset increased delivery rates and material costs in 2012.
Selling, general and administrative (SG&A) expense increased $11.2 million in the quarter compared to 2011, but as a percent of revenue, was down slightly to 45.5 percent. Increased SG&A expense associated with commissions on increased revenue, 2011 acquisitions, investments in revenue generating initiatives and higher performance based compensation expense was partially offset by benefits from continued execution against cost reduction initiatives and lower amortization related to previous acquisitions.
Operating income in 2012 was $78.0 million compared to $67.5 million in the first quarter of 2011. Restructuring related costs were $1.9 million in 2012 vs. $1.5 million in 2011. These costs were primarily attributable to the Company’s on-going cost reduction initiatives. Operating income was 20.6 percent of revenue compared to 19.3 percent in the prior year driven primarily by higher revenue per order, favorable product mix, and continued cost reductions.
Small Business Services
Revenue was $229.6 million vs. $200.0 million in 2011. Revenue was 14.8 percent higher in the quarter driven by growth in marketing solutions 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 2012 increased to $38.8 million from $35.8 million in 2011.
Revenue was $90.6 million compared to $88.0 million in 2011. The impact of price increases, growth in non-check revenue and revenue from a new financial institution client more than offset the impact of check usage declines. Operating income in 2012 increased to $21.9 million from $15.7 million in 2011.
Revenue was $57.8 million compared to $61.8 million in 2011, primarily driven by lower order volume resulting from the continued decline in check usage. Operating income in 2012 increased to $17.3 million from $16.0 million in 2011.
Cash provided by operating activities for the first quarter of 2012 totaled $52.0 million, a decrease of $9.1 million compared to 2011. Improved operating performance and the discontinuation of payments to our defined contribution pension plan were more than offset by planned contributions to our VEBA trust for future medical costs, and higher contract acquisition and interest payments.
Deluxe Corp. 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 website 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.